We adopted the new revenue recognition guidance on the first day of our fiscal 2019 year using a modified retrospective approach; however, we did not record a cumulative-effect adjustment from initially applying the standard as the adoption did not have a material impact on our financial position or results of operations. We completed a review of customer contracts and evaluated the impact of the new standard on certain common practices currently employed by us. We also finalized our assessment of the impact on our accounting policies, processes, system requirements, internal controls and disclosures.

When Performance Obligations Are Satisfied

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

The singular performance obligation of our customer contracts for product and machine sales is determined by each individual purchase order and the respective products ordered, with revenue being recognized at a point-in-time when the obligation under the terms of the agreement is satisfied and product control is transferred to our customer. Specifically, control transfers to our customers when the product is delivered to, installed or picked up by our customers based upon applicable shipping terms, as our customers can direct the use and obtain substantially all of the remaining benefits from the product at this point in time. The performance obligations in our customer contracts for product are generally satisfied within 30 days.

The singular performance obligation of our customer contracts for time and material repair and maintenance equipment service is the performance of the repair and maintenance with revenue being recognized at a point-in-time when the repair and maintenance is completed.

The singular performance obligation of our customer repair and maintenance equipment service contracts is the performance of the repair and maintenance with revenue being recognized over the time the service is expected to be performed. Our customers are billed for service contracts in advance of performance and therefore we have contract liability on our balance sheet.

Significant Payment Terms

In general, within our customer contracts, the purchase order identifies the product, quantity, price, pick-up allowances, payment terms and final delivery terms. Although some payment terms may be more extended, presently the majority of our payment terms are 30 days. As a result, we have used the available practical expedient and, consequently, do not adjust our revenues for the effects of a significant financing component.

Shipping

All amounts billed to customers related to shipping and handling are classified as revenues; therefore, we recognize revenue for shipping and handling fees at the time the products are shipped or when services are performed. The cost of shipping products to the customer is recognized at the time the products are shipped to the customer and our policy is to classify them as Distribution expenses.

~~Note 2~~

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 determinable 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. We provide an allowance for doubtful receivables after taking into consideration historical experience and other factors. The allowance for doubtful receivables was $420,000 and $359,000 at June 30, 2018 and September 30, 2017, respectively.

Variable Consideration

In addition to fixed contract consideration, our contracts include some form of variable consideration, including sales discounts, trade promotions and certain other sales and consumer incentives, including rebates and coupon redemptions. In general, variable consideration is treated as a reduction in revenue when the related revenue is recognized. Depending on the specific type of variable consideration, we use the most likely amount method to determine the variable consideration. We believe there will be no significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. We review and update our estimates and related accruals of variable consideration each period based on historical experience.

Warranties & Returns

We provide all customers with a standard or assurance type warranty. Either stated or implied, we provide assurance the related products will comply with all agreed-upon specifications and other warranties provided under the law. No services beyond an assurance warranty are provided to our customers.

We do not grant a general right of return. However, customers may return defective or non-conforming products. Customer remedies may include either a cash refund or an exchange of the product. We do not estimate a right of return and related refund liability as returns of our products are rare.

Contract Balances

Our customers are billed for service contracts in advance of performance and therefore we have contract liability on our balance sheet as follows:

	Three Months Ended			Nine Months Ended
	June 29, 2019			June 29, 2019
	(unaudited)			(unaudited)
	(in thousands)			(in thousands)

Beginning Balance	$	1,655		$	1,865
Additions to contract liability		1,271			4,299
Amounts recognized as revenue		(1,499	)		(4,737	)
Ending Balance	$	1,427		$	1,427

Disaggregation of Revenue

See Note 9 for disaggregation of our net sales by class of similar product and type of customer.

Allowance for Doubtful Receivables

We provide an allowance for doubtful receivables after taking into consideration historical experience and other factors. The allowance for doubtful receivables was $665,000 and $400,000 at June 29, 2019 and September 29, 2018, respectively.

Note 3

Depreciation of equipment and buildings is provided for by the straight-line method over the assets’ estimated useful lives. Amortization of improvements is provided for by the straight-line method over the term of the lease or the assets’ estimated useful lives, whichever is shorter. Licenses and rights, customer relationships and non-compete agreements arising from acquisitions are amortized by the straight-line method over periods ranging from 2 to 20 years. Depreciation expense was ~~$10,569,000~~$11,484,000 and ~~$9,629,000~~$10,569,000 for the three months ended June 29, 2019 and June 30, 2018, ~~and June 24, 2017,~~ respectively and ~~$31,929,000~~$33,374,000 and ~~$28,060,000~~$31,929,000 for the nine months ended June 29, 2019 and June 30, 2018, ~~and June 24, 2017,~~ respectively.

Note 4

Basic earnings per common share (EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period. Diluted EPS takes into consideration the potential dilution that could occur if securities (stock options) or other contracts to issue common stock were exercised and converted into common stock. Our calculation of EPS is as follows:

	Three Months Ended June 29, 2019
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount

	(in thousands, except per share amounts)
Basic EPS
Net Earnings available to common stockholders	$	30,872		18,823	$	1.64

Effect of Dilutive Securities
Options		-		124		(0.01	)

Diluted EPS
Net Earnings available to common stockholders plus assumed conversions	$	30,872		18,947	$	1.63

163,170 anti-dilutive shares have been excluded in the computation of EPS for the three months ended June 29, 2019.

	Nine Months Ended June 29, 2019
	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount

	(in thousands, except per share amounts)
Basic EPS
Net Earnings available to common stockholders	$	68,752		18,794	$	3.66

Effect of Dilutive Securities
Options		-		118		(0.02	)

Diluted EPS
Net Earnings available to common stockholders plus assumed conversions	$	68,752		18,912	$	3.64

163,670 anti-dilutive shares have been excluded in the computation of EPS for the nine months ended June 29, 2019.

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

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

Effect of Dilutive Securities
Options		-		124		(0.01	)

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

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

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

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

Effect of Dilutive Securities
Options		-		118		(0.02	)

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

1,000 anti-dilutive shares have been excluded in the computation of EPS for the nine months ended June 30, 2018.

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

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

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 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.

The total amount of gross unrecognized tax benefits is ~~$389,000~~$409,000 and ~~$374,000~~$394,000 on June ~~30,~~29, 2019 and September 29, 2018, ~~and September 30, 2017,~~ respectively, all of which would impact our effective tax rate over time, if recognized. We recognize interest and penalties related to uncertain tax positions as a part of the provision for income taxes. As of June ~~30,~~29, 2019, and September 29, 2018, ~~and September 30, 2017,~~ respectively, the Company has ~~$254,000~~$274,000 and ~~$239,000~~$259,000 of accrued interest and penalties.

In addition to our federal tax return and tax returns for Mexico and Canada, we file tax returns in all states that have a corporate income tax with virtually all open for examination for three to four years.

Net earnings for ~~the~~ last year’s nine months ~~ended June 30, 2018~~ benefited from a $20.9 million ~~or $1.11 per diluted share,~~ gain on the remeasurement of deferred tax liabilities ~~and~~which was partially offset by a ~~$7.4~~$1.2 million ~~or $0.40 per diluted share, reduction in income taxes related primarily to~~provision for the ~~lower corporate~~one time repatriation tax, ~~rate enacted under~~both of which resulted from the Tax Cuts and Jobs Act enacted in December 2017. Net earnings for the 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 June 30, 2018, net earnings benefited by a $3.5 million, or $.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~~one time repatriation tax, our effective tax rate ~~decreased to 28.1% from 35.4%~~was 28.4% in last year’s nine months. Net earnings in this year’s nine months benefitted by a reduction of approximately $900,000 in tax as the ~~prior~~provision for the one time repatriation tax was reduced as the amount recorded last year ~~quarter and to 28.4% from 35.0% in prior year nine months reflecting~~was an estimate. Excluding the reduction in the ~~federal statutory rate to 21% from 35% on January 1, 2018. Last year’s nine months’~~provision for the one time repatriation tax, our effective tax rate ~~benefited from an unusually high tax benefit on share based compensation of $2,060,000 which compares to~~was 27.5% in this year’s nine ~~month’s tax benefit of $909,000. We are presently estimating an effective tax rate of 28-29% for the last quarter of our fiscal year 2018 and 26-27% for our fiscal year 2019.~~ months.

On December 22, 2017, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) directing taxpayers to consider the impact of the U.S. legislation as “provisional” when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. In accordance with SAB 118, the estimated income tax net benefit of $3.5 million for the three months and $27.1 million for the nine months represents our best estimate based on interpretation of the U.S. legislation as we are still accumulating data to finalize the underlying calculations, or in certain cases, the U.S. Treasury is expected to issue further guidance on the application of certain provisions of the U.S. legislation. In accordance with SAB 118, the additional estimated income tax net benefit of $3.5 million for the three months and $27.1 million for the nine months are considered provisional and will be finalized before December 22, 2018.

Note 7

In May 2014 and in subsequent updates, the FASB issued guidance on revenue recognition which requires that we recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration which we expect to be entitled in exchange for those goods or services. We ~~have~~ performed a review of the requirements of the new revenue standard, ~~and are in the process of~~including reviewing customer contracts and applying the ~~five-step~~five-step model of this new guidance to each contract category we ~~have identified and will compare the results to our current accounting practices.~~identified. We ~~plan to adopt~~adopted this guidance on the first day of our fiscal 2019 ~~year. We will apply the~~ year using a modified retrospective ~~transition method, which would result in an~~approach; however, we did not record a cumulative-effect adjustment ~~to retained earnings for the cumulative effect, if any, of~~from initially applying the standard ~~to contracts in process~~ as of the adoption ~~date. Under this method, we would~~ did not restate the prior financial statements presented. Therefore, this guidance would require additional disclosures of the amount by which each financial statement line item is affected in the fiscal year 2019 reporting period. Our analysis indicates that the have a material impact ~~of this guidance~~ on our ~~consolidated~~ financial ~~statements will not be material.~~position or results of operations. See additional revenue recognition disclosures in Note 2.

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~~prior guidance, changes in fair value of equity investments ~~are~~available for sale were recognized in Stockholders’ Equity. ~~This~~We adopted this guidance ~~is effective for~~on the first day of our 2019fiscal ~~year ended September 2019. Early adoption is not permitted. We do not anticipate that the~~year. The adoption of this ~~new~~ guidance ~~will have a material impact~~ on our consolidated financial ~~statements.~~statements was not material.

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 8 Inventories consist of the following:

	June 29,		September 29,
	2019		2018
	(unaudited)
	(in thousands)

Finished goods	$	55,282	$	52,221
Raw materials		22,910		23,173
Packaging materials		10,754		9,780
Equipment parts and other		30,244		27,710
Total Inventories	$	119,190	$	112,884

Note 8

~~Inventories consist of the following:~~

June 30,

September 30,

2018

2017

(unaudited)

(in thousands)

Finished goods
$ 54,183 $ 45,394
Raw Materials
25,082 22,682
Packaging materials
10,744 8,833
Equipment parts & other
26,185 26,359
Total Inventories
$ 116,194 $ 103,268

~~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~~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						Nine months ended
													June 29,			June 30,			June 29,			June 30,
	Three months ended						Nine months ended						2019			2018			2019			2018
	June 30,			June 24,			June 30,			June 24,			(unaudited)
	2018			2017			2018			2017			(in thousands)
Sales to External Customers:
Food Service
Soft pretzels	$	53,880		$	45,069		$	151,649		$	129,556		$	55,867		$	53,880		$	154,670		$	151,649
Frozen juices and ices		12,825			16,281			29,448			33,453			13,862			12,825			30,336			29,448
Churros		16,739			17,536			46,603			46,693			18,888			16,739			49,793			46,603
Handhelds		9,974			8,574			30,667			24,155			8,550			9,974			25,339			30,667
Bakery		93,082			89,712			278,828			248,795			95,299			93,082			288,172			278,828
Other		5,201			5,938			16,235			14,833			6,105			5,201			19,576			16,235
Total Food Service	$	191,701		$	183,110		$	553,430		$	497,485		$	198,571		$	191,701		$	567,886		$	553,430

Retail Supermarket
Soft pretzels	$	7,332		$	7,496		$	27,925		$	25,626		$	7,294		$	7,332		$	28,309		$	27,925
Frozen juices and ices		28,785			27,317			53,950			50,359			26,515			28,785			52,179			53,950
Handhelds		2,960			3,548			8,749			10,374			3,063			2,960			8,110			8,749
Coupon redemption		(1,278	)		(1,092	)		(2,647	)		(3,246	)		(962	)		(1,278	)		(2,163	)		(2,647	)
Other		733			873			1,715			2,260			642			733			1,341			1,715
Total Retail Supermarket	$	38,532		$	38,142		$	89,692		$	85,373		$	36,552		$	38,532		$	87,776		$	89,692

Frozen Beverages
Beverages	$	50,343		$	48,714		$	118,932		$	108,812		$	56,937		$	49,131		$	121,976		$	115,401
Repair and maintenance service		19,693			18,549			58,005			54,327			22,514			19,693			62,291			58,005
Machines sales		5,644			6,496			16,652			20,547
Machines revenue														11,810			6,856			33,875			20,183
Other		326			404			839			954			317			326			811			839
Total Frozen Beverages	$	76,006		$	74,163		$	194,428		$	184,640		$	91,578		$	76,006		$	218,953		$	194,428

Consolidated Sales	$	306,239		$	295,415		$	837,550		$	767,498		$	326,701		$	306,239		$	874,615		$	837,550

Depreciation and Amortization:
Food Service	$	6,237		$	6,028		$	19,376		$	18,155		$	6,973		$	6,237		$	19,911		$	19,376
Retail Supermarket		332			221			980			859			335			332			990			980
Frozen Beverages		4,860			4,437			14,212			12,382			5,015			4,860			15,059			14,212
Total Depreciation and Amortization	$	11,429		$	10,686		$	34,568		$	31,396		$	12,323		$	11,429		$	35,960		$	34,568

Operating Income:
Food Service	$	19,663		$	22,005		$	54,098		$	58,695		$	21,154		$	19,663		$	59,195		$	54,098
Retail Supermarket		3,203			4,890			8,295			8,390			3,651			3,203			7,739			8,295
Frozen Beverages		12,003			10,905			17,245			14,153			14,237			12,003			18,961			17,245
Total Operating Income	$	34,869		$	37,800		$	79,638		$	81,238		$	39,042		$	34,869		$	85,895		$	79,638

Capital Expenditures:
Food Service	$	10,172		$	16,923		$	25,872		$	35,536		$	8,665		$	10,172		$	23,346		$	25,872
Retail Supermarket		273			15			376			228			597			273			1,730			376
Frozen Beverages		6,618			7,230			17,096			21,387			6,523			6,618			17,060			17,096
Total Capital Expenditures	$	17,063		$	24,168		$	43,344		$	57,151		$	15,785		$	17,063		$	42,136		$	43,344

Assets:
Food Service	$	672,861		$	631,131		$	672,861		$	631,131		$	752,117		$	672,861		$	752,117		$	672,861
Retail Supermarket		24,215			25,212			24,215			25,212			24,349			24,215			24,349			24,215
Frozen Beverages		217,156			209,441			217,156			209,441			219,224			217,156			219,224			217,156
Total Assets	$	914,232		$	865,784		$	914,232		$	865,784		$	995,690		$	914,232		$	995,690		$	914,232

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 June ~~30,~~29, 2019 and September 29, 2018 ~~and September 30, 2017~~ are as follows:

	June 30, 2018				September 30, 2017
	Gross				Gross				June 29, 2019				September 29, 2018
	Carrying		Accumulated		Carrying		Accumulated		Gross				Gross
	Amount		Amortization		Amount		Amortization		Carrying		Accumulated		Carrying		Accumulated
	(in thousands)								Amount		Amortization		Amount		Amortization
									(in thousands)
FOOD SERVICE
Indefinite lived intangible assets
Trade Names	$	16,628	$	-	$	16,628	$	-
Trade names									$	16,628	$	-	$	16,628	$	-

Amortized intangible assets
Non compete agreements		980		462		980		263
Non-compete agreements										858		622		980		538
Customer relationships		20,510		8,070		20,510		6,476		19,900		9,473		20,510		8,600
License and rights		1,690		1,122		1,690		1,058
Licenses and rights										1,690		1,206		1,690		1,143
TOTAL FOOD SERVICE	$	39,808	$	9,654	$	39,808	$	7,797	$	39,076	$	11,301	$	39,808	$	10,281

RETAIL SUPERMARKETS

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

Amortized Intangible Assets
Trade Names		649		227		649		130
Trade names										649		357		649		260
Customer relationships		7,979		3,423		7,979		2,822		7,979		4,223		7,979		3,623
TOTAL RETAIL SUPERMARKETS	$	15,185	$	3,650	$	15,185	$	2,952	$	15,185	$	4,580	$	15,185	$	3,883


FROZEN BEVERAGES

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

Amortized intangible assets
Customer relationships		257		69		257		50		737		95		257		76
Licenses and rights		1,400		846		1,400		794		1,400		916		1,400		863
TOTAL FROZEN BEVERAGES	$	17,872	$	915	$	17,872	$	844	$	18,352	$	1,011	$	17,872	$	939

CONSOLIDATED	$	72,865	$	14,219	$	72,865	$	11,593	$	72,613	$	16,892	$	72,865	$	15,103

~~Amortized~~Fully amortized intangible assets have been removed from the June 29, 2019 amounts. Intangible assets of $480,000 were acquired in the Frozen Beverages segment in the third quarter.

Amortizing 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 29, 2019 and June 30, 2018 was $836,000 and ~~June 24, 2017 was~~ $876,000, ~~and $828,000, respectively and~~respectively. Aggregate amortization expense of intangible assets for the nine months ended June 29, 2019 and June 30, 2018 was $2,521,000 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.~~2022 and in 2023. The weighted amortization period of the intangible assets is ~~10.8~~10.7 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

	Food		Retail		Frozen
	Service		Supermarket		Beverages		Total
	(in thousands)
Balance at June 29, 2019	$	61,665	$	3,670	$	37,176	$	102,511

Balance at September 29, 2018	$	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~~input 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~~ 29, 2019 are summarized as follows:

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

Corporate Bonds	$	126,939	$	8	$	1,600	$	125,347	$	133,993	$	1,011	$	125	$	134,879
Certificates of Deposit		6,880		-		8		6,872		2,880		5		-		2,885
Total marketable securities held to maturity	$	133,819	$	8	$	1,608	$	132,219	$	136,873	$	1,016	$	125	$	137,764

The amortized cost, unrealized gains and losses, and fair market values of our investment securities available for sale at June ~~30, 2018~~ 29, 2019 are summarized as follows:

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

Mutual Funds	$	12,954	$	-	$	385	$	12,569	$	5,549	$	-	$	394	$	5,155
Preferred Stock		16,035		344		40		16,339		15,681		254		58		15,877
Total marketable securities available for sale	$	28,989	$	344	$	425	$	28,908	$	21,230	$	254	$	452	$	21,032

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,~~ 2019,2020 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~~2019 through ~~2021,~~2022, with ~~$124~~$112 million maturing within 32 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~~ 29, 2018 are summarized as follows:

											Gross		Gross		Fair
			Gross		Gross		Fair		Amortized		Unrealized		Unrealized		Market
	Amortized		Unrealized		Unrealized		Market		Cost		Gains		Losses		Value
	Cost		Gains		Losses		Value				(in thousands)
	(in thousands)
Corporate Bonds	$	114,101	$	424	$	155	$	114,370	$	136,933	$	28	$	1,520	$	135,441
Certificates of Deposit		5,920		18		1		5,937		2,880		-		7		2,873
Total marketable securities held to maturity	$	120,021	$	442	$	156	$	120,307	$	139,813	$	28	$	1,527	$	138,314

The amortized cost, unrealized gains and losses, and fair market values of our investment securities available for sale at September ~~30, 2017~~ 29, 2018 are summarized as follows:

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

Mutual Funds	$	13,003	$	77	$	240	$	12,840	$	8,978	$	-	$	295		$	8,683
Preferred Stock		16,791		711		82		17,420		15,680		380		-			16,060
Total marketable securities available for sale	$	29,794	$	788	$	322	$	30,260	$	24,658	$	380	$	295	��	$	24,743

The amortized cost and fair value of the Company’s held to maturity securities by contractual maturity at June ~~30,~~29, 2019 and September 29, 2018 ~~and September 30, 2017~~ are summarized as follows:

	June 30, 2018				September 30, 2017				June 29, 2019				September 29, 2018

			Fair				Fair				Fair				Fair
	Amortized		Market		Amortized		Market		Amortized		Market		Amortized		Market
	Cost		Value		Cost		Value		Cost		Value		Cost		Value
	(in thousands)										(in thousands)
Due in one year or less	$	30,271	$	30,200	$	59,113	$	59,194	$	40,809	$	40,895	$	21,048	$	21,001
Due after one year through five years		103,548		102,019		60,908		61,113		96,064		96,869		118,765		117,313
Due after five years through ten years		-		-		-		-		-		-		-		-
Total held to maturity securities	$	133,819	$	132,219	$	120,021	$	120,307	$	136,873	$	137,764	$	139,813	$	138,314
Less current portion		30,271		30,200		59,113		59,194		40,809		40,895		21,048		21,001
Long term held to maturity securities	$	103,548	$	102,019	$	60,908	$	61,113	$	96,064	$	96,869	$	118,765	$	117,313

Proceeds from the redemption and sale of marketable securities were $6,584,800 and $29,721,000 in the three and nine months ended June 29, 2019 and were $21,964,000 and $51,417,000 in the three and nine months ended June 30, 2018, respectively. Realized losses of $8,000 and ~~$9,577,000 and $14,681,000~~$25,000 were recorded in the three and nine months ended June ~~24, 2017, respectively. Losses~~29, 2019 and realized 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.~~respectively. We use the specific identification method to determine the cost of securities sold. Under new accounting guidance adopted on the first day of this fiscal year, recognized unrealized losses on marketable securities of $118,000 and $385,000 were recorded in the three months and nine months ended June 29, 2019, respectively.

~~Note 12~~

Note 12Changes to the components of accumulated other comprehensive loss are as follows:

	Three Months Ended June 29, 2019								Nine Months Ended June 29, 2019
	(unaudited)								(unaudited)
	(in thousands)								(in thousands)

				Unrealized								Unrealized
	Foreign Currency			Holding Gain					Foreign Currency			Holding Gain
	Translation			on Marketable					Translation			on Marketable
	Adjustments			Securities		Total			Adjustments			Securities			Total

Beginning Balance	$	(13,044	)	$	-	$	(13,044	)	$	(12,079	)	$	85		$	(11,994	)

Other comprehensive income (loss) before reclassifications		496			-		496			(469	)		-			(469	)

Amounts reclassified from accumulated other comprehensive income		-			-		-			-			(85	)		(85	)

Ending Balance	$	(12,548	)	$	-	$	(12,548	)	$	(12,548	)	$	-		$	(12,548	)

	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	)

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 )

~~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 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 million. Labriola Bakery, with sales of approximately $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.~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results 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 ~~$.45~~$.50 per share of its common stock payable on July ~~5, 2018,~~3, 2019, to shareholders of record as of the close of business on June ~~14, 2018.~~12, 2019.

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,~~29, 2018, we purchased and retired 20,604 shares of our common stock at a cost of $2,794,027. In the three months and nine months ended June 29, 2019 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; ~~384,446~~384,506 shares remain to be purchased under this authorization.

~~In the three months ended June 30, 2018 and June 24, 2017 fluctuations~~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 $496,000 in accumulated other comprehensive loss in the 2019 third quarter and 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 $469,000 in accumulated other comprehensive loss in the 2019 nine-month period and 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.~~29, 2019.

~~Results of Operations~~RESULTS OF OPERATIONS

Net sales increased ~~$10,824,000~~$20,462,000 or 4%7% to ~~$306,239,000~~$326,701,000 for the three months and ~~$70,052,000~~$37,065,000 or 9%4% to ~~$837,550,000~~$874,615,000 for the nine months ended June ~~30, 2018~~29, 2019 compared to the three and nine months ended 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 $6,329,000 or 2% from last year and sales for the nine months increased $38,365,000, or 5% from last year.30, 2018, respectively.

FOOD SERVICE

Sales to food service customers increased ~~$8,591,000~~$6,870,000 or 5%4% in the third quarter to ~~$191,701,000~~$198,571,000 and increased ~~$55,945,000 or 11% for the nine months. Excluding first twelve months’ sales of Hill & Valley and Labriola, sales increased $4,596,000~~$14,456,000 or 3% ~~for the third quarter and $26,161,000 or 5%~~to $567,886,000 for the nine months. Soft pretzel sales to the food service market increased ~~20%~~4% to ~~$53,880,000~~$55,867,000 in the three months and ~~17%~~2% to ~~$151,649,000~~$154,670,000 in the nine months due primarily to higher sales to convenience store chains. Two chains accounted for about 3/4 of the sales increase in the third quarter and about ~~11% and 10%~~1/2 of the increase in the ~~three and~~ 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.months.

Frozen juices and ices sales ~~decreased 21%~~increased 8% to ~~$12,825,000~~$13,862,000 in the three months and ~~decreased 12%~~3% to ~~$29,448,000~~$30,336,000 in the nine months ~~due entirely to lower~~as sales to warehouse club stores ~~because~~accounted for over 60% of ~~a loss~~the increase in the third quarter and all of ~~a promotion and because of reduced distribution.~~the increase in the nine months.

Churro sales to food service customers were ~~down 5%~~up 13% in the ~~third~~ quarter to ~~$16,739,000~~$18,888,000 and ~~were essentially unchanged at $46,603,000~~up 7% to $49,793,000 in the nine months with strong sales to warehouse club stores and general increases and decreases across our customer ~~base but with particularly lower sales to one warehouse club store in the third quarter which last year had sales of a new product since discontinued.~~ base.

Sales of bakery products increased ~~$3,370,000~~$2,217,000 or 4%2% to $95,299,000 in the third quarter ~~to $93,082,000~~ and increased ~~$30,033,000~~$9,344,000 or ~~12%~~3% to $288,172,000 for the nine ~~months. Excluding sales of Hill & Valley and Labriola, bakery~~months as sales were higher to school foodservice and were up ~~3% for the quarter~~ and ~~4% for the year primarily due to increased sales to several customers.~~down across our customer base.

Sales of handhelds ~~increased $1,400,000~~decreased $1,424,000 or ~~16%~~14% in the ~~third~~ quarter and ~~$6,512,000~~$5,328,000 or ~~27% for~~17% in the nine months with the ~~increase in both periods~~decrease primarily coming ~~primarily~~ from lower sales to ~~two customers.~~co-pack customers because of unsuccessful product launches. Sales of funnel cake ~~decreased $535,000~~increased $522,000 or, 10%, to $5,616,000 in the quarter and $2,873,000, or 19%, to ~~$5,094,000 and increased $1,512,000 or 11% for~~$18,308,000 in the nine months. The nine months ~~to $15,435,000 as we continue to~~sales increase was primarily sales to ~~school food service. Sales of~~a quick service restaurant under a limited time ~~only funnel cake sold for distribution into independent fast food restaurant chains were down approximately $350,000~~offer program which ended 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.~~ second quarter.

Sales of new products in the first twelve months since their introduction were approximately $4 million in this quarter and ~~$17~~$11 million in the nine months. Price increases ~~accounted~~were approximately $4 million for the quarter and $11 million for the nine months and net volume increases were approximately ~~$2.4~~$3 million of sales in the quarter and $6.0 million of sales in the nine months and net volume increases, including new product sales as defined above and Hill & Valley and Labriola sales, accounted for approximately $6 million of sales in the quarter and $50 million of sales in the nine months.

Operating income in our Food Service segment ~~decreased~~increased from ~~$22,005,000~~$19,663,000 to ~~$19,663,000~~$21,154,000 in the ~~third~~ quarter and ~~decreased~~increased from ~~$58,695,000~~$54,098,000 to ~~$54,098,000~~$59,195,000 in the nine months. ~~Last year’s~~For the quarter, operating income ~~in the third quarter~~increased primarily because of increased volume, lower distribution expenses 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 monthsincreased pricing but was impacted by approximately ~~$1.3 million~~$600,000 of costs related to prior years’ product recalls. For the nine months, operating income improved primarily because of increased volume, price increases, lower marketing expenses and ~~$3.3 million, respectively,~~improved operations at several of our manufacturing facilities. Additionally, last year’s first quarter included shutdown costs of our Chambersburg, PA production facility. However, this year’s nine months, all in the first quarter, was impacted by approximately $900,000 of higher distribution expenses primarily due to higher ~~fuel costs and~~freight rates which increased with the ~~recent~~ implementation of the electronic logging device ~~mandate.~~mandate in January 2018. Additionally, lower sales of our MARY B’s biscuits and related costs due to our recall in ~~early~~ January 2018 impacted our operating income by approximately $500,000 in the third quarter and $1.0 million in the nine months. Hill & Valley contributed improved operating income of $364,000 in the third quarter and $2.1 million in the nine months. For the third quarter and 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 had little impact beyond thelast year’s first quarter.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets ~~increased $390,000~~decreased $1,980,000 or 1%5% to ~~$38,532,000~~$36,552,000 in the third quarter and ~~increased $4,319,000~~decreased $1,916,000 or ~~5% in~~2% to $87,776,000 for the nine months. Soft pretzel sales for the third quarter were down 2%less than 1% to ~~$7,332,000~~$7,294,000 and up 9%1% to ~~$27,925,000~~$28,309,000 for the 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 $1,468,000~~decreased $2,270,000 or 5%8% to ~~$28,785,000~~$26,515,000 in the third quarter and ~~were up $3,591,000~~decreased $1,771,000 or ~~7% to $53,950,000 for~~3% in the nine months ~~primarily~~as we lost some volume and placements due to ~~sales of SOUR PATCH KIDS** frozen novelties under a new license agreement.~~price increases. Handheld sales to retail supermarket customers ~~decreased 17%~~increased 3% to ~~$2,960,000~~$3,063,000 in the ~~third~~ quarter and ~~decreased 16%~~were down 7% to ~~$8,749,000 for~~$8,110,000 in the nine months as the sales of this product line ~~in retail supermarkets continues~~continue their ~~long term~~long-term decline.

Sales of new products in the third quarter were approximately ~~$3 million~~$200,000 and were $7approximately $1 million for the nine months. Price increases ~~had no impact on sales in the quarter and nine months and net volume increases, including new product sales as defined above accounted for $390,000~~provided about $1.1 million of sales in the quarter and ~~$4.3~~$2.0 million of sales in the nine months and net volume decreased by about $3.1 million for the quarter and $4.0 million for the nine months.

Operating income in our Retail Supermarkets segment ~~was $3,203,000~~increased to $3,651,000 in this year’s third quarter ~~compared to $4,890,000~~from $3,203,000 in last year’s quarter, a 14% increase and ~~was $8,295,000~~decreased to $7,739,000 in this year’s nine months compared to ~~$8,390,000~~$8,295,000 in last year’s nine months. ~~Contributions to~~For the ~~lower~~quarter, operating income ~~in this year’s quarter were~~benefited from lower ~~sales of soft pretzels and LUIGI’S Real Italian Ice and increases in trade spending, coupon redemptions~~marketing and distribution ~~costs.~~

* AUNTIE ANNE’S is a registered trademarkcosts and increased pricing. For the nine months, increased product costs combined with lower volume were the primary drivers of ~~Auntie Anne’s LLC.~~the decrease in operating income.

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

FROZEN BEVERAGES

Frozen beverage and related product sales increased 2%20% to ~~$76,006,000~~$91,578,000 in the third quarter and increased 5%13% to ~~$194,428,000~~$218,953,000 in the nine ~~month period. Excluding sales of the acquired ICEE distributor, frozen beverages and~~months. Beverage related ~~product~~ sales were up 16% to $56,937,000 in the quarter due in large part to increased sales to one distributor of about $4 million and up 6% to $121,976,000 in the nine months. The increased sales to this one distributor did not benefit operating income. Sales to this distributor may continue to be higher into our fourth quarter. Gallon sales were up 2% for the ~~third quarter and 4% for the nine month period. Beverage sales alone were up 3%~~three months. Service revenue increased 14% to ~~$50,343,000~~$22,514,000 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~~$62,291,000 in the nine months with sales increases ~~concentrated~~and decreases spread throughout our customer base, but with significant increases in sales to ~~several~~two customers.

~~Sales~~Machines revenue (primarily sales of frozen beverage ~~machines, which tend to fluctuate from year to year while following no specific trend, were $5,644,000, a decrease~~machines) was $11,810,000, an increase of ~~13% for~~$4,954,000, in the quarter and ~~$16,652,000, a decrease~~$33,875,000, an increase of ~~19%~~$13,692,000, in the nine months. Increases in sales to three customers accounted for the ~~nine month period.~~

higher revenue in the quarter. Operating income in our Frozen ~~Beverage~~Beverages segment increased to ~~$12,003,000~~$14,237,000, or 19%, in this ~~year’s~~ quarter and was up $1,716,000, or 10%, to ~~$17,245,000 for this year’s~~$18,961,000 in the nine months ~~compared to $10,905,000 and $14,153,000 in last years’ quarter and nine months, respectively,~~primarily as a result of ~~higher beverage sales and service revenue.~~the increases in sales.

CONSOLIDATED

Gross profit as a percentage of sales was ~~30.85%~~31.02% in the third quarter and ~~32.08%~~30.85% last year. Gross profit as a percentage of sales was ~~29.26%~~29.44% in the nine month period this year and ~~30.42%~~29.26% last year. ~~Without~~Gross profit percentage for 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 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~~increased because of ~~products previously manufactured~~improved operations at ~~other facilities), product mix changes, significantly lower volume concentrated in specific facilities, lower sales~~several of our ~~MARY B’S biscuits~~manufacturing facilities, price increases and ~~related costs due to our recall in early January, shutdown costs~~because last year had the burden of shutting down our Chambersburg, PA production facility and ~~higher ingredients costs. Of these, the inefficiencies at Labriola and shutdown costs of our Chambersburg facility had little impact in our third quarter.~~ moving its production to other facilities.

Total operating expenses increased ~~$2,642,000~~$2,701,000 in the third quarter and as a percentage of sales ~~increased~~decreased to ~~19.5%~~19.1% from ~~19.3%~~19.5% last year. For the nine months, operating expenses increased ~~$13,156,000,~~$6,171,000 and as a percentage of sales decreased to 19.6% from ~~19.8% to~~ 19.7%. last year. Marketing expenses decreased to ~~8.4%~~8.1% of sales in this year’s quarter from ~~8.7%~~8.4% last year ~~primarily because of lower spending to support warehouse club store sales~~and were 8.0% in ~~our foodservice business and lower marketing expenses of~~ the ~~acquired Labriola business. Marketing expenses were 8.3% in this year’s~~ nine months compared to ~~8.8%~~8.3% of sales in last year’s nine months primarily because of ~~lower media~~controlled spending inacross all of 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.segments. Distribution expenses were ~~7.9%~~7.5% of sales in the third quarter and ~~7.4%~~7.9% of sales in last year’s quarter and were 8.1% in ~~this year’s nine months compared to 7.6% of sales in last~~both year’s nine months. Distribution expenses as a percentage of sales were lower in the third quarter primarily because freight rates have ~~increased due~~dropped compared 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~~last year. Administrative expenses were ~~3.2%~~3.3% of sales in the third quarter compared to 3.2% of sales last year in the third quarter and were ~~3.3%~~3.4% in this year’s nine months compared to ~~3.4%~~3.3% of sales in last year’s nine months. Other general operating expense in this year’s quarter includes $621,000 of costs related to prior years’ product recalls.

Operating income ~~decreased $2,931,000~~increased $4,173,000 or 12% to $39,042,000 in the three months and increased $6,257,000 or 8% to ~~$34,869,000 in~~$85,895,000 the ~~third quarter and decreased $1,600,000 or 2% to $79,638,000 in the~~first nine months as a result of the aforementioned items.

Investment income increased by ~~$283,000~~$248,000 and ~~$863,000~~$1,088,000 in the third quarter and nine months, respectively, resulting from higher amounts invested and higher interest rates. Additionally, the third quarter and nine months were impacted by $118,000 and $385,000 of recognized unrealized losses.

This year’s other income in the third quarter includes a $2.0 million payment received from a customer due to cancellation of production under a co-manufacturing agreement. Our sales of the product line cancelled were $121,000 and $1.2 million in the three and nine months ended June 30, 2018 and we have not had any sales since June 30, 2018. Other income for ~~this~~last year’s nine months includes a $520,000 gain on a sale of ~~property; other expense in last year’s quarter and nine months includes $53,000 and $567,000, respectively, of acquisition costs for the Hill & Valley and ICEE distributor purchases.~~property.

Net earnings increased ~~$825,000,~~$4,743,000, or 3%18%, in the current three month period to ~~$26,129,000~~$30,872,000 and were ~~$80,211,000~~$68,752,000 for the nine month period this year compared to ~~$54,831,000~~$80,211,000 for the nine month period last year.

Net earnings for ~~the~~last year’s nine months ~~ended June 30, 2018~~ benefited from a $20.9 million gain, or $1.11 per diluted share, ~~gain~~ on the remeasurement of deferred tax liabilities and a $7.4 million, or $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 nine months were impactedwhich was partially offset by a $1.2 million, or $.06 per diluted share, provision for the one time repatriation tax, ~~required under~~both of which resulted from the ~~new tax law. For the three months ended June 30, 2018, net earnings benefited by a $3.5 million, or $.18 per diluted share, reduction~~Tax Cuts and Jobs Act enacted in ~~income taxes primarily related to the lower corporate tax rate.~~December 2017. Excluding the deferred tax gain and the ~~one-time~~one time repatriation tax, our effective tax rate ~~decreased to 28.1% from 35.4%~~was 28.4% in ~~the prior year quarter and to 28.4% from 35.0%~~last year’s nine months. Net earnings in ~~prior year~~this year’s nine months ~~reflecting~~benefitted by a reduction of approximately $900,000 in tax as the provision for the one time repatriation tax was reduced as the amount recorded last year was an estimate. Excluding the reduction in the ~~federal statutory rate to 21% from 35% on January 1, 2018. Last year’s nine months’~~provision for the one time repatriation tax, our effective tax rate ~~benefited from an unusually high tax benefit on share based compensation of $2,060,000 which compares to~~was 27.5% in this year’s nine ~~month’s tax benefit of $909,000. We are presently estimating an~~months. Our effective tax rate ~~of 28-29%~~ for the third quarter this year was 28.1% and 28.1% for last year’s third quarter, ~~of our fiscal~~as this year ~~2018~~benefitted from tax credits on returns filed this year and ~~26-27% for our fiscal year 2019.~~a lower federal tax rate.

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.

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 June ~~30, 2018,~~29, 2019, 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,~~29, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~PART II. OTHER INFORMATION~~

	PART II. OTHER INFORMATION

Item 6.	Exhibits

	Exhibit No.

~~Exhibit No.~~	31.1	&	Certification Pursuant to Section 302 of
	31.2		the Sarbanes-Oxley Act of 2002

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

	99.5 ~~99.6~~	&	Certification Pursuant to the 18 U.S.C.
	99.6		Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	101.1		The following financial information from J&J Snack Foods Corp.'s Quarterly Report on Form 10-Q for the quarter ended June ~~30, 2018,~~29, 2019, 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 1, 2019	/s/ Gerald B. Shreiber
	Gerald B. Shreiber
	Chairman of the Board,
	President, Chief Executive
	Officer and Director
	(Principal Executive Officer)

Dated: August ~~2, 2018~~ 1, 2019	~~/s/ Gerald B. Shreiber~~
	~~Gerald B. Shreiber~~ ~~Chairman of the Board,~~ ~~President, Chief Executive~~ ~~Officer and Director~~ ~~(Principal Executive Officer)~~



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

2829

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

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, no par value	JJSF	The NASDAQ Global Select Market

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

			Page
			Number
Part I.			Financial Information

	Item l.	Consolidated Financial Statements

		Consolidated Balance Sheets – June ~~30, 2018~~29, 2019 (unaudited) and September ~~30, 2017~~29, 2018	3

		Consolidated Statements of Earnings (unaudited) -– Three and nine months ended June ~~30, 2018~~29, 2019 and June ~~24, 2017~~ 30, 2018	4

		Consolidated Statements of Comprehensive Income (unaudited) – Three and nine months Ended June ~~30, 2018~~29, 2019 and June ~~24, 2017~~30, 2018	5

		Consolidated Statements of Changes In Stockholders’ Equity (unaudited) – Nine months Ended June 29, 2019 and June 30, 2018	6

		Consolidated Statements of Cash Flows (unaudited) – Nine months Ended June ~~30, 2018~~29, 2019 and June ~~24, 2017~~30, 2018	6 8

		Notes to the Consolidated Financial Statements (unaudited)	7 9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20 23

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26 28

	Item 4.	Controls and Procedures	2628

Part II.			Other Information

	Item 6.	Exhibits	29
~~Item 6.~~	~~Exhibits~~	27

	June 29,			September 29,
	2019			2018
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	156,097		$	111,479
Marketable securities held to maturity		40,809			21,048
Accounts receivable, net		146,553			132,342
Inventories		119,190			112,884
Prepaid expenses and other		4,146			5,044
Total current assets		466,795			382,797

Property, plant and equipment, at cost
Land		2,494			2,494
Buildings		26,582			26,582
Plant machinery and equipment		307,787			290,396
Marketing equipment		307,077			290,955
Transportation equipment		9,534			8,929
Office equipment		30,958			30,752
Improvements		39,761			38,941
Construction in progress		12,978			8,468
Total Property, plant and equipment, at cost		737,171			697,517
Less accumulated depreciation and amortization		486,519			454,844
Property, plant and equipment, net		250,652			242,673

Other assets
Goodwill		102,511			102,511
Other intangible assets, net		55,721			57,762
Marketable securities held to maturity		96,064			118,765
Marketable securities available for sale		21,032			24,743
Other		2,915			2,762
Total other assets		278,243			306,543
Total Assets	$	995,690		$	932,013

Liabilities and Stockholders' Equity
Current Liabilities
Current obligations under capital leases	$	330		$	324
Accounts payable		80,237			69,592
Accrued insurance liability		9,281			11,217
Accrued liabilities		14,098			8,031
Accrued compensation expense		17,177			20,297
Dividends payable		9,413			8,438
Total current liabilities		130,536			117,899

Long-term obligations under capital leases		714			753
Deferred income taxes		53,009			52,322
Other long-term liabilities		1,764			1,948

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 18,830,000 and 18,754,000 respectively		37,840			27,340
Accumulated other comprehensive loss		(12,548	)		(11,994	)
Retained Earnings		784,375			743,745
Total stockholders' equity		809,667			759,091
Total Liabilities and Stockholders' Equity	$	995,690		$	932,013

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

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

Other assets
Goodwill		102,511			102,511
Other intangible assets, net		58,646			61,272
Marketable securities held to maturity		103,548			60,908
Marketable securities available for sale		28,908			30,260
Other		2,625			2,864
Total other assets		296,238			257,815
Total Assets	$	914,232		$	867,228

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

Long-term obligations under capital leases		833			904
Deferred income taxes		50,228			62,705
Other long-term liabilities		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 18,705,000 respectively		23,047			17,382
Accumulated other comprehensive loss		(13,770	)		(8,875	)
Retained Earnings		728,798			673,815
Total stockholders' equity		738,075			682,322
Total Liabilities and Stockholders' Equity	$	914,232		$	867,228

(1)	Includes share-based compensation expense of $271 and $735 for the three months and nine months ended June 29, 2019, respectively and $225 and $642 for the three months and nine months ended June 30, 2018.
(2)	Includes share-based compensation expense of $391 and $1,061 for the three months and nine months ended June 29, 2019, respectively and $349 and $998 for the three months and nine months ended June 30, 2018.
(3)	Includes share-based compensation expense of $24 and $65 for the three months and nine months ended June 29, 2019,, respectively and $20 and $56 for the three months and nine months ended June 30, 2018.
(4)	Includes share-based compensation expense of $435 and $1,191 for the three months and nine months ended June 29, 2019, respectively and $412 and $1,178 for the three months and nine months ended June 30, 2018.

					Accumulated
					Other
	Common Stock				Comprehensive			Retained
	Shares		Amount		Loss			Earnings			Total

Balance at September 29, 2018		18,754	$	27,340	$	(11,994	)	$	743,745		$	759,091
Issuance of common stock upon exercise of stock options		20		1,704		-			-			1,704
Foreign currency translation adjustment		-		-		(1,359	)		-			(1,359	)
Reclass from accumulated other comprehensive gain		-		-		(85	)		85			-
Dividends declared		-		-		-			(9,389	)		(9,389	)
Share-based compensation		-		972		-			-			972
Repurchase of common stock		-		-		-			-			-
Net earnings		-		-		-			17,526			17,526
Balance at December 29, 2018		18,774	$	30,016	$	(13,438	)	$	751,967		$	768,545
Issuance of common stock upon exercise of stock options		34		3,451		-			-			3,451
Issuance of common stock for employee stock purchase plan		6		772		-			-			772
Foreign currency translation adjustment		-		-		394			-			394
Issuance of common stock under deferred stock plan		1		90		-			-			90
Dividends declared		-		-		-			(9,405	)		(9,405	)
Share-based compensation		-		914		-			-			914
Repurchase of common stock		-		-		-			-			-
Net earnings		-		-		-			20,354			20,354
Balance at March 30, 2019		18,815	$	35,243	$	(13,044	)	$	762,916		$	785,115
Issuance of common stock upon exercise of stock options		15		1,499		-			-			1,499
Foreign currency translation adjustment		-		-		496			-			496
Dividends declared		-		-		-			(9,413	)		(9,413	)
Share-based compensation		-		1,098		-			-			1,098
Repurchase of common stock		-		-		-			-			-
Net earnings		-		-		-			30,872			30,872
Balance at June 29, 2019		18,830	$	37,840	$	(12,548	)	$	784,375		$	809,667

J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ~~EARNINGS~~
~~(Unaudited)~~CHANGES IN STOCKHOLDERS' EQUITY
(in ~~thousands, except per share amounts)~~thousands)

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

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

Effect of Dilutive Securities
Options		-		119		(0.01	)

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

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

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

Effect of Dilutive Securities
Options		-		110		(0.02	)

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

	June 30,		September 30,
	2018		2017
	(unaudited)
	(in thousands)

Finished goods	$	54,183	$	45,394
Raw Materials		25,082		22,682
Packaging materials		10,744		8,833
Equipment parts & other		26,185		26,359
Total Inventories	$	116,194	$	103,268

	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