J & J Snack Foods Corp (JJSF) 2009 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the J&J Snack Foods Fourth Quarter Earnings Conference Call.

(Operator Instructions) I will now turn the call over to Mr.

Gerry Schreiber.

Mr.

Schreiber, you may begin.

Good morning, everybody, and welcome to (technical difficulty) conference call.

I'm Gerry Schreiber, and with me today is Dennis Moore, our Senior Vice President and Chief Financial Officer, Bob Radano, our COO, Vince Melchiorre, our Executive Vice President of Sales and Marketing, and Vince also serves in a dual capacity as President of Country Home, and Teddy Shepherd, who is our CED.

I will begin with the obligatory statement.

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 hereof.

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 3% for the quarter, and 4% for the year.

This represents the 38th consecutive year of sales increases, and the 152nd, 152 consecutive quarters of sales increases.

That is truly something that we are very proud about, and we can crow about.

For the quarter, for the quarter, our net earnings increased by 32% to $14.8 million, or $0.79 per share, from $11.2 million or $0.59 per share from a year ago.

For the year, our net earnings increased by 48% to $2.21 per share, from $1.47 per share a year ago period.

Again, let me restate that.

We earned $2.21 per share, an increase of 48% this year.

This is reflective of the total dedication and performance by our staff people and management, and indeed something we're very proud of.

Our EBITDA, our earnings before interest, taxes depreciation and amortization, for the past 12 months was $96.1 million, an increase from $73.5 million a year ago.

That represents a $22.6 million dollar increase in EBITDA.

Food service, sales to food service customers increased 2% for the quarter and 4% for the year.

Soft pretzel sales were down less than 1% for the year.

Italian ice and frozen juice treat and dessert sales decreased 6% for the quarter and 2% for the year.

Churro sales were up strong, 8% in the quarter and 16% for the year.

Bakery sales, excluding biscuit and dumpling and fruit and fig bar sales, were up 5% in the quarter and 4% for the year.

Biscuit and dumpling sales were up 8% in the quarter and for the year, and fruit and fig bar sales were down 6% for the quarter but up 8% for the year.

Funnel cake sales were up 38% for the quarter and 49% for the year.

Retail grocery and supermarkets, sales of products to retail supermarkets were up 27% for the quarter and 14% for the year.

Soft pretzel sales were up 27% for the quarter and 11% for the year on the strength of a 27% case sales increase.

That's unit sales increase in the fourth quarter.

It's reflective, perhaps, of more snacking at home in today's economy and even more so, it's reflective of having our products in key positions in almost every business segment.

Sales of our frozen juice and Italian ices were up 29% for the quarter, and up 19% in the year on case volume increase of 32% in the quarter and 25% for the year.

ICEE and frozen beverages.

ICEE and frozen beverages, which include our other brands including ARCTIC BLAST and SLUSH PUPPIE, and related product sales, were down 4% in the fourth quarter and 1% in a year.

Beverage sales alone were down 4% in the quarter and 1% for the year.

Service revenue in the ICEE business for others was up 5% in the quarter and 8% in the year.

Sales of drink and frozen carbonated beverage machines were up $300,000 in the quarter, but down $2.8 million for the year, most due to reduced capital spending by C-stores and others.

Consolidated gross profit as a percentage of sales in the quarter increased to 33.8% from 31.2% last year, and to 32% in the year from 29.7% a year ago.

That's an increase of 2.3 full basis points.

We benefited by about $6 million of lower commodity costs in the quarter and $11 million for the year.

Total operating expense as a percentage of sales was 0.4 percentage points lower in the quarter and 1.1 percentage points lower in the year, primarily due to lower fuel and transportation costs and lower selling expenses in our food service business and frozen beverage business.

Capital spending and cash flow, our cash and investment securities balance increased $17.4 million in the quarter to $119 million.

We bought back $12.5 million of our stock in the past year, but nothing in the fourth quarter.

Our capital spending was $27.2 million, right on target for the year, as we increased spending to improve efficiencies and increase capacities on specific product lines.

A cash dividend of $0.0975 cents per share was declared by our Board of Directors, and paid on October 6, 2009.

Some other commentary -- our sales growth of 3% this 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 and increased couponing in our retail supermarket segment.

Soft pretzel unit volume was flat, which is a significant improvement over the past year.

Churros, biscuits and dumplings, cookies and in-store bakery and funnel cake, had strong positive unit growth due to new products and customers and increased distribution.

Unit sales of soft pretzels in our retail supermarket segment were up 27% in the quarter which follows a 6% increase in our third quarter.

Case sales of frozen ices and juices were up 32% in the quarter following a 41% increase in the third quarter.

Operating income in this segment was impacted by higher slotting costs in connection with the introduction of new products, of $1.3 million for the year.

We also began running a TV commercial in June around a baseball and Harry Kalas featuring a "Bring 'Em Home" theme, at a cost of about $500,000 in the quarter and $1 million for the year.

We think that we are benefitting from this TV campaign.

Additionally, we increased couponing in our third and fourth quarters to help build and sustain volume.

Gallon sales in our base ICEE business continue to be down, however, our service revenue to others increased by 8% for the year, and now represents about 25% of our frozen beverage business.

Again, this is a business that we -- an adjunct to our ICEE business that we started about six or seven years ago, and now represents close to about $40 million.

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

And, this is of course related to lower interest rates.

Our estimated income tax rate was 39% for the year.

We expect and hope our income tax rates remain in the 39% range and hopefully those in the Obama administration, and President Obama himself, are listening.

We want to thank you for your continued interest and we look forward to having another great year for our Fiscal Year 2010.

I will now turn it back to the listeners for your questions and comments.

Thank you.

(Operator Instructions) First question is from Mitchell Pinheiro, please go ahead with your question.

Good morning, everybody.

Good morning, Mitch.

A couple things, Gerry, could you give us some color on the food service channel, what you're seeing?

I'm seeing trends obviously deteriorate in food service.

Also, I'd love to hear what your thoughts are on the food service channel, what you're seeing traffic-wise, and anything else you can share with us.

Well, we've seen some steep challenges for the past year, year-and-a-half, and we appear to be doing okay at handling these challenges.

You know, it's like playing ball, when you're hitting high school and a fast ball comes in at 60 miles an hour, you think you've never -- it's like a freight train, you get better and better, but why don't I pass it on to Vince, who's been getting his arms around food service, and been driving our sales growth.

I think Mitch, in some channels we've seen a little bit of decreased traffic.

Some of our theater business is a little bit down.

But for the most part, this is, having the business be flat was good.

And Mitch, this is Gerry again, you know, our product line appears to be, it's certainly not, it's not completely recession-proof but it seems to be having less impact.

I mean, it's an affordable product and it's certainly profitable to the retailers, and we're getting good featured space.

What's driving the good featured space?

Is it the -- is it your margins, for the -- their margins on your product?

Why are you getting more feature, as opposed to somebody else?

That's a combination of features.

One, the margins are as good or better.

Two, the program we provide, everything for the retailer except a customer.

Three, the products are nutritious, and we keep emphasizing that more and more.

Our soft pretzels are all natural, and it's something that they were before, and we're just starting to bugle it a little bit more.

And it's execution in the field, we're doing a better job of executing in the field.

If you take a look, walk around, you'll see them.

Have you been to the stadiums in the past couple of months in there?

They're packed full with pretzels beforehand, they're packed full during, and hopefully not afterwards.

So -- yes.

So, but, so your core soft pretzels were down on the quarter in food service.

I realize that baseball attendance, other than maybe in Philadelphia, is down.

That must be a big part of it.

Are you seeing similar weakness anywhere else within the food service channel, in soft pretzels?

Well, yes.

Movies were down this past quarter.

And, it's not just because it was summer, it was summer a year ago, too.

But more people are perhaps spending less outside.

But again, our other side of the business, grocery/retail, that was up 27% in the quarter.

So we appear to be managing, not that it's a see-saw, but we're balancing the ups and the downs.

We've expanded our business into the dollar stores, where two years ago that was something that, that was a segment that we were not in.

So, we not only get in but we build and establish a business there.

And, more recently of late we've been expanding our product into the channel that we have been focused on for years, the fast food restaurant, which some of our newer products and some of the funnel cakes and churros, that continues to do well.

So, I think overall, we have focused management, we have talented management, and the execution in the field, we're just not going around flopping heads in there.

We're executing well in the field.

What's interesting is, since 2006, your soft pretzel business has basically been flat in the food service.

It was about just under $100 million of sales in 2006, and pretty much flat, and this year ended up just under $100 million as well.

So, as much as you've had some economic factors and puts and takes there, your overall, that business hasn't grown.

Do you think it's -- I mean, what do you think?

Mitch, if you take a look (technical difficulty) and the niches that we're in, we've added over $100 million in revenue from product lines, niche product lines, that we didn't have a couple years ago.

I agree, but that's not my question.

My question is, what is it with the soft pretzel?

Have we just, is it -- I mean I understand you're growing in other areas and that's very good news.

But, I'm just curious, is the soft pretzel everywhere it should be and at consumption levels, everybody's aware of soft pretzels, and it's just going to be a slower growth avenue in food service?

Or, are there areas that you see growth for the soft pretzel?

Well, we still certainly see areas of growth potential, we're focusing on them.

But you know, where we are, we're not everywhere but we're almost everywhere.

And the growth in that product segment maybe is going to be a little bit more subdued than it was in the years that we were channeling out and bumping out 8% and 10%, so certainly we haven't lost any market share.

And if you want to take a look at the top two or three brands that are out there in soft pretzels, chances are that two, or all three, are ours.

So, we need to continue to maintain that share, and build overall case sales.

Okay.

How about, when you look at, by the way you did say that C-stores, your in-store bakery was up?

Was that up in the quarter?

In-store bakery?

Is that what I heard?

Yes, C-stores, I don't know if we pulled that really out.

C-stores I would expect overall would be down.

Okay.

Commodities, so you benefited in this quarter.

When Dennis or Gerry, when do you expect to have tougher comparisons on the commodity side?

Well, I think we'll start to see a lower spread beginning in this quarter that we're in now, and then towards the second and third quarters, we may start to get really tight.

So, sugar, sugar has been up, that's a fairly big purchase for you, isn't it?

Yes, it is.

Are you, have you, are you hedged or are you favorably covered for sugar?

Or is it unfavorable for 2010?

Well, it's not all that big but we actually are bought out pretty far into 2010.

We would expect no more than about $1 million, $1.5 million impact from higher sugar prices, 2010 versus 2009.

Okay.

And again, we use sugars in some of our frozen desserts of course, all right, and we use sugar in cookies.

We don't use any sugar in our soft pretzel product.

Okay.

And how about, any other commodity costs, I mean, cocoa is up.

In your cookie business, is anything else that you're looking at that we should be aware of, on the upside?

You talk cookie business, that's been one of the most, one of our proudest turnarounds that we've accomplished here.

A couple years ago we had some issues with the overall cookie business, with reformulation, with margins, with some operating income in there, but the turnaround in there has been nothing short of dramatic and Vince and his team, including people like [Mike Harbison] and Don McComas and [Bill Darkety] have done a fabulous job in not only just improving the overall products, but in controlling costs and growing our sales and making ourselves more competitive.

So, we think we still have a long way to go when you get a little bit of taste of the success here.

You can be challenged, it's like a "D" student suddenly getting "B-", well why can't I get a B or an A?

So, but so what happened, so cocoa is going to be up?

Any other commodity costs that are going to be up?

In the quarter?

When you look at the overall mix, we have fruit-based products, fruit-based ingredients, flavors, some will be up, some will be down.

So overall, other than the one as you mentioned, sugar, which is clearly going to be higher this year the overall mix of the others is you know, really could be up, could be down, but we don't think substantially one way or the other.

Okay, so it'll be kind of a neutral year for you on the commodities side, largely.

We would expect flour costs to be down a little bit, at least the first part of the year.

Okay.

Gotcha.

Last, two more questions.

One, you have a sizeable cash balance, you know, $99 million if you include the marketable securities.

There's more than that, Mitch, there's about $119 million because I just counted it this morning before I came on the call.

So --

We run a tight ship here, Mitch.

What's that?

I said, you know we run a tight ship here.

Yes, yes.

But now my question would be number one, obviously, you're looking for acquisitions, or you always are.

What's the pipeline look like there, and then second, are there any other, I mean, are you going to buy back stock, what are your other uses for your cash?

Dennis?

Well, we are looking for acquisitions, and that would be the number one preferred use of the cash.

Has to be right.

Has to be right.

Whether we do, whether we buy back stock, or not, we may.

And we may not.

We have an authorization in place so we might go out there and buy back.

But at this, at this level, at this level, Dennis is looking.

At this price, at this price, it's still, it's a good buy.

Our stock is a good buy.

Okay.

Final question is, I was just looking at the FCB, the assets, and it generally has been, it's been flat year over year.

My question is, is that reflective of the number of beverage dispensers in the market?

Is that also roughly been flat, or are there other things happening on that line?

We probably, the factors have gone up a little bit.

But we've also, some of our current assets have dropped, actually, this year.

Inventory and receivables have come down, which have offset a little bit of the --

Okay.

The other.

Okay, thank you, that's helpful.

No further questions.

Thanks, Mitch.

Thank you, the next question is from Brian Rafn, please go ahead.

Good morning, guys.

Good morning, Brian.

Give me a sense on your dollar store business, Gerry, what kind of penetrations?

Are you guys looking at maybe packaging more smaller convenience sizes across your product line, for that channel?

Give me a sense as to what you have in offerings in the dollar stores today, versus what you think you could do over the next couple of years.

Well, let me just back up a moment, and a couple years ago we had virtually nothing in the dollar stores, and our sales and marketing team, and the one thing about us and I think you know that, Brian, is we're quick, we're efficient, and we don't know the meaning of the words, "we cannot." So, we've been able to develop special packaging and special (technical difficulty) for our brands, primary brands, and some of the secondary-tertiary brands, and we've been able to get in there very, very quickly to the point that it has been great relationships that we've been building with these stores and building them quickly in there, and now we have a business in there where we have our fig and fruit bars in there, and that is well over $30 million.

We have our specialty frozen novelty product, we have some soft pretzel products in there, and they're all in different sizes in there.

And keeping with the economic theme is you can have anything you want for a dollar.

So, we've done a good job with that, and it gives us some margin challenges.

And it gives us some distribution challenges, but I'm proud to say we've been equal to the task.

Okay, all right.

What, from the standpoint in the grocery wars, relative to the encroachment of private label on some of your brands.

Have you been successful in defending some of that with your brands, or is it more profitable for J&J to actually you know, manufacture some house brands or some private label brands for the supermarkets?

That's a great, question, all right, that's a good question.

And let me just answer you in a way where I'm -- I'll give you some rough comparisons.

We're about a 70 share in the soft pretzel market with our brand.

Okay.

And we're probably an 85 to 90 share in private label.

With our cookies in the in-store bakery, we're making product for Target under the Archer Farms, with the rooster.

We're making product for Costco, we make a -- Costco's been a terrific partner for a long, long time.

We make the [Canyon] label product.

So, on a cookie business it's been primarily private-label brands, and with the pretzels and (technical difficulty) Italian ices, it's been a combination of both.

Okay, okay.

Give me a sense on the soft pretzel business.

You guys had launched a couple of years ago, your Pretzel Fills, or whatever, with some different flavors, and that.

What, how is that going, how's the roll-out of that, give me a sense as to what the traction there is?

We've been a little bit disappointed with that, and we -- sales were a little bit less than anticipated.

We've gone back and looked at the strategies, we've looked at some formulations in there, and (technical difficulty) it'll be part of our 2010 re-launch and focus.

But again, nothing stops while we're doing this.

What we have, we're continuing with and the new product we just went through some focus groups that we think we've improved, some of the products we're adding, we're looking to add protein to the Pretzel Fillers, and we've come out with a new dynamite pizza product which we're hopefully getting out in the field.

[Jonathan T.

Mandermar] helped us with the development of the product in there, and we think that our product is just absolutely a big improvement over what we had.

Okay.

And the consumer in the grocery store Gerry, what's been -- you guys have talked a little about couponing.

What's been kind of the couponing usage, you know, this year versus the last few years?

Has it been a delta change up?

It's been up, and it's up because there's more of it and people are more sensitive to saving $0.50, to saving $1.00, to buying 2 for $1.00, to putting it away.

Vince said something to me like, part of the campaign, "They have a freezer, use the freezer space at home," in there, so we've been dollaring, coupons, buy-two, buy-three, get $1.00 off, and it's been working.

Our coupon expense has been up, but again our retail stores are -- Vince and Bob Pape and his group have had a terrific year and a terrific past quarter.

You get the sense, Gerry, that you guys are as aggressive, or more aggressive, in couponing to defend your market share versus some of your competitors?

Well, we're more aggressive in establishing our penetration and then defending it, and keep in mind we're looking at our competitors as anybody that's putting a snack, a specialty snack, in a box.

But even in the ice cream aisle, we have some, we picked up a brand about two years ago called Whole Fruit, that it was just absolutely dead.

It was deader than 4:00 a.m.

We re-launched the product, we changed some of the packaging, we got it in pints, we got it in sticks, and that business now is, next year we're projecting it'll be about $8 million, $9 million, for us.

And that's from a zero base, so it's a niche product, the brand Whole Fruit says it all, and it has a lot of equity.

And we're doing quite well with it.

What are you seeing in the education area, as far as you talked about it, a little bit about reformulations and low sugar, and vending machine sales at schools and that, is that -- give me a sense as to where that is today?

That's flat.

It's better than what it was when everybody was stalled to a crawl about a year, year-and-a-half ago.

The reformulation has been done, our new cookie product for schools called Benefit, with no trans-fats, with no this, with no that, in there, seems to be doing well.

But the business overall, our overall business this past year appears to be slightly up which is a lot better than slightly down.

We've done the conversions, we've gone through the costs, and our products are in there.

They're approved and some are menued and some are a la carte.

Okay.

You hinted a little, Gerry, relative to you broke out top line revenues, volume versus price.

Did you get a little price inflation in there?

You guys have always been very guarded and cautious about defending, you know, the freezer case.

Got a little bit of price a year ago, when we were getting killed on commodities.

And it took us, we were kind of late in getting out there.

This past quarter even though, I mean, I read that and said that because Dennis wrote that but I'm not sure where he got, I'm not sure where we got any kind of pricing in this past fourth quarter.

But far be it from me to argue with my CFO or CED.

All right, all right.

The theater-cinema business, kind of broad for the overall year, give us a sense what, you mentioned a little, you saw some weakness this summer?

Give us a sense what you know, ICEE and that channel?

Well, our sales were like soft, to down.

You know?

And part of it was, were the movies good, were the movies not good.

The ICEE channel was, they started off the season good.

Summer, you know, fourth quarter good, but it had declining sales, too.

That may be nothing more than the impact from the overall economy.

Okay.

Is the theater-cinema channel, is that -- because you guys have been very good, you talked about it in the dollar stores, about being able to penetrate those channels with multiple products.

Is the theater-cinema chain primarily just an ICEE channel for you guys, or are there other products you can bring to that?

Well, ICEE's done a remarkable job in the theater chain.

Dan Fachner and his group started developing that business about 10 years ago, and now we have a significant, a tremendous share in that business.

We also have pretzels and probably most of the major theaters either our regular soft pretzels, one of the varieties of it, and theaters used to be candy.

Oversized candy and popcorn and drinks.

Now, when you walk into a theater, you're going to see an ICEE machine, you're going to see some type of soft pretzel, whether it be SUPERPRETZEL or Bites, you know, Bites with the cheese sauce.

So, we've got good penetration and we've got good space, we've got penetration and presentation.

And again, because we satisfy their profit objectives, it's a quick, wholesome snack, and it's very profitable to the theater chains, too.

Okay.

Give me a sense, Gerry, you had it now I think a couple of years, the SLUSH PUPPIE addition to the -- which is a little different distribution, I think it's a little more of a kind of a kiosk/cart or whatever.

How is, from your expectations, how has SLUSH PUPPIE done?

We've improved its performance.

When we bought it, it was -- we knew when we bought it, that it had some challenges.

It was owned by the Dr.

Pepper/7UP people, and they kind of didn't focus on it.

So, we folded it into our group and after a challenging year, year-and-a-half, we improved its performance and its profitability this past year, and we finished integrating it into our ICEE group and we're looking forward to expanding the business.

Okay.

What in dollar terms is SLUSH PUPPIE, versus ICEE, Gerry?

Oh, ICEE is much bigger.

ICEE is much bigger.

If ICEE is overall $180 million, SLUSH PUPPIE would be probably about 9% of that.

9% okay.

What, anything relative to, with a tough market you're looking at challenges in, with consumers, and what has been across your product lines, you know, reformulations, new flavorings, new seasonings, give us a sense across for J&J what you guys have done in 2009?

Well, what we're really, really, let's say, excited about, cautiously optimistic, is a couple of our product lines related to our fried dough products, Churros, funnel cake, variations of that, Funnel Fries.

And we've recently expanded our R&D staff where we had great R&D capabilities, in California, and in Atlanta, and they were certainly equal to the challenge with cookies.

We recently expanded our R&D staff here and hired somebody that came out of a chef and a dessert category that has some, that Vince has some high hopes that [Italian Joe] will be able to help us with our pretzel products and we can get to the, maybe to the next level of specialty you know, pretzels, in there.

So, we think we're going to have a pretty good year for organic growth for this coming year.

And as long as the economy still needs to get better, all right, but as long as we don't go through that fitful, stressful October through December of last year, we think we're going to have a decent percentage of organic growth for this year.

And then, if we can compliment that, or when we compliment that, with an acquisition or two overall, it'll bode well for the year.

Okay.

Gerry, give us a sense, the stadium, the arena sports, it's probably a little more inelasticity of a family going out to the ball park or whatever.

How, from your expectations given the difficulties with the consumer and spending and tightening up and price, quality, value, and that, in the sports and stadium channel whether it be major league baseball or football, basketball, how has that channel been relative to your sales penetration of pretzels and ICEE and that?

Well, our penetration has been good.

As a matter of fact, it's even been improved.

Attendance, overall was down, and it was frightfully down early in the year.

Philadelphia had a great year, the Phillies had a great year, and we've done well there with our base product and some of our newer products.

But, since we're talking baseball and since there is a big game tonight, and since we're a combination of Phillies and Yankee fans, maybe we want to discuss who's going to win this game tonight and what kind of criticism we have, even for "ch-ch-ch-ch-Charlie" (technical difficulty) too.

Because it seems like no matter what happens tonight, one of them is going to be called on the carpet for what they did do, or didn't do.

Okay.

One final question.

You talked about certainly stuffing the pipeline, Gerry, and as I've always said you've been a master, relative to buying things at very attractive valuations.

What are you seeing as multiples of EBITDA?

Is the malaise in the economy, is it prices coming to you, or is it a buyer's market, is it a seller's market, give me a sense as to what you're seeing when you're looking at acquisitions?

Seems like good stuff at 5 times EBITDA, that's what I see, but the seller sees them at 8 times EBITDA.

So, that's why we've got to narrow the difference before we go on to the -- but I think prices have steadied, or they are certainly down from where the expectations were four or five years ago.

And I think overall we're being, we're still being cautious and conservative, and it has to feel good for us and it has to be good for us.

And we're past the point you know, years ago when we were much smaller, it was almost like committing the store, or betting the store.

We don't do that today.

So we're looking at things in a range that certainly would be accretive to us.

And that we can bring value to, and certainly that they can bring, they can complement to our value also.

Okay, sounds good.

Superb job, Gerry, as always, thanks.

Thanks very much.

The next question is from Sarah Lester, please go ahead.

Good morning.

Good morning, Sarah.

Could you talk -- could you talk about pricing, I guess more on the food service side?

Have your competitors become more promotional recently?

Not really.

We're looking for ways that we can maybe instead of getting whatever the number is, I'm not putting a number, 1 in 20 shoppers at the snack bar, maybe we could increase that to 1 in 12 or 14, whether that's a promotion or some type of marketing development.

But, we haven't really, we really haven't seen that.

Okay, that's all, thank you.

(Operator Instructions) Brian Rafn is back on line with a question, please go ahead.

Let me ask you guys, maybe a question for Gerry or Dennis, what -- from the standpoint of total pretzel volume, what is J&J's, by case or pounds, what is your annualized production in total pretzels?

Well, in sales?

Yes, I'm just looking at, yes, not dollar sales, but I'm just saying in volume.

I'm just wondering from a production standpoint, everyone's talking -- because from the sales side, you could be couponing or there are price erosions, and as you said, 2 for 1 and that.

I'm just on a volume basis, if you look back and there was a comment about sales being somewhat static since '06.

Has your production volumes in actual pretzels and poundage actually gone up, or has it been about the same the last three or four years?

It's been about the same.

It might have dipped a bit maybe a year, 18 months ago, and we're back, getting back to the levels, we do about 2 million pretzels a day.

And I can almost feel and sense when we're running five days, three shifts, you know, that we're at that number.

And when we're not, it'll be slightly less.

But we have, we have real good penetration and during the past year, year-and-a-half, two years, when the economy dips slightly and there's less people in a General Motors plant, and the mall shopping has turned off, and the mass merchandisers reported a little bit down, that affects us a little bit.

So that's why there's a hard and sustained push for some of the other business segments, including the -- and our other products including the dollar stores, and the --

Let me ask you, on -- yes, on the pretzel sales, Gerry, are soft pretzels primarily a single sales point of sale, where you're going in and buying one or two for current consumption, or how much of the business is in cases where you were talking about, put them in the freezer, put them in the pantry, that type of thing?

How much of the business is in cases versus single sales, and has that changed over the few years?

Well, I don't want to -- the second part of your question relates to supermarkets.

And there, we've been doing promotions in there with a dollar off so that they could buy a box or two.

But I don't want to duck the other part of the question.

But most of the sales in food service locations are single units, unless there's some type of promotion, buy two, get one free, which we do from time to time.

So, I'm not ducking your question.

But I'm just trying to give you a balance for, on each side of it.

Okay, okay.

You also mentioned funnel cakes and churros in a fast food outlet.

Is that a national chain or is that local regional chains?

Well, hopefully it'll be both.

Hopefully it'll be both.

All right.

With that, thanks again Gerry, great job.

[Sunk] your question in there, but.

But hopefully it'll be both.

Next quarter, ask that question next quarter.

All right, I will do that.

Thanks, Gerry.

Welcome.

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