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Note 1 - Summary of Significant Accounting Policies | 12 Months Ended
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Sep. 24, 2011
Significant Accounting Policies [Text Block] | NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES J & J Snack Foods Corp. and Subsidiaries (the Company) manufactures, markets and distributes a variety of nutritional snack foods and beverages to the food service and retail supermarket industries. A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows. 1. Principles of Consolidation The consolidated financial statements include the accounts of J & J Snack Foods Corp. and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in the consolidated financial statements. 2. Revenue Recognition We recognize revenue from our products when the products are shipped to our customers. Repair and maintenance equipment service revenue is recorded when it is performed provided the customer terms are that the customer is to be charged on a time and material basis or on a straight-line basis over the term of the contract when the customer has signed a service contract. Revenue is recognized only where persuasive evidence of an arrangement exists, our price is fixed or estimable and collectability is reasonably assured. We record offsets to revenue for allowances, end-user pricing adjustments, trade spending, coupon redemption costs and returned product. Customers generally do not have the right to return product unless it is damaged or defective. All amounts billed to customers related to shipping and handling are classified as revenues. Our product costs include amounts for shipping and handling, therefore, we charge our customers shipping and handling fees at the time the products are shipped or when services are performed. The cost of shipping products to the customer is recognized at the time the products are shipped to the customer and our policy is to classify them as Distribution expenses. The cost of shipping products to the customer classified as Distribution expenses was $57,462,000, $52,146,000 and $49,705,000 for the fiscal years ended 2011, 2010 and 2009, respectively. During the years ended September 24, 2011, September 25, 2010 and September 26, 2009, we sold $18,711,000, $16,185,000 and $16,745,000, respectively, of repair and maintenance service contracts related to frozen beverage machines. At September 24, 2011 and September 25, 2010, deferred income on repair and maintenance service contracts was $1,383,000 and $1,416,000, respectively, of which $34,000 and $67,000 is included in other long-term liabilities as of September 24, 2011 and September 25, 2010, respectively and the balance is reflected as short-term and included in accrued liabilities on the consolidated balance sheet. Repair and maintenance service contract income of $18,744,000, $16,192,000 and $16,451,000 was recognized for the fiscal years ended 2011, 2010 and 2009, respectively. 3. Foreign Currency Assets and liabilities in foreign currencies are translated into U.S. dollars at the rate of exchange prevailing at the balance sheet date. Revenues and expenses are translated at the average rate of exchange for the period. The cumulative translation adjustment is recorded as a separate component of stockholders’ equity and changes to such are included in comprehensive income. 4. Use of Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 5. Cash Equivalents Cash equivalents are short-term, highly liquid investments with original maturities of three months or less. 6. Concentrations of Credit Risk and Accounts Receivable We maintain cash balances at financial institutions located in various states. Our cash is in bank accounts which are insured by the Federal Deposit Insurance Corporation with no limit. Financial instruments that could potentially subject us to concentrations of credit risk are trade accounts receivable; however, such risks are limited due to the large number of customers comprising our customer base and their dispersion across geographic regions. We usually have approximately 10 customers with accounts receivable balances of between $1 million and $7 million. We have several large customers that account for a significant portion of our sales. Our top ten customers accounted for 43%, 42% and 43% of our sales during fiscal years 2011, 2010 and 2009, respectively, with our largest customer accounting for 8% of our sales in 2011, 8% in 2010 and 9% in 2009. Three of the ten customers are food distributors who sell our product to many end users. The majority of our accounts receivable are due from trade customers. Credit is extended based on evaluation of our customers’ financial condition and collateral is not required. Accounts receivable payment terms vary and are stated in the financial statements at amounts due from customers net of an allowance for doubtful accounts. Accounts outstanding longer than the payment terms are considered past due. We determine our allowance by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss history, customers’ current ability to pay their obligations to us, and the condition of the general economy and the industry as a whole. We write off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. 7. Inventories Inventories are valued at the lower of cost (determined by the first-in, first-out or weighted-average method) or market. We recognize abnormal amounts of idle facilities, freight, handling costs, and spoilage as charges of the current period. Additionally, we allocate fixed production overheads to inventories based on the normal capacity of our production facilities. We calculate normal capacity as the production expected to be achieved over a number of periods or seasons under normal circumstances, taking into account the loss of capacity resulting from planned maintenance. This requires us to use judgment to determine when production is outside the range of expected variation in production (either abnormally low or abnormally high). In periods of abnormally low production (for example, periods in which there is significantly lower demand, labor and material shortages exist, or there is unplanned equipment downtime) the amount of fixed overhead allocated to each unit of production is not increased. However, in periods of abnormally high production the amount of fixed overhead allocated to each unit of production is decreased to assure inventories are not measured above cost. We review for slow moving and obsolete inventory and a reserve is established for the value of inventory that we estimate will not be used. At September 24, 2011 and September 25, 2010, our reserve for inventory was $4,615,000 and $4,189,000, respectively. 8. Investment Securities We classify our investment securities in one of three categories: held to maturity, trading, or available for sale; however, we have classified our auction market preferred stock separately in our statement of cash flows because of the failure of the auction market beginning in February 2008. The balance of our investment portfolio consists solely of investments classified as held to maturity. See Note C for further information on our holdings of investment securities. 9. Depreciation and Amortization Depreciation of equipment and buildings is provided for by the straight-line method over the assets’ estimated useful lives. We review our equipment and buildings to ensure that they provide economic benefit and are not impaired. Amortization of improvements is provided for by the straight-line method over the term of the lease or the assets’ estimated useful lives, whichever is shorter. Licenses and rights, customer relationships and non compete agreements are being amortized by the straight-line method over periods ranging from 3 to 20 years and amortization expense is reflected throughout operating expenses. Long-lived assets, including fixed assets and amortizing intangibles, are reviewed for impairment as events or changes in circumstances occur indicating that the carrying amount of the asset may not be recoverable. Indefinite lived intangibles are reviewed annually for impairment. Cash flow and sales analyses are used to assess impairment. The estimates of future cash flows and sales involve considerable management judgment and are based upon assumptions about expected future operating performance. Assumptions used in these forecasts are consistent with internal planning. The actual cash flows and sales could differ from management’s estimates due to changes in business conditions, operating performance, economic conditions, competition and consumer preferences. 10. Fair Value of Financial Instruments The carrying value of our short-term financial instruments, such as accounts receivables and accounts payable, approximate their fair values, based on the short-term maturities of these instruments. 11. Income Taxes We account for our income taxes under the liability method. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities. Additionally, we recognize a liability for income taxes and associated penalties and interest for tax positions taken or expected to be taken in a tax return which are more likely than not to be overturned by taxing authorities (“uncertain tax positions”). We have not recognized a tax benefit in our financial statements for these uncertain tax positions. As of September 24, 2011 and September 25, 2010, the total amount of gross unrecognized tax benefits is $973,000 and $1,249,000, respectively, all of which would impact our effective tax rate over time, if recognized. We recognize interest and penalties related to income tax matters as a part of the provision for income taxes. The Company had $335,000 and $429,000 of accrued interest and penalties as of September 24, 2011 and September 25, 2010, respectively. We recognized $8,000 and $7,000 of penalties and interest in the years ended September 24, 2011 and September 25, 2010, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|  | (in thousands) |
Balance at September 25, 2010 |  | $ | 1,249 |
Additions based on tax positions related to the current year |  |  | 110 |
Reductions for tax positions of prior years |  |  | (386 | )
Settlements |  |  | - |
Balance at September 24, 2011 |  | $ | 973 |
In addition to our federal tax return and tax returns for Mexico and Canada, we file tax returns in all states that have a corporate income tax. Virtually all the returns noted above are open for examination for three to four years. 12. Earnings Per Common Share Basic earnings per common share (EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period. Diluted EPS takes into consideration the potential dilution that could occur if securities (stock options) or other contracts to issue common stock were exercised and converted into common stock. Our calculation of EPS is as follows:
|  | Fiscal Year Ended September 24, 2011 |
|  | Income |  |  | Shares |  |  | Per Share |
|  | (Numerator) |  |  | (Denominator) |  |  | Amount |
|  | (in thousands, except per share amounts) |
Earnings Per Basic Share |  |  |  |  |  |  |  |  |
Net Income available to common stockholders |  | $ | 55,063 |  |  |  | 18,672 |  |  | $ | 2.95 |
Effect of Dilutive Securities |  |  |  |  |  |  |  |  |  |  |  |
Options |  |  | - |  |  |  | 117 |  |  | $ | (0.02 | )
Earnings Per Diluted Share |  |  |  |  |  |  |  |  |  |  |  |
Net Income available to common stockholders plus assumed conversions |  | $ | 55,063 |  |  |  | 18,789 |  |  | $ | 2.93 |
143,515 anti-dilutive shares have been excluded in the computation of 2011 diluted EPS because the options' exercise price is greater than the average market price of the common stock.
|  | Fiscal Year Ended September 25, 2010 |
|  | Income |  |  | Shares |  |  | Per Share |
|  | (Numerator) |  |  | (Denominator) |  |  | Amount |
|  | (in thousands, except per share amounts) |
Earnings Per Basic Share |  |  |  |  |  |  |  |  |
Net Income available to common stockholders |  | $ | 48,409 |  |  |  | 18,528 |  |  | $ | 2.61 |
Effect of Dilutive Securities |  |  |  |  |  |  |  |  |  |  |  |
Options |  |  | - |  |  |  | 175 |  |  |  | (0.02 | )
Earnings Per Diluted Share |  |  |  |  |  |  |  |  |  |  |  |
Net Income available to common stockholders plus assumed conversions |  | $ | 48,409 |  |  |  | 18,703 |  |  | $ | 2.59 |
110,910 anti-dilutive shares have been excluded in the computation of 2010 diluted EPS because the options' exercise price is greater than the average market price of the common stock.
|  | Fiscal Year Ended September 26, 2009 |
|  | Income |  |  | Shares |  |  | Per Share |
|  | (Numerator) |  |  | (Denominator) |  |  | Amount |
|  | (in thousands, except per share amounts) |
Earnings Per Basic Share |  |  |  |  |  |  |  |  |
Net Income available to common stockholders |  | $ | 41,312 |  |  |  | 18,516 |  |  | $ | 2.23 |
Effect of Dilutive Securities |  |  |  |  |  |  |  |  |  |  |  |
Options |  |  | - |  |  |  | 197 |  |  |  | (0.02 | )
Earnings Per Diluted Share |  |  |  |  |  |  |  |  |  |  |  |
Net Income available to common stockholders plus assumed conversions |  | $ | 41,312 |  |  |  | 18,713 |  |  | $ | 2.21 |
114,236 anti-dilutive shares have been excluded in the computation of 2009 diluted EPS because the options' exercise price is greater than the average market price of the common stock.
13. Accounting for Stock-Based Compensation At September 24, 2011, the Company has three stock-based employee compensation plans. Share-based compensation was recognized as follows:
|  | Fiscal year ended |
|  | September 24, |  |  | September 25, |  |  | September 26, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
|  | (in thousands, except per share amounts) |
Stock options |  | $ | 288 |  |  | $ | 592 |  |  | $ | 508 |
Stock purchase plan |  |  | 203 |  |  |  | 184 |  |  |  | 237 |
Deferred stock issued to outside directors |  |  | 46 |  |  |  | 138 |  |  |  | 138 |
Restricted stock issued to an employee |  |  | - |  |  |  | 28 |  |  |  | 87 |
|  | $ | 537 |  |  | $ | 942 |  |  | $ | 970 |
Per diluted share |  | $ | 0.03 |  |  | $ | 0.05 |  |  | $ | 0.05 |
The above compensation is net of tax benefits |  | $ | 381 |  |  | $ | 306 |  |  | $ | 746 |
At September 24, 2011, the Company has unrecognized compensation expense of approximately $2.4 million to be recognized over the next three fiscal years. The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model with the following weighted average assumptions used for grants in fiscal 2011, 2010 and 2009: expected volatility of 28.6% for fiscal year 2011, 29.0% for fiscal year 2010 and 23.3% for year 2009: weighted average risk-free interest rates of 1.56%, 2.21% and 2.70%; dividend rate of .9%, 1.2% and 1.2% and expected lives ranging between 5 and 10 years for all years. An expected forfeiture rate of 13% was used for fiscal years 2011 and 2010 and 15% was used for 2009. Expected volatility is based on the historical volatility of the price of our common shares over the past 50 to 54 months for 5 year options and 10 years for 10 year options. We use historical information to estimate expected life and forfeitures within the valuation model. The expected term of awards represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Compensation cost is recognized using a straight-line method over the vesting or service period and is net of estimated forfeitures. 14. Advertising Costs Advertising costs are expensed as incurred. Total advertising expense was $1,919,000, $2,751,000 and $2,267,000 for the fiscal years 2011, 2010 and 2009, respectively. 15. Commodity Price Risk Management Our most significant raw material requirements include flour, shortening, corn syrup, sugar, juice, cheese, chocolate, and a variety of nuts. We attempt to minimize the effect of future price fluctuations related to the purchase of raw materials primarily through forward purchasing to cover future manufacturing requirements, generally for periods from 1 to 12 months. As of September 24, 2011, we have approximately $60 million of such commitments. Futures contracts are not used in combination with forward purchasing of these raw materials. Our procurement practices are intended to reduce the risk of future price increases, but also may potentially limit the ability to benefit from possible price decreases. Our policy is to recognize estimated losses on purchase commitments when they occur. At each of the last three fiscal year ends, we did not have any material losses on our purchase commitments. 16. Research and Development Costs Research and development costs are expensed as incurred. Total research and development expense was $941,000, $866,000 and $761,000 for the fiscal years 2011, 2010 and 2009, respectively. 17. Recent Accounting Pronouncements In January 2010, the FASB issued guidance that amends existing disclosure requirements of fair value measurements adding required disclosures about items transferring into and out of Levels 1 and 2 in the fair value hierarchy; adding separate disclosures about purchases, sales, issuances, and settlements relative to Level 3 measurements; and clarifying, among other things, the existing fair value disclosures about the level of disaggregation. This guidance was effective for our fiscal year beginning September 26, 2010, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for our fiscal year beginning September 25, 2011. Since this standard impacts disclosure requirements only, its adoption has not and will not have any impact on the Company’s consolidated results of operations or financial condition. In December 2010, the FASB issued guidance which requires that if a company presents comparative financial statements to include business combinations, the company should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. This guidance also expands the supplemental pro forma adjustments to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. This guidance is effective for our fiscal year beginning September 25, 2011. The adoption of this guidance will not have a material impact on the Company’s financial position, results of operations or cash flows. In May 2011, the FASB issued guidance which amends current fair value measurement and disclosure guidance to include increased transparency around valuation inputs and investment categorization. This guidance results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements. This guidance will be effective for our second quarter of fiscal year 2012, and is not expected to have a material impact on our financial statements. In June 2011, the FASB issued guidance which gives us the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both options, we are required to present each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this guidance do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This guidance will be effective for our fiscal year 2013, and is not expected to have a material impact on our financial statements. In December 2010, the FASB issued guidance related to goodwill impairment testing for reporting entities with a zero or negative carrying amount. Under the amended guidance, we must consider whether it is more likely than not that a goodwill impairment exists for reporting units with a zero or negative carrying amount. If it is more likely than not that a goodwill impairment exists, the second step of the goodwill impairment test must be performed to measure the amount of the goodwill impairment loss, if any. This guidance is effective for our fiscal year 2012 and is not expected to have a material impact on our financial statements. In September 2011, the FASB issued guidance to simplify the current two-step goodwill impairment test. This guidance permits entities to first perform a qualitative assessment to determine whether it is more likely than not (a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount. If the entity determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, it would then perform the first step of the current two-step goodwill impairment test; otherwise, no further impairment test would be required. Entities are permitted to make the election to perform the qualitative assessment on a period-by-period basis. Under the new guidance, an entity applying the qualitative assessment must (1) consider the totality of the relevant factors (existing events or circumstances) and (2) weigh those factors according to their effect on the difference between a reporting unit’s fair value and its carrying amount. In addition to the factors described in the amended guidance, an entity must also consider other positive and mitigating events and circumstances that might impact its qualitative assessment. Also under the amended guidance, an entity is no longer permitted to carry forward the calculation of a reporting unit’s fair value from a prior year when performing step one of the goodwill impairment test. The amended guidance further clarifies that the requirements to disclose certain quantitative information about significant unobservable inputs used in a Level 3 fair value measurement do not apply to measurements related to accounting and reporting for goodwill after its initial recognition in a business combination. The amended guidance requires entities that perform the qualitative assessment to consider the difference between the fair value and the carrying amount from a recent fair value calculation of a reporting unit, if available, as a factor in determining whether the reporting unit’s fair value more likely than not exceeds its carrying amount. The amended guidance is effective prospectively for annual and interim goodwill impairment tests performed for our fiscal year 2013. We are permitted to apply, and have applied, the amended guidance for our annual impairment tests for our 2011 year. The adoption of this guidance had no effect on our consolidated financial statements. 18. Reclassifications Certain prior year financial statement amounts have been reclassified to be consistent with the presentation for the current year.

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- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18743-107790 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18854-107790 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18861-107790 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18780-107790 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18726-107790 + Details
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