J & J Snack Foods Corp (JJSF) 2011 Q4 法說會逐字稿

All participants please continue to standby. Your conference call will begin shortly. Please continue to standby as we allow others to join today's conference. Welcome to the J&J Snack Foods fourth quarter earnings conference call. My name is Monica and I'll be your operator for today's call. At this time, all participants are in a listen only mode. Later we'll conduct a question-and-answer session . fI'll turn the call over to Mr. Gerry Shreiber, Mr. Shreiber, you may begin.

Good morning, thank you Monica, and welcome to the J&J Snack Foods conference call here on Friday November 4. I'm Gerry Shreiber, with me today is Bob Radano, our COO, Dennis Moore, our CFO, Jerry Law, our SVP, and Bob Pape, our SVP of Sales. Ted Sheperd is absent today, our CED. I'll begin with the obligatory statements.

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 the forward-looking statements to reflect events or circumstances that arise after the date hereof.

Results of operations. Net sales increased 9% for the quarter, and 7% for the year.

Excluding sales from the acquisition of Parrot Ice in February 2010, California Churros in June 2010 and the frozen hand-held business we purchased from ConAgra Foods in May 2011, sales increased 3% for the year.

For the quarter, our net earnings decreased by 3% to $16.0 million or $0.85 a share from $16.5 million or $0.88 a share a year ago. For the year our earnings before bargain gain increased to $48.5 million or $2.58 a share from $48.4 million to $59 a share a year ago, a drop of one penny.

Our EBITDA before bargain gain for the past 12 months was $107.9 million. Food Service, sales to Food Service customers increased 9% for the quarter and 6% for the year. Without sales of California Churros and hand-helds, sales increased 4% for the quarter and were up 2% for the year.

Soft Pretzel sales were up 8% for the quarter and 3% for the year. Italian Ice and frozen juice treat and dessert sales decreased 1% for the quarter and were up 5% for the year, due to higher sales to school food service business segment.

Churro sales up 6% for the quarter and 31% for the year, benefiting from the sales of California Churros in the first nine months. Without sales from California Churros, churros sales were up about 2% for the year. The fourth quarter increase of 6% was organic growth.

Bakery sales excluding Biscuit and Dumplings sales and fruit and fig bar sales were up 10% in the quarter and 5% for the year. Biscuit and dumpling sales were up 6% for the quarter and 4% for the year.

Fruit and fig bar sales were down 2% in the quarter and 11% for the year,with sales generally down across the board. A drop in funnel cake sales to one customer of $2.3 million in the quarter and $9.6 million for the year had a large negative impact on food service sales.

Retail supermarkets. Sales of products to retail supermarkets were up 31% for the quarter and 20% for the year. Without sales of hand-helds, sales were up 4% and 7% for the quarter in the year. Soft Pretzel sales were up 9% for the quarter and 5% for the year on a case-buy increase of 4% and 2%. Sales of our frozen juice bars and Italian ices were up 2% for the quarter and 8% for the year. On case volume increase up 4% and 9%.

ICEE and frozen beverages. ICEE frozen beverages and related product sales were up 1% in the quarter and 4% for the year. Overall sales were impacted by a drop in machine sales of $2.7 million for the quarter and $602,000 for the year.

Beverage sales alone up 5% for the quarter and 4% for the year, a healthy increase. Domestic gallon sales up 1% in the base ICEE business in the quarter and flat for the year. Service revenues for others was up 14% in the quarter and 5% for the year.

Consolidated, gross profit as a percentage of sales in the quarter decreased to 30.6% from 33.4% last year and for the year decreased to 30.9% from 32.7% a year ago.

We're impacted by about $7 million in the quarter and $18 million of higher ingredient and packaging costs in the quarter and the year. We cannot project the impact or benefit of changes in ingredients and packaging costs going forward. However, there's been a very significant increase in the market cost of ingredients and packaging costs over the past 18 months. Additionally, our overall gross profit percentage was impacted by the mid-single gross profit margins of the hand-held business.

Total operating expense as a percentage of sales was 1.6%points lower in the quarter, and 1.0%points lower in the year. Operating expense in last year's fourth quarter included an unclaimed property assessment of $1.6 million and about $500,000 of acquisition costs for an acquisition that did not happen.

Capital spending and cash flow. Our cash and investment securities balance increased $19.8 million in the quarter to $155 million. We continued to look for conservative ways and acquisitions as a use of our cash. Our capital spending was $9.1 million in the quarter as we continued to invest in plant efficiencies and growing our business.

We are presently estimating capital spending for the next year to be in the range of $25 million to $30 million. A cash dividend of $11.75 a share was declared by our Board of Directors and paid on October 5. We did not buy back any of our stock the past year.

Commentary. Our sales growth of 3% this quarter before acquisitions was generally in line with last quarter. Sales of Soft Pretzels, one of our core products in food service, picked up substantially as we continued to make in-roads into the chain restaurant channel and other new business segments. Frozen juice bars and ices show weakness due to various unrelated factors.

Churros sales continued to grow even as we have lapped the acquisition of California Churros. The decline in our fig and food bar business has slowed and we're beginning to introduce resized smaller products into the value store channel so that we can be in line price-wise. Funnel cake sales to our previously largest customer were down $2.2 million in the quarter.

Unit sales of Soft Pretzels in our retail supermarket segment were up for the fourth quarter, due in large part to the introduction of SUPERPRETZEL pretzel dogs. Case sales of frozen juice bar and ices were up 4% in the quarter, an improvement from the third quarter. We did not run any significant advertising programs during the quarter.

In frozen beverages, service revenue to others was up a very strong 14% in the quarter after a relatively sluggish first half and we hope to continue to show growth in this area. We're impacted by significantly higher gasoline costs in the quarter and we expect to be impacted going into next fiscal year.

A decrease in operating expenses combined with strong service revenue growth and significant growth from our ICEE Mexico subsidiary resulted in a $2.4 million increase in operating income in the quarter, and $2.9 million for the year.

Our estimated income tax rate, before bargain gain was at 37% for the year. We're estimating a rate of between 37% and 38% for next year. As previously reported and commented, we do not expect the acquired hand-held business to contribute operating income to the company over the short term.

At this point, we have stabilized this business to an annual sales rate of, approximately, $50 million. This business had been declining double-digits before that. Improvements in operating income will come only as we gross sales. I thank you for your continued interest, and I would like to turn it back to the listening audience for questions.

Thank you, we'll now begin the question-and-answer session. (Operator instructions). Our first question comes from Akshay Jagdale, please go ahead.

Hello.

Good morning.

Hi, good morning. How you doing?

We're good. How are you?

I'm hanging in there. So, first question is, just regarding how you're thinking of 2012, Gerry, so can you just, give your thoughts? I mean, are you optimistic? How do you feel about 2012? If you could preference your comments on sort of sales and then any commentary on costs, if you could separate that out, that would be great.

Well, I'm cautiously optimistic for 2012. But then again I have been cautiously optimistic for all of our years. I think 2012 is going to be a good year for J&J Snack Foods. We have some things happening in sales with the regular core business as well as with the recent acquisition that we should have a healthy year on the top line. And we have taken measures and we're looking at some of the issues with respect to related expenses in there, so that overall, it will be the kind of year that we all want.

And what is the kind of year you want?

Well, in simple terms, delivering value to shareholder. Increasing sales and earnings would be the kind of year we want, all right? And we all are working very hard here to make that happen. There are challenges.

There are challenges in the economy; there are challenges that we're going to have with respect to input costs; there's challenges in health care; there's challenges with logistics. But I think that we have the team in place that will certainly can handle these challenges and we're not going into the year with a lot of fright.

Now, looking back at 2011, it was a tough year, obviously, and there was a lot of challenges. Do you see less challenges in 2012? I mean, I would say it seems, from my perspective, that at least commodity costs are not going to be as high and, perhaps, in the back half, it could actually decline for you, if they stay where they are today, and I saw that the pretzel sales for the first time sort of popped out and are starting to grow again. So, can you help me understand, on a relative basis here, you just had a tough year, but you feel better? About 2012? Now that you been through 2011? Compared to 2011? Or no?

Well, let me just go back to your question. If you look at our overall year, could we have done better? Yes. But, was it a tough year? I mean we had a lot of input costs, ingredients, packages, materials in there that impacted us. So, I guess if you want to view it in a perfect cylindrical, I think our Company did some good things over the year and so I am optimistic for 2012. I think that we have a business plan to deliver in the mid-single-digits in growth on our regular business, and then what we can hopefully deliver on the hand held business, which is a recent acquisition.

And what do you expect for the hand-held business? You know, usually, you acquire companies that are accretive, if I'm not wrong, in the first quarter. This one, you said, would be a little bit more challenging from that standpoint, but are you willing now to say it is going to be accretive in 2012?

No, I didn't say that. I said it is going to take us at least a year. If you look at what we acquired we have tremendous potential. We took a business that had been declining in double-digits for the last couple of years under their previous ownership. It has two tremendous well located plants that produce good quality products.

We stabilized what was a 20% decline and now we have this business running at an annual rate of about $50 million. We're now taking all of the steps to improve its operating performance. What will that business look like in a couple years?

Hey, we're hopeful it can be double that; if it is, it can deliver, perhaps, a operating income and could add as much as $0.12,$0.14,$0.16, a share. But that's down the road. It is not going to happen this year. If we get ourselves in a position for that to happen in the next two years, this year, I'll be satisfied.

That's very helpful. Can you talk about pretzel? Am I making too much of the 8% growth in the quarter?

Not at all. Pretzels is still one of our primary products. It is not just like a pussycat part of our business. It is our core product. It contributes handsomely to our profits and we were almost everywhere. There's been a concentrated effort, as we spoke about, to expand into the fast food restaurant business. And you know it is taking us a couple of years to do so. Now, we're finally getting some in-roads with some small chains and some bigger chains. So we're very hopeful that that will continue over the near term and long-term.

And what about, obviously, you say your cash balance has gone up again, that's good news, but help us understand the M&A picture here, what kind of assets are you looking at? Should we expect, are you busy on that end? What do you plan on doing with the cash? Plan on buying back shares, maybe?

Well.

If you don't find anything for another year, should we think of you buying back shares?

Well, you gave me about three or four questions there, all right? One thing about us, our Company, my people, we don't let the cash burn a hole in our pocket and we're not going to be wasteful with it. We made acquisitions in the past, and yes, we are looking at things now. And we are conservative in our approach and discipline and our activity.

So, although I can't comment on anything right now, I said the same thing a year or two years ago, and we bought California Churros, we bought the hand-held business and we acquired a little company called Parrot Ice. So chances are there will be some more of these things; perhaps some even bigger, but perhaps not.

Our stock price, you know, we want to use our cash, a war chest, if you like, to improve and grow the business and as far as buying back shares, we'll look at the market price from time to time, we bought back some shares over the past couple of years, we just didn't buy any back in the past nine or ten months.

Perfect. I'll pass it along. I've taken too much of your time. I'll go back in line.

Thank you, Akshay.

Our next question comes from Mitch Pinheiro, please go ahead.

Hey. Good morning.

Good morning, Mitch.

Hey, so, can you quantify what the total pricing impact was in the quarter ?

2.5?

Mitch, this is Dennis. Yeah. We estimated the dollar impact, $5 million to $6 million.

Okay.

What is that?

And on our business ICEE for 4% to 5%.

4% to 5% ex-ICEE. Okay. So for fiscal, you're obviously going to have input cost headwind's, I guess as Akshay sort of mentioned, probably things ease, obviously there's a lot of volatility, so it is hard to say with any certainty, but things should ease a little in the back half. Do you think your pricing initiatives that you are taking now can hold? Or is there any kind of give back? You know? As things go down, if they were to go down.

That's a good, Frank question. Let's just say that we're looking at possible pricing initiatives.

You've always been somewhat reluctant to push pricing. Sometimes it works for you sometimes, it doesn't. Do you just feel the need to protect your margins with these recent price increases? And feel better about where you are versus competition? I mean, is it a marketplace decision or sort of a margin decision?

Mitch, you've asked a question there's two balances to it, almost like on a see-saw.

Right.

We're very sensitive to our our consumer and to our customers. Even though in some of our fears we have a significant share, we got to put that in balance. So we're looking at that now, and, hey, if I had the perfect chart and I was running the boat into a gentle breeze, not into the stiff winds, all right? Commodities would come way back down and we'd have plenty of room there. But, the answer to your question, we're looking at alternatives right now that would happen in early 2012.

Okay. Related to pricing, and commodity costs, Dennis, inventories were up, year-over-year, is that a function of higher cost inputs? In both the unfinished and finished goods?

Mitch, it is a combination, yes, our (inaudible) costs would cause inventory to increase. We took on about $8 million of inventory for the hand-held business, which is part of the increase; and then generally speaking we need to do a little better job, I think, and we're looking at working on managing the inventory a little bit better going forward.

Okay. That's helpful.

Done up a little bit more than what we would have wanted it to.

Interestingly, Gerry, again, we just completed our sales meeting and conference meeting last weekend, and Dennis pointed that out to the manufacturing heads of inventory and it is something that is one of our targets and goals for next year.

Is there any component of bonuses structured that is related to either inventory or working capital?

Not really.

Okay. All right. Related to that, of your CapEx spending are there any significant projects happening this year?

We're expanding our plant in Moscow, Missouri, which has been going on for about a year-plus. And we're expanding our plant in Texas to keep up with the pace of the increase demand with specialty Soft Pretzel products. And we're always looking for ways to improve our manufacturing efficiencies in the other plants, too. Those are the two big things.

Okay. That's helpful. And then, Gerry, the acquisition pipeline it sounds like, you're looking at things. If you were to compare the pipeline and likelihoods, has it improved since the last time? Your last quarter? Is it the same? I know is it a qualitative question, but how do you see it building right now?

We're looking at more things, has it improved? You know, you got to strip out the quality, just because a girl comes into the bar looking pretty, you want to make sure there's something in the head, something in substance in there. We kind of get rid of the fluff and prettiness, all right? And make sure there's real value in there.

You're obviously speaking for yourself?

I'm speaking for Bob Radano, really.

Okay. All right, last question, on FCB, you know it looks like the through-put per machine is declined a little bit. A., is that, in fact, correct? And then, second, what is happening in that segment, traffic-wise, competitive issues, anything you can talk about around that?

Well, to begin with, you're right, you know, volume. All right? Velocity has gone down. Over the years, this is not a new thing, it's gone down over the years. As we compete against not only the new wave of beverages, but the coffees, the smoothies, the lemonade's and what-not. As you go into either a mass merchandiser or a C store and they're just loaded with products. However, ICEE has earned a place of preeminence in there and you'll find there's more, not just ICEE, but ICEE and related products are in there. It is not like the old days where you would get 5 or 6 hundred gallons a year out of a K-mart, we're getting decent size through-puts from accounts and we have programs. We have programs now that would fit if they can't handle the ICEE requirements, certainly a Slush Puppie or a Parrot Ice or an ARTIC BLAST would be able to fit their specific needs. I'm pleased with the way overall, our ICEE and frozen beverage business has grown. Both with beverages sales, which I might note overall are a little better than the major Cola companies, and certainly with our infrastructure that does manage service for others. I'm looking for them both to grow.

What would you say is the biggest limiting factor, or perhaps the biggest challenge that you see for that business in the next 12 months? Is it consumer spending? Is it the need to have a little more innovation on that side?

Well , consumer spending is always a factor. We have some decent innovation on the ICEE side, new mix-it-up has created some plus-sales for us. the ICEE applications that they are now on, on the smart phones. ICEE has close to 1.5 million friends and their people are just very ICEE-centric. That's good, we need to learn how to spin some of that off and get some benefit on our Snack Foods side, too. Limitations on ICEE, keep in mind there's investment that could be upwards of $10,000 or more every time we setup an account in there. You got to make sure the account is right, that it works right in there. The overall improvement of the economy, when it happens, would also serve to, perhaps, generate a little spark in sales, not only for our beverages, but across the board.

Just one last question, you think fiscal 2012 will be a good year, but what do you think would be what part of the business, what segment, or what other things would make it a great year? You know, a really strong year? Where do you think, the upside could come from if you really were having a good year?

Well, I'm fairly satisfied with the beverage groups' performance and I'm pretty happy with Soft Pretzel sales increases, particularly the way it's been kind of like climbing. The churros sales have been good for us. The acquisition, we benefited from the acquisition. We've got major things happening in Daddy Ray's plants. And we really can't talk about it now, we may have some other business boosts that are going to hit there sometime in the mid-2012.

Okay. All right. Gerry, thank you, everybody.

Thanks, Mitch.

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

Hello, Gerry.

Hey, Bob, how are you?

Good. Um, couple of questions. Um, you talked just recently about the beverage side. What is going on with the BJ's? I went in there and your ICEE is gone and now they got a smoothie and they've double the price, more than doubled it. So, is that happening with just that account? Or is that a trend that was going on in just the chain? Or? I remember asking you about it. The price point of an ICEE is pretty inexpensive, it's always been, that's a selling point for kids and for parents and they're selling the new product at more than twice the price.

You're right, Bob. And if I may, you know, we lost that business. Sometimes a customer moves in a direction, the polar opposite of what they had. We had been working with them before. We are looking for ways to put the ICEE system back in there. We pointed out to the customer what their sales were. And I might add there have been requests from the consumer base, but sometimes somebody wants to switch something up because. Sometimes we benefit from that, sometimes we're on the other side of it.

Right. Well, with regards to innovation, though, I think you hit a home run with push pops with ICEE, but I think there's a lot of opportunity with the liquid sales that just aren't being taken advantage of with other means of other innovation with regards to distribution of the product that doesn't require the big machine. And that seems to be the obstacle to further liquid sales, maybe, in my opinion? The machines itself seem to have more issues that, may be an obstacle that you see when you did the push pops you were able to explode that business, because you didn't have to deal with that.

Well, they have to be in a cabinet and have to be displayed.

Right.

Right. I hear what you're saying. We're looking for both direct and alternative ways to maximize our sales.

A couple of years ago I remember asking you the question in the restaurant side about Lipton's on the desktop at bars, for mixed drinks and stuff for ICEE, as an alternative. Is that still something you're talking about? Or is it not something you would get into?

Well, it is not something we'd be getting into any time soon.

Any time soon. All right. Another question, the chain restaurant business, with the Soft Pretzel, is that something that you think is not a one-time product, like the Burger King was? Or is it something you see renewable and it is a continual business that you're not, a one 12 month product and then it gets taken out?

It is part of our product line. See, the Burger King product was kind of like customized for what they wanted.

Right.

But new Soft Pretzel varieties that we're making, the stick, the roll, the bun, the hot dog bun, the specialty pretzels, these are part of a bakery expansion of our Soft Pretzel line and it appears like it is getting some traction. Soft Pretzel sales the last couple of months was up quite dramatically, not because of something that happened in August and September, because things that were put in place last November and December and January. And the trees are growing. And starting to bear some fruit.

Right. How close are we to seeing churros in the club stores? In the boxes like you sell with other product right next to it? Any closer than before? Or is it still (inaudible).

Churros are being sold into Sam's now and they're in Costco and I think BJ's is selling them? But as far as in the grocery store? We're doing a test with a retailer here and we're having, you know, when you introduce a product in the retail in there, it costs you money, it costs you time, it costs you resources. We're monitoring the (inaudible) real closely.

Right. A question about the commodity prices, there was huge variations in the recent quarter, not just in the stock market but in the price of wheat and corn. It went to from six to eight and back to six and up from six. When you see a pullback in the commodity prices do you ever go out any longer than your three months, or whatever, that you do buy to take advantage of that? Or you still just maintain the same commodity purchase policy?

Well, we're out as far as about six or seven months, now, Bob?

Yes.

Till June next year?

Yes.

You won't see it from six to eight right away, what you see is from seven...

Right.

Right. But we do extend in there. And hopefully our major commodities will continue to soften and we'll be talking about a different prospect for them this time.

Right. Thanks a lot.

Thanks, Bob.

Next question comes from Mike Lavery, please go ahead.

Good morning, guys.

Good morning, Mike, how are you?

Not too bad, how are you doing, Gerry?

Good, good.

Just a couple left here, they've been whittled down a little bit. One, just to hone in on commodities on the follow-up on the last one, does that imply you're bought through at least on wheat? That's really the only one I'm concerned about, through the third quarter? Or just partially into the third quarter of 2012?

I think partially into Q3. So if we look six months from now, December, January, February, March, April, May, so that would be into the third quarter.

Third quarter. Okay. And then just on the sale of Soft Pretzel's. I'm sorry?

By the same token, if there was a precipitous drop like now, we would not get the real benefit of that until June.

Right. Right. Understood. And then, just on the Soft Pretzel sales to restaurant chains, are you willing to, talk about customers at all there? As far as where some of those products are?

Yes, yes. Buffalo Wildwings is a new account that's doing very, very well with our Soft Pretzels. Max & Erma's, we've been in that account a couple years now and sales continue to grow and to be strong. Lu-Lu kids, there's a bunch of small restaurants and small chains. Jerry's Jack-in-the-Box? No. Dave and Buster's.

Okay.

Mike, there's a whole, printed list with the logos of the fast food and the restaurant chains that, remember, in one of your conferences, saying that we targeted them. Well, now we've kind of like landed on the targets and we're starting to develop them. But you'll see Soft Pretzels on restaurant menus, Soft Pretzel STIX as an appetizer. Recently in Friendly' s up until a while ago, and they were featuring the Soft Pretzel bun instead of a hamburger bun. Now it's unfortunate (inaudible) but these are the kind of things that happen in business from time to time.

Got you. Okay. Well, that's helpful, appreciate the time. That's all I have.

Okay, thank you, Michael.

Thank you.

Once again, for any questions -- (Operator instructions). Our next question comes from Brian Rafn's line, please go ahead.

Good morning, Gerry, good morning, Dennis.

Hey, good morning, how are you?

Good, good, good. I'm going to ask the same commodity question ten different ways to Sunday, like everyone has had. You talked a little, Gerry, about passing on some potentially price inflation in 2012 and raising some prices and you've always been very judicious relative to there are some issues when you go over like you said, $3 or $4 per items in the case and mom got the kids there and there's elasticity there. Is there just a strategy, Gerry, of raising prices or is it taking down some volumes, a lot of the package food companies have kept the price, but they cut the ounces or cut that, you guys have not down that. Or is it raising prices and more couponing? What type of mechanics are you guys willing to look at?

Well, he only product line that we have looked at, and we've had to do some resizing, that's in connection with our specialty store business, The Dollar Store's, the economy channel. There we have done some things to reduce weight sizes and packaging. We have essentially, certainly not touched the base product, whether it is the ounces per ICEE or Soft Pretzel weights and what not. We make them in all shapes and sizes as it is. So if the input costs go up, margin suffers. But if sales rise we makeup for that temporary set back in margins.

Okay. All right. You guys were talking about some CapEx allocated toward Moscow Mills, is that the day you raised operation?

That's right, yes.

Give us a sense, year-over-year, how Daddy Ray's is doing in sales?

It has doubled in sales in the past four years.

Okay what would it be running at on an aggregate year basis? 10 million, 20, 30?

If I would project out it would be 40-ishes.

Okay. Okay. I'm going to jump over to ICEE. If you look, Gerry, in the beverage section and you said that that's been doing fairly well. What, if you look at the entire group, and you take ICEE, Slush Puppie, Parrot Ice and ARTIC BLAST, what might be the volume percentages in that mix? Would ICEE be 80% of the total? Is it 80/10/10? Give me a sense of the other volumes of three branding.

Doing it quickly in my head. Let's say, roughly, 182, take off 40 would be140. ICEE would be, ICEE would be 80% of that. You hit it right on.

Okay. Okay. And of the other remaining, Gerry, Slush Puppie, Parrot Ice or ARTIC BLAST, is it equally weighted? Is Slush Puppie larger? What kind of mix segmentation is there?

Slush Puppie is larger. Parrot Ice, which is really unique quality drink is smaller, although we believe that it has some great potential, particularly as a mixer in bars. We're developing ways that we could maximize its presence. ARTIC BLAST, if you recall, was kind of like a fighting brand for us many years ago. When we didn't have the ICEE rights in some of these territories. So we developed the brand and ARTIC BLAST became the competitor to ICEE and what you call the AE territories, Abraham and Elsor territories.

Okay. Okay. From your standpoint, when you look at penetration of sales and setting up new accounts, how do you view Slush Puppie Parrot Ice for Parrot Ice and ARTIC BLAST? You talk about what you've done on the ICEE side. What are some of your strategies on the other three brands?

Well, some of them are placement; some of them are more C-store oriented. And some of them are strong regional. Slush Puppie is very strong in the Southand in the Southwest.

Okay. You also talked about some of the legacy, you mentioned the old K-marts, five to six hundred gallons per store.

(inaudible)

Go ahead.

Some did even more than that.

Okay. What would be a big target there? What would be a large customer, if you don't went to mention the brand channel, on single site and an annual, what would be a large ICEE customer?

Well, out of respect to my customers, all right? It would be less today.

Okay.

On a single basis.

Okay. In the year, Gerry, was weather or say the Hollywood cinema production product venues, was that either a headwind or tail wind maybe in the movie channel or overall? I know you don't want to hide behind weather, but if you looked at 2011, would you say the weather helped us or weather really hindered us?

I think first of all weather was, with exception of the one week of the hurricane scare, weather was pretty good. Movies, the cinemas, I don't know if there was really an array of fits that would have caused movie attendance to have been up and offhandI personally don't think it was.

Okay.

We got all kinds of weather and all kinds of business situations, and we do.

Okay. Okay. Fair enough. Then the Dollar channel, Gerry, you talked about doing some resizing. And from the standpoint of penetration of types of SKUs, types of brands, would you say your dollar channel business is about the same as it was in 2011 or 2010? Or are you constantly trying to expand the assortment that penetrates that dollar channel?

Well, the dollar business was down this past year. Part of that was due to losing a couple of SKUs until we were able to remarkettize, restrategize it. But we have things under way to improve that business.

Okay. On the pretzel side, Gerry, you talked about some nice gains. Is the gains in pretzel sales driving your core products to new customers? Or is it more in layering some of the buns and the stick and pretzel fill and some more exotic permentation of the brand, is that really driving the sales?

Combinations. We've gotten some new business, channels and segments as well as adding additional products to our same strong customer base.

Okay.

Let's give someone else a chance, Brian. But it's always good to talk to you.

All right, Gerry, thanks.

You're welcome.

(Operator instructions). We have a follow-up question in queue from Robert Costello.

Yeah, Gerry, quick question, NBA lockout what impact is 30 teams, are you in all 30 arenas?

Well, we're probably in 28 of them. So it's going to be, that's 28 times 1,000 games, if the whole season is lost.

Right, but justin this quarter, say they're through Christmas. They're not having any games, and that would be two months of the year, plus, you know, so what type of impact sales-wise is that lost in the mix? Or is it something quantifiable?

Probably not quantifiable as a businessman and a sport fan, I wish they were playing because people, pretzels in there, they would sell more products and it makes for a happier overall environment with the concessionaires and the help. Those are the people I feel the most sympathy to. I guess of all of the sports, and I don't mean it in a negative way, it's really a marginal impact. However, saying that, I hope that they are back on the basketball courts before Christmas.

Thank you very much.

Welcome.

There is a follow up question in queue from Brian Rafn, please go ahead.

I had to get back in line, Gerry. All right, you talked a little bit about pricing or maybe you didn't. I missed your opening comments. What are you seeing relative to acquisitions, Gerry, how is pricing as a multiple of EBITDA?

I think that people's expectation s have come back a little bit. All right? Come down a little bit. But there is never going to be good stuff out there cheap. All right? There is fast stuff that may be out there cheap, all right? And there is better stuff that is out there more expensive. We got to sort through it, digest it, and, you know, keep our senses about us.

Let me ask you, relative to sourcing deals, Gerry, are you guys better at organically going out and having an aptitude as to what's available? Or always deals that are shopped to you guys because you got a good reputation?

Combination of both. Over the years, we have kind of, like, targeted our own. But, it is a combination of both now. And I guessthe fact we're bigger now and some of the bigger people know who we are and we're probably getting more things shown to us, perhaps a few years ago were not shown to us because we were too small, unknown, what not.

All right. Let me ask Dennis, what's kind of year-over-year headcount, maybe? And then are you seeing any, kind of what's the salary, wage, payroll inflation? Then, a shot on health care benefits.

Well, year-over-year headcount is up about 250 or so. Most of that from the hand-held acquisition. We tried to limit our overall payroll increases to 3% or so or even less. Health care costs continued to increase, running at a rate of 11% or so increase year-over-year for the past several years.

I missed that. What was the health care number, Dennis?

11%.

Okay. Okay.

(inaudible) and will not continue.

Okay. All right. Then, Gerry, anything strategies on, you mentioned I think the frozen bar, the Italian Ices, Minute Maid, BARGs a little weak. Anything there? Seasonal? Weather? Slotting? What's the issue there?

I'm sorry, the question was on frozen juice bars?

Yeah. I think you made a comment it was a little weaker. You know, not a crisis. I'm wondering, is there anything material, weather issues?

No, one of them was our school food service business and the resistance to anything that has sugar in it, added sugar or from fruit juices. So we did reformulate there, but you know there's not any one significant thing.

Okay. Super job, guys, thank you very much, appreciate it.

Thank you.

We have no further questions in queue.

I want to thank everybody for participating in this conference call and I look forward to all of you attending in the next conference call. Thank you.

Thank you, Ladies and Gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.