J & J Snack Foods Corp (JJSF) 2007 Q3 法說會逐字稿

Good morning, ladies and gentleman and welcome to the J&J Snack Foods third quarter 2007 earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session. Please note that this conference is being recorded. I will now turn the call over to Mr. Gary Shreiber, President and CEO. Mr. Shreiber, you may begin.

Thank you and good morning to everybody. I'm Gerry Schreiber and with me today is Dennis Moore, our Senior Vice President and Chief Financial Officer; Bob Purdano, our COO; and Ruthie Hound. I want to start out with the obligatory statements. The forward looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in the forward looking statements. You're cautioned not to place undo reliance on these forward looking statements which reflect management's analysis only as of the date here of. We undertake no obligation to publicly revise or update these forward looking statements to reflect events or circumstances that arise after the date hereof.

Results of operations. Net sales increased 16% for the quarter and 13% for the nine months. Adjusting for sales related to the acquisitions made over the past year, sales increased approximately 5% for the quarter and 4% for the nine months. For the quarter, our net earnings increased by 16% to $12.5 million or $0.66 a share from $10.8 million or $0.57 a share a year ago. For the nine months, our net earnings increased by 21% to $21.6 million or $1.14 a share from $17.9 million or $0.95 a share last year.

This past quarter makes the 25th, that's 25, straight quarters of increased earnings over the prior year. Our EBITDA for the last 12 months reached an all time high of $79.5 million for a 12 month period.

Food service. Sales for food service customers increased 15% for the quarter and 12% for the nine months. Without sales of Hom/Ade foods and Daddy Ray's, acquired during the second quarter, sales increased 2% for the quarter and 3% for the nine months. Soft pretzel food service sales were down 4% in the quarter and flat for the nine months. Italian Ice and frozen juice bars and dessert sales increased 10% for the quarter and 12% for the nine months; 5% and 10% without acquisitions, primarily due to increased sales of Luigi sherbet cups to schools. (Inaudible) sales were down 7% in the quarter and flat for the nine months going up against 60% and 52% sharp increases of a year ago period in connection with a rollout.

Bakery sales were up 9% in the quarter and 4% for the nine months as our specialty and private label business improved in the quarter, which offset a decline in sales of food service branded cookie business, which was that decline due in large part to reformulation caused by nutritional guidelines.

Retail, grocery and supermarkets. Sales and products to retail supermarkets increased 20% for the quarter and 16% for the nine months. Soft pretzel sales retail were up 20% for the quarter and up 16% for the nine months because of reduced trade spending treated as a reduction of sales and higher case volumes. Sales of our frozen juice bars and Italian ices were up 21% for the quarter and 24% for the first half. In addition to strong sales growth of Luigi's Real Italian water ice our Minute Maid licensed product had sharp increases in sales mostly attributable to new products which were introduced last year.

Restaurant groups. Sales of our restaurant group decreased 31% for the quarter and 27% for the year due to the closing of unprofitable stores and lower sales in general. During the quarter, we closed one additional store. [Name] store sales for the ten remaining stores were down about 9% for the quarter and 5% for the nine month period reflecting continued downturn in mall traffic. As previously stated, we are continuing with our exit strategy with this business.

Frozen beverages. ICEE and frozen beverage and related product sales increased 18% in the third quarter and 16% for the nine months. Excluding the impact of ICEE Hawaii and Slush Puppie, sales were up 7% for the quarter and up 4% for the nine months. Beverage sales alone were up 14% for the quarter and 16% for the nine months and up 5.3% without the acquisition. [Service] revenue for others was up 20% in the quarter and 27% for the nine months. Sales of frozen carbonated beverage drink machines were about the same as last year in the quarter.

Consolidated. Gross profit as a percentage of sales decreased to 34.25% from 36.2% last year, roughly two points. About half of the decline resulted from the lower margin rate Daddy Ray's business. We were impacted by about $2 million of higher commodity costs in the quarter and we expect to continue to be impacted going forward. Additionally, some costs which had declined early in the year, such as insurance costs, had year over year increases this quarter. Trade spending in our retail supermarket segment which had been running lower for the first six months of the year also increased this quarter to year ago levels. And coupon expense, treated as a reduction of sales, also increased this quarter.

Total operating expense as a percentage of sales was 1.58 percentage points lower in the quarter. However, excluding the impairment charges reported last year and other general income, operating expenses as a percentage of sales were lower by .23 of a percentage point this year.

Marketing expenses included $842,000 for the quarter and $1,764,000 for the nine months for a TV/Internet advertising campaign for our retail SUPERPRETZEL product. Approximately $670,000 of our increase in net earnings for the June quarter was directly attributable to Hom/Ade and Daddy Ray's. Without Hom/Ade and Daddy Ray's, our net earnings still would have increased by approximately $1,043,000 or 10%.

Capital spending and cash flow. Our cash and marketable securities balance increased $4.9 million in the quarter to $40.7 million at quarter end. Our capital spending was $5.4 million for the quarter. We are projecting capital spending to be about $24 million to $25 million this year which we estimate will be most with free cash flow, operating cash flow less capital spending, of about $33 million to $35 million. Cash dividend of $0.085 a share was declared by our Board of Directors on July 6. This represents the 11th consecutive dividend since we initiated it.

We are continuing to seek acquisitions to supplement our internal growth. Since our last call, we have acquired an additional ICEE distributor in Kansas; a smallish distributor, but nevertheless a continuation of our strategy which has worked so well in the past. As we discussed on our last call on April 2nd, we acquired the Whole Fruit sorbet and Fruit-a-Freeze frozen fruit bar brands from Cool Brands international. Over the past several years, sales of these branded products under Cool Brands have declined sharply for various reasons; however, we believe we of purchased the right brands at the right time and that the right price. Although we expect only modest sales for the remainder of our 2007 fiscal year, we expect significantly higher sales in succeeding years.

Along with the acquisition came a manufacturing facility in Southern California which gives us a West Coast manufacturing presence for our frozen novelty items and an ability to make stick items which rounds out our product lines. Sales of these brands in our third quarter were $831,000, in line with our expectations.

Additional commentary. My internal sales organic growth improved close to 5% this quarter from a little over 3% in the first six months. The exception of bakery items, which increase was driven by increased specialty and private label business, growth of our other food service business slowed. Although there are specific reasons for some of these declines in sales to some of our customers, we cannot offer our product excuses; we have to and we'll do better.

We are facing a continuing challenge with cookies in our school food service business because of nutritional concerns. We've made some progress with reformulated products, but the progress has been slow. Our frozen juice bar and dessert sales (inaudible) as we begin to emphasize growth in the health services sector in addition to school food service at stadiums, arenas and theme parks and because of the addition of Fruit-a-Freeze and Whole Fruit. And we recently completed an expansion at our frozen novelty plant which will increase our capacity to make frozen juice bars our school food service item, our signature school food service item, by 80%.

We anticipate continued growth in our retail supermarket segment, especially in frozen juice and ices as the new varieties of our Minute Maid branded licensed products [triggered] last spring appear to have been very well received by consumers and growth of our Luigi's Italian Water Ice continue to be strong. We expect Fruit-a-Freeze and Whole Fruit to gain significant distribution next year. Additionally, we expanded sales of our frozen juice and ices under private and co-branding label brands this year with two major supermarket chains.

We began a TV/Internet advertising program in March to support our SUPERPRETZEL brand. Total cost of this program is approximately $2 million of which we have already spent and incurred $1,764,000 through the third quarter. Our frozen beverage segment experienced slightly lower [gallons] down sales in our base ICEE business. We expect to continue to be challenged by our major customers as they make changes to their food service operations.

Our service revenue to others continues to grow, up 20% in the quarter, as this is a key component of our growth plans going forward. Slush Puppie, acquired last June, had a strong quarter and we're hopeful of continued improvement from this business. We expect to continue to be impacted by higher commodity costs for the foreseeable future, perhaps escalate from recent levels as the price of dairy products which impact cheese and milk -- which impacted dairy products have recently taken off.

Costs which were down in the first six month, such as liability and group health insurance, was slightly higher in the quarter contributed to the downturn in gross margin percent. Our investment income will be lower over the foreseeable future because of the money invested in recent acquisitions. Our estimated income tax rate decreased to 35% in the quarter primarily due to the resolution of State and Farm tax matters this quarter.

We have added Vince Melchiorre to our senior management team. Vince was recently named as our Executive Vice President in charge of sales and marketing across all snack channels. Melchiorre, 46, brings an outstanding 20 year track record and experience. Vince previously served as Senior Vice President with the George Weston Baking Group, responsible for a $1.8 billion division. Prior to that, was Senior Vice President of marketing and sales for Tasty Baking. Previously had been Senior Vice President of the Pepperidge Farm cookie and biscuit business and prior he was Brand Manager for Campbell's flagship Red & White Soup Group. Vince is a local Philadelphia guy; a graduate of LaSalle University with an MBA from Wharton.

Michael Caravan, our Senior Vice President of Marketing, is retiring and will be leaving at the end of our fiscal year in September. I would be remiss if I didn't acknowledge Michael's outstanding contributions to both the Company and to my successes over the past 17 years. He served with dedication and distinction.

In summary, our sales and earnings are up again. EBITDA reached an all time high. Our market share of our core businesses were maintained. Our product lines are expanding. Our management team and talent are committed and have been strengthened with the addition of Hom/Ade and Daddy Ray's. We believe we are well prepared for the future. Thank you for your interest. I'll take some questions.

Thank you. We will now begin the question and answer session. (Operator instructions). Our first question comes from Mitchell Pinero. Please state your question.

Good morning, everybody.

Good morning, Mitch.

A couple questions here for you. The way I look at the quarter, you had $0.03 a share with favorable tax rate and $0.03 of onetime gains; the royalty settlement, et cetera. So I back out that and I add back that one time impairment charge. The quarter to me looked down; $0.60 versus $0.61, despite a very remarkable up 16% sales and a very strong organic sales growth of up 5%.

I understand the commodity costs issue hurting by $0.04 a share. Certainly, that's a major part of it, but what I want to understand is did the acquisitions, recent acquisitions not contribute meaningfully in the quarter? I don't really understand why earnings wouldn't have been better, even including that heavy pressure from commodities.

Mitch, when you say recent acquisitions, I assume you mean Hom/Ade and Daddy Ray's.

Correct.

They contributed, I think, close to $0.04 in the quarter.

Okay.

What we were really impacted by was the cost increase.

That I guess when I look -- I looked at your segment breakdown and return on assets was down in the quarter in food service. So part of that is explained by commodities. It's incredible. It's hitting every company. Are you not getting enough pricing?

We didn't get any pricing in the quarter. We concluded that all of our -- we've known a lot of companies have been going out there and getting pricing and maybe we've got to look at that a little bit closer. Allowances were up. Our retail marketing campaign aided the profitability. Plus fundamentally there's nothing wrong, but we've got to pick up that two percentage points on margin and we think we can do that.

So is it going to get picked up because of higher prices or get picked up because you're going to operate more efficiently? How do you get that up there?

Hopefully, we'll get a little bit of stability with what's going on here. Back in March and April, prices hit the ceiling and can't go up any more. Well, guess what? Most people were wrong. We think it will be a combination of both, Mitch.

Your TV spending seems to be driving sales growth. Sales of soft pretzels up 20%. Do you attribute that to TV?

I can't tell yet. It's still too early to tell. Sometimes you get some of these little shifts between food service and between retail. We won't be able to tell for another quarter.

So you had really strong growth there, but again, it looks like segment sales or profits were down.

In the second quarter, our sales and retail were way down, so there were some deals in place in there. Unfortunately, in retail it's a longer played deal when you look at to get the fact. You know what our market share is and we think we're capable of managing that business and building those sales incrementally.

When it comes to by the way, is your tax rate -- is that the tax rate for the fourth quarter, that 35%?

Mitch, this is Dennis. No. We would expect it to go back up to the 38%, 39% range.

Okay. Okay. I'm just, again, struggling with the difference between your sales growth and the earnings growth. I just see it as they're not meshing. Certainly, I'm pleased with the top line. I just don't quite is it just commodity costs? Is there anything else in the business that's kind of are there more acquisition synergies yet to come? Have they played out as much as you thought they would; Hom/Ade and Daddy Ray's?

I think you have a four-part question. If I had a chance to rearrange our product mix, I could do some things and do some adjustments with some allowances and some other margins in there. We don't think that there's anything in there that has to be fundamentally reworked.

Okay. In years past, your fourth quarter generally looks a lot like your third quarter. Is there anything is that going to hold true again this year?

There's one perhaps significant difference between last year's fourth quarter and this year's fourth quarter. Last year was one of the seven years where we had 14 weeks.

Okay. You had the extra week. Right. Sure. Is there anything else besides that? So in other words, commodity costs are going to continue to hurt you?

Commodity costs are going to impact us.

And pricing -- if pricing hasn't helped yet or you haven't --it's probably not going to help you here in the fourth quarter.

That's correct. There would be no measurable impact until the next fiscal year. (Inaudible) is slow. It just takes a while.

Okay. That's it for now. I'll yield the floor. Thank you.

Thank you, Mitch.

Our next question comes from Sarah Lester. Please state your question.

Good morning.

Good morning, Sarah.

I have a question about the raw materials cost for the fourth quarter. Are you expecting a bigger impact for the fourth quarter then what we saw in the third quarter?

I hope not. Dairy has almost doubled and that's some of the milk solids, cheese, butter, and eggs; wheat, flour has risen tremendously. The consensus seems to be that they have peaked there, but since we've been twice burned, we'll wait to see what happens.

Okay. And then, I wanted to talk about the decline in pretzel sales in food service. It was due to one customer. Is this a one time decline or is this a more of a permanent change?

We believe it's really a one time decline because of a shift in focus with some other products. We think that will be recaptured if not this quarter, certainly within the next quarter and a half.

Okay. And then you've mentioned the health services sector a few times. I just wanted to know are you selling your frozen juice bars, which is the Minute Maid, or are the formulations different?

The formulation is a little different. We're selling something other than Luigi's banner and we're selling a sherbet which meets the nutritional guidelines and it's a very smooth eating product, which means health care patients who have swallowing issues and digestive issues; we have now been approved to be on their menu and it's turning out we had some nice sales from that over the future.

Okay. Great. Thank you.

(Operator instructions). We have Mitchell Pinero online with a question. Please state your question.

Hi, it's me again.

Hello, me again.

Just getting back to the fourth quarter. Excluding your wheat issue, I look last year -- if I add back the $0.04 of impairment charge to your third quarter you did $0.61. You did $0.61 in the fourth quarter. This year you did $0.66 in the third, but six-tenths of that were -- you're not going to have one time gains and one time tax rate benefit. I'm looking more like are we going to see it I know you don't give guidance but are we going to see that type of earnings growth equivalent to more like $0.60? Or are your expectations for the fourth quarter should look similar to this quarter on an absolute?

I hear you, Mitch, and I think I hear where you're going. Keep in mind that it's (inaudible) high and ICEEs and our retail novelty group, their strong periods are July, August and September.

Right

I think that we should be hopeful of -- and again, we don't give guidance but the 14th week we've been pushing and stretching to see how we can overcome that fourteenth week this year and we're still committed to doing that.

Okay. As far as -- by the way, April, at least on East Coast was a pretty bad month. Did that have any impact on the quarter? Weather wise?

April was flat. May was good. June quite frankly, June the weather was the weather and what not. June was not good in some of our soft pretzel and bakery sales. It didn't help that a major customer remodeled their whole format and literally were out of pretzels for a couple of weeks. That's one of the big changes.

Okay. When you look at -- going back to school food service for a second. Obviously, you're getting hit. What are they replacing your product with? What are you seeing going in instead of your cookies? Is there any is it carrots and celery sticks?

Yes, they are. Apples with the dippers. A lot of fruit stuff what happened was some of them were being replaced with reformulated products where the Trans fats or reduced fats weren't changed. Goodness and children have a way of voicing their opinion on new products very quickly by like, "Yuck, I'm not eating that." Right? Which is okay for us because it gives us a chance to get back information real quickly and we've made some great strides recently in school. About two weeks ago where we had much more people in Chicago and we seem to have a better feel and a better handle on what we've got to do and how we're going to do it.

Does daddy Ray's product line help you at all in this area?

It will. It will. Daddy Ray's is probably you know about the acquisition. Both acquisitions, Hom/Ade and Daddy Ray's fit right in. They ran very minor no headaches, good management employment groups in there; both running fine. So they will continue. As a matter of fact they may even increase their contributions.

My last question for you is regarding acquisitions. To me, with the recent issues in the credit markets and maybe having easy money gone, do you think that's going to give you an advantage in bidding for other companies, or at least broadening the potential acquisition pipeline? How would you characterize your current acquisition pipeline? Full, active?

Mitch, we've made some acquisitions in the past, but we hit a little low period where we didn't take any for a year and a half and then, boom, we did three last year. We have some things in the funnel and we're looking at some things. We made a small acquisition of an independent ICEE distributor this past quarter. We're looking to grow our business both organically and through acquisitions and we expect to do both.

Okay. Thank you.

Thank you.

Our next question comes from Brian Rafn. Please state your question.

Good morning, Gerry.

Good morning, Brian. How are you?

I'm good. I jumped on a little late so this might be a little redundant. You were talking about commodity inflation, Gerry. What is your ability at the retail level to pass on per unit higher costs in the product to the consumer? You've always talked about, especially in the frozen area, that $3 is kind of the benchmark. As you absorb these commodity rises, what is your ability either to change packaging or volumes or to pass on higher prices?

We're going to be more tenacious because when you look at things that we've done within our own operation to glean out efficiencies and glean efficiencies there comes a point where in order to protect and maintain margins that you just have to. I think it's interesting and it bears mentioning that a lot of the packaged foods companies, the Kellogg, Swan, McGee, they've all recently announced price increases. I don't know if it's fashionable, but it's certainly not foreign.

Okay. Okay. Did you have a level of -- I think you talked about the dairy being up if I caught your question right and the answer right, you were up almost double. What in some of the grains and I'll say wheat, oats, corn that you guys might use. What are you seeing as far as year over year?

It probably costs about $11 this time last year; $12 is now $17 roughly. That's a 50% increase. We're probably one of the biggest flour buyers/users around. Spot prices today would still be about that. Is that right, Dennis?

Okay.

It's pretty high. Part of that is a lot of different reasons. Some of it is going to China. Corn is going crazy because of ethanol. Dairy has gone up because they've reduced the herds because farmers didn't make any money on dairy a couple years ago. So, now they slaughter the cows so they'll have less dairy and the price goes up. You go through these cycles.

Right, right, right. Are you guys seeing currently in a quarter the same type of Delta change or do you think some of those costs maybe are plateauing a little?

No.

Okay. Okay. Let me jump over to -- you guys talked about the swap-out on a school service side and all the calorie and Trans fat issues. What do you guys and I missed the first part of your comments what are you guys doing relative to the substitute products to get back in where you might have had cookies or some other things pulled out?

Well, we have a couple of new products that meet the bread requirements and satisfy the nutritional guidelines. They seem to be doing okay to well. We are also in the process of reformulating our cookies with respect to Trans fat and reduced fat.

Okay. Anything on the acquisition of the Slush Puppie side? You guys have had it not for a while. Anything on product line extensions, new flavors, things you may have picked up?

We are constantly developing new flavors of ICEE and we'll rotate these flavors and add them at point of sale locations. But that's an ongoing continuation basis.

Okay. Okay. Can you comment this summer, both in terms of what you might have seen from a weather standpoint across the country, as well as maybe the impact of the theater cinema, what Hollywood's producing in movies and that impact on what you're seeing volumes distributed in ICEE? Either theaters and again the weather issue?

The weather has been okay. I can't complain about the weather. If anything, a couple of days it was too hot. But you want hot weather in the summer. It's certainly serves us well for frozen novelty and our ICEE and Slush Puppie business. We have one month of the summer so far and hopefully rain and cool weather is what we want to avoid, but summer weather is generally good for our business.

Okay. So you would characterize '07 here as being okay?

Yes, I would.

Okay. Okay. And finally, what are you guys seeing relative to the labor pool, employee retention, turnover and kind of what you're seeing salary and wage inflation?

That's manageable. If I had to make a list of my 10 things that I worry about most, one would be sales, two be commodity pressure; that labor would be somewhere around the ninth or tenth.

Okay. Would you characterize what you're having to pay in wage growth, Gerry, low to mid single digits? I'm just kind of getting a sense of magnitude.

Mid single digits.

Okay.

Wait. Low to mid -- we're probably high single digits.

Okay. All right. Thanks, guys. Good job.

Our next question comes from Cheryl Cortez. Please state your question.

Gerry?

Yes.

Most of my questions were answered, but I had a few more high level ones.

Sorry, who is this again?

Cheryl Cortez.

Cheryl, how are you?

I'm good.

I'd like to is back up to the comment that I made to the gentleman who was just on before, Brian. Wage rates are going up low single digits, not high single digits. Okay.

Are you ready? Okay. One of your associates told me that there is a direct trademark register under JJSF or something called the Big Swiss. Is this going to be a large innovation going forward?

Big what?

The Big Swiss.

Big Swiss?

Yes. It's on the Office of Patents and Trade website.

The Big Swiss. Boy, not that I'm involved in every detail -- the Big Head?

No, something about Swiss, like the cheese.

Big Swiss. Huh. I really don't know. Michael Caravan, are you on the call? The Big Swiss. I just don't know adding about it.

Okay. That's all right. I was also noticing that at the end of June there was Supreme Court ruling on minimum retail pricing, saying that it is actually legal to sort of have preferential pricing to specific retailers. I was wondering if that would have any implication on the SUPERPRETZEL?

That doesn't impact us.

Okay. My last question is in terms of the frozen beverages segment, on the soda side you're looking at new products that come out with more nutritional or pharmaceutical effect like no sugar, no sodium, et cetera. Do you see that as a trend in the way future for your frozen drinks?

Well, we do and we're testing with that segment all the time. Some of these things are on trend and we introduced a couple of products last year with no sugar added on our Italian Ice. To the extent that these things become trends, not fads, we expect to widen our product offerings.

Thank you very much.

Excuse me. We have Michael Caravan's line open for you.

Okay.

Hi, Gerry. This is Michael Caravan. I'm not at your location but I just did want to answer that question about the Big Swiss. One of the initiatives we have on cheese and we do have a trademark for the Big Cheese was we were working on some other initiatives including Swiss cheese, so we wanted to make sure that we projected that mark as well as a potential extension of our Big Cheese line. That was something that we did -- a lot of that was about nine months ago or 10 months ago when we were working on product development. So I just wanted to throw that answer in.

That's great. Again, for all of your listeners, I try and keep on top as much as possible, but I do have a terrific staff of people that have duties and responsibilities so we do have a registered trademark. Are you saying, Michael, that there is no plans to introduce a product like that?

It's one of the areas that we're looking at and something that we certainly wanted to project. When we go into development on something, the first thing you do is you want to try and file an intent to use in case we want to use that trademark; it is projected.

Okay. All right. I hope that answers the question for the previous caller. Cheryl.

Our next question comes from Matt Spitznagle. Please state your question.

Hi. Good morning. I was wondering if you could comment about your biggest opportunities to increase penetration in existing market channels and then also your biggest opportunities to expand established products into new markets.

Well, we have multiple opportunities which also present various challenges. For a number of years, we have been trying to expand our product offerings into the fast food and casual restaurants and we appear to be making some progress, albeit slow. Just to get our cookie business right side up and reformulate it with the educational system and schools and whatnot and meeting the nutritional guidelines. It should present an excellent opportunity to recover some of the sales that we've been impacted by.

Okay. And in terms of your acquisition pipeline, are there any other food areas that you're looking to add to your portfolio that you can share?

I'll answer that in two parts. One, yes there are other food areas. Two, I can't share because some things are confidential and certain things I just don't feel comfortable sharing at this time.

Okay. Thank you.

Thank you.

Our next question comes from Brian Rafn. Please state your question.

Gerry, I'll follow up on that last question on a portfolio for packaged foods. When you're able to finish those acquisitions or whatever those areas, would we as investors either retail or institutional be surprised at the portfolio diversification in foods that J&J would answer or would they all be -- that sounds like its appropriate?

That's a hypothetical question, but let me ask it to you another way. Have you been surprised by anything in the past?

No.

Okay.

Okay. Let me ask you, too, from the standpoint you guys have done a superb job over the years of doing niche acquisitions and tuck-ins and rebuilding brands and that. We haven't really had a severe recession going back really pre-Reagan, 1980-82. We always talk about on the [M&A] side the price and private equity and multiples of EBITDA.

Are the quality of the companies that you're seeing today can you put a (inaudible) on say maybe versus 10, 15, 20 years ago. Are you seeing less of the resurrection or damaged balance sheet or can you get a sense as to the companies that you look at in your pipeline buying today? Is there any difference in the quality of the company today versus say 20 years ago?

There's a difference in the pricing, I'll tell you that much. We looked at numerous, maybe 10, 12 yields over a period of time. Maybe one will make the criteria for our cut, for our getting seriously involved in. Of that one, there may be another 17 that get to the point that we get billed from our interest and completion. We've been pretty good at finding things below the radar screen and we've looked at some bigger things. We'll continue to look at some bigger things.

You mentioned the recession years under Reagan. I don't know if the recession years were really under Reagan. I was a big supporter of President Reagan. I think the recession years came from the previous guy, the peanut guy, Carter.

Right, right, right.

Reagan had to fix. Things were pretty good for us under Reagan, as they were with (inaudible), Bush and Clinton and what not. Recession sometimes hurts, but we've had some of our best growth years during what others would call a recessionary period.

Okay. That answer's that. Thanks, Ger.

Thank you.

At this time, I am showing no further questions.

Okay. I want to thank everybody for joining us today and we look forward to having you all with us at our next conference call.

Thank you, ladies and gentleman. This concludes today's J&J Snack Foods third quarter 2007 earnings conference call. Thank you for participating. You may now disconnect.