# J&J SNACK FOODS CORP (JJSF) Informational only - not investment advice. CIK: 0000785956 SIC: 2052 Cookies & Crackers SIC breadcrumb: [Manufacturing](/division/D/) > [Food And Kindred Products](/major-group/20/) > [SIC 2052 Cookies & Crackers](/industry/2052/) Latest 10-K filed: 2025-11-26 SEC page: https://www.sec.gov/edgar/browse/?CIK=785956 Filing source: https://www.sec.gov/Archives/edgar/data/785956/000143774925036456/jjsf20250927_10k.htm ## Selected Fundamentals | Metric | Value | Unit | FY | Filed | | --- | ---: | --- | ---: | --- | | Revenue | 1583233000 | USD | 2025 | 2025-11-26 | | Net income | 65595000 | USD | 2025 | 2025-11-26 | | Assets | 1381501000 | USD | 2025 | 2025-11-26 | ## Financials Annual standardized facts from SEC companyfacts as of latest extracted filing date 2025-11-26. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000785956.json. Derived margins are computed from the extracted annual SEC facts. | Metric | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | | Revenue | | 1,084,224,000 | 1,138,265,000 | 1,186,487,000 | 1,022,038,000 | 1,144,579,000 | 1,380,656,000 | 1,558,829,000 | 1,574,755,000 | 1,583,233,000 | | Net income | 75,975,000 | 79,174,000 | 103,596,000 | 94,819,000 | 18,305,000 | 55,607,000 | 47,235,000 | 78,906,000 | 86,551,000 | 65,595,000 | | Operating income | 112,810,000 | 118,107,000 | 110,775,000 | 116,956,000 | 17,194,000 | 71,218,000 | 61,799,000 | 109,518,000 | 117,545,000 | 84,326,000 | | Gross profit | 304,467,000 | 331,023,000 | 336,286,000 | 350,401,000 | 238,427,000 | 298,928,000 | 369,642,000 | 469,865,000 | 486,125,000 | 469,882,000 | | Diluted EPS | 4.05 | 4.21 | 5.51 | 5.00 | 0.96 | 2.91 | 2.46 | 4.08 | 4.45 | 3.36 | | Assets | 790,487,000 | 867,228,000 | 938,233,000 | 1,019,339,000 | 1,056,553,000 | 1,122,219,000 | 1,216,966,000 | 1,277,236,000 | 1,365,101,000 | 1,381,501,000 | | Stockholders' equity | 637,974,000 | 682,322,000 | 759,091,000 | 833,751,000 | 809,498,000 | 845,654,000 | 863,169,000 | 911,518,000 | 956,970,000 | 966,695,000 | | Cash and cash equivalents | 140,652,000 | 90,962,000 | 111,479,000 | 192,395,000 | 195,809,000 | 283,192,000 | 35,181,000 | 49,581,000 | 73,394,000 | 105,893,000 | | Net margin | | 7.30% | 9.10% | 7.99% | 1.79% | 4.86% | 3.42% | 5.06% | 5.50% | 4.14% | | Operating margin | | 10.89% | 9.73% | 9.86% | 1.68% | 6.22% | 4.48% | 7.03% | 7.46% | 5.33% | ## Quarterly Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-07. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000785956.json. Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived. | Quarter | End date | Revenue | Net income | Diluted EPS | Method | | --- | --- | ---: | ---: | ---: | --- | | 2022-Q3 | 2022-06-25 | | | 0.81 | reported discrete quarter | | 2023-Q1 | 2022-12-24 | | | 0.34 | reported discrete quarter | | 2023-Q2 | 2023-03-25 | | | 0.36 | reported discrete quarter | | 2023-Q3 | 2023-06-24 | 425,769,000 | 34,981,000 | 1.81 | reported discrete quarter | | 2023-Q4 | 2023-09-30 | 443,863,000 | 30,421,000 | | derived Q4 = FY annual - nine-month YTD | | 2024-Q1 | 2023-12-30 | 348,308,000 | 7,282,000 | 0.37 | reported discrete quarter | | 2024-Q2 | 2024-03-30 | 359,734,000 | 13,329,000 | 0.69 | reported discrete quarter | | 2024-Q3 | 2024-06-29 | 439,957,000 | 36,299,000 | 1.87 | reported discrete quarter | | 2024-Q4 | 2024-09-28 | 426,756,000 | 29,641,000 | | derived Q4 = FY annual - nine-month YTD | | 2025-Q1 | 2024-12-28 | 362,598,000 | 5,143,000 | 0.26 | reported discrete quarter | | 2025-Q2 | 2025-03-29 | 356,099,000 | 4,824,000 | 0.25 | reported discrete quarter | | 2025-Q3 | 2025-06-28 | 454,293,000 | 44,247,000 | 2.26 | reported discrete quarter | | 2025-Q4 | 2025-09-27 | 410,243,000 | 11,381,000 | | derived Q4 = FY annual - nine-month YTD | | 2026-Q1 | 2025-12-27 | 343,778,000 | 883,000 | 0.05 | reported discrete quarter | | 2026-Q2 | 2026-03-28 | 344,819,000 | 1,677,000 | 0.09 | reported discrete quarter | ## Macro Cross-References - [CPIAUCSL](/indicator/CPIAUCSL/): Consumer Price Index for All Urban Consumers: All Items in U.S. City Average - [UNRATE](/indicator/UNRATE/): Unemployment Rate - [FEDFUNDS](/indicator/FEDFUNDS/): Federal Funds Effective Rate - [CES0500000003](/indicator/CES0500000003/): Average Hourly Earnings of All Employees, Total Private - [DFEDTARU](/indicator/DFEDTARU/): Federal Funds Target Range - Upper Limit - [DFEDTARL](/indicator/DFEDTARL/): Federal Funds Target Range - Lower Limit - [DGS3MO](/indicator/DGS3MO/): Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity - [DGS2](/indicator/DGS2/): Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity - [DGS10](/indicator/DGS10/): Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity - [DGS30](/indicator/DGS30/): Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity - [T10Y2Y](/indicator/T10Y2Y/): 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity - [CPILFESL](/indicator/CPILFESL/): Consumer Price Index for All Urban Consumers: All Items Less Food and Energy - [CPIUFDSL](/indicator/CPIUFDSL/): Consumer Price Index for All Urban Consumers: Food - [CPIENGSL](/indicator/CPIENGSL/): Consumer Price Index for All Urban Consumers: Energy - [CUSR0000SAH1](/indicator/CUSR0000SAH1/): Consumer Price Index for All Urban Consumers: Shelter - [PCEPI](/indicator/PCEPI/): Personal Consumption Expenditures: Chain-type Price Index - [PCEPILFE](/indicator/PCEPILFE/): Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index - [PPIACO](/indicator/PPIACO/): Producer Price Index by Commodity: All Commodities - [T10YIE](/indicator/T10YIE/): 10-Year Breakeven Inflation Rate - [U6RATE](/indicator/U6RATE/): Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons - [PAYEMS](/indicator/PAYEMS/): All Employees, Total Nonfarm - [CIVPART](/indicator/CIVPART/): Labor Force Participation Rate - [EMRATIO](/indicator/EMRATIO/): Employment-Population Ratio - [UNEMPLOY](/indicator/UNEMPLOY/): Unemployed - [CE16OV](/indicator/CE16OV/): Employment Level - [ICSA](/indicator/ICSA/): Initial Claims - [JTSJOL](/indicator/JTSJOL/): Job Openings: Total Nonfarm - [JTSQUR](/indicator/JTSQUR/): Quits: Total Nonfarm - [GDPC1](/indicator/GDPC1/): Real Gross Domestic Product - [A191RL1Q225SBEA](/indicator/A191RL1Q225SBEA/): Real Gross Domestic Product: Percent Change from Preceding Period - [INDPRO](/indicator/INDPRO/): Industrial Production: Total Index - [TCU](/indicator/TCU/): Capacity Utilization: Total Index - [HOUST](/indicator/HOUST/): New Privately-Owned Housing Units Started: Total Units - [PERMIT](/indicator/PERMIT/): New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units - [RSAFS](/indicator/RSAFS/): Advance Retail Sales: Retail Trade - [PCE](/indicator/PCE/): Personal Consumption Expenditures - [DSPIC96](/indicator/DSPIC96/): Real Disposable Personal Income - [PSAVERT](/indicator/PSAVERT/): Personal Saving Rate - [M2SL](/indicator/M2SL/): M2 - [BOPGSTB](/indicator/BOPGSTB/): U.S. International Trade in Goods and Services: Balance - [MSPUS](/indicator/MSPUS/): Median Sales Price of Houses Sold for the United States - [HSN1F](/indicator/HSN1F/): New One Family Houses Sold: United States - [RHORUSQ156N](/indicator/RHORUSQ156N/): Homeownership Rate in the United States - [TTLCONS](/indicator/TTLCONS/): Total Construction Spending: Total Construction in the United States - [RRVRUSQ156N](/indicator/RRVRUSQ156N/): Rental Vacancy Rate in the United States - [TOTALSL](/indicator/TOTALSL/): Total Consumer Credit Owned and Securitized - [REVOLSL](/indicator/REVOLSL/): Revolving Consumer Credit Owned and Securitized - [DRCCLACBS](/indicator/DRCCLACBS/): Delinquency Rate on Credit Card Loans, All Commercial Banks - [GDP](/indicator/GDP/): Gross Domestic Product - [GPDI](/indicator/GPDI/): Gross Private Domestic Investment - [GCE](/indicator/GCE/): Government Consumption Expenditures and Gross Investment - [PCEC](/indicator/PCEC/): Personal Consumption Expenditures - [NETEXP](/indicator/NETEXP/): Net Exports of Goods and Services - [GFDEBTN](/indicator/GFDEBTN/): Federal Debt: Total Public Debt - [GFDEGDQ188S](/indicator/GFDEGDQ188S/): Federal Debt: Total Public Debt as Percent of Gross Domestic Product - [FYFSD](/indicator/FYFSD/): Federal Surplus or Deficit - [FGRECPT](/indicator/FGRECPT/): Federal Government Current Receipts - [FGEXPND](/indicator/FGEXPND/): Federal Government: Current Expenditures - [MANEMP](/indicator/MANEMP/): All Employees, Manufacturing - [USCONS](/indicator/USCONS/): All Employees, Construction - [USTRADE](/indicator/USTRADE/): All Employees, Retail Trade - [USFIRE](/indicator/USFIRE/): All Employees, Financial Activities - [USGOVT](/indicator/USGOVT/): All Employees, Government - [AWHAETP](/indicator/AWHAETP/): Average Weekly Hours of All Employees, Total Private - [DGORDER](/indicator/DGORDER/): Manufacturers' New Orders: Durable Goods - [NEWORDER](/indicator/NEWORDER/): Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft - [BUSINV](/indicator/BUSINV/): Total Business Inventories - [EXPGS](/indicator/EXPGS/): Exports of Goods and Services - [IMPGS](/indicator/IMPGS/): Imports of Goods and Services - [IR](/indicator/IR/): Import Price Index (End Use): All Commodities - [PPIFIS](/indicator/PPIFIS/): Producer Price Index by Commodity: Final Demand ## Latest quarter (10-Q) Latest 10-Q source: https://www.sec.gov/Archives/edgar/data/785956/000143774926015618/jjsf20260328_10q.htm Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization. Confidence: high Filing date: 2026-05-07 Report date: 2026-03-28 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Statements made in this Form 10-Q that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to us, based on our current beliefs as well as assumptions made by us and information currently available to us. Forward-looking statements generally will be accompanied by words such as "anticipate," "if," "may," "believe," "plan,", "goals," "estimate," "expect," "project," "continue," "forecast," "intend," "may," "could," "should," "will," and other similar expressions. Statements addressing our future operating performance and statements addressing events and developments that we expect or anticipate will occur are also considered as forward-looking statements. This includes, without limitation, our statements and expectations regarding any current or future recovery in our industry (or the industries of our customers), the success of new product innovations, and the future impact of our supply chain efficiency projects, including investments in additional production capacity and logistics and warehousing operations. Such forward-looking statements are inherently uncertain, and readers must recognize that actual results may differ materially from the expectations of management. We intend that such forward-looking statements be subject to the safe harbor provisions of the Securities Act and the Exchange Act. 23 We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties, and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation to revise, update, add or to otherwise correct, any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events. Objective This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide readers of our financial statements with a narrative form from the perspective of our management regarding our financial condition and results of operations, liquidity and certain other factors that may affect our future results. The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and within the Company’s Annual Report on Form 10-K filed for the fiscal year ended September 27, 2025. Business Overview The Company manufactures and sells snack foods and distributes frozen beverages which it markets nationally to the foodservice and retail supermarket industries. The Company’s principal snack food products are soft pretzels, frozen novelties, churros and bakery products. We believe we are the largest manufacturer of soft pretzels in the United States. Other snack food products include donuts, churros, cookies, funnel cake and handheld products. The Company’s principal frozen beverage products are the ICEE brand frozen carbonated beverage and the SLUSH PUPPIE brand frozen non-carbonated beverage. The Company’s Food Service and Frozen Beverage sales are made principally to foodservice customers including snack bar and food stand locations in leading chain, department, discount, warehouse club and convenience stores; malls and shopping centers; fast food and casual dining restaurants; stadiums and sports arenas; leisure and theme parks; movie theaters; independent retailers; and schools, colleges and other institutions. The Company’s Retail Supermarket customers are primarily supermarket chains. Business Trends and Strategy Our products are generally sold for discretionary consumption. Our results are impacted by macroeconomic and demographic trends and changes in consumer behavior. The U.S. economy has experienced economic volatility and uncertainty in recent years, which has had, and we expect might continue to have, an impact on consumer behavior. Consumer spending may continue to be impacted by levels of discretionary income and the impact of that on the consumer’s decisions making around their purchases. In addition, inflation continues to impact our business and fluctuating raw material input costs may continue to impact the cost of our products. While overall packaging and raw material inflation appears to be moderating for fiscal 2026, uncertainty within the supply chain surrounding impacts from the US government’s tariffs on imports, as well as rising fuel costs, could continue to be potential headwinds for the Company in fiscal 2026. Tariffs may increase the cost of certain raw materials and packaging that we use in our business, and our financial performance may be adversely impacted if we are unable to pass on the cost increases in the form of price increases to our customers. Additionally, the ultimate impact of tariffs may be difficult to predict as tariff rates and duration remain uncertain, which can make our planning process more challenging. To help combat these potential headwinds, we continue to pursue operational improvements, as well as expand growth opportunities across our various channels and customers. Some recent examples of implementing these strategies include: ● Our recently completed strategic supply chain transformation in which we opened three regional distribution centers which is projected to drive significant cost reductions around warehousing and distribution costs. 24 ● Many examples of successful cross-selling and leveraging our brands across customer channels, including our recent expansion of Dippin’ Dots brand into retail and further into the theater channel. ● Further expansion of our SuperPretzel brand across the retail market through the launch of Bavarian Sticks. ● Our recently announced transformation program, “Project Apollo,” which is anticipated to generate sustainable efficiencies and cost savings across the enterprise. The above referenced Project Apollo is expected to generate at least $20 million of run-rate operating income for the initiatives that are expected to be implemented by the end of fiscal 2026. The initial focus of the project is the consolidation and optimization of our manufacturing network. During the fourth quarter of fiscal 2025, we announced the closure of two manufacturing facilities, our plant in Holly Ridge, North Carolina, and our plant in Atlanta, Georgia. In the first quarter of fiscal 2026, we announced the closure of a third manufacturing facility, our plant in Colton, California. During the second quarter of fiscal 2026, we made the decision to close a fourth facility, our manufacturing/distribution facility in New York, New York, which is expected to close in our third fiscal quarter. Production from these facilities will either be consolidated into various other facilities across our network, or it will be discontinued. This consolidation was enabled by investments we have made in our plants to modernize and expand capacity for our core products, as well as our investments made to build out our three regional distribution centers. In connection with the closing of our four facilities, we recorded plant closure costs of approximately $24 million in the fourth quarter of fiscal 2025, and another $4.8 million and $10.9 million in the three and six months ended March 28, 2026, respectively. These costs primarily related to non-cash write-downs and write-offs related to inventory and property, plant and equipment, as well as severance and benefit costs and other exit and disposal activities. In addition to plant consolidation, as part of the first phase of Project Apollo, we are expecting to optimally reposition production within our network, which we are expecting to generate additional freight savings in fiscal 2026 and beyond, and to streamline our corporate functions, which is expected to generate general and administrative expense savings in fiscal 2026 and beyond. RESULTS OF OPERATIONS – Three and six months ended March 28, 2026 The following discussion provides a review of results for the three and six months ended March 28, 2026 as compared with the three and six months ended March 29, 2025. Summary of Results Three months ended Six months ended March 28, March 29, March 28, March 29, 2026 2025 % Change 2026 2025 % Change (in thousands) (in thousands) Net sales $ 344,819 $ 356,099 (3.2 )% $ 688,597 $ 718,697 (4.2 )% Cost of goods sold 245,527 260,396 (5.7 )% 493,293 529,093 (6.8 )% Gross profit 99,292 95,703 3.8 % 195,304 189,604 3.0 % Operating expenses Marketing and Selling 30,083 28,507 5.5 % 61,582 57,176 7.7 % Distribution 41,737 41,833 (0.2 )% 79,793 81,443 (2.0 )% Administrative 21,184 19,754 7.2 % 41,561 38,657 7.5 % Gain on insurance proceeds received for damage to property, plant, and equipment - - (800 ) - Plant closure expense 4,756 - 10,869 - Other general expense (income) (271 ) (414 ) (34.5 )% (141 ) 66 (313.6 )% Total operating expenses 97,489 89,680 8.7 % 192,864 177,342 8.8 % Operating income 1,803 6,023 (70.1 )% 2,440 12,262 (80.1 )% Other income (expense) Investment income 832 689 20.8 % 1,544 1,726 (10.5 )% Interest expense (302 ) (85 ) 255.3 % (441 ) (297 ) 48.5 % Earnings before income taxes 2,333 6,627 (64.8 )% 3,543 13,691 (74.1 )% Income tax expense 656 1,803 (63.6 )% 983 3,724 (73.6 )% NET EARNINGS $ 1,677 $ 4,824 (65.2 )% $ 2,560 $ 9,967 (74.3 )% Comparisons as a Percentage of Net Sales Three months ended Six months ended March 28, March 29, March 28, March 29, 2026 2025 Basis Pt Chg 2026 2025 Basis Pt Chg Gross profit 28.8 % 26.9 % 190 28.4 % 26.4 % 200 Marketing 8.7 % 8.0 % 70 8.9 % 8.0 % 90 Distribution 12.1 % 11.7 % 40 11.6 % 11.3 % 30 Administrative 6.1 % 5.5 % 60 6.0 % 5.4 % 60 Operating income 0.5 % 1.7 % (120 ) 0.4 % 1.7 % (130 ) Earnings before income taxes 0.7 % 1.9 % (120 ) 0.5 % 1.9 % (140 ) Net earnings 0.5 % 1.4 % (90 ) 0.4 % 1.4 % (100 ) 25 Net Sales Net sales decreased by $11.3 million, or 3.2%, to $344.8 million for the three months ended March 28, 2026. Net sales decreased by $30.1 million, or 4.2%, to $688.6 million for the six months ended March 28, 2026. The sales decrease was primarily driven by declines in our Food Service segment, most notably within our bakery portfolio, and the majority of which related to the anticipated sales reductions in our bakery business. Gross Profit Gross Profit increased by $3.6 million, or 3.8%, to $99.3 million for the three months ended March 28, 2026. As a percentage of sales, gross profit increased from 26.9% to 28.8%. The increase in gross profit as a percentage of sales was largely driven by the benefits of our previously announced plant closures as well as the favorable impact from mix improvements. These favorable tailwinds significantly offset the unfavorable impact of lower sales volumes in our Food Service segment, as well as the higher slotting fees and promotional spend within our Retail segment. Gross Profit increased by $5.7 mil [Excerpt truncated for page length; source filing is linked above.] ## Latest 10-K MD&A Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high Item 7.  Management’s Discussion And Analysis Of Financial Condition And Results Of Operations Objective This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management regarding our financial condition and results of operations, liquidity and certain other factors that may affect our future results. The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Item 8 of this Form 10-K. Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended September 28, 2024 for additional information related to the discussion and analysis of our financial condition and results of operations for the fiscal year ended September 28, 2024 compared to the fiscal year ended September 30, 2023. Business Overview The Company manufactures snack foods and distributes frozen beverages which it markets nationally to the foodservice and retail supermarket industries. The Company’s principal snack food products are soft pretzels, frozen novelties, churros and bakery products. We are the largest manufacturer of soft pretzels in the United States. Other snack food products include funnel cake and handheld products. The Company’s principal frozen beverage products are the ICEE brand frozen carbonated beverage and the SLUSH PUPPIE brand frozen non-carbonated beverage. 17 The Company’s Food Service and Frozen Beverages sales are made primarily to foodservice customers including snack bar and food stand locations in leading chain, department, discount, warehouse club and convenience stores; malls and shopping centers; fast food and casual dining restaurants; stadiums and sports arenas; leisure and theme parks; movie theatres; independent retailers; and schools, colleges and other institutions. The Company’s retail supermarket customers are primarily supermarket chains. Business Trends and Strategy Our results are impacted by macroeconomic and demographic trends and changes in consumer behavior. The U.S. economy has experienced economic volatility and uncertainty in recent years, which has had, and we expect might continue to have, an impact on consumer behavior. Consumer spending may continue to be impacted by levels of discretionary income and the impact of that on the consumer’s decision making around their purchases. In addition, inflation continues to impact our business, and fluctuating raw material input costs may continue to impact the costs of our products. In fiscal year 2025, we encountered significant headwinds associated with certain cost inputs, most notably, rising cocoa costs. Record high cocoa costs were fueled by supply deficits, led by significant production declines among the largest producers. Despite an anticipated supply recovery, cocoa market prices continued to remain volatile, and touched record highs in fiscal 2025. These rising costs pressured margins, primarily during the first half of our fiscal year, as they outweighed pricing actions up to that point in time. While overall packaging and raw material inflation, inclusive of the cocoa market, appears to be moderating for fiscal 2026, uncertainty within the supply chain surrounding impacts from the U.S. government’s tariffs on imports could be a potential headwind for the Company in fiscal 2026. Tariffs may increase the cost of certain raw materials and packaging that we use in our business, and our financial performance may be adversely impacted if we are unable to pass on the cost increases in the form of price increases to our customers. Additionally, the ultimate impact of tariffs may be difficult to predict as tariff rates and duration remain uncertain, which can make our planning process more challenging. To help combat these potential headwinds, we continue to pursue operational improvements, as well as expand growth opportunities across our various channels and customers. Some recent examples of implementing these strategies include: ● Our recently completed strategic supply chain transformation in which we opened three regional distribution centers which is projected to drive cost reductions around warehousing and distribution. ● The recent addition of six new production lines which has significantly expanded our capacity and allowed us to meet growth opportunities across our core products such as pretzels, churros and frozen novelties. ● Implementation of a new ERP system in fiscal 2022 which has helped to create efficiencies and streamline internal processes. ● Many examples of successful cross-selling and leveraging our brands across customer channels, including our recent expansion of Dippin’ Dots brand into retail and further into the theater channel. ● Further expansion of our SuperPretzel brand across the retail market through the launch of Bavarian Sticks. ● Our fiscal year 2023 rollout of our new Hola! Churro brand. ● Our recently announced transformation program, “Project Apollo,” which is anticipated to generate sustainable efficiencies and cost savings across the enterprise. The above-referenced Project Apollo is expected to generate at least $20 million of run-rate operating income for the initiatives that are expected to be implemented by fiscal 2026. The initial focus of the project is the consolidation and optimization of our manufacturing network. During the fourth quarter of fiscal 2025, we announced the closure of two manufacturing facilities, our plant in Holly Ridge, North Carolina, and our plant in Atlanta, Georgia. In October 2025, we subsequently announced the closure of a third manufacturing facility, our plant in Colton, California. Production from these facilities will either be consolidated into various other facilities across our network, or it will be discontinued as part of our ongoing sales portfolio optimization. This consolidation was enabled by the investments we have made in our plants to modernize and expand capacity for our core products, as well as our investments made to build out our three regional distribution centers. In connection with the closing of our three facilities, we recorded plant closure costs of approximately $24 million in the fourth quarter of fiscal 2025, which primarily related to non-cash write-downs and write-offs related to inventory and to property, plant and equipment, as well as severance and benefit costs. We expect to continue to incur non-recurring costs related to this optimization of our manufacturing network into fiscal 2026. 18 In addition to plant consolidation, as part of the first phase of Project Apollo, we are expecting to optimally reposition production within our network, which we are expecting to generate additional freight savings in fiscal 2026 and beyond, and to streamline our corporate functions, which is expected to generate general and administrative expense savings in fiscal 2026 and beyond. Fiscal Period The Company’s fiscal year is the 52- or 53- week period that ends on the last Saturday of September. An additional week is included in the last fiscal quarter every five or six years to realign the Company’s fiscal quarters with calendar quarters, which occurred in the Company’s fourth quarter of fiscal 2023. The Company’s fiscal years 2025 and 2024 spanned 52 weeks each, whereas fiscal year 2023 spanned 53 weeks. RESULTS OF OPERATIONS: Fiscal Year 2025 Compared to Fiscal Year 2024 Results of Consolidated Operations The following discussion provides a review of results for the fiscal year ended September 27, 2025 as compared with the fiscal year ended September 28, 2024. Summary of Results Fiscal year ended September 27, September 28, 2025 2024 (52 weeks) (52 weeks) % Change (in thousands) Net Sales $ 1,583,233 $ 1,574,755 0.5 % Cost of goods sold 1,113,351 1,088,630 2.3 % Gross Profit 469,882 486,125 (3.3 )% Operating expenses Marketing 123,606 118,805 4.0 % Distribution 168,305 175,601 (4.2 )% Administrative 77,787 74,771 4.0 % Intangible asset impairment charges 2,257 - 100.0 % Gain on insurance proceeds received for damage to property, plant, and equipment (10,622 ) - 100.0 % Plant closure expense 24,073 - 100.0 % Other general expense 150 (597 ) (125.1 )% Total Operating Expenses 385,556 368,580 4.6 % Operating Income 84,326 117,545 (28.3 )% Other income (expense) Investment income 3,596 3,228 11.4 % Interest expense (1,493 ) (1,826 ) (18.2 )% Earnings before income taxes 86,429 118,947 (27.3 )% Income tax expense 20,834 32,396 (35.7 )% NET EARNINGS $ 65,595 $ 86,551 (24.2 )% 19 Comparisons as a Percentage of Net Sales Fiscal year ended September 27, September 28, 2025 2024 Basis Pt Chg Gross profit 29.7 % 30.9 % (120 ) Marketing 7.8 % 7.5 % 30 Distribution 10.6 % 11.2 % (60 ) Administrative 4.9 % 4.7 % 20 Operating income 5.3 % 7.5 % (220 ) Earnings before income taxes 5.5 % 7.6 % (210 ) Net earnings 4.1 % 5.5 % (140 ) NET SALES Net sales increased by $8.5 million, or 1%, to $1,583.2 million in fiscal 2025, with the increase led by sales growth in our foodservice segment, somewhat offset by a decrease in our retail supermarket segment. GROSS PROFIT Gross profit decreased by $16.3 million, or 3%, to $469.8 million in fiscal 2025. Gross profit as a percentage of sales decreased to 29.7% in fiscal 2025 from 30.9% in fiscal 2024. This decrease primarily reflected the negative margin impacts from comparatively rising raw material costs and other inflationary pressures that had outweighed pricing actions through the first half of our fiscal year. Additionally, the loss of some limited time offer churro volumes from prior year, the impact of mix and foreign exchange related headwinds in our frozen beverages segment, and mix changes within our bakery business negatively impacted current period gross profit when compared to prior year. 20 OPERATING EXPENSES Total operating expenses increased by $17.0 million, or 5%, to $385.6 million in fiscal 2025 and increased as a percentage of sales to 24.4% in fiscal 2025, compared to 23.4% in fiscal 2024. In fiscal 2025, operating expenses included $24.1 million of plant closure expense, $2.3 million of intangible asset impairment charges, and a partly offsetting $10.6 million gain on insurance proceeds received for damage to property, plant, and equipment. The net impact of these items increased operating expenses as a percentage of sales by approximately 100 bps. Marketing and selling expenses as a percentage of sales increased from 7.5% in fiscal 2024 to 7.8% in fiscal 2025, with the increase primarily driven by the higher promotional marketing spend and sponsorships. Distribution expenses as a percentage of sales decreased to 10.6% in fiscal 2025 from 11.2% in fiscal 2024, with the decrease driven by the continued benefits of our strategic initiatives to improve logistics management and increase efficiency across our distribution network and supply chain, as well as approximately $5 million of non-recurring start-up costs related to the opening of regional distribution centers in fiscal 2024. Administrative expenses as a percentage of sales increased slightly from 4.7% in fiscal 2024 to 4.9% in fiscal 2025, with the increase largely attributable to higher compensation costs. OTHER INCOME AND EXPENSE Investment income increased by $0.4 million, or 11%, to $3.6 million in fiscal 2025 due to higher average cash balances during the year. Interest expense decreased by $0.3 million, or 18%, to $1.5 million in fiscal 2025 due to the reduction in the Company’s average outstanding borrowings under the Amended Credit Agreement throughout the fiscal year. INCOME TAX EXPENSE Our effective tax rate in fiscal 2025 was 24.1%. Our effective tax rate in fiscal 2024 was 27.2%. The decrease in rate between periods was primarily attributable to a change in estimate on blended state tax rate and the impact on the valuation of net deferred tax liabilities. NET EARNINGS Net earnings decreased by $21.0 million, or 24%, in fiscal 2025 to $65.6 million, or $3.36 per diluted share, from $86.6 million or $4.45 per diluted share, in fiscal 2024 as a result of the aforementioned items. There are many factors which can impact our net earnings from year to year, 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. Results of Operations – Segments We have three reportable segments, as disclosed in the accompanying notes to the consolidated financial statements: Food Service, Retail Supermarkets and Frozen Beverages. The Chief Operating Decision Maker for Food Service, Retail Supermarkets and Frozen Beverages reviews monthly detailed operating income statements and sales reports to assess performance and allocate resources to each individual segment. Sales and operating income are the key variables monitored by the Chief Operating Decision Maker when determining each segment and the Company’s financial condition and operating performance. In addition, the Chief Operating Decision Maker reviews and evaluates capital spending of each segment on a quarterly basis to monitor cash flow and asset needs of each segment. To align with how our Chief Operating Decision Maker currently reviews the monthly detailed operating income statements, we have reclassified certain corporate expenses that are not allocated to our three reportable segments. This change in presentation resulted in an increase to our Food Service segment operating income of $24.8 million, to our Retail segment operating income of $2.6 million and to our Frozen Beverages segment of $1.5 million in fiscal 2024, respectively. 21 The following table is a summary of sales and operating income, which is how we measure segment profit. Fiscal year ended September 27, September 28, 2025 2024 (52 weeks) (52 weeks) % Change (in thousands) Net Sales Food Service $ 1,001,361 $ 985,195 1.6 % Retail Supermarket 213,809 221,308 (3.4 )% Frozen Beverages 368,063 368,252 (0.1 )% Total Sales $ 1,583,233 $ 1,574,755 0.5 % Fiscal year ended September 27, September 28, 2025 2024 (52 weeks) (52 weeks) % Change (in thousands) Operating Income Food Service $ 64,794 $ 74,214 (12.7 )% Retail Supermarket 13,318 19,192 (30.6 )% Frozen Beverages 49,529 52,996 (6.5 )% General corporate expenses (29,864 ) (28,857 ) 3.5 % Gain on insurance proceeds received for damage to property, plant, and equipment 10,622 - 100.0 % Plant closure expense (24,073 ) - 100.0 % Total Operating Income $ 84,326 $ 117,545 (28.3 )% FOOD SERVICE SEGMENT RESULTS Fiscal year ended September 27, September 28, 2025 2024 (52 weeks) (52 weeks) % Change (in thousands) Food Service Sales to External Customers Soft pretzels $ 230,070 $ 222,237 3.5 % Frozen novelties 149,884 147,995 1.3 % Churros 97,867 114,306 (14.4 )% Handhelds 92,018 86,053 6.9 % Bakery 405,909 387,129 4.9 % Other 25,613 27,475 (6.8 )% Total Food Service $ 1,001,361 $ 985,195 1.6 % Food Service Operating Income $ 64,794 $ 74,214 (12.7 )% 22 Sales to food service customers increased $16.2 million, or 1.6%, to $1,001.4 million in fiscal 2025. Soft pretzel sales to the food service market increased 4% to $230.1 million for the year, with the increase largely driven by strong second-half of the fiscal year volume increases across many of our pretzel products and brands, most notably our Bavarian pretzels, with a secondary benefit of price increases. Frozen novelties sales increased $1.9 million, or 1%, to $149.9 million for the year, with the increase driven by an approximate 3% increase in Dippin’ Dots sales. Churro sales to food service customers were down 14% to $97.9 million for the year with the decrease largely driven by the lapping of the benefit of limited time offer churro volumes with a major customer in the prior year period which did not recur in the current year period. Sales of bakery products increased $18.8 million, or 5%, to $405.9 million for the year, with the increase attributable to contractual pricing true-up on costing on certain raw material ingredients, as well as some targeted, non-contractual price increases taken to offset the rising costs on certain raw material ingredients, offset somewhat by volume declines, most notably in our first fiscal quarter related to our pie portfolio and the loss of some seasonal business with a declining margin profile that we bid on, but did not retain. Handheld sales to food service customers increased 7% to $92.0 million in fiscal 2025, with the increase largely attributable to a combination of strong volume increases across our core food service handhelds as well as pricing increases related to the contractual pricing true-up of costing on certain raw material ingredients. Sales of new products in the first twelve months since their introduction were approximately $3.9 million for the fiscal year, driven primarily by the addition of churros to the menu of a major fast-food customer. Sales in the fiscal year benefited from the impact of mid-single digit percentage price increases, with those price increases primarily related to the contractual pricing true-up of costing on certain raw material ingredients, as well as some targeted, non-contractual price increases taken in an attempt to offset the rising costs on certain raw material ingredients. The revenue increase attributable to price increases was somewhat offset by declining volumes, most noticeably in our churro portfolio due to the lapping of the benefit of limited time offer churro volumes with a major customer in the prior fiscal year, as well as in our bakery portfolio, due to the volume declines in our pie business in the first fiscal quarter related to the loss of some seasonal business with declining profit margin profile that we bid on, but did not retain. Operating income in our Food Service segment decreased $9.4 million or 13% to $64.8 million in fiscal 2025, with the decrease primarily driven by the impact of gross margin pressures due to rising raw material costs and other inflationary pressures which outweighed the benefits from price increases in the first half of our fiscal year, as well as the impact of the lapping of the benefit of limited time offer churro volumes with a major customer in fiscal 2024. RETAIL SUPERMARKETS SEGMENT RESULTS Fiscal year ended September 27, September 28, 2025 2024 (52 weeks) (52 weeks) % Change (in thousands) Retail Supermarket Sales to External Customers Soft pretzels $ 61,713 $ 61,744 (0.1 )% Frozen novelties 110,286 112,192 (1.7 )% Biscuits 23,123 24,229 (4.6 )% Handhelds 21,578 26,253 (17.8 )% Coupon redemption (2,707 ) (3,162 ) (14.4 )% Other (184 ) 52 (453.8 )% Total Retail Supermarket $ 213,809 $ 221,308 (3.4 )% Retail Supermarket Operating Income $ 13,318 $ 19,192 (30.6 )% Sales of products to retail supermarkets decreased $7.5 million, or 3%, to $213.8 million in fiscal year 2025. Soft pretzel sales to retail supermarkets remained materially flat at $61.7 million, with a strong fiscal fourth quarter offsetting some declines earlier in the fiscal year. Sales of frozen novelties decreased $1.9 million, or 2%, to $110.3 million in fiscal 2025, with the decrease mostly attributable to volume declines seen in the second half of our fiscal year. Sales of biscuits and dumplings decreased 5% to $23.1 million and handheld sales to retail supermarket customers decreased 18% to $21.6 million in fiscal 2025, with the decrease in handheld sales primarily attributable to the impact of capacity constraints related to the fire at our Holly Ridge facility. Sales of new products in retail supermarkets were approximately $5.0 million, driven primarily by the launch of Dippin’ Dots sundaes. Sales in the fiscal year benefited from the impact of low-single digit percentage price increases, with those increases more than offset by volume decreases that were primarily noted within the third and fourth fiscal quarters. 23 Operating income in our Retail Supermarkets segment decreased $5.9 million or 31% to $13.3 million in fiscal 2025, with the decrease primarily driven by the declining frozen novelties volumes seen in the second half of our fiscal year. FROZEN BEVERAGES SEGMENT RESULTS Fiscal year ended September 27, September 28, 2025 2024 (52 weeks) (52 weeks) % Change (in thousands) Frozen Beverages Beverages $ 219,312 $ 230,030 (4.7 )% Repair and maintenance service 97,392 96,589 0.8 % Machines revenue 47,807 38,188 25.2 % Other 3,552 3,445 3.1 % Total Frozen Beverages $ 368,063 $ 368,252 (0.1 )% Frozen Beverages Operating Income $ 49,529 $ 52,996 (6.5 )% Total frozen beverage segment sales decreased slightly by $0.2 million, to $368.0 in fiscal 2025. Beverage-related sales decreased 5%, or $10.7 million, in fiscal 2025, with the decrease primarily reflecting weakness in certain channels, as well as the unfavorable foreign exchange impacts from a weaker Mexican Peso, somewhat offset by comparative strength noted within the theater channel. Gallon sales decreased 4% from the prior fiscal year. Service revenue increased 1% to $97.4 million in fiscal 2025 and machines revenue, primarily sales of frozen beverage machines, increased 25% to $47.8 million in fiscal 2025, primarily driven by strong growth from theater and convenience customers. The estimated number of Company-owned frozen beverage dispensers was 24,000 at both September 27, 2025 and September 28, 2024. Operating income in our Frozen Beverage segment decreased 7%, or $3.5 million, in fiscal 2025, primarily due to the impact of unfavorable mix and the unfavorable foreign exchange related headwinds. RESULTS OF OPERATIONS: Fiscal Year 2024 (52 weeks) Compared to Fiscal Year 2023 (53 weeks) The discussion of our results of operations for Fiscal Year 2024 (52 weeks) compared to Fiscal Year 2023 (53 weeks) can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended September 28, 2024 and such discussion is incorporated by reference herein. ACQUISITIONS Thinsters Acquisition On April 8, 2024, J & J Snack Foods Corp. completed the acquisition of the Thinsters cookie business from Hain Celestial Group. The purchase price was approximately $7.0 million, consisting entirely of cash. The acquisition was accounted for under the purchase method of accounting, and its operations are included in the accompanying consolidated financial statements from their respective acquisition dates. 24 LIQUIDITY AND CAPITAL RESOURCES Although there are many factors that could impact our operating cash flow, most notably net earnings, we believe that our future operating cash flow, along with our borrowing capacity, our current cash and cash equivalent balances and our investment securities is sufficient to satisfy our cash requirements over the next twelve months and beyond, as well as fund future growth and expansion. Fiscal 2025 Compared to Fiscal 2024 September 27, September 28, 2025 2024 (in thousands) Cash flows from operating activities Net earnings $ 65,595 $ 86,551 Non-cash items in net income: Depreciation of fixed assets 66,018 63,411 Amortization of intangibles and deferred costs 7,314 7,190 Intangible asset impairment charges 2,257 - Losses from disposals of property & equipment 320 11 Non-cash plant shutdown expenses 20,845 - Share-based compensation 6,320 6,220 Deferred income taxes 3,949 6,434 Gain on insurance proceeds received for damage to property, plant, and equipment (10,622 ) - Gain on insurance proceeds received in excess of operating losses recognized (799 ) - Other 95 (199 ) Changes in assets and liabilities, net of effects from purchase of companies 3,834 3,448 Net cash provided by operating activities $ 165,126 $ 173,066 ● Non-cash plant shutdown costs relate to the write-down and write-off of assets in connection with the Company’s shutdown of its Holly Ridge, NC, Atlanta, GA, and Colton, CA manufacturing plants. ● Gain on insurance proceeds received related to insurance recoveries related to the Holly Ridge fire and totaled approximately $11.4 million. ● Cash flows associated with changes in assets and liabilities, net effects from purchase of companies, generated approximately $3.8 million of cash in fiscal 2025 compared with $3.4 million of cash in fiscal 2024. September 27, September 28, 2025 2024 (in thousands) Cash flows from investing activities Payments for purchases of companies, net of cash acquired - (7,014 ) Purchases of property, plant and equipment (82,873 ) (73,569 ) Proceeds from disposal of property and equipment 1,401 699 Proceeds from insurance for fixed assets 11,421 2,218 Net cash (used in) investing activities $ (70,051 ) $ (77,666 ) ● The payments for purchases of companies, net of cash acquired, in fiscal 2024 related to the Thinsters acquisition. ● Purchases of property, plant and equipment include spending for production growth, in addition to acquiring new equipment, infrastructure replacements, and upgrades to maintain competitive standing and position us for future opportunities. ● Proceeds from insurance for fixed assets related to insurance recoveries related to the Holly Ridge fire. 25 September 27, September 28, 2025 2024 (in thousands) Cash flows from financing activities Payments to repurchase common stock (8,000 ) - Proceeds from issuance of stock 4,282 15,740 Borrowings under credit facility 50,000 71,000 Repayment of borrowings under credit facility (50,000 ) (98,000 ) Payments on finance lease obligations (238 ) (151 ) Payment of cash dividends (60,751 ) (56,957 ) Net cash (used in) financing activities $ (64,707 ) $ (68,368 ) ● In fiscal 2025, the Company repurchased 66,776 shares of common stock of the Company at an average price of $119.80 per share on the open market, pursuant to the share repurchase program. ● Proceeds from issuance of stock decreased in fiscal 2025 as the quantity of stock options being exercised continues to decline as the Company began to issue service share units and performance units as forms of stock-based compensation in recent years. ● Borrowings under the credit facility and repayment of borrowings under the credit facility relate to the Company’s cash draws and repayments made to primarily fund working capital needs and represent the continued net pay-down of borrowings outstanding across both fiscal periods. ● Dividends paid during fiscal 2025 increased as our quarterly dividend was raised during fiscal 2025. Liquidity As of September 27, 2025, we had $105.9 million of cash and cash equivalents. In December 2021, the Company entered into an amended and restated loan agreement (the “Credit Agreement”) with our existing banks which provided for up to a $50 million revolving credit facility repayable in December 2026. On June 21, 2022, the Company entered into an amendment to the Credit Agreement, the “Amended Credit Agreement” which provided for an incremental increase of $175 million in available borrowings. The Amended Credit Agreement also includes an option to increase the size of the revolving credit facility by up to an amount not to exceed in the aggregate the greater of $225 million or, $50 million plus the Consolidated EBITDA of the Borrowers, subject to the satisfaction of certain terms and conditions. Interest accrues, at the Company’s election at (i) the SOFR Rate (as defined in the Credit Agreement), plus an applicable margin, based upon the Consolidated Net Leverage Ratio, as defined in the Credit Agreement, or (ii) the Alternate Base Rate (a rate based on the higher of (a) the prime rate announced from time-to-time by the Administrative Agent, (b) the Federal Reserve System’s federal funds rate, plus 0.50% or (c) the Daily SOFR Rate, plus an applicable margin). The Alternate Base Rate is defined in the Credit Agreement. The Credit Agreement requires the Company to comply with various affirmative and negative covenants, including without limitation (i) covenants to maintain a minimum specified interest coverage ratio and maximum specified net leverage ratio, and (ii) subject to certain exceptions, covenants that prevent or restrict the Company’s ability to pay dividends, engage in certain mergers or acquisitions, make certain investments or loans, incur future indebtedness, alter its capital structure or line of business, prepay subordinated indebtedness, engage in certain transactions with affiliates, or amend its organizational documents. As of September 27, 2025, the Company is in compliance with all financial covenants of the Credit Agreement. As of September 27, 2025, we had no outstanding borrowings drawn on the Amended Credit Agreement. As of September 27, 2025, we had $210.2 million of additional borrowing capacity, after giving effect to the $14.8 million of letters of credit outstanding. 26 The Company’s material cash requirements include the following contractual and other obligations: Purchase Commitments Our most significant raw material requirements include flour, packaging, shortening, corn syrup, sugar, juice, cheese, chocolate, and a variety of nuts. We attempt to minimize the effect of future price fluctuations related to the purchase of raw materials primarily through forward purchasing to cover future manufacturing requirements, generally for periods from 1 to 12 months. As of September 27, 2025, we have approximately $133 million of such commitments. The purchase commitments do not exceed our projected requirements over the related terms and are in the normal course of business. Leases We have operating leases with initial noncancelable lease terms in excess of one year covering the rental of various facilities and equipment. Our operating leases include leases for real estate from some of our office, distribution and manufacturing facilities as well as manufacturing and non-manufacturing equipment used in our business. As of September 27, 2025, we have operating lease payment obligations of $161.6 million, with $21.6 million payable within 12 months. Off –Balance Sheet Arrangements The Company has off-balance sheet arrangements for purchase commitments as of September 27, 2025. Critical Accounting Policies, Judgments and Estimates We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. The preparation of such financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of those financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company discloses its significant accounting policies in the accompanying notes to its audited consolidated financial statements. Judgments and estimates of uncertainties are required in applying the Company’s accounting policies in certain areas. Following are some of the areas requiring significant judgments and estimates: revenue recognition, allowance for estimated credit losses, valuation of goodwill and long-lived and intangible assets, insurance reserves, and income taxes and business combinations. Revenue Recognition The performance obligations of our customer contracts for product and machine sales are 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, which is when our customers can direct the use and obtain substantially all of the remaining benefits from the product. 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. 27 Revenue is measured by the transaction price, which is defined as the amount of consideration we expect to receive in exchange for satisfying the performance obligations noted above. The transaction price is adjusted for estimates of known or expected variable consideration which includes sales discounts, trade promotions and certain other sales and customer incentives, including rebates and coupon redemptions. Variable consideration related to these programs is recorded as a reduction to revenue when the related revenue is recognized, and is recorded using the most likely amount method, with updates to estimates and related accruals of variable consideration occurring each period based on historical experience, changes in circumstances and other factors, including review of contractual pricing and rebate arrangements with customers. We do not believe that there is a reasonable likelihood that there will be material change in the estimates or assumptions used to recognize revenue. As noted above, estimates are made based on historical experience and other factors. However, if the level of redemption rates or performance was to vary significantly from estimates, we may be exposed to gains or losses that could be material. We have not made any material changes in the accounting methodology used to recognize revenue during the past three fiscal years. Allowance for Estimated Credit Losses We provide an allowance for estimated credit losses after taking into consideration historical experience and other factors. On September 27, 2020, the Company adopted guidance issued by the FASB in ASU 2016-13 Measurement of Credit Losses on Financial Instruments, which requires companies to recognize an allowance that reflects a current estimate of credit losses expected to be incurred over the life of the asset. The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses. The allowance for estimated credit losses considers a number of factors including the age of receivable balances, the history of losses, expectations of future credit losses and the customers’ ability to pay off obligations. We do not believe that there is a reasonable likelihood that there will be a material change in the estimates or assumptions used to value our accounts receivable. Since adoption of the new guidance on September 27, 2020, we have not made any material changes in the accounting methodology used to value accounts receivable. Valuation of Goodwill We have three reporting units with goodwill. Goodwill is evaluated annually by the Company for impairment. We perform impairment tests at year end for our reporting units, which are also the operating segment levels with recorded goodwill utilizing primarily the discounted cash flow method. This methodology used to estimate the fair value of the total Company and its reporting units requires inputs and assumptions (i.e. revenue growth, operating profit margins, capital spending requirements and discount rates) that reflect current market conditions. The estimated fair value of each reporting unit is compared to the carrying value of the reporting unit. If the carrying value of the reporting unit exceeds its fair value, the goodwill of the reporting unit is potentially impaired, and the Company then determines the implied fair value of goodwill, which is compared to the carrying value of goodwill to determine if impairment exists. Our tests at September 27, 2025 show that the fair value of each of our reporting units with goodwill exceeded its carrying value by at least 50%. Therefore, no further analysis was required. The inputs and assumptions used involve considerable management judgment and are based upon assumptions about expected future operating performance. Assumptions used in these forecasts are consistent with internal planning. The actual performance of the reporting units could differ from management’s estimates due to changes in business conditions, operating performance, economic conditions, competition, and consumer preferences. We have not made any material changes in the accounting methodology used to value goodwill during the past three fiscal years. Valuation of Long-Lived Assets and Other Intangible Assets We record an impairment charge to property, plant and equipment and amortizing intangible assets in accordance with the applicable accounting standards, when, based on certain indicators of impairment, we believe such assets have experienced a decline in value that is other than temporary. Future adverse changes in market conditions or poor operating results of these underlying assets could result in losses or an inability to recover the carrying value of the asset that may not be reflected in the asset’s current carrying value, thereby possibly requiring impairment charges in the future. 28 Indefinite lived intangibles are reviewed annually for impairment. The fair value of our indefinite lived intangible assets is calculated using either a relief from royalty valuation approach, or the excess earnings method. We are required to make estimates and assumptions about sales growth, royalty rates, and discount rates based on budgets, business plans, economic projections, and marketplace data. Our impairment analysis contains uncertainties due to uncontrollable events that could positively or negatively impact the future economic and operating conditions. We have not made any material changes in the accounting methodology used to evaluate impairment of long-lived assets and other intangibles during the last three fiscal years. While we believe we have made reasonable estimates and assumptions to calculate fair value of these assets, it is possible a material change could occur. If our actual results are not consistent with our estimates and assumptions used to calculate fair value, it could result in a material impairment of our long-lived assets and other intangibles. Insurance Reserves We have a self-insured medical plan which covers approximately 1,800 of our employees. We record a liability for incurred but not yet reported or paid claims based on our historical experience of claims payments and a calculated lag time. Considering that we have stop loss coverage of $300,000 for each individual plan subscriber, the general consistency of claims payments and the short time lag, we believe that there is not a material exposure for this liability. We self-insure, up to loss limits, workers’ compensation, automobile and general liability claims. Insurance reserves are calculated on a combination of an undiscounted basis based on actual claims data and estimates of incurred but not reported claims developed utilizing historical claims trends. Projected settlements of incurred but not reported claims are estimated based on pending claims, historical trends, industry trends related to expected losses and actual reported losses, and key assumptions, including loss development factors and expected loss rates. We have not made any material changes in the accounting methodology used to establish our self-insurance liability during the past three fiscal years. We do not believe that there is a reasonable likelihood that there will be a material change in the estimate or assumptions used to calculate our self-insurance liability. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to gains or losses that could be material. Income Taxes The annual tax rate is based on our income and statutory tax rates. Changes in statutory rates and tax laws in jurisdictions in which we operate may have a material effect on our annual tax rate. The effect of these changes, if any, would be recognized as a discrete item upon enactment. Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenues and expenses. Deferred tax assets and liabilities are measured based on the enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. We have not made any material changes in the accounting methodology used to account for income taxes during the past three fiscal years. Changes in tax laws and rates could affect recorded deferred tax assets and liabilities in the future. Other than those potential impacts, we do not believe there is a reasonable likelihood that there will be a material change in tax related balances. Business Combinations We use assumptions and estimates in determining the fair value of assets acquired and liabilities assumed in a business combination. We use various models to value assets acquired and liabilities assumed, such as the net realizable value method to value inventory, and the cost method and market approach to value property, plant and equipment. The determination of the fair value of intangible assets, which can represent a significant portion of the purchase price of our acquisitions, requires the use of significant judgement with regard to the fair value, and whether such intangibles are amortizable or non-amortizable and, if the former, the period and method by which the intangible will be amortized. We estimate the fair value of acquisition-related intangibles either through the relief of royalty method or multi-period excess earnings method, or based on projections of cash flows that will arise from identifiable intangible assets of acquired businesses, which includes estimate of customer attrition. The projected cash flows are discounted to determine the present value of the assets at the date of acquisition. For significant acquisitions, we may use independent third-party valuation specialists to assist us in determining the fair value of assets acquired and liabilities assumed. 29 We have not made any material changes in the accounting methodology used to account for business combinations during the past three fiscal years. We do not believe that there is a reasonable likelihood that there will be a material change in the estimate or assumptions used to determine the fair value of assets acquired or liabilities assumed in a business combination. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to impairment charges that could be material.