~~159,378~~1,000 anti-dilutive shares have been excluded in the computation of EPS for the three months ended ~~March 31,~~June 30, 2018.

~~159,378~~1,000 anti-dilutive shares have been excluded in the computation of EPS for the ~~six~~nine months ended ~~March 31,~~June 30, 2018.

~~2,500~~500 anti-dilutive shares have been excluded in the computation of EPS for the three months ended ~~March 25,~~June 24, 2017.

158,494 anti-dilutive shares have been excluded in the computation of EPS for the ~~six~~nine months ended ~~March 25,~~June 24, 2017

In 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 are recognized in Stockholders’ Equity. This guidance is effective for our fiscal year ended September 2019. Early adoption is not permitted. We do not anticipate that the adoption of this new guidance will have a material impact on our consolidated financial statements.

In 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 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 increase our total assets and liabilities. We anticipate that the impact of this guidance on our financial statements will be material.

Note 9	We principally sell our products to the food service and retail supermarket industries. Sales and results of our frozen beverages business are monitored separately from the balance of our food service business because of different distribution and capital requirements. We maintain separate and discrete financial information for the three operating segments mentioned above which is available to our Chief Operating Decision Makers.

Our three reportable segments are Food Service, Retail Supermarkets and Frozen Beverages. All inter-segment net sales and expenses have been eliminated in computing net sales and operating income. These segments are described below.

Food Service

The primary products sold by the food service group are soft pretzels, frozen juice treats and desserts, churros, dough enrobed handheld products and baked goods. Our customers in the food service industry include snack bars and food stands in chain, department and discount stores; malls and shopping centers; fast food outlets; stadiums and sports arenas; leisure and theme parks; convenience stores; movie theatres; warehouse club stores; schools, colleges and other institutions. Within the food service industry, our products are purchased by the consumer primarily for consumption at the point-of-sale.

Retail Supermarkets

The primary products sold to the retail supermarket channel are soft pretzel products – including SUPERPRETZEL, frozen juice treats and desserts including LUIGI’S Real Italian Ice, MINUTE MAID Juice Bars and Soft Frozen Lemonade, WHOLE FRUIT frozen fruit bars and sorbet, PHILLY SWIRL cups and sticks, ICEE Squeeze-Up Tubes and dough enrobed handheld products including PATIO burritos. Within the retail supermarket channel, our frozen and prepackaged products are purchased by the consumer for consumption at home.

Frozen Beverages

We sell frozen beverages and related products to the food service industry primarily under the names ICEE, SLUSH PUPPIE and PARROT ICE in the United States, Mexico and Canada. We also provide repair and maintenance service to customers for customers’ owned equipment.

The Chief Operating Decision Maker for Food Service and Retail Supermarkets and the Chief Operating Decision Maker for Frozen Beverages monthly review detailed operating income statements and sales reports in order to assess performance and allocate resources to each individual segment. Sales and operating income are key variables monitored by the Chief Operating Decision Makers and management when determining each segment’s and the company’s financial condition and operating performance. In addition, the Chief Operating Decision Makers review and evaluate depreciation, capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment. Information regarding the operations in these three reportable segments is as follows:

Three months ended

Six months ended

March 31,

March 25,

March 31,

March 25,

2018

2017

2018

2017

Sales to External Customers:

Food Service

Soft pretzels
$ 48,748 $ 42,993 $ 97,769 $ 84,487
Frozen juices and ices
9,439 9,693 16,623 17,172
Churros
15,272 14,719 29,864 29,157
Handhelds
9,331 8,102 20,693 15,581
Bakery
90,813 83,804 185,746 159,083
Other
5,862 4,767 11,034 8,895
Total Food Service
$ 179,465 $ 164,078 $ 361,729 $ 314,375

Retail Supermarket

Soft pretzels
$ 10,081 $ 9,186 $ 20,593 $ 18,130
Frozen juices and ices
15,438 13,191 25,165 23,042
Handhelds
2,763 3,376 5,789 6,826
Coupon redemption
(618 ) (895 ) (1,369 ) (2,154 )
Other
420 754 982 1,387
Total Retail Supermarket
$ 28,084 $ 25,612 $ 51,160 $ 47,231

Frozen Beverages

Beverages
$ 34,286 $ 31,822 $ 68,589 $ 60,098
Repair and maintenance service
19,308 17,687 38,312 35,778
Machines sales
4,695 7,012 11,008 14,051
Other
263 302 513 550
Total Frozen Beverages
$ 58,552 $ 56,823 $ 118,422 $ 110,477

Consolidated Sales
$ 266,101 $ 246,513 $ 531,311 $ 472,083

Depreciation and Amortization:

Food Service
$ 6,041 $ 6,395 $ 13,139 $ 12,127
Retail Supermarket
358 360 648 638
Frozen Beverages
4,754 4,044 9,352 7,945
Total Depreciation and Amortization
$ 11,153 $ 10,799 $ 23,139 $ 20,710

Operating Income:

Food Service
$ 18,535 $ 19,636 $ 34,435 $ 36,690
Retail Supermarket
2,534 2,454 5,092 3,500
Frozen Beverages
2,472 2,021 5,242 3,248
Total Operating Income
$ 23,541 $ 24,111 $ 44,769 $ 43,438

Capital Expenditures:

Food Service
$ 6,259 $ 12,026 $ 15,700 $ 18,613
Retail Supermarket
103 131 103 213
Frozen Beverages
5,296 9,427 10,478 14,157
Total Capital Expenditures
$ 11,658 $ 21,584 $ 26,281 $ 32,983

Assets:

Food Service
$ 652,850 $ 616,971 $ 652,850 $ 616,971
Retail Supermarket
23,783 23,502 23,783 23,502
Frozen Beverages
210,916 184,564 210,916 184,564
Total Assets
$ 887,549 $ 825,037 $ 887,549 $ 825,037

	Three months ended						Nine months ended
	June 30,			June 24,			June 30,			June 24,
	2018			2017			2018			2017
Sales to External Customers:
Food Service
Soft pretzels	$	53,880		$	45,069		$	151,649		$	129,556
Frozen juices and ices		12,825			16,281			29,448			33,453
Churros		16,739			17,536			46,603			46,693
Handhelds		9,974			8,574			30,667			24,155
Bakery		93,082			89,712			278,828			248,795
Other		5,201			5,938			16,235			14,833
Total Food Service	$	191,701		$	183,110		$	553,430		$	497,485

Retail Supermarket
Soft pretzels	$	7,332		$	7,496		$	27,925		$	25,626
Frozen juices and ices		28,785			27,317			53,950			50,359
Handhelds		2,960			3,548			8,749			10,374
Coupon redemption		(1,278	)		(1,092	)		(2,647	)		(3,246	)
Other		733			873			1,715			2,260
Total Retail Supermarket	$	38,532		$	38,142		$	89,692		$	85,373

Frozen Beverages
Beverages	$	50,343		$	48,714		$	118,932		$	108,812
Repair and maintenance service		19,693			18,549			58,005			54,327
Machines sales		5,644			6,496			16,652			20,547
Other		326			404			839			954
Total Frozen Beverages	$	76,006		$	74,163		$	194,428		$	184,640

Consolidated Sales	$	306,239		$	295,415		$	837,550		$	767,498

Depreciation and Amortization:
Food Service	$	6,237		$	6,028		$	19,376		$	18,155
Retail Supermarket		332			221			980			859
Frozen Beverages		4,860			4,437			14,212			12,382
Total Depreciation and Amortization	$	11,429		$	10,686		$	34,568		$	31,396

Operating Income:
Food Service	$	19,663		$	22,005		$	54,098		$	58,695
Retail Supermarket		3,203			4,890			8,295			8,390
Frozen Beverages		12,003			10,905			17,245			14,153
Total Operating Income	$	34,869		$	37,800		$	79,638		$	81,238

Capital Expenditures:
Food Service	$	10,172		$	16,923		$	25,872		$	35,536
Retail Supermarket		273			15			376			228
Frozen Beverages		6,618			7,230			17,096			21,387
Total Capital Expenditures	$	17,063		$	24,168		$	43,344		$	57,151

Assets:
Food Service	$	672,861		$	631,131		$	672,861		$	631,131
Retail Supermarket		24,215			25,212			24,215			25,212
Frozen Beverages		217,156			209,441			217,156			209,441
Total Assets	$	914,232		$	865,784		$	914,232		$	865,784

Note 10	Our three reporting units, which are also reportable segments, are Food Service, Retail Supermarkets and Frozen Beverages.

The carrying amounts of acquired intangible assets for the Food Service, Retail Supermarkets and Frozen Beverage segments as of ~~March 31,~~June 30, 2018 and September 30, 2017 are as follows:

	June 30, 2018				September 30, 2017
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization
	(in thousands)

FOOD SERVICE
Indefinite lived intangible assets
Trade Names	$	16,628	$	-	$	16,628	$	-

Amortized intangible assets
Non compete agreements		980		462		980		263
Customer relationships		20,510		8,070		20,510		6,476
License and rights		1,690		1,122		1,690		1,058
TOTAL FOOD SERVICE	$	39,808	$	9,654	$	39,808	$	7,797

RETAIL SUPERMARKETS

Indefinite lived intangible assets
Trade Names	$	6,557	$	-	$	6,557	$	-

Amortized Intangible Assets
Trade Names		649		227		649		130
Customer relationships		7,979		3,423		7,979		2,822
TOTAL RETAIL SUPERMARKETS	$	15,185	$	3,650	$	15,185	$	2,952


FROZEN BEVERAGES

Indefinite lived intangible assets
Trade Names	$	9,315	$	-	$	9,315	$	-
Distribution rights		6,900		-		6,900		-

Amortized intangible assets
Customer relationships		257		69		257		50
Licenses and rights		1,400		846		1,400		794
TOTAL FROZEN BEVERAGES	$	17,872	$	915	$	17,872	$	844

CONSOLIDATED	$	72,865	$	14,219	$	72,865	$	11,593

Amortized intangible assets are being amortized by the straight-line method over periods ranging from 2 to 20 years and amortization expense is reflected throughout operating expenses. In last year’s fiscal year, intangible assets of $6,957,000 were acquired in an ICEE distributor acquisition in our frozen beverage segment, intangible assets of $15,760,000 were acquired in the Hill & Valley acquisition in our food service segment and intangible assets of $576,000 were acquired in the Labriola Baking acquisition, also in our food service segment. Aggregate amortization expense of intangible assets for the three months ended June 30, 2018 and June 24, 2017 was $876,000 and $828,000, respectively and for the nine months ended June 30, 2018 and June 24, 2017 was $2,626,000 and $2,957,000, respectively.

Estimated amortization expense for the next five fiscal years is approximately $3,500,000 in 2018, $3,300,000 in 2019, $3,000,000 in 2020, $2,400,000 in 2021 and $2,300,000 in 2022. The weighted amortization period of the intangible assets is 10.8 years.

Goodwill

The carrying amounts of goodwill for the Food Service, Retail Supermarket and Frozen Beverage segments are as follows:

	Food Service		Retail Supermarket		Frozen Beverages		Total
	(in thousands)
Balance at June 30, 2018	$	61,665	$	3,670	$	37,176	$	102,511

Balance at September 30, 2017	$	61,665	$	3,670	$	37,176	$	102,511

In last year’s fiscal year, goodwill of $1,236,000 was acquired in an ICEE distributor acquisition in our frozen beverage segment, goodwill of $14,175,000 was acquired in the Hill & Valley acquisition in our food service segment and goodwill of $658,000 was acquired in our Labriola Baking acquisition, also in our food service segment.

Note 11

We have classified our investment securities as marketable securities held to maturity and available for sale. The FASB defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the FASB has established three levels of inputs that may be used to measure fair value:

March 31, 2018

September 30, 2017

Gross

Gross

Carrying

Accumulated

Carrying

Accumulated

Amount

Amortization

Amount

Amortization

(in thousands)

FOOD SERVICE

Indefinite lived intangible assets

Trade Names
$ 16,628 $ - $ 16,628 $ -

Amortized intangible assets

Non compete agreements
980 394 980 263
Customer relationships
20,510 7,539 20,510 6,476
License and rights
1,690 1,101 1,690 1,058
TOTAL FOOD SERVICE
$ 39,808 $ 9,034 $ 39,808 $ 7,797

RETAIL SUPERMARKETS

Indefinite lived intangible assets

Trade Names
$ 6,557 $ - $ 6,557 $ -

Amortized Intangible Assets

Trade Names
649 195 649 130
Customer relationships
7,979 3,223 7,979 2,822
TOTAL RETAIL SUPERMARKETS
$ 15,185 $ 3,418 $ 15,185 $ 2,952

FROZEN BEVERAGES

Indefinite lived intangible assets

Trade Names
$ 9,315 $ - $ 9,315 $ -
Distribution rights
6,900 - 6,900 -

Amortized intangible assets

Customer relationships
257 63 257 50
Licenses and rights
1,400 828 1,400 794
TOTAL FROZEN BEVERAGES
$ 17,872 $ 891 $ 17,872 $ 844

CONSOLIDATED
$ 72,865 $ 13,343 $ 72,865 $ 11,593

~~Amortized intangible assets are being amortized by the straight-line method over periods ranging from~~ 3 to 20 ~~years and amortization expense is reflected throughout operating expenses. In last year’s fiscal year, intangible assets of~~ ~~$6,957,000~~ ~~were acquired in an ICEE distributor acquisition in our frozen beverage segment, intangible assets of~~ ~~$15,760,000~~ ~~were acquired in the Hill & Valley acquisition in our food service segment and intangible assets of~~ ~~$576,000~~ ~~were acquired in the Labriola Baking acquisition, also in our food service segment. Aggregate amortization expense of intangible assets for the~~ ~~three~~ ~~months ended~~ ~~March 31, 2018~~ ~~and~~ ~~March 25, 2017~~ ~~was~~ ~~$931,000~~ ~~and~~ ~~$1,021,000,~~ ~~respectively and for the~~ ~~six~~ ~~months ended~~ ~~March 31, 2018~~ ~~and~~ ~~March 25, 2017~~ ~~was~~ ~~$1,750,000~~ ~~and~~ ~~$2,129,000,~~ ~~respectively~~

~~Estimated amortization expense for the next~~ ~~five~~ ~~fiscal years is approximately~~ ~~$3,500,000~~ in ~~2018,~~~~$3,400,000~~ in ~~2019,~~~~$3,000,000~~ in ~~2020,~~~~$2,400,000~~ in ~~2021~~ ~~and~~ ~~$2,300,000~~ in ~~2022.~~ ~~The weighted amortization period of the intangible assets is~~ ~~10.8~~ ~~years.~~

~~Goodwill~~

~~The carrying amounts of goodwill for the Food Service, Retail Supermarket and Frozen Beverage segments are as follows:~~

Food
Service

Retail
Supermarket

Frozen
Beverages
Total
(in thousands)
Balance at March 31, 2018
$ 61,665 $ 3,670 $ 37,176 $ 102,511

Balance at September 30, 2017
$ 61,665 $ 3,670 $ 37,176 $ 102,511

~~In last year’s fiscal year, goodwill of~~ ~~$1,236,000~~ ~~was acquired in an ICEE distributor acquisition in our frozen beverage segment, goodwill of~~ ~~$14,175,000~~ ~~was acquired in the Hill & Valley acquisition in our food service segment and goodwill of~~ ~~$658,000~~ ~~was acquired in our Labriola Baking acquisition, also in our food service segment.~~

~~Note~~ 11

We have classified our investment securities as marketable securities held to maturity and available for sale. The FASB defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the FASB has established ~~three~~ ~~levels of inputs that~~ ~~may~~ ~~be used to measure fair value:~~

Level 1

Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2

Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and

Level 3

Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

Marketable securities held to maturity and available for sale consist primarily of investments in mutual funds, preferred stock and corporate bonds. The fair values of mutual funds are based on quoted market prices in active markets and are classified within Level 1 of the fair value hierarchy. The fair values of preferred stock, corporate bonds and certificates of deposit are based on quoted prices for identical or similar instruments in markets that are not active. As a result, preferred stock, corporate bonds and certificates of deposit are classified within Level 2 of the fair value hierarchy.

The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at June 30, 2018 are summarized as follows:

			Gross		Gross		Fair
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
	(in thousands)

Corporate Bonds	$	126,939	$	8	$	1,600	$	125,347
Certificates of Deposit		6,880		-		8		6,872
Total marketable securities held to maturity	$	133,819	$	8	$	1,608	$	132,219

The amortized cost, unrealized gains and losses, and fair market values of our investment securities available for sale at June 30, 2018 are summarized as follows:

			Gross		Gross		Fair
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
	(in thousands)

Mutual Funds	$	12,954	$	-	$	385	$	12,569
Preferred Stock		16,035		344		40		16,339
Total marketable securities available for sale	$	28,989	$	344	$	425	$	28,908

~~Level~~ 2

~~Observable inputs, other than Level~~ 1 ~~inputs~~The mutual funds seek current income with an emphasis on maintaining low volatility and overall moderate duration. The Fixed-to-Floating Perpetual Preferred Stock generate fixed income to call dates in ~~active markets,~~2018, 2019 and 2025 and then income is based on a spread above LIBOR if the securities are not called. The mutual funds and Fixed-to-Floating Perpetual Preferred Stock do not have contractual maturities; however, we classify them as long term assets as it is our intent to hold them for a period of over one year, although we may sell some or all of them depending on presently unanticipated needs for liquidity or market conditions. The corporate bonds generate fixed income to maturity dates in 2018 through 2021, with $124 million maturing within 3 years. Our expectation is that we will hold the corporate bonds to their maturity dates and redeem them at our amortized cost.

The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at September 30, 2017 are ~~observable either directly or indirectly;~~summarized as follows:

			Gross		Gross		Fair
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
	(in thousands)
Corporate Bonds	$	114,101	$	424	$	155	$	114,370
Certificates of Deposit		5,920		18		1		5,937
Total marketable securities held to maturity	$	120,021	$	442	$	156	$	120,307

The amortized cost, unrealized gains and losses, and fair market values of our investment securities available for sale at September 30, 2017 are summarized as follows:

			Gross		Gross		Fair
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
	(in thousands)

Mutual Funds	$	13,003	$	77	$	240	$	12,840
Preferred Stock		16,791		711		82		17,420
Total marketable securities available for sale	$	29,794	$	788	$	322	$	30,260

The amortized cost and fair value of the Company’s held to maturity securities by contractual maturity at June 30, 2018 and September 30, 2017 are summarized as follows:

	June 30, 2018				September 30, 2017

			Fair				Fair
	Amortized		Market		Amortized		Market
	Cost		Value		Cost		Value
	(in thousands)
Due in one year or less	$	30,271	$	30,200	$	59,113	$	59,194
Due after one year through five years		103,548		102,019		60,908		61,113
Due after five years through ten years		-		-		-		-
Total held to maturity securities	$	133,819	$	132,219	$	120,021	$	120,307
Less current portion		30,271		30,200		59,113		59,194
Long term held to maturity securities	$	103,548	$	102,019	$	60,908	$	61,113

Proceeds from the redemption and sale of marketable securities were $21,964,000 and $51,417,000 in the three and nine months ended June 30, 2018, and $9,577,000 and $14,681,000 in the three and nine months ended June 24, 2017, respectively. Losses of $35,000 and $32,000 were recorded in the three and nine months ended June 30, 2018, respectively and gains of $13,000 were recorded in the three and nine months ended June 24, 2017. We use the specific identification method to determine the cost of securities sold.

Note 12

Changes to the components of accumulated other comprehensive loss are as follows:

	Three Months Ended June 30, 2018									Nine Months Ended June 30, 2018
	(unaudited)									(unaudited)
	(in thousands)									(in thousands)

				Unrealized									Unrealized
	Foreign Currency			Holding Gain (Loss)						Foreign Currency			Holding Gain (Loss)
	Translation			on Marketable						Translation			on Marketable
	Adjustments			Securities			Total			Adjustments			Securities			Total

Beginning Balance	$	(11,330	)	$	172		$	(11,158	)	$	(9,341	)	$	466		$	(8,875	)

Other comprehensive loss before reclassifications		(2,359	)		(328	)		(2,687	)		(4,348	)		(622	)		(4,970	)

Amounts reclassified from accumulated other comprehensive income		-			75			75			-			75			75

Ending Balance	$	(13,689	)	$	(81	)	$	(13,770	)	$	(13,689	)	$	(81	)	$	(13,770	)

~~Level~~ 3

~~Unobservable inputs for which there is little or~~ no ~~market data, which require the reporting entity to develop its own assumptions.~~

Marketable securities held to maturity and available for sale consist primarily of investments in mutual funds, preferred stock and corporate bonds. The fair values of mutual funds are based on quoted market prices in active markets and are classified within Level 1 ~~of the fair value hierarchy. The fair values of preferred stock, corporate bonds and certificates of deposit are based on quoted prices for identical or similar instruments in markets that are~~ ~~not~~ ~~active. As a result, preferred stock, corporate bonds and certificates of deposit are classified within Level~~ 2 ~~of the fair value hierarchy.~~

~~The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at~~ ~~March 31, 2018~~ ~~are summarized as follows:~~

Gross

Gross

Fair

Amortized

Unrealized

Unrealized

Market

Cost

Gains

Losses

Value

(in thousands)

Corporate Bonds
$ 130,359 $ 45 $ 1,478 $ 128,926
Certificates of Deposit
6,880 3 5 6,878
Total marketable securities held to maturity
$ 137,239 $ 48 $ 1,483 $ 135,804

	Three Months Ended June 24, 2017								Nine Months Ended June 24, 2017
	(unaudited)								(unaudited)
	(in thousands)								(in thousands)

												Unrealized
				Unrealized								Holding
	Foreign Currency			Holding Gain on					Foreign Currency			Loss (Gain) on
	Translation			Marketable					Translation			Marketable
	Adjustments			Securities		Total			Adjustments			Securities			Total

Beginning Balance	$	(12,296	)	$	166	$	(12,130	)	$	(13,086	)	$	(329	)	$	(13,415	)

Other comprehensive income before reclassifications		1,095			204		1,299			1,885			699			2,584

Amounts reclassified from accumulated other comprehensive income		-			-		-			-						-

Ending Balance	$	(11,201	)	$	370	$	(10,831	)	$	(11,201	)	$	370		$	(10,831	)

~~The amortized cost, unrealized gains and losses, and fair market values of our investment securities available for sale at~~ ~~March 31, 2018~~ ~~are summarized as follows:~~

Gross

Gross

Fair

Amortized

Unrealized

Unrealized

Market

Cost

Gains

Losses

Value

(in thousands)

Mutual Funds
$ 12,952 $ - $ 234 $ 12,718
Preferred Stock
16,791 517 111 17,197
Total marketable securities available for sale
$ 29,743 $ 517 $ 345 $ 29,915

The mutual funds seek current income with an emphasis on maintaining low volatility and overall moderate duration. The Fixed-to-Floating Perpetual Preferred Stock generate fixed income to call dates in ~~2018,~~~~2019~~ ~~and~~ ~~2025~~ ~~and then income is based on a spread above LIBOR if the securities are~~ ~~not~~ ~~called. The mutual funds and Fixed-to-Floating Perpetual Preferred Stock do~~ ~~not~~ ~~have contractual maturities; however, we classify them as long term assets as it is our intent to hold them for a period of over~~ ~~one~~ ~~year, although we~~ ~~may~~ ~~sell some or all of them depending on presently unanticipated needs for liquidity or market conditions. The corporate bonds generate fixed income to maturity dates in~~ ~~2018~~ ~~through~~ ~~2021,~~ ~~with~~ ~~$126~~ ~~million maturing within~~ 3 ~~years. Our expectation is that we will hold the corporate bonds to their maturity dates and redeem them at our amortized cost.~~

~~The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at~~ ~~September 30, 2017~~ ~~are summarized as follows:~~

Gross

Gross

Fair

Amortized

Unrealized

Unrealized

Market

Cost

Gains

Losses

Value

(in thousands)
Corporate Bonds
$ 114,101 $ 424 $ 155 $ 114,370
Certificates of Deposit
5,920 18 1 5,937
Total marketable securities held to maturity
$ 120,021 $ 442 $ 156 $ 120,307

~~The amortized cost, unrealized gains and losses, and fair market values of our investment securities available for sale at~~ ~~September 30, 2017~~ ~~are summarized as follows:~~

Gross

Gross

Fair

Amortized

Unrealized

Unrealized

Market

Cost

Gains

Losses

Value

(in thousands)

Mutual Funds
$ 13,003 $ 77 $ 240 $ 12,840
Preferred Stock
16,791 711 82 17,420
Total marketable securities available for sale
$ 29,794 $ 788 $ 322 $ 30,260

~~The amortized cost and fair value of the Company’s held to maturity securities by contractual maturity at~~ ~~March 31, 2018~~ ~~and~~ ~~September 30, 2017~~ ~~are summarized as follows:~~

March 31, 2018

September 30, 2017

Fair

Fair

Amortized

Market

Amortized

Market

Cost

Value

Cost

Value

(in thousands)

Due in one year or less
$ 50,571 $ 50,466 $ 59,113 $ 59,194
Due after one year through five years
86,668 85,338 60,908 61,113
Due after five years through ten years
- - - -
Total held to maturity securities
$ 137,239 $ 135,804 $ 120,021 $ 120,307
Less current portion
50,571 50,466 59,113 59,194
Long term held to maturity securities
$ 86,668 $ 85,338 $ 60,908 $ 61,113

~~Proceeds from the redemption and sale of marketable securities were~~ ~~$10,357,000~~ ~~and~~ ~~$29,453,000~~ ~~in the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~March 31, 2018,~~ ~~and~~ ~~$4,629,000~~ ~~and~~ ~~$5,104,00~~ ~~in the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~March 25, 2017,~~ ~~respectively. Gains of~~ ~~$3,000~~ ~~and~~ ~~$3,000~~ ~~were recorded in the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~March 31, 2018,~~ ~~respectively and~~ no ~~gains or losses were recorded in the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~March 25, 2017.~~ ~~We use the specific identification method to determine the cost of securities sold.~~

~~Note~~ 12

~~Changes to the components of accumulated other comprehensive loss are as follows:~~

Three Months Ended March 31, 2018

Six Months Ended March 31, 2018

(unaudited) (unaudited)
(in thousands) (in thousands)

Unrealized

Unrealized

Foreign
Currency

Holding Gain (Loss)

Foreign
Currency

Holding Gain (Loss)

Translation

on Marketable

Translation

on Marketable

Adjustments

Securities

Total

Adjustments

Securities

Total

Beginning Balance
$ (13,228 ) $ 356 $ (12,872 ) $ (9,341 ) $ 466 $ (8,875 )

Other comprehensive income (loss) before reclassifications
1,898 (184 ) 1,714 (1,989 ) (294 ) (2,283 )

Amounts reclassified from accumulated other comprehensive income
- - - - - -

Ending Balance
$ (11,330 ) $ 172 $ (11,158 ) $ (11,330 ) $ 172 $ (11,158 )

Three Months Ended March 25, 2017

Six Months Ended March 25, 2017

(unaudited) (unaudited)
(in thousands) (in thousands)

Unrealized

Unrealized

Foreign
Currency

Holding (Loss) Gain

Foreign
Currency

Holding (Loss) Gain

Translation

on Marketable

Translation

on Marketable

Adjustments

Securities

Total

Adjustments

Securities

Total

Beginning Balance
$ (14,190 ) $ (432 ) $ (14,622 ) $ (13,086 ) $ (329 ) $ (13,415 )

Other comprehensive income before reclassifications
1,894 598 2,492 790 495 1,285

Amounts reclassified from accumulated other comprehensive income
- - - - - -

Ending Balance
$ (12,296 ) $ 166 $ (12,130 ) $ (12,296 ) $ 166 $ (12,130 )

~~Note~~ 13

On ~~December 30, 2016,~~ ~~we acquired Hill & Valley Inc., a premium bakery located in Rock Island, IL, for approximately~~ ~~$31~~ ~~million. Hill & Valley, with sales of over~~ ~~$45~~
Note 13
On December 30, 2016, we acquired Hill & Valley Inc., a premium bakery located in Rock Island, IL, for approximately $31 million. Hill & Valley, with sales of over $45 million annually, is a manufacturer of a variety of pre-baked cakes, cookies, pies, muffins and other desserts to retail in-store bakeries. Hill & Valley is a leading brand of Sugar Free and No Sugar Added pre-baked in-store bakery items. Additionally, Hill & Valley sustains strategic private labeling partnerships with retailers nationwide.

On May 22, 2017, we acquired an ICEE distributor doing business in Georgia and Tennessee for approximately ~~$11~~$11 million.

On August 16, 2017, we acquired Labriola Baking Company, a bakery of breads and artisan soft pretzels located in Alsip, IL for approximately $6$6 million. Labriola Bakery, with sales of approximately ~~$17~~$17 million annually, is a manufacturer of pre-baked breads, rolls and soft pretzels for retail in-store bakery and foodservice outlets nationwide.

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
~~Item 2.~~	~~Management’s Discussion~~

Liquidity and ~~Analysis~~Capital Resources

Our current cash and cash equivalents balances, investments and cash expected to be provided by future operations are our primary sources of ~~Financial Condition~~liquidity. We believe that these sources, along with our borrowing capacity, are sufficient to fund future growth and ~~Results~~expansion. See Note 11 to these financial statements for a discussion of ~~Operations~~

~~Liquidity and Capital Resources~~

Our current cash and cash equivalents balances, investments and cash expected to be provided by future operations are our primary sources of liquidity. We believe that these sources, along with our borrowing capacity, are sufficient to fund future growth and expansion. See Note 11 to these financial statements for a discussion of our investment securities.

The Company’s Board of Directors declared a regular quarterly cash dividend of $.45 per share of its common stock payable on April 4, 2018, to shareholders of record as of the close of business on March 15,our investment securities.

The Company’s Board of Directors declared a regular quarterly cash dividend of $.45 per share of its common stock payable on July 5, 2018, to shareholders of record as of the close of business on June 14, 2018.

In our fiscal year ended September 30, 2017, we purchased and retired 142,665 shares of our common stock at a cost of $18,228,763. In the three and nine months ended June 30, 2018, we purchased and retired 20,604 shares of our common stock at a cost of $2,794,027. On August 4, 2017 the Company’s Board of Directors authorized the purchase and retirement of 500,000 shares of the Company’s common stock; 384,446 shares remain to be purchased under this authorization.

In the three months ended June 30, 2018 and June 24, 2017 fluctuations in the valuation of the Mexican and Canadian currencies and the resulting translation of the net assets of our Mexican and Canadian subsidiaries caused an increase of $2,359,000 in accumulated other comprehensive loss in the 2018 third quarter and a decrease of $1,095,000 in accumulated other comprehensive loss in the 2017 third quarter. In the nine-month period, fluctuations in the valuation of the Mexican and Canadian currencies and the resulting translation of the net assets of our Mexican and Canadian subsidiaries caused an increase of $4,348,000 in accumulated other comprehensive loss in the 2018 nine-month period and decrease of $1,885,000 in accumulated other comprehensive loss in the 2017 nine-month period.

Our general-purpose bank credit line which expires in November 2021 provides for up to a $50,000,000 revolving credit facility. The agreement contains restrictive covenants and requires commitment fees in accordance with standard banking practice. There were no outstanding balances under this facility at June 30, 2018.

In our fiscal year ended September 30, 2017, we purchased and retired 142,665 shares of our common stock at a cost of $18,228,763. In the three and six months ended March 31, 2018, we did not purchase and retire any shares. On August 4, 2017 the Company’s Board of Directors authorized the purchase and retirement of 500,000 shares of the Company’s common stock; 405,110 shares remain to be purchased under this authorization.

In the three months ended March 31, 2018 and March 25, 2017 fluctuations in the valuation of the Mexican and Canadian currencies and the resulting translation of the net assets of our Mexican and Canadian subsidiaries caused a decrease of $1,898,000 in accumulated other comprehensive loss in the 2018 second quarter and a decrease of $1,894,000 in accumulated other comprehensive loss in the 2017 second quarter. In the six-month period, fluctuations in the valuation of the Mexican and Canadian currencies and the resulting translation of the net assets of our Mexican and Canadian subsidiaries caused an increase of $1,989,000 in accumulated other comprehensive loss in the 2018 six-month period and decrease of $790,000 in accumulated other comprehensive loss in the 2017 six-month period.

Results of Operations

Net sales increased ~~$19,588,000~~$10,824,000 or 8%4% to ~~$266,101,000~~$306,239,000 for the three months and ~~$59,228,000~~$70,052,000 or ~~13%~~9% to ~~$531,111,000~~$837,550,000 for the ~~six~~nine months ended ~~March 31,~~June 30, 2018 compared to the three and ~~six~~nine months ended ~~March 25,~~June 24, 2017. Excluding first twelve months’ sales from Hill & Valley, Inc., acquired in January 2017, an ICEE distributor located in the Southeast acquired in June 2017 and Labriola Bakery which was acquired in August 2017, sales for the three months increased ~~$15,492,000,~~$6,329,000 or 6%2% from last year and sales for the ~~six~~nine months increased ~~$32,036,000,~~$38,365,000, or 7%5% from last year.

FOOD SERVICE

Sales to food service customers increased ~~$15,387,000~~$8,591,000 or 9%5% in the ~~second~~third quarter to ~~$179,465,000~~$191,701,000 and increased ~~$47,354,000~~$55,945,000 or ~~15%~~11% for the ~~six~~nine months. Excluding first twelve months’ sales of Hill & Valley and Labriola, sales increased ~~$11,996,000~~$4,596,000 or 7%3% for the ~~second~~third quarter and ~~$21,565,000~~$26,161,000 or 7%5% for the ~~six~~nine months. Soft pretzel sales to the food service market increased ~~13%~~20% to ~~$48,748,000~~$53,880,000 in the three months and ~~16%~~17% to ~~$97,769,000~~$151,649,000 in the ~~six~~nine months and about 8%11% and 9%10% in the three and ~~six~~nine months without Labriola sales. In addition to Labriola sales, soft pretzel sales increased significantly due to increased distribution to restaurant chains and movie theatres and we had strong sales of our recently introduced BRAUHAUS pretzels.

Frozen juices and ices sales decreased 3%21% to ~~$9,439,000~~$12,825,000 in the three months and decreased 3%12% to ~~$16,623,000~~$29,448,000 in the ~~six~~nine months due entirely to lower sales to warehouse club stores because of a loss of a promotion and because of reduced distribution.

Churro sales to food service customers were down 5% in the third quarter to $16,739,000 and were essentially unchanged at $46,603,000 in the nine months, with sales increases and decreases across our customer ~~base.~~

~~Churro~~base but with particularly lower sales to ~~food service customers were up 4%~~one warehouse club store in the ~~second~~third quarter ~~to $15,272,000 and up 2% to $29,864,000 in the six months, with~~which last year had sales ~~increases and decreases across our customer base. Sales~~ of a ~~limited time only churro sold for distribution into independent fast food restaurant chains were down approximately $800,000 in both periods compared to a year ago.~~new product since discontinued.

Sales of bakery products increased ~~$7,009,000~~$3,370,000 or 8%4% in the ~~second~~third quarter to ~~$90,813,000~~$93,082,000 and increased ~~$26,663,000~~$30,033,000 or ~~17%~~12% for the ~~six~~nine months. Excluding sales of Hill & Valley and Labriola, bakery sales were up 7%3% for the quarter and 4% for the year primarily due to increased sales to ~~three~~several customers.

Sales of handhelds increased ~~$1,229,000~~$1,400,000 or ~~15%~~16% in the ~~second~~third quarter and ~~$5,112,000~~$6,512,000 or ~~33%~~27% for the ~~six~~nine months with the increase in both periods coming primarily from sales to ~~four~~two customers. Sales of funnel cake ~~increased $1,136,000~~decreased $535,000 or ~~26%~~10% in the quarter to ~~$5,547,000~~$5,094,000 and ~~$2,047,000~~increased $1,512,000 or ~~25%~~11% for the ~~six~~nine months to ~~$10,341,000~~$15,435,000 as we continue to increase sales to school food service. Sales of a limited time only funnel cake sold for distribution into independent fast food restaurant chains were down approximately $350,000 in both periods compared to a year ago and lower sales to one fast food restaurant chain accounted for the balance of the decrease in this year’s quarter’s sales.

Sales of new products in the first twelve months since their introduction were approximately $5$4 million in this quarter and ~~$13~~$17 million in the ~~six~~nine months. Price increases accounted for approximately ~~$1.7~~$2.4 million of sales in the quarter and ~~$2.8~~$6.0 million of sales in the ~~six~~nine months and net volume increases, including new product sales as defined above and Hill & Valley and Labriola sales, accounted for approximately ~~$14~~$6 million of sales in the quarter and ~~$45~~$50 million of sales in the ~~six~~nine months.

Operating income in our Food Service segment decreased from ~~$19,636,000~~$22,005,000 to ~~$18,535,000~~$19,663,000 in the ~~second~~third quarter and decreased from ~~$36,690,000~~$58,695,000 to ~~$34,435,000~~$54,098,000 in the ~~six~~nine months. ~~Our second~~Last year’s operating income in the third quarter and nine months benefited from a $1.8 million gain on an insurance recovery related to product quality issues in our 2016 fiscal year which was recorded as a reduction of cost of goods sold. This year’s quarter and nine months was impacted by approximately $2$1.3 million and $3.3 million, respectively, of higher distribution expenses primarily due to higher fuel costs and the recent implementation of the electronic logging device mandate. Additionally, lower sales of our MARY B’s biscuits and related costs due to our recall in early January impacted our operating income by approximately $500,000 in the ~~second quarter.~~third quarter and $1.0 million in the nine months. Hill & Valley contributed improved operating income of ~~$338,000~~$364,000 in the ~~second~~third quarter and ~~$1,722,000~~$2.1 million in the ~~six~~nine months. For the ~~second~~third quarter and ~~six~~nine months, operating income in the balance of our food service business was impacted by generally higher costs for payroll and insurance, added personnel in the selling function, product mix changes and significantly lower volume concentrated in specific facilities and higher ingredients costs. Operating income in the first quarter was impacted by inefficiencies at our recently acquired Labriola production facility (compounded by the integration of products previously manufactured at other facilities) and shutdown costs of our Chambersburg facility; both of which ~~are behind us and~~ had little impact inbeyond the ~~second~~first quarter.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets increased ~~$2,472,000~~$390,000 or ~~10%~~1% to ~~$28,084,000~~$38,532,000 in the ~~second~~third quarter and increased ~~$3,929,000~~$4,319,000 or 8%5% in the ~~six~~nine months. Soft pretzel sales for the ~~second~~third quarter were ~~up 10%~~down 2% to ~~$10,081,000~~$7,332,000 and up ~~14%~~9% to ~~$20,593,000~~$27,925,000 for the ~~six months~~nine months. The nine month increase was primarily due to sales of AUNTIE ANNE’S* soft pretzels under a license agreement entered into in 2017. Sales of frozen juices and ices increased ~~$2,247,000~~$1,468,000 or ~~17%~~5% to ~~$15,438,000~~$28,785,000 in the ~~second~~third quarter and were up ~~$2,123,000~~$3,591,000 or 9%7% to ~~$25,165,000~~$53,950,000 for the ~~six~~nine months primarily due to sales of SOUR PATCH KIDS** frozen novelties under a new license agreement. Handheld sales to retail supermarket customers decreased ~~18%~~17% to ~~$2,763,000~~$2,960,000 in the ~~second~~third quarter and decreased ~~15%~~16% to ~~$5,789,000~~$8,749,000 for the ~~six~~nine months as the sales of this product line in retail supermarkets continues their long term decline.

Sales of new products in the ~~second~~third quarter were approximately $2$3 million and were $3$7 million for the ~~six~~nine months. Price increases had no impact on sales in the quarter and ~~six~~nine months and net volume increases, including new product sales as defined above accounted for ~~$2.5 million~~$390,000 of sales in the quarter and ~~$3.9~~$4.3 million of sales in the ~~six~~nine months.

Operating income in our Retail Supermarkets segment was ~~$2,534,000~~$3,203,000 in this year’s ~~second~~third quarter compared to ~~$2,454,000~~$4,890,000 in last year’s quarter and ~~increased to $5,092,000~~was $8,295,000 in this year’s ~~six~~nine months compared to ~~$3,500,000~~$8,390,000 in last year’s ~~six~~nine months. ~~Lower coupon expense of $785,000 and~~Contributions to the lower ~~media spending of $728,000 along with the increase in soft pretzel sales and the increase in frozen juices and ices sales were the major reasons for the increase in~~ operating income in ~~the six months.~~

~~FROZEN BEVERAGES~~

~~Frozen beverage and related product sales increased 3% to $58,552,000 in the second~~this year’s quarter ~~and increased 7% to $118,422,000 in the six month period. Excluding~~were lower sales of ~~the acquired ICEE distributor, frozen beverages~~soft pretzels and ~~related product sales were up about 2% for the second quarter~~LUIGI’S Real Italian Ice and ~~6% for the six month period. Beverage sales alone were up 8% to $34,286,000~~increases in ~~the second quarter~~trade spending, coupon redemptions and up 14% to $68,589,000 for the six months. Without the acquired ICEE distributor, beverage sales alone were up about 6% for the quarter and 12% for the six months. Gallon sales were up 2% for the second quarter and 8% for the six months with higher sales to movie theatres and across our customer base. Service revenue increased 9% to $19,308,000 in the second quarter and 7% to $38,312,000 for the six months with sales increases concentrated to several customers.

Sales of beverage machines, which tend to fluctuate from year to year while following no specific trend, were $4,695,00, a decrease of 33% for the quarter and $11,008,000, a decrease of 22% for the six month period.

distribution costs.

* AUNTIE ANNE’S is a registered trademark of Auntie Anne’s LLC.

**SOUR PATCH KIDS is a registered trademark of Mondelez International Group

FROZEN BEVERAGES

Frozen beverage and related product sales increased 2% to $76,006,000 in the third quarter and increased 5% to $194,428,000 in the nine month period. Excluding sales of the acquired ICEE distributor, frozen beverages and related product sales were up about 2% for the third quarter and 4% for the nine month period. Beverage sales alone were up 3% to $50,343,000 in the third quarter and up 9% to $118,932,000 for the nine months. Without the acquired ICEE distributor, beverage sales alone were up about 2% for the quarter and 8% for the nine months. Gallon sales were up 7% for the third quarter and 7% for the nine months with higher sales to movie theatres and across our customer base. Service revenue increased 6% to $19,693,000 in the third quarter and 7% to $58,005,000 for the nine months with sales increases concentrated to several customers.

Sales of beverage machines, which tend to fluctuate from year to year while following no specific trend, were $5,644,000, a decrease of 13% for the quarter, and $16,652,000, a decrease of 19% for the nine month period.

Operating income in our Frozen Beverage segment increased to ~~$2,472,000~~$12,003,000 in this year’s quarter and to ~~$5,242,000~~$17,245,000 for ~~the six~~this year’s nine months compared to ~~$2,021,000~~$10,905,000 and ~~$3,248,000~~$14,153,000 in last years’ quarter and ~~six~~nine months, respectively, as a result of higher beverage sales and service revenue.

CONSOLIDATED

Gross profit as a percentage of sales was ~~29.04%~~30.85% in the ~~second~~third quarter and ~~29.54%~~32.08% last year. Gross profit as a percentage of sales was ~~28.34%~~29.26% in the ~~six~~nine month period this year and ~~29.38%~~30.42% last year. Without the gain on insurance recovery of $1.8 million recorded in last year’s third quarter related to certain product quality issues in our 2016 fiscal year, gross profit as a percentage of sales would have been 31.48% in last year’s third quarter and 30.19% in the nine months last year. For the ~~six~~nine months, the decrease was caused by higher costs for payroll and insurance, inefficiencies in our recently acquired Labriola production facility (compounded by the integration of products previously manufactured at other facilities), product mix changes, significantly lower volume concentrated in specific facilities, lower sales of our MARY B’S biscuits and related costs due to our recall in early January, shutdown costs of our Chambersburg, PA production facility and higher ingredients costs. ~~The~~Of these, the inefficiencies at Labriola and shutdown costs of our Chambersburg facility ~~are behind us and~~ had little impact in our ~~second~~third quarter.

Total operating expenses increased ~~$5,031,000~~$2,642,000 in the ~~second~~third quarter and as a percentage of sales increased to ~~20.2%~~19.5% from ~~19.8%~~19.3% last year. For the ~~first half,~~nine months, operating expenses increased ~~$10,514,000,~~$13,156,000, and as a percentage of sales decreased from ~~20.2%~~19.8% to ~~19.9%~~19.7%. Marketing expenses decreased to ~~8.5%~~8.4% of sales in this year’s quarter from 8.7% last year primarily because of lower spending to support warehouse club store sales in our foodservice business and lower marketing expenses of the acquired Labriola business. Marketing expenses were 8.3% in this year’s ~~six~~nine months compared to ~~8.9%~~8.8% of sales in last year’s ~~six~~nine months primarily because of lower media spending in our retail supermarket business in the first six months of the year, lower spending to support warehouse club store sales in our foodservice business and lower marketing expenses of the acquired Hill & Valley and Labriola businesses. Distribution expenses were ~~8.4%~~7.9% of sales in the ~~second~~third quarter and ~~7.5%~~7.4% of sales in last year’s quarter and were ~~8.2%~~8.1% in this year’s ~~six~~nine months compared to ~~7.8%~~7.6% of sales in last year’s ~~six~~nine months. Distribution expenses have increased due to higher fuel costs and the recent implementation of the electronic logging device mandate. We expect distribution expenses to remain higher for at least the remainder of our 2018 fiscal year. Administrative expenses were ~~3.4%~~3.2% of sales in the ~~second~~third quarter compared to ~~3.5%~~3.2% of sales last year in the ~~second~~third quarter and were ~~3.5%~~3.3% in this year’s ~~six~~nine months compared to ~~3.6%~~3.4% of sales in last year’s ~~six~~nine months.

Operating income decreased ~~$570,000~~$2,931,000 or 8% to $34,869,000 in the third quarter and decreased $1,600,000 or 2% to ~~$23,541,000~~$79,638,000 in the ~~second quarter and increased $1,331,000 or 3% to $44,769,000 in the first half~~nine months as a result of the aforementioned items.

Investment income increased by ~~$318,000~~$283,000 and ~~$580,000~~$863,000 in the ~~second~~third quarter and ~~six~~nine months, respectively, resulting from higher amounts invested and higher interest rates.

Other income for this year’s ~~six~~nine months includes a $520,000 gain on a sale of property; other expense in last year’s quarter and ~~six~~nine months includes ~~$514,000~~$53,000 and $567,000, respectively, of acquisition costs for the Hill & Valley ~~purchase.~~and ICEE distributor purchases.

Net earnings increased ~~$1,846,000,~~$825,000, or ~~12%~~3%, in the current three month period to ~~$17,833,000~~$26,129,000 and were ~~$54,082,000~~$80,211,000 for the ~~six~~nine month period this year compared to ~~$29,527,000~~$54,831,000 for the ~~six~~nine month period last year.

Net earnings for the ~~six~~nine months ended ~~March 31,~~June 30, 2018 benefited from a $20.9 million, or $1.11 per diluted share, gain on the remeasurement of deferred tax liabilities and a ~~$3.9~~$7.4 million, or ~~$0.21~~$0.40 per diluted share, 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 ~~six~~nine months were impacted by a $1.2 million, or $.06 per diluted share, provision for the one time repatriation tax required under the new tax law. For the three months ended ~~March 31,~~June 30, 2018, net earnings benefited by a ~~$1.9~~$3.5 million, or ~~$.10~~$.18 per diluted share, reduction in income taxes primarily related to the lower corporate tax rate. Excluding the deferred tax gain and the one-time repatriation tax, our effective tax rate decreased to ~~28.7%~~28.1% from 35.4% in the prior year quarter and to ~~28.6%~~28.4% from ~~34.8%~~35.0% in prior year ~~six~~nine months reflecting the reduction in the federal statutory rate to 21% from 35% on January 1, 2018. Last year’s ~~six month’s~~nine months’ effective tax rate ~~benefitted~~benefited from an unusually high tax benefit on share based compensation of ~~$1,309,000~~$2,060,000 which compares to this year’s ~~six~~nine month’s tax benefit of ~~$482,000.~~$909,000. We are presently estimating an effective tax rate of 28-29% for the last ~~two quarters~~quarter of our fiscal year 2018 and 26-27% for our fiscal year 2019.

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

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

There has been no material change in the Company’s assessment of its sensitivity to market risk since its presentation set forth, in item 7a. “Quantitative and Qualitative Disclosures About Market Risk,” in its 2017 annual report on Form 10-K filed with the SEC.


	There has been no material change in the Company’s assessment of its sensitivity to market risk since its presentation set forth, in item 7a. “Quantitative and Qualitative Disclosures About Market Risk,” in its 2017 annual report on Form 10-K filed with the SEC.

Item 4.	Controls and Procedures

	The Chief Executive Officer and the Chief Financial Officer of the Company (its principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation as of March 31, 2018, that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in the Company’s internal control over financial reporting during the quarter ended March 31, 2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The Chief Executive Officer and the Chief Financial Officer of the Company (its principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation as of June 30, 2018, that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in the Company’s internal control over financial reporting during the quarter ended June 30, 2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 6.

Exhibits

Exhibit No.
	~~Exhibit No.~~


	31.1 31.2	&	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	~~31.2~~

	99.5 99.6	&	Certification Pursuant to the 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	~~99.6~~
101.1
	~~101.1~~	The following financial information from J&J Snack Foods Corp.'s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~June 30, 2018, formatted in XBRL (extensible Business Reporting Language):

		(i)	Consolidated Balance Sheets,
		(ii)	Consolidated Statements of Earnings,
		(iii)	Consolidated Statements of Comprehensive Income,
		(iv)	Consolidated Statements of Cash Flows and
		(v)	the Notes to the Consolidated Financial Statements

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		J & J SNACK FOODS CORP.



Dated: August 2, 2018
~~Dated: May 3, 2018~~		/s/ Gerald B. Shreiber
	Gerald B. Shreiber Chairman of the Board, President, Chief Executive Officer and Director (Principal Executive Officer)




Dated: ~~May 3,~~August 2, 2018		/s/ Dennis G. Moore
	Dennis G. Moore, Senior Vice President, Chief Financial Officer and Director (Principal Financial Officer) (Principal Accounting Officer)

New Jersey	22-1935537
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

Large Accelerated filer	(X)	Accelerated filer	( )
��
Non-accelerated filer	( ) (Do not check if a smaller reporting company)
		Smaller reporting company	( )
		Emerging growth company	( )

Item l.	Consolidated Financial Statements

Consolidated Balance Sheets – ~~March 31,~~June 30, 2018 (unaudited) and September 30, 2017		3

Consolidated Statements of Earnings (unaudited) - ~~Six~~Three and nine months ended ~~March 31,~~June 30, 2018 and ~~March 25,~~June 24, 2017		4

Consolidated Statements of Comprehensive Income (unaudited) – ~~Six Months~~Three and nine months Ended ~~March 31,~~June 30, 2018 and ~~March 25,~~June 24, 2017		5

Consolidated Statements of Cash Flows (unaudited) – ~~Six Months~~Nine months Ended ~~March 31,~~June 30, 2018 and ~~March 25,~~June 24, 2017		6

Notes to the Consolidated Financial Statements (unaudited)		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2526

Item 4.	Controls and Procedures	2526

Part II.	Other Information

Item 6.	Exhibits	2627

	March 31,			September 30,			June 30,			September 30,
	2018			2017			2018			2017
	(unaudited)						(unaudited)
Assets
Current assets
Cash and cash equivalents	$	75,205		$	90,962		$	95,628		$	90,962
Marketable securities held to maturity		50,571			59,113			30,271			59,113
Accounts receivable, net		126,245			124,553			131,776			124,553
Inventories		116,086			103,268			116,194			103,268
Prepaid expenses and other		6,493			3,936			6,857			3,936
Total current assets		374,600			381,832			380,726			381,832

Property, plant and equipment, at cost
Land		2,494			2,482			2,494			2,482
Buildings		26,582			26,741			26,582			26,741
Plant machinery and equipment		268,304			257,172			279,077			257,172
Marketing equipment		281,799			278,860			285,689			278,860
Transportation equipment		8,729			8,449			8,648			8,449
Office equipment		26,009			25,302			27,948			25,302
Improvements		38,236			38,003			38,657			38,003
Construction in progress		17,445			16,880			13,174			16,880
Total Property, plant and equipment, at cost		669,598			653,889			682,269			653,889
Less accumulated depreciation and amortization		438,037			426,308			445,001			426,308
Property, plant and equipment, net		231,561			227,581			237,268			227,581

Other assets
Goodwill		102,511			102,511			102,511			102,511
Other intangible assets, net		59,522			61,272			58,646			61,272
Marketable securities held to maturity		86,668			60,908			103,548			60,908
Marketable securities available for sale		29,915			30,260			28,908			30,260
Other		2,772			2,864			2,625			2,864
Total other assets		281,388			257,815			296,238			257,815
Total Assets	$	887,549		$	867,228		$	914,232		$	867,228

Liabilities and Stockholders' Equity
Current Liabilities
Current obligations under capital leases	$	347		$	340		$	336		$	340
Accounts payable		72,653			72,729			79,489			72,729
Accrued insurance liability		12,590			10,558			11,929			10,558
Accrued liabilities		6,263			7,753			7,770			7,753
Accrued compensation expense		14,767			19,826			15,147			19,826
Dividends payable		8,413			7,838			8,415			7,838
Total current liabilities		115,033			119,044			123,086			119,044

Long-term obligations under capital leases		911			904			833			904
Deferred income taxes		47,347			62,705			50,228			62,705
Other long-term liabilities		2,076			2,253			2,010			2,253

Stockholders' Equity
Preferred stock, $1 par value; authorized 10,000,000 shares; none issued		-			-			-			-
Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding 18,697,000 and 18,663,000 respectively		22,256			17,382
Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding 18,697,000 and 18,705,000 respectively								23,047			17,382
Accumulated other comprehensive loss		(11,158	)		(8,875	)		(13,770	)		(8,875	)
Retained Earnings		711,084			673,815			728,798			673,815
Total stockholders' equity		722,182			682,322			738,075			682,322
Total Liabilities and Stockholders' Equity	$	887,549		$	867,228		$	914,232		$	867,228

J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)

	Three months ended						Six months ended						Three months ended						Nine months ended
	March 31,			March 25,			March 31,			March 25,			June 30,			June 24,			June 30,			June 24,
	2018			2017			2018			2017			2018			2017			2018			2017

Net Sales	$	266,101		$	246,513		$	531,311		$	472,083		$	306,239		$	295,415		$	837,550		$	767,498

Cost of goods sold⁽¹⁾		188,823			173,696			380,754			333,371			211,764			200,651			592,518			534,022
Gross Profit		77,278			72,817			150,557			138,712			94,475			94,764			245,032			233,476

Operating expenses
Marketing⁽²⁾		22,507			21,529			44,083			41,864			25,589			25,571			69,672			67,435
Distribution ⁽³⁾		22,417			18,508			43,576			36,672			24,325			21,865			67,901			58,537
Administrative ⁽⁴⁾		9,004			8,718			18,360			16,816			9,654			9,588			28,014			26,404
Other general income		(191	)		(49	)		(231	)		(78	)
Total Operating Expenses		53,737			48,706			105,788			95,274
Other general expense (income)														38			(60	)		(193	)		(138	)
Total operating expenses														59,606			56,964			165,394			152,238

Operating Income		23,541			24,111			44,769			43,438			34,869			37,800			79,638			81,238

Other income (expense)
Investment income		1,493			1,175			2,982			2,402			1,705			1,422			4,687			3,824
Interest expense & other		(33	)		(545	)		476			(571	)		(209	)		(80	)		267			(651	)

Earnings before income taxes		25,001			24,741			48,227			45,269			36,365			39,142			84,592			84,411

Income taxes		7,168			8,754			(5,855	)		15,742			10,236			13,838			4,381			29,580

NET EARNINGS	$	17,833		$	15,987		$	54,082		$	29,527		$	26,129		$	25,304		$	80,211		$	54,831

Earnings per diluted share	$	0.95		$	0.85		$	2.88		$	1.57		$	1.39		$	1.34		$	4.27		$	2.91

Weighted average number of diluted shares		18,803			18,821			18,790			18,804			18,822			18,846			18,801			18,818

Earnings per basic share	$	0.95		$	0.85		$	2.90		$	1.58		$	1.40		$	1.35		$	4.29		$	2.93

Weighted average number of basic shares		18,685			18,711			18,675			18,698			18,698			18,727			18,683			18,708

	Three Months Ended March 31, 2018						Three Months Ended June 30, 2018
	Income		Shares		Per Share		Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount		(Numerator)		(Denominator)		Amount

	(in thousands, except per share amounts)						(in thousands, except per share amounts)
Basic EPS
Net Earnings available to common stockholders	$	17,833		18,685	$	0.95	$	26,129		18,698	$	1.40

Effect of Dilutive Securities
Options		-		118		-		-		124		(0.01	)

Diluted EPS
Net Earnings available to common stockholders plus assumed conversions	$	17,833		18,803	$	0.95	$	26,129		18,822	$	1.39

	Six Months Ended March 31, 2018							Nine Months Ended June 30, 2018
	Income		Shares		Per Share			Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount			(Numerator)		(Denominator)		Amount

	(in thousands, except per share amounts)							(in thousands, except per share amounts)
Basic EPS
Net Earnings available to common stockholders	$	54,082		18,675	$	2.90		$	80,211		18,683	$	4.29

Effect of Dilutive Securities
Options		-		115		(0.02	)		-		118		(0.02	)

Diluted EPS
Net Earnings available to common stockholders plus assumed conversions	$	54,082		18,790	$	2.88		$	80,211		18,801	$	4.27

	Three Months Ended March 25,2017						Three Months Ended June 24, 2017
	Income		Shares		Per Share		Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount		(Numerator)		(Denominator)		Amount

	(in thousands, except per share amounts)						(in thousands, except per share amounts)
Basic EPS
Net Earnings available to common stockholders	$	15,987		18,711	$	0.85	$	25,304		18,727	$	1.35

Effect of Dilutive Securities
Options		-		110		-		-		119		(0.01	)

Diluted EPS
Net Earnings available to common stockholders plus assumed conversions	$	15,987		18,821	$	0.85	$	25,304		18,846	$	1.34

	Six Months Ended March 25, 2017							Nine Months Ended June 24, 2017
	Income		Shares		Per Share			Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount			(Numerator)		(Denominator)		Amount

	(in thousands, except per share amounts)							(in thousands, except per share amounts)
Basic EPS
Net Earnings available to common stockholders	$	29,527		18,698	$	1.58		$	54,831		18,708	$	2.93

Effect of Dilutive Securities
Options		-		106		(0.01	)		-		110		(0.02	)

Diluted EPS
Net Earnings available to common stockholders plus assumed conversions	$	29,527		18,804	$	1.57		$	54,831		18,818	$	2.91

Note 6	We account for our income taxes under the liability method. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities.

	~~Additionally, we recognize a liability for income taxes and associated penalties and interest for tax positions taken or expected to be taken in a tax return which are more likely than~~ ~~not~~ ~~to be overturned by taxing authorities (“uncertain tax positions”). We have~~ ~~not~~ ~~recognized a tax benefit in our financial statements for these uncertain tax positions.~~

	March 31,		September 30,
	2018		2017
	(unaudited)
	(in thousands)

Finished goods	$	54,383	$	45,394
Raw Materials		24,593		22,682
Packaging materials		11,087		8,833
Equipment parts & other		26,023		26,359
Total Inventories	$	116,086	$	103,268