J & J Snack Foods Corp (JJSF) 2012 Q4 法說會逐字稿

Welcome to the J & J Snack Foods fourth-quarter earnings conference call. My name is John and I will be your Operator for today's call. At this time all participants are in a listen only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Mr. Gerry Shreiber. Mr. Shreiber, you may begin.

Thank you, John, and welcome all participants to our fourth-quarter and year-end conference call. I'm Gerry Shreiber and with me today is Dennis Moore, our Senior Vice President and CFO; Bob Radano, our Senior Vice President in charge of Operations; Bob Pape, who is in charge of Food Service and Retail Sales, also a Senior Vice President; and Jerry Law, our Senior Vice President and Special Assistant to me; and also Teddy Shepherd our CED.

I will begin with the beginning 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 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. We had a good quarter and a good year. Our net sales increased 10% for the quarter and 12% for the year.

Excluding sales, post 12 months resulting from the acquisitions of the frozen handheld business of ConAgra Foods in May 2011, and more recently Kim & Scott's Gourmet Pretzels in June 2012, sales nevertheless increased 10% for the quarter and 7% for the year. This year's fourth quarter had 14 weeks compared to 13 last year, and the year had 53 weeks this year compared to 52 last year. This is something that happens, I believe, every seven years. The additional week added about 7% to sales for the quarter and 2% for the year. For the quarter, our net earnings increased by 22% to $19.5 million, $1.03 a share, from $16 million, or $0.85 a share a year ago.

For the year, after adjusting out the positive effect of the bargain gain on last year's earnings, our net earnings increased by 12% to $54.2 million or $2.86 a share from $48.5 million a year ago. And that's something that we are very proud and we could crow about. Our EBITDA for the past 12 months was a record high of $117.3 million. Food-service -- sales to food service customers increased 13% for the quarter and 12% for the year. Adjusting for the handheld business and Kim & Scott's acquisition as noted above, sales increased 12% for the quarter and 8% for the year.

Soft pretzel sales were up 28% for the quarter -- let me repeat that line, soft pretzel sales were up 28% for the quarter and 14% for the year. Even without Kim & Scott's Soft Pretzels acquisition, sales were up 24% for the quarter. Italian Ice and Frozen Juice Bar and dessert sales increased 6% for the quarter and 8% for the year. Churros sales were up 13% in the quarter and 11% for the year. Bakery sales were up 9% for the quarter and 10% for the year, a drop in Funnel Cake product sales to two customers in the quarter and three customers in the year caused the sales decline in funnel cake product sales of $626,000 in the quarter and $8.6 million for the year. Handheld sales were up 9% in the quarter.

Retail supermarkets -- sales of products to grocery and retail supermarkets were up 12% for the quarter and 21% for the year. Adjusting for handhelds and Kim & Scott's, sales were up 11% for the quarter and 4% for the year. Soft pretzel sales were up 19% for the quarter and 6% for the year on higher case volume of 15% for the quarter and 2% for the year. Kim & Scott's sales accounted for approximately 25% of the increase in sales for the quarter and 22% for the year.

Sales of our Frozen Juice Bar and Italian Ices were up 5% in the quarter and up 3% in the year on a slight case volume decrease of 1% for the quarter and a slight increase of 0.3% for the year. Handheld sales in the quarter increased to $7.5 million from $6.6 million a year ago. ICEE and frozen beverages -- ICEE frozen beverage and related product sales were up 5% in the quarter and 5% for the year. Beverage related sales alone were up about 0.5% in the quarter and up 2% in the year. Domestic gallon sales were essentially flat in our base ICEE business in the quarter and for the year. Service revenue for others was up 12% in the quarter and 15% for the year as we continued to grow this niche part of our overall ICEE business and organization.

Consolidated -- gross profit as a percentage of sales in the quarter increased to 31.9% from 30.6% last year, and for the year, decreased to 30.1% from 30.9% a year ago. The gross profit percentage decrease in the year resulted from lower margins of the handheld business and by comparison, last year we did not own handhelds for the entire year. We are impacted marginally by higher ingredient and packaging costs in the quarter by about $10 million for the year. We cannot project the impact or benefit of changes in ingredient and packaging costs going forward, period. Total operating expense as a percentage of sales was exactly 19.38% in both years' quarter and 0.7 percentage points lower in the year, that's 0,7, mainly because of sales increases. Capital spending and cash flow. Our cash and investment securities balance increased $16 million in the quarter to $180.4 million.

We continue to look for acquisitions as a proper use of our cash. Our capital spending increased to $12.7 million in the quarter and $42.8 million for the year, as we continue to invest in plant efficiencies and expansion in connection to growing our business. During the year, during the last 12 months, we completed the expansion of our St. Louis bakery building, essentially doubling its size and added pretzel lines at our Carrollton, Texas plant near Dallas and Bellmawr, New Jersey facilities. We are presently estimating capital spending for next year to be $30 million or so. A cash dividend of $0.13 a share was declared by our Board of Directors and paid on October 3, 2012.

Stock buyback -- we bought and retired 187,649 shares of our common stock at an aggregate cost of $10.8 million over the period from July 25 to October 31. More recently, on November 8, our board authorized the purchase of an additional 500,000 shares.

Commentary -- our sales growth of 2% this quarter before the benefit of acquisitions and adjusting for the extra week, was not up to our standards, to say the least. Sales of soft pretzels and food service were very strong and include new pretzel products such as rolls, sticks, and soft pretzel buns to casual dining restaurants and club stores. Frozen juice bar and ices sales in food service on an adjusted weekly basis were flat, as we were impacted by changes in the USDA schools service program. Churros did reasonably well with an adjusted sales increase of 6% and adjusted bakery sales increase less than 2%. The decline in funnel cake sales and funnel cake products has just about run its course.

Unit sales of soft pretzels in our retail supermarket segment were significantly higher in the quarter, but frozen juice bars and ices continue to be relatively flat. In ICEE and frozen beverages, gallon sales were flat and service revenue to others was up an adjusted 5% in the quarter, as this area of our business continues to perform well. Although frozen beverages had a strong year, operating income in the fourth quarter was down about $1 million.

Regarding the acquired handheld business, sales have improved to roughly $53 million annual rate in the quarter and this business has begun to contribute to operating income. In short, we are somewhat ahead of our schedule. We are working diligently to get the top-line increasing further. Our estimated income taxed rate was 36% for the quarter both this year end of last year.

We are estimating a rate of about 37% in fiscal year 2013. Perhaps slightly lower than this year's full-year rate. Again, this marked the 41st straight year of increased sales, the 41st straight year of profitability and the 164th straight quarter of quarter after quarter increased sales. And also, I might note that this Company, your Company, J & J Snack Food, has never had a quarter in its entire history that it was not profitable.

I thank you for your continued interest and I will turn it back over to the listeners for their comments and questions.

(Operator Instructions)

Akshay Jagdale.

My first question is regarding the ConAgra handheld business. I heard your comments. Can you remind me again where given where you are today, which is ahead of your initial expectations, when can we -- how much accretion should we expect from that acquisition this year? And is the $0.10 accretion still in play? And if so, is that a 2013 or 2014 phenomenon?

When we made that acquisition, we looked at the opportunity, the risk and the value and we projected out two years. We are slightly ahead of our projections. We have a lot of opportunities before us. Some of them are in the middle stages of development. I think 2013 might be a watershed year, but I think it is going to be probably some time a little bit down the road until we could expect significant earnings.

What has been accomplished, the operations are part of our team, our culture. We have even moved the pretzel product into the far west plant. So, it is going overall very well. And we need to just build on volume and our sales force and people are dedicated to it. We think we've got a wonderful opportunity there. We are happy. It was a horse that we had to catch while it was running and now we are doing a good job with it.

Moving on to what I thought was the continuing bright spot amongst other bright spots is pretzels. Again, a really outstanding quarter. I believe a lot of that has to do with some of your products showing up on the restaurant menu. But help me understand the growth prospects for that business in fiscal '13. Should we continue to expect double-digit organic growth on the pretzel side? I think there's potential for that to accelerate, but I would just like to get your view.

Akshay, you've been following us for several years and we've been talking about breaking through some of the barriers that we had with casual dining and fast food restaurants and it goes back to three and four years ago, some of the presentations were made in New York. We've gained traction.

The product is now being sold in several fast food restaurants, Applebee's, TGIF Fridays, Clemson and on. There's a bunch of people that are putting it. We expect to have another good year. Will it be in the high double digits? We don't give guidance, but we are working very, very hard to maintain that type of sales growth.

And we are cautiously optimistic we are going to have another strong year in our core products, which includes pretzels and churros. How about we give somebody else a chance, Akshay, and then we will come back to you.

Okay, sounds good. Thanks.

Brian Rafn.

Give us a little sense of where ingredient commodities are. Would you see them continuing to escalate? Are the plateauing? What's kind of as you enter your next fiscal year? What's the delta change?

Let me turn to Dennis to comment on that, but we are always fearful of commodities starting to run out of hand like a wild horse, but if we take a look at where we were a couple years ago -- here, let me turn it to Dennis.

Brian, as I'm sure you are aware, the cost of wheat has gone up considerably over the last six months. It actually has gone up six months ago for about over two month period and has pretty much remained at that high level. Additionally, packaging cost of corrugated and paper, manufacturers are trying to through significant cost increases. So we would expect to have some additional cost this year. Don't know how much they are going be; we cannot quantify at this point, but we don't expect costs to be dropping.

Okay, you talked about wheat, Dennis. How about like eggs and sugar or shortening? Is there anything else that sticks out, or are they all incrementally up?

You look at all of the others there's probably a combination of ups and downs. At this point, perhaps, neutral, perhaps a little bit down, perhaps a little bit up, it is hard to say.

Give me a sense -- we've had across the US a drought and it was a heat wave this summer. How did that affect at all your frozen juice bars or ICEE sales? Did that have a bearing at all?

Warm weather helps our ICEE and juice bar sales. When it is too hot and there people aren't out as much, so therefore it would have a more of a moderate to negative impact, but we have plenty -- it is not like we're running out of supply.

We have plenty of supply and we will continue to have a plenty of supply, it is just what we watch are the cost and we do book out perhaps as far as six months at a time. So we watch it, we watch it on a certainly on a weekly to daily basis. We have plenty of supply, it is not like suddenly that we're going to be out of a critical ingredient.

When you look at your pretzel sales, how much of the incremental growth year over year in the pretzel category across the entire Company would be the sticks and the rolls and some of the new product iterations versus your core box soft pretzel sales?

Well, obviously, as we expand into some of these new channels and new segments of these channels, it is a product that although pretzel-like in character, it's a little bit different. A Bavarian stick, a pretzel bun, a pretzel roll, so, a big part of that growth, and I cannot quantify the percentages, but it would probably be certainly be 60% or more, is these new products.

When you think about it, we've been able to develop, get the market, go through its alpha test, go through its beta test, get into, take advantage of some of these opportunities and now we are there. Now we are there.

I understand that one of our new customers is going to start advertising Monday night on football showing our Bavarian Stick being sold in there. So, we are pleased with the progress that we've made so far in the past year or so with these new products and new opportunities and we are cautiously optimistic. We will continue that growth.

Outstanding. Thank you.

Bob Costello.

Your Capital Ex, you mentioned what you did this year and what you expect to do next year, if I remember hearing correctly that numbers up significantly? Could you give us some clarity to where the money you expect to spend?

In the past year what we did is we doubled our Moscow Mills, Missouri, plant operations, that's near St. Louis. We doubled that in anticipation of some growth and we are getting that growth. We are going to be very, very pleased with what our numbers are going to look like coming out of Daddy Ray's.

We also doubled our pretzel facility in Carrollton, which is near Dallas. And we needed to do that. We were probably a little bit even late in getting it done and we expect to get the benefits of that production capacity. Here in Bellmawr, New Jersey, we put in a new line of churros, and as you can see, Churros have been growing in double digits for the past several years. And we put in an additional specialty pretzel line for these Bavarian sticks.

We probably did a little more in the past year than we had been because we have been spending $30 million to $35 million a year and I think we spent close to $43 million in the past year. And we are looking at $30 million in the coming year, which would include plant efficiencies, ICEE beverage dispensers, and just some ongoing capital improvements throughout our system that we need to either refresh our lines or to make ourselves more efficient.

Question on the frozen juice business. At the local club store you are now selling the Whole Fruit push pops and you didn't sell them, I don't believe, before and I noticed the price per quarter, whatever it is, is almost double what some of the other items are. Is that going to benefit your juice business on a margin basis if you pick up incremental volume?

Any incremental volume that we do pick up hopefully has some benefits hanging onto it. And, Bob, you make an interesting comment. Our juice bar business has been a little bit softened because of USDA requirements because our school business has been impacted by that.

So, we are continually looking for new and perhaps different opportunities, whether they be a club stores, grocery channel, other specialty stores, value stores in there and we are real good at producing a product that is nutritional, contains juice in a cup, in a stick, in a tube, so our people are out there and they are riding real hard everywhere on their horses to get the products in there. So, you have --

How much business do you do with the US school program overall?

I guess that business, if we take it, if we go across all product lines could be $60 million or so.

What do anticipate with the continuation of this administration? Is there any more changes that you anticipate with the school programs?

A lot of the changes have been put in over the past couple years. None of them, quite frankly -- well, let me just put aside my personal comments, most of them are designed to provide a healthier product choices for the children, whether it be carrot sticks or whole wheat pretzel.

We have had to reformulate nearly our entire product line for the school system and we've done that. Sometimes it is hard to keep up with it and we have to satisfy not only the USDA, but the directors of the school in there and ultimately it gets down to the student there who -- they have to like the pretzel or the product on there. We still have some challenges left for us. We're real good at reformulating. We are real good at keeping with the standards. We have a dedicated sales team that is on top of that. And we are hopeful that this will improve over the next couple years.

But quite frankly, the last couple years, because of the nutritional changes, the school systems have had a negative impact on our sales and profitability. You wouldn't know it on our overall numbers, because we are still running like hard charging horses everywhere else, but we've had to make up the differences.

Last question. If you add up all the acquisitions you did since 2010, I think you spent $35 million give or take. What kind of sales from the California Churros, the pretzel business, the ConAgra, what's the incremental new business sales in 2013 you think that would do?

Well, let's see, you are adding up California Churros, which would be in the $20 millions, ConAgra [1030]. How much did you say we spent?

$30 some million, $35 million, $37 million you spent over the last three years for acquisitions.

Picked up $78 million in sales, Dennis? Roughly, $78 million, $80 million in sales.

Okay, thank you very much. Thank you.

Mitch Pinheiro.

In this quarter, backing out the extra week impact, and you may have said this and I may have missed this. What was your volume performance in the quarter?

Up 2%.

I'm sorry?

Dennis is saying it was flat. Volume.

When you look at next year, fiscal '13, which of the segments do you think are going to provide the strongest performance if you had to rank them? Or which ones are the ones that are likely to be the meaningful drivers of the top line?

Pretzels and churros. There are good things happening. I don't want to say big things in there, but we are not exactly the cat's meow with that yet, but we are going there.

And the handheld business, Akshay was asking about it. It sounds like you are at a pretty nice run rate. You're ahead of schedule. The key there remains revenue growth and that drives ultimate margins?

Sales growth. Sales, we need sales.

And, obviously, your optimistic and you work hard at these acquisitions, but how do you feel now with almost a year under your belt with this? How do you feel about the prospects for gaining new customers?

Feel good, Mitch, all right? I like that my team has gotten their arms around it. I like that they have converted quickly. The other people, the other staff I like that we're finding other opportunities at these plants. I feel good about it. I will feel great in a couple years, but right now I feel good.

When you look at -- a couple other odds and ends questions. Will the lack of an NHL season have an impact on your food service soft pretzel business?

Any time we lose, how many teams are there, Mitch, 30 teams, 31 teams?

32 or so.

And you lose all those dates and all that, yes, is going to have some impact. Hopefully, we are able to, as we expand our channels and our customer base, that we'll maybe be able to pick up some or if not all that business elsewhere.

But I would be -- hockey season is nice in the winter and they are pretzel eaters. If I had my druthers, I would order them to start playing tomorrow. But we have survived baseball strikes, not just survived, we have thrived. We survived baseball strikes, the NFL, hockey season before, basketball season and this too will be like a little pimple on the dot.

Sure. No, I realize it is a temporary situation, but I was wondering if the would have -- whether we would actually see any impact from it in the next quarter or so. And it sounds like maybe a little bit.

I'm more concerned with the overall economy and some of the overall issues that are going to be affecting the people in our governments and what not.

And then finally, how would you characterize your acquisition pipeline? Are you seeing good flow of ideas? Are you working on anything? How could you characterize that?

This question comes up often and I don't mean to be furtive or secretive, but we are always working on things and sometimes things hang-on and we bring a -- if you look at our acquisition made over the past few years, some of them we had a five or six year history of discussions and negotiations like with California Churros.

Others happen relatively quickly, like ConAgra, which got us into a different variety of products that we were looking to develop on our own. So, we have a reasonable amount of these opportunities, but we don't give guidance and we certainly don't talk about acquisition of things before they are going to happen, but you stayed with us for a long time. I would stay on that horse.

Let me ask you one more question around acquisitions. Almost all of your acquisitions have been in your core competencies and certainly complementing either in the retail side frozen, like your handhelds and the handhelds being a little different, but certainly fits into your channels. Are you still focused on acquisitions within your core competencies and the focus in your core channels? Should we not be surprised by something new? A new channel? New type of capability? Things like that.

We are not going to run out and do something that's going to be transformational. But to the extent that we've stayed within -- we've expanded our playing field over the years. We've gone from pretzels to beverages to juice, but we are going to -- it would take something significant and or dramatic that we would have -- that we would do something that would be too far outside of our core competencies.

Okay. All right thank you very much.

Brian Rafn.

Gerry, give me a sense if you look at your CapEx budget for the last year, $42.8 million, what was your budget for CapEx going into the year and how much -- and you gave us a $30 million bogie next year, how much on an in season, when you are in the year, can you either reduce or expand that CapEx budget or is that pretty static from going in year one?

Good question, Brian. Last year I believe we were projecting about $35 million. We had an opportunity that came up deep into the year, midpoint, and we had to put another line for pretzels and churros and we did it in a hurry and we completed it in the fourth quarter or in the beginning of this year's first quarter, October.

I used to say we could stop on a dime and turn and change direction. Now maybe we cannot stop on a dime, but we could stop on a quarter, so to speak, and we can move and change direction. So, we had opportunities that came up during the year and we seized on them and now we are going to be able to take advantage of them this year in 2013, because the sales are going to be -- we are projecting significant increase in sales from these lines.

Well, you did about $1.63 in CapEx, D&A, and that's outstanding. For a Company your size, you guys do a superb job. Gerry, you had a great track record in finding these little orphan kind of niche brands and taken them from a local brand to a regional to a national, putting some CapEx in. Go back to your Daddy Ray's. I think when you said you're doubling the size at Moscow Mills, that's the Daddy Ray's fig bar. Where was that when you started in sales and what do you see that product today?

When we started that we made that acquisition, I think, it's six years ago. It will be six years this February and that was about a $15 million annualized sales making fruit bars. The year we bought it all hell broke loose with the commodities and Jerry Law, who's sitting right here next to me, had a tough year controlling expenses and building that business.

Jerry, what are we expecting to do this year out of there, $60 million? We will do $50 million to $55 million this year out of that facility. That's selling fig and fruit bars and now another cookie line in there. What Daddy Ray's is, it is like every, all of our product lines. Daddy Ray's may be the best producer of fig and fruit bars in the country.

And just like we are the best producer of soft pretzels and of juice bars and of frozen beverages, where there are real efficiencies that we have dedicated ourselves to since the beginning. And it continues to be our mantra to have a niche product, be the low-cost producer with barriers to entry and dominate the marketing and distribution channels and my team, it is embreaded in them that that's where their thought process and their execution process is on a daily basis.

If you double that line, I think you said capacity up 100%, what might be the capacity and does that get you for another couple of years or would you be right at $50 million or $60 million in capacity with the second line?

They've already making overtures, which I'm making them justify, they want to talk about how they can expand that facility one more time. But we will see. It is a good problems to have, Brian.

Where are you guys on ICEE and Slush Puppie and Parrot Ice? What's your infield machine count as far as dispensers? You got an idea, just a ballpark? I'm just curious.

Roughly there is about 40,000 that we own and there's about 80,000 that we touch service for others and it is only been about maybe eight or nine years that we started doing service for others. So that was a business that we've really grown from a bare field at a zero-base level and now we are doing about $50ish million, Dennis, in service?

So, that business continues to grow and our beverage business we find a way to continue to grow it, too. The combined ICEE group, and this was a Company that we've owned since 1987, it was doing about $13 million a year then, but it is about $200 million right now.

That's outstanding, Gerry. When you look at ICEE Slush Puppies, Parrot Ice, how much on an annualized basis do you guys play around with flavors, ingredients. I'm looking for kind of the end-user demand having a bunch of little kids here on my side, is that a fairly -- where you're driven, you've got to constantly be upgrading flavors or is that something where you can be somewhat static for a few years?

We do and we are constantly rotating flavors and we have a variety of flavors. Still gets down to a core few, Cherry, Blue Raz, Coca-Cola. We now have a mix it up variety, but vanilla and chocolate are still probably the two most popular flavors of ice cream. And similarly, there is two or three base flavors of ICEE.

And even though we may switch out and promote different flavors throughout the year, in the fall we will do a pumpkin and we will do a mix berry, but we have all of these varieties and it will help -- it keeps the customers happy, the guests happy, but the majority of our sales are still the core flavors.

Right, that's understandable. You made a comment, Gerry. Go back to this, obviously, the encroachment from the government on nutrition standards and that. That's been ongoing. You talked a little bit about the reception of students to new flavors. You have to reformulate and make it healthier. What's your sense of the reception?

Obviously, you have a Slurpee on one side and frozen broccoli stick on the other side, the kids, like in the cinema chain, they are going to go for the Slurpee or anything sweet and sugary. But, as you reformulate, how has been the reception and demand from students?

To begin with, you cannot have, like you said Slurpee, I will switch it, a Slush Puppie or an ICEE next to a broccoli or a carrot because they don't even allow it in schools anymore.

The reception by students has been mixed. When I say mixed, we get field reports and then we will get USDA comments and it appears the USDA and the school system still has challenges as they attempt to influence the feeding patterns of children. It has to taste good. We make great-tasting soft pretzels, but when they become a grain or a multigrain or a different product in there they are not near -- some of the taste flavor impact changes.

You talked a little bit, Gerry, about acquisitions, which you've been superb at. When you look at the pipeline, would you say that the acquisitions have any more sourcing from, say, maybe restructured bankruptcy deals versus things that may be good brands, they just might be small little orphan brands and it is more of a size and scale, it is not really a restructuring. Go back to when you started with J & J The Pretzel, if I remember right in 1970 that was a bankrupt deal. What are you seeing in the quality of the pipeline?

A mix. When you take a Company or a product line and you have to fix it up from plant operation level all the way through the culture in there, it's a tremendous amount of effort. There's a lot of smaller things out there like that and unless they are a nice jigsaw fit with us, we are going to probably refrain from just putting them into our mosaic.

So, we're looking for things that maybe are operating well already and that maybe we could add what we do well, which is selling and produce and the logistics in there, perhaps even provide management and funding in there. So, we are a little bit more diligent and there's enough of the fixer-uppers around there that -- and sometimes it takes the same amount of energy and time to fix something that's not good as to grow something that is good.

And one more question, Gerry. Give me a sense and comment a little bit on sales and products, introductions maybe new products into the dollar chain stores.

Bob Pape is sitting here. Talks about dollar.

In the area of pretzels and also frozen novelties, those are the two areas that we are continuing to expand on. And across accounts like Dollar General, Dollar Tree and so on, we continue to add new products in those two areas specifically.

Are you guys seeing any new -- how would you measure your penetration from shelf space? Is that about the same or are you able to push a little more shelf space in the dollar chain?

We've been very pleased with our share of shelf, specifically in that channel.

Okay. Thanks, guys, superb job as always.

Thanks. Thank you very much.

Akshay Jagdale.

First question, sales drag from -- you mentioned funnel cakes $8.6 million drag this year ago. Obviously, it won't have that next year, I'm assuming, and so confirm that. And, secondly, how much -- the school lunch program, what negative impact has it had this year and how many more quarters of that should we expect next year?

Let me answer your first question first. All of that funnel cake product sales decline comes from, I think, two maybe three customers, Burger King, Jack-in-the-Box and IHOP. So, we probably will not have these comparables going forward for this year.

With respect to the school foodservice program, I don't know if we've really had an impact yet on our sales overall on an annualized basis, but we saw a slowdown in what was our fourth quarter during the July, August, September, and we were off roughly about $1 million from the comparable year-ago period.

It has, however, even accelerated a little bit in this year our first quarter. We are into November and we're already passed that $1 million. It is off $1 million after two months. Part of that is the uncertainty that the administrative school foodservice system is getting from the USDA. We think that will shake out between now and the new year and hopefully it will stabilize then.

And on similar lines, but on the margin side. This year the handheld business, how much of a drag was it on gross margins?

Dennis, do we have an exact number on that?

Well, what I would say is this, if we had backed out the handheld business from both years, our margin overall would have been roughly the same gross margin, the same both years as a percentage.

And that equation should only get better next year, correct?

Hopefully.

And with pretzel sales outpacing other products, we should expect a margin benefit from that roughly just directionally, correct? I'm assuming that's a yes. Anyway, the last question I have is on buybacks, so, nobody asked about it. I thought it was a significant issue. You haven't bought back shares in two years, roughly, and you bought back quite a bit and you've got authorization to do a lot more. Obviously, you've been building a lot of cash and you're basically telling investors that you're not just going to sit on the cash.

So, help me understand that. Does that decision to buy back shares in any way signal that you are not seeing enough in the pipeline or from a timing perspective you don't see anything on the acquisition side that's going to happen or basically what you are saying is we're not going to sit on cash, we have enough cash and other firepower to do the deals that we might be pursuing, but this is just a prudent use of capital. Can you just help me with that? There was a change, so I'm trying to understand what you were thinking.

I think you've analyzed it pretty good, if not perfectly. Our cash reserves continue to grow. We had some expansion requirements and opportunities and we did that all from within our coffers, our cash flow.

And perhaps we felt the timing was right and it was beneficial to buy back and retire these shares, which provides some ultimate EPS value, but it is not because we don't -- we are not planning a massive buyback. We've bought back shares before at different times, so the real question is it was a good use for some of our cash and I would not expect that every quarter, but we felt the metrics were right.

Okay, that's it, I will pass it on. Thank you.

We have no further questions at this time.

I want to thank everybody for joining in and participating in the conversation, and we look forward to all of you here in the next quarter too. Thank you very much.

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