Accounting Policies, by Policy (Policies)

12 Months Ended

Sep. 28, 2013

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

1.    Principles of Consolidation

The consolidated 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.

Revenue Recognition, Policy [Policy Text Block]

2.    Revenue Recognition

We recognize revenue from our products when the products are shipped to our customers. Repair and maintenance equipment service revenue is recorded when it is performed provided the customer terms are that the customer is to be charged on a time and material basis or on a straight-line basis over the term of the contract when the customer has signed a service contract. Revenue is recognized only where persuasive evidence of an arrangement exists, our price is fixed or estimable and collectability is reasonably assured. We record offsets to revenue for allowances, end-user pricing adjustments, trade spending, coupon redemption costs and returned product. Customers generally do not have the right to return product unless it is damaged or defective. Our recorded liability for allowances, end-user pricing adjustments and trade spending was approximately $10 million at September 28, 2013 and $12 million at September 29, 2012.

All amounts billed to customers related to shipping and handling are classified as revenues. Our product costs include amounts for shipping and handling, therefore, we charge our customers 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. The cost of shipping products to the customer classified as Distribution expenses was $65,025,000, $62,250,000 and $57,462,000 for the fiscal years ended 2013, 2012 and 2011, respectively.

During the years ended September 28, 2013, September 29, 2012 and September 24, 2011, we sold $22,836,000, $20,324,000 and $18,711,000, respectively, of repair and maintenance service contracts in our frozen beverage business. At September 28, 2013 and September 29, 2012, deferred income on repair and maintenance service contracts was $1,454,000 and $1,398,000, respectively, of which $45,000 and $6,000 is included in other long-term liabilities as of September 28, 2013 and September 29, 2012, respectively and the balance is reflected as short-term and included in accrued liabilities on the consolidated balance sheet. Repair and maintenance service contract income of $22,780,000, $20,309,000 and $18,744,000 was recognized for the fiscal years ended 2013, 2012 and 2011, respectively.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

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.

Use of Estimates, Policy [Policy Text Block]

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.

Cash and Cash Equivalents, Policy [Policy Text Block]

5.   Cash Equivalents

Cash equivalents are short-term, highly liquid investments with original maturities of three months or less.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

6.   Concentrations of Credit Risk and Accounts Receivable

We maintain cash balances at financial institutions located in various states. We have cash balances at two banks totalling approximately $55 million that is in excess of FDIC insurance of $250,000 per bank.

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 usually have approximately 15 customers with accounts receivable balances of between $1 million and $10 million.

We have several large customers that account for a significant portion of our sales. Our top ten customers accounted for 43%, 41% and 43% of our sales during fiscal years 2013, 2012 and 2011, respectively, with our largest customer accounting for 8% of our sales in 2013, 8% of our sales in 2012 and 8% in 2011. Three of the ten customers are food distributors who sell our product to many end users.

The majority 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 28, 2013 and September 29, 2012, our accounts receivables were $87,545,000 and $76,414,000 net of an allowance for doubtful accounts of $854,000 and $987,000. 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.

Inventory, Policy [Policy Text Block]

7.   Inventories

Inventories are valued at the lower of cost (determined by the first-in, first-out or weighted-average method) or market. 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.

We review for slow moving and obsolete inventory and a reserve is established for the value of inventory that we estimate will not be used. At September 28, 2013 and September 29, 2012, our reserve for inventory was $4,449,000 and $3,883,000, respectively.

Marketable Securities, Policy [Policy Text Block]

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 28, 2013, consists of investments classified as held to maturity and available for sale. The mutual funds 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.

Depreciation, Depletion, and Amortization [Policy Text Block]

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 improvements is provided for by the straight-line method over the term of the lease or the assets’ estimated useful lives, whichever is shorter.  Licenses and rights, customer relationships and non compete agreements are being amortized by the straight-line method over periods ranging from 3 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.

Fair Value of Financial Instruments, Policy [Policy Text Block]

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.

Income Tax, Policy [Policy Text Block]

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 28, 2013 and September 29, 2012, the total amount of gross unrecognized tax benefits is $438,000 and $541,000, 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.  The Company had $224,000 and $284,000 of accrued interest and penalties as of September 28, 2013 and September 29, 2012, respectively. We recognized $11,000, $10,000 and $8,000 of penalties and interest in the years ended September 28, 2013, September 29, 2012 and September 24, 2011 respectively.  A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	(in thousands)
Balance at September 29, 2012	$	541
Additions based on tax positions related to the current year		42
Reductions for tax positions of prior years		(88	)
Settlements		(57	)
Balance at September 28, 2013	$	438

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.

Earnings Per Share, Policy [Policy Text Block]

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.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

13.     Accounting for Stock-Based Compensation

At September 28, 2013, the Company has three stock-based employee compensation plans. Share-based compensation was recognized as follows:

	Fiscal year ended
	September 28, 2013		September 29, 2012		September 24, 2011
	(in thousands, except per share amounts)
Stock options	$	795	$	684	$	288
Stock purchase plan		363		256		203
Deferred stock issued to outside directors		47		-		46
Restricted stock issued to an employee		18		1		-
	$	1,223	$	941	$	537
Per diluted share	$	0.06	$	0.05	$	0.03
The above compensation is net of tax benefits	$	647	$	305	$	381

At September 28, 2013, the Company has unrecognized compensation expense of approximately $2.4 million to be recognized over the next three fiscal years.

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 2013, 2012 and 2011: expected volatility of 25.7% for fiscal year 2013, 28.3% for fiscal year 2012 and 28.6% for fiscal year 2011: weighted average risk-free interest rates of 2.64%, .81% and 1.56%; dividend rate of .8%, .9% and .9% and expected lives ranging between 5 and 10 years for all years. An expected forfeiture rate of 20% was used for 2013, 18% was used for 2012 and 13% was used for fiscal year 2011.

Expected volatility is based on the historical volatility of the price of our common shares over the past 52 to 55 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.

Advertising Costs, Policy [Policy Text Block]

14.     Advertising Costs

Advertising costs are expensed as incurred. Total advertising expense was $3,069,000, $2,571,000 and $1,919,000 for the fiscal years 2013, 2012 and 2011, respectively.

Derivatives, Hedge Discontinuances [Policy Text Block]

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 28, 2013, we have approximately $40 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. Our policy is to recognize estimated losses on purchase commitments when they occur. At each of the last three fiscal year ends, we did not have any material losses on our purchase commitments.

Research, Development, and Computer Software, Policy [Policy Text Block]

16.     Research and Development Costs

Research and development costs are expensed as incurred. Total research and development expense was $478,000, $501,000 and $941,000 for the fiscal years 2013, 2012 and 2011, respectively.

New Accounting Pronouncements, Policy [Policy Text Block]

17.     Recent Accounting Pronouncements

In June 2011, the FASB issued guidance which gives us the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both options, we are required to present each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this guidance do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. In December 2011, the FASB issued an update deferring the effective date for amendments to the presentation of reclassifications of items out of accumulated other comprehensive income.  This guidance was effective for our fiscal year 2013, and its adoption did not have a material impact on our financial statements.

In July 2012, the FASB issued guidance which allows us the option to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that an indefinite-lived intangible asset is impaired.  If, after assessing the totality of events and circumstances, we conclude that it is not more likely than not that the indefinite-lived intangible asset is impaired, then we are not required to take further action.  We also have the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test.  We would be able to resume performing the qualitative assessment in any subsequent period.  The amendments are effective for annual and interim impairment tests performed for our 2013 fiscal year.  Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if our financial statements for the most recent annual or interim period had not yet been issued.  We adopted this guidance in our fiscal year 2013.  The adoption of this guidance did not have a significant impact on our consolidated financial statements.

In February 2013, the FASB issued guidance which requires us to provide information about the amounts reclassified out of accumulated other comprehensive income by component.  In addition, we are required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.  For other amounts not required under U.S. GAAP to be reclassified in their entirety to net income, we are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts.  This guidance is effective for our fiscal year 2014.  We do not believe that the adoption of this guidance will have a significant effect on our consolidated financial statements.

Reclassification, Policy [Policy Text Block]

18.     Reclassifications

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