Fiscal year ended in September
			(In thousands except per share data)
		2013				2012				2011				2010				2009
Net Sales		$	867,683			$	830,796			$	744,071			$	696,703			$	653,047
Net Earnings		$	64,381			$	54,118			$	55,063			$	48,409			$	41,312
Total Assets		$	645,661			$	603,044			$	550,816			$	483,994			$	439,827
Long-Term Debt		$	-			$	-			$	-			$	-			$	-
Capital Lease Obligations		$	347			$	687			$	801			$	863			$	381
Stockholders' Equity		$	516,565			$	475,487			$	432,388			$	380,575			$	342,844
Common Share Data
Earnings Per Diluted Share		$	3.41			$	2.86			$	2.93			$	2.59			$	2.21
Earnings Per Basic Share		$	3.43			$	2.87			$	2.95			$	2.61			$	2.23
Book Value Per Share		$	27.66			$	25.32			$	23.09			$	20.58			$	18.51
Common Shares Outstanding At Year End			18,677				18,780				18,727				18,491				18,526
Cash Dividends Declared Per Common Share		$	0.64			$	0.52			$	0.47			$	0.43			$	0.39

Item 7. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

In addition to historical information, this document and analysis contains forward-looking statements. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Important factors that might cause such a difference include, but are not limited to, those discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof.

Critical Accounting Policies, Judgments and Estimates

We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. The preparation of such financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of those financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company discloses its significant accounting policies in the accompanying notes to its audited consolidated financial statements.

Judgments and estimates of uncertainties are required in applying the Company’s accounting policies in certain areas. Following are some of the areas requiring significant judgments and estimates: revenue recognition, accounts receivable, cash flow and valuation assumptions in performing asset impairment tests of long-lived and intangible assets, estimates of the value and useful lives of intangible assets, insurance reserves, inventories and insurance reserves.income taxes.

There are numerous critical assumptions that may influence accounting estimates in these and other areas. We base our critical assumptions on historical experience, third-party data and various other estimates we believe to be reasonable. A description of the aforementioned policies follows: 

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. Off-invoice allowances are deducted directly from the amount invoiced to our customer when our products are shipped to the customer. Offsets to revenue for allowances, end-user pricing adjustments and trade spending are recorded primarily as a reduction of accounts receivable based on our estimates of liability which are based on customer programs and historical experience. These offsets to revenue are basedestimated primarily on the quantity of product purchased over specific time periods. For our Retail Supermarket and Frozen Beverages segments, we accrue for the liability based on products sold multiplied by per product offsets. Offsets to revenue for our Food Service segment are calculated in a similar manner for offsets owed to our direct customers; however, because shipments to end-users are unknown to us until reported by our direct customers or by the end-users, there is a greater degree of uncertainty as to the accuracy of the amounts accrued for end-user offsets. Additional uncertainty may occur as customers take deductions when they make payments to us. This creates complexities because our customers do not always provide reasons for the deductions taken. Additionally, customers may take deductions to which they are not entitled and the length of time customers take deductions to which they are entitled can vary from two weeks to well over a year. Because of the aforementioned uncertainties, the process to determine these estimates requires judgment. We feel that due to constant monitoring of the process, including but not limited to comparing actual results to estimates made on a monthly basis, these estimates are reasonable in all material respects. Our recorded liability for allowances, end-user pricing adjustments and trade spending was approximately $10$14.3 million at September 28, 201324, 2016 and $12$11.7 million at September 29, 2012, respectively.26, 2015.

Accounts Receivable - We record accounts receivable at the time revenue is recognized. Bad debt expense is recorded in marketing and administrative expenses. The amount of the allowance for doubtful accounts is based on our estimate of the accounts receivable amount that is uncollectable. It is comprised of a general reserve based on historical experience and amounts for specific customers’ accounts receivable balances that we believe are at risk due to our knowledge of facts regarding the customer(s). We continually monitor our estimate of the allowance for doubtful accounts and adjust it monthly. We usually have approximately 15 customers with accounts receivable balances of between $1 million to $10 million. Failure of these customers, and others with lesser balances, to pay us the amounts owed, could have a material impact on our consolidated financial statements.

Accounts receivable due from any of our customers is subject to risk. Our total bad debt expense was $276,000$525,000, $310,000 and $423,000$161,000 for the fiscal years 20122016, 2015 and 2011,2014, respectively. We had a credit to expense of $70,000 in fiscal year 2013. At September 28, 201324, 2016 and September 29, 2012,26, 2015, our accounts receivables were $87,545,000$98,325,000 and $76,414,000$102,649,000 net of an allowance for doubtful accounts of $854,000$571,000 and $987,000.$304,000.

Asset Impairment – We have three reporting units with goodwill totaling $76,899,000$86,442,000 as of September 28, 2013.24, 2016. Goodwill is evaluated annually by the Company for impairment. We perform impairment tests at year end for our reporting units, which is also the operating segment level, with recorded goodwill utilizing primarily the discounted cash flow method. This methodology used to estimate the fair value of the total Company and its reporting units requires inputs and assumptions (i.e. revenue growth, operating profit margins, capital spending requirements and discount rates) that reflect current market conditions. The estimated fair value of each reporting unit is compared to the carrying value of the reporting unit. If the carrying value of the reporting unit exceeds its fair value, the goodwill of the reporting unit is potentially impaired, and the Company then determines the implied fair value of goodwill, which is compared to the carrying value of goodwill to determine if impairment exists.  Our tests at September 28, 201324, 2016 show that the fair value of each of our reporting units with goodwill exceeded its carrying value. Therefore no further analysis was required.  The inputs and assumptions used 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 performance of the reporting units could differ from management’s estimates due to changes in business conditions, operating performance, economic conditions, competition and consumer preferences. 

Licenses and rights, customer relationships and nonnon- 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 ofthe 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. 

Useful Lives of Intangible Assets - Most of our trade names which have carrying value have been assigned an indefinite life and are not amortized because we plan to receive the benefit from them indefinitely. If we decide to curtail or eliminate the use of any of the trade names or if sales that are generated from any particular trade name do not support the carrying value of the trade name, then we would record impairment or assign an estimated useful life and amortize over the remaining useful life. Rights such as prepaid licenses and non competenon-compete agreements are amortized over contractual periods. The useful lives of customer relationships are based on the discounted cash flows expected to be received from sales to the customers adjusted for an attrition rate. The loss of a major customer or declining sales in general could create an impairment charge.

Insurance Reserves - We have a self-insured medical plan which covers approximately 1,4001,500 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. We maintain a spreadsheet that includes claims payments made each month according to the date the claim was incurred. This enables us to have an historical record of claims incurred but not yet paid at any point in the past. We then compare our accrued liability to the more recent claims incurred but not yet paid amounts and adjust our recorded liability up or down accordingly. Our recorded liability at September 28, 201324, 2016 and September 29, 201226, 2015 was $1,516,000$1,719,000 and $1,332,000,$1,659,000, respectively. Considering that we have stop loss coverage of $200,000 for each individual plan subscriber, the general consistency of claims payments and the short time lag, we believe that there is not a material exposure for this liability. Because of the foregoing, we do not engage a third party actuary to assist in this analysis.

We self-insure, up to loss limits, worker’s compensation and automobile liability claims. Accruals for claims under our self-insurance program are recorded on a claims-incurred basis. Under this program, the estimated liability for claims incurred but unpaid in fiscal years 20132016 and 20122015 was $3,200,000$1,900,000 and $1,800,000,$2,800,000 respectively. Our total recorded liability for all years’ claims incurred but not yet paid was $8,500,000$8,200,000 and $6,200,000$8,200,000 at September 28, 201324, 2016 and September 29, 2012,26, 2015, respectively. We estimate the liability based on total incurred claims and paid claims adjusting for loss development factors which account for the development of open claims over time. We estimate the amounts we expect to pay for some insurance years by multiplying incurred losses by a loss development factor which is based on insurance industry averages and the age of the incurred claims; our estimated liability is then thedifference between the amounts we expect to pay and the amounts we have already paid for those years. Loss development factors that we use range from 1.0 to 2.0. However, for some years, the estimated liability is the difference between the amounts we have already paid for that year and the maximum we could pay under the program in effect for that particular year because the calculated amount we expect to pay is higher than the maximum. For other years, where there are few claims open, the estimated liability we record is the amount the insurance company has reserved for those claims. We evaluate our estimated liability on a continuing basis and adjust it accordingly. Due to the multi-year length of these insurance programs, there is exposure to claims coming in lower or higher than anticipated; however, due to constant monitoring and stop loss coverage of $350,000 on individual claims, we believe our exposure is not material. Because of the foregoing, we do not engage a third party actuary to assist in this analysis. In connection with these self-insurance agreements, we customarily enter into letters of credit arrangements with our insurers. At each of September 28, 201324, 2016 and September 29, 2012,26, 2015, we had outstanding letters of credit totaling $8,175,000.$8,675,000 and $9,075,000, respectively.

Inventories - Inventories are valued at the lower of cost (determined by the first-in, first-out 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.

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.

Refer to Note A to the accompanying consolidated financial statements for additional information on our accounting policies.

RESULTS OF OPERATIONS:

Fiscal 20132016 (52 weeks) Compared to Fiscal 2012 (53Year 2015 (52 weeks)

Net sales increased $36,887,000,$16,525,000, or 4%2%, to $867,683,000$992,781,000 in fiscal 20132016 from $830,796,000$976,256,000 in fiscal 2012. Excluding sales from the extra week in 2012, sales increased approximately 6 1/2% from 2012 to 2013.

Excluding sales from the acquisition of Kim & Scott’s Gourmet Pretzels in June 2012 in the twelve months post acquisition and the extra week in 2012, sales increased approximately 6% for the year.2015.

We have three reportable segments, as disclosed in the accompanying notes to the consolidated financial statements: Food Service, Retail Supermarkets and Frozen Beverages.

The Chief Operating Decision Maker for Food Service and Retail Supermarkets and the Chief Operating Decision Maker for Frozen Beverages monthly review detailed operating income statements and sales reports in order to assess performance and allocate resources to each individual segment. Sales is considered to be the one and only key variable monitored by the Chief Operating Decision Makers and management when determining each segment’s and the company’s financial condition and operating performance. In addition, the Chief Operating Decision Makers review and evaluate depreciation, capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment.

FOOD SERVICE

Sales to food service customers increased $39,497,000$4,894,000 or 8%less than 1%, to $560,759,000$621,529,000 in fiscal 2013. Excluding sales from the extra week in 2012, sales increased approximately 10% from 2012 to 2013. Excluding Kim & Scott’s sales in the twelve months post acquisition and the extra week in 2012, sales increased approximately 9% for the year.2016. Soft pretzel sales to the food service market increased 23%1% to $145,026,000$170,155,000 for the year aided by increasedwith sales increases and decreases throughout our customer base. Soft pretzel sales to restaurant chains warehouse club storeswere about the same this year and throughout our customer base. Increased sales to two customers accounted for approximately 1/3 of the pretzel sales increase. Excluding Kim & Scott’s sales, food service soft pretzel sales increased 20% for thelast year. Frozen juice bar and ices sales decreased $4,982,000$2,656,000, or 9%5%, to $48,831,000$51,798,000 for the year due primarily as the result ofto lower sales to warehouse club stores due we believe to weather and school food service accounts due to changes in USDA school food programs. We believe the impact of the changes in the USDA school food programs on our frozen juice and ices sales has bottomed out.two customers. Churro sales to food service customers increased 22%were up 1% to $56,099,000 in 2013$57,318,000 for the year with sales increases and decreases throughout our customer base. Sales of bakery products decreased $6,617,000, or 2%, for the year with sales to one restaurant chain accounting for all ofcustomer down $7.0 million as the sales increase. Sales of bakery products increased $8,591,000, or 3%, for the year as sales increases and decreases were spread throughout our customer base.added a secondary supplier. Handheld sales to food service customers were down 5%up 26% to $26,488,000$27,427,000 in 2013 as two customers accounted2016 with sales increases to one customer accounting for allabout 80% of the decrease in sales.increase. Sales of funnel cake increased $7,000,000, or 57% to $19,179,000 due primarily to increased sales to school food service and $4.0 million of sales to a new restaurant chain customer. Sales of new products in the first twelve months since their introduction were approximately $11.2$32 million for the year. Price increases accounted for approximately $11.6$5 million of sales for the year and net volume, increases, including new product sales as defined above, and sales resultingwas essentially unchanged from the acquisition of Kim & Scott’s, accounted for approximately $27.9 million of sales for thelast year. Operating income in our Food Service segment increased from $49,770,000$75,286,000 in 20122015 to $65,907,000$76,539,000 in 2013.2016. Operating income benefitedfor the year benefitted from lower marketing expenses, lower ingredient costs, significantly increased sales volume price increasesof our handhelds and funnel cake products, pricing and more favorable product mix and was hurt by higher group health insurance costs and lower ingredientvolume of our frozen juices and packagingices and bakery products. However, operating income in the fourth quarter decreased from $23,665,000 in 2015 to $17,498,000 in 2016 primarily because of a 2% decline in sales and higher manufacturing expenses.  We anticipate that these issues will continue to affect us into the first quarter of fiscal year 2017. Additionally, approximately 1/4 of the decrease of $6,167,000 in operating income resulted from costs of approximately $2 million. Operating income was impacted by a product write down of $500,000 and by a $2.1 million increase in liability insurance expenserelated to certain bakery products that were withdrawn from last year. The increase in insurance expense isthe market due to an increase in claims and estimates for claims incurred but not yet paid.quality issues.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets decreased $7,529,000$5,788,000 or 7%5% to $102,339,000$117,589,000 in fiscal year 2013. Excluding sales from the extra week in 2012, sales decreased approximately 5% from 2012 to 2013. Excluding Kim & Scott’s sales in the twelve months post acquisition and the extra week in 2012, sales decreased approximately 5% for the year.2016. Soft pretzel sales to retail supermarkets were $34,597,000$33,279,000 compared to $33,842,000$35,727,000 in 2012 on2015, a unit volume increasedecrease of 2%7%. About 1/2 of the pretzel sales decline was due to the discontinuance of SUPERPRETZEL BAVARIAN Soft Pretzel bread which was introduced in 2015. Sales of frozen juices and ices decreased $5,596,000$3,250,000 or 10%5% to $48,077,000 on a volume decrease$68,924,000. Increased trade spending to introduce WHOLE FRUIT Organic juice tubes and new PHILLY SWIRL products and general declines in sales of about 9%. Frozenour existing PHILLY SWIRL products accounted for all of the sales decline in frozen juices and icesices.  PHILLY SWIRL sales were impacted by cold weather throughoutdown primarily because of lower sales to a customer in Canada due to the second halfstronger US dollar, lower sales to one warehouse club store which carried fewer SKUS this year and decreased sales to one retail supermarket customer of a product that is being discontinued.  Although sales were down for the year.year, PHILLY SWIRL sales were marginally higher in the fourth quarter.  Coupon redemption costs, a reduction of sales, increased 14% or about $459,000which were higher in the first six months a year ago supporting the introduction of the SUPERPRETZEL BAVARIAN Soft Pretzel Bread, decreased 6% to $4,430,000 for the year.  Handheld sales to retail supermarket customers decreased 8%19% to $22,528,000 in 2013 as two customers accounted$15,347,000 for allthe year.  Roughly 37% of the decreasehandhelds sales decline in sales.the year resulted from increased trade spending to introduce PILLSBURY mini dessert pies.  The balance of the sales decline was spread over our customer base.  Sales of OREO churros, introduced this year, were approximately $4.0 million for the year, with about ½ of the sales coming in the fourth quarter. 

Sales of new products in the first twelve months since their introduction were approximately $1.4$8 million in fiscal year 2013.2016. Price increases accounted for approximately $2.9$2 million of sales for the year but higher trade spending of $6 million and net volume decreases including new productof $2 million resulted in an overall sales as defined above and Kim & Scott’s sales and netdecline of increased coupon costs, reduced sales by approximately $10.4 million for the year.$5.7 million. Operating income in our Retail Supermarkets segment decreased from $13,316,000 in 2012$11,020,000 to $8,594,000 in 2013 with 84%$9,618,000 for the year primarily because of approximately $2 million of increased trade spending related to the decrease, or $3,982,000, coming in the fourth quarter. The fourth quarter was impacted by sharplyintroduction of WHOLE FRUIT Organic juice tubes, OREO churros, PILLSBURY mini dessert pies and other new  products and lower sales ofsoft pretzels and frozen juices and ices which were down 26%, and bysales volume. However, operating income in the fourth quarter increased trade spending neededfrom $1,413,000 in 2015 to generate those$1,793,000 in 2016 primarily because of a 4% increase in overall sales. We believe that the impact of cold weather on frozen novelties’ sales was widespread among manufacturers.

FROZEN BEVERAGES

Frozen beverage and related product sales increased 2%7% to $204,585,000$253,663,000 in fiscal 2013. Excluding sales from the extra week in 2012, sales increased approximately 4% from 2012 to 2013.2016. Beverage sales alone decreased 2%increased 5% to $132,274,000$150,118,000 for the year with increases and decreases throughout our customer base. Gallon sales were down 4%up 6% in our base ICEE business.business, with sales to movie theaters accounting for about 3/4 of the increase. Service revenue increased 8% to $52,813,000$71,123,000 for the year with sales increases and decreases spread acrossthroughout our customer base. Sales of beverage machines, which tend to fluctuate from year to year while following no specific trend, increased from $13,136,000$26,413,000 in 20122015 to $17,376,000$31,155,000 in 2013.2016. The estimated number of Company owned frozen beverage dispensers was 44,70052,000 and 42,50049,000 at September 28, 201324, 2016 and September 29, 2012,26, 2015, respectively. Operating income in our Frozen Beverage segment increased from $21,881,000$24,582,000 in 20122015 to $22,903,000$26,653,000 in 2013 as a result2016 due primarily to higher sales in all areas of increased service revenue and machine sales as discussed above and controlled expenses.the business.

CONSOLIDATED

Other than as commented upon above by segment, there are no material specific reasons for the reported sales increases or decreases. Sales levels can be impacted by the appeal of our products to our customers and consumers and their changing tastes, competitive and pricing pressures, sales execution, marketing programs, seasonal weather, customer stability and general economic conditions.

Gross profit as a percentage of sales decreased to 30.67% in 2016 from 30.82% in 2015. Gross profit percentage benefitted from lower ingredient costs, pricing and increased food service handhelds and funnel cake business which was more than offset by higher costs in our frozen beverages business and increased trade spending related to 30.35%the introduction of WHOLE FRUIT Organic juice tubes, OREO churros, PILLSBURY mini dessert pies and new PHILLY SWIRL products in 2013 from 30.11%our retail supermarket business, as well as by lower volume in 2012 primarily due to higher volumemost of our food service segment and in our retail supermarket business and the product withdrawal in our food service segment and the margin also benefitted by lower ingredient and packaging costs of about $2.3 million. Gross profit was impacted by about $2.1 million of increased liability insurance expense compared to last year and a product write down of $500,000 related to a new product that was not successful. Ingredient and packaging costs can be extremely volatile and may be significantly different from what we are presently expecting and therefore we cannot project the impact of ingredient and packaging costs on our business going forward.mentioned previously.

Total operating expenses increased $680,000$1,655,000 to $165,898,000$191,657,000 in fiscal 2013 but2016 and as a percentage of sales decreased .77 percentage points to 19%19.31% of sales.sales from 19.46% in 2015. Marketing expenses decreased .65 percentage pointswere 8.66% and remained at 9%8.72% of sales as a result of higher salesin 2016 and lower expenses of which about $800,000 resulted from a management and sales meeting held in 2012 which did not reoccur in 2013.2015, respectively. Distribution expenses as a percent of sales were 7.49%decreased to 7.36% from 7.60% in both years.2015 due in part to lower fuel costs and shipping efficiencies. Administrative expenses were 3.16%3.25% and 3.15%3.16% of sales in 20132016 and 2012,2015, respectively. Other general incomeexpense of $651,000$281,000 this year compared to other general expenseincome of $458,000$207,000 in 2012. Included in other general income in 2013 is $805,000 of settlement income related to prior acquisitions. Included in other general expense in 2012 is $404,000 of acquisition costs and costs of relocating Kim & Scott’s operations.2015.

Operating income increased $12,437,000$1,922,000 or 15%2% to $97,404,000$112,810,000 in fiscal year 20132016 as a result of the aforementioned items.

InvestmentOur investments generated before tax income increased by $2,100,000of $4.1 million this year, up from $1.2 million last year as sales of our mutual fund investments, net of capital gain distributions, generated a realized loss of $598,000 this year compared to $3,492,000 due to increaseda realized loss of $3.9 million last year.   Although we recognized losses as we decreased our investments in marketable securities. We invested $80 million in the first quarter and $30 million in the third quarter in mutual funds, that seek currentour overall return on the mutual funds has been positive since we first made the investments in October 2012. We have reduced our investments in mutual funds over the past year to $13 million at September 2016 from $19 million at September 2015 and $128 million at September 2014.The remaining unrealized losses of $520,000 are spread over 4 funds with total fair market value of $12.5 million. The remaining mutual funds presently generate income with an emphasisof 4.9 % per year. We have invested $17 million in Fixed-to-Floating Perpetual Preferred Stock which generates fixed income to call dates in 2018, 2019 and 2025 and then income is based on maintaining low volatility and overall moderate duration. We estimatea spread above LIBOR if the securities are not called. The annual yield from these investments is presently 5.5%, of which 70% 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 approximate 3.5 – 3.75%. US Government Agency debthold them for a period of $23.0over one year, although we may sell some or all of them depending on presently unanticipated needs for liquidity or market conditions. We have invested $103 million heldin corporate bonds which generate fixed income to maturity dates in 2017 through 2021, with $67 million maturing prior to the end of our fiscal year 2018. The bonds presently generate income of about 2.2% per year. Our expectation is that we will hold the corporate bonds to their maturity dates and redeem them at September 29, 2012 which was yielding 2.0% was called in the year ended September 28, 2013.our amortized cost.    

The effective income tax rate decreased to 36%35.0% from 37%37.3% last year because actual liabilitythe realized losses on sales of our mutual fund investments in 2015 and 2016 are not deductible as we do not have capital gains to offset the losses and our income tax expense for 2016 benefitted by $885,000 related to share base compensation (see Note A13). We expect the effective income tax rate for 2017 to be between 35% and 35-1/2%.

Net investment after tax income for the year of $2.7 million, or $.14 per share, compared to last year’s taxes was less than estimated and the estimate for this year’s taxes has been lowered accordingly.net investment after tax loss of $516,000, or $.03 per share.

Net earnings increased $10,263,000$5,792,000 or 19%8%, in fiscal 20132016 to $64,381,000,$75,975,000, or $3.41$.32 per diluted share as a result of the aforementioned items.

There are many factors which can impact our net earnings from year to year and in the long run, among which are the supply and cost of raw materials and labor, insurance costs, factors impacting sales as noted above, the continuing consolidation of our customers, our ability to manage our manufacturing, marketing and distribution activities, our ability to make and integrate acquisitions and changes in tax laws and interest rates.

Fiscal 2012  (532015 (52 weeks) Compared to Fiscal 2011Year 2014 (52 weeks)

Net sales increased $86,725,000,$56,805,000, or 12%6%, to $830,796,000$976,256,000 in fiscal 20122015 from $744,071,000$919,451,000 in fiscal 2011. Excluding sales from the extra week in 2012, sales increased approximately 10% from 2011 to 2012.2014.

Excluding sales from the acquisitions of the frozen handheld business of ConAgra Foods in May 2011 and Kim & Scott’s Gourmet Pretzels in June 2012PHILLY SWIRL, which was acquired in the twelve months post acquisitions and the extra week in 2012,third quarter of fiscal 2014, through April of this year, sales increased approximately 5% for the year.

We have three reportable segments, as disclosed in the accompanying notes to the consolidated financial statements: Food Service, Retail Supermarkets and Frozen Beverages.

The Chief Operating Decision Maker for Food Service and Retail Supermarkets and the Chief Operating Decision Maker for Frozen Beverages monthly review detailed operating income statements and sales reports in order to assess performance and allocate resources to each individual segment. Sales is considered to be the one and only key variable monitored by the Chief Operating Decision Makers and management when determining each segment’s and the company’s financial condition and operating performance. In addition, the Chief Operating Decision Makers review and evaluate depreciation, capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment.

FOOD SERVICE

Sales to food service customers increased $57,700,000$24,737,000 or 12%4%, to $521,262,000$616,635,000 in fiscal 2012. Excluding sales from the extra week in 2012, sales increased approximately 10% from 2011 to 2012. Excluding handhelds and Kim & Scott’s sales in the twelve months post acquisitions and the extra week in 2012, sales increased approximately 6% for the year.2015. Soft pretzel sales to the food service market increased 14%3% to $118,014,000$168,970,000 for the year aided primarily by increased sales to restaurant chains, warehouse club storesschool food service and throughout our customer base.convenience stores. Increased sales to one customer accounted for approximately 25%3/4 of the pretzel sales increase. Excluding Kim & Scott’s sales, food service softSoft pretzel sales increased 12% for the year.to restaurant chains were down about 4% this year to about $40 million. Frozen juice bar and ices sales increased $4,073,000$566,000, or 8%1%, to $53,813,000$54,454,000 for the year primarily as the resultdue entirely to increased sales of higher sales to warehouse club stores and throughout our customer base. Increased salesWHOLEFRUIT Frozen Organic Juice Tubes to one customer accounted for about 85% of thecustomer; excluding these sales, frozen juices and ices sales increase.were down 3%. Churro sales to food service customers increased 11%were up 1% to $45,974,000$56,602,000 for the year which include a decline in 2012 with sales increasing generally throughout our customer base,of $6,469,000 to one restaurant chain that discontinued carrying churros in August 2014. Churro sales to other customers were up 15% for the year with sales to internationalfour customers accounting for about 1/32 of the sales increase. Sales of bakery products increased $24,904,000,$19,579,000, or 10%7%, for the year as sales increases were spread throughout our customer base.concentrated in eight customers and to school food service. Handheld sales to food service customers were $27,818,000down 10% to $21,817,000 in 2012. Funnel cake and related funnel cake product2015 as sales decreased by $8,564,000 to $8,033,000 with lower sales to three customers accounting for all of the decrease.declines were spread throughout our customer base. Sales of new products in the first twelve months since their introduction were approximately $15.2$18 million for the year. Price increases accounted for approximately $16.1$9 million of sales for the year and net volume increases, including new product sales as defined above, accounted for approximately $16 million of sales for the year. Operating income in our Food Service segment increased from $73,731,000 in 2014 to $75,286,000 in 2015. Operating income benefited from lower distribution costs and improved performance at some of our smaller manufacturing facilities and was negatively impacted by continuing declines in sales of our handhelds business, higher manufacturing costs and higher costs of egg raw material. Additionally, operating income was impacted in 2014 by $973,000 of shutdown costs of our Norwalk, California, manufacturing facility.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets increased $10,733,000 or 10% to $123,377,000 in fiscal year 2015. Excluding sales of PHILLY SWIRL through April of this year, sales increased approximately 1% for the year, although sales in our fourth quarter were down 9% due to lower sales of handhelds and higher trade spending. Soft pretzel sales to retail supermarkets were $35,727,000 compared to $34,830,000 in 2014, an increase of 3%. Sales of frozen juices and ices increased $12,770,000 or 21% to $72,174,000. Without PHILLY SWIRL sales, sales of frozen juices and ices were up $3,669,000, or 6%, with sales increases and decreases spread across our customer base. Coupon redemption costs, a reduction of sales, increased 24% or about $918,000 for the year. Handheld sales to retail supermarket customers decreased 11% to $18,957,000 in 2015 as three customers accounted for about 3/4 of the decrease in sales. Sales of products in the first twelve months since their introduction were approximately $1.5 million in fiscal year 2015. Price increases accounted for approximately $2.7 million of sales for the year and net volume increases, including new product sales as defined above and sales resulting from the acquisitions of Kim & Scott’s and the handheld business, accounted for approximately $41.6 million of sales for the year. Operating income in our Food Service segment increased from $46,171,000 in 2011 to $49,770,000 in 2012 primarily as a result of increased sales volume and price increases which offset higher ingredient and packaging cost increases of about $9 million and the negative impact of the sharp decline in funnel cake sales.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets increased $18,769,000 or 21% to $109,868,000 in fiscal year 2012. Excluding sales from the extra week in 2012, sales increased approximately 18% from 2011 to 2012. Excluding handheld sales and Kim & Scott’s sales in the twelve months post acquisitions and the extra week in 2012, sales increased approximately 2% for the year. Soft pretzel sales to retail supermarkets were $33,842,000 compared to $32,044,000 in 2011 on a unit volume increase of 2%. Sales of frozen juices and ices increased $1,733,000 or 3% to $53,673,000 on flat volume. Coupon redemption costs, a reduction of sales, decreased 16% or about $635,000 for the year. Handheld sales to retail supermarket customers were $24,358,000 in 2012. Sales of products in the first twelve months since their introduction were approximately $7.0 million in fiscal year 2012. Price increases accounted for approximately $3.7 million of sales for the year and net volume increases, including new product sales as defined above and handheld sales and Kim & Scott’sPHILLY SWIRL’s sales and net of decreasedincreased coupon costs, accounted for approximately $15.0$8 million ofin sales for the year. Operating income in our Retail Supermarkets segment increaseddecreased from $11,830,000$11,201,000 in 20112014 to $13,316,000$11,020,000 in 20122015 due primarily due to higher coupon expense and advertising expenses to support our SUPERPRETZEL soft pretzel products. Additionally, in 2015, we were impacted by operating income generated by handheld sales and lower coupon expense.losses of PHILLY SWIRL during its off season while in 2014 we acquired PHILLY SWIRL after its off season.

FROZEN BEVERAGES

Frozen beverage and related product sales increased 5%10% to $199,666,000$236,244,000 in fiscal 2012. Excluding sales from the extra week in 2012, sales increased approximately 4% from 2011 to 2012.2015. Beverage sales alone increased 2%7% to $135,436,000$142,705,000 for the year with increases and decreases throughout our customer base. Domestic gallonGallon sales were flatup 7% in our base ICEE business.business, with sales to movie theaters accounting for about half of the increase. Service revenue increased 15%10% to $49,115,000$65,765,000 for the year with sales increases and decreases spread acrossthroughout our customer base. Sales of beverage machines, which tend to fluctuate from year to year while following no specific trend, increased from $11,362,000$20,224,000 in 20112014 to $13,136,000$26,413,000 in 2012.2015. The estimated number of Company owned frozen beverage dispensers was 42,50053,000 and 40,80049,000 at September 29, 201226, 2015 and September 24, 2011,27, 2014, respectively. Operating income in our Frozen Beverage segment increased from $18,582,000$21,916,000 in 20112014 to $21,881,000$24,582,000 in 2012 as a result2015 due primarily to higher sales in all areas of increased sales as discussed abovethe business and controlled expenses. Higher gasoline costs of approximately $900,000 impacted the year’s operating income.lower fuel costs.

CONSOLIDATED

Other than as commented upon above by segment, there are no material specific reasons for the reported sales increases or decreases. Sales levels can be impacted by the appeal of our products to our customers and consumers and their changing tastes, competitive and pricing pressures, sales execution, marketing programs, seasonal weather, customer stability and general economic conditions.

Gross profit as a percentage of sales decreased to 30.11%30.82% in 20122015 from 30.88%31.28% in 2011. Higher ingredient2014. Gross profit margins benefited from the improved performance of our frozen beverages business and packaging costs compared to last year of approximately $10 million and the lowerfrom higher gross profit margins in our retail supermarket business. Gross profit margins in our food service segment were impacted by increased lower margin of handheldschool food service sales, were primarily responsible for the decreased gross profit percentage. Without this handhelds impact, gross profit as a percentage ofcontinuing decline in sales would have been roughly the same for 2011 and 2012. Ingredient and packaging costs can be extremely volatile and may be significantly different from what we are presently expecting and therefore we cannot project the impact of ingredient and packaging costs on our business going forward; however, there has been a very significant increase in the market cost of flour and packaging as well as other lesser used ingredients over the past six months which we anticipate will result in higher costs over some portions of our handhelds business, higher manufacturing costs, modest volume increases and higher egg raw material costs. We will continue to be impacted by higher egg raw material costs in our 2016 fiscal year 2013.resulting from the Avian Flu epidemic; however, we have increased our selling prices intending to recover a significant portion of the increased costs.

Total operating expenses increased $12,027,000$9,273,000 to $165,218,000$190,002,000 in fiscal 2012 but2015 and as a percentage of sales decreased .70 percentage points to 20%19.46% of sales.sales from 19.66% in 2014. Marketing expenses decreased .30 percentage pointswere 8.72% and remained at 9% of sales. Distribution expenses decreased .23 percentage points to 7% of sales. Administrative expenses decreased .15 percentage points and were 3%8.55% of sales in both years. The drops2015 and 2014, respectively. Marketing expenses this year included additional spending to support our retail SUPERPRETZEL soft pretzel products. Distribution expenses as a percent of sales decreased to 7.60% from 7.74% in percentages2014 due in part to lower fuel costs. Administrative expenses were generally because3.16% and 3.24% of increased sales.sales in 2015 and 2014, respectively. Other general expenseincome of $458,000$207,000 this year compared to other general expense of $524,000$1,154,000 in 2011.2014. Included in other general expense in 20122014 is $404,000$973,000 of acquisition costs andshutdown costs of relocating Kim & Scott’s operations. Included in other general expense in 2011 is $546,000 of acquisition costs.

Operating income for the year was impacted by approximately $800,000 of costs of a management and sales meeting held in October 2011, which has historically been held every five years.our Norwalk, CA manufacturing facility.

Operating income increased $8,384,000$4,040,000 or 11%4% to $84,967,000$110,888,000 in fiscal year 20122015 as a result of the aforementioned items.

GainOur investments generated before tax income of $1.2 million this year, down from $4.5 million last year as sales of our mutual fund investments, net of capital gain distributions, generated a realized loss of $3.9 million this year.   Although we recognized losses as we decreased our investments in mutual funds, our overall return on the bargain purchasemutual funds has been positive since we first made the investments in October 2012. We have reduced our investments in mutual funds over the past year to $19 million at September 2015 from $128 million at September 2014.The remaining unrealized losses of a business of $6,580,000 in 2011 resulted from the$827,000 are spread over 4 funds with total fair market value of $19.2 million. The remaining mutual funds presently generate income of 4.8 % per year. We invested $20 million this year in Fixed-to-Floating Perpetual Preferred Stock which generates fixed income to call dates in 2018, 2019 and 2025 and then income is based on a spread above LIBOR if the identifiablesecurities are not called. The annual yield from these investments is presently 5.5%, of which 70% 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 acquiredas 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.In the fourth quarter we invested $67 million in corporate bonds which generate fixed income to maturity dates in 2017 through 2021, with $40 million maturing prior to the handhelds acquisition exceedingend of our fiscal year 2018. The bonds presently generate income of about 2.5% per year. Our expectation is that we will hold the purchase price.

Investment income increased by $351,000corporate bonds to $1,392,000 due to increased investments in marketable securities.their maturity dates and redeem them at our amortized cost.

The effective income tax rate increased 2.78 percentage points to 37%37.3% from 35%35.4% last year. Adjusting outyear primarily because the effectrealized losses on sales of our mutual fund investments in 2015 are not deductible as we do not have capital gains to offset the gain on bargain purchase of a business,losses. We expect the effective income tax rate in 2011 was 37%for 2016 to be between 36% and 36.5%.

Net investment after tax loss for the year of $516,000, or $.03 per share, compared to last year’s net investment after tax income of $2.8 million, or $.15 per share.

Net earnings decreased $945,000$1,631,000 or 2%, in fiscal 20122015 to $54,118,000,$70,183,000, or $2.86$.09 per diluted share as a result of the aforementioned items. Without the benefit of the gain on bargain purchase of a business in 2011, net earnings were $48,483,000 in 2011 compared to $54,118,000 this year.

There are many factors which can impact our net earnings from year to year and in the long run, among which are the supply and cost of raw materials and labor, insurance costs, factors impacting sales as noted above, the continuing consolidation of our customers, our ability to manage our manufacturing, marketing and distribution activities, our ability to make and integrate acquisitions and changes in tax laws and interest rates.

ACQUISITIONSRESULTS OF OPERATIONS

On June 10, 2010 we acquired the assets of California Churros, Inc., a manufacturer and seller of premium brand churros selling its products under the brand CALIFORNIA CHURROS. Headquartered and with its manufacturing facility in Colton, CA, California Churros had sales of approximately $2.5 million in our 2010 fiscal year.

In May 2011, we acquired the frozen handheld business of ConAgra Foods. This business had sales of approximately $50 million over the prior twelve months to food service and retail supermarket customers and sales of $18.3 million in our 2011 fiscal year from the acquisition date.ACQUISITIONS

In June 2012, we acquired the assets of Kim & Scott’s Gourmet Pretzels, Inc., a manufacturer and seller of a premium brand soft pretzel. This business had sales of approximately $8 million over the prior twelve months to food service and retail supermarket customers, and had sales of approximately $1.8 million in our 2012 fiscal year from the acquisition date.

In October 2013, we acquired the assets of New York Pretzel, a manufacturer and distributor of soft pretzels selling primarily in the northeast to foodservice and retail locations.  Of the purchase price of $11.8 million, $849,000 was allocated to intangible assets, $7,716,000 was allocated to goodwill and $3,049,000 was allocated to property, plant and equipment. This business had sales of about $4.3 million in our 2014 fiscal year included in the food service segment.

In May 2014, we acquired the stock of Philly’s Famous Water Ice, Inc. (PHILLY SWIRL). PHILLY SWIRL, located in Tampa, FL, produces frozen novelty products sold primarily to retail supermarket locations throughout the United States and to Canada with annual sales approximating $25 million.  The allocation of the purchase price of $17.4 million is $4.0 million to working capital, $1.2 million to property, plant and equipment, $11.1 million to intangible assets, $1.8 million to goodwill, $4.0 million to deferred tax assets and $95,000 to other assets and $4.8 million to deferred tax liabilities. Sales of PHILLY SWIRL from the acquisition date to September 26, 2015 were $12.6 million and are included in the retail supermarket segment.

These acquisitions were accounted for under the purchase method of accounting, and their operations are included in the accompanying consolidated financial statements from their respective acquisition dates.

LIQUIDITY AND CAPITAL RESOURCES

Although there are many factors that could impact our operating cash flow, most notably net earnings, we believe that our future operating cash flow, along with our borrowing capacity, our current cash and cash equivalent balances and our investment securities is sufficient to fund future growth and expansion. See Note C to theseour financial statements for a discussion of our investment securities.

Fluctuations in the value of the Mexican and Canadian currencies and the resulting translation of the net assets of our Mexican and Canadian subsidiaries caused an increase of $571,000$3,065,000 in accumulated other comprehensive loss in 2013, a decrease2016, an increase of $782,000$5,389,000 in accumulated other comprehensive loss in 20122015 and an increase of $1,060,000$929,000 in 2011.accumulated other comprehensive loss in 2014. In 2013,2016, sales of the two subsidiaries were $23,161,000$27,075,000 as compared to $19,491,000$25,313,000 in 20122015 and $18,025,000$23,633,000 in 2011.2014.

In our fiscal year ended September 28, 2013,24, 2016, we purchased and retired 204,397141,700 shares of our common stock at a cost of $14,500,215.$15,265,019. In our first quarter, we purchased and retired 48,25527,083 shares at a cost of $2,762,622.$3,115,439. In our second quarter, we purchased and retired 80,565 shares at a cost of $8,642,887. In our third quarter, we purchased and retired 58,84034,052 shares at a cost of $4,435,078. In$3,506,693. We did not purchase and retire any shares in our fourth quarter, we purchased and retired 97,302 shares at a cost of $7,302,515.quarter.

In our fiscal year ended September 29, 2012,26, 2015, we purchased and retired 142,03872,698 shares of our common stock at a cost of $8,167,125.$8,011,118.

In our fiscal year ended September 24, 2011,27, 2014, we did not purchasepurchased and retire anyretired 81,685 shares of our common stock.stock at a cost of $7,504,729.

In November 2011,2016, we entered into an amendment and modification to an amended and restated loan agreement with our existing banks which provides for up to a $50,000,000 revolving credit facility repayable in November 2016.2021. The agreement contains restrictive covenants and requires commitment fees in accordance with standard banking practice. There were no outstanding balances under the facility at September 28, 201324, 2016 or at September 29, 2012.26, 2015. The significant financial covenants are:

We were in compliance with the financial covenants described above at September 28, 2013.24, 2016.

We self-insure, up to loss limits, certain insurable risks such as worker's compensation and automobile liability claims. Accruals for claims under our self-insurance program are recorded on a claims-incurred basis. Under this program, the estimated liability for claims incurred but unpaid in fiscal years 20132016 and 20122015 was $3,200,000$1,900,000 and $1,800,000,$2,800,000, respectively. In connection with certain self-insurance agreements, we customarily enter into letters of credit arrangements with our insurers. At each of September 28, 201324, 2016 and September 29, 2012,26, 2015, we had outstanding letters of credit totaling $8,175,000.$8,575,000 and $9,075,000, respectively.

The following table presents our contractual cash flow commitments on long-term debt, operating leases and purchase commitments for raw materials and packaging. See Notes to the consolidated financial statements for additional information on our long-term debt and operating leases.

The purchase commitments do not exceed our projected requirements over the related terms and are in the normal course of business.

Fiscal 20132016 Compared to Fiscal 20122015

Cash and cash equivalents and marketable securities held to maturity and available for sale increased $26,855,000,$34,401,000, or 15%14%, to $207,265,000$274,388,000 from a year ago for reasons described below.

Accounts receivables, net increased $11,131,000,decreased $4,324,000, or 15%4%, to $87,545,000$98,325,000 in 2013. On a days’ outstanding basis, the balance a year ago was at an unusually low level; the increase2016 because of lower sales in this year’s September month and timing of collections. Inventories increased $6,027,000 or 7% to $88,684,000 in 2016 due to sluggish September sales this year is partly due to a bounceback and partly due to the composition of the receivables. Inventories increased $2,024,000 or 3% to $71,785,000changes in 2013 primarily due to higher unit costs of inventory.product mix.

Prepaid expenses and other increased to $3,284,000$13,904,000 from $2,220,000$6,557,000 last year becausedue primarily to an increase in prepaid income taxes as a result of requirements for prepayments by various vendors.adopting bonus depreciation.

Net property, plant and equipment increased $5,620,000$12,159,000 to $147,164,000$184,213,000 because purchases of property, plant and equipment for the improvement and expansion of our manufacturing capabilities and frozen carbonated beverage business exceeded depreciation on existing assets. Included in purchasesPurchases of property, plant and equipment were $48,709,000 in 2013 is approximately $5.4 million for equipment additions2016 and $48,641,000 in 2015.

Goodwill remained at our manufacturing facility$86,442,000 because there was no goodwill acquired in Moscow Mills, MO which essentially completes the multi-year expansion of that facility.acquisitions and no impairment charges.

Goodwill remained the same at $76,899,000.

Other intangible assets, less accumulated amortization decreased $4,452,000$4,000,000 to $44,012,000$41,819,000 due entirely to amortization expense of $4,452,000.$5,078,000 during the year, offset by $1,078,000 paid for the acquisition of the HEARTBAR brand in the food service segment.

Marketable securities available for sale and held to maturity increased by $83,708,000$27,438,000 to $109,920,000$133,736,000 as we invested $110 million intoreinvested proceeds from the 2015 sales of our mutual funds designedinvestments.

Accounts Payables increased 5% to generate current income while maintaining a low volatility and overall moderate duration.$62,026,000 from $59,206,000.

Accrued insurance liability increased $2,130,000 due to increases in insurance companywas essentially unchanged at $10,119,000 as our estimates for incurred but not yet paid claims under our group insurance and insurance liability programs for prior years and higher claims levels during 2013.remained about the same as at September 2015.

Accrued compensation expense increased 4%7% to $13,671,000$16,340,000 due to an increase in our employee base and a general increase in the level of pay rates.

Dividends payable increased to $7,280,000 as our quarterly dividend payment increased to $.39/share from $.36/share.

Deferred income tax liabilities increased by $309,000$7,663,000 to $45,183,000 which$48,186,000 from $40,523,000 because of increased liabilities related primarily to amortizationdepreciation of goodwillproperty and other intangible assets.equipment.

Other long-term liabilities at September 28, 2013 include $438,000$354,000 of gross unrecognized tax benefits which decreased from $541,000 a year ago due to reductions for tax positions of prior years.at September 24, 2016 and $334,000 at September 26, 2015.

Common stock decreased $8,495,000$6,321,000 to $34,516,000$25,332,000 in 20132016 because repurchases of our common stock of $14,500,000$15,265,000 exceeded increases totaling $6,005,000 from the exercise of incentive and nonqualified stock options, stock issued under our stock purchase plan for employees, stock issued under our deferred stock plan and share-based compensation expense.

Net cash provided by operating activities decreased $2,877,000 to $86,548,000 in 2013 primarily because of an increase of accounts receivables in 2013 of $11,148,000 compared to an increase of $605,000 in 2012 and an increase in accounts payable and accrued liabilities of $578,000 in 2013 compared to an increase of $5,248,000 in 2012 which more than offset increased net earnings of $10,263,000 and other positive factors.

Net cash used in investing activities increased $111,519,000 to $120,837,000 in 2013 from $9,318,000 in 2012 primarily because net purchases of marketable securities of $85,934,000 in 2013 compared to net proceeds from marketable securities of $41,294,000 in 2012.

Net cash used in financing activities of $22,360,000 in 2013 compared to net cash used by financing activities of $13,800,000 in 2012. The increase was caused primarily by increased payments of $6,333,000 to repurchase common stock and increased dividend payments of $1,919,000.

In 2013, the major variables in determining our net increase in cash and cash equivalents and marketable securities were our net earnings, depreciation and amortization of fixed assets, increase in accounts receivable, purchases of property, plant and equipment, payments of cash dividend and the repurchase of common stock. Other variables which in the past have had a significant impact on our change in cash and cash equivalents are proceeds from borrowings and payments of long-term debt and purchases of companies. As discussed in results of operations, our net earnings may be influenced by many factors. Depreciation and amortization of fixed assets is primarily determined by past purchases of property, plant and equipment although it could be impacted by a significant acquisition. Purchases of property, plant and equipment are primarily determined by our ongoing normal manufacturing and marketing requirements but could be increased significantly for manufacturing expansion requirements or large frozen beverage customer needs. From time to time, we have repurchased common stock and we anticipate that we will do so again in the future. We are actively seeking acquisitions that could be a significant use of cash. Although we have no long-term debt at September 28, 2013, we may borrow in the future depending on our needs.

Fiscal 2012 Compared to Fiscal 2011

Cash and cash equivalents and marketable securities held to maturity increased $25,425,000, or 16%, to $180,410,000 from a year ago for reasons described below.

Accounts receivables, net increased $1,414,000, or 2%, to $76,414,000 in 2012 due to increased sales levels in our fourth quarter which was offset by improved collections. Inventories increased $6,300,000 or 10% to $69,761,000 in 2012 due to higher unit costs of inventory and increased inventory requirements due to increased sales.

Prepaid expenses and other decreased to $2,220,000 from $4,196,000 last year because of higher estimated federal income tax payments made in 2011 prior to the enactment of the law extending bonus depreciation which resulted in prepaid income taxes of $1,814,000 at September 2011.

Net property, plant and equipment increased $16,894,000 to $141,544,000 because purchases of property, plant and equipment for the improvement and expansion of our manufacturing capabilities and frozen carbonated beverage business exceeded depreciation on existing assets, and because of the addition of $724,000 in fixed assets acquired in the Kim & Scott’s acquisition. Included in purchases of property, plant and equipment in 2012 is approximately $6.5 million for a building addition at our manufacturing facility in Moscow Mills, MO and $7.5 million for pretzel lines added at our facilities in Bellmawr, NJ and Carrollton, TX.

Goodwill increased to $76,899,000 because of $6,829,000 acquired in the Kim & Scott’s acquisition.

Other intangible assets, less accumulated amortization decreased $3,541,000 to $48,464,000 due to intangible assets of $436,000 acquired in the Kim & Scott’s acquisition and a separate purchase of a $500,000 intangible asset, net of amortization expense of $4,477,000.

Accounts payable and accrued liabilities increased $5,057,000 due to increased levels of business and higher purchase costs of ingredients and packaging, and because of an accrued liability of $962,000 for income taxes that existed on September 2012 compared to none at September 2011.

Accrued compensation expense increased 2% to $13,151,000 due to an increase in our employee base and a general increase in the level of pay rates.

Deferred income tax liabilities increased by $3,824,000 to $44,874,000 which related primarily to amortization of goodwill and other intangible assets and depreciation of property, plant and equipment.

Other long-term liabilities at September 29, 2012 include $825,000 of gross unrecognized tax benefits which decreased from $973,000 a year ago due to reductions for tax positions of prior years.

Common stock decreased $2,006,000 to $43,011,000 in 2012 because repurchases of our common stock of $8,167,000 exceeded increases totaling $6,161,000$8,945,000 from the exercise of incentive and nonqualified stock options, stock issued under our stock purchase plan for employees, stock issued under our deferred stock plan and share-based compensation expense.

Net cash provided by operating activities increased $8,969,000$17,304,000 to $89,425,000$121,225,000 in 20122016 primarily because of an increase in net earnings of $5,792,000, a reduction of accounts receivable of $605,000$3,571,000 in 20122016 compared to an increase of $5,231,000$3,123,000 in 20112015, an increase of accounts payable and accrued liabilities of $3,888,000 compared to $287,000 in 2015 and an increase in deferred income taxes of $3,108,000$7,700,000, as well as by higher depreciation of fixed assets of $2,180,000 in 2012 compared to an increase of $6,108,000 in 2011. Additionally, net earnings in 2011 included a gain on bargain purchase of a business of $6,580,000 which did not contribute to cash provided by operating activities.2016.

Net cash used in investing activities decreased $54,587,000increased $46,111,000 to $9,318,000$74,602,000 in 20122016 from $63,905,000$28,491,000 in 20112015 primarily because net proceeds from redemption and sales of marketable securities of $41,294,000 in 2012 compared to net purchases of marketable securities, net of $25,725,000proceeds, was $28,562,000 in 2011. This change2016 compared to proceeds from marketable securities, net of $67,019,000 was partially offset by higher spending of $13,676,000 on purchases, of property, plant and equipment.$19,877,000, in 2015. We reduced our holdings of mutual funds in 2015 by $109 million.

Net cash used in financing activities of $13,800,000$29,745,000 in 2012 compared2015 increased to net cash used by financing activities$37,573,000 in 2016 primarily because of $3,407,000 in 2011. The increase was caused primarily by $8,167,000 of payments to repurchase common stock and increased dividend payments of $1,009,000.$2,369,000 and increased repurchases of common stock of $7,254,000.

In 2012,2016, the major variables in determining our net increase in cash and cash equivalents and marketable securities were our net earnings, depreciation and amortization of fixed assets, changes in accounts receivable and accounts payable, purchases of property, plant and equipment, purchases of companies, payments of cash dividend and the repurchase of common stock. Other variables which in the past have had a significant impact on our change in cash and cash equivalents and marketable securities are purchases of companies and proceeds from borrowings and payments of long-term debt. As discussed in results of operations, our net earnings may be influenced by many factors. Depreciation and amortization of fixed assets is primarily determined by past purchases of property, plant and equipment although it could be impacted by a significant acquisition. Purchases of property, plant and equipment are primarily determined by our ongoing normal manufacturing and marketing requirements but could be increased significantly for manufacturing expansion requirements or large frozen beverage customer needs. From time to time, we have repurchased common stock and we anticipate that we will do so again in the future. We are actively seeking acquisitions that could be a significant use of cash. Although we have no long-term debt at September 29, 2012,24, 2016, we may borrow in the future depending on our needs.

Fiscal 2015 Compared to Fiscal 2014

Cash and cash equivalents and marketable securities held to maturity and available for sale increased $18,110,000, or 8%, to $239,987,000 from a year ago for reasons described below.

Accounts receivables, net increased $2,677,000, or 3%, to $102,649,000 in 2015, generally in line with sales increases in our fourth quarter. Inventories increased $4,539,000 or 6% to $80,622,000 in 2015 due primarily to an increase in parts inventory to support our growing repair and maintenance service in our frozen beverages segment.

Prepaid expenses and other increased to $6,557,000 from $3,695,000 last year primarily because of an increase in prepaid income taxes of $2,314,000 this year compared to last year.

Net property, plant and equipment increased $16,560,000 to $174,089,000 because purchases of property, plant and equipment for the improvement and expansion of our manufacturing capabilities and frozen carbonated beverage business exceeded depreciation on existing assets. Purchasing of property, plant and equipment were $11,265,000 higher in 2015 than in 2014 because of significant manufacturing improvements in pretzel production and growth of our frozen beverage customer base.

Goodwill remained at $86,442,000 because there was no goodwill acquired in acquisitions.

Other intangible assets, less accumulated amortization decreased $5,170,000 to $45,819,000 due almost entirely to amortization of $5,370,000 during the year.

Marketable securities available for sale and held to maturity decreased by $23,819,000 to $106,298,000 as we reduced our holdings of mutual funds from $128.1 million to $19.2 million during the year and invested $86.4 million in corporate bonds and preferred stocks.

Accounts Payables decreased less than 1% to $59,206,000 from $59,968,000.

Accrued insurance liability decreased $347,000, or 3% to $10,231,000 due to decreases in estimates for incurred but not yet paid claims under our group insurance and insurance liability programs.

Accrued compensation expense increased 7% to $15,318,000 due to an increase in our employee base and a general increase in the level of pay rates.

Dividends payable increased to $6,723,000 as our quarterly dividend payment increased to $.36/share from $.32/share.

Deferred income tax liabilities decreased $1,031,000 to $43,789,000 from $44,820,000.

Other long-term liabilities include $334,000 of gross unrecognized tax benefits at September 26, 2015 and $315,000 at September 27, 2014.

Common stock decreased $968,000 to $31,653,000 in 2015 because repurchases of our common stock of $8,011,000 exceeded increases totaling $6,625,000 from the exercise of incentive and nonqualified stock options, stock issued under our stock purchase plan for employees, stock issued under our deferred stock plan and share-based compensation expense.

Net cash provided by operating activities decreased $1,269,000 to $105,273,000 in 2015 primarily because of a decrease in net earnings of $1,631,000, an increase of prepaid expenses of $2,871,000 in 2015 compared to $182,000 in 2014 and an increase of accounts payable and accrued liabilities of $287,000 compared to $6,831,000 in 2014 which were mainly offset by increased loss on sale of marketable securities of $3,958,000 and a decrease in accounts receivable of $3,123,000 in 2015 compared to $8,913,000 in 2014.

Net cash used in investing activities decreased $56,269,000 to $29,843,000 in 2015 from $86,112,000 in 2014 primarily because net proceeds from marketable securities of $19,980,000 in 2015 compared to net purchases of marketable securities of $19,687,000 in 2014 and a decline in payments for purchases of companies of $27,745,000 which were offset by increased purchases of property, plant and equipment of $11,265,000.

Net cash used in financing activities of $25,435,000 in 2014 increased to $29,745,000 in 2015 primarily because of increased dividend payments $5,230,000.

In 2015, the major variables in determining our net increase in cash and cash equivalents and marketable securities were our net earnings, depreciation and amortization of fixed assets, increase in accounts receivable and accounts payable, purchases of property, plant and equipment, payments of cash dividend and the repurchase of common stock. Other variables which in the past have had a significant impact on our change in cash and cash equivalents and marketable securities are purchases of companies and proceeds from borrowings and payments of long-term debt. As discussed in results of operations, our net earnings may be influenced by many factors. Depreciation and amortization of fixed assets is primarily determined by past purchases of property, plant and equipment although it could be impacted by a significant acquisition. Purchases of property, plant and equipment are primarily determined by our ongoing normal manufacturing and marketing requirements but could be increased significantly for manufacturing expansion requirements or large frozen beverage customer needs. From time to time, we have repurchased common stock and we anticipate that we will do so again in the future. We are actively seeking acquisitions that could be a significant use of cash. Although we have no long-term debt at September 26, 2015, we may borrow in the future depending on our needs.

Item 7A. Quantitative And Qualitative Disclosures About Market Risk

The following is the Company’s quantitative and qualitative analysis of its financial market risk:

Interest Rate Sensitivity

The Company has in the past entered into interest rate swaps to limit its exposure to interest rate risk and may do so in the future if the Board of Directors feels that such non-trading purpose is in the best interest of the Company and its shareholders. As of September 28, 2013,24, 2016, the Company had no interest rate swap contracts.

Interest Rate Risk

At September 28, 2013,24, 2016, the Company had no long-term debt obligations.

Purchasing Risk

The Company’s most significant raw material requirements include flour, shortening, corn syrup, sugar, juice, cheese, chocolate, and a variety of nuts. The Company attempts 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. Future contracts are not used in combination with forward purchasing of these raw materials. The Company’s 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.

Foreign Exchange Rate Risk

The Company has not entered into any forward exchange contracts to hedge its foreign currency rate risk as of September 28, 2013,24, 2016, because it does not believe its foreign exchange exposure is significant.

Item 8.  Financial Statements And Supplementary Data

The financial statements of the Company are filed under this Item 8, beginning on page F-1 of this report.     

Item 9.  Changes In And Disagreements With Accountants On Accounting And Financial Disclosure

None.

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 28, 2013.24, 2016. Based on that evaluation, our chief executive officer and chief financial officer concluded that these controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported as specified in Securities and Exchange Commission rules and forms. There were no changes in these controls or procedures identified in connection with the evaluation of such controls or procedures that occurred during our last fiscal quarter, or in other factors that have materially affected, or are reasonably likely to materially affect these controls or procedures. There were no changes in the Company’s internal controls over financial reporting that occurred during our last fiscal quarter.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 Securities and Exchange Commission. 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: 

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 28, 2013.24, 2016. 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 (1992).Framework.

Based on our assessment, our management believes that, as of September 28, 2013,24, 2016, 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.

Our independent registered public accounting firm, Grant Thornton LLP, audited our internal control over financial reporting as of September 28, 2013.24, 2016.  Their report, dated November 26, 2013,21, 2016, 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.

Item 9B.  Other Information

There was no information required on Form 8-K during the quarter that was not reported.

PART III

Item 10.  Directors, Executive Officers and CorporateGovernance

Portions of the information concerning directors and executive officers, appearing under the captions “Information Concerning Nominees For Election To Board” and “Information Concerning Continuing Directors And Executive Officers” and information concerning Section 16(a) Compliance appearing under the caption “Compliance with Section 16(a) of the Securities Exchange Act of 1934” in the Company’s Proxy Statement filed with the Securities and Exchange Commission in connection with the Annual Meeting of Shareholders to be held on February 18, 201415, 2017 (“20132016 Proxy Statement”) is incorporated herein by reference.

Portions of the information concerning the Audit Committee, the requirement for an Audit Committee Financial Expert and the Nominating Committee in the Company’s 20132016 Proxy Statement filed with the Securities and Exchange Commission in connection with the Annual Meeting of Shareholders to be held on February 18, 201415, 2017 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 officer.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: Dennis Moore. A copy of the Code of Ethics can also be found on our website atwww.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 websitewww.jjsnack.com for a period of 12 months.

Item 11.  Executive Compensation

Information concerning executive compensation appearing in the Company’s 20132016 Proxy Statement under the caption “Management Remuneration” is incorporated herein by reference.

The following is a list of the executive officers of the Company and their principal past occupations or employment. All such persons serve at the pleasure of the Board of Directors and have been elected to serve until the Annual Meeting of Shareholders on February 18, 201415, 2017 or until their successors are duly elected.

Name	Age	Position
Gerald B. Shreiber	7174	Chairman of the Board,President, Chief ExecutiveOfficerExecutive Officer and Director
Dennis G. Moore	57 60	Senior Vice President, ChiefFinancial Officer, Secretary,Treasurer and Director
Robert M. Radano	64 67	Senior Vice President,Sales and Chief OperatingOfficer Operating Officer
Dan Fachner	53 57	President of The ICEE CompanySubsidiary
Gerard G. Law	39 42	Senior Vice President andAssistant to the President
Robert J. Pape	56 59	Senior Vice President Sales

Gerald B. Shreiber is the founder of the Company and has served as its Chairman of the Board, President, and Chief Executive Officer since its inception in 1971. His term as a director expires in 2015.2020.

Dennis G. Moore joined the Company in 1984. He served in various controllership functions prior to becoming the Chief Financial Officer in June 1992. His term as a director expires in 2017.

Robert M. Radano joined the Company in 1972 and in May 1996 was named Chief Operating Officer of the Company. Prior to becoming Chief Operating Officer, he was Senior Vice President, Sales responsible for national food service sales of J & J.

Dan Fachner has been an employee of ICEE-USA Corp., which was acquired by the Company in May 1987, since 1979. He was named Senior Vice President of The ICEE Company in April 1994 and became President in May 1997.

Gerard G. Law joined the Company in 1992.  He served in various manufacturing and sales management capacities prior to becoming Senior Vice President, Western Operations in 2009.  He was named to his present position in 2011 in which he has responsibility for marketing, research and development and overseeing a number of the manufacturing facilities of J & J. 

Robert J. Pape joined the Company in 1998. He served in various sales and sales management capacities prior to becoming Senior Vice President Sales in 2010.

Item 12.   Security Ownership Of Certain Beneficial Owners AndManagement And Related Stockholder Matters

Information concerning the security ownership of certain beneficial owners and management appearing in the Company’s 20132016 Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management” is incorporated herein by reference.

The following table details information regarding the Company’s existing equity compensation plans as of September 28, 2013.24, 2016.

 

		( a )				( b )				( c )
Plan Category		Number of securities to be issued upon exercise of outstanding options, warrants and rights				Weighted- average exercise price of outstandng options, warrants and rights				Number of Securities Remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) )
Equity compensation plans approvedby security holders			499,023			$	48.46				1,161,000
Equity compensation plans notapproved by security holders			-				-				-
Total			499,023			$	48.46				1,161,000