Jerry Shreiber - President & CEO Dennis Moore - SVP & CFO Bob Radano - SVP & COO Jerry Law - SVP Robert Pape - SVP

Akshay Jagdale - KeyBanc Capital Markets Jonathan Feeney John Anderson Brian Rafn

Good morning and welcome to our fourth quarter conference call. I’m Jerry Shreiber.

I am the President and CEO of the company and the other people with me today are Dennis Moore, Senior Vice President and Chief Financial Officer. Bob Radano, Senior Vice President and COO, Jerry Law, Senior Vice President and Special Assistant to me and Robert Pape, Senior Vice President, in charge of retail sales and food service sales.

I will begin with the obligatory statement, the forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements which we select management analysis only as of the date hereof.

We undertake no obligation to publicly revise or update these forward-looking statements to the select events or circumstances that arise after the date hereof. Results of operations, this year’s fourth quarter had 13 weeks compared to 14 weeks last year and the year had 52 weeks this year, compared to 53 last year.

The one last week lowered comparative sales about 7% for the quarter and 2% for the year. Net sales decreased because of the quarter weekly adjustment.

Net sales decreased 2% for the quarter and increased 4% for the year excluding sales post 12 months resulting from the acquisition of Kim & Scott's Gourmet Pretzels in June 2012 and adjusted for one less week in 2013 sales increased 5% from the quarter and 6.5% for the year. For the quarter our net earnings increased by 4% to $20.3 million or $1.08 a share from $19.5 million or $1.03 a share a year ago.

For the year our net earnings increased by 19% to $64.3 million or $3.41 per share from $54.2 million or $2.86 a share a year ago. Our EBITDA, earnings before interest taxes depreciation and amortization for the past 12 months was a $134.3 million a record up 15% from 2012.

Food Service, sales to food service customers increased 3% for the quarter and 8% for the year. Adjusting for Kim & Scott's as noted before and the one less week sales increased 11% for the quarter and 10% for the year.

Soft pretzels sales our core product were up 16% for the quarter and 23% for the year. Without Kim & Scott’s soft pretzels sales were up 20% for the year.

Italian ice and frozen juice treats and desserts were flat for the quarter and were down 9% for the year. Churro sales were up 15% in the quarter and 22% for the year.

Bakery sales were down 4% for the quarter and up 3% for the year. Handheld products sales were down 2% in the quarter and 4.5% for the year.

Retail supermarket, sales of product to retail supermarkets were down 24% for the quarter and 7% for the year. Adjusting for Kim & Scott’s and the one less week sales were down 18% for the quarter and 5% for the year.

Soft pretzel sales were down 23% for the quarter and up 2% for the year. Without Kim & Scott’s pretzel sales would have been flat for the year.

Sales of our frozen juices and Italian ice were down 26% in the quarter and down 10% a year on a case volume decrease of 17% for the quarter and 9% for the year. Most of this was attributable to the whole spring and summer seasons.

Handheld sales decreased 19% for the quarter and 8% for the year. ICEE and frozen beverages, frozen beverage and related product sales were flat in the quarter and up 2% for the year.

Adjusting for the one less week sales were up 5% for the quarter and 4% for the year. Beverage related sales alone were down 7% in the quarter and down 2% a year.

Gallon sales were about 10% in our base ICEE business in the quarter and 4% for the year. Our managed service revenue for others was up 9% in the quarter and 8% for the year.

Consolidated, gross profit as a percentage of sales in the quarter decreased slightly to 31.8% from 31.9% last year and for the year increased to 30.3% from 30.1% a year ago. The gross profit percentage increase in the year resulted primarily from higher volume in our food service segment.

We benefited by lowering ingredient and packing cost in the year of about $2.5 billion and about $900,000 for the quarter. We cannot project the impact or benefit of changes in ingredient and packaging cost going forward.

Total operating expense as a percentage of sales dropped to 18.9% this year from 19.4% in the quarter and dropped $0.08 percentage points in the year mainly because of sales increases and carefully managed expenses. Capital spending and cash flow our cash investment securities balance increased $15 million in the quarter to $207.3 million.

We continued to look for acquisitions but the right acquisitions as a use of our cash. Our capital spending was $8.9 million in the quarter and $35.8 million for the year as we continue to invest and plant efficiencies and expansions in growing our business.

During the year we essentially completed the expansion of our St. Louis bakery.

We’re presently estimating capital spending for next year to be $35 million or so. A cash dividend of $0.16 a share was declared by our Board of Directors and paid on October 2nd last.

We bought back 97,302 shares of our common stock at an aggregate cost of $7.3 million in the fourth quarter and 204,397 shares at a cost of $14.5 million in the year. Commentary, our sales growth of 5% this quarter adjusted for the one less week was okay but was driven down by the 18% adjusted sales decline and retail supermarket sales.

Sales of soft pretzels and food service were up a very strong adjusted 23% and includes new pretzels products such as rolls, sticks, soft pretzel buns to casual dining restaurants and club stores. Frozen juice and ICEE sales and food service on an adjusted weekly basis were up about 7% this quarter as we have left [ph] the changes in connection with the USDA School Food Service Program in this area of our business.

Churros continue to do very well with an adjusted sales increase of about 22% resulting from sales to major fast food restaurant chain and adjusted bakery sales increased approximately 3%. Handheld sales were up in adjusted 5%, handheld sales overall continue to run at about a $50 million annual rate.

Soft pretzel sales and frozen juice and ICEE sales in our retail segment were down an adjusted 16% and 19% respectively in the quarter. Combined with increased trade spending to move the frozen juice bars and ICEE’s to result was a $4 million lower operating income in the fourth quarter this year compared to a year ago.

In ICEE and frozen beverages gallon sales were down an adjusted 3% and service revenue to others was up at adjusted 16% in the quarter as this area of our business continues to perform well year-after-year. Our estimated income tax rate was a 36% from the quarter both this year and last year.

We’re estimating a rate of about 36.5% to 37% in fiscal year 2014. I thank you for your continued interest and I will now turn it back to the listeners with their comments and (indiscernible).

So Jerry can you talk about just as we look in the next year how should we think of Churros? I mean you have obviously had a really good year on both Churros and pretzels.

From where I see it, it looks like the pretzel gains if I may or growth has come from a number of different customers and perhaps the different variations whereas on the Churro side it might be skewed more towards one larger customer. So can you help us understand like how you think about food service Churro growth next year, like how should we thinking about that?

Well Akshay you’re right, certainly we’ve something to crow about with our pretzel sales and restaurant chains an casual dining and our Churro sales and again they were up at a very, very strong 22%. We continue to push new avenues, new opportunities with Churros but I cannot project that we’re going to be reaching those strong double digit growths with Churros for next year.

Although we’re looking at some opportunities both around the country and internationally so we expect to have continued growth in Churros but we think that the food service pretzels the new varieties will outpace that percentage wise.

But should we still think of growth there? I mean it's not going to be like funnel fries.

I mean we haven't heard about a discontinuation by any means but suddenly it's next quarter or so we’re going to start lapping [ph] the launch and maybe a tough comp there but beyond that should we still expect you know decent growth out of Churros?

Let me answer your question, no it's not going to be like funnel fries where we had the big blip in the one year and then we were kind of like disappointed like the little, but we will continue to grow in food service. We’re confident that if we look at like our company as a three legged stool at least we certainly have pretzels, then we have ICEE and we thin Churros will be that other leg.

And then just in terms of the product line that held you back this year, you know frozen juices and ICEE’s related to schools as well as you know on the retail side. Seems like the school issue has been fixed if I may at least for now but we’re still seeing some major challenges in retail and handhelds would love to get an update on sales and also you know longer term sort of margin or accretion projection for that and where we stand.

So I mean the bottom-line question there is are we going to see less of a negative on top-line from frozen juices and ICEE’s and handheld and perhaps maybe could we even be positive growth from both those product lines next year?

We’re projecting growth for next year in all of these areas. We believe and we’re hopeful that the changes through the USDA program since school food service that our sales have bottomed out and now we can begin to get a bounce back.

Certainly we expect to have a better year in the grocery and supermarkets weather permitting that we did the past year. And even though we lost a couple of customers that had challenged out in the handheld business we think too that business for us has bottomed out and we will be making significant gains.

We hire a person who is very experienced in that and we bottomed out on in May and we are hopeful that by concentrating, keep in mind that when we pick this up we integrated what our sales supply, we had nobody concentrating on it other than our regular sales reps. So we are hopeful that all three the categories that you mentioned will be contributors to both sales and earnings in the next 12 months.

Okay and just one like two part question on capital allocation. So first obviously the facts are that you continue accumulate cash which is like you’ve said in the past month, a bad problems [ph] but what do you with the cash?

I mean you made a small acquisition in the quarter or in October. Talk about that I mean how, it seems like a strategic move there.

So maybe talk a little bit about like acquisitions and then maybe just broadly on your dividend you know you yield is below 1% right now perhaps you can increase that significantly. It was good to see you buy back shares but again you have a lot of dry powder here and just wondering you know how you’re thinking about that now that you continue accumulate more dry powder there.

The comments, let me comment on your question and then we’re going to let somebody else ask the question Akshay. Yes we made a small strategic acquisition and sometimes these things will have more lasting benefit than the size and the analysis will when you look at it in the beginning.

Two, we have some cash, we have a lot of cash. We’re investing that cash, we’re putting it in about three or four lines to keep up with what project.

It's going to be increased pretzel demand and a category that we have targeted some years ago and that’s working out well. We’re also looking at some other things in the end, the only thing that would in worse not make an acquisition would be to make one or two that takes our management time and doesn’t work out and we’re very, very conservative with that but there are things where we’re looking at and hopefully we will be able to talk about these in the next couple of quarters and yes we’re looking at our dividend, our dividend would start out I think what it's $0.15?

$0.20? $0.25 as own up by 250% over the past seven years.

I would expect to have a significant increase in our dividends announced shortly but we will continue to accumulate some cash maybe a lot of cash and even though we’re taking care of all of our needs including expansion and acquisitions, so I hope I answered your questions.

I wanted to follow-up on something Akshay asked, so you projecting growth in the school channel next year is that right? And if so like about what portion of the business is now the school channel would you say?

Probably investment of 10% and we had a couple of bad years in a row and they are not because necessarily we did something bad but they because of the changes in the USDA program our base, you know we had to redo sugar products, our base pretzel business had to be reformulated, cookies [ph] were more or less out. So we’re expecting growth compared to the year we just had.

And I guess turning to the retail channel where you know it was tough year in a couple of pockets is there anything you know in terms of like sales and distribution strategy wise that you’re differently next year and are you projecting growth in that channel specifically next year?

Well we’re projecting a better year than what we had this year in the retail and grocery channel but let me give this to Bob I think who has been chopping a bit to add his comments because Bob runs retail and he runs it with a strong hand and he was really disappointed in the results this year and a lot of it was weather and some of them were some other reasons. Bob?

Yeah really you know we faced some challenges as far as the novelty category. We turned it pretty well but inventories in general when the industry were heavy, going into the season the category was somewhat sluggish and obviously the four summer weather did not help us very much and as a result as we try to direct it up and get you know get our products out of the door as far as our customers were concerned that provided a challenge and some disappointing results for this quarter.

Retail was nothing to crow about this year and hopefully it's going to have a much better year next year.

What we saw this year in the seasonal-

Just one last one on you know the pretzel bun rage that’s going on, heard a lot of menu-ins recently. Clearly it looks like that was the strength for this quarter and for the past couple of quarters.

Can you update us either Bob or Jerry in like what customers you know that you expect more introductions of pretzel based products and pretzel buns on restaurant menus? Are there any in the pipeline and how is the sell through going with the customers we know you do have?

Yes, yes and yes. I don’t want to name specific customers in here but we’re selling some majors and we have interest from other majors and it's not just pretzel buns it's some do call for pretzel sticks and now customers want special sizes of pretzel sticks and special sizes of pretzel buns.

In the last maybe three months we have refitted our, we have added pretzel productivity to our plan in Weston, Oregon and we have added a full line to our Bellmawr plan which is about 50 minutes from here and we have added a line converted in our Chambersburg plan. So we had all this fire power out there and we’re loading it up now.

Has it been capacity constraints that I mean you obviously you feel capacity constraint and you’ve been moderating, you’re selling as a result of that?

I know if it's moderating or selling because I push our people to sell all right? But we have had capacity constraints and we were like essentially caught up with them and it's not just the pretzel products, we introduced the pretzel (indiscernible) a couple of years and after a slow start it too has caught fire and so we had to have that productivity available.

So we expect to be fully, fully up to efficiency before the end of this month.

I wanted to ask also about the restaurant initiative I know it's clearly something you’ve been working on for some time now it's clearly bearing fruit for you. I’m wondering Jerry if you could just kind of characterize you know the restaurant opportunity in terms of how big it is today?

Where you kind of view it in terms of kind of what inning you’re in and how large that business could get over the next few years?

It's rolling at an annualized rate of 40 million to 50 million now showing real growth opportunities. What inning are we in?

Believe it or not it's pretty early, it's not in the 8th inning, it's pretty early and more that we’re into it the better handle we’re getting on it and we think that I think year or so ago I said this could be a potentially a $100 million category for us. I’ve seen nothing to back away from that number yet.

Our people did a good job all the way through from R&D it both in the West Coast and here. Couple of people that we add dedicated to sales, Robyn Shreiber (indiscernible) have done a real good job in getting it out there and with the exception of lengthening our delivery time and what not in there which now we’re catching up, we’re real excited about this opportunity what we’re doing with it and what’s going to happen next year.

I wanted to come back to Churros for a minute as well, I know in the release the growth there is 22% and has been terrific this year, absolutely. Lot of that growth as was mentioned earlier has been you know centered around one particular customer.

As you look at the kind of pipeline of opportunities within that business specifically are you anticipating you know another year of growth albeit it not at those kinds of level but a year of growth in ’14 on the Churro business?

We’re and hopefully some of these opportunities that we have before us which is some other change not all is big as a Taco Bell. We will be able to convert while we retain and maintain the business that we’re doing and I’m not saying it's going to be a strong double digit growth but as I mean this is the business has started off tiny with us and it has been growing double digits for us for some five to six years now and we’re filling them, we’re making them in different sizes, we got them double twisted.

We like the category, we dominate the category. We’re the most efficient producer and we have strong marketing and distribution channel.

So we think we’re in a pretty good position there.

One more, it wasn’t I guess that many years ago where the gross margins in the business were you know 300 plus basis points higher than they are today and I know there are a lot of things that influence that product mix, acquisition that you’ve done et cetera. But I’m just wondering if you could talk broadly about leverage points in the model.

Maybe you kind of the pricing in commodity environment and maybe where the main leverage points are and do you see an opportunity to gross margins overtime you know higher from current levels? Thanks.

I think your point is valid and accurate that a lot of the margin decline has to do with mix and you know in particular we thought the handheld business from ConAgra back in two years and a little bit more than two years plus and that’s more doing very, very low compared to our overall markets. So that’s driven down the margin and that is on mix and then you know and then some of the bakery product where we have had growth is also lower margin than the average so that would drive it down it as well.

However you know as we continue to grow some of the other product lines and handhelds which we hope to start in growth should help the margin go up but the key is volume. We need the volume growth and if we get the volume growth it will drive these margins up.

Give me a sense you talked about some of the weakness in the grocery chain, channel, if you look at 2014 there looked to be a little less marketing in that channel of this year. Do you look at throwing some more advertising dollars in there or do you just see the market kind of naturally coming back and you talked about issues like weather in that.

We’re really not sure, there has been some major consolidation of the retailers that we have to work our way through. There is some we had probably the roughest summer season weather wise, we have one of the roughest seasons weather and we’ve had it in years and years.

We don’t expect that to be like you know next year but who knows, you know we may wind up but we’re looking at all areas in retail, grocery and supermarkets because such an important business to us and has been sailing along pretty good. We’re not used to this and we’re going to change it.

Bob Pape has a short of committing what they call Harry Carey but we will not have another year like this.

Bob in that channel Jerry, have you seen any difference between the mix of national brands or private labels in the grocery store channel?

I think that it has remained relatively stable and obviously our brands are very important to us. We have used some corporate branded and private label product strategically with some of our customers to drive our overall business.

One of the things you know you talk about over the years Jerry is the whole USDA reformulations and you know because Michelle Obama wants to have kids eat frozen broccoli on a stick that’s all fine and well but the kids don’t eat it, so you can be successful at reformulating your recipes but you know you look like the movie exhibitor channels, AMCs, The Marcus [ph], the Regal Cinema, you don’t see any salads in their channel, I mean it's big Slurpee’s and lots of popcorn. What is the conundrum for you guys relative to finding a reformulated recipe but then you just don’t, the kids don’t buy it and how do you get around that?

We’ve been there and we’re still there and to some degree. We have reformulated all of our three products, all of our pretzel products to get whole grains and that appears to be making some progress.

We take it all the sugar out of juice bars and made it 100% juice and we really, truly believe that we have bottomed down in there and all the mandatory requirements that the USDA have made that we’re not only in compliance but the new products are being accepted and we think we’re going to have a better year and a much better year in 2014 than we had the last two years in schools.

And just one more, when you look at ICEE and Slush Puppie what is your sense of kind of the maturity you know the in-field machine installations, the flavor changes, how do you see that market going forward? I mean you’ve had pretzels for a long time and you keep, you’ve done a great job in driving the organic growth in pretzels but I’m at kind of the frozen Slurpee whatever you call it, the ICEE’s and that I think, how do you see that for the next say 2 to 3 years?

We see that slow growth and overall volume and case sales, however you know ICEE has gone from a smallish $13 million year company to over $207 million today and it's able to take pricing just like others in the beverage business the Coca-Cola’s and the Pepsi Cola’s they too are impacted by overall beverage sales being down. ICEE has been growing it's business rather stout heartedly with 8% and 10% gains, 6% gains in the service revenue end and ICEE has been approximately 50,000 machines of its own that it touches in one way or another, so that’s been a good business for us and ICEE continues to grow overall.

We also have some opportunities, we have done well in Mexico, we had some other opportunities in the Dominican Republic, which it's too early to put a label on it. But we have been in China for a few years and it looks like this year we have a major growth opportunity with the movie systems in there and we’re looking to take advantage of that opportunity in the second quarter of 2014.

Okay. I want to thank everybody for joining me on the call today and I look forward to having you all again in the first quarter in 2014.

Thank you and good bye.