UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the period ended ~~June~~March 25, ~~2022~~2023

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

Commission File Number: 0-14616

J ~~& 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, New 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	~~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

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

☒

Yes

☐

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 of the Exchange Act.

Large Accelerated filer ☒	☒	Accelerated filer	☐

Non-accelerated filer	☐
		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 of the Exchange Act).

~~☐ Yes ☒~~

☐

Yes

☒

At ~~July 29, 2022~~May 1, 2023 there were ~~19,192,251~~19,252,281 shares of the Registrant’s Common Stock outstanding.

INDEX

	Page Number
Part I. Financial Information

Item l. Consolidated Financial Statements

Consolidated Balance Sheets – ~~June~~March 25, ~~2022~~2023 (unaudited) and September 24, 2022	3

Consolidated Statements of Earnings (unaudited) - Three and Six Months Ended March 25, ~~2021~~ 2023 and March 26, 2022	4

~~Consolidated Statements of Earnings (unaudited) - Three and Nine Months Ended June 25, 2022 and June 26, 2021~~	5

Consolidated Statements of Comprehensive Income (unaudited) – Three and ~~Nine~~Six Months Ended ~~June~~March 25, ~~2022~~2023 and ~~June~~March 26, ~~2021~~ 2022	6 5

Consolidated Statements of Changes In Stockholders’ Equity (unaudited) – Three and ~~Nine~~Six Months Ended ~~June~~March 25, 2023 and March 26, 2022 ~~and June 26, 2021~~	7 6

Consolidated Statements of Cash Flows (unaudited) – ~~Nine~~Three and Six Months Ended ~~June~~March 25, ~~2022~~2023 and ~~June~~March 26, ~~2021~~ 2022	8 7

Notes to the Consolidated Financial Statements (unaudited)	98

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3123

Item 3. Quantitative and Qualitative Disclosures About Market Risk	3631

Item 4. Controls and Procedures	3632

Part II. Other Information	37

Item 6. Exhibits	37 33

PART I.FINANCIAL INFORMATION

Item 1.Consolidated Financial Statements

J & J SNACK FOODS CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

	March 25,
	2023			September 24,
	(unaudited)			2022
Assets
Current assets
Cash and cash equivalents	$	43,283		$	35,181
Marketable securities held to maturity		-			4,011
Accounts receivable, net		198,442			208,178
Inventories		180,721			180,473
Prepaid expenses and other		12,062			16,794
Total current assets		434,508			444,637

Property, plant and equipment, at cost
Land		3,714			3,714
Buildings		34,232			34,232
Plant machinery and equipment		396,522			374,566
Marketing equipment		284,509			274,904
Transportation equipment		13,244			11,685
Office equipment		46,355			45,865
Improvements		49,733			49,331
Construction in progress		79,808			65,753
Total Property, plant and equipment, at cost		908,117			860,050
Less accumulated depreciation and amortization		550,000			524,683
Property, plant and equipment, net		358,117			335,367

Other assets
Goodwill		185,070			184,420
Other intangible assets, net		188,347			191,732
Marketable securities available for sale		4,429			5,708
Operating lease right-of-use assets		50,252			51,137
Other		4,234			3,965
Total other assets		432,332			436,962
Total Assets	$	1,224,957		$	1,216,966

Liabilities and Stockholders' Equity
Current Liabilities
Current finance lease liabilities	$	226		$	124
Accounts payable		85,507			108,146
Accrued insurance liability		16,831			15,678
Accrued liabilities		10,448			9,214
Current operating lease liabilities		13,507			13,524
Accrued compensation expense		19,117			21,700
Dividends payable		13,475			13,453
Total current liabilities		159,111			181,839

Long-term debt		92,000			55,000
Noncurrent finance lease liabilities		702			254
Noncurrent operating lease liabilities		41,642			42,660
Deferred income taxes		69,602			70,407
Other long-term liabilities		3,613			3,637

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 19,252,000 and 19,219,000 respectively		100,637			94,026
Accumulated other comprehensive loss		(11,774	)		(13,713	)
Retained Earnings		769,424			782,856
Total stockholders' equity		858,287			863,169
Total Liabilities and Stockholders' Equity	$	1,224,957		$	1,216,966

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)

~~CONSOLIDATED BALANCE SHEETS~~

~~(in thousands, except share amounts)~~

June 25,

2022

September 25,

(unaudited)

2021

Assets

Current assets

Cash and cash equivalents
$ 81,283 $ 283,192
Marketable securities held to maturity
4,520 7,980
Accounts receivable, net
253,469 162,939
Inventories
173,948 123,160
Prepaid expenses and other
10,519 7,498
Total current assets
523,739 584,769

Property, plant and equipment, at cost

Land
3,714 2,494
Buildings
34,742 26,582
Plant machinery and equipment
367,297 343,716
Marketing equipment
266,915 258,624
Transportation equipment
11,780 10,315
Office equipment
45,518 34,648
Improvements
47,922 45,578
Construction in progress
54,537 35,285
Total Property, plant and equipment, at cost
832,425 757,242
Less accumulated depreciation and amortization
513,851 490,055
Property, plant and equipment, net
318,574 267,187

Other assets

Goodwill
188,467 121,833
Other intangible assets, net
196,407 77,776
Marketable securities held to maturity
0 4,047
Marketable securities available for sale
5,608 10,084
Operating lease right-of-use assets
54,990 54,555
Other
3,457 1,968
Total other assets
448,929 270,263
Total Assets
$ 1,291,242 $ 1,122,219

Liabilities and Stockholders' Equity

Current Liabilities

Current finance lease liabilities
$ 189 $ 182
Accounts payable
128,551 96,789
Accrued insurance liability
14,892 16,260
Accrued liabilities
10,121 10,955
Current operating lease liabilities
14,062 13,395
Accrued compensation expense
19,038 17,968
Dividends payable
12,138 12,080
Total current liabilities
198,991 167,629

Long-term debt
125,000 0
Noncurrent finance lease liabilities
318 392
Noncurrent operating lease liabilities
46,017 46,557
Deferred income taxes
61,350 61,578
Other long-term liabilities
3,667 409

Stockholders' Equity

Preferred stock, $1 par value; authorized 10,000,000 shares; none issued
0 0
Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding 19,184,000 and 19,084,000 respectively
90,274 73,597
Accumulated other comprehensive loss
(13,374 ) (13,383 )
Retained Earnings
778,999 785,440
Total stockholders' equity
855,899 845,654
Total Liabilities and Stockholders' Equity
$ 1,291,242 $ 1,122,219

	Three months ended						Six months ended
	March 25,			March 26,			March 25,			March 26,
	2023			2022			2023			2022

Net sales	$	337,854		$	281,513		$	689,197		$	600,003

Cost of goods sold		247,470			216,165			507,958			455,280
Gross profit		90,384			65,348			181,239			144,723

Operating expenses
Marketing		24,017			21,036			47,716			41,943
Distribution		38,188			28,349			80,237			61,664
Administrative		17,919			11,719			34,310			22,088
Other general expense		67			156			(545	)		95
Total operating expenses		80,191			61,260			161,718			125,790

Operating income		10,193			4,088			19,521			18,933

Other income (expense)
Investment income		401			160			1,086			431
Interest expense		(1,334	)		(57	)		(2,383	)		(75	)

Earnings before income taxes		9,260			4,191			18,224			19,289

Income tax expense		2,389			920			4,720			4,927

NET EARNINGS	$	6,871		$	3,271		$	13,504		$	14,362

Earnings per diluted share	$	0.36		$	0.17		$	0.70		$	0.75

Weighted average number of diluted shares		19,295			19,206			19,285			19,180

Earnings per basic share	$	0.36		$	0.17		$	0.70		$	0.75

Weighted average number of basic shares		19,238			19,134			19,230			19,110

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)

~~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 25,

June 26,

June 25,

June 26,

2022

2021

2022

2021

Net sales
$ 380,227 $ 324,344 $ 980,230 $ 821,519

Cost of goods sold
271,151 228,170 726,431 614,324
Gross profit
109,076 96,174 253,799 207,195

Operating expenses

Marketing
24,002 20,502 65,945 56,995
Distribution
48,157 27,311 109,821 75,643
Administrative
15,724 10,348 37,812 29,004
Other general expense
(67 ) (131 ) 28 (399 )
Total operating expenses
87,816 58,030 213,606 161,243

Operating income
21,260 38,144 40,193 45,952

Other income (expense)

Investment income
106 470 537 2,419
Interest expense & other
(156 ) (8 ) (231 ) (19 )

Earnings before income taxes
21,210 38,606 40,499 48,352

Income taxes
5,647 9,713 10,574 11,620

NET EARNINGS
$ 15,563 $ 28,893 $ 29,925 $ 36,732

Earnings per diluted share
$ 0.81 $ 1.51 $ 1.56 $ 1.92

Weighted average number of diluted shares
19,234 19,185 19,198 19,116

Earnings per basic share
$ 0.81 $ 1.52 $ 1.56 $ 1.93

Weighted average number of basic shares
19,174 19,045 19,131 18,996

	Three months ended				Six months Ended
	March 25,		March 26,		March 25,		March 26,
	2023		2022		2023		2022

Net earnings	$	6,871	$	3,271	$	13,504	$	14,362

Foreign currency translation adjustments		1,068		546		1,939		102
Total other comprehensive income, net of tax		1,068		546		1,939		102

Comprehensive income	$	7,939	$	3,817	$	15,443	$	14,464

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 as September 24, 2022		19,219	$	94,026	$	(13,713	)	$	782,856		$	863,169

Issuance of common stock upon exercise of stock options		10		1,285		-			-			1,285
Foreign currency translation adjustment		-		-		871			-			871
Dividends declared		-		-		-			(13,461	)		(13,461	)
Share-based compensation		-		1,239		-			-			1,239
Net earnings		-		-		-			6,633			6,633
Balance at December 24, 2022		19,229	$	96,550	$	(12,842	)	$	776,028		$	859,736

Issuance of common stock upon exercise of stock options		14		1,713		-			-			1,713
Issuance of common stock for employee stock purchase plan		9		1,061		-			-			1,061
Foreign currency translation adjustment		-		-		1,068			-			1,068
Dividends declared		-		-		-			(13,475	)		(13,475	)
Share-based compensation		-		1,313		-			-			1,313
Net earnings		-		-		-			6,871			6,871
Balance at March 25, 2023		19,252	$	100,637	$	(11,774	)	$	769,424		$	858,287

~~J & J SNACK FOODS CORP. AND SUBSIDIARIES~~
~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~
~~(Unaudited)~~
~~(in thousands)~~

Three Months Ended

Nine Months Ended

June 25,

June 26,

June 25,

June 26,

2022

2021

2022

2021

Net earnings
$ 15,563 $ 28,893 $ 29,925 $ 36,732

Foreign currency translation adjustments
(93 ) 657 9 2,405
Total other comprehensive (loss) income
(93 ) 657 9 2,405

Comprehensive income
$ 15,470 $ 29,550 $ 29,934 $ 39,137

					Accumulated
					Other
	Common Stock				Comprehensive			Retained
	Shares		Amount		Loss			Earnings			Total

Balance as September 25, 2021		19,084	$	73,597	$	(13,383	)	$	785,440		$	845,654

Issuance of common stock upon exercise of stock options		5		706		-			-			706
Foreign currency translation adjustment		-		-		(444	)		-			(444	)
Dividends declared		-		-		-			(12,092	)		(12,092	)
Share-based compensation		-		1,083		-			-			1,083
Net earnings		-		-		-			11,091			11,091
Balance at December 25, 2021		19,089	$	75,386	$	(13,827	)	$	784,439		$	845,998

Issuance of common stock upon exercise of stock options		76		10,012		-			-			10,012
Issuance of common stock for employee stock purchase plan		8		1,023		-			-			1,023
Foreign currency translation adjustment		-		-		546			-			546
Dividends declared		-		-		-			(12,136	)		(12,136	)
Share-based compensation		-		1,267		-			-			1,267
Net earnings		-		-		-			3,271			3,271
Balance at March 26, 2022		19,173	$	87,688	$	(13,281	)	$	775,574		$	849,981

The accompanying notes are an integral part of these statements.

J & J SNACK FOODS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (in thousands)

~~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 as September 25, 2021
19,084 $ 73,597 $ (13,383 ) $ 785,440 $ 845,654
Issuance of common stock upon exercise of stock options
5 706 0 0 706
Foreign currency translation adjustment
- 0 (444 ) 0 (444 )
Dividends declared
- 0 0 (12,092 ) (12,092 )
Share-based compensation
- 1,083 0 0 1,083
Net earnings
- 0 0 11,091 11,091

Balance at December 25, 2021
19,089 $ 75,386 $ (13,827 ) $ 784,439 $ 845,998
Issuance of common stock upon exercise of stock options
76 10,012 0 0 10,012
Issuance of common stock for employee stock purchase plan
8 1,023 0 0 1,023
Foreign currency translation adjustment
- 0 546 0 546
Dividends declared
- 0 0 (12,136 ) (12,136 )
Share-based compensation
- 1,267 0 0 1,267
Net earnings
- 0 0 3,271 3,271

Balance at March 26, 2022
19,173 $ 87,688 $ (13,281 ) $ 775,574 $ 849,981
Issuance of common stock upon exercise of stock options
11 1,452 0 0 1,452
Issuance of common stock for employee stock purchase plan
- - - - -
Foreign currency translation adjustment
- 0 (93 ) 0 (93 )
Dividends declared
- 0 0 (12,138 ) (12,138 )
Share-based compensation
- 1,134 0 0 1,134
Net earnings
- 0 0 15,563 15,563

Balance at June 25, 2022
19,184 $ 90,274 $ (13,374 ) $ 778,999 $ 855,899

Accumulated

Other

Common Stock

Comprehensive

Retained

Shares

Amount

Loss

Earnings

Total

Balance as September 26, 2020
18,915 $ 49,268 $ (15,587 ) $ 775,817 $ 809,498
Issuance of common stock upon exercise of stock options
41 4,390 0 0 4,390
Foreign currency translation adjustment
- 0 2,279 0 2,279
Dividends declared
- 0 0 (10,900 ) (10,900 )
Share-based compensation
- 1,244 0 0 1,244
Net earnings
- 0 0 1,778 1,778

Balance at December 26, 2020
18,956 $ 54,902 $ (13,308 ) $ 766,695 $ 808,289
Issuance of common stock upon exercise of stock options
72 8,384 0 0 8,384
Issuance of common stock for employee stock purchase plan
6 714 0 0 714
Foreign currency translation adjustment
- 0 (531 ) 0 (531 )
Dividends declared
- 0 0 (10,943 ) (10,943 )
Share-based compensation
- 1,026 0 0 1,026
Net earnings
- 0 0 6,061 6,061

Balance at March 27, 2021
19,034 $ 65,026 $ (13,839 ) $ 761,813 $ 813,000
Issuance of common stock upon exercise of stock options
27 3,564 0 0 3,564
Issuance of common stock for employee stock purchase plan
- - - - -
Foreign currency translation adjustment
- 0 657 0 657
Dividends declared
- 0 0 (12,066 ) (12,066 )
Share-based compensation
- 982 0 0 982
Net earnings
- 0 0 28,893 28,893

Balance at June 26, 2021
19,061 $ 69,572 $ (13,182 ) $ 778,640 $ 835,030

	Six months ended
	March 25,			March 26,
	2023			2022
Operating activities:
Net earnings	$	13,504		$	14,362
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation of fixed assets		27,236			23,868
Amortization of intangibles and deferred costs		3,385			1,183
(Gain) loss from disposals of property & equipment		(354	)		100
Share-based compensation		2,552			2,350
Deferred income taxes		(787	)		(251	)
(Gain) loss on marketable securities		(22	)		69
Other		(255	)		(184	)
Changes in assets and liabilities, net of effects from purchase of companies
Decrease (increase) in accounts receivable		10,541			(25,031	)
Decrease (increase) in inventories		823			(36,538	)
Decrease (increase) in prepaid expenses		4,787			(4,308	)
(Decrease) in accounts payable and accrued liabilities		(25,739	)		(2,055	)
Net cash provided by (used in) operating activities		35,671			(26,435	)

Investing activities:
Purchases of property, plant and equipment		(49,124	)		(35,306	)
Proceeds from redemption and sales of marketable securities		5,300			11,526
Proceeds from disposal of property and equipment		797			589
Net cash (used in) investing activities		(43,027	)		(23,191	)

Financing activities:
Proceeds from issuance of stock		4,059			11,741
Borrowings under credit facility		92,000			-
Repayment of borrowings under credit facility		(55,000	)		-
Payments on finance lease obligations		(71	)		(111	)
Payment of cash dividend		(26,914	)		(24,163	)
Net cash provided by (used in) financing activities		14,074			(12,533	)

Effect of exchange rates on cash and cash equivalents		1,384			(16	)

Net increase (decrease) in cash and cash equivalents		8,102			(62,175	)
Cash and cash equivalents at beginning of period		35,181			283,192
Cash and cash equivalents at end of period	$	43,283		$	221,017

The accompanying notes are an integral part of these statements.

~~J & J SNACK FOODS CORP. AND SUBSIDIARIES~~
~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~
~~(Unaudited)~~
~~(in thousands)~~

Nine Months Ended

June 25,

June 26,

2022

2021

Operating activities:

Net earnings
$ 29,925 $ 36,732
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:

Depreciation of fixed assets
36,292 36,278
Amortization of intangibles and deferred costs
1,775 2,096
Loss from disposals of property & equipment
50 0
Share-based compensation
3,484 3,252
Deferred income taxes
(227 ) (188 )
Loss (Gain) on marketable securities
412 (926 )
Other
(212 ) (305 )
Changes in assets and liabilities net of effects from purchase of companies

Increase in accounts receivable
(78,058 ) (27,940 )
Increase in inventories
(42,784 ) (5,964 )
(Increase) decrease in prepaid expenses
(102 ) 5,710
Increase in accounts payable and accrued liabilities
19,798 24,823
Net cash (used in) provided by operating activities
(29,647 ) 73,568
Investing activities:

Payments for purchases of companies, net of cash acquired
(221,301 ) 0
Purchases of property, plant and equipment
(64,231 ) (34,456 )
Proceeds from redemption and sales of marketable securities
11,526 54,191
Proceeds from disposal of property and equipment
1,147 2,079
Other
0 42
Net cash (used in) provided by investing activities
(272,859 ) 21,856
Financing activities:

Proceeds from issuance of stock
12,168 17,178
Borrowings under credit facility 125,000 0
Payments for debt issue costs
(225 ) 0
Payments on finance lease obligations
(150 ) (48 )
Payment of cash dividend
(36,299 ) (32,719 )
Net cash provided by (used in) financing activities
100,494 (15,589 )
Effect of exchange rate on cash and cash equivalents
103 624
Net (decrease) increase in cash and cash equivalents
(201,909 ) 80,459
Cash and cash equivalents at beginning of period
283,192 195,809
Cash and cash equivalents at end of period
$ 81,283 $ 276,268

~~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 and Rule~~ 10-01Basis of ~~Regulation 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 for the year ended~~ ~~September 25, 2021.~~Presentation

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 and Rule 10-01 of Regulation 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 for the year ended September 24, 2022.

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 ~~Company’s~~ financial position and the results of operations and cash flows.

The results of operations for the three and ~~nine~~six months ended ~~June~~March 25, 2023 and March 26, 2022 ~~and~~ ~~June 26, 2021~~ are not necessarily indicative of results for the full year. Sales of our frozen beverages and frozen novelties are generally higher in the fiscal third and fourth quarters due to warmer weather. ~~Also, approximately~~ ~~2/3~~ ~~of our sales are to venues and locations that previously shut down or sharply curtailed their foodservice operations as a result of COVID-~~~~19.~~ ~~While the majority of these venues have reopened, the extent of the future impact of COVID-~~19 ~~on our operations depends on future developments of the virus and its effects which are uncertain at this time.~~

While we believe that the disclosures presented are adequate to make the information not misleading, ~~we suggest~~it is suggested that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes included in the Company’s Annual Report on Form 10-K10-K for the fiscal year ended September ~~25, 2021.~~24, 2022.

Note 2

On ~~June 21, 2022,~~ ~~J & J Snack Foods Corp. and its wholly-owned subsidiary, DD Acquisition Holdings, LLC, completed the acquisition of~~ ~~one hundred~~ percent (100%) of the equity interests of Dippin’ Dots Holding, L.L.C. (“Dippin’ Dots”) which, through its wholly-owned subsidiaries, owns and operates the Dippin’ Dots and Doc Popcorn businesses. The purchase price was approximately $223,561,000, consisting entirely of cash, and ~~may~~ ~~be modified for certain customary post-closing purchase price adjustments.~~Business Combinations

On June 21, 2022, J & J Snack Foods Corp. and its wholly-owned subsidiary, DD Acquisition Holdings, LLC, completed the acquisition of one hundred percent (100%) of the equity interests of Dippin’ Dots Holding, L.L.C. (“Dippin’ Dots”) which, through its wholly-owned subsidiaries, owns and operates the Dippin’ Dots and Doc Popcorn businesses. The purchase price was approximately $223.6 million, consisting entirely of cash, and may be modified for certain customary post-closing purchase price adjustments.

Dippin’ Dots is a leading producer of flash-frozen beaded ice cream treats, and the acquisition will leverage synergies in entertainment and amusement locations, theaters, and convenience to continue to expand our business. The acquisition also includes the Doc Popcorn business operated by Dippin’ Dots.

The financial results of Dippin’ Dots have been included in our consolidated financial statements since the date of the acquisition. Sales and net earnings (loss) of Dippin’ Dots ~~since the date of acquisition~~ were ~~$2,218,000~~$16.0 million and ~~$621,000~~($0.2) million for the three months ended March 25, 2023 and ~~nine~~~~-months~~$29.3 million and ($0.8) million for the six months ended ~~June~~March 25, ~~2022.~~ 2023. Dippin’ Dots is reported as part of our Food Service segment. ~~Included within Administrative expenses for the quarter were $3,088,000 of acquisition costs.~~

Upon acquisition, the assets and liabilities of Dippin’ Dots were adjusted to their respective fair values as of the closing date of the transaction, including the identifiable intangible assets acquired. In addition, the excess of the purchase price over the fair value of the net assets acquired has been recorded as goodwill. The fair value estimates used in valuing certain acquired assets and liabilities are based, in part, on inputs that are unobservable. For intangible assets, these include, but are not limited to, forecasted future cash flows, revenue growth rates, attrition rates and discount rates.

The purchase price allocation as of the date of acquisition was based on a preliminary valuation and is subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available.

During the three months ended March 25, 2023, we recorded a measurement period adjustment to the estimated fair values initially recorded on June 21, 2022 which resulted in an increase in Other Current Liabilities of $0.7 million and an increase in Goodwill of $0.7 million. In fiscal year 2022, we previously recorded measurement period adjustments to the estimated fair values initially recorded on June 21, 2022, which resulted in an increase to Property, plant, and equipment, net of $6.5 million, and reductions in Goodwill, Identifiable intangible assets, and Inventories of $4.0 million, $2.2 million, and $0.3 million, respectively. The measurement period adjustments were recorded to better reflect market participant assumptions about facts and circumstances existing as of the acquisition date and did not have a material impact on our consolidated statement of income for the three months, or the six months, ended March 25, 2023.

The major classes of assets and liabilities to which we have preliminarily allocated the purchase price were as follows:

Preliminary Dippin' Dots Purchase Price Allocation (1)(1)

			Preliminary Value
			as of acquisition
			date (as previously		Measurement
	(in thousands)		reported as of		Period
	June 21,		June 25, 2022)		Adjustment			As Adjusted
	2022		(in thousands)

Cash and cash equivalents	$	2,259	$	2,259				$	2,259
Accounts receivable, net		12,257		12,257					12,257
Inventories		8,812		8,812		(301	)		8,511
Prepaid expenses and other		1,215		1,215					1,215
Property, plant and equipment, net		24,622		24,622		6,548			31,170
Intangible assets		120,400		120,400		(2,200	)		118,200
Goodwill⁽²⁾		66,634		66,634		(3,397	)		63,237
Operating lease right-of-use assets		3,514		3,514					3,514
Other noncurrent assets		243		243					243
Total assets acquired		239,956		239,956		650			240,606
Liabilities assumed:
Current lease liabilities		619		619					619
Accounts payable		6,005		6,005					6,005
Other current liabilities		3,532		3,532		650			4,182
Noncurrent lease liabilities		2,954		2,954					2,954
Other noncurrent liabilities		3,285		3,285					3,285
Total liabilities acquired		16,395		16,395		650			17,045
Purchase price	$	223,561	$	223,561	$	-		$	223,561

(1)

(1) Due to the limited time since the date of the acquisition, the purchase price allocation remains preliminary.

(2) Goodwill was assigned to our Food Services segment and was primarily attributed to the assembled workforce of the acquired business and to our expectations of favorable growth opportunities in entertainment and amusement locations, theaters, and convenience based on increased synergies that are expected to be achieved from the integration of Dippin’ Dots.

~~Due to the limited time since the date of the acquisition, the purchase price allocation remains preliminary.~~

(2)

Goodwill was assigned to our Food Services segment and was primarily attributed to the assembled workforce of the acquired business and to our expectations of favorable growth opportunities in entertainment and amusement locations, theaters, and convenience based on increased synergies that are expected to be achieved from the integration of Dippin’ Dots.

Acquired Intangible Assets

(in thousands)

Weighted average

June 21,

life (years)

2022

Amortizable

Trade name

indefinite
76,900
Customer relationships
10 12,100
Technology
10 22,900
Franchise agreements
10 8,500
Total acquired intangible assets
120,400

Acquired Intangible Assets

	Weighted average		June 21,
	life (years)		2022
			(in thousands)
Amortizable
Trade name	indefinite		$	76,900
Developed technology		10		22,900
Customer relationships		10		9,900
Franchise agreements		10		8,500
Total acquired intangible assets			$	118,200

Dippin' Dots Results Included in the Company's Consolidated Results

	(in thousands)				Three months ended			Six months ended
	Three Months ended		Nine Months ended		March 25,			March 25,
	June 25,		June 25,		2023			2023
	2022		2022		(in thousands)			(in thousands)

Net sales	$	2,218	$	2,218	$	15,967		$	29,345
Net earnings	$	621	$	621
Net earnings (loss)					$	(163	)	$	(830	)

~~The following unaudited pro forma information presents the consolidated results of operations as if the business combination in~~ ~~2022~~ ~~had occurred as of~~ ~~September 27, 2020,~~ ~~after giving effect to acquisition-related adjustments, including: (~~1~~) depreciation and amortization of assets; (~~2~~) amortization of unfavorable contracts related to the fair value adjustments of the assets acquired; (~~3~~) change in the effective tax rate; (~~4~~) interest expense on any debt incurred to fund the acquisitions which would have been incurred had such acquisitions occurred as of~~ ~~September 27, 2020;~~ ~~and (~~5~~) merger and acquisition costs.~~

~~J & J Snack Foods Corp and Dippin' Dots Unaudited Pro Forma Combined Financial Information~~

(in thousands)

Three Months ended

Nine Months ended

June 25,

June 26,

June 25,

June 26,

2022

2021

2022

2021

Net sales
$ 404,182 $ 349,722 $ 1,028,079 $ 861,536
Net earnings
$ 17,838 $ 33,980 $ 31,501 $ 35,893

Earnings per diluted share
$ 0.93 $ 1.77 $ 1.64 $ 1.88
Weighted average number of diluted shares
19,234 19,185 19,198 19,116

~~The pro forma information does~~ ~~not~~ ~~reflect the potential benefits of cost and funding synergies, opportunities to earn additional revenues, or other factors, and therefore does~~ ~~not~~ ~~represent what the actual Net sales and Net earnings would have been had the companies actually been combined as of this date.~~

Note 3

Revenue Recognition

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 a contract liability ~~recorded within Accrued liabilities~~ on our balance sheet.

The Company is entitled to royalties under its agreements with franchisees. Sales-based royalties are related entirely to the Company’s performance obligation under the franchise agreements and are recognized on a monthly basis. Purchase-based royalties are related entirely to the Company’s performance obligation under the franchise agreements and are recognized on a weekly basis.

Under franchise agreements, the Company provides franchisees with a franchise license allowing the use of brand intellectual property and certain ongoing services. As the performance obligations are satisfied, over time, franchise, renewal and transfer fees are recognized on a straight-line basis over the terms of the franchise agreement.

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.

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. Our recorded liability for allowances, end-user pricing adjustments and trade spending was ~~$16,907,000~~$13.8 million at ~~June~~March 25, ~~2022~~ 2023 and ~~$14,646,000~~$14.7 million at September ~~25, 2021.~~24, 2022.

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

~~Contract liabilities consist of deferred revenue resulting from service contracts in our Frozen Beverages segment where our~~

Our customers are billed for service contracts in advance of ~~performance. Contract liabilities also consist of deferred revenue in our Food Service segment resulting from initial franchise fees paid by franchisees, as well as renewal~~performance and ~~transfer fees paid by franchisees and license fees paid by licensees which are generally recognized on a straight-line basis over the term of the underlying agreement. Therefore,~~therefore we have contract ~~liabilities~~liability on our balance sheet as follows:

	(in thousands)												Three months ended						Six months ended
	Three Months Ended						Nine Months Ended						March 25,			March 26,			March 25,			March 26,
	June 25,			June 26,			June 25,			June 26,			2023			2022			2023			2022
	2022			2021			2022			2021			(in thousands)						(in thousands)

Beginning Balance	$	1,092		$	1,090		$	1,097		$	1,327
Beginning balance													$	4,767		$	1,030		$	4,926		$	1,097
Additions to contract liability		2,270			1,237			4,843			4,182			1,527			1,374			2,917			2,573
Amounts recognized as revenue		(1,276	)		(1,283	)		(3,854	)		(4,465	)		(1,465	)		(1,312	)		(3,014	)		(2,578	)
Ending Balance	$	2,086		$	1,044		$	2,086		$	1,044
Ending balance													$	4,829		$	1,092		$	4,829		$	1,092

Disaggregation of Revenue

See Note 11 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. On~~ ~~September 27, 2020,~~ ~~the Company adopted guidance issued by the FASB in ASU~~ ~~2016~~-~~13,~~~~Measurement of Credit Losses on Financial Instruments~~~~, which requires companies to recognize an allowance that reflects a current estimate of credit losses expected to be incurred over the life of the asset. Adoption of this new guidance did~~ ~~not~~ ~~have a material impact on the consolidated financial statements.~~ The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses. The allowance for doubtful accounts considers a number of factors including the age of receivable balances, the history of losses, expectations of future credit losses, and the customers’ ability to pay off obligations. The allowance for doubtful receivables was ~~$1,629,000~~$2.3 million and ~~$1,405,000~~$2.2 million on ~~June~~March 25, 2023 and September 24, 2022, respectively.

Note 4

Depreciation and Amortization Expense

Depreciation of equipment and ~~September~~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, franchise agreements, technology and non-compete agreements arising from acquisitions are amortized by the straight-line method over periods ranging from 2 to 20 years. Depreciation expense was $13.8 million and $11.9 million for the three months ended March 25, ~~2021,~~ 2023 and March 26, 2022, respectively and $27.2 million and $23.9 million for the six months ended March 25, 2023 and March 26, 2022, respectively.

Note 45

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, technology, and non-compete agreements arising from acquisitions are amortized by the straight-line method over periods ranging from 2 to 20 years. Depreciation expense was $12,424,000 and $12,025,000 for the ~~three~~ ~~months ended~~ ~~June 25, 2022~~ ~~and~~ ~~June 26, 2021,~~ ~~respectively and $36,292,000 and $36,278,000 for the~~ ~~nine~~ ~~months ended~~ ~~June 25, 2022~~ ~~and~~ ~~June 26, 2021,~~ ~~respectively.~~Earnings per Share

~~Note~~ 5

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 and restricted stock units (“RSU”)’s) or other contracts to issue common stock were exercised and converted into common stock. Our calculation of EPS is as follows:

	Three Months Ended June 25, 2022
	Income		Shares		Per Share		Three months ended March 25, 2023
	(Numerator)		(Denominator)		Amount		Income		Shares		Per Share
							(Numerator)		(Denominator)		Amount
	(in thousands, except per share amounts)						(in thousands, except per share amounts)
Basic EPS
Net earnings available to common stockholders	$	15,563		19,174	$	0.81	$	6,871		19,238	$	0.36

Effect of dilutive securities
Options		0		60		0
RSU's and options								-		57		-

Diluted EPS
Net earnings available to common stockholders plus assumed conversions	$	15,563		19,234	$	0.81	$	6,871		19,295	$	0.36

~~382,431~~381,735 anti-dilutive shares have been excluded in the computation of EPS for the three months ended ~~June~~March 25, ~~2022.~~2023.

Nine Months ended June 25, 2022

Income

Shares

Per Share

(Numerator)

(Denominator)

Amount

(in thousands, except per share amounts)

Basic EPS

Net earnings available to common stockholders
$ 29,925 19,131 $ 1.56

Effect of dilutive securities

Options
0 67 0

Diluted EPS

Net earnings available to common stockholders plus assumed conversions
$ 29,925 19,198 $ 1.56

	Six months ended March 25, 2023
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount
	(in thousands, except per share amounts)
Basic EPS
Net earnings available to common stockholders	$	13,504		19,230	$	0.70

Effect of dilutive securities
RSU's and options		-		55		-

Diluted EPS
Net earnings available to common stockholders plus assumed conversions	$	13,504		19,285	$	0.70

~~302,674~~386,510 anti-dilutive shares have been excluded in the computation of EPS for the ~~nine~~six months ended ~~June~~March 25, ~~2022.~~2023.

Three Months Ended June 26, 2021

Income

Shares

Per Share

(Numerator)

(Denominator)

Amount

(in thousands, except per share amounts)

Basic EPS

Net earnings available to common stockholders
$ 28,893 19,045 $ 1.52

Effect of dilutive securities

Options
0 140 0

Diluted EPS

Net earnings available to common stockholders plus assumed conversions
$ 28,893 19,185 $ 1.51

	Three months ended March 26, 2022
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount
	(in thousands, except per share amounts)
Basic EPS
Net earnings available to common stockholders	$	3,271		19,134	$	0.17

Effect of dilutive securities
RSU's and options		-		72		-

Diluted EPS
Net earnings available to common stockholders plus assumed conversions	$	3,271		19,206	$	0.17

~~20,800~~270,352 anti-dilutive shares have been excluded in the computation of EPS for the three months ended ~~June~~March 26, ~~2021.~~2022.

Nine Months Ended June 26, 2021

Income

Shares

Per Share

(Numerator)

(Denominator)

Amount

(in thousands, except per share amounts)

Basic EPS

Net earnings available to common stockholders
$ 36,732 18,996 $ 1.93

Effect of dilutive securities

Options
0 120 0

Diluted EPS

Net earnings available to common stockholders plus assumed conversions
$ 36,732 19,116 $ 1.92

	Six months ended March 26, 2022
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount
	(in thousands, except per share amounts)
Basic EPS
Net earnings available to common stockholders	$	14,362		19,110	$	0.75

Effect of dilutive securities
RSU's and options		-		70		-

Diluted EPS
Net earnings available to common stockholders plus assumed conversions	$	14,362		19,180	$	0.75

~~289,692~~271,452 anti-dilutive shares have been excluded in the computation of EPS for the ~~nine~~six months ended ~~June~~March 26, ~~2021.~~2022.

Note 6

At ~~June 25, 2022,~~ ~~the Company has~~ ~~three~~ ~~stock-based employee compensation plans. Share-based compensation expense was recognized as follows:~~Share-Based Compensation and Post-Retirement Benefits

Three Months Ended

Nine Months Ended

June 25,

June 26,

June 25,

June 26,

2022

2021

2022

2021

Stock options
$ 693 $ 523 $ 2,115 $ 1,538
Stock purchase plan
90 171 240 513
Restricted stock issued to employees
152 23 376 70
Performance stock issued to employees
83 0 204 0
Total share-based compensation
$ 1,018 $ 717 $ 2,935 $ 2,121

The above compensation is net of tax benefits
$ 116 $ 265 $ 549 $ 1,131

At March 25, 2023, the Company has three stock-based employee compensation plans. Share-based compensation expense was recognized as follows:

	Three months ended				Six months ended
	March 25,		March 26,		March 25,		March 26,
	2023		2022		2023		2022
	(in thousands)				(in thousands)

Stock options	$	559	$	586	$	1,179	$	1,400
Stock purchase plan		197		90		424		150
Stock issued to outside directors		27		11		27		22
Service share units issued to employees		193		152		374		224
Performance share units issued to employees		171		82		243		121
Total share-based compensation	$	1,147	$	921	$	2,247	$	1,917

The above compensation is net of tax benefits	$	166	$	346	$	305	$	433

The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model.

~~During the fiscal year~~ ~~2022~~~~nine~~~~-month period, the Company granted 115,700 stock options. The weighted-average grant date fair value of these options was $23.36.~~

~~During the fiscal year~~ ~~2021~~~~nine~~~~-month period, the Company granted 138,432 stock options. The weighted-average grant date fair value of these options was $31.20.~~

~~The Company issued 327 service share units (“RSU”)’s in the~~ ~~three~~~~-months ended~~ ~~June 25, 2022,~~ ~~and 9,200 RSU’s in the~~ ~~nine~~~~-months ended~~ ~~June 25, 2022.~~ ~~Each RSU entitles the awardee to~~ ~~one~~ ~~share of common stock upon vesting. The fair value of RSU’s was determined based upon the closing price of the Company’s common stock on the date of grant. NaN such RSU’s were issued in the~~ ~~three~~ or ~~nine~~~~-months ended~~ ~~June 26, 2021.~~

In ~~November 2021,~~ ~~the Company also issued 8,868 performance share units (“PSU”)’s. Each PSU~~ ~~may~~ ~~result in the issuance of up to~~ ~~two~~ shares of common stock upon vesting, dependent upon the level of achievement of the applicable Performance Goal. The fair value of the PSU’s was determined based upon the closing price of the Company’s common stock on the date of grant. Additionally, the Company applies a quarterly probability assessment in computing this non-cash compensation expense, and any change in estimate is reflected as a cumulative adjustment to expense in the quarter of the change. NaN such PSU’s were issued in the ~~three~~~~-months ended~~ ~~June 25, 2022~~ ~~or in the~~ ~~three~~ or ~~nine~~~~-months ended~~ ~~June 26, 2021.~~

Expected volatility is based on the historical volatility of the price of our common shares over the past 51 months for 5~~-year~~5-year options and 10 years for 10~~-year~~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.

The Company did not grant any stock options during the six months ended March 25, 2023 or during the six months ended March 26, 2022.

During the six months ended March 25, 2023, the Company issued 9,900 service share units (“RSU”)’s. Each RSU entitles the awardee to one share of common stock upon vesting. During the six months ended March 26, 2022, the Company issued 8,873 RSU’s. The fair value of the RSU’s was determined based upon the closing price of the Company’s common stock on the date of grant. No such RSU’s were issued in the three months ended March 25, 2023 or March 26, 2022.

During the six months ended March 25, 2023, the Company also issued 18,641 performance share units (“PSU”)’s. Each PSU may result in the issuance of up to two shares of common stock upon vesting, dependent upon the level of achievement of the applicable Performance Goal. The fair value of the PSU’s was determined based upon the closing price of the Company’s common stock on the date of grant. Additionally, the Company applies a quarterly probability assessment in computing this non-cash compensation expense, and any change in estimate is reflected as a cumulative adjustment to expense in the quarter of the change. During the six months ended March 26, 2022, the Company issued 8,868 PSU’s. No such PSU’s were issued in the three months ended March 25, 2023 or March 26, 2022.

Note 7

Income Taxes

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.

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 ~~$343,000~~$0.3 million on both ~~June~~March 25, 2023 and September 24, 2022, ~~and~~ ~~September 25, 2021,~~ 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 ~~June~~March 25, 2023, and September 24, 2022, ~~and~~ ~~September 25, 2021,~~ the Company has ~~$267,000~~$0.3 million of accrued interest and ~~penalties.~~penalties, respectively.

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.

Our effective tax rate was ~~26%~~25.8% for the ~~nine~~three months ended ~~June~~March 25, ~~2022~~ ~~and 24% for~~2023, as compared with 21.9% in the ~~nine~~ ~~months ended~~ ~~June 26, 2021.~~ prior year period, with the increase due to the impact of stock-based compensation expense in the prior year period.

Our effective tax rate was ~~27%~~25.9% for the ~~three~~six months ended ~~June~~March 25, ~~2022~~ ~~and 25% for~~2023, as compared with 25.5% in the ~~three~~ ~~months ended~~ ~~June 26, 2021.~~prior year period.

Note 8

In ~~June 2016,~~ ~~the FASB issued ASU~~ ~~2016~~-~~13,~~~~Measurement of Credit Losses on Financial Instruments~~, which changes the impairment model used to measure credit losses for most financial assets. We are required to recognize an allowance that reflects the Company’s current estimate of credit losses expected to be incurred over the life of the financial asset, including trade receivablesNew Accounting Pronouncements and ~~held-to-maturity debt securities.~~Policies

~~The Company adopted this~~In December 2022, the FASB issued ASU No. 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848", to provide optional guidance to temporarily ease the potential burden in accounting for (or recognizing the ~~first~~ ~~quarter of Fiscal~~ ~~2021~~ ~~using~~effects of) reference rate reform on financial reporting. Preceding the ~~modified retrospective transition method. The adoption~~issuance of ASU ~~2016~~-13 ~~did~~ 2020-04, which established ASC 848, the United Kingdom's Financial Conduct Authority ("FCA") announced that it would no longer need to persuade or compel banks to submit to LIBOR after December 31, 2021. In response, the FASB established December 31, 2022 as the expiration date for ASC 848. In March 2021, the FCA announced the intended cessation date of the overnight 1-, 3-, 6-, and 12-month USD LIBOR would be June 30, 2023. Because the current relief in Topic 848 may not cover a period of time during which a significant number of modifications may take place, this update deferred the sunset date in Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. This guidance is not expected to have a material impact on ~~the Company’s~~our consolidated financial ~~statements.~~statements and disclosures.

In September 2022, the FASB issued ASU No. 2022-04 “Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations”. This guidance requires annual and interim disclosures for entities that use supplier finance programs in connection with the purchase of goods and services. These amendments are effective for fiscal years beginning after December 15, 2022, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. We are currently assessing the impact of the guidance on our consolidated financial statements and disclosures.

Note 9

In ~~December 2021,~~ ~~the Company entered into an amended and restated loan agreement (the “Credit Agreement”) with our existing banks which provided for up to a $50,000,000 revolving credit facility repayable in~~ ~~December 2026.~~Long-Term Debt

In December 2021, the Company entered into an amended and restated loan agreement (the “Credit Agreement”) with our existing banks which provided for up to a $50 million revolving credit facility repayable in December 2026.

Interest accrues, at the Company’s election at (i) the BSBY Rate (as defined in the Credit Agreement) plus an applicable margin, based upon the Consolidated Net Leverage Ratio, as defined in the Credit Agreement, or (ii) the Alternate Base Rate (a rate based on the higher of (a) the prime rate announced from time-to-time by the Administrative Agent, (b) the Federal Reserve System’s federal funds rate, plus 0.50% or (c) the Daily BSBY Rate, plus an applicable ~~margin.~~margin). The Alternate Base Rate is defined in the Credit Agreement.

The Credit Agreement requires the Company to comply with various affirmative and negative covenants, including without limitation (i) covenants to maintain a minimum specified interest coverage ratio and maximum specified net leverage ratio, and (ii) subject to certain exceptions, covenants that prevent or restrict the Company’s ability to pay dividends, engage in certain mergers or acquisitions, make certain investments or loans, incur future indebtedness, alter its capital structure or line of business, prepay subordinated indebtedness, engage in certain transactions with affiliates, or amend its organizational documents. As of ~~June~~March 25, ~~2022,~~ 2023, the Company is in compliance with all financial covenants terms of the Credit Agreement.

On June 21, 2022, the Company entered into an amendment to the Credit Agreement, the “Amended Credit Agreement” which provided for an incremental increase of ~~$175,000,000~~$175 million in available borrowings. The Amended Credit Agreement also includes an option to increase the size of the revolving credit facility by up to an amount not to exceed in the aggregate the greater of ~~$225,000,000~~$225 million or ~~$50,000,000~~$50 million, plus the Consolidated EBITDA of the Borrowers, subject to the satisfaction of certain terms and conditions.

As of ~~June~~March 25, ~~2022,~~ ~~$125,000,000~~2023, $92 million was outstanding under the Amended Credit ~~Agreement.~~Agreement with a weighted average interest rate of 5.50%. These borrowings have been classified as Long-Term Debt on the Company’s Balance Sheet. As of ~~June~~March 25, ~~2022,~~ 2023, the amount available under the Amended Credit Agreement was ~~$91,225,000~~$123.2 million, after giving effect to the outstanding letters of credit. As of September ~~25, 2021,~~ ~~there were 0~~24, 2022, $55.0 million was outstanding balances under the Credit Agreement. As of September 24, 2022, the amount available under the Amended Agreement was $160.2 million, after giving effect to the outstanding letters of credit.

~~Note~~ 10

~~Inventories consist of the following:~~

June 25,

September 25,

2022

2021

(unaudited)

(in thousands)

Finished goods
$ 83,201 $ 49,756
Raw materials
39,856 29,529
Packaging materials
15,832 11,168
Equipment parts and other
35,059 32,707
Total inventories
$ 173,948 $ 123,160

Note 1110

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 Maker.~~Inventory

Inventories consist of the following:

	March 25,		September 24,
	2023		2022
	(unaudited)
	(in thousands)

Finished goods	$	93,409	$	86,464
Raw materials		35,142		41,505
Packaging materials		14,610		16,637
Equipment parts and other		37,560		35,867
Total inventories	$	180,721	$	180,473

Note 11

Segment Information

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 Maker.

Our 3 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.

Food Service

The primary products sold by the food service segment are soft pretzels, frozen novelties, churros, handheld products and baked goods. Our customers in the food service segment include snack bars and food stands in chain, department and discount stores; malls and shopping centers; casual dining restaurants, fast food outlets; stadiums and sports arenas; leisure andtheme 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.~~point-of-sale or for take-away.

Retail Supermarkets

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

Frozen Beverages

The Company markets frozen beverages primarily under the names ICEE, SLUSH PUPPIE and PARROT ICE which are sold primarily 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, Retail Supermarkets and Frozen Beverages reviews monthly 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 Maker and management when determining each segment’s, and the Company’s, financial condition and operating performance. In addition, the Chief Operating Decision Maker reviews and evaluates 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						Nine Months Ended						Three months ended						Six months ended
	June 25,			June 26,			June 25,			June 26,			March 25,			March 26,			March 25,			March 26,
	2022			2021			2022			2021			2023			2022			2023			2022
													(unaudited)						(unaudited)
													(in thousands)						(in thousands)
Sales to external customers:
Food Service
Soft pretzels	$	55,946		$	50,895		$	149,628		$	120,356		$	55,492		$	43,261		$	107,715		$	93,682
Frozen novelties		17,155			13,927			32,917			30,812			26,607			7,305			48,372			15,762
Churros		25,614			20,096			62,550			46,358			24,920			17,447			50,677			36,936
Handhelds		25,740			18,971			64,741			56,574			20,309			20,506			43,881			39,001
Bakery		95,495			85,706			287,293			257,580			85,300			83,967			194,248			191,798
Other		7,892			6,884			18,785			14,546			5,653			3,854			11,685			10,893
Total Food Service	$	227,842		$	196,479		$	615,914		$	526,226		$	218,281		$	176,340		$	456,578		$	388,072

Retail Supermarket
Soft pretzels	$	11,696		$	11,193		$	43,642		$	40,871		$	16,013		$	15,752		$	30,498		$	31,946
Frozen novelties		41,865			36,898			78,586			71,600			20,770			18,919			38,739			36,721
Biscuits		6,066			4,562			20,024			18,717			5,858			5,687			13,771			13,958
Handhelds		1,589			1,191			3,934			6,215			4,099			1,069			6,991			2,345
Coupon redemption		(605	)		(513	)		(2,227	)		(2,196	)		(375	)		(726	)		(551	)		(1,622	)
Other		397			526			501			1,652			(5	)		56			(15	)		104
Total Retail Supermarket	$	61,008		$	53,857		$	144,460		$	136,859		$	46,360		$	40,757		$	89,433		$	83,452

Frozen Beverages
Beverages	$	57,791		$	42,279		$	126,919		$	76,663		$	41,799		$	35,365		$	80,458		$	69,128
Repair and
maintenance service		22,892			22,789			65,903			59,903
Repair and maintenance service														22,585			21,000			46,412			43,011
Machines revenue		9,868			8,404			25,257			20,556			8,252			7,542			15,263			15,389
Other		826			536			1,777			1,312			577			509			1,053			951
Total Frozen Beverages	$	91,377		$	74,008		$	219,856		$	158,434		$	73,213		$	64,416		$	143,186		$	128,479

Consolidated sales	$	380,227		$	324,344		$	980,230		$	821,519		$	337,854		$	281,513		$	689,197		$	600,003

Depreciation and amortization:
Food Service	$	7,097		$	6,817		$	20,436		$	20,334		$	9,597		$	6,670		$	19,055		$	13,339
Retail Supermarket		405			378			1,157			1,147			492			386			883			752
Frozen Beverages		5,514			5,469			16,474			16,893			5,351			5,484			10,683			10,960
Total depreciation and amortization	$	13,016		$	12,664		$	38,067		$	38,374		$	15,440		$	12,540		$	30,621		$	25,051

Operating income:
Operating Income:
Food Service	$	2,640		$	17,644		$	12,177		$	29,879		$	5,133		$	536		$	11,520		$	9,537
Retail Supermarket		2,341			9,080			8,416			20,167			487			1,091			1,598			6,075
Frozen Beverages		16,279			11,420			19,600			(4,094	)		4,573			2,461			6,403			3,321
Total operating income	$	21,260		$	38,144		$	40,193		$	45,952		$	10,193		$	4,088		$	19,521		$	18,933

Capital expenditures:
Food Service	$	21,673		$	10,383		$	45,757		$	25,915		$	13,744		$	13,851		$	38,606		$	24,084
Retail Supermarket		2,815			93			6,438			194			105			1,094			1,479			3,623
Frozen Beverages		4,437			5,151			12,036			8,347			4,365			4,261			9,039			7,599
Total capital expenditures	$	28,925		$	15,627		$	64,231		$	34,456		$	18,214		$	19,206		$	49,124		$	35,306

Assets:
Food Service	$	957,719		$	779,730		$	957,719		$	779,730		$	910,573		$	799,710		$	910,573		$	799,710
Retail Supermarket		29,147			33,405			29,147			33,405			12,162			33,206			12,162			33,206
Frozen Beverages		304,376			288,411			304,376			288,411			302,222			290,412			302,222			290,412
Total assets	$	1,291,242		$	1,101,546		$	1,291,242		$	1,101,546		$	1,224,957		$	1,123,328		$	1,224,957		$	1,123,328

Note 12

Goodwill and Intangible Assets

Our 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 Beverages segments as of ~~June~~March 25, 2023 and September 24, 2022 ~~and~~ ~~September 25, 2021~~ are as follows:

	June 25, 2022				September 25, 2021				March 25, 2023				September 24, 2022
	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	$	86,496	$	0	$	10,408	$	812	$	85,872	$	-	$	85,872	$	-

Amortized intangible assets
Non compete agreements		670		670		670		670
Non-compete agreements										-		-		670		670
Franchise agreements		8,500		0		0		0		8,500		638		8,500		212
Customer relationships		25,100		7,163		13,000		6,188		22,900		9,044		22,900		7,790
Technology		22,900		0		0		0		23,110		1,735		23,110		576
License and rights		1,690		1,460		1,690		1,396		1,690		1,523		1,690		1,481
TOTAL FOOD SERVICE	$	145,356	$	9,293	$	25,768	$	9,066	$	142,072	$	12,940	$	142,742	$	10,729

RETAIL SUPERMARKETS

Indefinite lived intangible assets
Trade names	$	12,316	$	0	$	12,777	$	461	$	11,938	$	-	$	11,938	$	-

Amortized intangible Assets
Trade names		649		649		649		649		-		-		649		649
Customer relationships		7,907		6,500		7,907		5,931		7,688		6,871		7,907		6,693
TOTAL RETAIL SUPERMARKETS	$	20,872	$	7,149	$	21,333	$	7,041	$	19,626	$	6,871	$	20,494	$	7,342


FROZEN BEVERAGES

Indefinite lived intangible assets
Trade names	$	9,315	$	-	$	9,315	$	-	$	9,315	$	-	$	9,315	$	-
Distribution rights		36,100		-		36,100		-		36,100		-		36,100		-

Amortized intangible assets
Customer relationships		1,439		509		1,439		400		1,439		617		1,439		545
Licenses and rights		1,400		1,124		1,400		1,072		1,400		1,177		1,400		1,142
TOTAL FROZEN BEVERAGES	$	48,254	$	1,633	$	48,254	$	1,472	$	48,254	$	1,794	$	48,254	$	1,687

CONSOLIDATED	$	214,482	$	18,075	$	95,355	$	17,579	$	209,952	$	21,605	$	211,490	$	19,758

Amortizing intangible assets are being amortized by the straight-line method over periods ranging from 2 to 20 years and amortization expense is reflected throughout operating expenses. Aggregate amortization expense of intangible assets for the three months ended ~~June~~March 25, 2023 and March 26, 2022 was $1.7 million and ~~June 26, 2021~~ ~~was $584,000 and $639,000,~~$0.6 million, respectively. Aggregate amortization expense of intangible assets for the ~~nine~~six months ended ~~June~~March 25, 2023 and March 26, 2022 was $3.4 million and ~~June 26, 2021~~ ~~was $1,766,000 and $2,096,000, respectively~~$1.2 million, respectively.

Estimated amortization expense for the next five fiscal years is approximately ~~$3,500,000~~$3.3 million in ~~2022,~~ ~~$6,700,000~~2023 (excluding the six months ended March 25, 2023), $6.2 million in ~~2023,~~ ~~$6,400,000~~2024, $5.6 million in ~~2024,~~ ~~$5,800,000~~2025, and 2026, and $4.6 million in ~~2025,~~ ~~and $5,800,000 in~~ ~~2026.~~2027.

The weighted amortization period of the intangible assets, in total, is 10.4 years. The weighted amortization period by intangible asset class is 10 years for Technology, 10 years for Customer relationships, 20 years for Licenses & rights, and 10 years for Franchise agreements.

Goodwill

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

Food Retail Frozen
Service Supermarket Beverages Total
(in thousands)
Balance at June 25, 2022
$ 127,823 $ 4,146 $ 56,498 $ 188,467

Balance at September 25, 2021
$ 61,189 $ 4,146 $ 56,498 $ 121,833

Goodwill and Intangible Assets

	Food		Retail		Frozen
	Service		Supermarket		Beverages		Total
			(in thousands)

March 25, 2023	$	124,426	$	4,146	$	56,498	$	185,070

September 24, 2022	$	123,776	$	4,146	$	56,498	$	184,420

Note 13

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:~~Investments

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 and corporate bonds are based on quoted prices for identical or similar instruments in markets that are not active. As a result, preferred stock and corporate bonds are classified within Level 2 of the fair value hierarchy.

~~The amortized cost, unrealized gains and losses, and fair market values~~As of ~~our investment securities~~March 25, 2023, the Company held no held to maturity at ~~June 25, 2022~~ ~~are summarized as follows:~~investment securities.

Gross

Gross

Fair

Amortized

Unrealized

Unrealized

Market

Cost

Gains

Losses

Value

(in thousands)

Corporate bonds
$ 4,520 $ 0 $ 52 $ 4,468
Total marketable securities held to maturity
$ 4,520 $ 0 $ 52 $ 4,468

The amortized cost, unrealized gains and losses, and fair market values of our investment securities available for sale at ~~June~~March 25, ~~2022~~ 2023 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	$	3,588	$	0	$	742	$	2,846	$	3,588	$	-	$	739	$	2,849
Preferred stock		2,816		15		69		2,762		1,519		61		-		1,580
Total marketable securities available for sale	$	6,404	$	15	$	811	$	5,608	$	5,107	$	61	$	739	$	4,429

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 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~~ ~~2022~~ ~~through~~ ~~2023,~~ ~~with $4.5 million maturing within the next 12 months. 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 ~~25, 2021~~ 24, 2022 are summarized as follows:

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

Corporate bonds		12,027		123		18		12,132		4,011		-		21		3,990
Total marketable securities held to maturity	$	12,027	$	123	$	18	$	12,132	$	4,011	$	-	$	21	$	3,990

The amortized cost, unrealized gains and losses, and fair market values of our investment securities available for sale at September ~~25, 2021~~ 24, 2022 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	$	3,588	$	0	$	536	$	3,052	$	3,588	$	-	$	742	$	2,846
Preferred stock		6,892		175		35		7,032		2,816		46		-		2,862
Total marketable securities available for sale	$	10,480	$	175	$	571	$	10,084	$	6,404	$	46	$	742	$	5,708

The amortized cost and fair value of the Company’s held to maturity securities by contractual maturity at ~~June~~March 25, 2023 and September 24, 2022 ~~and~~ ~~September 25, 2021~~ are summarized as follows:

	June 25, 2022				September 25, 2021				March 25, 2023				September 24, 2022

			*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	$	4,520	$	4,468	$	7,980	$	8,080	$	-	$	-	$	4,011	$	3,990
Due after one year through five years		-		-		4,047		4,052		-		-		-		-
Due after five years through ten years										-		-		-		-
Total held to maturity securities	$	4,520	$	4,468	$	12,027	$	12,132	$	-	$	-	$	4,011	$	3,990
Less current portion		4,520		4,468		7,980		8,080		-		-		4,011		3,990
Long term held to maturity securities	$	-	$	-	$	4,047	$	4,052	$	-	$	-	$	-	$	-

Proceeds from the redemption and sale of marketable securities were $0$2.0 million and ~~$11,526,000~~$5.3 million in the three and ~~nine~~six months ended ~~June~~March 25, ~~2022~~ 2023 and were ~~$12,854,000~~$4.3 million and ~~$54,191,000~~$11.5 million in the three and ~~nine~~six months ended ~~June~~March 26, ~~2021,~~ 2022, respectively. ~~Losses~~Gains of ~~$343,000~~$59,000 and ~~$412,000~~$22,000 were recorded in the three and ~~nine~~six months ended ~~June~~March 25, ~~2022,~~ 2023, and ~~gains~~losses of ~~$21,000~~$25,000 and ~~$139,000~~$69,000 were recorded in the three and ~~nine~~six months ended ~~June~~March 26, ~~2021.~~ 2022. Included in the gains and losses were ~~unrealized losses of $401,000 and unrealized gains of $786,000 in the~~ ~~nine~~ ~~months ended~~ ~~June 25, 2022~~ ~~and~~ ~~June 26, 2021,~~ ~~respectively. An unrealized loss of $343,000 and~~ an unrealized gain of ~~$137,000~~$19,000 and an unrealized loss of $58,000 in the six months ended March 25, 2023 and March 26, 2022, respectively. An unrealized gain of $59,000 and an unrealized loss of $53,000 were recorded in the three months ended ~~June~~March 25, 2023, and March 26, 2022, ~~and~~ ~~June 26, 2021,~~ respectively. We use the specific identification method to determine the cost of securities sold.

~~Total marketable securities held~~

Note 14

Accumulated Other Comprehensive Income (Loss)

Changes to ~~maturity~~the components of accumulated other comprehensive loss are as of ~~June 25, 2022,~~ ~~with credit ratings of BBB/BB/B had an amortized cost basis totaling $4,520,000. This rating information was obtained~~ ~~June 30, 2022.~~follows:

	Three months ended			Six months ended
	March 25, 2023			March 25, 2023
	(in thousands)			(in thousands)

	Foreign Currency			Foreign Currency
	Translation Adjustments			Translation Adjustments

Beginning balance	$	(12,842	)	$	(13,713	)

Other comprehensive income		1,068			1,939
Ending balance	$	(11,774	)	$	(11,774	)

	Three Months ended			Six months ended
	March 26, 2022			March 26, 2022
	(in thousands)			(in thousands)

	Foreign Currency			Foreign Currency
	Translation Adjustments			Translation Adjustments

Beginning balance	$	(13,827	)	$	(13,383	)

Other comprehensive income		546			102
Ending balance	$	(13,281	)	$	(13,281	)

Note 14

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

Three Months Ended

Nine Months Ended

June 25, 2022

June 25, 2022

Foreign Currency

Foreign Currency

Translation

Translation

Adjustments

Adjustments

(unaudited)

(unaudited)

(in thousands)

(in thousands)

Beginning balance
$ (13,281 ) $ (13,383 )

Other comprehensive (loss) income (93 ) 9

Ending balance
$ (13,374 ) $ (13,374 )

Three Months Ended

Nine Months Ended

June 26, 2021

June 26, 2021

Foreign Currency

Foreign Currency

Translation

Translation

Adjustments

Adjustments

(unaudited)

(unaudited)

(in thousands)

(in thousands)

Beginning balance
$ (13,839 ) $ (15,587 )

Other comprehensive income
657 2,405

Ending balance
$ (13,182 ) $ (13,182 )

~~Note~~ 15 –

Leases

General Lease Description

We have operating leases with initial noncancelable lease terms in excess of one year covering the rental of various facilities and equipment. Certain of these leases contain renewal options and some provide options to purchase during the lease term. Our operating leases include leases for real estate for some of our office and manufacturing facilities as well as manufacturing and non-manufacturing equipment used in our business. The remaining lease terms for these operating leases range from ~~1 month~~1month to 1312 years.

We have finance leases with initial noncancelable lease terms in excess of one year covering the rental of various equipment. These leases are generally for manufacturing and non-manufacturing equipment used in our business. The remaining lease terms for these finance leases range from 1 year to 56 years.

Significant Assumptions and Judgments

Contract Contains a Lease

In evaluating our contracts to determine whether a contract is or contains a lease, we considered the following:

• ~~Whether explicitly or implicitly identified assets have been deployed in the contract; and~~

• Whether we obtain substantially all of the economic benefits from the use of that underlying asset, and we can direct how and for what purpose the asset is used during the term of the contract.

Whether explicitly or implicitly identified assets have been deployed in the contract; and

•

Whether we obtain substantially all of the economic benefits from the use of that underlying asset, and we can direct how and for what purpose the asset is used during the term of the contract.

Allocation of Consideration

In determining how to allocate consideration between lease and non-lease components in a contract that was deemed to contain a lease, we used judgment and consistent application of assumptions to reasonably allocate the consideration.

Options to Extend or Terminate Leases

We have leases which contain options to extend or terminate the leases. On a lease-by-lease basis, we have determined if the extension should be considered reasonably certain to be exercised and thus a right-of-use asset and a lease liability should be recorded.

Discount Rate

The discount rate for leases, if not explicitly stated in the lease, is the incremental borrowing rate, which is the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

We used the discount rate to calculate the present value of the lease liability at the date of adoption. In the development of the discount rate, we considered our incremental borrowing rate as provided by our lender which was based on cash collateral and credit risk specific to us, and our lease portfolio characteristics.

As of ~~June~~March 25, 2023, the weighted-average discount rate of our operating and finance leases was 3.5% and 3.8%, respectively. As of September 24, 2022, the weighted-average discount rate of our operating and finance leases was 3.3% and 3.2%, respectively. ~~As of~~ ~~June 26, 2021,~~ ~~the weighted-average discount rate of our operating and finance leases was 3.2% and 3.2%, respectively.~~

Practical Expedients and Accounting Policy Elections

We elected the package of practical expedients that permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs and made an accounting policy election to exclude short-term leases with an initial term of 12 months or less from our Consolidated Balance Sheets.

Amounts Recognized in the Financial Statements

The components of lease expense were as follows:

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended		Three months ended March 25, 2023		Three months ended March 26, 2022		Six months ended March 25, 2023		Six months ended March 26, 2022
	June 25, 2022		June 26, 2021		June 25, 2022		June 26, 2021
	(in thousands)		(in thousands)		(in thousands)		(in thousands)

Operating lease cost in cost of goods sold and operating expenses	$	3,630	$	3,846	$	11,550	$	11,747
Operating lease cost in Cost of goods sold and Operating Expenses									$	3,778	$	3,922	$	7,750	$	7,920
Finance lease cost:
Amortization of assets in cost of goods sold and operating expenses		19		62		141		216
Amortization of assets in Cost of goods sold and Operating Expenses									$	22	$	50	$	56	$	122
Interest on lease liabilities in Interest expense & other		1		5		8		30		2		2		4		7
Total finance lease cost	$	20	$	67	$	149	$	246	$	24	$	52	$	60	$	129
Short-term lease cost in cost of goods sold and operating expenses		0		0		0		0
Short-term lease cost in Cost of goods sold and Operating Expenses										-		-		-		-
Total net lease cost	$	3,650	$	3,913	$	11,699	$	11,993	$	3,802	$	3,974	$	7,810	$	8,049

Supplemental balance sheet information related to leases is as follows:

	June 25, 2022		September 25, 2021
	(in thousands)		(in thousands)		March 25, 2023		September 24, 2022
Operating Leases
Operating lease right-of-use assets	$	54,990	$	54,555	$	50,252	$	51,137

Current operating lease liabilities	$	14,062	$	13,395	$	13,507	$	13,524
Noncurrent operating lease liabilities		46,017		46,557		41,642		42,660
Total operating lease liabilities	$	60,079	$	59,952	$	55,149	$	56,184

Finance Leases
Finance lease right-of-use assets in property, plant and equipment, net	$	441	$	561
Finance lease right-of-use assets in Property, plant and equipment, net					$	766	$	328

Current finance lease liabilities	$	189	$	182	$	226	$	124
Noncurrent finance lease liabilities		318		392		702		254
Total finance lease liabilities	$	507	$	574	$	928	$	378

Supplemental cash flow information related to leases is as follows:

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	June 25, 2022		June 26, 2021		June 25, 2022		June 26, 2021		Three months ended		Three months ended		Six months ended		Six months ended
	(in thousands)		(in thousands)		(in thousands)		(in thousands)		March 25, 2023		March 26, 2022		March 25, 2023		March 26, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,181	$	3,860	$	12,189	$	11,847	$	3,861	$	3,970	$	7,779	$	8,008
Operating cash flows from finance leases	$	1	$	64	$	8	$	237	$	2	$	2	$	4	$	7
Financing cash flows from finance leases	$	39	$	23	$	150	$	48	$	32	$	37	$	71	$	111

Supplemental noncash information on lease liabilities arising from obtaining right-of-use assets	$	4,652	$	1,317	$	11,717	$	2,671	$	3,821	$	5,922	$	6,497	$	7,065
Supplemental noncash information on lease liabilities removed due to purchase of leased asset	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

As of ~~June~~March 25, ~~2022,~~ 2023, the maturities of lease liabilities were as follows:

				(in thousands)			Operating Leases			Finance Leases
	Operating Leases			Finance Leases
Three months ending September 24, 2022	$	4,187		$	64
2023		14,973			181
Six months ending September 30, 2023							$	8,137		$	144
2024		12,251			140			13,794			244
2025		8,753			65			10,263			189
2026		5,666			39			6,998			154
2027								5,967			153
Thereafter		20,515			33			15,960			137
Total minimum payments	$	66,345		$	522			61,119			1,021
Less amount representing interest		(6,266	)		(15	)		(5,970	)		(93	)
Present value of lease obligations	$	60,079		$	507		$	55,149		$	928

As of March 25, 2023 the weighted-average remaining term of our operating and finance leases was 5.7 years and 5.6 years, respectively. As of September 24, 2022, the weighted average remaining term of our operating and finance leases was 5.8 years and 3.3 years, respectively.

Note 16

We have related party expenses for distribution and shipping related costs with NFI Industries, Inc. Our director, Sidney R. Brown, is CEO of NFI Industries, Inc. The Company paid $12,004,000 and $15,984,000 to NFI in the ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~June 25, 2022~~ ~~and paid $19,000 and $115,000 through the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~June 26, 2021.~~ ~~Of the amounts paid to NFI, the amount related to management services performed by NFI was $149,000 and $403,000 in the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~June 25, 2022,~~ ~~and $19,000 and $115,000 through the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~June 26, 2021.~~ ~~The remainder of the costs related to amounts that were passed through to the~~ ~~third~~-party distribution and shipping vendors that are being managed on the Company’s behalf by NFI. The agreements with NFI include terms that are consistent with those that we believe would have been negotiated at an arm’s length with an independent party. As of ~~June 25, 2022~~ ~~our consolidated balance sheet included related party trade payables of approximately $3,305,000. We had 0 related party trade payable balance as of~~ ~~September 25, 2021.~~

Related Parties

We have related party expenses for distribution and shipping related costs with NFI Industries, Inc. Our director, Sidney R. Brown, is CEO and an owner of NFI Industries, Inc. The Company paid $13.3 million and $27.6 million to NFI in the three and six months ended March 25, 2023 and paid $2.9 million and $4.0 million through the three and six months ended March 26, 2022. Of the amounts paid to NFI, the amount related to management services performed by NFI was $0.2 million and $0.3 million in the three and six months ended March 25, 2023, and $0.2 million and $0.3 in the three and six months ended March 26, 2022. The remainder of the costs related to amounts that were passed through to the third-party distribution and shipping vendors that are being managed on the Company’s behalf by NFI. The agreements with NFI include terms that are consistent with those that we believe would have been negotiated at an arm’s length with an independent party. As of March 25, 2023 and September 24, 2022, our consolidated balance sheet included related party trade payables of approximately $2.8 million and $2.9 million, respectively.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Statements made in this Form 10-Q that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate,” “intend,” or “continue,” or, the negative thereof. We intend that such forward-looking statements be subject to the safe of the Act and the Exchange Act. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties, assumptions, and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

Objective

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with a narrative form from the perspective of our management regarding our financial condition and results of operations, liquidity and certain other factors that may affect our future results. The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and within the Company’s Annual Report on Form 10-K filed for the fiscal year ended September 24, 2022.

Business Overview

The Company manufactures snack foods and distributes frozen beverages which it markets nationally to the foodservice and retail supermarket industries. The Company’s principal snack food products are soft pretzels, frozen novelties, churros and bakery products. We believe we are the largest manufacturer of soft pretzels in the United States. Other snack food products include funnel cake and handheld products. The Company’s principal frozen beverage products are the ICEE brand frozen carbonated beverage and the SLUSH PUPPIE brand frozen non-carbonated beverage,

The Company’s Food Service and Frozen Beverages sales are made principally to foodservice customers including snack bar and food stand locations in leading chain, department, discount, warehouse club and convenience stores; malls and shopping centers; fast food and casual dining restaurants; stadiums and sports arenas; leisure and theme parks; movie theaters; independent retailers; and schools, colleges and other institutions. The Company’s retail supermarket customers are primarily supermarket chains.

RESULTS OF OPERATIONS – Three and six months ended March 25, 2023

The following discussion provides a review of results for the three and six months ended March 25, 2023 as compared with the three and six months ended March 26, 2022.

Summary of Results	Three months ended							Six months ended
	March 25,			March 26,				March 25,			March 26,
	2023			2022			% Change	2023			2022			% Change
	(in thousands)							(in thousands)

Net Sales	$	337,854		$	281,513		20.0 %	$	689,197		$	600,003		14.9 %

Cost of goods sold		247,470			216,165		14.5 %		507,958			455,280		11.6 %
Gross Profit		90,384			65,348		38.3 %		181,239			144,723		25.2 %

Operating expenses
Marketing		24,017			21,036		14.2 %		47,716			41,943		13.8 %
Distribution		38,188			28,349		34.7 %		80,237			61,664		30.1 %
Administrative		17,919			11,719		52.9 %		34,310			22,088		55.3 %
Other general expense (income)		67			156		(57.1) %		(545	)		95		(673.7) %
Total Operating Expenses		80,191			61,260		30.9 %		161,718			125,790		28.6 %

Operating Income		10,193			4,088		149.3 %		19,521			18,933		3.1 %

Other income (expense)
Investment income		401			160		150.6 %		1,086			431		152.0 %
Interest expense		(1,334	)		(57	)	2240.4 %		(2,383	)		(75	)	3077.3 %

Earnings before income taxes		9,260			4,191		120.9 %		18,224			19,289		(5.5) %

Income tax expense		2,389			920		159.7 %		4,720			4,927		(4.2) %

NET EARNINGS	$	6,871		$	3,271		110.1 %	$	13,504		$	14,362		(6.0) %

Comparisons as a Percentage of Net Sales	Three months ended					Six months ended
	March 25,	March 26,	Basis Pt			March 25,	March 26,	Basis Pt
	2023	2022	Chg			2023	2022	Chg
Gross profit	26.8 %	23.2 %		360		26.3 %	24.1 %		220
Marketing	7.1 %	7.5 %		(40	)	6.9 %	7.0 %		(10	)
Distribution	11.3 %	10.1 %		120		11.6 %	10.3 %		130
Administrative	5.3 %	4.2 %		110		5.0 %	3.7 %		130
Operating income	3.0 %	1.5 %		150		2.8 %	3.2 %		(40	)
Earnings before income taxes	2.7 %	1.5 %		120		2.6 %	3.2 %		(60	)
Net earnings	2.0 %	1.2 %		80		2.0 %	2.4 %		(40	)

Net Sales

Net sales increased by $56.3 million, or 20.0%, to $337.9 million for the three months ended March 25, 2023. Net sales in the period included $16.0 million of net sales from Dippin’ Dots. Net sales increased by $89.2 million, or 14.9%, to $689.2 million for the six months ended March 25, 2023. Net sales in the period included $29.3 million of net sales from Dippin’ Dots. Organic sales growth, across both the three months and six months ended March 25, 2023, was driven by growth across all three of the Company’s business segments, led by our core products including soft pretzels, churros, frozen novelties and frozen beverages.

Gross Profit

Gross Profit increased by $25.0 million, or 38.3%, to $90.4 million for the three months ended March 25, 2023. As a percentage of sales, gross profit increased from 23.2% to 26.8%. While inflationary trends have gradually improved during the fiscal year, key ingredients including flour, oils, eggs, meats, sugar and dairy continued to experience inflationary pressures compared with the same quarter last year, with average raw material costs up approximately 9%. Three pricing actions implemented in fiscal 2022, along with the initial benefits of our operating initiatives, and improved cost management and productivity, helped to offset the impact of the inflationary pressures noted above.

Gross Profit increased by $36.5 million, or 25.2%, to $181.2 million for the six months ended March 25, 2023. As a percentage of sales, gross profit increased from 24.1% to 26.3%. Key ingredients including flour, oils, eggs, meats, sugar and dairy continued to experience inflationary pressures compared with the same six-month period last year, with average raw material costs up approximately 15%. Three pricing actions implemented in fiscal 2022, along with the initial benefits of our operating initiatives, and improved cost management and productivity, helped to offset the impact of the inflationary pressures noted above.

Operating Expenses

Operating Expenses increased $18.9 million, or 30.9%, to $80.2 million for the three months ended March 25, 2023. As a percentage of sales, operating expenses increased from 21.8% to 23.7%, primarily reflecting the ongoing inflationary pressures across distribution and administrative costs, as well as the impact of Dippin’ Dots. As a percentage of sales, distribution expenses increased from 10.1% to 11.3%, reflecting inflationary pressures noted in fuel and outbound freight. As a percentage of sales, marketing expenses decreased from 7.5% to 7.1%. As a percentage of sales, general and administrative expenses increased from 4.2% to 5.3%, with the increase largely attributable to the impact of Dippin’ Dots.

Operating Expenses increased $35.9 million, or 28.6%, to $161.7 million for the six months ended March 25, 2023. As a percentage of sales, operating expenses increased from 21.0% to 23.5%, primarily reflecting the ongoing inflationary pressures across distribution and administrative costs, as well as the impact of Dippin’ Dots. As a percentage of sales, distribution expenses increased from 10.3% to 11.6%, reflecting inflationary pressures noted in fuel and outbound freight. As a percentage of sales, marketing expenses remained relatively flat, decreasing slightly from 7.0% to 6.9%. As a percentage of sales, general and administrative expenses increased from 3.7% to 5.0%, with the increase largely attributable to the impact of Dippin’ Dots.

Other Income and Expense

Investment income increased by $0.2 million to $0.4 million and by $0.7 million to $1.1 million for the three months, and six months, ended March 25, 2023, respectively. The increases were primary due to the improving interest rate environment in fiscal 2023.

Interest expense increase by $1.3 million to $1.3 million and by $2.3 million to $2.4 million for the three months, and six months, ended March 25, 2023, respectively, due to the Company’s outstanding borrowings on the Amended Credit Agreement.

Income Tax Expense

Income tax expense increased by $1.5 million, or 159.7%, to $2.4 million for the three months ended March 25, 2023. The effective tax rate was 25.8% as compared with 21.9% in the prior year period, with the increase due to the impact of tax benefits on stock-based compensation expense in the prior year period.

Income tax expense decreased by $0.2 million, or 4.2% to $4.7 million for the six months ended March 25, 2023. The effective tax rate was 25.9% as compared with 25.5% in the prior year period.

Net Earnings

Net earnings increased by $3.6 million, or 110.1%, for the three months ended March 25, 2023, due to the aforementioned items.

Net earnings decreased by $0.9 million, or 6.0%, for the six months ended March 25, 2023, due to the aforementioned items

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.

Business Segment Discussion

We operate in three segments: Food Service, Retail Supermarket, and Frozen Beverages. The following table is a summary of sales and operating income, which is how we measure segment profit.

	Three months ended					Six months ended
	March 25,		March 26,			March 25,		March 26,
	2023		2022		% Change	2023		2022		% Change
	(in thousands)					(in thousands)
Net Sales
Food Service	$	218,281	$	176,340	23.8 %	$	456,578	$	388,072	17.7 %
Retail Supermarket		46,360		40,757	13.7 %		89,433		83,452	7.2 %
Frozen Beverages		73,213		64,416	13.7 %		143,186		128,479	11.4 %
Total Sales	$	337,854	$	281,513	20.0 %	$	689,197	$	600,003	14.9 %

	Three months ended					Six months ended
	March 25,		March 26,			March 25,		March 26,
	2023		2022		% Change	2023		2022		% Change
	(in thousands)					(in thousands)

Operating Income
Food Service	$	5,133	$	536	857.6 %	$	11,520	$	9,537	20.8 %
Retail Supermarket		487		1,091	(55.4) %		1,598		6,075	(73.7) %
Frozen Beverages		4,573		2,461	85.8 %		6,403		3,321	92.8 %
Total Operating Income	$	10,193	$	4,088	149.3 %	$	19,521	$	18,933	3.1 %

Food Service Segment Results

	Three months ended					Six months ended
	March 25,		March 26,			March 25,		March 26,
	2023		2022		% Change	2023		2022		% Change
	(in thousands)					(in thousands)

Food Service Sales to External Customers
Soft pretzels	$	55,492	$	43,261	28.3 %	$	107,715	$	93,682	15.0 %
Frozen novelties		26,607		7,305	264.2 %		48,372		15,762	206.9 %
Churros		24,920		17,447	42.8 %		50,677		36,936	37.2 %
Handhelds		20,309		20,506	(1.0) %		43,881		39,001	12.5 %
Bakery		85,300		83,967	1.6 %		194,248		191,798	1.3 %
Other		5,653		3,854	46.7 %		11,685		10,893	7.3 %
Total Food Service	$	218,281	$	176,340	23.8 %	$	456,578	$	388,072	17.7 %

Food Service Operating Income	$	5,133	$	536	857.6 %	$	11,520	$	9,537	20.8 %

Sales to food service customers increased $41.9 million, or 24%, to $218.3 million for the three months ended March 25, 2023, which included approximately $16.0 million in sales from Dippin’ Dots. Soft pretzels sales to food service increased 28% to $55.5 million. Frozen novelties sales increased 264% to $26.6 million, largely driven by Dippin’ Dots sales. Churro sales increased 43% to $24.9 million led by customer expansion and growing menu penetration. Sales of bakery products increased by 2% to $85.3 million. Sales of handhelds decreased by 1% to $20.3 million.

Sales of new products in the first twelve months since their introduction were minimal in the quarter. Sales in the quarter benefited from the impact of the prior fiscal year’s price increases, along with modest increases in volume.

Operating income in our Food Service segment increased $4.6 million in the quarter to $5.1 million, driven by stronger sales and improved gross margin performance.

Sales to food service customers increased $68.5 million, or 18%, to $456.6 million for the six months ended March 25, 2023, which included approximately $29.3 million in sales from Dippin’ Dots. Soft pretzels sales to food service increased 15% to $107.7 million. Frozen novelties sales increased 207% to $48.4 million, largely driven by Dippin’ Dots sales. Churro sales increased 37% to $50.7 million led by customer expansion and growing menu penetration. Sales of bakery products increase by 1% to $194.2 million. Sales of handhelds increased by 13% to $43.9 million.

Sales of new products in the first twelve months since their introduction were minimal in the six months ended March 25, 2023. Price increases benefited sales in the six-month period, and more than offset some volume declines seen in certain product categories.

Operating income in our Food Service segment increased $2.0 million in the six months ended March 25, 2023, to $11.5 million, driven by stronger sales and improved gross margin performance.

Retail Supermarket Segment Results

	Three months ended							Six months ended
	March 25,			March 26,				March 25,			March 26,
	2023			2022			% Change	2023			2022			% Change
	(in thousands)							(in thousands)

Retail Supermarket Sales to External Customers
Soft pretzels	$	16,013		$	15,752		1.7 %	$	30,498		$	31,946		(4.5) %
Frozen novelties		20,770			18,919		9.8 %		38,739			36,721		5.5 %
Biscuits		5,858			5,687		3.0 %		13,771			13,958		(1.3) %
Handhelds		4,099			1,069		283.4 %		6,991			2,345		198.1 %
Coupon redemption		(375	)		(726	)	(48.3) %		(551	)		(1,622	)	(66.0) %
Other		(5	)		56		(108.9) %		(15	)		104		(114.4) %
Total Retail Supermarket	$	46,360		$	40,757		13.7 %	$	89,433		$	83,452		7.2 %

Retail Supermarket Operating Income	$	487		$	1,091		(55.4) %	$	1,598		$	6,075		(73.7) %

Sales of products to retail customers increased $5.6 million, or 14%, to $46.4 million for the three months ended March 25, 2023. Soft pretzel sales increased 2% to $16.0 million, frozen novelties sales increase 10% to $20.8 million, biscuit sales increased 3% to $5.9 million, and handheld sales increased 283% to $4.1 million with the increase in handheld sales largely driven by expansion with a major retailer. Sales of new products in retail supermarkets were minimal in the quarter. Sales in the quarter benefited from the impact of the prior fiscal year’s price increases, along with modest increases in volume.

Operating income in our Retail Supermarkets segment decreased $0.6 million in the quarter to $0.5 million primarily driven by gross margin challenges due to higher promotions and allowances.

Sales of products to retail customers increased $6.0 million, or 7%, to $89.4 million for the six months ended March 25, 2023. Soft pretzel sales decreased 5% to $30.5 million, frozen novelties sales increased 6% to $38.7 million, biscuit sales decreased 1% to $13.8 million, and handheld sales increased 198% to $7.0 million. Sales of new products in retail supermarkets were minimal in the six months ended March 25, 2023. Price increases benefited sales in the six-month period and helped to offset volume declines seen in certain product categories.

Operating income in our Retail Supermarkets segment decreased $4.5 million in the six months ended March 25, 2023 to $1.6 million primarily driven by gross margin challenges due to higher promotions and allowances, and higher distribution expenses.

Frozen Beverages Segment Results

	Three months ended					Six months ended
	March 25,		March 26,			March 25,		March 26,
	2023		2022		% Change	2023		2022		% Change
	(in thousands)					(in thousands)

Frozen Beverages
Beverages	$	41,799	$	35,365	18.2 %	$	80,458	$	69,128	16.4 %
Repair and maintenance service		22,585		21,000	7.5 %		46,412		43,011	7.9 %
Machines revenue		8,252		7,542	9.4 %		15,263		15,389	(0.8) %
Other		577		509	13.4 %		1,053		951	10.7 %
Total Frozen Beverages	$	73,213	$	64,416	13.7 %	$	143,186	$	128,479	11.4 %

Frozen Beverages Operating Income	$	4,573	$	2,461	85.8 %	$	6,403	$	3,321	92.8 %

Frozen beverage and related product sales increased $8.8 million, or 14%, in the three months ended March 25, 2023. Beverage related sales increased 18% to $41.8 million. Gallon sales were up 12% for the three months led by continued improving trends in travel, sporting events, concerts and amusement parks and theater. Service revenue increased 8% to $22.6 million and machine revenue (primarily sales of frozen beverage machines) increased 9% to $8.3 million due to strong customer installation volume.

Operating income in our Frozen Beverage segment increased $2.1 million in the quarter to $4.6 million, as strong sales drove leverage across the business.

Frozen beverage and related product sales increased $14.7 million, or 11%, in the six months ended March 25, 2023. Beverage related sales increased 16% to $80.5 million. Gallon sales were up 7% for the six months ended March 25, 2023, led by continued improving trends in travel, sporting events, concerts and amusement parks and theater. Sales remained strong for the period despite theater related volume declines in the first fiscal quarter due to the lower performing releases and weather-related impacts during the holiday season. Service revenue increased 8% to $46.4 million. Machine revenue (primarily sales of frozen beverage machines) decreased 1% to $15.3 million, primarily due to the comparative timing of customer installations in the first fiscal quarter.

Operating income in our Frozen Beverage segment increased $3.1 million in the six months ended March 25, 2023 to $6.4 million, as strong sales drove leverage across the business.

Liquidity and Capital Resources

Although there are many factors that could impact our operating cash flow, most notably net earnings, we believe that our future operating cash flow, along with our borrowing capacity, our current cash and cash equivalent balances and our investment securities is sufficient to satisfy our cash requirements over the next twelve months and beyond, as well as to fund future growth and expansion.

	Six months ended
	March 25,			March 26,
	2023			2022
	(in thousands)
Cash flows from operating activities
Net earnings	$	13,504		$	14,362
Non-cash items in net income:
Depreciation of fixed assets		27,236			23,868
Amortization of intangibles and deferred costs		3,385			1,183
(Gain) loss from disposals of property & equipment		(354	)		100
Share-based compensation		2,552			2,350
Deferred income taxes		(787	)		(251	)
(Gain) loss on marketable securities		(22	)		69
Other		(255	)		(184	)
Changes in assets and liabilities, net of effects from purchase of companies		(9,588	)		(67,932	)
Net cash provided by (used in) operating activities	$	35,671		$	(26,435	)

●

The increase in depreciation of fixed assets was largely due to prior year purchases of property plant and equipment, as well as depreciation expense related to assets acquired in the fiscal 2022 Dippin’ Dots acquisition.

●

The increase in amortization of intangibles and deferred costs was related to intangible assets acquired in the fiscal 2022 Dippin’ Dots acquisition.

●

The $0.4 million gain from disposals of property & equipment primarily related to the sale of a building.

●

The net cash outflow of $9.6 million in cash flows associated with changes in assets and liabilities, net of effects from purchase of companies, in the six months ended March 25, 2023, was primarily driven by a decrease in accounts payable and accrued liabilities of $25.7 million, offset somewhat by a $10.5 million decrease in accounts receivable and a $4.8 million decrease in prepaid expenses. In the prior year, the net $67.9 million cash outflow was largely attributable to increases in inventory of $36.5 million and increases in accounts receivable of $25.0 million.

	Six months ended
	March 25,			March 26,
	2023			2022
	(in thousands)
Cash flows from investing activities
Purchases of property, plant and equipment	$	(49,124	)	$	(35,306	)
Proceeds from redemption and sales of marketable securities		5,300			11,526
Proceeds from disposal of property and equipment		797			589
Net cash used in investing activities	$	(43,027	)	$	(23,191	)

●

Purchases of property, plant and equipment include spending for production growth, in addition to acquiring new equipment, infrastructure replacements, and upgrades to maintain competitive standing and position us for future opportunities. The increase was primarily due to increased spend for new lines at various plants aimed at increasing capacity.

●

The decrease in proceeds from redemption and sales of marketable securities was due to a strategic decision to no longer re-invest redeemed proceeds into marketable securities given the low interest rate environment.

	Six months ended
	March 25,			March 26,
	2023			2022
	(in thousands)
Cash flows from financing activities
Proceeds from issuance of stock	$	4,059		$	11,741
Borrowings under credit facility		92,000			-
Repayment of borrowings under credit facility		(55,000	)		-
Payments on finance lease obligations		(71	)		(111	)
Payment of cash dividends		(26,914	)		(24,163	)
Net cash provided by (used in) financing activities	$	14,074		$	(12,533	)

●

The decrease in proceeds from issuance of stock was primarily due to a lower rate of option exercises in the six months ended March 25, 2023 compared with the six months ended March 26, 2022.

●

Borrowings under credit facility and repayment of borrowings under credit facility relate to the Company’s cash draws and repayments made in the six months ended March 25, 2023 to primarily fund working capital needs.

●

Dividends paid increased as our quarterly dividend was raised during fiscal 2022.

Liquidity

As of March 25, 2023, we had $43.3 million of Cash and Cash Equivalents, and $4.4 million of Marketable Securities.

Interest accrues, at the Company’s election, at (i) the BSBY Rate (as defined in the Credit Agreement) plus an applicable margin, based upon the Consolidated Net Leverage Ratio, as defined in the Credit Agreement, or (ii) the Alternate Base Rate (a rate based on the higher of (a) the prime rate announced from time-to-time by the Administrative Agent, (b) the Federal Reserve System’s federal funds rate, plus 0.50% or (c) the Daily BSBY Rate, plus an applicable margin). The Alternate Base Rate is defined in the Credit Agreement.

The Credit Agreement requires the Company to comply with various affirmative and negative covenants, including without limitation (i) covenants to maintain a minimum specified interest coverage ratio and maximum specified net leverage ratio, and (ii) subject to certain exceptions, covenants that prevent or restrict the Company’s ability to pay dividends, engage in certain mergers or acquisitions, make certain investments or loans, incur future indebtedness, alter its capital structure or line of business, prepay subordinated indebtedness, engage in certain transactions with affiliates, or amend its organizational documents. As of March 25, 2023, the Company is in compliance with all financial covenants of the Credit Agreement.

On June 21, 2022, the Company entered into an amendment to the Credit Agreement, the “Amended Credit Agreement” which provided for an incremental increase of $175 million in available borrowings. The Amended Credit Agreement also includes an option to increase the size of the revolving credit facility by up to an amount not to exceed in the aggregate the greater of $225 million or $50 million, plus the Consolidated EBITDA of the Borrowers, subject to the satisfaction of certain terms and conditions.

As of March 25, 2023, we had $92.0 million of outstanding borrowings drawn on the Amended Credit Agreement. As of March 25, 2023, we had $123.2 million of additional borrowing capacity, after giving effect to the $9.8 million of letters of credit outstanding.

Recently Issued and Adopted Accounting Pronouncements

See Note 8 to the condensed consolidated financial statements included in this Form 10-Q for a discussion of recently adopted accounting guidance and other new accounting guidance.

Critical Accounting Estimates

We consider revenue recognition, allowance for doubtful receivables, valuation of goodwill, valuation of long-lived assets and other intangible assets, insurance reserves, income taxes, and business combinations to be critical accounting estimates. These policies are summarized in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended September 24, 2022. These critical accounting policies require us to make estimates and assumptions that affect the amounts reported in the consolidated condensed financial statements and accompanying notes.

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Statements made in this Form 10-Q that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the “Act”) and Section 21E of the Securities Exchange Act of 1934 “the Exchange Act”. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate,” “intend” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbor provisions of the Act and the Exchange Act. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties, assumptions, and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

~~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 working capital, capital spending, debt service requirements and future growth and expansion for at least the next twelve months. See Note 13 to these financial statements for a discussion of our investment securities.

The Company’s Board of Directors declared a regular quarterly cash dividend of $0.633 per share of its common stock payable on July 11, 2022, to shareholders of record as of the close of business on June 20, 2022.

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; 318,858 shares remain to be purchased under this authorization. We did not purchase any shares of our common stock in the nine months ended June 25, 2022, nor did we purchase any shares of our common stock in fiscal year 2021.

In the three months ended June 25, 2022 and June 26, 2021, 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 $93,000 and a decrease of $657,000 in accumulated other comprehensive loss, respectively. In the nine months ended June 25, 2022 and June 26, 2021, 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 $9,000 and $2,405,000 in accumulated other comprehensive loss, respectively.

In December 2021, the Company entered into an amended and restated loan agreement (the “Credit Agreement”) with our existing banks which provided for up to a $50,000,000 revolving credit facility repayable in December 2026.

On June 21, 2022, the Company entered into an amendment to the Credit Agreement, the “Amended Credit Agreement” which provided for an incremental increase of $175,000,000 in available borrowings. The Amended Credit Agreement also includes an option to increase the size of the revolving credit facility by up to an amount not to exceed in the aggregate the greater of $225,000,000 or $50,000,000 plus the Consolidated EBITDA of the Borrowers, subject to the satisfaction of certain terms and conditions.

As of June 25, 2022, $125,000,000 was outstanding under the Amended Credit Agreement. These borrowings have been classified as Long-Term Debt on the Company’s Balance Sheet. As of June 25, 2022, the amount available under the Amended Credit Agreement was $91,225,000, after giving effect to the outstanding letters of credit. As of September 25, 2021, there were no outstanding balances under the Credit Agreement. As of June 25, 2022, the Company is in compliance with all financial covenants of the Credit Agreement.

~~Critical Accounting Policies, Judgments and Estimates~~

There have been no material changes to our critical accounting policies, judgments and estimates from the information provided in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies, Judgments and Estimates, in our Annual Report on Form 10-K for the year ended September 25, 2021, as filed with the SEC on November 23, 2021.

~~RESULTS OF OPERATIONS~~

Net sales increased by 17% to $380,227,000 in the third quarter and by 19% to $980,230,000 for the nine months ended June 25, 2022 compared to the three and nine months ended June 26, 2021, respectively.

~~FOOD SERVICE~~

Sales to food service customers increased by 16% in the third quarter to $227,842,000 and by 17% to $615,914,000 for the nine months, compared to respective prior year periods. Sales were up across most product lines as many of the venues and locations where our products are sold that were previously shut down or operating at reduced capacity in the first nine months of 2021 have partially or fully re-opened in the first nine months of 2022. Theaters and outdoor venues, including stadiums and amusement parks, as well as schools, restaurants and strategic accounts continued to experience an increase in visitation that drove strong sales in our core products.

Soft pretzel sales to the food service market increased by 10% to $55,946,000 in the third quarter and by 24% to $149,628,000 in the nine months compared to respective prior year periods. Frozen novelties sales increased by 23% to $17,155,000 in the third quarter and increased by 7% to $32,917,000 in the nine months compared to respective prior year periods. Churro sales to food service customers increased by 27% to $25,614,000 in the third quarter and increased by 35% to $62,550,000 in the nine months compared to respective prior year periods. Sales of bakery products increased by 11% in the third quarter to $95,495,000 and increased 12% to $287,293,000 for the nine months compared to respective prior year periods. Sales of handhelds increased 36% in the third quarter to $25,740,000 and by 14% to $64,741,000 in the nine months compared to respective prior year periods.

Sales of new products in the first twelve months since their introduction were approximately $700,000 in the third quarter and $4,600,000 in the nine months, driven primarily by new bakery items, including a new empanada product with a major convenience customer. Price increases had a moderate impact on sales in the quarter, and the overall revenue growth included marginal volume increases as well.

Compared to prior year, operating income in our Food Service segment decreased by 85% to $2,640,000 in the third quarter and by 59% to $12,177,000 in the nine months reflecting the significant increase in ingredients, production and distribution costs year over year, as well as our ERP implementation which previously impacted our results in the fiscal second quarter.

~~RETAIL SUPERMARKETS~~

Compared to prior year, sales of products to retail supermarkets increased by 13% to $61,008,000 in the third quarter and increased by 6% to $144,460,000 in the nine months. Our SUPERPRETZEL brand has performed well helping to drive a 4% increase in sales of soft pretzels in the third quarter to $11,696,000 and a 7% increase in sales in the nine months to $43,642,000. Sales of frozen novelties increased by 13% to $41,865,000 in the third quarter and increased by 10% to $78,586,000 in the nine months compared to respective prior year periods, largely driven by the addition of new stock keeping units, and additional product placement with some of our key brands. Sales of biscuits increased by 33% to $6,066,000 in the third quarter and by 7% to $20,024,000 in the nine months compared to respective prior year periods. Handheld sales to retail supermarket customers increased by 33% to $1,589,000 in the third quarter but decreased by 37% to $3,934,000 in the nine months compared to respective prior year periods.

Sales of new products were approximately $400,000 for the third quarter and $900,000 in the nine months, primarily related to frozen novelty items. Price increases and volume increases both had a marginal impact on sales in the quarter.

Compared to prior year periods, operating income in our Retail Supermarkets segment decreased by 74% to $2,341,000 in the third quarter and by 58% to $8,416,000 in the nine months. The decreases in operating income were primarily attributable to higher cost of goods sold as well as higher shipping and distribution related costs, as well as our ERP implementation which previously impacted our results in the fiscal second quarter..

~~FROZEN BEVERAGES~~

Compared to prior year periods, frozen beverage and related product sales increased by 23% to $91,377,000 in the third quarter and by 39% to $219,856,000 in the nine months. Beverage related sales increased by 37% to $57,791,000 in the third quarter and by 66% to $126,919,000 in the nine months compared to respective prior year periods. Gallon sales were up 28% in the quarter and up 56% in the nine months compared to respective prior year periods. The increase in gallon sales reflects the strong demand across theaters, amusement parks, convenience and restaurants. In the amusement parks channel, we continue to see strong growth as both domestic and international visitation numbers continue to recover, and exceed, pre-COVID-19 levels. Theater sales continue on their upward trajectory as movie goers indulge in their favorite snacks and view highly anticipated movie releases. Service revenue remained relatively flat in the third quarter, but increased by 10% to $65,903,000 in the nine months, compared to respective prior year periods, led by an acceleration in maintenance calls and additional growth in one of our larger customers, earlier in the fiscal year. Machines revenue (primarily sales of frozen beverage machines) increased by 17% to $9,868,000 in the third quarter and by 23% to $25,257,000 in the nine months, compared to respective prior year periods, driven mainly by growth from large quick service restaurant (QSR) and convenience customers.

Our Frozen Beverage segment had operating income of $16,279,000 in the third quarter compared with $11,420,000 in the prior year third quarter. In the nine months, our Frozen Beverage segment had operating income of $19,600,000 compared with an operating loss of $4,094,000 in the prior year nine-month period. The comparative performance was primarily a result of higher beverage sales volume which drove leverage across the business.

~~CONSOLIDATED~~

Gross profit as a percentage of sales was 28.7% in the third quarter and 29.7% in the prior year quarter. Gross profit as a percentage of sales was 25.9% in the nine-month period this year and 25.2% last year. Inflation continued to build over the quarter and nine-month period which has significantly pressured margins. The impact was especially pronounced in key raw material purchases such as flour, eggs, dairy, chocolates and meats, as well as packaging and fuel. We have pricing and cost initiatives in place to offset these cost pressures, which included a price increase early in the third quarter.

Total operating expenses increased by 51% to $87,816,000 in the third quarter and by 32% to $213,606,000 in the nine months compared to respective prior year periods. As a percentage of net sales, operating expenses increased from 17.9% to 23.1% in the third quarter and from 19.6% to 21.8% in the nine months.

Marketing expenses remained flat at 6.3% of net sales in the third quarter and decreased to 6.7% in the nine months compared with 6.9% in prior year’s nine-month period. Distribution expenses increased to 12.7% of net sales in the third quarter from 8.4% in the prior year and to 11.2% in the nine months compared with 9.2% in prior year’s nine-month period, with the increases largely driven by higher truck driver wages and rising carrier, storage and fuel costs. Administrative expenses increased to 4.1% of net sales in the third quarter from 3.2% in prior year and to 3.9% in the nine months compared with 3.5% in prior year’s nine-month period, with the increase largely attributable to $3,088,000 of merger and acquisition costs which were incurred in the third quarter.

~~Compared to prior year, operating income decreased by 44% to $21,260,000 in the third quarter and by 13% to $40,193,000 in the nine months as a result of the aforementioned items.~~

Our investments generated before tax income of $106,000 in the third quarter, a $364,000 decrease over prior year. In the nine months, our investments generated before tax income of $537,000, a 78% decrease from the prior year period. The decrease in before tax investment income compared with prior year was due to decreases in the amount of investments as well as the impact of the rising interest rate environment on our investment holdings.

Compared to prior year, net earnings decreased by 46% to $15,563,000 in the third quarter and by 19% to $29,925,000 in the nine months. Our effective tax rate was 26% in the nine months compared with 24% in the prior year’s nine-month period, as prior year’s nine-month period effective tax rate was more favorably impacted by tax benefits related to share-based compensation. Our effective tax rate was 27% in the third quarter and was 25% in the prior year third quarter.

There are many factors which can impact our net earnings from year-to-year and in the long run, among including 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’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 ~~2021~~2022 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 ~~June~~March 25, ~~2022,~~2023, 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’s internal control over financial reporting during the quarter ended ~~June~~March 25, ~~2022,~~2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. During the fiscal third quarter of 2022, the Company completed the acquisition of Dippin’ Dots. As permitted by SEC staff interpretive guidance that an assessment of a recently acquired business may be omitted from the scope of evaluation for a period of up to one year following the acquisition, management excluded Dippin’ Dots from its interim evaluation of internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is subject, from time to time, to certain legal proceedings and claims that arise from our business. As of the date of this Quarterly Report on Form 10-Q, the Company does not expect that any such proceedings will have a material adverse effect on the Company’s financial position or results of operations.

Item 1A. Risk Factors

For information on risk factors, please refer to “Risk Factors” in Part I, Item 1A of the Company’s Form 10-K for the fiscal year ended September 24, 2022. The risks identified in that report have not changed in any material respect.

Item 2. Unregistered Sales of Equity Securities and the Use of Proceeds

None

3632

~~PART II. OTHER INFORMATION~~

Item 6.

Exhibits

Exhibit No.

	10.1	J & J Snack Foods Corp. 2022 Long-Term Incentive Plan (Incorporated by reference to the Company’s Form 8-K filed on February 14, 2023).
	10.2	Executive Employment Agreement, dated February 14, 2023, by and between J & J Snack Foods Corp. and Daniel Fachner (Incorporated by reference to the Company’s Form 8-K filed on February 17, 2023).
	31.1	~~31.1~~ Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	Certification Pursuant to the 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	Certification Pursuant to the 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~
101.1
The following financial information from J&J Snack Foods Corp.'s Quarterly Report on Form 10-Q for the quarter ended March 25, 2023, formatted in iXBRL (Inline extensible Business Reporting Language):

~~32.1 Certification Pursuant to the 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~
(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

~~32.2 Certification Pursuant to the 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

101.1 The following financial information from J&J Snack Foods Corp.'s Quarterly Report on Form 10-Q for the quarter ended June 25, 2022, formatted in inline XBRL (extensible Business Reporting Language):

~~(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~~

~~104 Cover Page Interactive Data File (embedded within the Inline XBRL and contained~~
104
Cover Page Interactive Data File (formatted as Inline XBRL and containing in Exhibit 101)

3733

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.

~~J & J SNACK FOODS CORP.~~


Dated: ~~August~~May 4, ~~2022~~2023	/s/ Dan Fachner
	Dan Fachner
	President and Chief Executive Officer
	(Principal Executive Officer)


~~Dated: August 4, 2022~~	~~/s/ Ken A. Plunk~~
	~~Ken A. Plunk, Senior Vice~~
	~~President and Chief Financial Officer~~
	~~(Principal Financial Officer)~~
	~~(Principal Accounting Officer)~~

Dated: May 4, 2023	/s/ Ken A. Plunk
	Ken A. Plunk, Senior Vice
	President and Chief Financial Officer
	(Principal Financial Officer)
	(Principal Accounting Officer)

3834

	June 25,
	2022			September 25,
	(unaudited)			2021
Assets
Current assets
Cash and cash equivalents	$	81,283		$	283,192
Marketable securities held to maturity		4,520			7,980
Accounts receivable, net		253,469			162,939
Inventories		173,948			123,160
Prepaid expenses and other		10,519			7,498
Total current assets		523,739			584,769

Property, plant and equipment, at cost
Land		3,714			2,494
Buildings		34,742			26,582
Plant machinery and equipment		367,297			343,716
Marketing equipment		266,915			258,624
Transportation equipment		11,780			10,315
Office equipment		45,518			34,648
Improvements		47,922			45,578
Construction in progress		54,537			35,285
Total Property, plant and equipment, at cost		832,425			757,242
Less accumulated depreciation and amortization		513,851			490,055
Property, plant and equipment, net		318,574			267,187

Other assets
Goodwill		188,467			121,833
Other intangible assets, net		196,407			77,776
Marketable securities held to maturity		0			4,047
Marketable securities available for sale		5,608			10,084
Operating lease right-of-use assets		54,990			54,555
Other		3,457			1,968
Total other assets		448,929			270,263
Total Assets	$	1,291,242		$	1,122,219

Liabilities and Stockholders' Equity
Current Liabilities
Current finance lease liabilities	$	189		$	182
Accounts payable		128,551			96,789
Accrued insurance liability		14,892			16,260
Accrued liabilities		10,121			10,955
Current operating lease liabilities		14,062			13,395
Accrued compensation expense		19,038			17,968
Dividends payable		12,138			12,080
Total current liabilities		198,991			167,629

Long-term debt		125,000			0
Noncurrent finance lease liabilities		318			392
Noncurrent operating lease liabilities		46,017			46,557
Deferred income taxes		61,350			61,578
Other long-term liabilities		3,667			409

Stockholders' Equity
Preferred stock, $1 par value; authorized 10,000,000 shares; none issued		0			0
Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding 19,184,000 and 19,084,000 respectively		90,274			73,597
Accumulated other comprehensive loss		(13,374	)		(13,383	)
Retained Earnings		778,999			785,440
Total stockholders' equity		855,899			845,654
Total Liabilities and Stockholders' Equity	$	1,291,242		$	1,122,219

Acquired Intangible Assets

			(in thousands)
	*Weighted average*		*June 21,*
	*life (years)*		*2022*
Amortizable
Trade name	indefinite			76,900
Customer relationships		10		12,100
Technology		10		22,900
Franchise agreements		10		8,500
Total acquired intangible assets				120,400

	Nine Months ended June 25, 2022
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount

	(in thousands, except per share amounts)
Basic EPS
Net earnings available to common stockholders	$	29,925		19,131	$	1.56

Effect of dilutive securities
Options		0		67		0

Diluted EPS
Net earnings available to common stockholders plus assumed conversions	$	29,925		19,198	$	1.56

	Three Months Ended June 26, 2021
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount

	(in thousands, except per share amounts)
Basic EPS
Net earnings available to common stockholders	$	28,893		19,045	$	1.52

Effect of dilutive securities
Options		0		140		0

Diluted EPS
Net earnings available to common stockholders plus assumed conversions	$	28,893		19,185	$	1.51

	Nine Months Ended June 26, 2021
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount

	(in thousands, except per share amounts)
Basic EPS
Net earnings available to common stockholders	$	36,732		18,996	$	1.93

Effect of dilutive securities
Options		0		120		0

Diluted EPS
Net earnings available to common stockholders plus assumed conversions	$	36,732		19,116	$	1.92

	(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