J&J SNACK FOODS CORP 10-K

Item 9A. Controls And Procedures   Disclosure Controls and Procedures   We carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), as amended for financial reporting, as of September 24, 2022. Based on that evaluation, our chief executive officer and chief financial officer concluded that these controls and procedures are effective at a reasonable assurance level.   Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the rules and forms of the SEC. These disclosure controls and procedures include, among other things, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.   Management ’ s Report on Internal Control over Financial Reporting   Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the chief executive officer and chief financial officer and effected by the board of directors and management to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:     ● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;     ● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of our management and board of directors;     ● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.   Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.   Our management assessed the effectiveness of our internal control over financial reporting as of September 24, 2022. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 2013 Internal Control-Integrated Framework.            Based on our assessment, our management believes that, as of September 24, 2022, our internal control over financial reporting is effective. There have been no changes that occurred during our fourth quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. During the third quarter of 2022, the Company completed the acquisition of Dippin’ Dots. In accordance with guidance issued by the SEC, recently acquired businesses may be excluded from management’s assessment of the effectiveness of the Company’s internal control over financial reporting in the year of acquisition. Accordingly, management excluded the Dippin’ Dots acquisition from management’s assessment of the effectiveness of the Company’s internal control over financial reporting from the June 21, 2022 acquisition date, which excluded total assets and total net revenues representing approximately 5% and 3%, respectively, of the Company’s related consolidated financial statement amounts as of and for the year ended September 24, 2022.   Our independent registered public accounting firm, Grant Thornton LLP, audited our internal control over financial reporting as of September 24, 2022. Their report, dated November 22, 2022, expressed an unqualified opinion on our internal control over financial reporting. That report appears in Item 15 of Part IV of this Annual Report on Form 10-K and is incorporated by reference to this Item 9A.   28     Item 9B. Other Information   There was no information required on Form 8-K during the quarter that was not reported.     Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections   Not applicable.   PART III     Item 10. Directors, Executive Officers and Corporate Governance   The information required relating to directors, director nominees and executive officers of the registrant is incorporated by reference from the information under the captions “Election of Directors,” “Biographical Information about the Nominees and Directors,” “Board Committees” and “Executive Officers” contained in our Proxy Statement for our Annual Meeting of Shareholders to be held on February 14, 2023 (the “Proxy Statement”).   The information relating to the identification of the audit committee, audit committee financial expert and director nomination procedures of the registrant is incorporated by reference from the information under the captions “The Audit Committee” and “The Nominating Committee” contained in the Proxy Statement.   29     The information concerning Section 16(a) Compliance appearing under the caption “Delinquent Section 16(a) Reports” in the Proxy Statement is incorporated herein by reference.   The Company has adopted a Code of Ethics pursuant to Section 406 of the Sarbanes-Oxley Act of 2002, which applies to the Company’s principal executive officer and senior financial officers. The Company has also adopted a Code of Business Conduct and Ethics which applies to all employees. The Company will furnish any person, without charge, a copy of the Code of Ethics upon written request to J & J Snack Foods Corp., 6000 Central Highway, Pennsauken, New Jersey 08109, Attn: Michael A. Pollner, Senior Vice President, General Counsel and Secretary. A copy of the Code of Ethics can also be found on our website at www.jjsnack.com . Any waiver of any provision of the Code of Ethics granted to the principal executive officer or senior financial officer may only be granted by a majority of the Company’s disinterested directors. If a waiver is granted, information concerning the waiver will be posted on our website www.jjsnack.com for a period of 12 months.   Item 11. Executive Compensation   Information concerning executive compensation appearing in the Company’s 2022 Proxy Statement under the caption “Executive Compensation” is incorporated herein by reference.   Item 12. Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters   Information concerning the security ownership of certain beneficial owners and management and the information concerning equity compensation plans appearing in the Proxy Statement under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” is incorporated herein by reference.   Item 13. Certain Relationships And Related Transactions, and Director Independence   The information set forth in the Proxy Statement under the captions “Certain Relationships” and “Director Independence” is incorporated herein by reference.   Item 14. Principal Accountant Fees And Services   The information set forth in the Proxy Statement under the captions “Ratification of Independent Registered Public Accounting Firm” and “Fees of Independent Registered Public Accounting Firm” is incorporated herein by reference.   30     PART IV   Item 15. Exhibits, Financial Statement Schedules     (a) The following documents are filed as part of this Report:     (1) Financial Statements     The financial statements filed as part of this report are listed on the Index to Consolidated Financial Statements and Financial Statements Schedule on page F-1.     (2) Financial Statement Schedule – Page S-1     Schedule II – Valuation and Qualifying Accounts   All other schedules are omitted either because they are not applicable or because the information required is contained in the financial statements or notes thereto.     (b) Exhibits   2.1 Securities Purchase Agreement, by and among the Company, DD Acquisition Holdings, LLC, Dippin’ Dots Holding, L.L.C., Fischer Industries, L.L.C, Stephen Scott Fischer Revocable Trust, Stephen Scott Fischer Exempt Trust, Mark A. Fischer 1994 Trust, Susan L. Fischer 1994 Trust, Christy Fischer Speakes Exempt Trust, Mark A. Fischer, as the Seller Representative, and Cryogenics Processors, LLC (Incorporated by reference from the Company’s Form 8-K filed May 20, 2022).   3.1** Amended and Restated Certificate of Incorporation of J & J Snack Foods Corp.   3.2 Certificate of Amendment to the Amended and Restated Certificate of Incorporation (Incorporated by reference from the Company’s Form 8-K filed June 24, 2022).   3.3 Revised Bylaws adopted November 19, 2013 (Incorporated by reference from the Company’s Form 10-K dated November 26, 2013).   4.3 Amended and Restated Loan Agreement dated December 1, 2006 by and among J & J Snack Foods Corp. and Certain of its Subsidiaries and Citizens Bank of Pennsylvania, as Agent (Incorporated by reference from the Company’s Form 10-K dated December 6, 2006).   4.4 First Amendment and Modification to Amended and Restated Loan Agreement (Incorporated by reference from the Company’s Form 10-K dated December 7, 2011).   31     4.5 Fourth Amendment and Modification to Amended and Restated Loan Agreement (Incorporated by reference from the Company’s Form 10-K dated November 21, 2016).   4.6 Second Amended and Restated Credit Agreement (Incorporated by reference from the Company ’ s Form 10-Q dated February 2, 2022).   4.7 Amendment No. 1 to the Second Amended and Restated Credit Agreement (Incorporated by reference to the Company ’ s Form 8-K filed on June 24, 2022).   4.8** Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934   10.1 * J & J Snack Foods Corp. Amended and Restated Long-Term Incentive Plan (Incorporated by referenced from the Company’s Form 8-K filed on February 12, 2021).   10.2 * J & J Snack Foods Corp. Stock Option Plan (Incorporated by reference from the Company’s Definitive Proxy Statement dated December 22, 2017).   10.3* Inducement Restricted Stock Award Agreement (Incorporated by reference from the Company’s Form 8-K filed on October 26, 2020).   10.4* Form of Performance Share Unit Agreement (Incorporated by reference from the Company’s Form 8-K filed on January 26, 2022).   10.5* Form of Service Share Unit Agreement (Incorporated by reference from the Company’s Form 8-K filed on January 26, 2022).   21.1 **           Subsidiaries of J & J Snack Foods Corp.   23.1 ** Consent of Independent Registered Public Accounting Firm.   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 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002.   32.2 ** Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002.   32     101** The following financial information from J&J Snack Foods Corp.'s Form 10-K for the year ended September 24, 2022, 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,   (v) Consolidated Statement of Changes in Stockholders' Equity and   (vi) The Notes to the Consolidated Financial Statements   104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).   _____________   *Compensatory Plan   **Filed Herewith     Item 16. Form 10-K Summary   Not applicable.     33     SIGNATURES     Pursuant to the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused report to be signed on its behalf by the undersigned, thereunto duly authorized.       J & J SNACK FOODS CORP.       November 22, 2022 By: /s/ Dan Fachner     Dan Fachner,     Chief Executive Officer     and President     (Principal Executive Officer)   Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.       November 22, 2022 /s/ Dan Fachner   Dan Fachner,   Chief Executive Officer, President and Director   (Principal Executive Officer)     November 22, 2022 /s/ Ken A. Plunk   Ken A. Plunk, Senior Vice   President and Chief Financial Officer   (Principal Financial Officer)   (Principal Accounting Officer)     November 22, 2022                                                    Gerald B. Shreiber, Chairman of the Board and Director     November 22, 2022 /s/ Sidney R. Brown   Sidney R. Brown, Director     November 22, 2022 /s/ Peter G. Stanley   Peter G. Stanley, Director     November 22, 2022 /s/ Vincent A. Melchiorre   Vincent A. Melchiorre, Director   34     November 22, 2022 /s/ Marjorie S. Roshkoff   Marjorie S. Roshkoff, Director     November 22, 2022 /s/ Roy C. Jackson   Roy C. Jackson, Director     November 22, 2022 /s/ Mary M. Meder   Mary M. Meder, Director   35       J & J SNACK FOODS CORP. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE       Financial Statements:       Report of Independent Registered Public Accounting Firm (PCAOB ID 248 ) F-2     Opinion of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting (PCAOB ID 248) F-4     Consolidated Balance Sheets as of September 24, 2022 and September 25, 2021 F-5     Consolidated Statements of Earnings for the fiscal years ended September 24, 2022, September 25, 2021 and September 26, 2020 F-6     Consolidated Statements of Comprehensive Income for the fiscal years ended September 24, 2022, September 25, 2021 and September 26, 2020 F-7     Consolidated Statement of Changes in Stockholders’ Equity for the fiscal years ended September 24, 2022, September 25, 2021 and September 26, 2020 F-8     Consolidated Statements of Cash Flows for the fiscal years ended September 24, 2022, September 25, 2021 and September 26, 2020 F-9     Notes to Consolidated Financial Statements F-10     Financial Statement Schedule:       Schedule II – Valuation and Qualifying Accounts S-1     F-1     REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     Board of Directors and Shareholders J&J Snack Food Corp. and Subsidiaries   Opinion on the financial statements We have audited the accompanying consolidated balance sheets of J&J Snack Foods Corp. (a New Jersey corporation) and subsidiaries (the “Company”) as of September 24, 2022 and September 25, 2021, the related consolidated statements of earnings, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended September 24, 2022, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 24, 2022 and September 25 2021, and the results of its operations and its cash flows for each of the three years in the period ended September 24, 2022, in conformity with accounting principles generally accepted in the United States of America.   We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of September 24, 2022, based on criteria established in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated November 22, 2022 expressed an unqualified opinion.   Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.   F-2     Critical audit matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.   Net Revenue Adjustments As described in Note A to the consolidated financial statements, contracts with customers include some form of variable consideration, including sales discounts, trade promotions and certain other sales and consumer incentives, including rebates. Variable consideration is treated as a reduction in revenue when the related revenue is recognized, and is recorded using the most likely amount method, with updates to estimates and related accruals of variable consideration occurring each period based on historical experience and changes in circumstances.   We identified the estimation of certain subsidiaries’ reserves for these net revenue adjustments by management as a critical audit matter because the inputs and assumptions utilized by management in estimating these reserves, including consistency of historical data and estimates of future customer credits, require significant judgment and create a high degree of estimation uncertainty. Consequently, auditing these assumptions require subjective auditor judgment.   Our audit procedures related to the estimation of the reserves included the following, among others:     ● We obtained an understanding of management’s processes and controls over calculating the reserves for net revenue adjustments, including understanding relevant inputs and assumptions.     ● We evaluated the design and tested the operating effectiveness of key controls relating to the calculation of the reserves for net revenue adjustments, including key management review controls over the period-end accrual of allowances and end-user pricing adjustments.     ● We re-performed management’s process for calculating the reserves for net revenue adjustments.     ● We evaluated key inputs relevant to the net revenue adjustments, including contractual pricing and rebate arrangements with customers and historical allowance data, which were compared to source documents. We evaluated key assumptions relevant to net revenue adjustments, including the consistency of historical data and estimates of future customer credits.     ● We considered transactions subsequent to year end occurring up to the date of our auditor’s opinion, which involved inspecting customer credits and relevant source documents submitted by customers in conjunction with the allowance, including end-user pricing adjustments.     /s/ GRANT THORNTON LLP   We have served as the Company’s auditor since 1984.   Philadelphia, Pennsylvania November 22, 2022   F-3     REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     Board of Directors and Shareholders J&J Snack Foods Corp. and Subsidiaries   Opinion on internal control over financial reporting We have audited the internal control over financial reporting of J&J Snack Foods Corp. (a New Jersey Corporation) and subsidiaries (the “Company”) as of September 24, 2022, based on criteria established in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 24, 2022, based on criteria established in the 2013 Internal Control — Integrated Framework issued by COSO.   We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended September 24, 2022, and our report dated November 22, 2022 expressed an unqualified opinion on those financial statements.   Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.   Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of Dippin’ Dots Holding, LLC, a wholly-owned subsidiary, whose financial statements reflect total assets and revenues constituting 5% and 3% percent, respectively, of the related consolidated financial statement amounts as of and for the year ended September 24, 2022. As indicated in Management’s Report, Dippin’ Dots Holding, LLC was acquired during 2022. Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of Dippin’ Dots Holdings, LLC.   Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.   Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.   /s/ GRANT THORNTON LLP     Philadelphia, Pennsylvania November 22, 2022   F-4       J & J SNACK FOODS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts)       September 24,     September 25,       2022     2021   Assets                 Current assets                 Cash and cash equivalents   $ 35,181     $ 283,192   Marketable securities held to maturity     4,011       7,980   Accounts receivable, net     208,178       162,939   Inventories     180,473       123,160   Prepaid expenses and other     16,794       7,498   Total current assets     444,637       584,769                     Property, plant and equipment, at cost     860,050       757,242   Less accumulated depreciation and amortization     524,683       490,055   Property, plant and equipment, net     335,367       267,187                     Other assets                 Goodwill     184,420       121,833   Other intangible assets, net     191,732       77,776   Marketable securities held to maturity     -       4,047   Marketable securities available for sale     5,708       10,084   Operating lease right-of-use assets     51,137       54,555   Other     3,965       1,968   Total other assets     436,962       270,263   Total Assets   $ 1,216,966     $ 1,122,219                     Liabilities and Stockholders' Equity                 Current Liabilities                 Current finance lease liabilities   $ 124     $ 182   Accounts payable     108,146       96,789   Accrued insurance liability     15,678       16,260   Accrued liabilities     9,214       10,955   Current operating lease liabilities     13,524       13,395   Accrued compensation expense     21,700       17,968   Dividends payable     13,453       12,080   Total current liabilities     181,839       167,629                     Long-term debt     55,000       -   Noncurrent finance lease liabilities     254       392   Noncurrent operating lease liabilities     42,660       46,557   Deferred income taxes     70,407       61,578   Other long-term liabilities     3,637       409                     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 19,219,000 and 19,084,000 respectively     94,026       73,597   Accumulated other comprehensive loss     ( 13,713 )     ( 13,383 ) Retained Earnings     782,856       785,440   Total stockholders' equity     863,169       845,654   Total Liabilities and Stockholders' Equity   $ 1,216,966     $ 1,122,219     The accompanying notes are an integral part of these statements.   F-5       J & J SNACK FOODS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (in thousands, except per share information)   Fiscal Year Ended                                 September 24,     September 25,     September 26,       2022     2021     2020       (52 weeks)     (52 weeks)     (52 weeks)                             Net Sales   $ 1,380,656     $ 1,144,579     $ 1,022,038   Cost of goods sold     1,011,014       845,651       783,611   Gross Profit     369,642       298,928       238,427                             Operating expenses                         Marketing and selling     91,636       77,922       84,977   Distribution     159,637       108,297       92,759   Administrative     55,189       40,538       36,747   Intangible asset impairment charges     1,010       1,273       -   Plant shutdown impairment costs     -       -       6,387   Other expense     371       ( 320 )     363   Total operating expenses     307,843       227,710       221,233   Operating Income     61,799       71,218       17,194                             Other income (expenses)                         Investment income     980       2,815       4,356   Interest expense & other     ( 1,025 )     ( 7 )     ( 84 )                           Earnings before income taxes     61,754       74,026       21,466                             Income taxes     14,519       18,419       3,161                             NET EARNINGS   $ 47,235     $ 55,607     $ 18,305                             Earnings per diluted share   $ 2.46     $ 2.91     $ 0.96                             Weighted average number of diluted shares     19,213       19,133       19,032                             Earnings per basic share   $ 2.47     $ 2.92     $ 0.97                             Weighted average number of basic shares     19,148       19,013       18,901     The accompanying notes are an integral part of these statements.   F-6       J&J SNACK FOODS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands)       Fiscal Year Ended                                 September 24,     September 25,     September 26,       2022     2021     2020       (52 weeks)     (52 weeks)     (52 weeks)                             Net Earnings   $ 47,235     $ 55,607     $ 18,305                             Foreign currency translation adjustments     ( 330 )     2,204       ( 2,599 ) Total Other Comprehensive (Loss) Income, net of tax     ( 330 )     2,204       ( 2,599 )                           Comprehensive Income   $ 46,905     $ 57,811     $ 15,706     The accompanying notes are an integral part of these statements.   F-7       J & J SNACK FOODS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (in thousands)                       Accumulated                                       Other                       Common Stock             Comprehensive     Retained               Shares     Amount     Loss     Earnings     Total                                             Balance at September 28, 2019     18,895     $ 45,744     $ ( 12,988 )   $ 800,995     $ 833,751   Issuance of common stock upon exercise of stock options     73       6,406       -       -       6,406   Issuance of common stock for employee stock purchase plan     12       1,495       -       -       1,495   Foreign currency translation adjustment     -       -       ( 2,599 )     -       ( 2,599 ) Issuance of common stock under deferred stock plan     1       91       -       -       91   Dividends declared     -       -       -       ( 43,483 )     ( 43,483 ) Share-based compensation     -       4,504       -       -       4,504   Repurchase of common stock     ( 66 )     ( 8,972 )     -       -       ( 8,972 ) Net earnings     -       -       -       18,305       18,305                                             Balance as September 26, 2020     18,915     $ 49,268     $ ( 15,587 )   $ 775,817     $ 809,498   Issuance of common stock upon exercise of stock options     158       18,739       -       -       18,739   Issuance of common stock for employee stock purchase plan     11       1,391       -       -       1,391   Foreign currency translation adjustment     -       -       2,204       -       2,204   Dividends declared     -       -       -       ( 45,984 )     ( 45,984 ) Share-based compensation     -       4,199       -       -       4,199   Net earnings     -       -       -       55,607       55,607                                             Balance as September 25, 2021     19,084     $ 73,597     $ ( 13,383 )   $ 785,440     $ 845,654   Issuance of common stock upon exercise of stock options     119       14,124       -       -       14,124   Issuance of common stock for employee stock purchase plan     16       2,036       -       -       2,036   Foreign currency translation adjustment     -       -       ( 330 )     -       ( 330 ) Dividends declared     -       -       -       ( 49,819 )     ( 49,819 ) Share-based compensation     -       4,269       -       -       4,269   Net earnings     -       -       -       47,235       47,235                                             Balance as September 24, 2022     19,219     $ 94,026     $ ( 13,713 )   $ 782,856     $ 863,169     The accompanying notes are an integral part of these statements.   F-8       J & J SNACK FOODS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)       Fiscal Year Ended                                 September 24,     September 25,     September 26,       2022     2021     2020       (52 weeks)     (52 weeks)     (52 weeks)                             Operating activities:                         Net earnings   $ 47,235     $ 55,607     $ 18,305   Adjustments to reconcile net earnings to net cash provided by operating activities                         Depreciation of fixed assets     49,669       46,781       49,830   Amortization of intangibles and deferred costs     3,454       2,610       3,218   Intangible asset impairment charges     1,010       1,273       -   Losses (Gains) from disposals of property & equipment     220       ( 231 )     ( 303 ) Plant shutdown impairment costs     -       -       6,387   Share-based compensation     4,269       4,199       4,595   Deferred income taxes     8,829       ( 2,896 )     2,622   Loss (Gain) on marketable securities     315       ( 1,026 )     882   Other     ( 95 )     77       296   Changes in assets and liabilities, net of effects from purchase of companies                         (Increase) decrease in accounts receivable     ( 32,778 )     ( 35,755 )     14,580   (Increase) decrease in inventories     ( 49,431 )     ( 14,155 )     7,877   (Increase) decrease in prepaid expenses     ( 9,343 )     9,629       ( 11,366 ) Increase (decrease) in accounts payable and accrued     2,708       35,386       ( 4,780 ) Net cash provided by operating activities     26,062       101,499       92,143                             Investing activities:                         Payments for purchases of companies, net of cash acquired     ( 221,301 )     -       ( 57,212 ) Purchases of property, plant and equipment     ( 87,291 )     ( 53,578 )     ( 57,817 ) Purchases of marketable securities     -       -       ( 6,103 ) Proceeds from redemption and sales of marketable securities     12,026       60,891       73,226   Proceeds from disposal of property and equipment     399       2,435       3,593   Other     -       191       ( 150 ) Net cash (used in) provided by investing activities     ( 296,167 )     9,939       ( 44,463 )                           Financing activities:                         Payments to repurchase common stock     -       -       ( 8,972 ) Proceeds from issuance of stock     16,160       20,256       7,901   Borrowings under credit facility     125,000       -       -   Repayment of borrowings under credit facility     ( 70,000 )     -       -   Payments for debt issuance costs     ( 225 )     -       -   Payments on finance lease obligations     ( 279 )     ( 144 )     ( 340 ) Payment of cash dividends     ( 48,437 )     ( 44,785 )     ( 42,053 ) Net cash provided by (used in) financing activities     22,219       ( 24,673 )     ( 43,464 )                           Effect of exchange rates on cash and cash equivalents     ( 125 )     618       ( 802 )                           Net (decrease) increase in cash and cash equivalents     ( 248,011 )     87,383       3,414                             Cash and cash equivalents at beginning of period     283,192       195,809       192,395                             Cash and cash equivalents at end of period   $ 35,181     $ 283,192     $ 195,809     The accompanying notes are an integral part of these statements.   F-9     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   J & J Snack Foods Corp. and Subsidiaries (the Company) manufactures, markets and distributes a variety of nutritional snack foods and beverages to the food service and retail supermarket industries. A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows. Our fiscal years 2022, 2021 and 2020 comprise 52 weeks.     1. Principles of Consolidation   The consolidated financial statements were prepared in accordance with U.S. GAAP. These financial statements include the accounts of J & J Snack Foods Corp. and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in the consolidated financial statements.     2. Revenue Recognition   We recognize revenue in accordance with ASC 606, “Revenue from Contracts with Customers.”   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.   F- 10     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The singular performance obligation of our customer repair and maintenance equipment service contracts is the performance of the repair and maintenance with revenue being recognized over the time the service is expected to be performed. Our customers are billed for service contracts in advance of performance and therefore we have contract liability on our balance sheet.   Significant Payment Terms   In general, within our customer contracts, the purchase order identifies the product, quantity, price, pick-up allowances, payment terms and final delivery terms. Although some payment terms may be more extended, presently the majority of our payment terms are 30 days. As a result, we have used the available practical expedient and, consequently, do not adjust our revenues for the effects of a significant financing component.   Shipping   All amounts billed to customers related to shipping and handling are classified as revenues; therefore, we recognize revenue for shipping and handling fees at the time the products are shipped or when services are performed. The cost of shipping products to the customer is recognized at the time the products are shipped to the customer and our policy is to classify them as Distribution expenses.   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 approximately $ 14.7  million at September 24, 2022 and $ 14.6 million at September 25, 2021.   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.   F- 11     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   We do not grant a general right of return. However, customers may return defective or non-conforming products. Customer remedies may include either a cash refund or an exchange of the product. We do not estimate a right of return and related refund liability as returns of our products are rare.   Contract Balances   Our customers are billed for service contracts in advance of performance and therefore we have contract liability on our balance sheet as follows:       Fiscal Year Ended       September 24,     September 25,       2022     2021       (in thousands)                     Beginning Balance   $ 1,097     $ 1,327   Additions to contract liability     9,163       5,544   Amounts recognized as revenue     ( 5,334 )     ( 5,774 ) Ending Balance   $ 4,926     $ 1,097       Disaggregation of Revenue   See Note N for disaggregation of our net sales by class of similar product and type of customer.   Allowance for Doubtful Receivables   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 $ 2.2 million and $ 1.4 million on September 24, 2022 and September 25, 2021, respectively.     3. Foreign Currency   Assets and liabilities in foreign currencies are translated into U.S. dollars at the rate of exchange prevailing at the balance sheet date. Revenues and expenses are translated at the average rate of exchange for the period. The cumulative translation adjustment is recorded as a separate component of stockholders’ equity and changes to such are included in comprehensive income.   F- 12     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   4. Use of Estimates   In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.     5. Cash Equivalents   Cash equivalents are short-term, highly liquid investments with original maturities of three months or less.     6. Concentrations and related risks   We maintain cash balances at financial institutions located in various states. We have cash balances at six banks totaling approximately $ 13 million that is in excess of federally insured limits.   Financial instruments that could potentially subject us to concentrations of credit risk are trade accounts receivable; however, such risks are limited due to the large number of customers comprising our customer base and their dispersion across geographic regions. We have approximately 33 customers with accounts receivable balances of between $ 1 million and $ 10 million and five customers with a balance greater than $ 10 million, with the largest being approximately $ 23 million.   We have several large customers that account for a significant portion of our sales. Our top ten customers accounted for 43 %, 43 % and 43 % of our sales during fiscal years 2022, 2021 and 2020, respectively, with our largest customer accounting for 8 % of our sales in 2022, 11 % of our sales in 2021 and 13 % of our sales in 2020. Six of the ten customers are food distributors who sell our product to many end users.   About 26 % of our employees are covered by collective bargaining agreements.   None of our vendors supplied more than 10% of our ingredients and packaging in 2022, 2021 or 2020.   Virtually all of our accounts receivable are due from trade customers. Credit is extended based on evaluation of our customers’ financial condition and collateral is not required. Accounts receivable payment terms vary and are stated in the financial statements at amounts due from customers net of an allowance for doubtful accounts. At September 24, 2022 and September 25, 2021, our accounts receivables were $ 208.2 million and $ 162.9 million, net of an allowance for doubtful accounts of $ 2.2 million and $ 1.4 million. Accounts receivable outstanding longer than the payment terms are considered past due. We determine our allowance by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss history, customers’ current ability to pay their obligations to us, and the condition of the general economy and the industry as a whole. We write off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts.     7. Inventories   Inventories are valued at the lower of cost (determined by the first -in, first -out method) or net realizable value. We recognize abnormal amounts of idle facilities, freight, handling costs, and spoilage as charges of the current period. Additionally, we allocate fixed production overhead to inventories based on the normal capacity of our production facilities. We calculate normal capacity as the production expected to be achieved over a number of periods or seasons under normal circumstances, taking into account the loss of capacity resulting from planned maintenance. This requires us to use judgment to determine when production is outside the range of expected variation in production (either abnormally low or abnormally high). In periods of abnormally low production (for example, periods in which there is significantly lower demand, labor and material shortages exist, or there is unplanned equipment downtime) the amount of fixed overhead allocated to each unit of production is not increased. However, in periods of abnormally high production the amount of fixed overhead allocated to each unit of production is decreased to assure inventories are not measured above cost.   F- 13     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   8. Investment Securities   We classify our investment securities in one of three categories: held to maturity, trading, or available for sale. Our investment portfolio at September 24, 2022 consists of investments classified as held to maturity and available for sale. The securities that we have the positive intent and ability to hold to maturity are classified as held to maturity and are stated at amortized cost. Investments classified as available for sale are reported at fair market value with unrealized gains and losses related to the changes in fair value of the securities recognized in investment income. The mutual funds and preferred stock in our available for sale portfolio 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. See Note C for further information on our holdings of investment securities.     9. Depreciation and Amortization   Depreciation of equipment and buildings is provided for by the straight-line method over the assets’ estimated useful lives. We review our equipment and buildings to ensure that they provide economic benefit and are not impaired.   Amortization of leasehold 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, non-compete agreements, and franchise agreements and certain tradenames are being amortized by the straight-line method over periods ranging from 2 to 20 years and amortization expense is reflected throughout operating expenses.   Long-lived assets, including fixed assets and amortizing intangibles, are reviewed for impairment as events or changes in circumstances occur indicating that the carrying amount of the asset may not be recoverable. Indefinite lived intangibles are reviewed annually for impairment. Cash flow and sales analyses are used to assess impairment. The estimates of future cash flows and sales involve considerable management judgment and are based upon assumptions about expected future operating performance. Assumptions used in these forecasts are consistent with internal planning. The actual cash flows and sales could differ from management’s estimates due to changes in business conditions, operating performance, economic conditions, competition, and consumer preferences.     10. Fair Value of Financial Instruments   The carrying value of our short-term financial instruments, such as accounts receivables and accounts payable, approximate their fair values, based on the short-term maturities of these instruments.   F- 14     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   11. 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.   As of September 24, 2022 and September 25, 2021, the total amount of gross unrecognized tax benefits is $ 0.3 million and $ 0.3 million, respectively, all of which would impact our effective tax rate over time, if recognized.  We recognize interest and penalties related to income tax matters as a part of the provision for income taxes. As of September 24, 2022 and September 25, 2021, we had $ 0.3 million of accrued interest and penalties. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:       (in thousands)             Balance at September 25, 2021   $ 343   Additions based on tax positions related to the current year     -   Reductions for tax positions of prior years     -   Settlements     -   Balance at September 24, 2022   $ 343       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. Virtually all the returns noted above are open for examination for three to four years.   Our effective tax rate in fiscal 2022 was 23.5 %. Our effective tax rate in our fiscal 2021 year was 24.9 %. Net earnings for the 2020 year benefited from a reduction in income tax expense related to state deferred taxes and provision to return adjustments of approximately $ 2.2 million. Excluding these benefits, our effective tax rate in our fiscal 2020 year was 25.0 %.   F- 15     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   12. Earnings Per Common Share   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:       Fiscal Year Ended September 24, 2022       Income     Shares     Per Share       (Numerator)     (Denominator)     Amount                                 (in thousands, except per share amounts)   Basic EPS                         Net earnings available to common stockholders   $ 47,235       19,148     $ 2.47                             Effect of dilutive securities                         Options   $ -       65       ( 0.01 )                           Diluted EPS                         Net earnings available to common stockholders plus assumed conversions   $ 47,235       19,213     $ 2.46     287,558 anti-dilutive shares have been excluded in the computation of 2022 diluted EPS.         Fiscal Year Ended September 25, 2021       Income     Shares     Per Share       (Numerator)     (Denominator)     Amount                                 (in thousands, except per share amounts)   Basic EPS                         Net earnings available to common stockholders   $ 55,607       19,013     $ 2.92                             Effect of dilutive securities                         Options   $ -       120       ( 0.01 )                           Diluted EPS                         Net earnings available to common stockholders plus assumed conversions   $ 55,607       19,133     $ 2.91     284,480 anti-dilutive shares have been excluded in the computation of 2021 diluted EPS.   F- 16     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS       Fiscal Year Ended September 26, 2020       Income     Shares     Per Share       (Numerator)     (Denominator)     Amount                                 (in thousands, except per share amounts)   Basic EPS                         Net earnings available to common stockholders   $ 18,305       18,901     $ 0.97                             Effect of dilutive securities                         Options   $ -       131       ( 0.01 )                           Diluted EPS                         Net earnings available to common stockholders plus assumed conversions   $ 18,305       19,032     $ 0.96     341,849 anti-dilutive shares have been excluded in the computation of 2020 diluted EPS.     13. Accounting for Stock-Based Compensation   At September 24, 2022, the Company has three stock-based employee compensation plans. Share-based compensation was recognized as follows:       Fiscal year ended                                 September 24,     September 25,     September 26,       2022     2021     2020       (in thousands)                             Stock options   $ 2,407     $ 2,265     $ 2,874   Stock purchase plan     389       573       390   Stock issued to an outside director     -       44       66   Restricted stock issued to employees     538       93       -   Performance stock issued to employees     -       -       -   Total share-based compensation   $ 3,334     $ 2,975     $ 3,330                             The above compensation is net of tax benefits   $ 935     $ 1,224     $ 1,265       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 2022, 2021 and 2020: expected volatility of 25.8 % for both fiscal years 2022 and 2021, and 17.4 % for fiscal year 2020; weighted average risk-free interest rates of 0.8 %, 0.8 % and 0.3%; dividend rate of 1.6 %, 1.4 % and 1.8 % and expected lives ranging between 4 and 10 years for all years.   F- 17     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   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.   The Company issued 9,200 service share units (“RSU”)’s in fiscal 2022. Each RSU entitles the awardee to one share of common stock upon vesting. 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 fiscal 2021or fiscal 2020.   The Company also issued 8,868 performance share units (“PSU”)’s in fiscal 2022. 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. No such PSU’s were issued in fiscal 2021 or fiscal 2020.     14. Advertising Costs   Advertising costs are expensed as incurred. Total advertising expense was $ 7.0 million, $ 4.9 million, and $ 6.5 million for the fiscal years 2022, 2021 and 2020, respectively.     15. Commodity Price Risk Management   Our most significant raw material requirements include flour, packaging, shortening, corn syrup, sugar, juice, cheese, chocolate, and a variety of nuts. We attempt to minimize the effect of future price fluctuations related to the purchase of raw materials primarily through forward purchasing to cover future manufacturing requirements, generally for periods from 1 to 12 months. As of September 24, 2022, we have approximately $ 130 million of such commitments. Futures contracts are not used in combination with forward purchasing of these raw materials. Our procurement practices are intended to reduce the risk of future price increases, but also may potentially limit the ability to benefit from possible price decreases. At each of the last three fiscal year ends, we did not have any material losses on our purchase commitments.     16. Research and Development Costs   Research and development costs are expensed as incurred. Total research and development expense was $ 0.7 million, $ 0.6 million and $ 0.7 million for the fiscal years 2022, 2021 and 2020, respectively.     17. Recent Accounting Pronouncements   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.     18. Reclassifications   Certain prior year financial statement amounts have been reclassified to be consistent with the presentation for the current year.   F- 18     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     NOTE B – ACQUISITIONS   On October 1, 2019, we acquired the assets of ICEE Distributors LLC, based in Bossier City, Louisiana for approximately $ 45 million. ICEE Distributors does business in Arkansas, Louisiana and Texas. Sales and operating income of ICEE Distributors were $ 9.7 million and $ 2.4 million for the year ended September 25, 2021. Sales and operating income of ICEE Distributors were $ 11.4 million and $ 3.6 million for the year ended September 26, 2020.   On February 4, 2020, we acquired the assets of BAMA ICEE, based in Birmingham, Alabama for approximately $ 12 million. BAMA ICEE does business in Alabama and Georgia. Sales and operating income of BAMA ICEE were $ 1.8 million and $ 0.5 million for the year ended September 25, 2021. Sales and operating income of BAMA ICEE were $ 1.7 million and $ 0.6 million for the year ended September 26, 2020.   The purchase price allocations for these two acquisitions are as follows:   ICEE Distributors LLC and BAMA ICEE Purchase Price Allocation                                 ICEE     BAMA               Distributors     ICEE     Total       (in thousands)                             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   Total assets acquired     45,180       12,352       57,532   Accounts Payable     ( 210 )     ( 110 )     ( 320 ) Purchase Price   $ 44,970     $ 12,242     $ 57,212     The goodwill and intangible assets acquired in the business combinations are recorded at estimated fair value. To measure fair value for such assets, we use techniques including discounted expected future cash flows (Level 3 input). The goodwill recognized is attributable to the assembled workforce of each acquired business and certain other strategic intangible assets that do not meet the requirements for recognition separate and apart from goodwill. Acquisition costs of $ 0.1 million are included in other general expense for the year ended September 26, 2020.   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 of Dippin’ Dots since the date of acquisition were $ 33.7 million and $ 6.6 million for the year ended September 24, 2022. Dippin’ Dots is reported as part of our Food Service segment. Acquisition costs of $ 3.1 million were included within Administrative expenses for the year ended September 24, 2022.   F- 19     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   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.   In fiscal year 2022, we 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 year ended September 24, 2022.   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)                                 Preliminary Value                       as of acquisition                       date (as previously     Measurement               reported as of     Period               June 25,2022)     Adjustment     As Adjusted       (in thousands)                             Cash and cash equivalents   $ 2,259             $ 2,259   Accounts receivable, net     12,257               12,257   Inventories     8,812       ( 301 )     8,511   Prepaid expenses and other     1,215               1,215   Property, plant and equipment, net     24,622       6,548       31,170   Intangible assets     120,400       ( 2,200 )     118,200   Goodwill (2)     66,634       ( 4,047 )     62,587   Operating lease right-of-use assets     3,514               3,514   Other noncurrent assets     243               243   Total assets acquired     239,956       -       239,956   Liabilities assumed:                         Current lease liabilities     619               619   Accounts payable     6,005               6,005   Other current liabilities     3,532               3,532   Noncurrent lease liabilities     2,954               2,954   Other noncurrent liabilities     3,285               3,285   Total liabilities acquired     16,395       -       16,395   Purchase price   $ 223,561     $ -     $ 223,561     ( 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.   Acquired Intangible Assets                                 (in thousands)       Weighted average     June 21,       life (years)     2022   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     F- 20     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   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.   Dippin' Dots Results Included in the Company's Consolidated Results                 Fiscal year ended       September 24,       2022       (in thousands)             Net sales   $ 33,734   Net earnings     4,859     J & J Snack Foods Corp and Dippin' Dots Unaudited Pro Forma Combined Financial Information                         Fiscal year ended       September 24,     September 25,       2022     2021       (in thousands)                     Net sales     1,428,505       1,209,055   Net earnings     49,191       61,001                     Earnings per diluted share   $ 2.56     $ 3.19   Weighted average number of diluted shares     19,213       19,133         NOTE C – INVESTMENT SECURITIES   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 inputs 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.   F- 21     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   Our 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 of our marketable securities held to maturity at September 24, 2022 are summarized as follows:               Gross     Gross     Fair       Amortized     Unrealized     Unrealized     Market       Cost     Gains     Losses     Value       (in thousands)                                     Corporate bonds   $ 4,011     $ -     $ 21     $ 3,990   Total marketable securities held to maturity   $ 4,011     $ -     $ 21     $ 3,990       The amortized cost, unrealized gains and losses, and fair market values of our marketable securities available for sale at September 24, 2022 are summarized as follows:               Gross     Gross     Fair       Amortized     Unrealized     Unrealized     Market       Cost     Gains     Losses     Value       (in thousands)                                     Mutual Funds   $ 3,588     $ -     $ 742     $ 2,846   Preferred Stock     2,816       46       -       2,862   Total marketable securities available for sale   $ 6,404     $ 46     $ 742     $ 5,708       The mutual funds seek current income with an emphasis on maintaining low volatility and overall moderate duration. The mutual funds presently generate income of about 3.7 % per year. We have invested $ 3 million in Fixed-to-Floating Perpetual Preferred Stock which generates fixed income to call dates in 2025 and then income is based on a spread above LIBOR if the securities are not called. The annual yield from these investments is presently 5.5 %, of which 50 % is not subject to income tax. The mutual funds and the Fixed-to-Floating Perpetual Preferred Stock investment securities 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. We have invested $ 4.0 million in corporate bonds which generate fixed income to maturity dates in 2022 through 2023, with $ 4.0 million maturing prior to the end of our fiscal year 2023. The bonds presently generate income of about 3.3 % per year based on purchase price. Our expectation is that we will hold the corporate bonds to their maturity dates and redeem them at our amortized cost.   F- 22     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The amortized cost, unrealized gains and losses, and fair market values of our marketable securities held to maturity at September 25, 2021 are summarized as follows:               Gross     Gross     Fair       Amortized     Unrealized     Unrealized     Market       Cost     Gains     Losses     Value       (in thousands)                                     Corporate Bonds   $ 12,027     $ 123     $ 18     $ 12,132   Total marketable securities held to maturity   $ 12,027     $ 123     $ 18     $ 12,132       The amortized cost, unrealized gains and losses, and fair market values of our marketable securities available for sale at September 25, 2021 are summarized as follows:               Gross     Gross     Fair       Amortized     Unrealized     Unrealized     Market       Cost     Gains     Losses     Value       (in thousands)                                     Mutual Funds   $ 3,588     $ -     $ 536     $ 3,052   Preferred Stock     6,892       175       35       7,032   Total marketable securities available for sale   $ 10,480     $ 175     $ 571     $ 10,084     The amortized cost and fair value of the Company’s held to maturity securities by contractual maturity at September 24, 2022 and September 25, 2021 are summarized as follows:       September 24, 2022     September 25, 2021                                                 Fair             Fair       Amortized     Market     Amortized     Market       Cost     Value     Cost     Value       (in thousands)   Due in one year or less   $ 4,011     $ 3,990     $ 7,980     $ 8,080   Due after one year through five years     -       -       4,047       4,052   Due after five years through ten years     -       -       -       -   Total held to maturity securities   $ 4,011     $ 3,990     $ 12,027     $ 12,132   Less current portion     4,011       3,990       7,980       8,080   Long term held to maturity securities   $ -     $ -     $ 4,047     $ 4,052       Proceeds from the sale and redemption of marketable securities were $ 12.0 million, $ 60.9 million, and $ 73.2 million in the years ended September 24, 2022, September 26, 2021, and September 26, 2020, respectively; with a loss of $ 0.3 million in 2022, a gain of $ 0.2 million in 2021 and a gain of $ 0.1 million in 2020. We use the specific identification method to determine the cost of securities sold. An unrealized loss of $ 0.3 million and an unrealized gain of $ 0.8 million were recorded in 2022 and 2021, respectively.   Total marketable securities held to maturity as of September 24, 2022 with credit ratings of BBB/BB/B had an amortized cost basis totaling $ 4.0 million. This rating information was obtained September 30, 2022.   F- 23     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     NOTE D – INVENTORIES   Inventories consist of the following:       September 24,     September 25,       2022     2021       (in thousands)                     Finished goods   $ 86,464     $ 49,756   Raw materials     41,505       29,529   Packaging materials     16,637       11,168   Equipment parts and other     35,867       32,707   Total inventories   $ 180,473     $ 123,160       NOTE E – PROPERTY, PLANT AND EQUIPMENT   Property, plant and equipment consist of the following:                   Estimated       September 24,     September 25,     Useful Lives       2022     2021     (in years)       (in thousands)                                         Land   $ 3,714     $ 2,494       -     Buildings     34,232       26,582     15 - 39.5   Plant machinery and equipment     374,566       343,716     5 - 20   Marketing equipment     274,904       258,624     5 - 7   Transportation equipment     11,685       10,315       5     Office equipment     45,865       34,648     3 - 5   Improvements     49,331       45,578     5 - 20   Construction in Progress     65,753       35,285       -           860,050       757,242             Less accumulated depreciation and amortization     524,683       490,055             Property, plant and equipment, net   $ 335,367     $ 267,187                 Depreciation expense was $ 49.7 million, $ 46.8 million, and $ 49.8 million for fiscal years 2022, 2021 and 2020, respectively .   F- 24     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     NOTE F – GOODWILL AND INTANGIBLE ASSETS   Our reportable segments are Food Service, Retail Supermarket and Frozen Beverages.   The carrying amount of acquired intangible assets for the reportable segments are as follows:       September 24, 2022     September 25, 2021       Gross             Gross               Carrying     Accumulated     Carrying     Accumulated       Amount     Amortization     Amount     Amortization                                     FOOD SERVICE                                                                   Indefinite lived intangible assets                                 Trade names   $ 85,872     $ -     $ 10,408     $ 812                                     Amortized intangible assets                                 Non compete agreements     670       670       670       670   Franchise agreements     8,500       212       -       -   Customer relationships     22,900       7,790       13,000       6,188   Technology     23,110       576       -       -   License and rights     1,690       1,481       1,690       1,396   TOTAL FOOD SERVICE   $ 142,742     $ 10,729     $ 25,768     $ 9,066                                     RETAIL SUPERMARKETS                                                                   Indefinite lived intangible assets                                 Trade names   $ 11,938     $ -     $ 12,777     $ 461                                     Amortized intangible Assets                                 Trade names     649       649       649       649   Customer relationships     7,907       6,693       7,907       5,931   TOTAL RETAIL SUPERMARKETS   $ 20,494     $ 7,342     $ 21,333     $ 7,041                                                                       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       545       1,439       400   Licenses and rights     1,400       1,142       1,400       1,072   TOTAL FROZEN BEVERAGES   $ 48,254     $ 1,687     $ 48,254     $ 1,472                                     CONSOLIDATED   $ 211,490     $ 19,758     $ 95,355     $ 17,579       The gross carrying amount of intangible assets is determined by applying a discounted cash flow model to the future sales and earnings associated with each intangible asset or is set by contract cost. The amortization period used for definite lived intangible assets is set by contract period or by the period over which the bulk of the discounted cash flow is expected to be generated. We currently believe that we will receive the benefit from the use of the trade names and distribution rights classified as indefinite lived intangible assets indefinitely and they are therefore not amortized.   F- 25     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   Licenses and rights, customer relationships, franchise agreements, technology and non-compete agreements are being amortized by the straight-line method over periods ranging from 2 to 20 years and amortization expense is reflected throughout operating expenses.   Amortizing intangibles are reviewed for impairment as events or changes in circumstances occur indicating that the carrying amount of the asset may not be recoverable. Indefinite lived intangibles are reviewed annually at year end for impairment. Cash flow and sales analyses are used to assess impairment. The estimates of future cash flows and sales involve considerable management judgment and are based upon assumptions about expected future operating performance which include Level 3 inputs such as annual growth rates and discount rates. Assumptions used in these forecasts are consistent with internal planning. The actual cash flows and sales could differ from management’s estimates due to changes in business conditions, operating performance, economic conditions, competition, and consumer preferences.   In connection with our annual impairment assessment conducted during the fourth quarter of 2022, we determined that the carrying amounts of three trade names exceeded their fair value as of September 24, 2022. As a result, the Company recorded an indefinite lived intangible asset impairment charge of $ 1.0 million in the fourth quarter of 2022. The intangible asset impairment charge is reflected in Intangible asset impairment charges in the Consolidated Statements of Earnings. Of the total impairment charge, $ 0.6 million related to trade names in the Food Service segment and $ 0.4 million related to trade names in the Retail Supermarket segment.   In fiscal year 2022, intangible assets of $ 118.2 million were added in the food service segment from the acquisition of Dippin’ Dots in the quarter ended June 25, 2022. There were no intangible assets acquired in fiscal year 2021. In fiscal year 2020, intangible assets of $ 23.0 million were added in the frozen beverages segment from the acquisition of ICEE Distributors in the quarter ended December 28, 2019 and $ 6.9 million from the acquisition of BAMA ICEE in the quarter ended March 28, 2020.   Aggregate amortization expense of intangible assets for the fiscal years 2022, 2021 and 2020 was $ 3.5 million, $ 2.6 million, and $ 3.2 million, respectively.   Estimated amortization expense for the next five fiscal years is approximately $ 6.7 million in 2023, $ 6.4 million in 2024, $ 5.8 million in 2025 and 2026, and $ 4.8 million in 2027.   F- 26     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   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 reportable segments are as follows:       Food     Retail     Frozen               Service     Supermarket     Beverages     Total         (in thousands)   September 24, 2022   $ 123,776     $ 4,146     $ 56,498     $ 184,420                                     September 25, 2021   $ 61,189     $ 4,146     $ 56,498     $ 121,833     The carrying value of goodwill is determined based on the excess of the purchase price of acquisitions over the estimated fair value of tangible and intangible assets. Goodwill is not amortized but is evaluated annually at year end by management for impairment. Our impairment analysis for 2022, 2021 and 2020 was based on a combination of the income approach, which estimates the fair value of reporting units based on discounted cash flows, and the market approach, which estimates the fair value of reporting units based on comparable market prices and multiples. Under the income approach the Company used a discounted cash flow which requires Level 3 inputs such as: annual growth rates, discount rates based upon the weighted average cost of capital and terminal values based upon current stock market multiples. There were no impairment charges in 2022, 2021 and 2020.   In fiscal year 2022, goodwill of $ 62.6 million was added in the food service segment from the acquisition of Dippin’ Dots in the quarter ended June 25, 2022. No goodwill was acquired in fiscal years 2021. In fiscal year 2020, goodwill of $ 15.8 million was added in the frozen beverages segment from the acquisition of ICEE Distributors in the quarter ended December 28, 2019 and $ 3.5 million from the acquisition of BAMA ICEE in the quarter ended March 28, 2020.     NOTE G – 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. 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 September 24, 2022, 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 September 24, 2022, $ 55.0 million was outstanding under the Amended Credit Agreement with a weighted average interest rate of 3.87 %. These borrowings have been classified as Long-Term Debt on the Company’s Balance Sheet. As of September 24, 2022, the amount available under the Amended Credit Agreement was $ 160.2  million, after giving effect to the outstanding letters of credit. As of September 25, 2021, there were no outstanding balances under the Credit Agreement.   F- 27     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     NOTE H – INCOME TAXES   Income tax expense (benefit) is as follows:       Fiscal year ended       September 24,     September 25,     September 26,       2022     2021     2020       (in thousands)                             Current                         U.S. Federal     ( 374 )   $ 13,964     $ 1,992   Foreign     2,854       860       193   State     3,210       6,431       ( 1,517 ) Total current expense     5,690       21,255       668                                                       Deferred                         U.S. Federal     10,834     $ ( 145 )   $ 3,139   Foreign     ( 394 )     ( 353 )     ( 536 ) State     ( 1,611 )     ( 2,338 )     ( 110 ) Total deferred (benefit) expense     8,829       ( 2,836 )     2,493   Total expense   $ 14,519     $ 18,419     $ 3,161       The provisions for income taxes differ from the amounts computed by applying the statutory federal income tax rate of 21% for the fiscal years ended 2022, 2021 and 2020 to earnings before income taxes for the following reasons:       Fiscal year ended       September 24,     September 25,     September 26,       2022     2021     2020       (in thousands)                             Income taxes at federal statutory rates   $ 12,968     $ 15,545     $ 4,508   Increase (decrease) in taxes resulting from:                         State income taxes, net of federal income tax benefit     1,261       3,233       ( 1,285 ) Share-based compensation     162       ( 124 )     ( 183 ) Other, net     128       ( 235 )     121   Income tax expense   $ 14,519     $ 18,419     $ 3,161       Our effective tax rate in fiscal 2022 was 23.5 %. Our effective tax rate in our fiscal 2021 year was 24.9 %. Net earnings for the 2020 year benefited from a reduction in income tax expense related to state deferred taxes and provision to return adjustments of approximately $ 2.2 million. Excluding these benefits, our effective tax rate in our fiscal 2020 year was 25.0%.   F- 28     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   Deferred tax assets and liabilities consist of the following:       Fiscal year ended       September 24,     September 25,       2022     2021       (in thousands)                     Deferred tax assets:                 Vacation accrual   $ 1,321     $ 1,359   Capital loss carry forwards     17       14   Unrealized gains/losses     504       598   Insurance accrual     3,614       3,918   Operating lease liabilities     14,521       16,235   Deferred income     10       30   Allowances     2,598       2,155   Inventory capitalization     1,620       1,108   Share-based compensation     1,680       1,754   Net operating loss     538       617   Payroll tax accrual     1,142       2,307   Foreign tax credit     404       404   Total deferred tax assets     27,969       30,499   Valuation allowance     ( 521 )     ( 612 ) Total deferred tax assets, net     27,448       29,887                     Deferred tax liabilities:                 Amortization of goodwill and other intangible assets     32,680       31,540   Depreciation of property, plant and equipement     51,972       44,924   Right-of-use assets     13,058       14,773   Accounting method change 481(a)     145       228   Total deferred tax liabilities     97,855       91,465   Total deferred tax liabilities, net   $ 70,407     $ 61,578     As of September 24, 2022, we have federal and state capital loss carry forwards of approximately $ 2.0 million primarily from the sale of marketable securities in fiscal year 2017 and unrealized losses incurred in fiscal years 2019 and 2020. These carry forwards began to expire in fiscal 2021. Except for current year usage, we have no foreseeable capital gains that would allow us to use this asset. Accordingly, we have recorded a valuation allowance for the full amount of this deferred tax asset.   As of September 24, 2022, we have a federal net operating loss carry forward of approximately $ 2.5 million from the PHILLY SWIRL acquisition. These carry forwards are subject to an annual limitation under Code Section 382 of approximately $ 0.4 million and will expire in 2033. We have determined there are no limitations to the total use of this tax asset and accordingly, have not recorded a valuation allowance for this deferred tax asset.   F- 29     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   We have undistributed earnings of our Mexican and Canadian subsidiaries. We are no longer permanently reinvested in earnings of our foreign subsidiaries for any year. No additional U.S. federal income taxes are anticipated if our undistributed earnings in our Mexican and Canadian subsidiaries were repatriated to the U.S. However, if such funds were repatriated, a portion of the funds remitted may be subject to applicable state income taxes and non-U.S. income and withholding taxes. The amount of unrecognized deferred income tax liabilities related to potential state income tax and foreign withholding taxes is immaterial.   The Coronavirus, Aid, Relief and Economic Security (“CARES”) Act was signed into law on March 27, 2020, which introduced and revised numerous provisions including a technical correction to qualified improvement property for assets placed in service after 2017 through 2022 to allow for immediate depreciation to be claimed on these assets and the deferral of employer’s share of certain payroll taxes. As a result of the CARES Act, we deferred $ 4.3 million of payroll taxes as of September 24, 2022.   On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA made several changes to the U.S. tax code effective after December 31, 2022, including, but not limited to, a 15% minimum tax on large corporations with average annual financial statement income of more than $1 billion for a three tax-year period and a 1% excise tax on public company stock buybacks, which will be accounted for in treasury stock. We do not expect these changes to have a material impact on our provision for income taxes or financial statements.     NOTE I ‑ COMMITMENTS   We are a party to litigation which has arisen in the normal course of business which management currently believes will not have a material adverse effect on our financial condition or results of operations.   We self-insure, up to loss limits, certain insurable risks such as workers’ compensation, automobile, and general liability claims. Accruals for claims under our self-insurance program are recorded on a claims incurred basis. Our total recorded liability for all years’ claims incurred but not yet paid was $ 13.7 million and $ 14.5 million at September 24, 2022 and September 25, 2021, respectively. In connection with certain self-insurance agreements, we customarily enter into letters of credit arrangements with our insurers. At September 24, 2022 and at September 25, 2021, we had outstanding letters of credit totaling $ 9.8 million and $ 9.3 million, respectively.   We have a self-insured medical plan which covers approximately 1,700 of our employees. We record a liability for incurred but not yet reported or paid claims based on our historical experience of claims payments and a calculated lag time period. Our recorded liability at September 24, 2022 and September 25, 2021 was $ 1.8 million and $ 1.8 million, respectively.     NOTE J ‑ CAPITAL STOCK   In our fiscal year ended September 26, 2020, we purchased and retired 65,648 shares of our common stock at a cost of $ 9.0 million.   We did not purchase any shares of our common stock in our fiscal years ended September 25, 2021 and September 24, 2022.   F- 30     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     NOTE K – STOCK-BASED COMPENSATION   We have a Long-Term Incentive Plan (the “Plan”). Pursuant to the Plan, stock options, which qualify as incentive stock options as well as stock options which are nonqualified, restricted stock units, and performance awards may be granted to officers and our key employees.   The exercise price of incentive stock options is at least the fair market value of the common stock on the date of grant. The exercise price for nonqualified options is determined by a committee of the Board of Directors. The options are generally exercisable after three years and expire no later than ten years from date of grant. The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model. Forfeitures are recognized as they occur.   Each restricted stock unit granted will be the equivalent in value to one share of common stock, and grants will generally vest over three years, with thirty-three and one - third percent ( 33 %) of the award vesting every 12 months from the date of the award. The fair value of the grant is determined based upon the closing price of the Company’s stock on the date of grant.   Performance awards may include (i) specific dollar-value target awards, (ii) performance units, or (iii) performance shares. The vesting of performance based awards, if any, is dependent upon the achievement of certain performance targets. If the performance standards are not achieved, all unvested units will expire, and any accrued expense will be reversed. The fair value of the grant is determined based upon the closing price of the Company’s stock on the date of grant.   There are approximately 91,000 shares reserved under the Plan for which options, restricted stock units, and performance awards have not yet been issued. There are options that were issued under prior option plans that have since been replaced that are still outstanding.   We have an Employee Stock Purchase Plan (“ESPP”) whereby employees purchase stock by making contributions through payroll deductions for six -month periods. The purchase price of the stock is 85 % of the lower of the market price of the stock at the beginning of the six -month period or the end of the six -month period. In fiscal years 2022, 2021 and 2020 employees purchased 16,274 , 11,988 and 12,292 shares at average purchase prices of $ 124.94 , $ 116.03 , and $ 121.62 , respectively. ESPP expense of $ 0.3 million, $ 0.6 million, and $ 0.4  million was recognized for fiscal years 2022, 2021 and 2020, respectively.   F- 31     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   Stock Options   A summary of the status of our stock option plans as of fiscal years 2022, 2021 and 2020 and the changes during the years ended on those dates is represented below:       Incentive Stock Options     Nonqualified Stock Options               Weighted-             Weighted-       Stock     Average     Stock     Average       Options     Exercise     Options     Exercise       Outstanding     Price     Outstanding     Price                                     Balance, September 28, 2019     434,152       136.53       362,742       118.19   Granted     124,414       126.33       37,074       125.83   Exercised     ( 51,350 )     109.73       ( 24,182 )     53.43   Canceled     ( 36,796 )     138.34       ( 29,192 )     135.79                                     Balance, September 26, 2020     470,420       136.62       346,442       122.04   Granted     111,862       165.53       43,970       160.14   Exercised     ( 102,976 )     120.83       ( 55,453 )     120.92   Canceled     ( 31,684 )     143.74       ( 41,222 )     95.95                                     Balance, September 25, 2021     447,622       146.98       293,737       132.29   Granted     103,405       132.38       11,545       132.38   Exercised     ( 67,782 )     131.35       ( 60,581 )     107.17   Canceled     ( 49,886 )     150.85       ( 36,383 )     140.40                                     Balance, September 24, 2022     433,359       145.48       208,318       138.19                                                                       Exercisable Options September 24, 2022     139,174       154.62       107,565       123.65       The weighted-average fair value of incentive stock options granted during fiscal years ended September 26, 2022, September 25, 2021 and September 26, 2020 was $ 23.36 , $ 31.20 and $ 14.43 , respectively. The weighted-average fair value of non-qualified stock options granted during the fiscal years ended September 24, 2022, September 25, 2021 and September 26, 2020 was $ 23.36 , $ 29.76 and $ 14.32 , respectively. The total intrinsic value of stock options exercised was $ 4.1 million, $ 6.0 million and $ 5.7 million in fiscal years 2022, 2021 and 2020, respectively.   The total cash received from these option exercises was $ 14.1 million, $ 18.7 million and $ 6.4 million in fiscal years 2022, 2021 and 2020, respectively; and the actual tax benefit realized from the tax deductions from these option exercises was $ 0.7 million, $ 1.2 million and $ 1.1 million in fiscal years 2022, 2021 and 2020, respectively.   At September 24, 2022, the Company has unrecognized compensation expense of approximately $ 5.2 million related to stock options to be recognized over the next three fiscal years.   F- 32     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The following table summarizes information about incentive stock options outstanding as of September 24, 2022:           Options Outstanding     Options Exercisable           Number     Weighted-             Number                   Outstanding     Average     Weighted-     Outstanding     Weighted-           at     Remaining     Average     at     Average   Range of   September 24,     Contractual     Exercise     September 24,     Exercise   Exercise Prices   2022     Life     Price     2022     Price                                                 $125.83 - $ 158.97     253,675       3.0     $ 131.93       54,966     $ 141.30   $163.29 - $ 192.13     179,684       2.7     $ 164.61       84,208     $ 163.31   Total options         433,359                       139,174       154.62     The following table summarizes information about nonqualified stock options outstanding as of September 24, 2022:           Options Outstanding     Options Exercisable           Number     Weighted-             Number                   Outstanding     Average     Weighted-     Outstanding     Weighted-           at     Remaining     Average     at     Average   Range of   September 24,     Contractual     Exercise     September 24,     Exercise   Exercise Prices   2022     Life     Price     2022     Price                                                 $80.79 - $ 117.85     60,000       2.0     $ 97.63       60,000     $ 97.63   $117.85 - $ 153.65     82,544       2.8     $ 140.22       23,573     $ 149.39   $163.29 - $ 191.40     65,774       2.4     $ 172.64       23,992     $ 163.42   Total options         208,318                       107,565       123.65     Restricted Stock Units and Performance Awards   The Company issued 9,200 service share units (“RSU”)’s in fiscal 2022 with a weighted average grant date fair value per share of $ 154.85 . The weighted average remaining contractual life is approximately 2.1 years, and the aggregate intrinsic value is approximately $ 1.3 million.  As of September 24, 2022, the Company has unrecognized compensation expense of approximately $ 0.6 million related to the RSU’s. No RSU’s vested, or were cancelled in fiscal 2022.   No RSU’s were granted, vested, or cancelled in fiscal 2021 or fiscal 2020.   The Company issued 8,868 performance share units (“PSU”)’s in fiscal 2022 with a weighted average grant date fair value per share of $ 155.01 . The weighted average remaining contractual life is approximately 2.1 years, and the aggregate intrinsic value is approximately $ 1.2 million. As of September 24, 2022, the Company had no unrecognized compensation expense related to the PSU’s. No PSU’s vested, or were cancelled in fiscal 2022.   No PSU’s were granted, vested, or cancelled in fiscal 2021 or fiscal 2020.     NOTE L – 401 (k) PROFIT ‑ SHARING PLAN   We maintain a 401 (k) profit-sharing plan for our employees. Under this plan, we may make discretionary profit‑sharing and matching 401 (k) contributions. Contributions of $ 2.5 million, $ 2.3 million, and $ 2.4 million were made in fiscal years 2022, 2021 and 2020, respectively.       NOTE M – CASH FLOW INFORMATION   The following is supplemental cash flow information:       Fiscal year ended       September 24,     September 25,     September 26,       2022     2021     2020       (in thousands)   Cash paid for:                         Interest   $ 985     $ 23     $ 29   Income taxes     16,814       4,275       11,556                             Non cash items:                         Obtaining a right-of-use asset in exchange for a lease liability   $ 11,783     $ 6,513     $ 685     F- 33     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     NOTE N – SEGMENT REPORTING   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. We have applied no aggregation criteria to any of these operating segments in order to determine reportable segments. 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.   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 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 novelties 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 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.   F- 34     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   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:       September 24,     September 25,     September 26,       2022     2021     2020       (52 weeks)     (52 weeks)     (52 weeks)       (in thousands)   Sales to external customers:                         Food Service                         Soft pretzels   $ 205,752     $ 174,977     $ 150,786   Frozen novelties     78,183       44,605       35,176   Churros     88,242       64,916       46,881   Handhelds     92,130       75,627       36,088   Bakery     381,526       342,609       332,514   Other     26,854       22,249       17,448   Total Food Service   $ 872,687     $ 724,983     $ 618,893                             Retail Supermarket                         Soft pretzels   $ 61,925     $ 54,990     $ 49,157   Frozen novelties     108,911       100,059       88,743   Biscuits     24,695       24,197       28,317   Handhelds     5,640       7,574       12,303   Coupon redemption     ( 3,713 )     ( 3,689 )     ( 3,569 ) Other     485       1,766       2,214   Total Retail Supermarket   $ 197,943     $ 184,897     $ 177,165                             Frozen Beverages                         Beverages   $ 184,063     $ 124,498     $ 107,004   Repair and maintenance service     89,840       81,305       83,420   Machines revenue     33,601       26,953       33,986   Other     2,522       1,943       1,570   Total Frozen Beverages   $ 310,026     $ 234,699     $ 225,980                             Consolidated sales   $ 1,380,656     $ 1,144,579     $ 1,022,038                             Depreciation and amortization:                         Food Service   $ 29,807     $ 26,738     $ 28,111   Retail Supermarket     1,536       1,671       1,577   Frozen Beverages     21,780       20,982       23,360   Total depreciation and amortization   $ 53,123     $ 49,391     $ 53,048                             Operating Income:                         Food Service   $ 18,512     $ 39,172     $ 6,458   Retail Supermarket     9,487       25,914       23,202   Frozen Beverages     33,800       6,132       ( 12,466 ) Total operating income   $ 61,799     $ 71,218     $ 17,194                             Capital expenditures:                         Food Service   $ 61,738     $ 38,558     $ 34,798   Retail Supermarket     8,885       288       1,763   Frozen Beverages     16,668       14,732       21,256   Total capital expenditures   $ 87,291     $ 53,578     $ 57,817                             Assets:                         Food Service   $ 893,045     $ 799,149     $ 738,033   Retail Supermarket     20,302       31,486       31,704   Frozen Beverages     303,619       291,584       286,816   Total assets   $ 1,216,966     $ 1,122,219     $ 1,056,553     F- 35     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     NOTE O - ACCUMULATED OTHER COMPREHENSIVE LOSS :   Changes to the components of accumulated other comprehensive loss are as follows:       Fiscal Year Ended September 24, 2022       (in thousands)                 Foreign Currency       Translation Adjustments             Beginning Balance   $ ( 13,383 ) Other comprehensive income (loss)     ( 330 ) Ending Balance   $ ( 13,713 )         Fiscal Year Ended September 25, 2021       (in thousands)                 Foreign Currency       Translation Adjustments             Beginning Balance   $ ( 15,587 ) Other comprehensive income (loss)     2,204   Ending Balance   $ ( 13,383 )       NOTE P – 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 from 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  12  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  5  years.                                                                                    F- 36     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   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 a lessee 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 a 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 internal borrowing rate, treasury security rates, collateral, and credit risk specific to us, and our lease portfolio characteristics.                                                                                   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 September 25, 2021, the weighted-average discount rate of our operating and finance leases was 3.3 % and 3.2 %, respectively   F- 37     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   Amounts Recognized in the Financial Statements The components of lease expense were as follows:       Fiscal year ended     Fiscal year ended       September 24, 2022     September 25, 2021   Operating lease cost in Cost of goods sold and Operating Expenses   $ 15,611     $ 15,471   Finance lease cost:                 Amortization of assets in Cost of goods sold and Operating Expenses   $ 160     $ 346   Interest on lease liabilities in Interest expense & other     13       25   Total finance lease cost   $ 173     $ 371   Short-term lease cost in Cost of goods sold and Operating Expenses     -       -   Total net lease cost   $ 15,784     $ 15,842       Supplemental balance sheet information related to leases is as follows:       September 24, 2022     September 25, 2021   Operating Leases                 Operating lease right-of-use assets   $ 51,137     $ 54,555                     Current operating lease liabilities   $ 13,524     $ 13,395   Noncurrent operating lease liabilities     42,660       46,557   Total operating lease liabilities   $ 56,184     $ 59,952                     Finance Leases                 Finance lease right-of-use assets in Property, plant and equipment, net   $ 328     $ 561                     Current finance lease liabilities   $ 124     $ 182   Noncurrent finance lease liabilities     254       392   Total finance lease liabilities   $ 378     $ 574       Supplemental cash flow information related to leases is as follows:       Fiscal year ended     Fiscal year ended       September 24, 2022     September 25, 2021   Cash paid for amounts included in the measurement of lease liabilities:                 Operating cash flows from operating leases   $ 16,505     $ 15,651   Operating cash flows from finance leases   $ 13     $ 144   Financing cash flows from finance leases   $ 279     $ 25                     Supplemental noncash information on lease liabilities arising from obtaining right-of-use assets   $ 11,783     $ 6,513   Supplemental noncash information on lease liabilities removed due to purchase of leased asset   $ -     $ -       As of  September 24, 2022, the maturities of lease liabilities were as follows:       Operating Leases     Finance Leases   2023   $ 15,138     $ 160   2024     12,410       113   2025     8,969       53   2026     5,822       39   2027     4,762       32   Thereafter     15,163       -   Total minimum payments     62,264       397   Less amount representing interest     ( 6,080 )     ( 19 ) Present value of lease obligations   $ 56,184     $ 378     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.   F- 38     J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     NOTE Q – Related Parties   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. In the fiscal years ended 2022 and 2021, the Company paid NFI $ 29.5 million and $ 0.2 million, respectively. Of the amounts paid to NFI, the amount related to management services performed by NFI was $ 0.6 million in fiscal year 2022 and $ 0.2 million in fiscal year 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 September 24, 2022 our consolidated balance sheet included related party trade payables of approximately $ 2.9 million. We had no related party trade payable balance as of September 25, 2021.   F- 39     J & J SNACK FOODS CORP. AND SUBSIDIARIES       SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (in thousands)           Opening     Charged to               Closing   Year   Description   Balance     Expense     Deductions       Balance                                           2022   Allowance for doubtful accounts   $ 1,405     $ 1,781     $ 1,028   (1)   $ 2,158   2021   Allowance for doubtful accounts   $ 1,388     $ 338     $ 321   (1)   $ 1,405   2020   Allowance for doubtful accounts   $ 572     $ 1,105     $ 289   (1)   $ 1,388         ( 1 ) Write-offs of uncollectible accounts receivable.   S-1