Gerry Shreiber - Chief Executive Officer Dennis Moore - Chief Financial Officer Bob Radano - Chief Operating Officer Jerry Law - Assistant and Senior Vice President [Bow Pal] [ph] - Substitute, Senior Vice President, Sales

Jon Andersen - William Blair & Co. Jonathan Feeney - Janney Montgomery Scott Akshay Jagdale - KeyBanc Capital Markets Brian Rafn - Morgan Dempsey Capital Management Robert Costello - Costello Asset Management Francesco Pellegrino - Sidoti & Company

Good morning everyone. This is Gerry Shreiber, and welcome to our third quarter conference call.

With me today is Dennis Moore, our CFO; Bob Radano, our COO; Jerry Law, my Assistant and Senior Vice President. Not with us today is Bob Pape nor Teddy Shepherd, our CED, but substituting Bob Pape is [Bow Pal] [ph].

Let me begin with the obligatory statement. The forward-looking statements contained herein are subject to certain risk and uncertainties that could cause actual results to differ materially from these -- for those projected in the forward-looking statements.

You’re cautioned not to place undue reliance on these statements, which reflect management’s analysis only as of the date hereof. We undertake no obligation to publicly revise or update these statements to reflect events or circumstances that arise after the date hereof.

Results of operations, net sales increased 8% for the quarter and 8% for the nine months. Excluding the benefit from Philly Swirl, which was acquired in May 2014, sales increased 8% for the quarter and 6% for the nine months.

For the quarter, our net earnings increased by 3% to $24.5 million or $1.30 a share from $23.7 million or $1.26 a share a year ago. For the nine months, our net earnings increased to $50.4 million or $2.68 a share from $49.6 million or $2.64 a share year ago.

We realized a loss of $1.4 million in the quarter as we reduced our holdings of mutual funds. This loss reduced our earnings per share by closed to $0.05 a share.

Although, we expect to recognize additional losses in these funds going forward our overall return on our investment in mutual funds has been positive since we first made the investments in October 2012. Our EBITDA that’s earnings before interest, taxes, depreciation and amortization for the past 12 months was $151.9 million, a record.

Food service, sales to food service customers increased 6% for the quarter and 5% for the nine months, in large part due to increased sales to school food service customers and convenience store change and warehouse club stores. Soft pretzel sales were up 4% for the quarter and 4% for the nine months.

Italian ice and frozen juice bar and dessert sales were up 6% in the quarter and 1% for the nine months. Churros sales were down 4% in the quarter and down 1% for the nine months as we continue to lap the loss of Taco Bell.

Bakery sales were up 10% in the quarter and 8% for the nine months. Retail supermarkets and grocery, sales of products to retail supermarkets were up 18% for the quarter and 18% for the nine months, and they were up 12% for the quarter and 6% for the nine months without the benefit of Philly Swirl.

Soft pretzel sales were up 5% for the quarter and 4% for the nine months, and sales of frozen juice bars and Italian ices were up 15% in the quarter and 12% for the nine months without the benefit of Philly Swirl. Handheld sales in the quarter were flat and down 4% for the nine months.

ICEE and frozen beverages which include Arctic Blast, Slush Puppie and Parrot Ice. Frozen beverage and related product sales were up 9% in the quarter and 10% for the nine months.

Beverage related sales alone were up 8% with gallon sales up 7% in our base ICEE business in the quarter and up 6% with gallon sales up 6% for the nine months. Service revenue for others was up 4% for the quarter and 11% for the nine months.

Consolidated, gross profit as a percentage of sales was 32.4% in this year’s third quarter, down slightly from 32.8% last year and for the nine months was 30.5% this year, down from 30.8% last year. The gross profit percentage in this year's quarter was driven higher by ICEE and retail supermarkets, and offset by reduced margins and food service resulting from -- primarily from higher manufacturing cost and significantly higher cost of egg raw materials.

Total operating expense as a percentage of sales decreased to 18.9% from 18.5% in last year's quarter, primarily because of increased sales. Capital spending and cash flow.

Our cash and investment securities balance increased $13.5 million in the quarter to $229.9 million. We continue to look for acquisitions as a use of our cash.

We reduced our holdings of income generating mutual funds to $90 million at quarter end and -- $67 million in our fourth quarter. We have reinvestment some of the proceeds in fixed to floating rate preferred stocks and corporate bonds.

Our capital spending was $15.6 million in the quarter as we continue to invest in plant efficiencies and growing our business. We are presently estimating capital spending for the year to be $45 million to $50 million or so.

A cash dividend of $0.36 a share was declared by our Board of Directors and paid on July 2nd. We did not purchase buyback any of our stock during the quarter.

Commentary, our sales growth of soft pretzels and food service was 4% this quarter. Although, sales to restaurant chain this year continued to be roughly flat with last year, sales to schools and convenience store chains were strong.

Frozen juice bars and ices sales and food service were up in this quarter due to sales of our branded whole fruit organic juice bars to a warehouse club store. Handheld sales on food service were down again 6% as we continue to face challenges in this business in driving its growth.

Churros sales were down 4%. Excluding the loss of sales to a major food restaurant chain last August, sales were up 8% in the quarter.

Bakery sales continued to be strong driven by sales to schools and co-packing business. Sales of soft pretzels in our retail supermarket were up a solid 4% for the quarter and frozen juice and ices were up very strong 15%.

Handheld sales in retail supermarket were down 5%, mainly due to lower sales to two customers. And frozen beverages gallon sales were up an outstanding 7% as we benefited from sales to movie theaters where attendance was very strong and service revenue to others was up 4% in the quarter as this area of our business continues to grow and perform very well.

Operating income increased $3.1 million in the quarter from a year ago, with operating income in frozen beverages higher by $1 million and retail supermarkets higher by $2.9 million. Food service was lower by $766,000.

Operating income and food service in this quarter was impacted by about $800,000 due to higher egg cost, which were not recovered through selling price increases and generally higher manufacturing cost in part due to start up inefficiencies as we expand our manufacturing capabilities. Our estimated income tax rate was 37% this year and last year for the same quarter.

We are estimating a rate of about 36.5% in fiscal year 2015. We continue to grow our sales quarter-over-quarter.

This marks a 175 straight quarters of sales increases. I want to thank you for your continued interest.

The past has been bright and our future is brighter. I will turn it now back to the audience for thesis and questions.

Hey, good morning, everybody.

Good morning, Jon.

I wanted to ask first about the retail supermarket business, which, as you pointed out Gerry, was quite strong in the quarter, up double digits on an organic basis. That’s the first time -- I think that’s happened since maybe the second quarter of 2011.

Could you talk a little bit more about the particular points of strength you’re seeing in the retail supermarket business and how sustainable this might be going forward?

Well, it’s a good point, Jon. It’s a combination of factors.

As you well know, our food service soft pretzel business had been growing significantly the last couple years, as that business was influenced by more soft pretzels more on menus everywhere. And our marketing department did a -- we had couple of special promotions on our major brands, including SUPERPRETZEL.

We benefited from the increase. Hopefully, what this -- we will be able to repeat this in the future, but there is obviously no guarantee there are going to be double-digit increases in the grocery end of the business.

In the Bavarian launch, how was -- I think that’s -- you’ve been at retail now for sometime and how was that kind of going so far in terms of sell-through, what you’re seeing in terms of velocity of the shelves, is it meeting expectations?

It is not, all right. So that’s even more significant that our major brand SUPERPRETZEL in the frozen section has done so well without having a particular headwind from the other bread products.

Okay.

You have to do things in there and we’ve expanded our -- not only our business, but we’ve expanded our share however slightly.

And then just within that the same segment, I think you mentioned the handhelds were flat, I think the handhelds have been declining. Is there an update you can provide there?

Are you seeing some more stability in that business at retail, or is it still kind of touching bell?

I really can’t say stability, but it’s terrible for me to say of all people that flat was good, but after a several declines flat was good. We do have a new product that we expect to be in some 500 stores of a major chain in about another month.

So we are continuing to develop products through R&D and we have some marketing plans for them.

Okay. Let me shift gear.

Let me ask you about the food service segment, because in the press release there was a line in there that indicated the results of the food service segment were disappointing. But I don’t know when I look at it, I see kind of 6% organic growth on a difficult comparison, 8% organic growth a year ago, that looks pretty good to me.

When you say disappointing, are you referring to margins within the business or what disappointed there?

Yes. The margins in the business, a 90% of it was caused by this tremendous increase for us in liquid eggs, which affects couple of our products in here.

And we absorbed that. So to the extent and that item, and perhaps due to some startup costs in one of our nearby plants that impacted margins, but we were very satisfied with the overall performance on the topline with food service, particularly since we were able to get back to driving sales in the school food service channel and made significant inroads in the c-store business.

That makes sense. My last question is just on eggs in particular.

Just to be clear, eggs, is this a headwind of 800 to 1 million a month going forward that you are going to be able to fully offset through price and other maybe, I don’t know reformulation or sourcing alternative inputs? Or is there -- what portion of that inflation do you think you are going to have to kind of absorb within the P&L over the next several quarters?

Thank you.

To answer your question on an annualized basis if we did nothing, it might cost us $9 million to $10 million, all right. But we have passed on some pricing, which is going to take effect next month, when I say next in August in here.

And hopefully, and I say this kind of a tongue and cheek. We have been slightly favorable in commodity cost all year, particularly in our major commodity, which is weak flower, but every once in a while we run into a rental too.

So we are going to iron out the rental and take care of it one way or the other.

Okay. Thanks.

I will pass it on.

Good morning, Jonathan.

Good morning, Gerry. Thanks very much as always.

I wanted to ask about are we seeing great growth across and particularly the pretzel part of the business and which you’re reporting some I guess what they call evidenced based pricing through in other businesses where you have egg pressure? Is there any pressure on you from customers to reduce price anywhere or being more promotional anywhere, particularly the food service business given some of the at least visible, apparent, declines in grain, the customers are aware of that as I change the dynamic at all?

No. Obviously when we talk to customers about the increase in egg products or products that are made with eggs, their first response is and their second response is what can you lower for us?

So we try and manage our selling efforts with our customers and be as transparent as we can with cost and whatnot. But our people are doing a pretty good job with that.

And even though there are some considerations being given particularly where those contractual obligations it has not had a going forward burden on a share.

Okay. That’s good to hear.

I guess as you look at the deal environment, small group companies that might fit into your portfolio. It seems like the price of everything has become extremely high, but you have historically even in periods I can remember when we were in -- I mean you go back to '05, '06 when we’re in some very elevated pricing environments for deals for food companies, insurance by private equities, do you still were able to source some good ones?

So any sort of view point you have on the level of activity. What are you looking at anything and your philosophy about it right now?

Jon, what I could say is that we continue to seek out and search, and there has been ongoing discussions and some of it for a longer than I -- for long time. Last year we made two acquisitions both of them kind of small, both of them tuck-in kind of things, one in the pretzel, one in ICEE, and their benefit is probably going to be more than what meets the eye in the long term and we continue to look at things.

We are looking at things, which are somewhat bigger, somewhat significantly bigger, but we are not going to make an acquisition just for an acquisition stake and the only thing worse than not making acquisition would be to make a bad one.

Right. That’s for sure.

And just….

Kind of [Technical Difficulty] we want to be wise about it and not just in acquisitions for acquisition sake.

Thank you very much, Gerry. Appreciate it.

Good morning, Akshay.

Good morning, Akshay.

I just want to ask about the restaurant channel within your Food Service segment. It seems like things are flattening out a little bit after couple of years of good growth.

Can you talk a little bit about just the restaurant channel? Why you are seeing so flattish growth there?

I think of it more like couple of years ago you started to get pretzels and to less extent churros on restaurant menus and more and more restaurants caught on. So what are we seeing now, are people pegging these items off the menus or are you just in a stage where timing wise, you are not adding a lot of new customers.

Can you help me understand that?

Combinational. It’s a combination of [Technical Difficulty].

Akshay, you want to sell? Hello.

Can you hear me?

I can hear you now.

Yeah. Sorry about that.

I was on my headphone.

But it’s a combination of both factors, partly the menu is changing because people get a little bit exposed and tied to it. But we’re not -- we're keeping reasonable pace with our targets and goals and sometimes looking at flat and there is a lot of effort that goes in to keep it on the menu and maintaining flat sales.

And can you talk a little bit more about innovation with the Oreo Churro, seems exciting but doesn’t look like a lot of big customers have caught on yet. I know, you went through a product formulation change that were -- it's now filled right.

So can you talk a little bit about how that launch is going?

We are still very, very not only committed but very excited with the Oreo Churros and now making it easier for the customers that they don’t have to have two SKUs to throw and the depth, we’re getting some strong interest in the filters. And I think that the product after a slow start, gets a lot of marketing.

You got off to a slow start but that pace has accelerated in the last few months. And we’re cautiously optimistic and we’ll continue to do so.

Okay. Thank you.

I’m going to try to dial back in because my connection is really bad. So I’ll pass it on to the next caller and I’ll get back in line.

Thank you.

Good morning Gerry.

Good morning Brian.

You talked a little bit about eggs. Can you go through some of the other ingredients if there is any delta change, flour, sugar, shortening chocolate, cocoa, anything else that’s up or down makes good life?

The primary ingredient, the main ingredient that I mentioned, wheat, is pretty stable. Flour is stable.

As a matter of fact, I have noticed, you know, year after -- year-over-year flour is probably down a bit. Dennis, you want to comment on chocolate or some of the…

[Technical Difficulty] guys, this is Dennis. Generally speaking, if you take the entire basket of commodity, without eggs, we’re relatively flattish at this point.

Okay. All right.

So talk a little bit about, you guys mentioned what I see, that’s fairly solid and installed base. Some of the other flavors that you have in that frozen drink area, ARTIC BLAST, PARROT ICE, SLUSH PUPPIE.

How are they relative to budget plan? How are they performing versus ICEE?

You have to go back to the genesis of some of the other brands. When ARTIC BLAST was developed to as a competitor brand against what’s then the ICEE distributors.

SLUSH PUPPIE, a brand, that we acquired a few years back is doing okay but it’s doing significant. We're getting a major benefit from our SLUSH PUPPIE in licensing.

Often times, you’ll see them in these little transparent plastic tubes and more recently in these what you call -- what they call, pouches. So ICEE has continued to perform well as a subsidiary company with ICEE being the main brand and some of the secondary and tertiary brands being used in a utility fashion.

Okay. Yes, I remember SLUSH PUPPIE was jumping.

You pushed around in carts like baseball fields or little [indiscernible]. What were ARTIC BLAST compared to PARROT ICE?

Are they just…

PARROT ICE is primarily like a cocktail enhancer or flavor. ARTIC BLAST was used in areas where we did not have the benefit of the ICEE brand.

So even though he is still part of our -- like our baseball team, our 25th man on our roster available for special pinch hitting and benefits. He is not on the front line.

Okay. That sounds good.

What’s the product R&D in those frozen drinks relative to new flavors and new aerations or -- I mean, I’m not a consumer but my kids are. What’s kind of the novelty there relative to menu selection?

We’re constantly developing new flavors. Sometimes we develop so many new flavors we put them together with something called mix it up where kids love that they can put four, five, six flavors together.

We’ve been experimenting. And some of the flavors that we’ve been experimenting with don’t quite make it to the front of the store at a major change was not but ICEE has a good traction with our syrup suppliers in developing new flavors.

Okay. Talk a little bit, Gerry, on PHILLY SWIRL and NEW YORK PRETZEL, kind of, two recent acquisitions.

What’s kind of the sale level momentum, maybe CapEx you’re quoting in anything you’re doing manufacturing wise?

We’re doing anything CapEx yet. We want to certainly -- I mean, we knew the business and we wanted to make sure that it was a nice fit and integrated.

They each had different reasons. NEW YORK PRETZEL was a manufacturer for some 60 years in a key critical markets of New York City and up through the North East.

We pretty much left that intact. We’ve added a couple of changes to benefit them and they are performing well.

PHILLY SWIRL, I think will be a diamond in the rough for us. We acquired them last May and it’s a very, very popular product with children and also young adults and we’re expanding its base.

That business is on track. It is somewhere between $26 million and $30 million versus coming year.

Yeah. That PHILLY SWIRL, Gerry, versus say that the Manhattan-based NEW YORK PRETZEL Upper East Coast, does PHILLY SWIRL give you more leverage in finding new distribution outlets across the country versus NEW YORK PRETZEL or is it [Technical Difficulty]?

PHILLY SWIRL is primarily to grocery and to some of the warehouse clubs. NEW YORK PRETZEL was made of good product and they were in a key area, which kind of improves our strengths in a north east card or with a like no longer competitive product.

Yeah. Okay.

You talked a little bit about certainly great performance on the grocery side, Gerry. Yeah, give us a little sense of the combat in the competition showing shop location, couponing, maybe encroachments with grocery private label.

What’s the battle like in the grocery store?

Interesting point to bring up. We have added a person to -- still I have seen a person have been with us number of years.

But we have now a couple of people doing nothing but that improving a set like a major change or what not. And of course, that’s a long byprocess to do so but we have people that are beak in the streak in the store.

All right. I will just ask one more and get back in line.

Gerry, if you look at your business and you were looking at -- you've got elasticity with a consumer, fairly value sensitive, somewhat of a tepid economy, you guys certainly have fluctuation impacts from weather. If you looked at, kind of three characteristics, manufacturing efficiency, new distribution outlets, new end customers or back to the R&D, stow courts where you are developing new flavors in that, where is for you the secret for your business?

It is combination of each of the things that you’ve mentioned, but basically it is sales, sales, generating sales. And we continue to put an emphasis on sales, complemented by strong marketing and R&D initiatives and I think we benefit from that.

And I'm confident we will continue to benefit from that.

Okay. And then you talked a little bit about some of the deal side.

You guys have been very, very good at restructuring turnarounds. In some cases, private equity doesn’t necessarily chase that.

The multiples as high on -- maybe they got bankruptcies, but liquidations, some of these turnarounds or you are still seeing some deals on areas where business is maybe somewhat weaker.

While you are right about the private equity structure and what their function is and we have been pretty much resolute not taking too much risk. But we believe in good business sense and good business risk.

But some of our -- we have been outbid on some of our multiples. But more recently, I am pretty much -- I am pleased that the things that we are looking at and even getting down to the bid process, it's not because we are being significantly outbid, that’s really because for one reason or the other, ownership has decided to pull back.

But we stay in touch with these people. We have a relationship with these people.

So one of these, we are hopeful that one of them will certainly come due and pretty soon we'll have something to crow about.

All right. Gerry, keep up the good work.

Thanks.

Thank you.

Hello. Could you be a little more specific…?

Bob.

How you doing? Could you be a little bit more specific on the cash and what you're invested in and what you were invested in that you took the loss on?

I’m going to give this one to Dennis. But we have lots of cash and we continue to generate somewhere between $12 million and $14 million in net cash a month in there.

And we invested some in some mutual fund with a pretty good yield, roughly 3.5%. But Dennis, why don’t you now explain why we decided to take the loss in this last quarter?

Well, Bob, as Gerry said, we’ve been invested in these mutual funds, which have been yielding roughly 3.5%, 4% and continue to the ones that we continue to own. However, although we are getting a good returns, they are little volatile and we were sitting with unrealized losses on our books.

So, we decided to reduce our holdings and in doing so, we generated losses and we still have unrealized losses on our books, we generate as we move forward. We’ve taken the funds and we are now investing some of it in corporate bonds with basically maturity gains in 2019, 2020, which eliminates for the most part the risk, the principals as long as we sold them to maturity, which we expect to do.

We’ve also invested some of our money in bank, preferred stock, which has a fixed to floating yields and aside from the fact that the yields is -- the yield is good but the tax advantage of 5% yields on those is really equivalent to about a 7% pre-tax yields.

But further, Bob, this is Gerry again. We put our cash, build and build and build, and it behooved us to invest some of it as opposed to getting 10 or 20 basis points with cash running nothing and putting it in these funds give us a decent return.

And overall, over the past couple years, we have made some money but we also understand that is not the primary purpose of our business. Our businesses continue to grow the business and grow our earnings.

Thanks for that insight. What about the -- about two years ago, I guess, August, September, you doubled the dividend and is it reviewed quarterly, annually, what do you normally, what is your strategy with regards to the dividend policy?

Well, I go way back, maybe eight years ago when the tax law was changed and we started generating a dividend for the first time. Since then we've increased the dividend every year.

Now it’s roughly a $1.43. Correct, Dennis, Am I right at $1.43 a share?

$1.44 a share. We will be looking it every Board of Directors meeting.

There is no set time to change it, but I think that…

In the last couple of years, it’s always been in the September quarter in ’12, in ’13, in 14 and I just wondered if that's your general policy.

We will be looking at it again, and given our cash position and given that we -- even if there was a big acquisition, we have plenty of lying cap available to us. But I would look at that as a distinct possibility going forward.

One other question, with the consolidation in the dollar store business, what impact, if any do you see going on your company?

So far, we have not seen any and that still represents to us a growing part of our business as we put new products, packaged a little bit differently into the dollar channel.

Yeah. I’ve seen some of your products recently in the back of the frozen novelty section.

And is that something relatively new for you?

Well, two things, it is relatively new and when you see in the back of the frozen novelty section, help us out move it to the front.

Well, no. The dollar tree puts it in the back of the store.

I mean, that is just a layout of the store but obviously that’s new for you in the novelty category, right?

Yeah. It's one of our newer initiatives, maybe not in the last couple years.

Right. Thanks.

Thank you.

Good morning, guys.

Good morning.

First of all, I want to hit on the retail supermarkets. Test OGs, going back to Q3 2014, it’s been pretty decent double-digit growth and in the first quarter and second quarter of this year, coupon redemption was going up significantly.

In the first quarter, it was up 58%. Second quarter, it was up 35%.

And then there was a dip. It was down 40% year-over-year in the third quarter.

Gerry, could you maybe just talk about where you're seeing the American consumer and sort of dipping into utilizing coupons, or you guys offering less coupons out there? Because when I look at the handheld business, I would think that more coupon redemption would be used to sort of get that business up.

But you know what, you sort of turn that business around slightly and it wasn’t at the expense of coupon. That coupon number seem to just jump out.

I mean, I was just wondering if you had any commentary on your end.

For our major brands like SUPERPRETZEL, where we have -- we are getting a little bit better hold. As far as handhelds, everything we're doing is private-label.

So, we are not couponing it and the stores -- the grocery channel, we private label for is not putting out a coupon of its own. We’ve been impacted a little bit in that business and we spoke about it before where the decline in general with some of the handheld products like Nestlé's Hot Pockets.

All right. Question I am going to about to ask, most of the time advance with rather unpredictable but sales of the beverage machines, past couple of quarters it’s been relatively strong.

With the relative decent releases of movies this summer, is there any downstream impact until maybe where additional beverage machine sales will be for the upcoming quarters? Or is it just - it's still going to be unpredictable going forward?

It follows no defined path.

Right. Okay.

When it goes up, we wonder why we can’t spot a trend in there. But basically, our overall ICEE frozen beverages business grows because it grows, people need more drink machines or beverage machines.

We’re in the business, so we benefit from it. But we have been very, very pleased and proud of ICEE’s contribution to sales and earnings and their managed service for other seems to be benefiting both, equipment and beverage sales.

All right. And just wanted to touch on the egg situation a little bit.

Is there a volume number that you guys do on a quarterly basis just to get our minds wrapped around with how volatile egg prices are? I mean, I think you can see 50%, 60% swings over the course of 30 to 40 days based upon if you are going from, on the fall period to the winter.

What type of volume numbers are you really using for eggs on a quarterly basis?

Well, I don’t have these figures in front of me but I would give you an idea. We were paying roughly $0.70, $0.72 a pound for liquid eggs and when the price started going up and it wasn’t walking up like a treadmill, it rocked up.

Now it’s running roughly $2.30 a pound for liquid eggs. Although we are doing some experimenting with egg substitutes and making sure that we don’t do anything to suffer in quality and whatnot or in appearance in there.

We don’t have a substitute yet, which would give us any type of significant release.

That was going to be my next question about egg alternatives out there and I know companies like Hampton Creek are sort of getting a little bit of a windfall from this avian influenza situation. What have been some of the problems that you have been running into when sort of experimenting with this egg alternative products?

Well, that’s an R&D question and that’s ongoing. We want to make sure that we certainly had a supply of egg products and our people have done a good job with that.

The next burden for us to tackle would be the price of it. We have raised some of our products pricing.

We use eggs in our cookies. We use them in our churro mix.

Fortunately, we don’t use eggs in our ICEE or in our pretzel products but you can predict. When your costs go up like that and you don’t have insulator or barrier to protect those costs, it creates some burdens but we believe we’re equal to that.

Right. And it seems that the avian influenza situation has died down a bit since…

For the chickens..

Right. Since the peak of June, there is talk about sort of popping up again this fall and the birds not migrating south.

Can you just talk a little bit about what your assortment is because -- are you able to lock into contract terms? Is there anyway that you can sort of get consistent supply over the next -- I don’t know, four to six quarters based upon the unpredictability of just sort of…..

I’ll tell you what happen though. They declared…

Force Majeure.

Force Majeure.

Right.

And there is not too much we could do. I mean, the birds were destroyed.

All right. The suppliers declared on.

All right. And we either had to absorb the pricing and take care of our customers more today and tomorrow.

We’ll make a different decision in there and we opted to absorb the pricing on a short-term. We have gone out to the field and announcing an increase in there.

But we still think that our business decisions that we made is best for the long run of J&J Snack Foods.

So, you were previously on contract term.

Right. But these contracting terms have been terminated suddenly.

Yeah. Makes sense to me.

All right. Thanks again, Gerry.

Thank you.

All right. I’m back and so it’s a long way.

So just to follow up on what I had asked before, so I could -- and I apologies I couldn’t hear everything you said, so if you, perhaps repeat, I apologies. But basically, what I heard on the restaurant side is that the combination of some customers taking stuff off the menu, others adding, and then, so can you just talk to like what’s the plan, like how does it look going forward?

Do you -- is it fully penetrated in terms of getting on all of restaurants that you had expected to get on and from hereon it’s more about adding more products or how should we think would be long-term evolution of growth in that channel? Is there still plenty of opportunity or we -- or sort of what inning are we in baseball terms in that regard?

Well, that’s a good question. And we believe there is plenty of opportunity, we hear about it everyday.

Of course, we have to kind of rinse this up and make a determination on what is immediate, what is two and three years out. And some of these changes, we were literally working on their menu plans for January, not of 2016 but 2017.

We bolstered our R&D efforts and our marketing efforts and complementing that with our sales initiatives. So we're looking forward to this business over the next two and three years.

We believe it will be -- it will continue to grow.

And just going back to your commentary on the disappointing food service results, just -- even last quarter before this egg cost issue came up, you had a disappointing profit performance in food service. So, you’ve mentioned a couple of times the startup issues.

Can you talk -- what are these startup issues, what are you starting up and why is it sort of lingering still? So can you give us some perspective there?

The startup issues have to do with one of our plant thereby, which we put in new lines and we had some issues, which we are working through with automation whatnot. But a lot of it was school food service mix, perhaps a year ago and I don’t think that the issues are all -- related at all.

If you take a look at food service for this most recent quarter, I mean, sales were good, sales were strong. We had the few with eggs, which have 100% impact delegated to food service, but it continues to be our strong -- a strong business, perhaps, our strongest business.

And just to be clear, so what lines did you add that you’re referring to?

Most of all, pretzel lines for pretzel walls.

Okay. And then these increases in the liquid egg cost, what product categories do they impact the most and once you get the pricing through, how are you thinking about the impact it might have on volumes?

Well, it impacts our cookie business which is not insignificant and our churro business. And always takes a longer to get to pricing as on mixed, separate and improved than it does to be hit on the other side.

And the long run over the next year, it may have as much as a $9 million or $10 million impact in cost. We think we are going to able to offset that with increased sales and pricing.

Okay. And just going back to this topic of capital allocation, obviously, we applaud you for being proactive in managing your cash.

I think you did the right thing there. But why not buyback shares like it seems as though -- I mean clearly the argument could be made that in today’s interest rate environment, your balance sheet is not as efficient as it could be.

You talked about the dividend, it seems like there is a decent chance that might grow again. But can you talk a little about share repurchases and why you haven’t been more active in what we see in recent quarters?

Although it’ s not a high robust. We tend to buyback equal number of shares of what we give out as stock options each year.

And that has ranged from roughly 150, 000 to 180,000 shares. I don’t -- I personally believe in and again I have shareholders that I represent in my board.

I just think that we as a fit in a float as it is, as you are aware. And buying back shares is an artificial way to increase earnings per share.

And I much rather concentrate on growing the business aggressively and increasing sales and earnings and perhaps make an acquisitions.

Yeah. I don’t really disagree with anything that you said.

But essentially, and correct me if I’m wrong, Dennis, but essential with the balance sheet that you have, I mean, and the cash that you have on your balance sheet. If you could -- if you wanted to, you have ability to buy something or several businesses, even more you could spend $500 million you could raise easily.

It seems as though. And your large the acquisitions have never been anywhere close to that.

So there seems to be a lot of cushion on your balance sheet to do things like share buyback that should be more accretive and more shareholder friendly than just holding the cash on the balance sheets. So?

I want to answer that, Akshay but I want to look at Dennis when he answers.

I will not disagree with you, Akshay. However, as Gerry said I think our goal is to kind of maintain table, share count, time, and we don’t see a major task investing a number of shares back.

But keep in mind over the years, we have both tracked a fair number of shares of focus. We have less than 19 million shares outstanding and probably insiders and funds hold a major portion of that until there is a major acquisition or perhaps two or more, we would -- we think it’s prudent to let the cash build, return some to shareholders and otherwise you use it for business needs.

Perfect. I’ll pass it on.

Thank you so much.

Good, Akshay.

Hi, Gerry.

Yes, Brian.

Your CapEx for the year, you said $45 million to $50 million. If you haven’t done budgets for next year, where have you been kind of putting your CapEx , different plans, refrigerators, filled lines, where has some of that been invested?

Well, we put out equipment. Our ICEE business, which has been growing significantly, puts out drink machines, ICEE machines and that can be depending on accounts, $20,000 or more for each location or maybe as little as half of that.

We continue to invest in plant efficiencies where we can drive cost down. And again, we are looking for other uses of the cash, including acquisitions.

If you look at your factory production, your footprints, are you running any plants with three shift or plants with significant overtime, where you might be building out a footprint in the future?

Yes, and yes, but not to the extent and a long week extend. We are going to be visiting one of our plants today that we’ve expanded probably three times in the last 10 or 12 years.

It seems like a lot, all right. But we are going to be looking at some capital plants that they have to further improve efficiency.

Okay. If you look just -- one more question, you look at some of your end customer markets, how tough is it for your people to get sales penetration, say the difference between convenience stores, warehouse clubs, grocery supermarkets, movies theater chains, do any of these stand out or are they all triage operations?

They’re all challenging and we have various and sundry different sales responsibilities for them. Somebody mentioned earlier, the dollar channel.

Five years ago we weren’t in there at all. Now we’re trying to penetrate them further and further.

We’ve had a big initiative with the convenience stores and that business has grown for us. I remember back in the late 90s movie theaters, how are we going to put machines in movie theaters and how are we going to benefit from that?

Well, obviously that’s been a big part of the ICEE’s growth and success. But we will -- we continue to look for new markets, new customers to sell our existing and new products.

Thanks, Gerry.

I want to thank everybody for joining us for this conference call. And we look forward to talking to you again three months from now.

Thank you.