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Significant Accounting Policies (Policies)

12 Months Ended

Sep. 29, 2018

Consolidation, Policy [Policy Text Block]

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.

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

$13.6

million at

September 29, 2018

and

$13.0

million at

September 30, 2017.

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

$92,281,000,

$81,824,000

and

$73,114,000

for the fiscal years ended

2018,

2017

and

2016,

respectively.

During the years ended

September 29, 2018,

September 30, 2017

and

September 24, 2016,

we sold

$22,474,000,

$23,489,000

and

$24,664,000,

respectively, of repair and maintenance service contracts in our frozen beverage business. At

September 29, 2018

and

September 30, 2017,

deferred income on repair and maintenance service contracts was

$1,865,000

and

$1,956,000,

respectively, of which

$159,000

and

$210,000

is included in other long-term liabilities as of

September 29, 2018

and

September 30, 2017,

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

$22,011,000,

$23,204,000

and

$24,571,000

was recognized for the fiscal years ended

2018,

2017

and

2016,

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.	Concentration s and related risks

We maintain cash balances at financial institutions located in various states. We have cash balances at

two

banks totaling approximately

$35

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 have approximately

customers with accounts receivable balances of between

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%,

42%

and

42%

of our sales during fiscal years

2018,

2017

and

2016,

respectively, with our largest customer accounting for

1/2%

of our sales in

2018,

1/2%

of our sales in

2017

and

of our sales in

2016.

Four of the

ten

customers are food distributors who sell our product to many end users.

About

27%

of our employees are covered by collective bargaining agreements.

None

of our vendors supplied more than

10%

of our ingredients and packaging in

2018,

2017

2016.

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 29, 2018

and

September 30, 2017,

our accounts receivables were

$132,342,000

and

$124,553,000,

net of an allowance for doubtful accounts of

$400,000

and

$359,000.

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 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.

Marketable Securities, Policy [Policy Text Block]

8.	Investment Securities

We classify our investment securities in

one

three

categories: held to maturity, trading, or available for sale. Our investment portfolio at

September 29, 2018

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 accumulated other comprehensive income (loss). 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.

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 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, non-compete agreements and certain tradenames are being amortized by the straight-line method over periods ranging from

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 29, 2018

and

September 30, 2017,

the total amount of gross unrecognized tax benefits is

$394,000

and

$374,000;

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. We had

$259,000

of accrued interest and penalties as of

September 29, 2018

and

$239,000

as of

September 30, 2017.

We did

not

recognize any penalties and interest resulting from tax settlements in the years ended

September 29, 2018

and

September 30, 2017.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	(in thousands)

Balance as of September 30, 2017	$	374
Additions based on tax positions related to the current year		20
Reductions for tax positions of prior years		-
Settlements		-
Balance at September 29, 2018	$	394

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

four

years.

Net earnings for the year ended

September 29, 2018

benefited from a

$20.9

million gain on the remeasurement of deferred tax liabilities and a

$8.8

million reduction in income taxes related primarily to the lower corporate tax rate enacted under the Tax Cuts and Jobs Act in

December 2017.

Net earnings for the year were impacted by a

$1.2

million provisional amount for the

one

-time repatriation tax required under the new federal tax law and by a

$1.4

million expense on the remeasurement of deferred tax liabilities due to changes in New Jersey tax regulations effective

July 2018.

Excluding the deferred tax gain, the deferred tax expense and the

one

-time repatriation tax, our effective tax rate decreased to

27.80%

from

35.2%

in the prior year reflecting the reduction in the federal statutory rate to

21%

from

35%

January 1, 2018.

Last year’s effective tax rate benefited from an unusually high tax benefit on share based compensation of

$3,061,000

which compares to this year’s tax benefit of

$1,935,000.

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.

Our calculation of EPS is as follows:

	Fiscal Year Ended September 29, 2018
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount
	(in thousands, except per share amounts)

Earnings Per Basic Share
Net Income available to common stockholders	$	103,596		18,694	$	5.54

Effect of Dilutive Securities
Options		-		123		(0.03	)

Earnings Per Diluted Share
Net Income available to common stockholders plus assumed conversions	$	103,596		18,817	$	5.51

1,000

anti-dilutive shares have been excluded in the computation of

2018

diluted EPS.

	Fiscal Year Ended September 30, 2017
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount
	(in thousands, except per share amounts)

Earnings Per Basic Share
Net Income available to common stockholders	$	79,174		18,707	$	4.23

Effect of Dilutive Securities
Options		-		109		(0.02	)

Earnings Per Diluted Share
Net Income available to common stockholders plus assumed conversions	$	79,174		18,816	$	4.21

157,994

anti-dilutive shares have been excluded in the computation of

2017

diluted EPS.

	Fiscal Year Ended September 24, 2016
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount
	(in thousands, except per share amounts)

Earnings Per Basic Share
Net Income available to common stockholders	$	75,975		18,649	$	4.07

Effect of Dilutive Securities
Options		-		120		(0.02	)

Earnings Per Diluted Share
Net Income available to common stockholders plus assumed conversions	$	75,975		18,769	$	4.05

180,170

anti-dilutive shares have been excluded in the computation of

2016

diluted EPS.

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

13.	Accounting for Stock-Based Compensation

September 29, 2018,

the Company has

three

stock-based employee compensation plans. Share-based compensation was recognized as follows:

	Fiscal year ended
	September 29,		September 30,			September 24,
	2018		2017			2016
	(in thousands)

Stock options	$	1,432	$	(436	)	$	86
Stock purchase plan		423		363			305
Stock issued to an outside director		64		56			-
Restricted stock issued to employees		4		4			4
Total share-based compensation	$	1,923	$	(13	)	$	395

The above compensation is net of tax benefits	$	1,935	$	3,061		$	1,980

Income tax benefit related to share-based compensation for the years ended

September 29, 2018,

September 30, 2017

and

September 24, 2016

includes

$821,000,

$1,497,000

and

$885,000

respectively, as a result of our early adoption as of our fiscal

March 2016

quarter of Accounting Standards Update

2016

09,

Improvements to Employee Share-Based Payment Accounting. Under this new standard, income tax benefit is recognized rather than additional paid in capital upon the exercise of stock options.

September 29, 2018,

the Company has unrecognized compensation expense of approximately

$6.3

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

2018,

2017

and

2016:

expected volatility of

17.4%

for fiscal year

2018,

expected volatility of

16.6%

for fiscal year

2017

and

16.7%

for fiscal year

2016:

weighted average risk-free interest rates of

2.7%,

2.0%

and

1.3%;

dividend rate of

1.3%,

1.3%

and

1.4%

and expected lives ranging between

and

years for all years. An expected forfeiture rate of

10%

was used for

2018,

13%

was used for

2017

and

19%

was used for

2016.

Expected volatility is based on the historical volatility of the price of our common shares over the past

months for

year options and

years for

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

$5,176,000,

$5,677,000

and

$4,870,000

for the fiscal years

2018,

2017

and

2016,

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

months. As of

September 29, 2018,

we have approximately

$77

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

$623,000,

$674,000

and

$525,000

for the fiscal years

2018,

2017

and

2016,

respectively.

New Accounting Pronouncements, Policy [Policy Text Block]

17.	Recent Accounting Pronouncements

May

2014

and in subsequent updates, the FASB issued guidance on revenue recognition which requires that we recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration which we expect to be entitled in exchange for those goods or services. We have performed a review of the requirements of the new revenue standard, including a review of customer contracts, and have applied the

five

-step model of this new guidance to each contract category we have. We adopted this guidance on the

first

day of our fiscal

2019

year using the modified retrospective transition method, which will result in an adjustment to retained earnings for the cumulative effect, if any, of applying the standard to contracts in process as of the adoption date. Under this method, we would

not

restate the prior financial statements presented. This guidance will require additional disclosures of the amount by which each financial statement line item is affected in the fiscal year

2019

reporting period. Based on our assessment, we have

not

identified any material impact on our financial statements, although this guidance will affect the disclosures.

January 2016,

the FASB issued guidance which requires an entity to measure equity investments at fair value with changes in fair value recognized in net income , to use the price that would be received by a seller when measuring the fair value of financial instruments for disclosure purposes, and which eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. Under present guidance, changes in fair value of equity investments available for sale are recognized in Stockholders’ Equity. We adopted this guidance on the

first

day of our fiscal

2019

year. The adoption of this guidance on our consolidated financial statements is

not

material.

February 2016,

the FASB issued guidance on lease accounting which requires that an entity recognize most leases on its balance sheet. The guidance retains a dual lease accounting model for purposes of income statement recognition, continuing the distinction between what are currently known as “capital” and “operating” leases for lessees. This guidance is effective for our fiscal year ended

September 2020.

While we continue to evaluate the effect of adopting this guidance on our consolidated financial statements and related disclosures, we expect our operating leases, as disclosed in Note J — Commitments and Contingencies, will be subject to the new standard. We will recognize right-of-use assets and operating lease liabilities on our consolidated balance sheets upon adoption, which will materially increase our total assets and liabilities.

March 2016,

the FASB issued guidance on share based compensation which requires that an entity recognize all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement as discrete items in the reporting period in which they occur. Under current guidance, excess tax benefits are recognized in additional paid-in capital and tax deficiencies are recognized either as an offset to accumulated excess tax benefits, or in the income statement. This guidance is effective for our fiscal year ended

September 2018.

See Note

A.13

to these financial statements for a discussion of the impact the adoption of this guidance in our

March 2016

quarter had 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.