UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the period ended ~~December 30, 2017~~June 29, 2019

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 0-14616

J & J SNACK FOODS CORP.

(Exact name of registrant as specified in its charter)

New Jersey	22-1935537
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

6000 Central Highway, Pennsauken, NJNew Jersey 08109

(Address of principal executive offices)

Telephone (856) 665-9533

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, no par value	JJSF	The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

~~X Yes~~ No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Yes

~~X Yes~~ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule ~~12b-2~~152-2 of the Exchange Act.

Large ~~accelerated~~Accelerated filer	(X)		Accelerated filer	( )

Non-accelerated filer	( )	~~(Do not check if a smaller reporting company)~~
		Smaller reporting company	( )
		Emerging growth company	( )

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule ~~12b-2~~bob-2 of the Exchange Act).

Yes

~~Yes X~~ No

As ~~January~~July 25, ~~2018~~2019, there were ~~18,678,473~~18,840,904 shares of the Registrant’s Common Stock outstanding.

INDEX

			Page
			Number
Part I.			Financial Information

	Item l.	Consolidated Financial Statements

		Consolidated Balance Sheets – ~~December 30, 2017~~June 29, 2019 (unaudited) and September ~~30, 2017~~29, 2018	3

		Consolidated Statements of Earnings (unaudited) – Three and nine months ended ~~December~~June 29, 2019 and June 30, ~~2017 and~~ ~~December 24, 2016~~ 2018	4

		Consolidated Statements of Comprehensive Income (unaudited) – Three ~~Months~~and nine months Ended ~~December~~June 29, 2019 and June 30, ~~2017 and~~ ~~December 24, 2016~~2018	5

		Consolidated Statements of Changes In Stockholders’ Equity (unaudited) – Nine months Ended June 29, 2019 and June 30, 2018	6

		Consolidated Statements of Cash Flows (unaudited) – ~~Three Months~~ Nine months Ended ~~December~~June 29, 2019 and June 30, ~~2017 and~~ ~~December 24, 2016~~2018	6 8

		Notes to the Consolidated Financial Statements (unaudited)	7 9

	Item 2.	~~Management~~’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations	19 23

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23 28

	Item 4.	Controls and Procedures	2328

Part II.			Other Information

	Item 6.	Exhibits	29
~~Item 6.~~	~~Exhibits~~	24

J & J SNACK FOODS CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

	December 30,			September 30,			June 29,			September 29,
	2017			2017			2019			2018
	(unaudited)						(unaudited)
Assets
Current assets
Cash and cash equivalents	$	81,089		$	90,962		$	156,097		$	111,479
Marketable securities held to maturity		49,445			59,113			40,809			21,048
Accounts receivable, net		109,709			124,553			146,553			132,342
Inventories		113,049			103,268			119,190			112,884
Prepaid expenses and other		3,800			3,936			4,146			5,044
Total current assets		357,092			381,832			466,795			382,797

Property, plant and equipment, at cost
Land		2,494			2,482			2,494			2,494
Buildings		26,582			26,741			26,582			26,582
Plant machinery and equipment		258,738			257,172			307,787			290,396
Marketing equipment		277,236			278,860			307,077			290,955
Transportation equipment		8,438			8,449			9,534			8,929
Office equipment		25,574			25,302			30,958			30,752
Improvements		37,999			38,003			39,761			38,941
Construction in progress		21,997			16,880			12,978			8,468
Total Property, plant and equipment, at cost		659,058			653,889			737,171			697,517
Less accumulated depreciation and amortization		429,217			426,308			486,519			454,844
Property, plant and equipment, net		229,841			227,581			250,652			242,673

Other assets
Goodwill		102,511			102,511			102,511			102,511
Other intangible assets, net		60,453			61,272			55,721			57,762
Marketable securities held to maturity		82,066			60,908			96,064			118,765
Marketable securities available for sale		30,150			30,260			21,032			24,743
Other		2,904			2,864			2,915			2,762
Total other assets		278,084			257,815			278,243			306,543
Total Assets	$	865,017		$	867,228		$	995,690		$	932,013

Liabilities and Stockholders' Equity
Current Liabilities
Current obligations under capital leases	$	339		$	340		$	330		$	324
Accounts payable		68,033			72,729			80,237			69,592
Accrued insurance liability		11,215			10,558			9,281			11,217
Accrued liabilities		10,491			7,753			14,098			8,031
Accrued compensation expense		11,764			19,826			17,177			20,297
Dividends payable		8,400			7,838			9,413			8,438
Total current liabilities		110,242			119,044			130,536			117,899

Long-term obligations under capital leases		815			904			714			753
Deferred income taxes		44,462			62,705			53,009			52,322
Other long-term liabilities		2,117			2,253			1,764			1,948

Stockholders' Equity
Preferred stock, $1 par value; authorized 10,000,000 shares; none issued		-			-			-			-
Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding 18,668,000 and 18,663,000 respectively		18,589			17,382
Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding 18,830,000 and 18,754,000 respectively								37,840			27,340
Accumulated other comprehensive loss		(12,872	)		(8,875	)		(12,548	)		(11,994	)
Retained Earnings		701,664			673,815			784,375			743,745
Total stockholders' equity		707,381			682,322			809,667			759,091
Total Liabilities and Stockholders' Equity	$	865,017		$	867,228		$	995,690		$	932,013

The accompanying notes are an integral part of these statements.

J & J SNACK FOODS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(in thousands, except per share amounts)

	Three months ended					Nine months ended
	June 29,		June 30,			June 29,		June 30,
	2019		2018			2019		2018

Net Sales	$	326,701	$	306,239		$	874,615	$	837,550

Cost of goods sold⁽¹⁾		225,352		211,764			617,155		592,518
Gross Profit		101,349		94,475			257,460		245,032

Operating expenses
Marketing⁽²⁾		26,398		25,589			69,792		69,672
Distribution ⁽³⁾		24,447		24,325			70,521		67,901
Administrative ⁽⁴⁾		10,668		9,654			29,909		28,014
Other general expense (income)		794		38			1,343		(193	)
Total operating expenses		62,307		59,606			171,565		165,394

Operating Income		39,042		34,869			85,895		79,638

Other income (expense)
Investment income		1,953		1,705			5,775		4,687
Interest expense & other		1,972		(209	)		1,920		267

Earnings before income taxes		42,967		36,365			93,590		84,592

Income taxes		12,095		10,236			24,838		4,381

NET EARNINGS	$	30,872	$	26,129		$	68,752	$	80,211

Earnings per diluted share	$	1.63	$	1.39		$	3.64	$	4.27

Weighted average number of diluted shares		18,947		18,822			18,912		18,801

Earnings per basic share	$	1.64	$	1.40		$	3.66	$	4.29

Weighted average number of basic shares		18,823		18,698			18,794		18,683

(1)	Includes share-based compensation expense of $271 and $735 for the three months and nine months ended June 29, 2019, respectively and $225 and $642 for the three months and nine months ended June 30, 2018.
(2)	Includes share-based compensation expense of $391 and $1,061 for the three months and nine months ended June 29, 2019, respectively and $349 and $998 for the three months and nine months ended June 30, 2018.
(3)	Includes share-based compensation expense of $24 and $65 for the three months and nine months ended June 29, 2019,, respectively and $20 and $56 for the three months and nine months ended June 30, 2018.
(4)	Includes share-based compensation expense of $435 and $1,191 for the three months and nine months ended June 29, 2019, respectively and $412 and $1,178 for the three months and nine months ended June 30, 2018.

The accompanying notes are an integral part of these statements.

J&J SNACK FOODS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands)

	Three months ended					Nine months ended
	June 29,		June 30,			June 29,			June 30,
	2019		2018			2019			2018

Net Earnings	$	30,872	$	26,129		$	68,752		$	80,211

Foreign currency translation adjustments		496		(2,359	)		(469	)		(4,348	)
Unrealized holding loss on marketable securities		-		(253	)		-			(547	)

Total Other Comprehensive Income(loss)		496		(2,612	)		(469	)		(4,895	)

Comprehensive Income	$	31,368	$	23,517		$	68,283		$	75,316

The accompanying notes are an integral part of these statements.

J & J SNACK FOODS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(in thousands)

					Accumulated
					Other
	Common Stock				Comprehensive			Retained
	Shares		Amount		Loss			Earnings			Total

Balance at September 29, 2018		18,754	$	27,340	$	(11,994	)	$	743,745		$	759,091
Issuance of common stock upon exercise of stock options		20		1,704		-			-			1,704
Foreign currency translation adjustment		-		-		(1,359	)		-			(1,359	)
Reclass from accumulated other comprehensive gain		-		-		(85	)		85			-
Dividends declared		-		-		-			(9,389	)		(9,389	)
Share-based compensation		-		972		-			-			972
Repurchase of common stock		-		-		-			-			-
Net earnings		-		-		-			17,526			17,526
Balance at December 29, 2018		18,774	$	30,016	$	(13,438	)	$	751,967		$	768,545
Issuance of common stock upon exercise of stock options		34		3,451		-			-			3,451
Issuance of common stock for employee stock purchase plan		6		772		-			-			772
Foreign currency translation adjustment		-		-		394			-			394
Issuance of common stock under deferred stock plan		1		90		-			-			90
Dividends declared		-		-		-			(9,405	)		(9,405	)
Share-based compensation		-		914		-			-			914
Repurchase of common stock		-		-		-			-			-
Net earnings		-		-		-			20,354			20,354
Balance at March 30, 2019		18,815	$	35,243	$	(13,044	)	$	762,916		$	785,115
Issuance of common stock upon exercise of stock options		15		1,499		-			-			1,499
Foreign currency translation adjustment		-		-		496			-			496
Dividends declared		-		-		-			(9,413	)		(9,413	)
Share-based compensation		-		1,098		-			-			1,098
Repurchase of common stock		-		-		-			-			-
Net earnings		-		-		-			30,872			30,872
Balance at June 29, 2019		18,830	$	37,840	$	(12,548	)	$	784,375		$	809,667

J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ~~EARNINGS~~
~~(Unaudited)~~CHANGES IN STOCKHOLDERS' EQUITY
(in ~~thousands, except per share amounts)~~

Three months ended

December 30,

December 24,

2017

2016

Net Sales
$ 265,210 $ 225,570

Cost of goods sold⁽¹⁾
191,931 159,675
Gross Profit
73,279 65,895

Operating expenses

Marketing⁽²⁾
21,576 20,335
Distribution ⁽³⁾
21,159 18,164
Administrative ⁽⁴⁾
9,356 8,098
Other general income
(40 ) (29 )
Total Operating Expenses
52,051 46,568

Operating Income
21,228 19,327

Other income (expense)

Investment income
1,489 1,227
Interest expense & other
509 (26 )

Earnings before income taxes
23,226 20,528

Income tax (benefit) expense
(13,023 ) 6,988

NET EARNINGS
$ 36,249 $ 13,540

Earnings per diluted share
$ 1.93 $ 0.72

Weighted average number of diluted shares
18,778 18,787

Earnings per basic share
$ 1.94 $ 0.72

Weighted average number of basic shares
18,666 18,686

~~(1) Includes share-based compensation expense of $218 and $182 for the three months ended December 30, 2017 and December 24, 2016, respectively.~~thousands)
~~(2) Includes share-based compensation expense of $339 and $261 for the three months ended December 30, 2017 and December 24, 2016, respectively.~~
~~(3) Includes share-based compensation expense of $19 and $18 for the three months ended December 30, 2017 and December 24, 2016, respectively.~~
~~(4) Includes share-based compensation expense of $377 and $286 for the three months ended December 30, 2017 and December 24, 2016, respectively.~~

~~The accompanying notes are an integral part of these statements.~~

							Accumulated
							Other
	Common Stock						Comprehensive			Retained
	Shares			Amount			Loss			Earnings			Total

Balance at September 30, 2017		18,663		$	17,382		$	(8,875	)	$	673,815		$	682,322
Issuance of common stock upon exercise of stock options		5			253			-			-			253
Foreign currency translation adjustment		-			-			(3,887	)		-			(3,887	)
Unrealized holding loss on marketable securities		-			-			(110	)		-			(110	)
Issuance of common stock under deferred stock plan		-			2			-			-			2
Dividends declared		-			-			-			(8,400	)		(8,400	)
Share-based compensation		-			952			-			-			952
Repurchase of common stock		-			-			-			-			-
Net earnings		-			-			-			36,249			36,249

Balance at December 30, 2017		18,668		$	18,589		$	(12,872	)	$	701,664		$	707,381
Issuance of common stock upon exercise of stock options		21			1,951			-			-			1,951
Issuance of common stock for employee stock purchase plan		7			756			-			-			756
Foreign currency translation adjustment		-			-			1,898			-			1,898
Unrealized holding loss on marketable securities		-			-			(184	)		-			(184	)
Issuance of common stock under deferred stock plan		1			92			-			-			92
Dividends declared		-			-			-			(8,413	)		(8,413	)
Share-based compensation		-			868			-			-			868
Repurchase of common stock		-			-			-			-			-
Net earnings		-			-			-			17,833			17,833

Balance at March 31, 2018		18,697		$	22,256		$	(11,158	)	$	711,084		$	722,182

Issuance of common stock upon exercise of stock options		29			2,601			-			-			2,601
Foreign currency translation adjustment		-			-			(2,359	)		-			(2,359	)
Unrealized holding loss on marketable securities		-			-			(253	)		-			(253	)
Issuance of common stock under deferred stock plan		-			2			-			-			2
Dividends declared		-			-			-			(8,415	)		(8,415	)
Share-based compensation		-			982			-			-			982
Repurchase of common stock		(21	)		(2,794	)		-			-			(2,794	)
Net earnings		-			-			-			26,129			26,129

Balance at June 30, 2018		18,705		$	23,047		$	(13,770	)	$	728,798		$	738,075

J&J & J SNACK FOODS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE INCOME~~CASH FLOWS

(Unaudited) (in thousands)

~~(in thousands)~~

Three months ended

December 30,

December 24,

2017

2016

Net Earnings
$ 36,249 $ 13,540

Foreign currency translation adjustments
(3,887 ) (1,104 )
Unrealized holding loss on marketable securities
(110 ) (103 )

Total Other Comprehensive Loss
(3,997 ) (1,207 )

Comprehensive Income
$ 32,252 $ 12,333

~~The accompanying notes are an integral part of these statements.~~

	Nine months ended
	June 29,			June 30,
	2019			2018
Operating activities:
Net earnings	$	68,752		$	80,211
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation of property, plant and equipment		33,374			31,929
Amortization of intangibles and deferred costs		2,586			2,639
Share-based compensation		3,006			2,874
Deferred income taxes		690			(12,502	)
Loss on marketable securities		410			32
Other		350			(3	)
Changes in assets and liabilities net of effects from purchase of companies
Increase in accounts receivable		(14,289	)		(7,530	)
Increase in inventories		(6,257	)		(13,020	)
Decrease (increase) in prepaid expenses		957			(2,949	)
Increase in accounts payable and accrued liabilities		11,584			3,606
Net cash provided by operating activities	$	101,163			85,287
Investing activities:
Payment for purchases of companies, net of cash acquired		(1,155	)		-
Purchases of property, plant and equipment		(42,136	)		(43,344	)
Purchases of marketable securities		(24,056	)		(65,227	)
Proceeds from redemption and sales of marketable securities		29,721			51,417
Proceeds from disposal of property, plant and equipment		1,463			1,895
Other		(212	)		171
Net cash used in investing activities		(36,375	)		(55,088	)
Financing activities:
Payments to repurchase common stock		-			(2,794	)
Proceeds from issuance of stock		7,426			5,561
Payments on capitalized lease obligations		(33	)		(278	)
Payment of cash dividend		(27,230	)		(24,652	)
Net cash used in financing activities		(19,837	)		(22,163	)
Effect of exchange rate on cash and cash equivalents		(333	)		(3,370	)
Net increase in cash and cash equivalents	$	44,618		$	4,666
Cash and cash equivalents at beginning of period		111,479			90,962
Cash and cash equivalents at end of period	$	156,097		$	95,628

~~J & J SNACK FOODS CORP. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited) (in thousands)~~

Three months ended

December 30,

December 24,

2017

2016

Operating activities:

Net earnings
$ 36,249 $ 13,540
Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation of fixed assets
11,152 8,728
Amortization of intangibles and deferred costs
834 1,183
Share-based compensation
953 748
Deferred income taxes
(18,265 ) (74 )
Loss on sale of marketable securities
(8 ) -
Other
(317 ) 222
Changes in assets and liabilities net of effects from purchase of companies

Decrease in accounts receivable
14,547 5,849
Increase in inventories
(9,933 ) (6,727 )
Decrease in prepaid expenses
111 5,747
Decrease in accounts payable and accrued liabilities
(9,216 ) (2,816 )
Net cash provided by operating activities
26,107 26,400
Investing activities:

Purchases of property, plant and equipment
(14,623 ) (11,399 )
Purchases of marketable securities
(30,865 ) (8,550 )
Proceeds from redemption and sales of marketable securities
19,096 475
Proceeds from disposal of property and equipment
1,046 645
Other
27 (20 )
Net cash used in investing activities
(25,319 ) (18,849 )
Financing activities:

Payments to repurchase common stock
- -
Proceeds from issuance of stock
253 980
Payments on capitalized lease obligations
(90 ) (90 )
Payment of cash dividend
(7,838 ) (7,280 )
Net cash used in financing activities
(7,675 ) (6,390 )
Effect of exchange rate on cash and cash equivalents
(2,986 ) (847 )
Net (decrease)increase in cash and cash equivalents
(9,873 ) 314
Cash and cash equivalents at beginning of period
90,962 140,652
Cash and cash equivalents at end of period
$ 81,089 $ 140,966

The accompanying notes are an integral part of these statements.

J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form ~~10-Q~~10-Q and Rule ~~10-01~~10-01 of Regulation ~~S-X.~~S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form ~~10-K~~10-K for the year ended September ~~30, 2017.~~29, 2018.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position and the results of operations and cash flows.

The results of operations for the ~~three~~nine months ended ~~December~~June 29, 2019 and June 30, ~~2017 and December 24, 2016~~ 2018 are not necessarily indicative of results for the full year. Sales of our frozen beverages and frozen juice bars and ices are generally higher in the third and fourth quarters due to warmer weather.

Certain prior year financial statement amounts have been reclassified to be consistent with the presentation for the current year.

While we believe that the disclosures presented are adequate to make the information not misleading, it is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes included in the ~~Company~~’sCompany’s Annual Report on Form ~~10-K~~10-K for the fiscal year ended September ~~30, 2017.~~29, 2018.

Note 2

Revenue Recognition

We adopted the new revenue recognition guidance on the first day of our fiscal 2019 year using a modified retrospective approach; however, we did not record a cumulative-effect adjustment from initially applying the standard as the adoption did not have a material impact on our financial position or results of operations. We completed a review of customer contracts and evaluated the impact of the new standard on certain common practices currently employed by us. We also finalized our assessment of the impact on our accounting policies, processes, system requirements, internal controls and disclosures.

When Performance Obligations Are Satisfied

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

The singular performance obligation of our customer contracts for product and machine sales is determined by each individual purchase order and the respective products ordered, with revenue being recognized at a point-in-time when the obligation under the terms of the agreement is satisfied and product control is transferred to our customer. Specifically, control transfers to our customers when the product is delivered to, installed or picked up by our customers based upon applicable shipping terms, as our customers can direct the use and obtain substantially all of the remaining benefits from the product at this point in time. The performance obligations in our customer contracts for product are generally satisfied within 30 days.

The singular performance obligation of our customer contracts for time and material repair and maintenance equipment service is the performance of the repair and maintenance with revenue being recognized at a point-in-time when the repair and maintenance is completed.

The singular performance obligation of our customer repair and maintenance equipment service contracts is the performance of the repair and maintenance with revenue being recognized over the time the service is expected to be performed. Our customers are billed for service contracts in advance of performance and therefore we have contract liability on our balance sheet.

Significant Payment Terms

In general, within our customer contracts, the purchase order identifies the product, quantity, price, pick-up allowances, payment terms and final delivery terms. Although some payment terms may be more extended, presently the majority of our payment terms are 30 days. As a result, we have used the available practical expedient and, consequently, do not adjust our revenues for the effects of a significant financing component.

Shipping

All amounts billed to customers related to shipping and handling are classified as revenues; therefore, we recognize revenue for shipping and handling fees at the time the products are shipped or when services are performed. The cost of shipping products to the customer is recognized at the time the products are shipped to the customer and our policy is to classify them as Distribution expenses.

~~Note 2~~

We recognize revenue from our products when the products are shipped to our customers. Repair and maintenance equipment service revenue is recorded when it is performed provided the customer terms are that the customer is to be charged on a time and material basis or on a straight-line basis over the term of the contract when the customer has signed a service contract. Revenue is recognized only where persuasive evidence of an arrangement exists, our price is fixed or determinable and collectability is reasonably assured. We record offsets to revenue for allowances, end-user pricing adjustments, trade spending, coupon redemption costs and returned product. Customers generally do not have the right to return product unless it is damaged or defective. We provide an allowance for doubtful receivables after taking into consideration historical experience and other factors. The allowance for doubtful receivables was $458,000 and $359,000 at December 30, 2017 and September 30, 2017, respectively.

Variable Consideration

In addition to fixed contract consideration, our contracts include some form of variable consideration, including sales discounts, trade promotions and certain other sales and consumer incentives, including rebates and coupon redemptions. In general, variable consideration is treated as a reduction in revenue when the related revenue is recognized. Depending on the specific type of variable consideration, we use the most likely amount method to determine the variable consideration. We believe there will be no significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. We review and update our estimates and related accruals of variable consideration each period based on historical experience.

Warranties & Returns

We provide all customers with a standard or assurance type warranty. Either stated or implied, we provide assurance the related products will comply with all agreed-upon specifications and other warranties provided under the law. No services beyond an assurance warranty are provided to our customers.

We do not grant a general right of return. However, customers may return defective or non-conforming products. Customer remedies may include either a cash refund or an exchange of the product. We do not estimate a right of return and related refund liability as returns of our products are rare.

Contract Balances

Our customers are billed for service contracts in advance of performance and therefore we have contract liability on our balance sheet as follows:

	Three Months Ended			Nine Months Ended
	June 29, 2019			June 29, 2019
	(unaudited)			(unaudited)
	(in thousands)			(in thousands)

Beginning Balance	$	1,655		$	1,865
Additions to contract liability		1,271			4,299
Amounts recognized as revenue		(1,499	)		(4,737	)
Ending Balance	$	1,427		$	1,427

Disaggregation of Revenue

See Note 9 for disaggregation of our net sales by class of similar product and type of customer.

Allowance for Doubtful Receivables

We provide an allowance for doubtful receivables after taking into consideration historical experience and other factors. The allowance for doubtful receivables was $665,000 and $400,000 at June 29, 2019 and September 29, 2018, respectively.

Note 3

Depreciation of equipment and buildings is provided for by the straight-line method over the assets’ estimated useful lives. Amortization of improvements is provided for by the straight-line method over the term of the lease or the assets’ estimated useful lives, whichever is shorter. Licenses and rights, customer relationships and non-compete agreements arising from acquisitions are amortized by the straight-line method over periods ranging from 32 to 20 years. Depreciation expense was ~~$11,152,000~~$11,484,000 and ~~$8,728,000~~$10,569,000 for the three months ended ~~December~~June 29, 2019 and June 30, ~~2017~~2018, respectively and ~~December 24, 2016,~~ $33,374,000 and $31,929,000 for the nine months ended June 29, 2019 and June 30, 2018, respectively.

Note 4

Basic earnings per common share (EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period. Diluted EPS takes into consideration the potential dilution that could occur if securities (stock options) or other contracts to issue common stock were exercised and converted into common stock. Our calculation of EPS is as follows:

	Three Months Ended December 30, 2017							Three Months Ended June 29, 2019
	Income		Shares		Per Share			Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount			(Numerator)		(Denominator)		Amount

	(in thousands, except per share amounts)							(in thousands, except per share amounts)
Basic EPS
Net Earnings available to common stockholders	$	36,249		18,666	$	1.94		$	30,872		18,823	$	1.64

Effect of Dilutive Securities
Options		-		112		(0.01	)		-		124		(0.01	)

Diluted EPS
Net Earnings available to common stockholders plus assumed conversions	$	36,249		18,778	$	1.93		$	30,872		18,947	$	1.63

163,170 anti-dilutive shares have been excluded in the computation of EPS for the three months ended June 29, 2019.

	Nine Months Ended June 29, 2019
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount

	(in thousands, except per share amounts)
Basic EPS
Net Earnings available to common stockholders	$	68,752		18,794	$	3.66

Effect of Dilutive Securities
Options		-		118		(0.02	)

Diluted EPS
Net Earnings available to common stockholders plus assumed conversions	$	68,752		18,912	$	3.64

163,670 anti-dilutive shares have been excluded in the computation of EPS for the nine months ended June 29, 2019.

	Three Months Ended June 30, 2018
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount

	(in thousands, except per share amounts)
Basic EPS
Net Earnings available to common stockholders	$	26,129		18,698	$	1.40

Effect of Dilutive Securities
Options		-		124		(0.01	)

Diluted EPS
Net Earnings available to common stockholders plus assumed conversions	$	26,129		18,822	$	1.39

1,000 anti-dilutive shares have been excluded in the computation of EPS for the three months ended ~~December~~June 30, ~~2017.~~2018.

Three Months Ended December 24, 2016

Income

Shares

Per Share

(Numerator)

(Denominator)

Amount

(in thousands, except per share amounts)

Basic EPS

Net Earnings available to common stockholders
$ 13,540 18,686 $ 0.72

Effect of Dilutive Securities

Options
- 101 -

Diluted EPS

Net Earnings available to common stockholders plus assumed conversions
$ 13,540 18,787 $ 0.72

	Nine Months Ended June 30, 2018
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount

	(in thousands, except per share amounts)
Basic EPS
Net Earnings available to common stockholders	$	80,211		18,683	$	4.29

Effect of Dilutive Securities
Options		-		118		(0.02	)

Diluted EPS
Net Earnings available to common stockholders plus assumed conversions	$	80,211		18,801	$	4.27

1,000 anti-dilutive shares have been excluded in the computation of EPS for the nine months ended June 30, 2018.

Note 5

At ~~December 30, 2017,~~ June 29, 2019, the Company has three stock-based employee compensation plans. Share-based compensation expense ~~(benefit)~~ was recognized as follows:

	Three months ended					Three months ended				Nine months ended
	December 30,		December 24,			June 29,		June 30,		June 29,		June 30,
	2017		2016			2019		2018		2019		2018
	(in thousands, except per share amounts)					(in thousands)


Stock Options	$	615	$	(211	)	$	663	$	473	$	1,741	$	1,559
Stock purchase plan		200		174			187		89		324		355
Stock issued to an outside director							17		16		50		48
Restricted stock issued to an employee		1		1			-		1		-		3
Total share-based compensation	$	816	$	(36	)	$	867	$	579	$	2,115	$	1,965

The above compensation is net of tax benefits	$	137	$	783		$	254	$	427	$	937	$	909

The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model with the following weighted average assumptions used forfor grants in fiscal ~~2018 first three~~2019nine months: expected volatility of 16.8%; risk-free interest rate of ~~2.1%~~2.2%; dividend rate of 1.2% and expected lives of 5 years.

During the fiscal year ~~2018 three~~2019nine month period, the Company granted ~~1,500~~165,170 stock options. The weighted-average grant date fair value of these options was ~~$23.14.~~$26.29.

During the fiscal year ~~2017 three~~2018nine month period, the Company granted ~~300~~159,878 stock options. The weighted-average grant date fair value of these options was ~~$15.15.~~$23.67.

Expected volatility is based on the historical volatility of the price of our common shares over the past 5051 months for 5 year options and 10 years for 10 year options. We use historical information to estimate expected life and forfeitures within the valuation model. The expected term of awards represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Compensation cost is recognized using a straight-line method over the vesting or service period and is net of estimated forfeitures.

Note 6

We account for our income taxes under the liability method. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities.

Additionally, we recognize a liability for income taxes and associated penalties and interest for tax positions taken or expected to be taken in a tax return which are more likely than not to be overturned by taxing authorities (“uncertain tax positions”). We have not recognized a tax benefit in our financial statements for these uncertain tax positions.

The total amount of gross unrecognized tax benefits is ~~$379,000~~$409,000 and ~~$374,000~~$394,000 on ~~December 30, 2017~~ June 29, 2019 and September ~~30, 2017,~~ 29, 2018, respectively, all of which would impact our effective tax rate over time, if recognized. We recognize interest and penalties related to uncertain tax positions as a part of the provision for income taxes. As of ~~December 30, 2017~~ June 29, 2019, and September ~~30, 2017,~~ 29, 2018, respectively, the Company has ~~$244,000~~$274,000 and ~~$239,000~~$259,000 of accrued interest and penalties.

In addition to our federal tax return and tax returns for Mexico and Canada, we file tax returns in all states that have a corporate income tax with virtually all open for examination for three to four years.

Net earnings for ~~the current year quarter~~last year’s nine months benefited from a $20.9 million ~~or $1.11 per diluted share,~~ gain on the remeasurement of deferred tax liabilities ~~and~~which was partially offset by a $~~2.0~~$1.2 million ~~or $0.11 per diluted share, reduction in income taxes related primarily to~~provision for the ~~lower corporate~~one time repatriation tax, ~~rate enacted under~~both of which resulted from the Tax Cuts and Jobs Act enacted in December 2017. ~~Net earnings were impacted by a $1.2 million, or $.06 per diluted share, provision for the one time repatriation tax required under the new tax law.~~ Excluding the deferred tax gain and the one time repatriation tax, our effective tax rate ~~decreased to 28.6% from 34.0%~~was 28.4% in last year’s nine months. Net earnings in this year’s nine months benefitted by a reduction of approximately $900,000 in tax as the ~~prior~~provision for the one time repatriation tax was reduced as the amount recorded last year ~~quarter reflecting~~was an estimate. Excluding the reduction in the ~~federal statutory rate to 21% from 35%~~provision for the ~~remaining three quarters of fiscal 2018. The gain on the remeasurement of deferred tax liabilities and the~~ one time repatriation tax, ~~are preliminary estimates.~~our effective tax rate was 27.5% in this year’s nine months.

~~On December 22, 2017, the SEC issued guidance under Staff~~ Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) directing taxpayers to consider the impact of the U.S. legislation as “provisional” when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. In accordance with SAB 118, the estimated income tax net benefit of $21.7 million represents our best estimate based on interpretation of the U.S. legislation as we are still accumulating data to finalize the underlying calculations, or in certain cases, the U.S. Treasury is expected to issue further guidance on the application of certain provisions of the U.S. legislation. In accordance with SAB 118, the additional estimated income tax net benefit of $21.7 million is considered provisional and will be finalized before December 22, 2018.

Note 7

In May 2014 and in subsequent updates, the FASB issued guidance on revenue recognition which requires that we recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration which we expect to be entitled in exchange for those goods or services. We ~~have~~ performed a review of the requirements of the new revenue standard, ~~and are in the process of~~including reviewing customer contracts and applying the ~~five-step~~five-step model of this new guidance to each contract category we ~~have identified and will compare the results to our current accounting practices.~~identified. We ~~plan to adopt~~adopted this guidance on the first day of our fiscal 2019 ~~year. We will apply the~~ year using a modified retrospective ~~transition method, which would result in an~~approach; however, we did not record a cumulative-effect adjustment ~~to retained earnings for the cumulative effect, if any, of~~from initially applying the standard ~~to contracts in process~~ as of the adoption ~~date. Under this method, we would~~ did not restate the prior financial statements presented. Therefore, this guidance would require additional disclosures of the amount by which each financial statement line item is affected in the fiscal year 2019 reporting period. ~~Our analysis indicates that the~~ have a material impact ~~of this guidance~~ on our ~~consolidated~~ financial ~~statements will not be material.~~ position or results of operations. See additional revenue recognition disclosures in Note 2.

In January 2016, the FASB issued guidance which requires an entity to measure equity investments at fair value with changes in fair value recognized in net income, to use the price that would be received by a seller when measuring the fair value of financial instruments for disclosure purposes, and which eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. Under ~~present~~prior guidance, changes in fair value of equity investments ~~are~~available for sale were recognized in Stockholders’ Equity. ~~This~~We adopted this guidance ~~is effective for~~on the first day of our 2019fiscal ~~year ended September 2019. Early adoption is not permitted. We do not anticipate that the~~year. The adoption of this ~~new~~ guidance ~~will have a material impact~~ on our consolidated financial ~~statements.~~statements was not material.

In February 2016, the FASB issued guidance on lease accounting which requires that an entity recognize most leases on its balance sheet. The guidance retains a dual lease accounting model for purposes of income statement recognition, continuing the distinction between what are currently known as “capital” and “operating” leases for lessees. This guidance is effective for our fiscal year ended September 2020. While we continue to evaluate the effect of adopting this guidance on our consolidated financial statements and related disclosures, we expect our operating leases will be subject to the new standard. We will recognize right-of-use assets and operating lease liabilities on our consolidated balance sheets upon adoption, which will increase our total assets and liabilities. We anticipate that the impact of this guidance on our financial statements will be material.

Note 8 Inventories consist of the following:

	June 29,		September 29,
	2019		2018
	(unaudited)
	(in thousands)

Finished goods	$	55,282	$	52,221
Raw materials		22,910		23,173
Packaging materials		10,754		9,780
Equipment parts and other		30,244		27,710
Total Inventories	$	119,190	$	112,884

Note 8

~~Inventories consist of the following:~~

December 30,

September 30,

2017

2017

(unaudited)

(in thousands)

Finished goods
$ 51,808 $ 45,394
Raw materials
25,291 22,682
Packaging materials
9,765 8,833
Equipment parts and other
26,185 26,359
Total Inventories
$ 113,049 $ 103,268

~~Note~~ 9

We principally sell our products to the food service and retail supermarket industries. Sales and results of our frozen beverages business are monitored separately from the balance of our food service business because of different distribution and capital requirements. We maintain separate and discrete financial information for the three operating segments mentioned above which is available to our Chief Operating Decision Makers.

Our three reportable segments are Food Service, Retail Supermarkets and Frozen Beverages. All inter-segment net sales and expenses have been eliminated in computing net sales and operating income. These segments are described ~~below~~.below.

Food Service

The primary products sold by the food service group are soft pretzels, frozen juice treats and desserts, churros, dough enrobed handheld products and baked goods. Our customers in the food service industry include snack bars and food stands in chain, department and discount stores; malls and shopping centers; fast food outlets; stadiums and sports arenas; leisure and theme parks; convenience stores; movie theatres; warehouse club stores; schools, colleges and other institutions. Within the food service industry, our products are purchased by the consumer primarily for consumption at the point-of-sale.

Retail Supermarkets

The primary products sold to the retail supermarket channel are soft pretzel products – including SUPERPRETZEL, frozen juice treats and desserts including LUIGI’S Real Italian Ice, MINUTE MAID Juice Bars and Soft Frozen Lemonade, WHOLE FRUIT frozen fruit bars and sorbet, PHILLY SWIRL cups and sticks, ICEE Squeeze-Up Tubes and dough enrobed handheld products including PATIO burritos. Within the retail supermarket channel, our frozen and prepackaged products are purchased by the consumer for consumption at home.

Frozen Beverages

We sell frozen beverages and related products to the food service industry primarily under the names ICEE, SLUSH PUPPIE and PARROT ICE in the United States, Mexico and Canada. We also provide repair and maintenance service to customers for customers’ owned equipment.

The Chief Operating Decision Maker for Food Service and Retail Supermarkets and the Chief Operating Decision Maker for Frozen Beverages monthly review detailed operating income statements and sales reports in order to assess performance and allocate resources to each individual segment. Sales and operating income are key variables monitored by the Chief Operating Decision Makers and management when determining each segment’s and the ~~company’s~~Company’s financial condition and operating performance. In addition, the Chief Operating Decision Makers review and evaluate depreciation, capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment. Information regarding the operations in these three reportable segments is as follows:

	Three months ended						Three months ended						Nine months ended
	December 30,			December 24,			June 29,			June 30,			June 29,			June 30,
	2017			2016			2019			2018			2019			2018
	(unaudited)						(unaudited)
	(in thousands)						(in thousands)
Sales to External Customers:
Food Service
Soft pretzels	$	50,131		$	41,494		$	55,867		$	53,880		$	154,670		$	151,649
Frozen juices and ices		7,184			7,479			13,862			12,825			30,336			29,448
Churros		14,592			14,438			18,888			16,739			49,793			46,603
Handhelds		10,252			7,479			8,550			9,974			25,339			30,667
Bakery		94,933			75,279			95,299			93,082			288,172			278,828
Other		5,172			4,128			6,105			5,201			19,576			16,235
Total Food Service	$	182,264		$	150,297		$	198,571		$	191,701		$	567,886		$	553,430

Retail Supermarket
Soft pretzels	$	10,512		$	8,944		$	7,294		$	7,332		$	28,309		$	27,925
Frozen juices and ices		9,727			9,851			26,515			28,785			52,179			53,950
Handhelds		3,026			3,450			3,063			2,960			8,110			8,749
Coupon redemption		(751	)		(1,259	)		(962	)		(1,278	)		(2,163	)		(2,647	)
Other		562			633			642			733			1,341			1,715
Total Retail Supermarket	$	23,076		$	21,619		$	36,552		$	38,532		$	87,776		$	89,692

Frozen Beverages
Beverages	$	34,303		$	28,276		$	56,937		$	49,131		$	121,976		$	115,401
Repair and maintenance service		19,004			18,091			22,514			19,693			62,291			58,005
Machines sales		6,313			7,039
Machines revenue								11,810			6,856			33,875			20,183
Other		250			248			317			326			811			839
Total Frozen Beverages	$	59,870		$	53,654		$	91,578		$	76,006		$	218,953		$	194,428

Consolidated Sales	$	265,210		$	225,570		$	326,701		$	306,239		$	874,615		$	837,550

Depreciation and Amortization:
Food Service	$	7,098		$	5,732		$	6,973		$	6,237		$	19,911		$	19,376
Retail Supermarket		290			278			335			332			990			980
Frozen Beverages		4,598			3,901			5,015			4,860			15,059			14,212
Total Depreciation and Amortization	$	11,986		$	9,911		$	12,323		$	11,429		$	35,960		$	34,568

Operating Income :
Operating Income:
Food Service	$	15,900		$	17,054		$	21,154		$	19,663		$	59,195		$	54,098
Retail Supermarket		2,558			1,046			3,651			3,203			7,739			8,295
Frozen Beverages		2,770			1,227			14,237			12,003			18,961			17,245
Total Operating Income	$	21,228		$	19,327		$	39,042		$	34,869		$	85,895		$	79,638

Capital Expenditures:
Food Service	$	9,441		$	6,587		$	8,665		$	10,172		$	23,346		$	25,872
Retail Supermarket		-			82			597			273			1,730			376
Frozen Beverages		5,182			4,730			6,523			6,618			17,060			17,096
Total Capital Expenditures	$	14,623		$	11,399		$	15,785		$	17,063		$	42,136		$	43,344

Assets:
Food Service	$	635,988		$	594,963		$	752,117		$	672,861		$	752,117		$	672,861
Retail Supermarket		21,531			22,128			24,349			24,215			24,349			24,215
Frozen Beverages		207,498			177,082			219,224			217,156			219,224			217,156
Total Assets	$	865,017		$	794,173		$	995,690		$	914,232		$	995,690		$	914,232

Note 10

Our three reporting units, which are also reportable segments, are Food Service, Retail Supermarkets and Frozen Beverages.

The carrying amounts of acquired intangible assets for the Food Service, Retail Supermarkets and Frozen Beverage segments as of ~~December 30, 2017~~ June 29, 2019 and September ~~30, 2017~~ 29, 2018 are as follows:

	December 30, 2017				September 30, 2017				June 29, 2019				September 29, 2018
	Gross				Gross				Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated		Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization		Amount		Amortization		Amount		Amortization
	(in thousands)								(in thousands)
FOOD SERVICE
Indefinite lived intangible assets
Trade Names	$	16,628	$	-	$	16,628	$	-
Trade names									$	16,628	$	-	$	16,628	$	-

Amortized intangible assets
Non compete agreements		980		302		980		263
Non-compete agreements										858		622		980		538
Customer relationships		20,510		7,011		20,510		6,476		19,900		9,473		20,510		8,600
License and rights		1,690		1,080		1,690		1,058
Licenses and rights										1,690		1,206		1,690		1,143
TOTAL FOOD SERVICE	$	39,808	$	8,393	$	39,808	$	7,797	$	39,076	$	11,301	$	39,808	$	10,281

RETAIL SUPERMARKETS

Indefinite lived intangible assets
Trade Names	$	6,557	$	-	$	6,557	$	-
Trade names									$	6,557	$	-	$	6,557	$	-

Amortized Intangible Assets
Trade names		649		130		649		130		649		357		649		260
Customer relationships		7,979		3,022		7,979		2,822		7,979		4,223		7,979		3,623
TOTAL RETAIL SUPERMARKETS	$	15,185	$	3,152	$	15,185	$	2,952	$	15,185	$	4,580	$	15,185	$	3,883


FROZEN BEVERAGES

Indefinite lived intangible assets
Trade Names	$	9,315	$	-	$	9,315	$	-
Trade names									$	9,315	$	-	$	9,315	$	-
Distribution rights		6,900		-		6,900		-		6,900				6,900		-

Amortized intangible assets
Customer relationships		257		56		257		50		737		95		257		76
Licenses and rights		1,400		811		1,400		794		1,400		916		1,400		863
TOTAL FROZEN BEVERAGES	$	17,872	$	867	$	17,872	$	844	$	18,352	$	1,011	$	17,872	$	939

CONSOLIDATED	$	72,865	$	12,412	$	72,865	$	11,593	$	72,613	$	16,892	$	72,865	$	15,103

~~Amortized~~Fully amortized intangible assets have been removed from the June 29, 2019 amounts. Intangible assets of $480,000 were acquired in the Frozen Beverages segment in the third quarter.

Amortizing intangible assets are being amortized by the straight-line method over periods ranging from 32 to 20 years and amortization expense is reflected throughout operating expenses. In last year’s fiscal year, intangible assets of $6,957,000 were acquired in an ICEE distributor acquisition in our frozen beverage segment, intangible assets of $15,760,000 were acquired in the Hill & Valley acquisition in our food service segment and intangible assets fo $576,000 were acquired in the Labriola Baking acquisition, also in our food service segment.

Aggregate amortization expense of intangible assets for the three months ended ~~December~~June 29, 2019 and June 30, ~~2017~~2018 was $836,000 and ~~December 24, 2016~~ $876,000, respectively. Aggregate amortization expense of intangible assets for the nine months ended June 29, 2019 and June 30, 2018 was ~~$819,000~~$2,521,000 and ~~$1,108,000,~~$2,626,000, respectively.

Estimated amortization expense for the next five fiscal years is approximately ~~$3,500,000~~$3,300,000 in ~~2018, $3,400,000 in~~ 2019, $3,000,000 in 2020, $2,400,000 in 2021, and $2,300,000 in ~~2022.~~2022 and in 2023. The weighted amortization period of the intangible assets is ~~10.8~~10.7 years.

Goodwill

The carrying amounts of goodwill for the Food Service, Retail Supermarket and Frozen Beverage segments are as follows:

Food

Retail

Frozen

Service Supermarket Beverages Total
(in thousands)
Balance at December 30, 2017
$ 61,665 $ 3,670 $ 37,176 $ 102,511

Balance at September 30, 2017
$ 61,665 $ 3,670 $ 37,176 $ 102,511

	Food		Retail		Frozen
	Service		Supermarket		Beverages		Total
	(in thousands)
Balance at June 29, 2019	$	61,665	$	3,670	$	37,176	$	102,511

Balance at September 29, 2018	$	61,665	$	3,670	$	37,176	$	102,511

~~In last year~~’s fiscal year, goodwill of $1,236,000 was acquired in an ICEE distributor acquisition in our frozen beverage segment, goodwill of $14,175,000 was acquired in the Hill & Valley acquisition in our food service segment and goodwill of $658,000 was acquired in our Labriola Baking acquisition, also in our food service segment.

Note 1111

We have classified our investment securities as marketable securities held to maturity and available for sale. The FASB defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the FASB has established three levels of inputs that may be used to measure fair value:

Level 1

Observable input such as quoted prices in active markets for identical assets or liabilities;


Level 2	Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and


Level 3	Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

Marketable securities held to maturity and available for sale consist primarily of investments in mutual funds,, preferred stock and corporate bonds. The fair values of mutual funds are based on quoted market prices in active markets and are classified within Level 1 of the fair value hierarchy. The fair values of preferred stock, corporate bonds and certificates of deposit are based on quoted prices for identical or similar instruments in markets that are not active. As a result, preferred stock, corporate bonds and certificates of deposit are classified within Level 2 of the fair value hierarchy.

The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at ~~December 30, 2017~~ June 29, 2019 are summarized as follows:

			Gross		Gross		Fair				Gross		Gross		Fair
	Amortized		Unrealized		Unrealized		Market		Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
	(in thousands)								(in thousands)

Corporate Bonds	$	125,591	$	165	$	551	$	125,205	$	133,993	$	1,011	$	125	$	134,879
Certificates of Deposit		5,920		8		-		5,928		2,880		5		-		2,885
Total marketable securities held to maturity	$	131,511	$	173	$	551	$	131,133	$	136,873	$	1,016	$	125	$	137,764

The amortized cost, unrealized gains and losses, and fair market values of our investment securities available for sale at ~~December 30, 2017~~ June 29, 2019 are summarized as follows:

			Gross		Gross		Fair				Gross		Gross		Fair
	Amortized		Unrealized		Unrealized		Market		Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
	(in thousands)								(in thousands)

Mutual Funds	$	13,003	$	58	$	237	$	12,824	$	5,549	$	-	$	394	$	5,155
Preferred Stock		16,791		608		73		17,326		15,681		254		58		15,877
Total marketable securities available for sale	$	29,794	$	666	$	310	$	30,150	$	21,230	$	254	$	452	$	21,032

The mutual funds seek current income with an emphasis on maintaining low volatility and overall moderate duration. The Fixed-to-Floating Perpetual Preferred Stock generate fixed income to call dates in ~~2018,~~ 2019,2020 and 2025 and then income is based on a spread above LIBOR if the securities are not called. The mutual funds and Fixed-to-Floating Perpetual Preferred Stock do not have contractual maturities; however, we classify them as long term assets as it is our intent to hold them for a period of over one year, although we may sell some or all of them depending on presently unanticipated needs for liquidity or market conditions. The corporate bonds generate fixed income to maturity dates in ~~2017~~2019 through ~~2021,~~2022, with ~~$123~~$112 million maturing within 32 years. Our expectation is that we will hold the corporate bonds to their maturity dates and redeem them at our amortized cost.

The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at September ~~30, 2017~~ 29, 2018 are summarized as follows:

											Gross		Gross		Fair
			Gross		Gross		Fair		Amortized		Unrealized		Unrealized		Market
	Amortized		Unrealized		Unrealized		Market		Cost		Gains		Losses		Value
	Cost		Gains		Losses		Value				(in thousands)
	(in thousands)
Corporate Bonds	$	114,101	$	424	$	155	$	114,370	$	136,933	$	28	$	1,520	$	135,441
Certificates of Deposit		5,920		18		1		5,937		2,880		-		7		2,873
Total marketable securities held to maturity	$	120,021	$	442	$	156	$	120,307	$	139,813	$	28	$	1,527	$	138,314

The amortized cost, unrealized gains and losses, and fair market values of our investment securities available for sale at September ~~30, 2017~~ 29, 2018 are summarized as follows:

			Gross		Gross		Fair				Gross		Gross			Fair
	Amortized		Unrealized		Unrealized		Market		Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses		Value		Cost		Gains		Losses			Value
	(in thousands)										(in thousands)

Mutual Funds	$	13,003	$	77	$	240	$	12,840	$	8,978	$	-	$	295		$	8,683
Preferred Stock		16,791		711		82		17,420		15,680		380		-			16,060
Total marketable securities available for sale	$	29,794	$	788	$	322	$	30,260	$	24,658	$	380	$	295	��	$	24,743

The amortized cost and fair value of the ~~Company~~’sCompany’s held to maturity securities by contractual maturity at ~~December 30, 2017~~ June 29, 2019 and September ~~30, 2017~~ 29, 2018 are summarized as follows:

September 24, 2011	December 30, 2017				September 30, 2017
									June 29, 2019				September 29, 2018

			Fair				Fair				Fair				Fair
	Amortized		Market		Amortized		Market		Amortized		Market		Amortized		Market
	Cost		Value		Cost		Value		Cost		Value		Cost		Value
			(in thousands)								(in thousands)
Due in one year or less	$	49,445	$	49,444	$	59,113	$	59,194	$	40,809	$	40,895	$	21,048	$	21,001
Due after one year through five years		82,066		81,689		60,908		61,113		96,064		96,869		118,765		117,313
Due after five years through ten years						-		-		-		-		-		-
Total held to maturity securities	$	131,511	$	131,133	$	120,021	$	120,307	$	136,873	$	137,764	$	139,813	$	138,314
Less current portion		49,445		49,444		59,113		59,194		40,809		40,895		21,048		21,001
Long term held to maturity securities	$	82,066	$	81,689	$	60,908	$	61,113	$	96,064	$	96,869	$	118,765	$	117,313

Proceeds from the redemption and sale of marketable securities were ~~$19,096,000~~$6,584,800 and $29,721,000 in the three and nine months ended ~~December 30, 2017~~ June 29, 2019 and ~~$475,000~~were $21,964,000 and $51,417,000 in the three and nine months ended ~~December 24, 2016,~~ June 30, 2018, respectively. ~~Gains~~Realized losses of ~~$7,558~~$8,000 and $25,000 were recorded in the three and nine months ended ~~December 30, 2017~~ June 29, 2019 and ~~no gains or~~realized losses of $35,000 and $32,000 were recorded in the three and nine months ended ~~December 24, 2016.~~June 30, 2018, respectively. We use the specific identification method to determine the cost of securities sold. Under new accounting guidance adopted on the first day of this fiscal year, recognized unrealized losses on marketable securities of $118,000 and $385,000 were recorded in the three months and nine months ended June 29, 2019, respectively.

Note12 Changes to the components of accumulated other comprehensive loss are as follows:

	Three Months Ended June 29, 2019								Nine Months Ended June 29, 2019
	(unaudited)								(unaudited)
	(in thousands)								(in thousands)

				Unrealized								Unrealized
	Foreign Currency			Holding Gain					Foreign Currency			Holding Gain
	Translation			on Marketable					Translation			on Marketable
	Adjustments			Securities		Total			Adjustments			Securities			Total

Beginning Balance	$	(13,044	)	$	-	$	(13,044	)	$	(12,079	)	$	85		$	(11,994	)

Other comprehensive income (loss) before reclassifications		496			-		496			(469	)		-			(469	)

Amounts reclassified from accumulated other comprehensive income		-			-		-			-			(85	)		(85	)

Ending Balance	$	(12,548	)	$	-	$	(12,548	)	$	(12,548	)	$	-		$	(12,548	)

										Three Months Ended June 30, 2018									Nine Months Ended June 30, 2018
	Three Months ended December 30, 2017									(unaudited)									(unaudited)
				(unaudited)						(in thousands)									(in thousands)
				(in thousands)
													Unrealized									Unrealized
				Unrealized Holding						Foreign Currency			Holding Gain (Loss)						Foreign Currency			Holding Gain (Loss)
	Foreign Currency			Gain on						Translation			on Marketable						Translation			on Marketable
	Translation Adjustments			Marketable Securities			Total			Adjustments			Securities			Total			Adjustments			Securities			Total

Beginning Balance	$	(9,341	)	$	466		$	(8,875	)	$	(11,330	)	$	172		$	(11,158	)	$	(9,341	)	$	466		$	(8,875	)

Other comprehensive loss before reclassifications		(3,887	)		(110	)	$	(3,997	)		(2,359	)		(328	)		(2,687	)		(4,348	)		(622	)		(4,970	)

Amounts reclassified from accumulated other comprehensive income		-			-			-			-			75			75			-			75			75

Ending Balance	$	(13,228	)	$	356		$	(12,872	)	$	(13,689	)	$	(81	)	$	(13,770	)	$	(13,689	)	$	(81	)	$	(13,770	)

Three Months ended December 24, 2016

(unaudited)

(in thousands)

Unrealized Holding

Foreign Currency

Loss on

Translation Adjustments

Marketable Securities

Total

Beginning Balance
$ (13,086 ) $ (329 ) $ (13,415 )

Other comprehensive(loss)income before reclassifications
(1,104 ) (103 ) (1,207 )

Amounts reclassified from accumulated other comprehensive income
- - -

Ending Balance
$ (14,190 ) $ (432 ) $ (14,622 )

~~Note 13~~

On December 30, 2016, we acquired Hill & Valley Inc., a premium bakery located in Rock Island, IL, for approximately $31 million. Hill & Valley, with sales of over $45 million annually, is a manufacturer of a variety of pre-baked cakes, cookies, pies, muffins and other desserts to retail in-store bakeries. Hill & Valley is a leading brand of Sugar Free and No Sugar Added pre-baked in-store bakery items. Additionally, Hill & Valley sustains strategic private labeling partnerships with retailers nationwide.

~~On May 22, 2017, we acquired an ICEE distributor doing business in Georgia~~Item 2. Management’s Discussion and ~~Tennessee for approximately $11 million.~~

~~On August 16, 2017, we acquired Labriola Baking Company, a bakery~~ Analysis of ~~breads~~Financial Condition and ~~artisan soft pretzels located in Alsip, IL for approximately $6 million. Labriola Bakery, with sales~~Results of ~~approximately $17 million annually, is a manufacturer of pre-baked breads, rolls and soft pretzels for retail in-store bakery and foodservice outlets nationwide.~~Operations

~~Note 14~~

~~Subsequent Event~~

On January 8, 2018, Hom/Ade Foods, Inc, a wholly owned subsidiary of J & J Snack Foods Corp. (the “Company”), issued a Product Recall Notification for certain products marketed under the name “MARY B~~’s Biscuits,” which have the potential to be contaminated with~~ ~~Listeria monocytogenes.~~ The affected products were manufactured by Flowers Foods, Inc. (“Flowers”), and the Company is working in coordination with Flowers and the U.S. Food and Drug Administration to effectuate the recall. We believe that Flowers, the manufacturer of the recalled product and initiator of the recall, is contractually obligated to indemnify us against all costs related to a recall triggered by defective product or governmental demand. Although we are not able to estimate the costs related to the recall presently, we do not expect the costs to have a material impact on our financial statements. Additionally, we expect to be reimbursed by Flowers for our costs related to the recall. ~~We anticipate disruption to our product supply and sales going forward.~~

~~Item 2.~~

~~Management’s Discussion and Analysis of~~ F~~inancial Condition and Results of Operations~~

Liquidity and Capital Resources

Our current cash and cash equivalents balances, investments and cash expected to be provided by future operations are our primary sources of liquidity. We believe that these sources, along with our borrowing capacity, are sufficient to fund future growth and expansion. See Note 11 to these financial statements for a discussion of our investment securities.

The Company’s Board of Directors declared a regular quarterly cash dividend of ~~$.45~~$.50 per share of its common stock payable on ~~January 4, 2018,~~July 3, 2019, to shareholders of record as of the close of business on ~~December 13, 2017.~~June 12, 2019.

In our fiscal year ended September ~~30, 2017,~~29, 2018, we purchased and retired ~~142,665~~20,604 shares of our common stock at a cost of ~~$18,228,763.~~$2,794,027. In the three months and nine months ended ~~December 30, 2017~~June 29, 2019 we did not purchase and retire any shares. On August 4, 2017 the Company’s Board of Directors authorized the purchase and retirement of 500,000 shares of the Company’s common stock; ~~405,110~~384,506 shares remain to be purchased under this authorization.

Fluctuations in the valuation of the Mexican and Canadian currencies and the resulting translation of the net assets of our Mexican and Canadian subsidiaries caused a decrease of $496,000 in accumulated other comprehensive loss in the 2019 third quarter and an increase of $2,359,000 in accumulated other comprehensive loss in the 2018 third quarter. In the ~~three months ended December 30, 2017 and December 24, 2016~~nine-month period, fluctuations in the valuation of the Mexican and Canadian currencies and the resulting translation of the net assets of our Mexican and Canadian subsidiaries caused an increase of ~~$3,887,000~~$469,000 in accumulated other comprehensive loss in the 2019 nine-month period and an increase of $4,348,000 in accumulated other comprehensive loss in the 2018 ~~first quarter and an increase of $1,104,000 accumulated other comprehensive loss in the 2017 first quarter.~~nine-month period.

Our general-purpose bank credit line which expires in November 2021 provides for up to a $50,000,000 revolving credit facility. The agreement contains restrictive covenants and requires commitment fees in accordance with standard banking practice. There were no outstanding balances under this facility at ~~December 30, 2017.~~June 29, 2019.

~~Results of Operations~~RESULTS OF OPERATIONS

Net sales increased ~~$39,640,000~~$20,462,000 or ~~18%~~7% to ~~$265,210,000~~$326,701,000 for the three months and $37,065,000 or 4% to $874,615,000 for the nine months ended ~~December 30, 2017~~June 29, 2019 compared to the three and nine months ended ~~December 24, 2016. Excluding sales from Hill & Valley, Inc., acquired in January 2017, an ICEE distributor located in the Southeast acquired in~~ June ~~2017 and Labriola Bakery which was acquired in August 2017, sales increased approximately 7% for the quarter.~~30, 2018, respectively.

FOOD SERVICE

Sales to food service customers increased ~~$ 31,967,000~~$6,870,000 or ~~21%~~4% in the ~~first~~third quarter to ~~$182,264,000. Excluding sales of Hill & Valley~~$198,571,000 and ~~Labriola, sales~~ increased ~~$9,569,000~~$14,456,000 or 6%3% to $567,886,000 for the ~~first quarter.~~nine months. Soft pretzel sales to the food service market increased ~~21%~~4% to ~~$50,131,000~~$55,867,000 in the three months and 2% to $154,670,000 in the nine months due primarily to higher sales to convenience store chains. Two chains accounted for about 3/4 of the sales increase in the third quarter and about ~~14% without Labriola sales. In addition to Labriola sales, soft pretzel sales increased significantly due to increased distribution to restaurant chains and movie theatres and we had strong sales~~1/2 of ~~our recently introduced BRAUHAUS pretzels.~~the increase in the nine months.

Frozen juices and ices sales ~~decreased 4%~~increased 8% to ~~$7,184,000~~$13,862,000 in the three months ~~with~~and 3% to $30,336,000 in the nine months as sales ~~increases~~to warehouse club stores accounted for over 60% of the increase in the third quarter and ~~decreases across our customer base.~~all of the increase in the nine months.

Churro sales to food service customers were up 1%13% in the quarter to ~~$14,592,000.~~$18,888,000 and up 7% to $49,793,000 in the nine months with strong sales to warehouse club stores and general increases and decreases across our customer base.

Sales of bakery products increased ~~$19,654,000~~$2,217,000 or ~~26%~~2% to $95,299,000 in the ~~first~~third quarter and increased $9,344,000 or 3% to ~~$94,933,000. Excluding sales of Hill & Valley, bakery~~$288,172,000 for the nine months as sales were ~~essentially flat for the quarter.~~higher to school foodservice and were up and down across our customer base.

Sales of handhelds ~~increased $2,773,000~~decreased $1,424,000 or ~~37%~~14% in the quarter and $5,328,000 or 17% in the nine months with ~~all of~~ the ~~increase~~decrease primarily coming from lower sales to ~~three customers.~~co-pack customers because of unsuccessful product launches. Sales of funnel cake increased ~~$911,000~~$522,000 or, ~~23%~~10%, to $5,616,000 in the quarter and $2,873,000, or 19%, to ~~$4,794,000 as we continue to~~$18,308,000 in the nine months. The nine months sales increase was primarily sales to ~~school food service.~~a quick service restaurant under a limited time offer program which ended in the second quarter.

Sales of new products in the first twelve months since their introduction were approximately $8$4 million in this ~~quarter.~~quarter and $11 million in the nine months. Price increases ~~had no impact on~~were approximately $4 million for the quarter and $11 million for the nine months and net volume increases were approximately $3 million of sales in the quarter and ~~net volume increases, including new product sales as defined above and Hill & Valley and Labriola sales, accounted for approximately $32 million of sales~~ in the ~~quarter.~~nine months.

Operating income in our Food Service segment ~~decreased~~increased from ~~$17,054,000~~$19,663,000 to ~~$15,900,000~~$21,154,000 in the ~~quarter. Hill & Valley contributed $1,384,000~~quarter and increased from $54,098,000 to $59,195,000 in the nine months. For the quarter, operating income ~~in the quarter; however, operating income in the balance~~increased primarily because of ~~our food service business~~increased volume, lower distribution expenses and increased pricing but was impacted by ~~generally~~ ~~higher~~approximately $600,000 of costs ~~for payroll~~related to prior years’ product recalls. For the nine months, operating income improved primarily because of increased volume, price increases, lower marketing expenses and ~~insurance, added personnel in the selling function, inefficiencies in~~improved operations at several of our recently acquired Labriola production facility (compounded by the integration of products previously manufactured at other facilities), product mix changes and significantly lower volume concentrated in specific facilities,manufacturing facilities. Additionally, last year’s first quarter included shutdown costs of our Chambersburg, PA production ~~facility~~facility. However, this year’s nine months, all in the first quarter, was impacted by approximately $900,000 of higher distribution expenses primarily due to higher freight rates which increased with the implementation of the electronic logging device mandate in January 2018. Additionally, lower sales of our MARY B’s biscuits and ~~higher ingredients costs. There was no benefit of pricing~~related costs due to ~~offset these higher costs.~~ our recall in January 2018 impacted our operating income by approximately $500,000 in last year’s first quarter.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets ~~increased $1,457,000~~decreased $1,980,000 or 7%5% to ~~$23,076,000~~$36,552,000 in the ~~first quarter.~~third quarter and decreased $1,916,000 or 2% to $87,776,000 for the nine months. Soft pretzel sales for the ~~first~~third quarter were down less than 1% to $7,294,000 and up ~~18%~~1% to ~~$10,512,000 primarily due to sales of AUNTIE ANNE’S soft pretzels under a license agreement entered into in 2017.~~$28,309,000 for the nine months. Sales of frozen juices and ices decreased ~~$124,000~~$2,270,000 or 1%8% to ~~$9,727,000~~$26,515,000 in the ~~first quarter.~~third quarter and decreased $1,771,000 or 3% in the nine months as we lost some volume and placements due to price increases. Handheld sales to retail supermarket customers ~~decreased 12%~~increased 3% to ~~$3,026,000~~$3,063,000 in the quarter and were down 7% to $8,110,000 in the nine months as the sales of this product line ~~continues~~continue their ~~long term~~long-term decline.

Sales of new products in the ~~first~~third quarter were approximately ~~$1.9 million.~~$200,000 and were approximately $1 million for the nine months. Price increases ~~had no impact on~~provided about $1.1 million of sales in the quarter and ~~net volume increases, including new product sales as defined above accounted for $1.5~~$2.0 million of sales in the ~~quarter.~~nine months and net volume decreased by about $3.1 million for the quarter and $4.0 million for the nine months.

Operating income in our Retail Supermarkets segment ~~was $2,558,000~~increased to $3,651,000 in this year’s ~~first~~third quarter ~~compared to $1,046,000~~from $3,203,000 in last year’s quarter, a ~~145% increase. Lower coupon expense of $508,000~~14% increase and decreased to $7,739,000 in this year’s nine months compared to $8,295,000 in last year’s nine months. For the quarter, operating income benefited from lower ~~media spending of $543,000 along~~marketing and distribution costs and increased pricing. For the nine months, increased product costs combined with ~~the 18% increase in soft pretzel sales~~lower volume were the ~~major reasons for~~primary drivers of the ~~increase~~decrease in operating income.

FROZEN BEVERAGES

Frozen beverage and related product sales increased ~~12%~~20% to ~~$59,870,000~~$91,578,000 in the ~~first~~third quarter and ~~excluding sales of~~increased 13% to $218,953,000 in the ~~acquired ICEE distributor were up about 10%.~~nine months. Beverage related sales ~~alone~~ were up ~~21%~~16% to ~~$34,303,000~~$56,937,000 in the quarter due in large part to increased sales to one distributor of about $4 million and ~~were~~ up ~~about 19% without~~6% to $121,976,000 in the nine months. The increased sales ~~of the acquired ICEE distributor.~~to this one distributor did not benefit operating income. Sales to this distributor may continue to be higher into our fourth quarter. Gallon sales were up ~~15%~~2% for the three ~~months with higher sales to movie theatres and across our customer base.~~months. Service revenue increased 5%14% to ~~$19,004,000~~$22,514,000 in the ~~first~~third quarter and increased 7% to $62,291,000 in the nine months with sales increases and decreases spread throughout our customer ~~base.~~base, but with significant increases in sales to two customers.

~~Sales~~Machines revenue (primarily sales of frozen beverage ~~machines, which tend~~machines) was $11,810,000, an increase of $4,954,000, in the quarter and $33,875,000, an increase of $13,692,000, in the nine months. Increases in sales to ~~fluctuate from year to year while following no specific trend, were $6,313,000, a decrease of 10%.~~three customers accounted for the higher revenue in the quarter. Operating income in our Frozen ~~Beverage~~Beverages segment increased to ~~$2,770,000~~$14,237,000, or 19%, in this quarter ~~compared~~and was up $1,716,000, or 10%, to ~~$1,227,000 last year~~$18,961,000 in the nine months primarily as a result of ~~significantly higher beverage~~the increases in sales.

CONSOLIDATED

Gross profit as a percentage of sales was ~~27.63%~~31.02% in the ~~three~~third quarter and 30.85% last year. Gross profit as a percentage of sales was 29.44% in the nine month period this year and ~~29.21%~~29.26% last year. ~~About 20% of the gross~~Gross profit percentage ~~decrease in~~for the quarter ~~resulted from~~and nine months increased because of improved operations at several of our manufacturing facilities, price increases and because last year had the ~~lower gross profit percentage~~burden of the Hill & Valley business. The balance of the decrease was caused by higher costs for payroll and insurance, inefficiencies in our recently acquired Labriola production facility (compounded by the integration of products previously manufactured at other facilities), product mix changes, significantly lower volume concentrated in specific facilities, shutdown costs ofshutting down our Chambersburg, PA production facility and ~~higher ingredients costs. There was no benefit of pricing~~moving its production to ~~offset these higher costs.~~ other facilities.

Total operating expenses increased ~~$5,483,000~~$2,701,000 in the ~~first~~third quarter ~~but~~and as a percentage of sales decreased to 19.1% from 19.5% last year. For the nine months, operating expenses increased $6,171,000 and as a percentage of sales decreased to 19.6% from ~~20.6%~~19.7% last year. Marketing expenses decreased to ~~8.14%~~8.1% of sales in this year’s quarter from ~~9.01%~~8.4% last year ~~primarily because of lower media spending~~and were 8.0% in ~~our retail supermarket business and lower marketing expenses of~~ the ~~acquired Hill & Valley and Labriola businesses. Distribution expenses were 7.98% of sales in this year’s quarter and 8.05%~~nine months compared to 8.3% of sales in last year’s ~~quarter.~~nine months primarily because of controlled spending across all of our segments. Distribution expenses were 7.5% of sales in the third quarter and 7.9% of sales in last year’s quarter and were 8.1% in both year’s nine months. Distribution expenses as a percentage of sales were lower in the third quarter primarily because freight rates have dropped compared to last year. Administrative expenses were ~~3.53%~~3.3% of sales ~~this~~in the third quarter compared to ~~3.59%~~3.2% of sales last year in the ~~first~~third quarter and were 3.4% in this year’s nine months compared to 3.3% of sales in last year’s nine months. Other general operating expense in this year’s quarter includes $621,000 of costs related to prior years’ product recalls.

Operating income increased ~~$1,901,000~~$4,173,000 or ~~10%~~12% to ~~$21,228,000~~$39,042,000 in the three months and increased $6,257,000 or 8% to $85,895,000 the first ~~quarter~~nine months as a result of the aforementioned items.

Investment income increased by ~~$262,000~~$248,000 and $1,088,000 in the ~~first~~third quarter and nine months, respectively, resulting from higher amounts invested and ~~slightly~~ higher interest rates. Additionally, the third quarter and nine months were impacted by $118,000 and $385,000 of recognized unrealized losses.

This year’s other income in the third quarter includes a $2.0 million payment received from a customer due to cancellation of production under a co-manufacturing agreement. Our sales of the product line cancelled were $121,000 and $1.2 million in the three and nine months ended June 30, 2018 and we have not had any sales since June 30, 2018. Other income ~~this quarter~~for last year’s nine months includes a $520,000 gain on a sale of property.

Net earnings increased ~~$22,709,000,~~$4,743,000, or ~~168%~~18%, in the current three month period to ~~$36,249,000.~~ $30,872,000 and were $68,752,000 for the nine month period this year compared to $80,211,000 for the nine month period last year.

Net earnings for ~~the current year quarter~~last year’s nine months benefited from a $20.9 million gain, or $1.11 per diluted share, ~~gain~~ on the remeasurement of deferred tax liabilities and a $2.0 million, or $0.11 per diluted share, reduction in income taxes related primarily to the lower corporate tax rate enacted under the Tax Cuts and Jobs Act in December 2017. Net earnings were impactedwhich was partially offset by a $1.2 million, or $.06 per diluted share, provision for the one time repatriation tax, ~~required under~~both of which resulted from the ~~new tax law.~~Tax Cuts and Jobs Act enacted in December 2017. Excluding the deferred tax gain and the one time repatriation tax, our effective tax rate ~~decreased to 28.6% from 34.0%~~was 28.4% in last year’s nine months. Net earnings in this year’s nine months benefitted by a reduction of approximately $900,000 in tax as the ~~prior~~provision for the one time repatriation tax was reduced as the amount recorded last year ~~quarter reflecting~~was an estimate. Excluding the reduction in the ~~federal statutory rate to 21% from 35%~~provision for the ~~remaining three quarters of fiscal 2018. Last year’s quarter’s~~one time repatriation tax, our effective tax rate ~~benefitted from an unusually high tax benefit on share based compensation of $783,000 which compares to~~was 27.5% in this year’s ~~quarter’s tax benefit of $137,000. We are presently estimating an~~nine months. Our effective tax rate ~~of 28-29%~~ for the third quarter this year was 28.1% and 28.1% for last ~~three quarters of our fiscal~~year’s third quarter, as this year ~~2018~~benefitted from tax credits on returns filed this year and ~~26-27% for our fiscal year 2019.~~a lower federal tax rate.

There are many factors which can impact our net earnings from year to year and in the long run, among which are the supply and cost of raw materials and labor, insurance costs, factors impacting sales as noted above, the continuing consolidation of our customers, our ability to manage our manufacturing, marketing and distribution activities, our ability to make and integrate acquisitions and changes in tax laws and interest rates.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

There has been no material change in the ~~Company~~’sCompany’s assessment of its sensitivity to market risk since its presentation set forth, in item 7a. “Quantitative and Qualitative Disclosures About Market Risk,” in its 2017 annual report on Form 10-K filed with the SEC.

Item 4.

Controls and Procedures

The Chief Executive Officer and the Chief Financial Officer of the Company (its principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation as of ~~December 30, 2017,~~June 29, 2019, that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in the ~~Company~~’sCompany’s internal control over financial reporting during the quarter ended ~~December 30, 2017,~~June 29, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~PART II. OTHER INFORMATION~~

	PART II. OTHER INFORMATION

Item 6.	Exhibits

~~Exhibit No.~~

	Exhibit No.

	31.1	&	Certification Pursuant to Section 302 of
	31.2		the Sarbanes-Oxley Act of 2002
~~31.2~~


99.5	&	Certification Pursuant to the 18 U.S.C.
	99.6		Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
~~99.6~~

	101.1		The following financial information from J&J Snack Foods Corp.'s Quarterly Report on Form 10-Q for the quarter ended ~~December 30, 2017,~~June 29, 2019, formatted in XBRL (extensible Business Reporting Language):

(i)		~~(i)~~ Consolidated Balance Sheets,
			(ii)	Consolidated Statements of Earnings,
			(iii)	Consolidated Statements of Comprehensive Income,
			(iv)	Consolidated Statements of Cash Flows and
			(v)	the Notes to the Consolidated Financial Statements

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		J & J SNACK FOODS CORP.



~~Dated: February 1, 2018~~		~~/s/~~ ~~Gerald B. Shreiber~~
		~~Gerald B. Shreiber~~ ~~Chairman of the Board,~~ ~~President, Chief Executive~~ ~~Officer and Director~~ ~~(Principal Executive Officer)~~



Dated: ~~February~~ August 1, ~~2018~~2019	/s/ Gerald B. Shreiber
	~~/s/ Dennis G. Moore~~Gerald B. Shreiber
	Chairman of the Board,
	President, Chief Executive
	Officer and Director
	(Principal Executive Officer)

Dated: August 1, 2019	/s/ Dennis G. Moore
	Dennis G. Moore, Senior Vice
	President, Chief Financial
	Officer and Director
	(Principal Financial Officer)
	(Principal Accounting Officer)

2429

	Three months ended
	December 30,			December 24,
	2017			2016

Net Sales	$	265,210		$	225,570

Cost of goods sold⁽¹⁾		191,931			159,675
Gross Profit		73,279			65,895

Operating expenses
Marketing⁽²⁾		21,576			20,335
Distribution ⁽³⁾		21,159			18,164
Administrative ⁽⁴⁾		9,356			8,098
Other general income		(40	)		(29	)
Total Operating Expenses		52,051			46,568

Operating Income		21,228			19,327

Other income (expense)
Investment income		1,489			1,227
Interest expense & other		509			(26	)

Earnings before income taxes		23,226			20,528

Income tax (benefit) expense		(13,023	)		6,988

NET EARNINGS	$	36,249		$	13,540

Earnings per diluted share	$	1.93		$	0.72

Weighted average number of diluted shares		18,778			18,787

Earnings per basic share	$	1.94		$	0.72

Weighted average number of basic shares		18,666			18,686

	Three Months Ended December 24, 2016
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount

	(in thousands, except per share amounts)
Basic EPS
Net Earnings available to common stockholders	$	13,540		18,686	$	0.72

Effect of Dilutive Securities
Options		-		101		-

Diluted EPS
Net Earnings available to common stockholders plus assumed conversions	$	13,540		18,787	$	0.72

	December 30,		September 30,
	2017		2017
	(unaudited)
	(in thousands)

Finished goods	$	51,808	$	45,394
Raw materials		25,291		22,682
Packaging materials		9,765		8,833
Equipment parts and other		26,185		26,359
Total Inventories	$	113,049	$	103,268