J & J Snack Foods Corp (JJSF) 2009 Q3 法說會逐字稿

Good morning ladies and gentlemen and welcome to the J&J Snack Foods third quarter 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 Gerry Schreiber, President and CEO.

Mr.

Schreiber, you may begin.

Thank you, good morning, everybody, and welcome to our third quarter conference call.

With me today is Dennis Moore, our Senior Vice President and Chief Financial Officer; and Vince Melchiorre, our Executive Vice President in charge of Sales and Marketing; Bob Radano, our Senior Vice President and COO is participating from a remote location.

I will begin the conference call 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 are cautioned not to place undue 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 the forward-looking statements to reflect events or circumstances that arise after the date here of.

Results of operations net sales increased 2% for the quarter, and 4% for the nine months.

For the quarter net earnings increased by 38%, to $14.9 million, or $0.80 a share, from $10.8 million, or $0.57 a share a year ago.

If the nine months our net earnings increased by 58%.

That's 58% to $1.42 a share from $0.88 a share the year ago period.

Our EBITDA for the past 12 months set a new record of $90.1 million.

Food service, sales to food service customers increased 2% for the quarter and 5% for the nine months.

Soft pretzel sales were unchanged in the quarter and up less than 1% in the nine months as unit sales were flat in the quarter and down 5% for the 9 months.

Italian ice and frozen juice bars and dessert sales decreased 3% for the quarter and were flat for the nine months.

Churro sales continued its strong gains with up 11% in the quarter and 29% in the nine months primarily due to sales to one customer.

Bakery sales excluding biscuit and dumpling sales and fruit and fig bar sales were down 3% in the quarter and up 4% in the nine months.

Biscuit and dumpling sales were up 27% in the quarter and up 8% for the nine months.

Fruit and fig bar sales were up 9% and 18% as sales to dollar stores and discount grocery stores increased.

Funnel cake sales were up 64% in the quarter.

And 54% for the nine months as we have introduced new varieties of the product which appeared to be gaining successful trial.

Maybe in the next few months we may have something really to crow about.

Despite the challenges of the economy our balanced portfolio appeared to do very very well for the period in the 9 months.

Retail supermarkets, sales of products to retail supermarkets were up 22% for the quarter, and 9% for the nine months.

Soft pretzel sales were up 18%, on a case volume increase of 6% for the quarter, and up 6% on a case by case basis for the nine months.

Sales of frozen juice bars and Italian ices up 28% on a case volume increase of 41%, for the quarter, and up 14% on a case volume increase of 21% for the nine months.

Frozen beverages.

ICEE frozen beverages, which include Arctic Blast and Slush Puppy and related product sales were down 6% in the quarter and down less than 1% for the nine months.

Beverage sales alone were down 2% in the quarter and up 1% for the nine months.

Beverage dollar sales increase for the nine months resulted from a change in program structure for one customer, which resulted in both higher sales, and higher cost of sales and operating expenses.

Gallon sales were down 3% in our base ICEE business, which kind of reflects what has gone on in the overall beverage category, although we were down less than the major beverage producers, and down 2% for the nine months.

Service revenues for others was down 7% in the quarter and up 9% for the nine months.

Sales of frozen carbonated beverage machines were down $1.4 million a quarter and $3.1 million for the nine months reflecting the tighter economy, particularly impacting the convenience store segment.

Consolidated, gross profit as a percentage of sales increased to 34% from 31.5% last year.

And to 31.3% in the nine months from 29.1% a year ago.

This was a gain of over 2 full percentage points.

We benefited by over $6.0 million of lower commodity costs in the quarter, the nine months commodity costs lower than last year by about $5 million.

Notwithstanding that commodity costs are still substantially higher than what they were two years ago.

Total operating expense as a percentage of sales was 1.3 percentage points lower in the quarter, primarily due to lower fuel and transportation costs and lower selling expenses in our food service business and frozen beverage segments.

Our operating income was impacted by about $2.3 million of higher workman's compensation and group health insurance costs for the nine months with about $1.5 million of the increase coming in the third quarter alone.

Capital spending and cash flow, our cash and investment securities balance increased $19.1 million in the quarter, to $101.6 million.

Let me repeat that, we are sitting on over $100 million in cash.

Our capital spending was $7.4 million in the quarter, capital spending for the year will be in the 22 million to $24 million range as we continue to invest in plant efficiencies and in growing our business and business segments.

A cash dividend of $0.0975 a share was declared by our Board of Directors and paid July 7, 2009.

Our Board of Directors authorized a 1 million share buy back in February 2008.

We bought back and retired 586,000 shares through the end of June.

We did not buy back stock in the June quarter.

Commentary, our sales growth of 2% in the quarter resulted from a combination of limited pricing, unit volume increases and decreases and increased trade spending in our retail supermarket segment related to the introduction of whole fruit frozen fruit bars as well as increased couponing in our retail supermarket segment.

In food service, soft pretzel unit volume was flat which is a significant improvement from the first six months of the year, when unit volume was down 7%.

Just as an added commentary, far be it for me or anybody at J&J management to be satisfied with flat growth and we are not, but flat growth represents a pick up in the previous couple of periods that at least we believe we are on the right track.

Churros, biscuit and dumpling fruit and fig bar and funnel cake had strong positive unit growth due to new products and customers increased distribution.

Other bakery item sales were down in the quarter due primarily to lower unit volume to two customers.

Unit sales of soft pretzels in our retail supermarket segment were up 18% in the quarter.

Which was a significant improvement from last quarter when case sales were down 6%.

Some of this may be due to timing, and some of this maybe economically related as more families are snacking at home.

Case sales of frozen ice and juice bars were up 41% in the quarter compared to being up 18% in the second quarter.

Operating income in this segment was impacted by higher grocery slotting cost of $466,000 in the quarter and $1.1 million for the nine months as we introduced new products.

We also began running a TV commercial in June at a cost of about $200,000 in the quarter and $500,000 for the nine months.

Additionally, we increased couponing in the third quarter to help sustain and build volume.

Gallon sales in our ICEE business were down 3% in the quarter after having been up 1% in the second quarter.

Our service revenue to others fell this quarter by 7%, but we should note that last year's service revenue which was up 44% from the year before included significant one time revenue from the installation of beverage machines at a major fast food restaurant.

We expect our investment income to be significantly lower over the short term even though our balance of investment securities in cash and cash equivalents is higher than a year ago.

We have invested in lower risk investments since mid September and we have lost the benefit from our holdings of higher yielding auction market preferred stock amps.

Additionally the drop in interest rates in general will impact our investment income.

Our estimated income tax rate was 39% for this year compared to 40% last year.

We expect our income tax rate to remain in the 39% range.

Our Company finished 2008 with a theme of standing strong.

We are now standing stronger after three quarters of fiscal year 2009.

We are continually driven to do our best and make these gains sustainable.

Our fundamentals are strong and getting stronger.

The future remains bright.

Our financial condition is pristine.

We have no debt, our management team is experienced, accomplished and seasoned.

Surely we have something to cheer about for the quarter and we look forward to repeating the success next quarter.

Thank you for your continued interest.

Now I will turn it back to you for questions and comments.

Thank you.

(Operator Instructions) Our first question comes from Mitch Pinheiro.

So this is kind -- it was an interesting quarter.

In the sense that on the top line it was probably one of your weaker performances of going back five plus years.

And then on the margin side the 13.6% operating margin was, I guess could have been the best in the last ten years.

So with that as background, and then with your sort of closing remarks saying that your fundamentals are strong and getting stronger, what exactly, what exactly do you mean by the fundamentals getting stronger?

Do you think the margins that you posted are sustainable?

Do you think your sales growth has bottomed?

And we are going to see stronger growth?

Could you elaborate?

Surely.

I certainly don't think that our sales growth has flattened and bottomed out and we are cautiously optimistic.

The fact that we were able to gain a couple of points in this kind of economy I'm reasonably satisfied with that.

We have particular segments that were significantly off.

I mean the major, some of the major chains of mass merchandisers without mentioning names had declines of mid single digits.

Some of of the convenient stores also had similar declines, leisure and theme parks were off.

With all that I think that our expanding and balanced portfolio gave us some other gains to offset that and our continued efficiencies in managing and running the business and being a low cost producer and expanding our distribution network have added value and driven to the bottom line.

I think then we are poised to continue these gains and I have, in some ways I have never felt better about the business, I have a high degree of confidence in my team's ability to execute.

Gerry, in that regard on the sales line, I didn't mean to suggest that things are bottoming here but I guess you do have -- you said you were cautiously optimistic on the sales grid.

Perhaps the 1.7% sales growth in the quarter might be the low point for the year and maybe for the next several quarters you see yourself working off that rate to a higher level.

I would hope so.

But who knows.

We have an unemployment rate out there depending on who you talk to, that is somewheres between 10% and a lot higher.

I think it's -- we are an impulse item.

If people are not going to a theme park or to a ballpark, our local team excluded because we are showing up in record numbers here in Philadelphia, but when people are not there is it's hard for us to get our 1 and 10 or our 1 and 20 sales from traffic.

However, if you look at retail, more people are shopping, perhaps are snacking at home and we noticed a little bit of driven -- our retail grocery portfolio and certainly the success that that we had with the dollar store segment in the past 2 years is significant.

That's a business segment we weren't even in some 2.5, 3 years ago now it's driving what is a fair amount of sales.

But I think we've always been down -- one thing I didn't mention our school business has been a little bit challenged too, as they are dealing with their budget woes and some of the staff adjustments and overall general issues.

But given that we've always been recession resistant.

I can never say recession proof but we've been recession resistant and we continue to work with our customer partners and doing everything we can to one, be a good partner and two, to help out and develop and drive product sales.

How much, if any, did weather have an impact on Q3?

I mean, it's hard to gauge, but we certainly had a cool start to the summer on the East Coast.

You are right.

I'm going to say this, on behalf of my people, they know I never like to accept the weak excuse for weather, I don't give a (expletive) if it snows in June I will not accept weather.

I've got to tell you something, it did have some impact.

We were a little bit slowed in our retail drive with some of our new products and it certainly had an impact on ICEE and Slush Puppy in there.

I think that the team did an outstanding job given what we we had a lot of rain and cool weather.

But it happens.

Generally it balances out over the long run, we are certainly long run people.

As you look -- and how about as you're into this fourth quarter now -- have you seen -- and weather seems to have normalized, have you seen any change in the gallon sales or in SCB?

Too early, Mitch.

We're three weeks, today's nice, yesterday it rained.

Okay.

Just getting back to the margin question.

Is there -- are you at all -- do you feel you are at all under spending on the marketing side.

You clearly shifted some of your consumer spending to couponing and trade promotion to offer value.

But do you feel -- and you did increase advertising modestly.

Do you feel that you're spending enough to support your business or will we see maybe next year in 2010 that the marketing line ramping up?

Depending when I talk to Vince either early in the morning or late at night, I'm either spending too much or spending too little.

Let me have Vince answer that he is sitting right here.

This year we are spending and we're learning and we're testing and we're limiting the geography.

If we are successful, and we see sales growth from it, we will expand it next year.

We are certainly not going to starve our brands, we spent too long of a time in building them.

We have some really successful leading brands and good brands in there so we want to invest wisely.

Just a couple more questions.

One, staying with the margin question.

Other than some unusual spikes in commodity costs and staying in a pattern that we are seeing now in terms of what the economy is doing to the food service business and those type of, sort of those inputs, the margins that you delivered in this quarter and the improving margins you saw through the year, would you expect to be able to, on a annual basis be able to maintain the type of margin that you are doing in fiscal 2009?

Do you think it's sustainable in 2010?

We would hope so.

We are going to do our best.

There is nothing out there that you see, I mean product mixwise or channel mix or anything that would have an impact on your margins in the upcoming quarters?

Right now our major commodities and packaging and for that matter, energy, seem to have stabilized.

We went through something a year, year and a half ago which was unprecedented.

I hope we don't have to go through that again, where we are going to have our raw material commodity costs increase by 60, 80%, suddenly and without warning and really for no reason.

We dealt with that.

We had to pass along some pricing, we never got ahead of the curve, we never passed on enough to make up for what we lost.

But we seem to have managed that crisis well.

We had a very profitable year last year, even though it was down against the year before.

But this is all part of thinking wisely and managing for the long-term.

So we are comfortable now.

And we are watching the commodities closer, we are booked out until what amounts to almost calendar year end.

And to the extent that stability remains stability, we will be fine.

I do have one last question, I'm sorry.

When I do look at your third and fourth quarters throughout the years going back they typically have been very close to one another.

And I just was curious if you could comment on why, if any, there would be a difference between the third quarter this year and upcoming, and the quarter you are in now, the fourth quarter?

I think what you are trying to do is you're trying to say let's see, now, they earned now $1.42, $1.43, for the quarter, if I put $0.80 on that -- that would really be a strong strong quarter, we have some things that are happening this quarter that we didn't have last year, like some increased advertising, which is all written off during the quarter.

We also had some slotting -- we expect to have another good quarter but as you know, Mitch, we don't give guidance.

Hopefully the economy -- the way things are now, we are managing, and we will continue to manage -- how far it waivers in to the different aisles.

Okay.

Thank you.

Thank you.

Mitch

Our next question comes from the Brian Rafn, please go ahead.

Morning, Gerry.

Question for you, give us a sense, Gerry, in the grocery stores, the warehouse clubs how much is the battle for shelf space, are you defending territory or are you able to crowd out other brands?

Well I wouldn't exactly be overconfident, but by the same token our people are defensively offensive and offensively defensive too.

The supermarkets struggle, fight is an ongoing one, we seem to have reasonably good presence in our core brands and so we've done an outstanding job in getting trial and we think successful trial with our whole fruit line up.

Club stores which is on a store by store basis bigger volume and lesser skews in there, we are also doing a fine job and there is always other people looking at it.

But we make a good quality niche product and we are the low cost producer and we are lean, efficient, and sometimes mean.

So we are going to protect our turf and our values as best as we can.

Okay.

Relative that some of the, when you guys come out with line extensions and new flavorings and formulations, your co-branded stuff on the Minute Maid you originally came out with those little juice triangles, you had a grape, cherry and orange offering, now you come out with green apple, mango and fruit punch.

When you come out with new flavors, Gerry, does that give you more penetration in sales or do the new flavors cannibalize and the group as a whole, six flavors versus three, are really about the same?

It's interesting.

It's something we are studying now, because this is a new product line.

Overall we have higher sales but there is some cannibalization because if you look at some of the favors in there, and it's something that we are looking at what we can do, so we can have more sales but less cannibalization.

Okay.

Do you need more flavors in that business or more new formulations just to keep the brand fresh?

It's -- you need to -- you need to offer a vary of flavors and then there is trends, some of the new flavors are Hispanic, some of the new flavors are, mango appears to be a popular flavor now and so we made some adjustments that way.

The basic red, blue, and other flavors are always going to be there, but it was the first new flavor offerings in the Minute Maid box label for supermarkets in a number of years and we are reasonably satisfied although we're looking for ways that we can goose it some more.

Okay, all right.

From the standpoint of you looked at, you made acquisitions last year, the whole fruit sorbet, the Fruita Freeze, Daddy Rays, and you had some numbers in sales in the K last year, can you tell us home made the biscuits and the dumplings was about a $30 million business when you bought it.

Are you incrementally adding sales in those new products, are you holding sales, are they meeting your revenue plan?

We are adding sales.

That business is being well managed by Greg Lowery who was part of -- who is President of the unit force and running it and it continues to grow its sales and expand its geography.

Would you characterize those new products, Gerry, as still regional brands or are they pushing nationally?

It's predominantly in the southwest, which would be our predominant biscuit and dumpling geography.

Anything on the pretzel fills you guys were certainly looking at different fill flavorings, coatings and that type of things, you did see a case good change to the positive in the pretzel area.

Anything on the permutations for that area?

Actually we are in the process of taking a look at one of them, at one of the fill products there because it should be doing better and we are -- so yes, we have -- Vince has under him an innovation and R&D team and we are looking at ways to make the product better and make it more satisfying to eat both the taste profile and flavor in there.

So we are not happy where the overall sales and a couple of other, in a couple of instances so we are looking for ways to further that.

Okay.

Gerry you talked about baseball and -- stadiums and arena sales, the movie docket cinemas, theaters have been pretty good.

It's been good product, have you guys noticed anything change or dealt the change of sales of maybe ICEE in to that area.

Theaters has been a positive growth for us this year, couple of reasons I guess, good movies attracts people and I think people are not moving around as much this year and staying at home and going to a movie and that.

To the extent that our pretzels and our ICEE and some of our other products in there, yes, we benefit.

Wall Street Journal ran a article a couple of days ago, Gerry, on obesity with children and that it was buried in one of the second sections.

When you go out and look at trends in school systems and food service, and sugar and vending machines, when you look at those statistics in the article, it looked like the Gulf Coast, the obesity was much higher than say up in the Pacific Northwest, when you look at school systems across the country or food service across the country do you guys see differences in trends or health or nutrition or is it a blanket across the country?

Well, you have some of the leading states, California is always a leading state with rules, regs and some of the others, obesity, in children, I'm a big believer, kids should play and gym and that belongs in schools.

I have grown three children, outstanding children in there that were always busy and active and they took gym in there, I wonder maybe are we -- sometimes do we worry too much on what they are eating and not enough on what they are doing.

If they are sedentary and sitting, working on a computer and watching TV and video games in there, the metabolism is going to change.

Our products, our cookies have been formulated, with sugar out and trans fats out.

Our juice bars have been reformulated so they're whole fruit and contains no sugar.

We have been on the leading edge with that to support the school food service system.

However have we seen an appreciable increase in our business, the answer to that is no we have not although our sales are by and large holding.

Yet we understand they are going through some serious issues with budget, with staffing, with spending in there, so that's part of the problems that we have to help our partners in this case the school food service system internationally and we do a good job of that, we have a good team with that.

Do you think they are -- they are at least giving you the benefit of the credibility of those reformulations even though you are not seeing the incremental sales?

Are they acknowledging to you guys yes, you are giving us a better product, healthier product?

Yes they do, we do, we have people that work with them very very closely and we are known to be very high on their list as a good partner and a good provider.

What trends do you talk, Gerry, commodity prices although still up versus three years ago, plus.

Are trends continuing in to the fourth quarter here are the same?

Kind of a decline?

I mentioned commodity prices up from two years ago.

But commodity prices have stabilized.

To some degree softened.

Hopefully that trend will continue or even improve.

We are comfortable right now.

Give me a sense, Gerry, your level of importance as the CEO relative to incremental sales growth, delta change in sales from new products, new flavorings, new formulations versus new penetration in the different distribution channels?

Let me defer to Vince.

I think new penetration at distribution channels is always first for us.

Okay.

Innovation will give us some growth but it's always, you got to grow the core items first, and whether it's channels or programs or whatever but you got to grow the core business first.

Okay.

Gerry, you've always been the master in the M&A side, let me ask you, in looking down kind of across 15 or 20 plants in the K, Pensauken, and Del Mar, Norwalk, Atlanta, Scranton, you got a whole list, you have latent capacity?

I only have 11 plants.

They all give me headaches from time to time.

You got me up to 15 to 20, we will get there.

I apologize but from the standpoint you guys, you still have internal capacity, when you are looking at deals, Gerry, do you ever see in the packaged foods area the ability to buy a product line, a flavoring without getting the attached property, plant, and equipment in the plant or are most of the deals that you see have hard assets with them?

Most of the deals that we see are with hard assets.

Occasionally we will see something that has no hard assets with them with the exception of point of sale equipment like when we bought Slush Puppy.

But it varies and we have a constant flow of things that we are looking at and I think for the first time in a couple of years we could actually say that some of the values have come back down to earth.

Maybe they haven't touched ground yet.

But they are no longer sailing too far above our head to make it a wise acquisition.

So Dennis and I and Vince are busy looking at a few things now and we've made some acquisitions in the past and I don't want to comment on that too much right now except chances are we will be making some acquisitions in the future.

So the multiples in EBITDA are getting a little more rational from your side?

A little more rational.

Superb, job, Gerry.

Thanks again.

Thank you.

Our next question comes from the [Robert Costello], please go ahead.

A couple of quick questions.

One, you mentioned on the Wendy's chain and your -- in Six Flags with the financial problems they have as well as Anheuser Busch--.

Excuse me.

I don't think I mentioned Wendy's chain at all.

Well, I know they are in there with the ICEE, I've been in them.

Hello?

Yes.

But I don't think I mentioned Wendy's chain.

I'm just saying, I'm just asking with the changes in management in these different organizations, with what has gone on, is there any affect on your business with, in the amusement park or in the food store business positive or negative?

Let me comment on the second part of the question first.

Or on the third part of the question second.

Whatever.

I will comment on the amusement park business you mentioned Six Flags and I think you're perhaps alluding to perhaps the credit financial problems?

Right, they are offering by one get one to get in this summer.

Hopefully the buy one get one will get more people in there, if there is more people in there, that should a positive affect on us on sales.

However it's no secret that the leisure and the theme park industry has been sagging a little bit on attendance the past 90 to 140 days that does impact us.

So this quarter when we are comparing our sales and sales were a little bit tipped, up a little bit in there, part of that was attendance driven at leisure and theme parks, which would mean the amusement parks as well as the baseball stadiums.

So it does have a little bit of impact there.

We kind of are -- always have managed our receivables well and we put in some measures in there to make sure that we don't get too badly exposed.

There was only one year and that was about 10 years ago when all of the movie theaters went through some adjustments and they went through -- some of them -- bankruptcy filings that we had to writeoff any kind of significant dollars.

So we are confident that we will continue to manage through there.

There has been no management changes within the major amusement parks that have impacted our business.

With the exception of attendance when most of the parks are down a little bit in there we continue to sell them one or several of our products including ICEE and soft pretzels and some of our juice bars and frozen novelties and churros and funnel cake.

What about on the Wendy's side.

Well, you keep saying Wendy's, and if we are in a few Wendy's, they are probably -- it's being done by our ICEE group.

And I don't know, I don't believe it's part of a national program.

Down in the South Jersey, Gerry, that's where they are at.

They are in, ICEE is in the chain.

Okay.

Well, that might be.

And again, Dan Fachner runs the ICEE group and he is probably as capable as any of my managers and he runs it autonomously and if we have several Wendy's units in there and it's a test, it's good for ICEE, it's good for Dan it's good for me, I appreciate the question.

I don't mean to sound like I don't know what is going on because I think I generally do but I will have to check that one out.

Other question you mention about the price changes in commodity costs over the last two years, are you behind the curve still over the last two years or ahead of the curve in price changes versus commodity overall?

Have you looked at it over a 2-year period?

Well, we are not back to where we were two years but we're in better shape than we were a year ago.

You still have a little further to go, what about distribution of some of the products in club stores, you have very good distribution in the frozen novelty.

And, but your other products that you mentioned, is there opportunity you see near term for more distribution in some of these end markets than you currently have given the penetration you have with other products that you can cross sell there?

Well, yes.

But it's not an automatic putting a product in club stores and we have good distribution with pretzels in club stores and churro's and some of our frozen novelties like ICEE, some of the other products, we have cookies in some of the club stores but it's not an automatic and even though we may have real aggressive ambitious plans to put all of our products in each place everywhere all the time it has to be part of the customers plan -- it has to have value for everybody.

Last question.

If you go in to the club stores, that, if you watch the prices, there's been pretty significant increases in a lot of the snack good items over the last year, year and a half.

Do you think that has had some impact on sales given that the prices are -- there has been in many cases double digit increases over the last two years.

And that it's an impulse item like you mentioned and that that could have some impact near term on demand?

Well, one of the things I learned in marketing from my marketing people was any time you move price it has some impact on volume.

And I know club stores do a masterful job in delivering value in managing their business and I think we -- so to the extent that they have to move pricing in there I'm sure they do it very very reluctantly.

We haven't passed on any increases in 2009 to anybody.

We don't expect to.

So to the extent that--.

This is a year you're saying of digesting what's happened?

Well, I'm not saying that, I'm just saying that we value our partners and our relationships and we do everything we can to establish and maintain popular pricing competitive value.

That's one of the reasons we waited as long as we did last year when we finally had to pass some of this on, but -- club stores deliver a great value and I think that, I mean their business model, they sell membership, so that's cash flow in revenue.

I think their model is to pass on just a percent for profitability, and they do a real good job managing that, to the extent that traffic may be done or people are being in there less frequently, that's another issue, that may be just a reflection on what is happening in the overall economy.

Right.

Last question, when you talk about the pipeline, so obviously with $100 million of cash on the balance sheet now, the incentive or the imperative to try to utilize that instead of earning low interest, government bond returns is more imperative than in the recent past.

Is the pipeline you're saying, just it's thicker versus thinner than in the past.

So you have more opportunity to look at things or is it still the same as it was a year ago, opportunities?

Dennis, you want to comment?

Well, first of all the fact that we have more funds available isn't going to push us to make an acquisition.

I'm not, I'm just saying that obviously you got to dig deeper, though, because you don't want to keep accumulating cash if you want to sign something?

At investment, we would rather accumulate cash.

I agree with you.

Find some more frozen fruit companies and we will all be happy

I think what Dennis is saying, and Dennis wears several hats and he wears them well.

In addition to being a confidante, he is a controller and advisor, and we got to past the litmus tests and these asset tests in here and the one thing we like about Dennis on the acquisitions, is that he really holds our feet to the fire.

Not only Vince and myself but all of our other capable managers too.

So by the time we make an acquisition in there, we have been through the process and we are controlled and confident and witness that by over the years we've done some little acquisitions and some of them not so little.

Some of them were fix me uppers some of them were existing.

All of them turned out to be little pieces of coal that we were able to find and polish and work and most of them are shining now .

We never had to get rid of an acquisition because of a drain on cash and losing money.

So I think we are proud of that so we continue to work on that pride with

Thanks lot.

Thank you.

Our next question comes from the Sarah Lester, please go ahead.

Good morning.

I saw that you had requested and I guess it was approved, a zoning change for the Daddy Ray's plant.

And I was wondering if you had any comments about that?

Well, Daddy Ray's is in Moscow Mills, Missouri and we were going to put up a night club right next to it and -- no, I'm only kidding.

We are looking at the possibility of expanding that plant consistent with the business as it's growing.

So the only comment on that is -- and that falls under Gerry law that we have some plants in there that we're looking at to double its capacity.

Mind you, that was a business that we bought, oh, roughly .2.5 years ago, was doing about $15 million, it was an 80,000 square foot building on 11 acres and I thought we had room forever.

Guess what?

We don't.

We've used up part of the grounds and now we're providing for a zoning change in there so that we can deal with an environmental issue and also expand the facility.

So that's a good problem.

That was all, thank you.

We have no further questions at this time.

I want to thank everybody for participating and attending in the call I look forward to discussing with you again in three months from now, equally as well on another good quarter forthcoming.

Thank you ladies and gentlemen, this concludes today's conference, thank you for participating you may all disconnect.