Gerry Shreiber - Chairman, President and CEO Bob Radano - COO Dennis Moore - CFO Ted Shepherd - CED Bob Pape - VP of Sales Jerry Law - SVP.

Jon Andersen - William Blair Robert Costello - Costello Asset Management Akshay Jagdale - KeyBanc Capital Markets.

Welcome to the J&J Snack Foods' First Quarter Earnings Conference Call. My name is Christine, 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 Gerry Shreiber, President and CEO. You may begin..

Thank you, and welcome to our conference call. I'm Gerry Shreiber, and with me today is Bob Radano, our COO; Dennis Moore, our CFO; Ted Shepherd, our CED; Bob Pape, our Vice President of Sales; and in a remote location is Jerry Law who is Senior Vice President and assistant to me.

We also have with us today, Charles Greyhound [ph], who is a Financial Analyst. Let me begin with the obligatory statement. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements.

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

Results of operations; net sales increased 5% for the quarter. Excluding sales of Philly Swirl, which was acquired in May of 2014, sales increased approximately 3.5%. For the quarter, our net earnings decreased by 9% to $11.3 million or $0.60 a share, from $12.4 million or $0.66 a share a year ago. That is our net earnings decreased by $0.06 a share.

Our EBITDA for the past 12 months was $147.7 million. Food service; sales to food service customers increased 3% for the quarter [in large part] [ph] due to increased sales to our education and school food service accounts. Soft pretzel sales were up 4% for the quarter. Italian ice and frozen juice bars and dessert sales were unchanged.

Churros sales were down 7% in the quarter and bakery sales were up 8%. Retail supermarkets; sales of products to retail supermarkets were up 11% for the quarter, but down less than 1% without the benefit of Philly Swirl. Soft pretzel sales were up 3% for the quarter, and sales of frozen juice bars and Italian ices were up 6% in the quarter.

Handheld sales, primarily due to one product line decreased 8% in the quarter. ICEE and frozen beverages; frozen beverages and related products sales were up 5% in the quarter. Beverage related sales alone were up 1%, with gallon sales up 2% in our base ICEE business in the quarter.

Service revenue, which has been growing steadily over the years, was up 12%. Consolidated; gross profit as a percentage of sales in the quarter decreased 28.7% from 29.4% last year.

The gross profit percentage [technical difficulty] primarily due to Philly Swirl higher manufacturing expenses and relatively low volume increases in our food service business. Total operating expense as a percentage of sales increased to 20.9% from 20.6% in last year's quarter.

Absent the charge for shutdown costs of a Norwalk, California manufacturing facility in last year's quarter, operating expenses increased to 20.9% from 20.2% a year ago. [Indiscernible] Over 40% of the percentage increase was attributable to Philly Swirl.

Capital spending and cash flow; our cash and investment securities balances increased $3.9 million in the quarter to $225.8 million. We continually and actively look for acquisitions as a use of our cash. We have invested $114 million in mutual funds that seek current income with an emphasis on maintaining low volatility and overall moderate duration.

Presently, we estimate annual yield from these funds to be about 3.5%. During the quarter, we invested $11.6 million in fixed to floating perpetual preferred stock with an estimated yield of 5%. Our capital spending was $10.9 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 $35 million to $40 million or so. A cash dividend of $0.36 a share, a 12.5% increase was declared by our Board of Directors and paid on January 8, 2015. During the quarter, we bought back 16,164 shares of our stock at a cost of $1.7 million [technical difficulty].

Commentary; our sales growth in soft pretzels and food service slowed 4% this quarter after being up 14% in fiscal year 2014. While the sales to [restaurants increased] [ph] slightly this quarter following two years of robust growth, we continue to develop opportunities, but we do not expect a major pick up in these sales over the short-term.

Frozen juices and ices sales and food service were flat. Handheld sales in food service were down 19% on top of being down in 2014. Churros sales were down [10%] [ph] as we lost sales [technical difficultly] multiple breakfast items. Excluding that customer, sales were up 9% in the Churros segment.

We have just begun making shipments of Oreo Churros and continue to be excited about its prospects. As I said earlier, school food service business performed very well as we introduced products to comply with the new regulations.

Sales of soft pretzels in our retail supermarket segment were modestly higher in the quarter as we introduced SuperPretzel Bavarian soft pretzel Bread and frozen juice and ICEEs were up 6% [in this of their] [ph] slow season.

[Indiscernible] sales in retail supermarket were down 8%, mainly due to lower sales in one brand to one customer, and frozen beverages gallon sales were up modestly and service revenue to others was up 12% in the quarter as this area of our business continues to perform very well.

Operating income dropped $1.4 million from a year ago with Philly Swirl accounting for 951,000 of the decrease as this is a seasonal loss quarter for Swirl. However, the operating income comparison to last year benefited from $800,000 [indiscernible].

Our estimated income tax rate was at [37%] [ph] [technical difficulty] for this year and 35% last year for the quarter. We are estimating a rate of about 36.5% in fiscal year 2015. Although, we were slightly disappointed in this quarter's result, we point out that our core products remained fertile and we look at this quarter as an aberration.

We are continually optimistic about our long-term prospects. I want to thank you for your continued interest, and turn it over for questions and [indiscernible]..

Thank you. [Operator Instructions] And our first question is from [Brian Radman] [ph]. Please go ahead..

Good morning, Gerry..

Good morning, Brian..

I guess you took a dogsled to work this morning. So it's nice to hear you guys out there, and hope everybody is safe. First question….

It wasn't too bad. And actually last night [technical difficulty] and do this from home, but the weather eased up and we were all able to get in..

All right. It sounds good, Gerry.

Give me a sense, we've seen a little moderate decline year-over-year in the spot prices of some of your commodity ingredients; just wondering, one, if that's going to give you any headwind or any tailwind in the margins, and then if you guys are going to do anything relative to stockpiling any ingredients or any forward purchases?.

Brian, hi, this is Dennis. We would anticipate that the ingredient costs [technical difficulty] at this point would be relatively benign. We're not expecting a benefit nor necessarily….

Okay, all right. Gerry, could you remind us your purchase of Philly Swirl, what is that in sales revenue and how is that tracked? You almost have a full calendar year..

Well, we don't have a full calendar year. We acquired it in May. And it's a little company in Tampa, Florida. We’ve watched its sales, we’ve watched it establish a niche, and pretty much was under the radar screen.

But that's tracking at about $25 million and has a good base of employees, and as a matter of fact, Jerry Lewis is down there now as we're converting their accounting system. But we're anticipating Philly swirl contributing significant sales and contribution [indiscernible]..

Gerry, the one thing you guys have been really, really good at is finding these little niche flavorings, ingredients, and then bringing them regionally and nationally.

How wide a national distribution was Philly Swirl before you guys bought it?.

Well, it wasn't. It was primarily in a couple of key areas. They had gotten into Walmart, and the product was really being accepted. It was owned by a private equity company, and we had looked at it several years back. And finally, we were able to conclude the deal.

Sometimes it happens like this, Brian, you look at something, you follow it, but we think that we're constantly looking at things, some of them bigger, all right, but that's what we do. Let's see if we can move on to another question, and Brian, we'll come back to you..

All right..

Thank you..

Thank you. Our next question is from Jon Anderson. Please go ahead..

Good morning, everybody..

Good morning, Jon..

My question -- I guess my first question is on the restaurant channel, I know it's been an important driver of your growth over the past several years for -- the current quarter to be kind of flat. I guess I'm just wondering if you could provide some more color around kind of what you are seeing in that segment.

Are you seeing any kind of menu fatigue for some of the offerings that you've sold into the restaurant channel? Are there new customer additions that maybe just didn't hit this quarter that are in the pipeline? And are you losing any business there, so just more of a kind of the lay of the landscape of how you're thinking about that segment, both in the quarter and going forward?.

I wanted to describe it in one animal and one animal sound I would say back [ph]. But to answer your question we're not losing share to anybody.

All right, but we had seen a little bit of menu fatigue with a couple of customers, but we have lots of opportunities out there and our people and our sales people together with our R&D team are working on multiple opportunities.

So we certainly believe that this is more of a slowdown, if not an aberration and we expect that hopefully to be back on track as soon as possible..

Okay. Can you remind me how -- generally speaking, how what kind of run rate this restaurants business has achieved? And I think you did say in your prepared comments that you didn't expect a major pick up in the short-term.

What kind of time frame should we be thinking about perhaps for an acceleration from the level we saw in the current quarter?.

We had been estimating that run rate about $50 million a year. Now, of course we talk about discontinued Churros in the year, and that took a healthy piece in here. But we have some other opportunities that we're developing. Our product [technical difficulty] they're quality products and most of them are, as you're aware, are unique.

So we want to build on those benefits as we continue to build on the business..

Okay. And then on the Churros business, obviously we've known about the Taco Bell shift but you know the core or ex-Taco Bell part of business grew nicely in the quarter and I'm not sure did that -- did that include any contribution from the new Oreo Churros and then you know what….

Not really. We've got a fair and unusual amount of publicity on the Oreo Churro, but the fact of the matter is it was introduced at a show, at [indiscernible] show in October, and we really didn't begin shipping product till December in there.

So we're not going to see -- we're not going to be able to have any kind of measurables on that probably in -- well into the second or third quarter..

Okay. I guess my last question is on the gross margin which did come in shy of our expectation. I understand the Philly Swirl dynamic. There were a couple of other items cited, specifically the lower volume in the food service segment, but also higher manufacturing expenses.

And I'm just wondering was there anything that was one-time or unusual in nature with respect to manufacturing expenses in the quarter?.

Listen to my words, we can and we'll fix that. It was just a matter of volume mix..

Okay. Thank you, guys. Good luck..

Thank you. Our next question is from Robert Costello. Please go ahead..

Hello, Gerry..

Hello, Rob, how are you?.

Good.

Could you give us some -- are you going to stick primarily on the Churros product with food service or might we see it in retail in the near-future?.

Well, I won't use the word "Near-future," but right now our emphasis is on food service. We do have a retail customer. Let me it over to Bob Pape here who can comment on that because we're going ahead with a test with one customer..

Yes, we're going ahead with the retail execution for Churros products to be able to test the products to see how it performs and that's the way we would work against that to see if there is business proposition for us on a wider geographic area..

Okay, thanks..

The rollout is roughly 2000 stores..

And that should happen this spring, Bob. So it's something that we've looked at and we focused on and we want to make sure that we had our ducks in row in here and before we introduce it, because without the ducks in a row it could be all over the place..

Right. You mentioned that the bakery was up 8%.

Could you give a little more specificity to where the growth came from or how you got it, was it price units?.

All volume, Bob, and base -- and Dennis will say, Dennis will talk about bakery specifics. It was really all over. Daddy Ray's had some growth. We continue to grow with Wawa and we've had some growth with our major customers including Walmart..

Great, last question; how many stores do you service down in Florida right now with Wawa?.

I believe it's in the low 50s, and we're serving them with the Philly Swirl Federal Pretzel and we are really enjoying the co-packer [ph] down there that we've had a relationship with for the past year. And it's seems to be going well..

All right, thank you..

Thank you..

Thank you. Our next question is from Herman Kay [ph]. Please go ahead..

This is Herman Geyer [ph], actually at Tower View. Just a quick question, in terms of the Philly Swirl businesses, obviously you had a loss this quarter, seasonal, and so forth.

Do you have a sense of what the potential is for that kind of reverse going forward and sort of over time are you -- do you have any sense of the target profit margin for that business relative to the company as a whole?.

This is Dennis. It's a matter of timing, the first quarter they will lose money almost every year because of seasonal issues. But we do expect it to be profitable the next nine months of the year. And to be more profitable then it was down in the first quarter. So we expect marginal profit in that business for the fiscal year..

Okay.

So may be just a little bit below the company average but may be as it builds volume here, goal would be to get that up over time?.

For sure..

Yes, okay..

Herman, can I get who you are with, I heard you say, but your name is not….

Yes, Tower View, it's T-O-W-E-R V-I-E-W Investment Management, we are out of Milwaukee and we are institutional shareholders of yours..

Hey, great. Thanks, nice to meet you, sir..

Yes, nice to meet you too..

Thank you. Our next question is from Akshay Jagdale. Please go ahead..

Good morning, Akshay..

Good morning.

How are you?.

Okay, I got to let you know, you set me up late last night as I read and re-read, or actually this morning as I anticipated your note..

Yes. Well, I'm glad that's flattering. I'm glad to know that you're reading our note. So at least there is one person who is reading it other than us..

Oh, no; Dennis reads it, the Board reads it, Jerry Law reads it..

Well, I'm flattered, again, it obviously we downgraded the stock on evaluation, but -- yes, but you obviously done a great job. So it's partly a pat on your back because the stock's done so while. And I expect longer term for it to continue to do well.

But in terms of my question for you, can you start with handheld business, just give us an update where you are with it obviously there is the performance, excess sales of handheld business and I am assuming the margin haven't gone as well as you probably would have hoped and I know you had hired somebody to run that business and I am just curious to know how that's going and what the plan is as we speak?.

Good question, Akshay. Obviously it has not gone a 42-hour plan. That was about a 50 million business when we acquired it, and it's now running at an annual rate of about $40 million to $45 million.

Most of the decline this year came from one product segment, a price product in the Patio brand and we did hire a guy full time for that and we are not satisfied with the results that we are getting yet.

So we will continue to put emphasis on the product and on the selling initiative but as a further note we have added a threshold capacity to the West Coast plant -- the Western plant. We're making good utilization of the plant assets..

Right, so in terms of the handheld business I mean the plants were strategic part of why you bought it obviously you put that to good use and not's as visible I guess in the sales numbers but without those plants you wouldn't be able to support the soft pretzel growth that you are seeing.

Is that right?.

I am sorry, I didn't mean to interrupt you but beyond that the plans gave us immediate credibility as far as U.S. -- abilities and we think we are still looking for ways to maximize that potential. But you are right; it gave us more flexibility for soft pretzels production and other distribution channels throughout the country..

Okay.

And then just you know going back to soft pretzels and the rest, I mean just the overall restaurant initiatives so you had great success there and I know you added some leadership over the last five years there that has done really well there and how do you -- I mean where what inning would you say you are in sort of capturing that opportunity for your overall product portfolio? And this quarter is a just sort of a short-term issue where we saw little slowdown, the comps were tough nothing to really read into in that regard?.

Well, I don't know if I could say what it was certainly somewhere is in the middle of the game. And we are not in the eight innings, so to speak. We have plenty. We believe we have numerous opportunities out there and sometimes they develop at a rapid pace and sometimes [technical difficulty] we are cautiously optimistic.

I might take out the word "Cautiously," we are still very optimistic about that channel as a whole and as of today we are making I mean our people are making presentations and working with several of the fast food chains to get a product or products on a menu and put that on a limited basis and second perhaps on a more permanent basis..

Okay. And just one last one it's again a little bit of a broader question but I am trying to get my arms around the opportunity for licensing brands and using your manufacturing prowess to capture some of those opportunities in retail, Oreo Churros obviously are the headliner in that regard -- I mean Oreo Churros are the headliner there.

I am guessing there is more in the works in terms of licensing partnerships with other larger conglomerates, but broadly speaking is that an opportunity similar to where the restaurant opportunity was three years ago? I mean would it be that good and are you in that stage right now where we're just trying to capitalize on it like you did three or four years ago in restaurants?.

Akshay, we have a couple of licensing opportunity that we are in the middle of now; Minute Maid for years Oreo Churros, which has just started.

There is couple of others that we looked at that would have helped, that can help too, but what we've done deeper and deeper and measured the impact of royalty and [technical difficulty] did not make for good business deals. One was in participation with a restaurant chain that was out there.

One of them was taking a old favorite pitch of -- but we looked at these things and we ran through running samples and meeting with management, and for one reason or another probably more than others we decided not to proceed. That was a pretty much a business decision.

However, we're still looking at these opportunities and we expect to add a license or two over the next couple of years. But it will not be even the results of those [technical difficulty] equal one we're getting out of the restaurant industry fast food industry with respect to sales contribution..

Okay, great. I'll pass it on and continue the great work you're doing..

Thank you..

Thank you. Our next question is from Francesco Pellegrino [ph]. Please go ahead..

Hello, good morning, guys..

Hi, Pellegrino..

How's everything going now, Gerry?.

Good..

Just want to follow up with you about your response to one of Akshay's questions in regard to the in-house guy now you're now employing for the frozen and handheld business. You mentioned that you're not currently happy with what you're seeing out of the line.

Are we trying to catch a falling knife? Where do you want to try and to be twelve months from now, twenty four months from now? I know when you initially acquired the line there were lots of expectations of about $80 million in the annual sales.

But being reasonable, what would make you happy now?.

Well, what would make me happy if we improved our performance across the [technical difficulty] and catching a falling knife, they got to make sure that that don't get something cut off in air. We think that we may have overestimated the potential of this business with the near-term, perhaps, overestimated the category.

And Bob and his group have gone through [indiscernible] or gone through some strategic evaluations now. That may just sound like fluff words. But what we're really taking a look at it as far as the possibility of licensing and as the licensing perhaps shrinking our own offering so that we can concentrate on some of the more profitable opportunities..

All right. I guess one other things, I know you guys had a 4.5% revenue growth year-over-year; a lot of what I'm hearing now is oil gas prices that's going to mean more money in consumer's pocket. Maybe you can touch on relatively high coupon redemption on the relatively high redemptions that we have seen over the past three quarters.

Is there a read-through for may be the consumer discretionary funding is going given the exposure of lot of your products have to the food service industry whether it's product and arenas and maybe with higher coupon redemption, are you worried at all about the limitation and perhaps not higher prices to consumers?.

Well, until we spoke about that last night and quite, and quite honestly I was unprepared to answer you then..

I think we do see some additional disposable income on the part of consumers and I think that's obviously helping drives more retail purchases and we're spending more in coupons..

We're spending more -– what is our convert rate? Is it running less than 1%?.

I'd say, it's average for the U.S., yes..

All right..

Last night, I'd mentioned to you that often times the expenses gets in front of the sales?.

Right..

May be by several, periods or several months and we did introduce two new varieties of Pretzel products, Pretzel Sticks, Pretzel Rolls, and Pretzel [indiscernible] and there we spent a fair amount of money in advertising these things would probably hit in our fourth quarter and we're still -- our sales even though they're growing it hasn't made for a good ratio yet..

Right. And I only add few talk; third quarter last year we had coupon redemption of about a little bit over 40%; Q4 it was still over a million and this quarter it was just about increase of 60%. So I know you said a coupon redemptions tend to be a couple of months ahead of when you sort of realize the incremental revenue.

I just wasn't sure of may be a new trend was developing but I appreciate the answer but can it be one of the things we could hit on just switching topics for a minute its -- can we look at as a number to what food service sales in the schools on a percentage basis increased year-over-year, do you have that available?.

It's probably a mid level single-digit, which is significant. It's actually 6%-7%..

Right. I understand all the products reformulations that you guys look at that's starting to pay dividend.

And maybe just for my last question, company that's historically done a lot of acquisitions I know this isn't something that we spoke about last night on the phone Gerry, but could you maybe give us a little bit of color in terms of what you're seeing on the acquisition landscape and maybe opportunities currently out there that would've lined well with the company.

I know that you had said something about big premium brand names being available; could you just expand a little bit more on that?.

Well, I think the question last night added there were us buying little companies that had been dumped and we were a jump seater or something like that..

I heard that from dumpster diaper its -- that's not my word..

You might be right. We've bought some things over the years rather economical, I don't want to use the word "Cheap," and we've been -- we've had a unique uncanny ability to fix them. We may continue to do that.

But I also said to you we're now looking at a couple of companies that are more frequent, not necessarily premium names but premium in value with real EBITDA in there and a lot of figure and that's what -- and you spoke a new term over the next 6 to 12 months that we're going to be concentrating our efforts on.

We have ability to make these acquisitions we have the cash in our coffers. It certainly doesn't burn a hole in our pockets. We look at these opportunities and I have a close confidante of people that look at them and will be sometimes very critical of them, no matter how good it looks in there.

But we all have our input and I would be hopeful and cautiously optimistic that we're going to bring n one perhaps two of these things hope in the not too distant future..

All right. Thanks again for the call. I appreciate. Thanks again..

Did you get home safely last night from the….

Yes, I did after writing insanely to write that note. But I appreciate the time you guys spent with me..

I got it. I admire you. You're a New Yorker, an analyst and you were available at 7'O clock on the phone..

Yes, I appreciate the time you gave me. So thanks again guys on a great quarter..

Thank you. Our next question is from Brian Radman [ph]. Please go ahead..

Yes, Gerry may be a question for Dennis.

You talked about $35 million - $40 million in CapEx; can you discuss from a strategic view, what primarily operating efficiencies or it's the capacity expansion? And then could you give us a sense maybe some of the plans where you might be adding some of that CapEx?.

Well, I'll start off about -- we're adding it in Pennsauken which is our home plan our largest plant and in Bellmawr and what we're adding is not only efficiency but more expandable growth and to refresh the lines; some of the things -- some of the lines where as much as 30 years old. They will give us more flexibility.

And quite frankly and looking at logistics part of this, we do have tremendous firepower around the country not the plants. But when you got to move something from Orleans to the Northeast then there is a big, big factor called freight expense.

And what we're trying to do now is to ratchet up our ability to make different products here at Pennsauken and then bring it some of the things that are doing well here. And these projects will last probably for the next year or so but I think overall they will add to our efficiencies, our flexibilities and ultimately to our bottom line..

Okay, if anyone questions your Philly Swirl purchase [indiscernible] raised. Give me a sense out of Moscow [ph] mills, what's the business doing in at Daddy Ray's and you adding any flavors, any different formulations or anything. So that's certainly one over the years that you guys are really growing good organically after you bought it..

Brian, if somebody doesn't know you might think the practice [technical difficulty] 643, we bought Daddy Ray's about seven years ago, and it was about a $15 million business. We've grown it and expand it and added some product lines and whatnot, it will do -- Dennis, $60 million this year? And it's a significant contributor to our overall success.

But there is other multiple examples like that. We've brought a little sleepy company up in music PA in 1988 which used to do about a $1.5 million at the time. We've added brands at Minute Maid, and LUIGI, and cold fruits, which Bob has a whole campaign photo fair this year. That company is now producing sales at an annual rate at $100 million.

So there are multiple stories like that within that you can find in J&J Snack Foods, and we're looking to sign other little pieces of coal that we can turn into diamonds..

Okay. It maybe a little off season but can you talk a little bit -- you've added Paradise and Slush Puppie because they are kind of the ICEE and the frozen slush area.

Can you talk a little bit about some of those other -- there was not so much ice as everybody knows about but how are Slush Puppie and Paradise and some of those smaller brands doing?.

Well, sometimes Slush Puppie is doing okay for its purpose. We are also doing some things with Slush Puppie on licensing. And I also should note that our overall ICEE sales volume and gallons was up close to 2% this year, and that's after the big cola people, both Pepsi and Coca Cola has reported down gallons in sales.

One of the big successes of the ICEE business over the last ten years is its managed service for others. That's started out about in the year 2000 taking care of some maintenance and partnership with Coke as their infrastructure partner.

Now, that business has grown and I think, Dennis, is that business a $55 million year business for us now? So it's the ICEE machines out there, ICEE plants machine, the Slush Puppie machines, our partnerships with Coca Cola and to a lesser extent Pepsi Cola, but you have compound that, and suddenly it is a $55 million business flowing to a good contribution..

Yes, okay. Gerry, you talked a little bit about some of your licensing, Oreo Churros and you guys had done [indiscernible] and Minute Maid Lemonade and all over the years. I came across a couple of selected candies; I don't remember what they were for my kids.

But is Candy a licensing area, I mean you got such a strong brand name with anybody under 10 years age kids in that, is Candy an outlet for licensing for J&J?.

Well, we've looked at Candy. And I don't want to mention names but I personally would think so. We did have an ICEE Candy at one point and we'll continue to look at Candy again.

Where candy comes the mom says it's bad for you or if it's not mom it's it's the people who are writing articles for mom, but they are really exciting candy brands out there and even though I am not a candy, either per se but I have been a proponent at least looking at and exploring the candy licensing opportunity..

Okay, all right, Gerry. You guys have kind of dipped toe back into some of these -- you called the fix loading rate perpetual, anybody that owns stock obviously you had certainly with everyone else the issues back in 2008 and '09 with some of the -- I think the preferred that you had.

Is that something that is a different security that you had in the past or and in kind of what's your thought process of the mix of those preferred relative to what you had when the kind of payables, it looks like money market mutual funds..

I am going to let Charles or Dennis answer that..

Thanks, Brian. It's a different type of security. We certainly did not anticipate any liquidity issues with them over time. However they are roughly a little less than 10% of our investment portfolio, as we couldn't expect them to be substantially higher than that..

Okay. And just one in closing, Gerry, what is your -- you talked a little bit potential acquisitions.

How are you see pricing as multiples of EBITDA going in to 2015 or whether it be -- you guys have been very good at turnarounds, I wouldn't call it bottom features, because you guys have a unique ability to resurrect brand means versus something that maybe something firing on all cylinders..

I won't say they are higher, all right, and that's something that we are getting a little more comfortable with but obviously as the acquisition world's influenced by private equity and others and the economy improves the multiples are obviously going to go up, you don't find three or five times multiples anymore and even the five to seven range is fierce.

There are people asking significant higher than that 9, 10, 11, 12. Whether or not they are going to get is another thing. We once paid a 12 times multiple for a little sleepy Churro company out in California.

There are a lot of people that we thought that we are overpaid for that and we thought it was unique brand and a unique setting that combined with what we were already doing, not paying for that acquisition inside of two years with the return..

Yes, okay.

And some -- from a strategy standpoint Gerry, much like you did Philly Swirl, what has been your experience in actually retaining or keeping the management team, the employee or that type of thing, how important is that and what has been your experience?.

Particularly when that person is something that we want to add to our bar study test. We lost a guy from Philly Swirl, almost right when we acquired that. He left us in November and on good terms and we plugged that hole before it became a hole.

There are some guys that like to go around and work for much smaller companies and private equity groups and unfortunately they look at us today as a bigger company we are really not so but I think by and large we have retained most of the people that we would certainly wanted to..

Right. It sounds good. Thanks, guys. Good job..

Thank you. And we have no further questions..

Well, I want to thank everybody for participating in this conference call, and I look forward to talking to you again. Thank you..

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