J&J SNACK FOODS CORP 10-Q

jjsf20210626_10q.htm     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 26, 2021 or   ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934   Commission File Number:          0-14616   J&J SNACK FOODS CORP. (Exact name of registrant as specified in its charter)   New Jersey 22-1935537 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)                                                6000 Central Highway , Pennsauken , 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   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 ☐ No                                                                 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 ☐ No   Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 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 ☒ No   At July 23, 2021 there were 19,063,903 shares of the Registrant’s Common Stock outstanding.   1         INDEX   Page Number Part I.   Financial Information       Item l.   Consolidated Financial Statements       Consolidated Balance Sheets – June 26,2021(unaudited) and September 26, 2020 3     Consolidated Statements of Earnings (unaudited) – Three and nine months Ended June 26, 2021 and June 27, 2020 4     Consolidated Statements of Comprehensive Income (unaudited) – Three and nine months Ended June 26, 2021 and June 27, 2020 5     Consolidated Statements of Changes In Stockholders’ Equity (unaudited) – Three and nine months Ended June 26, 2021 and June 27, 2020 6     Consolidated Statements of Cash Flows (unaudited) – Nine Months Ended June 26, 2021 and June 27, 2020 7     Notes to the Consolidated Financial Statements (unaudited) 8     Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations 27     Item 3.   Quantitative and Qualitative Disclosures About Market Risk 31     Item 4.   Controls and Procedures 31     Part II.   Other Information 32     Item 6.   Exhibits 32   2        J & J SNACK FOODS CORP. AND SUBSIDIARIES  CONSOLIDATED BALANCE SHEETS  (in thousands, except share amounts)       June 26,               2021     September 26,       (unaudited)     2020   Assets                 Current assets                 Cash and cash equivalents   $ 276,268     $ 195,809   Marketable securities held to maturity     9,902       51,151   Accounts receivable, net     154,845       126,587   Inventories     114,822       108,923   Prepaid expenses and other     11,547       17,087   Total current assets     567,384       499,557                     Property, plant and equipment, at cost                 Land     2,494       2,494   Buildings     26,582       26,582   Plant machinery and equipment     340,693       330,168   Marketing equipment     253,199       250,914   Transportation equipment     10,232       9,966   Office equipment     34,291       33,878   Improvements     45,349       43,264   Construction in progress     28,134       19,995   Total Property, plant and equipment, at cost     740,974       717,261   Less accumulated depreciation and amortization     482,056       455,645   Property, plant and equipment, net     258,918       261,616                     Other assets                 Goodwill     121,833       121,833   Other intangible assets, net     79,676       81,622   Marketable securities held to maturity     7,568       16,927   Marketable securities available for sale     11,273       13,976   Operating lease right-of-use assets     51,811       58,110   Other     3,083       2,912   Total other assets     275,244       295,380   Total Assets   $ 1,101,546     $ 1,056,553                     Liabilities and Stockholders' Equity                 Current Liabilities                 Current finance lease liabilities   $ 252     $ 349   Accounts payable     97,117       73,135   Accrued insurance liability     15,764       13,039   Accrued liabilities     6,890       7,420   Current operating lease liabilities     12,780       13,173   Accrued compensation expense     15,000       16,134   Dividends payable     12,064       10,876   Total current liabilities     159,867       134,126                     Noncurrent finance lease liabilities     417       368   Noncurrent operating lease liabilities     41,573       47,688   Deferred income taxes     64,284       64,413   Other long-term liabilities     375       460                     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 19,061,000 and 18,915,000 respectively     69,572       49,268   Accumulated other comprehensive loss     ( 13,182 )     ( 15,587 ) Retained Earnings     778,640       775,817   Total stockholders' equity     835,030       809,498   Total Liabilities and Stockholders' Equity   $ 1,101,546     $ 1,056,553     The accompanying notes are an integral part of these statements.   3        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 26,     June 27,     June 26,     June 27,       2021     2020     2021     2020                                     Net Sales   $ 324,344     $ 214,563     $ 821,519     $ 769,502                                     Cost of goods sold     228,170       177,367       614,324       585,002   Gross Profit     96,174       37,196       207,195       184,500                                     Operating expenses                                 Marketing     20,502       21,952       56,995       68,532   Distribution     27,311       21,272       75,643       69,648   Administrative     10,348       8,374       29,004       28,166   Plant shutdown impairment costs     -       5,072       -       5,072   Other general (income) expense     ( 131 )     ( 54 )     ( 399 )     ( 183 ) Total Operating Expenses     58,030       56,616       161,243       171,235                                     Operating Income (loss)     38,144       ( 19,420 )     45,952       13,265                                     Other (expense)income                                 Investment income (loss)     470       1,300       2,419       2,673   Interest (expense) & other     ( 8 )     ( 7 )     ( 19 )     ( 60 )                                   Earnings (loss) before income taxes     38,606       ( 18,127 )     48,352       15,878                                     Income taxes (benefit)     9,713       ( 5,480 )     11,620       4,157                                     NET EARNINGS (LOSS)   $ 28,893     $ ( 12,647 )   $ 36,732     $ 11,721                                     Earnings (loss) per diluted share   $ 1.51     $ ( 0.67 )   $ 1.92     $ 0.62                                     Weighted average number of diluted shares     19,185       18,888       19,116       19,036                                     Earnings (loss) per basic share   $ 1.52     $ ( 0.67 )   $ 1.93     $ 0.62                                     Weighted average number of basic shares     19,045       18,888       18,996       18,902     The accompanying notes are an integral part of these statements.   4       J&J SNACK FOODS CORP. AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (in thousands)       Three months ended     Nine months ended       June 26,     June 27,     June 26,     June 27,       2021     2020     2021     2020                                     Net Earnings (loss)   $ 28,893     $ ( 12,647 )   $ 36,732     $ 11,721                                     Foreign currency translation adjustments     657       41       2,405       ( 3,070 ) Total Other Comprehensive Income (loss) , net of tax     657       41       2,405       ( 3,070 )                                   Comprehensive Income (loss)   $ 29,550     $ ( 12,606 )   $ 39,137     $ 8,651     The accompanying notes are an integral part of these statements.   5       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 26, 2020     18,915     $ 49,268     $ ( 15,587 )   $ 775,817     $ 809,498   Issuance of common stock upon exercise of stock options     41       4,390       -       -       4,390   Foreign currency translation adjustment     -       -       2,279       -       2,279   Dividends declared     -       -       -       ( 10,900 )     ( 10,900 ) Share-based compensation     -       1,244       -             1,244   Net earnings     -       -       -       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       -       -       8,384   Issuance of common stock for employee stock purchase plan     6       714       -       -       714   Foreign currency translation adjustment     -       -       ( 531 )     -       ( 531 ) Dividends declared     -       -       -       ( 10,943 )     ( 10,943 ) Share-based compensation     -       1,026       -             1,026   Net earnings     -       -       -       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       -       -       3,564   Foreign currency translation adjustment     -       -       657       -       657   Dividends declared     -       -       -       ( 12,066 )     ( 12,066 ) Share-based compensation     -       982       -       -       982   Net earnings     -       -       -       28,893       28,893                                             Balance at June 26, 2021     19,061       69,572       ( 13,182 )     778,640       835,030                         Accumulated                                       Other                       Common Stock     Comprehensive     Retained               Shares     Amount     Loss     Earnings     Total                                             Balance at September 28, 2019     18,895     $ 45,744     $ ( 12,988 )   $ 800,995     $ 833,751   Issuance of common stock upon exercise of stock options     5       468       -       -       468   Foreign currency translation adjustment     -       -       810       -       810   Dividends declared     -       -       -       ( 10,867 )     ( 10,867 ) Share-based compensation     -       1,299       -       -       1,299   Net earnings     -       -       -       17,059       17,059                                             Balance at December 28, 2019     18,900     $ 47,511     $ ( 12,178 )   $ 807,187     $ 842,520   Issuance of common stock upon exercise of stock options     47       5,049       -       -       5,049   Issuance of common stock for employee stock purchase plan     6       783       -       -       783   Foreign currency translation adjustment     -       -       ( 3,921 )     -       ( 3,921 ) Issuance of common stock under deferred stock plan     1       90       -       -       90   Dividends declared     -       -       -       ( 10,878 )     ( 10,878 ) Share-based compensation     -       1,088       -       -       1,088   Repurchase of common stock     ( 66 )     ( 8,972 )     -       -       ( 8,972 ) Net earnings     -       -       -       7,309       7,309                                             Balance at March 28, 2020     18,888       45,549       ( 16,099 )     803,618       833,068   Foreign currency translation adjustment     -       -       41       -       41   Dividends declared     -       -       -       ( 10,873 )     ( 10,873 ) Share-based compensation     -       1,011       -       -       1,011   Net loss     -       -       -       ( 12,647 )     ( 12,647 )                                           Balance at June 27, 2020     18,888       46,560       ( 16,058 )     780,098       810,600     The accompanying notes are an integral part of these statements.   6       J & J SNACK FOODS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)       (in thousands)       Nine Months Ended       June 26,     June 27,       2021     2020   Operating activities:                 Net earnings   $ 36,732     $ 11,721   Adjustments to reconcile net earnings to net cash provided by operating activities:                 Depreciation of fixed assets     36,278       37,353   Amortization of intangibles and deferred costs     2,096       2,516   Share-based compensation     3,252       3,421   Deferred income taxes     ( 188 )     ( 426 ) (Gain) loss on marketable securities     ( 926 )     1,746   Plant shutdown impairment costs     -       5,072   Other     ( 305 )     ( 309 ) Changes in assets and liabilities net of effects from purchase of companies                 (Increase) decrease in accounts receivable     ( 27,940 )     24,634   Increase in inventories     ( 5,964 )     ( 3,751 ) (Increase) decrease in prepaid expenses     5,710       ( 7,879 ) Increase (decrease) in accounts payable and accrued liabilities     24,823       ( 7,478 ) Net cash provided by operating activities     73,568       66,620   Investing activities:                 Payments for purchases of companies, net of cash acquired     -       ( 57,197 ) Purchases of property, plant and equipment     ( 34,456 )     ( 47,637 ) Purchases of marketable securities     -       ( 6,103 ) Proceeds from redemption and sales of marketable securities     54,191       54,125   Proceeds from disposal of property and equipment     2,079       2,852   Other     42       ( 72 ) Net cash provided by (used in) investing activities     21,856       ( 54,032 ) Financing activities:                 Payments to repurchase common stock     -       ( 8,972 ) Proceeds from issuance of stock     17,178       6,300   Payments on capitalized lease obligations     ( 48 )     ( 272 ) Payment of cash dividend     ( 32,719 )     ( 31,193 ) Net cash used in financing activities     ( 15,589 )     ( 34,137 ) Effect of exchange rate on cash and cash equivalents     624       ( 885 ) Net increase (decrease) in cash and cash equivalents     80,459       ( 22,434 ) Cash and cash equivalents at beginning of period     195,809       192,395   Cash and cash equivalents at end of period   $ 276,268     $ 169,961     The accompanying notes are an integral part of these statements.   7     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 - 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 26, 2020.   In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position and the results of operations and cash flows.   The results of operations for the three and nine months ended June 26, 2021 and June 27, 2020 are not necessarily indicative of results for the full year. Sales of our frozen beverages and frozen juice bars and ices are generally higher in the third and fourth quarters due to warmer weather. 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, which has impacted the comparative nature of our results. While the majority of these venues have re-opened, the future impact of COVID- 19 is still uncertain and continues to be monitored.   While we believe that the disclosures presented are adequate to make the information not misleading, we suggest that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes included in the Company’s Annual Report on Form 10 -K for the fiscal year ended September 26, 2020.     Note 2   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.   8       The singular performance obligation of our customer contracts for product and machine sales is determined by each individual purchase order and the respective products ordered, with revenue being recognized at a point-in-time when the obligation under the terms of the agreement is satisfied and product control is transferred to our customer. Specifically, control transfers to our customers when the product is delivered to, installed, or picked up by our customers based upon applicable shipping terms, as our customers can direct the use and obtain substantially all of the remaining benefits from the product at this point in time. The performance obligations in our customer contracts for product are generally satisfied within 30 days.   The singular performance obligation of our customer contracts for time and material repair and maintenance equipment service is the performance of the repair and maintenance with revenue being recognized at a point-in-time when the repair and maintenance is completed.   The singular performance obligation of our customer repair and maintenance equipment service contracts is the performance of the repair and maintenance with revenue being recognized over the time the service is expected to be performed. Our customers are billed for service contracts in advance of performance and therefore we have contract liabilities on our balance sheet.   Significant Payment Terms In general, within our customer contracts, the purchase order identifies the product, quantity, price, pick-up allowances, payment terms and final delivery terms. Although some payment terms may be more extended, presently the majority of our payment terms are 30 days. As a result, we have used the available practical expedient and, consequently, do not adjust our revenues for the effects of a significant financing component.   Shipping All amounts billed to customers related to shipping and handling are classified as revenues; therefore, we recognize revenue for shipping and handling fees at the time the products are shipped or when services are performed. The cost of shipping products to the customer is recognized at the time the products are shipped to the customer and our policy is to classify them as Distribution expenses.   9       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 $ 15,481,000 at June 26, 2021 and $ 14,345,000 at September 26, 2020.   Warranties & Returns We provide all customers with a standard or assurance type warranty. Either stated or implied, we provide assurance the related products will comply with all agreed-upon specifications and other warranties provided under the law. No services beyond an assurance warranty are provided to our customers.   We do not grant a general right of return. However, customers may return defective or non-conforming products. Customer remedies may include either a cash refund or an exchange of the product. We do not estimate a right of return and related refund liability as returns of our products are rare.   Contract Balances Our customers are billed for service contracts in advance of performance and therefore we have contract liabilities on our balance sheet as follows:       (in thousands)       Three months ended     Nine months ended       June 26,     June 27,     June 26,     June 27,       2021     2020     2021     2020                                     Beginning Balance   $ 1,090     $ 1,235     $ 1,327     $ 1,334   Additions to contract liability   $ 1,237       1,362       4,182       4,111   Amounts recognized as revenue   $ ( 1,283 )     ( 1,311 )     ( 4,465 )     ( 4,159 ) Ending Balance   $ 1,044     $ 1,286     $ 1,044     $ 1,286     Disaggregation of Revenue     See Note 9 for disaggregation of our net sales by class of similar product and type of customer.   10       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 $ 1,185,000 and $ 1,388,000 on June 26, 2021 and September 26, 2020, respectively.     Note  3 Depreciation of equipment and buildings is provided for by the straight-line method over the assets’ estimated useful lives. Amortization of improvements is provided for by the straight-line method over the term of the lease or the assets’ estimated useful lives, whichever is shorter. Licenses and rights, customer relationships and non-compete agreements arising from acquisitions are amortized by the straight-line method over periods ranging from 2 to 20 years. Depreciation expense was $ 12,025,000 and $ 12,543,000 for the three months ended June 26, 2021 and June 27, 2020, respectively and $ 36,278,000 and $ 37,353,000 for the nine months ended June 26, 2021 and June 27, 2020, respectively.     Note  4 Basic earnings per common share (EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period. Diluted EPS takes into consideration the potential dilution that could occur if securities (stock options) or other contracts to issue common stock were exercised and converted into common stock. Our calculation of EPS is as follows:   11         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     -       140       ( 0.01 )                           Diluted EPS                         Net Earnings available to common stockholders plus assumed conversions   $ 28,893       19,185     $ 1.51     20,800 anti-dilutive shares have been excluded in the computation of EPS for  the three months ended June 26, 2021       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     -       120       ( 0.01 )                           Diluted EPS                         Net Earnings available to common stockholders plus assumed conversions   $ 36,732       19,116     $ 1.92     289,692 anti-dilutive shares have been excluded in the computation of EPS for the nine months ended June 26, 2021   12         Three Months Ended June 27, 2020       Income     Shares     Per Share       (Numerator)     (Denominator)     Amount                                 (in thousands, except per share amounts)   Basic EPS                         Net Earnings available to common stockholders   $ ( 12,647 )     18,888     $ ( 0.67 )                           Effect of Dilutive Securities                         Options     -       -       -                             Diluted EPS                         Net Earnings available to common stockholders plus assumed conversions   $ ( 12,647 )     18,888     $ ( 0.67 )   845,977 anti-dilutive shares have been excluded in the computation  of EPS for the three months ended June 27, 2020       Nine Months Ended June 27, 2020       Income     Shares     Per Share       (Numerator)     (Denominator)     Amount                                 (in thousands, except per share amounts)   Basic EPS                         Net Earnings available to common stockholders   $ 11,721       18,902     $ 0.62                             Effect of Dilutive Securities                         Options     -       134       -                             Diluted EPS                         Net Earnings available to common stockholders plus assumed conversions   $ 11,721       19,036     $ 0.62     169,246 anti-dilutive shares have been excluded in the computation  of EPS for the nine months ended June 27, 2020     Note  5 At June 26, 2021, the Company has three stock-based employee compensation plans. Share-based compensation expense was recognized as follows:       Three months ended     Nine months ended       June 26,     June 27,     June 26,     June 27,       2021     2020     2021     2020       (in thousands) Stock Options   $ 512     $ 890     $ 1,505     $ 2,267   Stock purchase plan     171       57       513       328   Stock issued to outside director     11       17       33       50   Restricted stock issued to an employee     23       -       70       -   Total share-based compensation   $ 717     $ 964     $ 2,121     $ 2,645                                     The above compensation is net of tax benefits   $ 265     $ 70     $ 1,131     $ 822     13       The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model with the following weighted average assumptions used for grants in fiscal 2021 nine months: expected volatility of 25.8%; risk-free interest rate of 0.8%; dividend rate of 1.4 % and expected lives of 51 months.   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 .   During the fiscal year 2020 nine -month period, the Company granted 161,682 stock options. The weighted-average grant date fair value of these options was $ 14.40 .   Expected volatility is based on the historical volatility of the price of our common shares over the past 51 months for 5 -year options and 10 years for 10 -year options. We use historical information to estimate expected life and forfeitures within the valuation model. The expected term of awards represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Compensation cost is recognized using a straight-line method over the vesting or service period and is net of estimated forfeitures.     Note  6 We account for our income taxes under the liability method. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities.   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 and $ 360,000 on June 26, 2021 and September 26, 2020, 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 26, 2021, and September 26, 2020, the Company has $ 267,000 of accrued interest and penalties.   14       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 for the nine months ended June 26, 2021 was 24 %, primarily due to a $ 1,131,000 tax benefit related to share-based compensation. Our effective tax rate for the nine months ended June 27, 2020 was 26 %.     Note  7 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 receivables and held-to-maturity debt securities.   The Company adopted this guidance in the first quarter of Fiscal 2021 using the modified retrospective transition method. The adoption of ASU 2016 - 13 did not have a material impact on the Company’s consolidated financial statements.     Note  8 Inventories consist of the following:       June 26,     September 26,       2021     2020       (unaudited)               (in thousands)                     Finished goods   $ 40,850     $ 40,184   Raw materials     29,171       24,550   Packaging materials     12,080       10,545   Equipment parts and other     32,721       33,644   Total Inventories   $ 114,822     $ 108,923       Note  9 We principally sell our products to the food service and retail supermarket industries. Sales and results of our frozen beverages business are monitored separately from the balance of our food service business because of different distribution and capital requirements. We maintain separate and discrete financial information for the three operating segments mentioned above, which is available to our Chief Operating Decision Makers.   Our three reportable segments are Food Service, Retail Supermarkets and Frozen Beverages. All inter-segment net sales and expenses have been eliminated in computing net sales and operating income. These segments are described below.   15       Food Service   The primary products sold by the food service group are soft pretzels, frozen juice treats and desserts, churros, dough enrobed handheld products and baked goods. Our customers in the food service industry include snack bars and food stands in chain, department and discount stores; malls and shopping centers; fast food outlets; stadiums and sports arenas; leisure and theme parks; convenience stores; movie theatres; warehouse club stores; schools, colleges and other institutions. Within the food service industry, our products are purchased by the consumer primarily for consumption at the point-of-sale.   Retail Supermarkets   The primary products sold to the retail supermarket channel are soft pretzel products – including SUPERPRETZEL, frozen juice treats and desserts including LUIGI’S Real Italian Ice, MINUTE MAID Juice Bars and Soft Frozen Lemonade, WHOLE FRUIT frozen fruit bars and sorbet, PHILLY SWIRL cups and sticks, ICEE Squeeze-Up Tubes and dough enrobed handheld products. Within the retail supermarket channel, our frozen and prepackaged products are purchased by the consumer for consumption at home.   Frozen Beverages   We sell frozen beverages and related products to the food service industry primarily under the names ICEE, SLUSH PUPPIE and PARROT ICE in the United States, Mexico and Canada. We also provide repair and maintenance service to customers for customers’ owned equipment.   The Chief Operating Decision Maker for Food Service and Retail Supermarkets and the Chief Operating Decision Maker for Frozen Beverages monthly review detailed operating income statements and sales reports in order to assess performance and allocate resources to each individual segment. Sales and operating income are key variables monitored by the Chief Operating Decision Makers and management when determining each segment’s and the company’s financial condition and operating performance. In addition, the Chief Operating Decision Makers review and evaluate depreciation, capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment. Information regarding the operations in these three reportable segments is as follows:   16           Three months ended     Nine months ended       June 26     June 27     June 26     June 27       2021     2020     2021     2020                                                                       Sales to External Customers:                                 Food Service                                 Soft pretzels   $ 50,895     $ 21,384     $ 120,359     $ 116,985   Frozen juices and ices     13,927       8,688       30,812       25,222   Churros     20,096       7,321       46,358       38,466   Handhelds     18,971       7,448       56,574       22,084   Bakery     85,706       69,237       257,580       255,016   Other     6,884       2,543       14,546       13,628   Total Food Service   $ 196,478     $ 116,621     $ 526,226     $ 471,401                                     Retail Supermarket                                 Soft pretzels   $ 11,193     $ 12,716     $ 40,871     $ 34,874   Frozen juices and ices     36,898       33,322       71,600       59,279   Biscuits     4,562       8,151       18,717       21,759   Handhelds     1,191       3,257       6,215       9,135   Coupon redemption     ( 513 )     ( 807 )     ( 2,196 )     ( 2,216 ) Other     526       863       1,652       1,668   Total Retail Supermarket   $ 53,857     $ 57,502     $ 136,859     $ 124,499                                     Frozen Beverages                                 Beverages   $ 42,279     $ 16,456     $ 76,663     $ 83,606   Repair and maintenance service     22,789       17,259       59,903       61,524   Machines revenue     8,404       6,363       20,556       27,254   Other     536       362       1,312       1,218   Total Frozen Beverages   $ 74,009     $ 40,440     $ 158,434     $ 173,602                                     Consolidated Sales   $ 324,344     $ 214,563     $ 821,519     $ 769,502                                     Depreciation and Amortization:                                 Food Service   $ 6,817     $ 7,050     $ 20,334     $ 21,208   Retail Supermarket     378       468       1,147       1,156   Frozen Beverages     5,469       5,864       16,893       17,505   Total Depreciation and Amortization   $ 12,664     $ 13,382     $ 38,374     $ 39,869                                     Operating Income :                                 Food Service   $ 17,644     $ ( 18,242 )   $ 29,879     $ 7,743   Retail Supermarket     9,080       7,910       20,167       14,464   Frozen Beverages     11,420       ( 9,088 )     ( 4,094 )     ( 8,942 ) Total Operating Income (Loss)   $ 38,144     $ ( 19,420 )   $ 45,952     $ 13,265                                     Capital Expenditures:                                 Food Service   $ 10,383     $ 7,865     $ 25,915     $ 26,599   Retail Supermarket     93       390       194       1,625   Frozen Beverages     5,151       2,397       8,347       19,413   Total Capital Expenditures   $ 15,627     $ 10,652     $ 34,456     $ 47,637                                     Assets:                                 Food Service   $ 779,730     $ 729,331     $ 779,730     $ 729,331   Retail Supermarket     33,405       33,766       33,405       33,766   Frozen Beverages     288,411       294,189       288,411       294,189   Total Assets   $ 1,101,546     $ 1,057,286     $ 1,101,546     $ 1,057,286     17       Note  10 Our three reporting units, which are also reportable segments, are Food Service, Retail Supermarkets and Frozen Beverages.   The carrying amounts of acquired intangible assets for the Food Service, Retail Supermarkets and Frozen Beverage segments as of June 26, 2021 and September 26, 2020 are as follows:         June 26, 2021           September 26, 2020       Gross             Gross               Carrying     Accumulated     Carrying     Accumulated       Amount     Amortization     Amount     Amortization       (in thousands)   FOOD SERVICE                                                                   Indefinite lived intangible assets                                 Trade names   $ 10,408     $ -     $ 10,408     $ -                                     Amortized intangible assets                                 Non compete agreements     670       670       670       645   Customer relationships     13,000       5,863       19,737       11,595   License and rights     1,690       1,375       1,690       1,312   TOTAL FOOD SERVICE   $ 25,768     $ 7,908     $ 32,505     $ 13,552                                     RETAIL SUPERMARKETS                                                                   Indefinite lived intangible assets                                 Trade names   $ 12,750     $ -     $ 12,750     $ -                                     Amortized Intangible Assets                                 Trade names     676       619       676       519   Customer relationships     7,907       5,733       7,907       5,140   TOTAL RETAIL SUPERMARKETS   $ 21,333     $ 6,352     $ 21,333     $ 5,659                                                                       FROZEN BEVERAGES                                                                   Indefinite lived intangible assets                                 Trade names   $ 9,315     $ -     $ 9,315     $ -   Distribution rights     36,100       -       36,100       -                                     Amortized intangible assets                                 Customer relationships     1,439       365       1,439       257   Licenses and rights     1,400       1,054       1,400       1,002   TOTAL FROZEN BEVERAGES   $ 48,254     $ 1,420     $ 48,254     $ 1,259                                     CONSOLIDATED   $ 95,355     $ 15,680     $ 102,092     $ 20,470     Fully amortized intangible assets have been removed from the June 26, 2021 amounts.   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 26, 2021 and June 27, 2020 was $ 639,000 and $ 831,000 , respectively. Aggregate amortization expense of intangible assets for the nine months ended June 26, 2021 and June 27, 2020 was $ 2,096,000 and $ 2,507,000 , respectively.   18     Estimated amortization expense for the next five fiscal years is approximately $ 2,500,000 in 2021, $ 2,300,000 in 2022, $ 2,300,000 in 2023, $ 2,000,000 in 2024, and $ 1,400,000 in 2025. The weighted amortization period of the intangible assets is 10.9 years.   Goodwill             The carrying amounts of goodwill for the Food Service, Retail Supermarket and Frozen Beverage segments are as follows:       Food     Retail     Frozen             Service     Supermarket     Beverages     Total       (in thousands)   Balance at June 26, 2021   $ 61,189     $ 4,146     $ 56,498     $ 121,833                                     Balance at September 26, 2020   $ 61,189     $ 4,146     $ 56,498     $ 121,833         Note  11 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.    19     The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at June 26, 2021 are summarized as follows:               Gross     Gross     Fair       Amortized     Unrealized     Unrealized     Market       Cost     Gains     Losses     Value       (in thousands)                                     Corporate Bonds   $ 17,470     $ 243     $ 6     $ 17,707   Total marketable securities held to maturity   $ 17,470     $ 243     $ 6     $ 17,707     The amortized cost, unrealized gains and losses, and fair market values of our investment securities available for sale at June 26, 2021 are summarized as follows:               Gross     Gross     Fair       Amortized     Unrealized     Unrealized     Market       Cost     Gains     Losses     Value       (in thousands)                                     Mutual Funds   $ 3,588     $ -     $ 581     $ 3,007   Preferred Stock     8,107       213       54       8,266   Total marketable securities available for sale   $ 11,695     $ 213     $ 635     $ 11,273     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 2021 and 2025 and then income is based on a spread above LIBOR if the securities are not called. The mutual funds and Fixed-to-Floating Perpetual Preferred Stock do not have contractual maturities; however, we classify them as long-term assets as it is our intent to hold them for a period of over one year, although we may sell some or all of them depending on presently unanticipated needs for liquidity or market conditions. The corporate bonds generate fixed income to maturity dates in 2021 through 2023, with $ 17.5 million maturing within 2 years. Our expectation is that we will hold the corporate bonds to their maturity dates and redeem them at our amortized cost.   20     The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at September 26, 2020 are summarized as follows:               Gross     Gross     Fair       Amortized     Unrealized     Unrealized     Market       Cost     Gains     Losses     Value       (in thousands)                                     Corporate Bonds     68,078       1,015       32       69,061   Total marketable securities held to maturity   $ 68,078     $ 1,015     $ 32     $ 69,061     The amortized cost, unrealized gains and losses, and fair market values of our investment securities available for sale at September 26, 2020 are summarized as follows:               Gross     Gross     Fair       Amortized     Unrealized     Unrealized     Market       Cost     Gains     Losses     Value       (in thousands)                                     Mutual Funds   $ 3,588     $ -     $ 738     $ 2,850   Preferred Stock     11,596       116       586       11,126   Total marketable securities available for sale   $ 15,184     $ 116     $ 1,324     $ 13,976     The amortized cost and fair value of the Company’s held to maturity securities by contractual maturity at June 26, 2021 and September 26, 2020 are summarized as follows:       June 26, 2021     September 26, 2020                                                 Fair             Fair       Amortized     Market     Amortized     Market       Cost     Value     Cost     Value       (in thousands)   Due in one year or less   $ 9,902     $ 10,041     $ 51,151     $ 51,815   Due after one year through five years     7,568       7,666       16,927       17,246   Due after five years through ten years     -       -       -       -   Total held to maturity securities   $ 17,470     $ 17,707     $ 68,078     $ 69,061   Less current portion     9,902       10,041       51,151       51,815   Long term held to maturity securities   $ 7,568     $ 7,666     $ 16,927     $ 17,246     21     Proceeds from the redemption and sale of marketable securities were $ 12,854,000 and $ 54,191,000 in the three and nine months ended June 26, 2021 and were $ 23,187,000 and $ 54,125,000 in the three and nine months ended June 27, 2020, respectively. Gains of $ 21,000 and $ 139,000 were recorded in the three and nine months ended June 26, 2021, respectively. A gain of $ 324,000 was recorded in the three months ended June 27, 2020 and losses of $ 1,746,000 were recorded in the nine months ended June 27, 2020. Included in the gains and losses were unrealized gains of $ 786,000 and unrealized losses of $ 1,708,000 in the nine months ended June 26, 2021 and June 27, 2020, respectively. Unrealized gains of $ 137,000 and $ 285,000 were recorded in the three months ended June 26, 2021 and June 27, 2020, respectively. We use the specific identification method to determine the cost of securities sold.   Total marketable securities held to maturity as of June 26, 2021 with credit ratings of AAA/AA/A had an amortized cost basis totaling $ 4,970,000 and those with credit ratings of BBB/BB/B had an amortized cost basis totaling $ 12,500,000 . This rating information was obtained June 30, 2021.     Note  12   Changes to the components of accumulated other comprehensive loss are as follows:       Three Months Ended June 26, 2021     Nine Months Ended June 26, 2021                                                                           (unaudited)     (unaudited)       (in thousands)     (in thousands)                                                                           Foreign Currency             Foreign Currency               Translation             Translation               Adjustments     Total     Adjustments     Total                                     Beginning Balance   $ ( 13,839 )   $ ( 13,839 )   $ ( 15,587 )   $ ( 15,587 )                                   Other comprehensive income (loss) before reclassifications     657     $ 657       2,405     $ 2,405                                                                       Ending Balance   $ ( 13,182 )   $ ( 13,182 )   $ ( 13,182 )   $ ( 13,182 )       Three Months Ended June 27, 2020     Nine Months Ended June 27, 2020                                         (unaudited)     (unaudited)       (in thousands)     (in thousands)                                                                           Foreign Currency             Foreign Currency               Translation             Translation               Adjustments     Total     Adjustments     Total                                     Beginning Balance   $ ( 16,099 )   $ ( 16,099 )   $ ( 12,988 )   $ ( 12,988 )                                   Other comprehensive income (loss) before reclassifications     41     $ 41       ( 3,070 )   $ ( 3,070 )                                                                     Ending Balance   $ ( 16,058 )   $ ( 16,058 )   $ ( 16,058 )   $ ( 16,058 )   22       Note 13 On October 1, 2019, we acquired the assets of ICEE Distributors LLC, based in Bossier City, Louisiana. ICEE Distributors does business in Arkansas, Louisiana and Texas with annual sales of approximately $ 13 million. Sales and operating income of ICEE Distributors were $ 3,163,000 and $ 1,099,000 for the three months ended June 26, 2021 and were $ 6,952,000 and $ 1,568,000 for the nine months ended June 26, 2021. Sales and operating income of ICEE Distributors were $ 3,200,000 and $ 1,100,000 for the three months ended June 27, 2020 and were $ 8,000,000 and $ 2,000,000 for the nine months ended June 27, 2020.   On February 4, 2020, we acquired the assets of BAMA ICEE, based in Birmingham, Alabama. BAMA ICEE does business in Alabama and Georgia with annual sales of approximately $ 3.5 million. Sales and operating income of BAMA ICEE were $ 632,000 and $ 221,000 for the three months ended June 26, 2021 and were $ 1,437,000 and $ 365,000 for nine months ended June 26, 2021. Sales and operating income of BAMA ICEE were $ 636,000 and $ 205,000 for the three months and were $ 975,000 and $ 281,000 for the nine months ended June 27, 2020.   The purchase price allocations for the acquisitions are as follows:         (in thousands)                                 ICEE     BAMA     Total       Distributors     ICEE                                     Accounts Receivable, net   $ 721     $ 71     $ 792   Inventories     866       77       943   Property, plant & equipment, net     4,851       1,722       6,573   Customer Relationships     569       133       702   Distribution rights     22,400       6,800       29,200   Goodwill     15,773       3,549       19,322   Accounts Payable     ( 210 )     ( 110 )     ( 320 ) Purchase Price   $ 44,970     $ 12,242     $ 57,212     The goodwill recognized is attributable to the assembled workforce of ICEE Distributors and certain other strategic intangible assets that do not meet the requirements for recognition separate and apart from goodwill.   The Company incurred no acquisitions costs during the three or nine months ended June 26, 2021. Acquisition costs of $ 76,000 are included in other general expense for the nine months ended June 27, 2020.   23       Note 14 – 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 to  14 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  6  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.                                                                                    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.   24     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 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     Nine Months Ended       June 26, 2021     June 26, 2021       (in thousands)     (in thousands)                     Operating lease cost in Cost of goods sold and Operating Expenses   $ 3,846     $ 11,747   Finance lease cost:                 Amortization of assets in Cost of goods sold and Operating Expenses     62       216   Interest on lease liabilities in Interest expense & other     5       30   Total finance lease cost     67       246   Short-term lease cost in Cost of goods sold and Operating Expenses     -       -   Total net lease cost   $ 3,913     $ 11,993     25     Supplemental balance sheet information related to leases is as follows:       June 26, 2021       (in thousands)   Operating Leases         Operating lease right-of-use assets   $ 51,811             Current operating lease liabilities   $ 12,780   Noncurrent operating lease liabilities     41,573   Total operating lease liabilities   $ 54,353             Finance Leases         Finance lease right-of-use assets in Property, plant and equipment, net   $ 654             Current finance lease liabilities   $ 252   Noncurrent finance lease liabilities     417   Total finance lease liabilities   $ 669     Supplemental cash flow information related to leases is as follows:       Three Months Ended     Nine Months Ended       June 26, 2021     June 26, 2021       (in thousands)     (in thousands)   Cash paid for amounts included in the measurement of lease liabilities:                 Operating cash flows from operating leases   $ 3,860     $ 11,847   Operating cash flows from finance leases   $ 64     $ 237   Financing cash flows from finance leases   $ 23     $ 48                     Supplemental noncash information on lease liabilities arising from obtaining right-of-use assets   $ 1,317     $ 2,671   Supplemental noncash information on lease liabilities removed due to purchase of leased asset   $ -       -     As of  June 26, 2021, the maturities of lease liabilities were as follows:       (in thousands)       Operating Leases     Finance Leases   Three months ending September 25, 2021   $ 3,863     $ 117   2022     13,804       203   2023     11,681       133   2024     8,967       133   2025     5,726       61   Thereafter     16,480       70   Total minimum payments   $ 60,521     $ 717   Less amount representing interest     ( 6,168 )     ( 48 ) Present value of lease obligations   $ 54,353     $ 669     As of June 26, 2021, the weighted-average remaining term of our operating and finance leases was 6.2 years and 4.2 years, respectively.   26       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. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate,” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. 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, 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 future growth and expansion. See Note 11 to these financial statements for a discussion of our investment securities.   The Company’s Board of Directors declared a regular quarterly cash dividend of $.633 per share of its common stock payable on July 12, 2021, to shareholders of record as of the close of business on June 21, 2021. The cash dividend of $.633 per share represents an increase of 10% from the previous quarterly dividend rate of $.575 per share.   We purchased 65,648 shares of our common stock in fiscal year 2020, but did not purchase any shares in the nine months ended June 26, 2021. 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.   In the three months ended June 26, 2021 and June 27, 2020, 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 decreases of $657,000 and $41,000 in accumulated other comprehensive loss, respectively. In the nine months ended June 26, 2021 and June 27, 2020, 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 $2,405,000 and an increase of $3,070,000 in accumulated other comprehensive loss, respectively.   27     Our general-purpose bank credit line, which expires in November 2021, provides for up to a $50,000,000 revolving credit facility. The agreement contains restrictive covenants and requires commitment fees in accordance with standard banking practice. There were no outstanding balances under this facility at June 26, 2021.   RESULTS OF OPERATIONS   Net sales increased by 51% to $324,344,000 in the third quarter and by 7% to $821,519,000 for the nine months ended June 26, 2021 compared to the three and nine months ended June 27, 2020, respectively.   FOOD SERVICE   Sales to food service customers increased by 68% in the third quarter to $196,478,000 and by 12% to $526,226,000 for the nine months, compared to respective prior year periods. Food service venues are approaching pre-COVID capacity levels and more confident consumers are leaving their homes and spending more as the market normalizes. Sales accelerated throughout our key channels led by schools, amusement/recreation, restaurants, c-stores and theaters.   Soft pretzel sales to the food service market increased by 138% to $50,895,000 in the third quarter and by 3% to $120,359,000 in the nine months. Frozen juices and ices sales increased by 60% to $13,927,000 in the third quarter and increased by 22% to $30,812,000 in the nine months. Churro sales to food service customers increased by 174% to $20,096,000 in the third quarter and increased by 21% to $46,358,000 in the nine months. Sales of bakery products increased by 24% in the third quarter to $85,706,000 and increased by 1% to $257,580,000 for the nine months.   Sales of handhelds increased by 155% in the third quarter to $18,971,000 and by 156% in the nine months to $56,574,000 led by the continued success of a new product developed for one of our larger wholesale club customers.   Sales of new products in the first twelve months since their introduction were approximately $11,762,000 in the third quarter and $38,929,000 in the nine months led by the previously noted handheld item. Price increases had a marginal impact on results in the quarter as traffic and volume drove almost all of the sales decline compared to prior year.   Operating income in our Food Service segment was $17,644,000 in the third quarter compared with an operating loss of $18,242,000 in the prior year quarter. Operating income in our Food Service segment increased by 286% to $29,879,000 in the nine months. The increase in operating income was primarily due to the increase in sales which improved margin efficiencies and expense leverage.   28     RETAIL SUPERMARKETS   Sales of products to retail supermarkets decreased by 6% to $53,857,000 in the third quarter but increased by 10% to $136,859,000 in the nine months. The decrease in sales in the current quarter was primarily attributable to the stronger customer demand in the prior year third quarter resulting from the initial responses to the COVID-19 pandemic. During the prior year third quarter, a surge in demand and sales was experienced related to the effects of the rapid changes in consumer purchasing habits.   Sales of soft pretzels decreased by 12% in the third quarter to $11,193,000 but increased by 17% in the nine months to $40,871,000. Sales of frozen juices and ices increased by 11% to $36,898,000 in the third quarter and by 21% to $71,600,000 in the nine months. Sales of biscuits decreased by 44% to $4,562,000 in the third quarter and by 14% to $18,717,000 in the nine months. Handheld sales to retail supermarket customers decreased by 63% to $1,191,000 in the third quarter and by 32% to $6,215,000 in the nine months.   Sales of new products in the nine months were approximately $550,000 and were primarily related to frozen novelty items. Price increases had a minimal impact on sales in the third quarter and in the nine months, as sales were driven primarily by consumer traffic and volume trends in retail outlets.   Operating income in our Retail Supermarkets segment increased by 15% to $9,080,000 in the third quarter and by 39% to $20,167,000 in the nine months. The increases in operating income was primarily attributable to the improvement in operating margins.             FROZEN BEVERAGES   Frozen beverage and related product sales increased by 83% to $74,009,000 in the third quarter but decreased by 9% to $158,434,000 in the nine months.   Beverages sales increased by 157% to $42,279,000 in the third quarter but decreased by 8% to $76,663,000 in the nine months, with the majority of the fluctuations attributable to gallon sales. The increase in sales in the current quarter was led by the amusement channel that experienced sales above pre-COVID 19 levels, and continued traffic increases in the mass merchandise, QSR and theater channels.   Service revenue increased by 32% to $22,789,000 in the third quarter but decreased by 3% to $59,903,000 in the nine months. The increase in the quarter was largely due to customers accelerating equipment maintenance to support the post COVID-19 recovery.   29     Machines revenue (primarily sales of frozen beverage machines) increased by 32% to $8,404,000 in the third quarter but decreased by 25% to $20,556,000 in the nine months. Retailers are beginning to re-invest again which helped to accelerate machine revenues in the quarter.   Our Frozen Beverage segment generated operating income of $11,420,000 in the third quarter compared with an operating loss of $9,088,000 in the prior year third quarter. In the nine months, our Frozen Beverage segment incurred an operating loss of $4,094,000 compared with an operating loss of $8,942,000 in the prior year nine-month period. The comparative performance was impacted by the challenging sales environment in the prior year quarter due to the COVID-19 pandemic.   CONSOLIDATED   Gross profit as a percentage of sales was 29.7% in the third quarter and 17.3% in the prior year quarter.  Gross profit as a percentage of sales was 25.2% in the nine-month period this year and 24.0% last year. The increase is largely attributable to the benefit of increased sales, favorable product mix and corresponding margin efficiencies.   Total operating expenses increased by 2.5% to $58,030,000 in the third quarter but decreased by 5.8% to $161,243,000 in the nine months. As a percentage of net sales, operating expenses decreased from 26.4% to 17.9% in the third quarter and increased in the nine months from 22.2% to 19.6%.   Marketing expenses decreased to 6.3% of net sales in the third quarter from 10.2% in prior year and to 6.9% in the nine months compared with 8.9% in prior year’s nine-month period. Distribution expenses decreased to 8.4% of net sales in the third quarter from 9.9% in the prior year but increased slightly to 9.2% in the nine months compared with 9.1% in prior year’s nine-month period. Administrative expenses decreased to 3.2% of net sales in the third quarter from 3.9% in prior year, and to 3.5% in the nine months compared with 3.7% in prior year’s nine-month period. Operating expenses in the prior year were impacted by $5.1 million of plant shutdown impairment costs in both the three month, and nine-month periods.   Operating income was $38,144,000 in the third quarter compared with an operating loss of $19,420,000 in the prior year. Operating income increased by 246% to $45,952,000 in the nine months as a result of the aforementioned items.   Our investments generated before tax income of $470,000 in the third quarter, a $830,000 decrease from prior year. In the nine months, our investments generated before tax income of $2,419,000, a 10% decrease from the prior year period. The decrease in before tax investment income compared with prior year was primarily attributable to the decrease in investments held between periods.   30     Net earnings in the third quarter were $28,893,000 compared with a loss of $12,647,000 in prior year. Net earnings increased by 213% in the nine months to $36,732,000. Our effective tax rate was 24% in the nine months compared with 26% in the prior year’s nine-month period.   There are many factors which can impact our net earnings from year to year and in the long run, among which are the supply and cost of raw materials and labor, insurance costs, factors impacting sales as noted above, the continuing consolidation of our customers, our ability to manage our manufacturing, marketing and distribution activities, our ability to make and integrate acquisitions and changes in tax laws and interest rates.   Item 3. Quantitative and Qualitative Disclosures About Market Risk   There has been no material change in the Company’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 2020 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 26, 2021, 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 26,2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.   31     PART II. OTHER INFORMATION   Item 6.  Exhibits   Exhibit No.     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.     101.1 The following financial information from J&J Snack Foods Corp.'s Quarterly Report on Form 10-Q for the quarter ended June 26, 2021, formatted in iXBRL (Inline 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 (formatted as Inline XBRL and contained in Exhibit 101)   32     SIGNATURES     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.   J & J SNACK FOODS CORP.                Dated: July 29, 2021   /s/  Dan Fachner       Dan Fachner       President and Chief Executive Officer       (Principal Executive Officer)              Dated: July 29, 2021   /s/  Ken A. Plunk       Ken A. Plunk, Senior Vice       President and Chief Financial Officer       (Principal Financial Officer)       (Principal Accounting Officer)       33