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J&J Snack Foods Corp  (NASDAQ:JJSF)
Q1 2019 Earnings Conference Call
Jan. 29, 2019, 10:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Welcome to the J&J Snack Foods First Quarter Earnings Conference Call. My name is James, I'll 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. (Operator Instructions) Also note, this conference is being recorded.

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

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Thank you and welcome, everybody. I know you're from all over the country, but it's really cold here so -- but this is not a contest on what's the coldest or what's the warmest. So, 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 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.

I'm Gerry Schreiber, I will lead this conference call from my end. But with me today is Gerry Law, our Senior Vice President and my assistant; Dennis Moore, Senior Vice President in charge of Finance and Administration; Bob Radano, our COO; Bob Pape, Senior Vice President in charge of Sales; and Marjorie Schreiber Roshkoff, who is in charge of Legal. So, let me begin. Results of operations, net sales increased 2% for the quarter. Our EBITDA; earnings before interest, taxes, depreciation, and amortization; for the past 12 months was $164.3 million. Food service, sales to food service customers increased 3% for the quarter. Our sales increase was due to increased sales of frozen juice bars and ices up 5%; churros up 4%; funnel cake up 3%; and bakery sales up 8%. Sales of soft pretzels were essentially flat and handheld sales were down.

Retail supermarkets, which is grocery. Sales of product to retail supermarkets were up 1% for the quarter. Soft pretzel sales were down 3% for the quarter and sales of frozen juice bars and Italian ices were up 13%. Handheld sales were down 15% for the quarter. ICEE and Frozen Beverages; which includes ICEE, Arctic Blast, and SLUSH PUPPIE. Frozen beverage and related product sales were up 1% in the quarter. Beverage related sales were down 5% in the quarter compared to being up 21% in the year-ago quarter. Service revenue for others was up 4% as this category for us continues to grow quarter-after-quarter. Machine sales, that's the beverage machines, were up $7.7 million, up $6.3 million last year. No significant reason for that, but that is a harbinger of what will happen in the future putting those machines -- having the machine sales has a tendency to increase beverage sales

Consolidated. Gross profit as a percentage of sales was up -- was 28.3% in the three month period this year, up from 27.6% last year. Gross profit increased because of improved operations at several of our manufacturing facilities, especially at our Labriola production facility and because last year we had the burden of shutting down an older plant in Chambersburg. PA, and moving its production to other facilities where it is more efficient. Operating income in our Food Service segment increased to $18.461 million from $17.054 million in the quarter four (ph). And for these reasons and higher bakery sales even though distribution expenses continued to be a burden, they were about $2 million as a percentage of sales, and we continued to be impacted by a recall in our biscuit business a year ago in January.

Total operating expense as a percentage of sales was 20.2% in the quarter, up from last year's 19.6%. The increase was due primarily to higher distribution cost. Capital spending and cash flow. Our cash and investment securities balance of $288 million is up $12 million from our September year-end. We continue to look for acquisitions as a use of our cash. $143 million of our investments are in corporate bonds with a purchase price yield to maturity of 2.6%. Our capital spending was $12 million in the quarter as we continue to invest in plant efficiencies and growing our business. We estimate our spending for the year to be about $55 million to $56 million as several one-time manufacturing projects are in progress and turning toward home for completion.

A cash dividend of $0.50 a share was declared by our Board of Directors and paid on January the 4th. This was an 11.1% increase to the dividend. We did not buy back any shares of our stock during the quarter. Commentary. Our overall sales increase of 2% this quarter was largely from the 8% sales increase in our Food Service business. We are expecting to improve upon this as the year moves along. Although operating income in our Retail Supermarkets and Frozen Beverage segments were down from a year ago against very strong comparison numbers from a year ago, we are pleased our overall operating income has increased this year especially considering sharply higher distribution expense. And as I mentioned, significant manufacturing improvements and higher pricing benefited this quarter and will more -- will likely affect the rest of the year too in a positive way.

Our investment income this year was $449,000 less than last year because in accordance with new accounting regulations, we recognize over $1 million unrealized investment losses this quarter. About half of these losses have reversed already in January. Also the various adjustments due to income tax changes, we have income tax expenses of $5.6 million this year compared to a $13 million benefit last year. We anticipate an effective tax rate of 28% going forward.

I want to thank you for your continued interest. And now, I'll turn it back to your end for questions and comments.

Questions and Answers:

Operator

Thank you. We can now begin our question-and-answer session. (Operator Instructions) And our first question is from Michael Gallo.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Good morning, Michael.

Michael Gallo -- CL King & Associates, Inc. -- Analyst

Hi, good morning. Couple of questions, Gerry. It would seem this is the first quarter you really started to see some meaningful price realization, looks like it was up 1.7% and Food Service little better than that. As I recall, pricing kind of went in as the quarter progressed. So I guess as we think about pricing, one, how much do you expect that to be stronger Q2, Q3, and Q4 versus Q1 and would seem so far it's generally being fairly well received?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Well, let's just say that we're getting it through. We have good relationships with our customers both in the Food Service and grocery business. But -- and I might have mentioned this before, it's always a process to take pricing, but we seem to be -- with very, very few exceptions, we seem to be doing OK with it.

Michael Gallo -- CL King & Associates, Inc. -- Analyst

All right, great. Gerry, logistics cost still pretty big headwind. I think couple of million dollar headwind year-over-year. There has been some anecdotal signs that perhaps they should start to level off going forward. I was wondering as we think about the rest of fiscal '19 that you'll start to lap obviously the big increases. Do you see a continuing increase -- do you see a continuing increase but at a low rate or do you see signs that as we kind of go through this year that we can finally see -- start to see some leveling off? And then from your own logistics cost standpoint as you move things around, do you think you could start to see a better impact from mitigation strategies?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

We believe that the worst is over. And with very, very few exceptions, there may be some future adjustments, but the worst is over.

Michael Gallo -- CL King & Associates, Inc. -- Analyst

Great. Thank you. I'll pass the floor.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Sure.

Operator

Next question from Brian Holland.

Brian Holland -- Consumer Edge Research -- Analyst

Yes, thanks. Good morning.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Hi.

Brian Holland -- Consumer Edge Research -- Analyst

First question on maybe the topline. Just curious if you could kind of give us an overview of what the pipeline looks like not just only for new product rollouts in 2019, but also on the M&A, which as you've wrapped other acquisitions, you don't -- not necessarily or you don't have a catalyst in place right now. So just curious about the pipeline on M&A, the new products especially on the retail side, I know you're lapping a few things with Auntie Anne's and the SOUR PATCH KIDS novelty. So, just curious how we follow up what was really nice contribution in 2018?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Well, that's true what -- how you just outlined it. We are also doing very well in the fast food and casual dining segment of our business. And as I mentioned before that was a blank slate for us about six years ago and it quickly went to $40 million, $50 million and then we backed off a little bit as it dropped. But we have reason to be excited as we have a couple of new products going into new and existing change in there and we've gotten -- we've been through the R&D and approval process and we'll have these two major changes, we'll be realizing these sales from the second quarter onwards.

Brian Holland -- Consumer Edge Research -- Analyst

And then just on the M&A front, sort of what are you seeing out there as far as a pipeline for assets. So there are a lot of assets out there, how are multiples -- how do multiples look relative to sort of what your historical discipline has been?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Well, we're always looking and when we do execute, we integrate real quick and make sure that we have everything in place and we're still looking and we have a slight war chest in there. But for some reason or other everything that we looked at, we have decided against or it's on a hold. And I don't want to make -- and even though we have a war chest for acquisitions and we're always looking, I don't want to bring in things that are going to not have benefit.

Brian Holland -- Consumer Edge Research -- Analyst

Of course, understood. Last question from me just on the margin side. Obviously nice margin inflection in the quarter. Mike asked about some of logistics possibilities that could add to the tailwinds as we go through the balance of the year. Obviously the acquired facility last year seems to be sort of running as you'd like it to or at least closer to that. Other projects you had going on or that I understood you had in place as far as plant automation, SKU rationalization across the broader footprint. Any update or color you can give us with respect to how you expect those to come along and potentially further benefit gross margin over the balance of '19?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Sure. Gerry Law is sitting right next to me here and Gerry is my guy for all these operations -- or our guy. But we still expect to get marginal -- margin improvements in some of these projects. And Gerry, why don't you comment on the Churro line that just got done in there?

Gerard G. Law -- Senior Vice President and Assistant to the President

Yes. I mean we're through with the big lines starting up and we continue to have a pipeline of projects to offset labor pressure that we're having and increase our yields and throughout the year we'll continue to see those come on line.

Brian Holland -- Consumer Edge Research -- Analyst

Thanks. Appreciate it. Best of luck.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Thank you.

Operator

Next question from Jon Anderson.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Hi Jon.

Jon Anderson -- William Blair & Company -- Analyst

Good morning, everybody. You guys are not horsing around, you have a lot to crow about here.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

You're right, we are not horsing around. But I appreciate the way you let me into that comment, Jon.

Jon Anderson -- William Blair & Company -- Analyst

Very good. My first question is on -- it's on cost pressure that you've experienced over the past three or four quarters. I think the majority of that cost pressure, as you mentioned, has been two things. One is distribution or transportation costs and then I think you also bore some cost pressure or margin pressure due to the I think it was the biscuit recall. And I'm wondering if you can quantify that a little bit for us, how much those two things have pressured your operating income and whether we are at a point now where that pressure kind of reverses or goes away as you move through 2019?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Well, we had an experience at biscuit recall and that's a -- even though it's a minor part of our business, we still had to execute on the recall, take the product back and make nice nice with the customers and whatnot. It affected a smaller business of ours on the biscuit and it's essentially done. Now we've got to work to get back the sales and the momentum that was lost. Dennis, what effect did that have on us?

Dennis G. Moore -- Chief Financial Officer and Senior Vice President

Yes, Well, essentially we would say roughly $500,000 hit to operating income each quarter for the past four quarters although we did have a recovery to offset that in one -- in the fourth quarter last year. But that's just about over now so we should not be seeing any pressure on that in this quarter and going forward.

Jon Anderson -- William Blair & Company -- Analyst

And on the transportation cost pressure?

Dennis G. Moore -- Chief Financial Officer and Senior Vice President

On transportation, if you look at our transportation cost as a percent of sales, if you do your calculation in that way, we're -- that's roughly $2 million a quarter was higher last year than -- this year than last year. And we think that should be leveling off and perhaps it's too early to really tell, but we may have no increase in that regard starting with this quarter that we're in.

Jon Anderson -- William Blair & Company -- Analyst

Okay, thanks. On the product pipeline, it sounds like there are a couple of new things that are happening to help drive the restaurant business. Are you able to talk with a little more specificity about what those are? And are they kind of LTL, limited time offer, situations or do you think they're more permanent placement or yet to be determined I guess?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Well, as I mentioned before, we always have a bunch of products in the funnel. Every once in a while they get cogged up in there and they take a little longer, but every once in a while one or two come out together and we're sitting in the catbird position right now managing this, which will add several thousand point of sale locations as well as some existing product and a new product. And we think that it's going to -- we're going to have a very good year with respect to that. Gerry, you want to comment further?

Gerard G. Law -- Senior Vice President and Assistant to the President

But these are LTOs, Jon. So we don't know whether they will roll on if they perform well, they could continue. But right now, they are a fixed duration.

Jon Anderson -- William Blair & Company -- Analyst

Okay.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

And one of them already begun, correct?

Gerard G. Law -- Senior Vice President and Assistant to the President

Yes.

Yes.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

January. That would be Burger King with Funnel Fries. And what it is Jon, believe it or not, if you recall, we were doing for Funnel Fries with Burger King about four, five years ago.

Jon Anderson -- William Blair & Company -- Analyst

Right.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Ten years ago, gosh. And then they were acquired and they sliced and diced the menu, but now they're back with this very same product packaged in a different way and the early, early promise or the early, early results are really promising. So before I bring out the flags and wave the band in there, let's make sure that we have another quarter or two under our belt.

Jon Anderson -- William Blair & Company -- Analyst

Okay. And last question. On the Frozen Beverage business, I thought it was interesting what you said about -- I think that the machine sales grew at a strong double-digit rate in the quarter. I understand that that is hard to predict, but are there some specific -- I mean is there anything specific that you can point to in terms of upgrade activity that's going on that's driving that? And then should we really view that as a leading indicator of maybe future gallon or beverage demand?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Well, we have Dan Fachner on the phone in a remote location. Dan is the very active President of our ICEE Group. Dan, what caused the big increase in machine sales this year or this quarter and what does that reflect for the future in gallon sales?

Daniel Fachner -- President of ICEE Group

Yes, Jon. We had a really nice quarter with machine sales. As you know those can be cyclical, but we had a great quarter that included some big sales to our quick-serve restaurants, to the theaters, and to the convenience stores. So, a nice spread across the different categories. And any machine sales has absolutely the tendency to grow gallons in the future. So hopefully, that's a good trend. As you know, they've been down for the past few quarters and we look to see that up this year.

Jon Anderson -- William Blair & Company -- Analyst

Excellent. That's really helpful. Everybody, thank you very much and good luck going forward.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Thank you.

Operator

Next question from Akshay Jagdale.

Akshay Jagdale -- Jefferies LLC -- Analyst

Good morning.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Hi, Akshay. How are you?

Akshay Jagdale -- Jefferies LLC -- Analyst

Good. How you doing?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Good.

Akshay Jagdale -- Jefferies LLC -- Analyst

So, I wanted to ask about the bakery. The bakery business drove significant -- I mean almost all of the growth this quarter. So, can you talk about what drove that and how sustainable that is? It looks like some co-packing business might have played a role. But can you give us a little more color on that -- on the growth that we saw?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

It came from a lot of directions. As you know, Food Service is our largest segment but everybody in Food Service does something in bakery, whether it's a cookie or whether it's a special roll or whatnot, and we've gotten our sales team in high gear. The R&D effort that we have within the Company has grown significantly the last three or four years and we've just been the recipient of a lot of these things coming home.

Akshay Jagdale -- Jefferies LLC -- Analyst

So is it -- how sustainable is the growth rate that we saw?

Dennis G. Moore -- Chief Financial Officer and Senior Vice President

This is Dennis. The increase in the quarter, probably half of that is a bump -- a one-time bump that's not going to continue. So...

Gerard G. Law -- Senior Vice President and Assistant to the President

There is a large club rotation with that co-pack customer. So...

Dennis G. Moore -- Chief Financial Officer and Senior Vice President

And one of our -- and yes, one of customers as well so...

Akshay Jagdale -- Jefferies LLC -- Analyst

Right. So, there's two factors in there like one club looks like promotion and one co-packer related -- co-packing business related bump up that you don't think will repeat. Am I understanding that correctly?

Dennis G. Moore -- Chief Financial Officer and Senior Vice President

Yes.

Gerard G. Law -- Senior Vice President and Assistant to the President

Yes.

Akshay Jagdale -- Jefferies LLC -- Analyst

Okay. And that's roughly half of the growth?

Dennis G. Moore -- Chief Financial Officer and Senior Vice President

Yes. Maybe a little bit more than that.

Akshay Jagdale -- Jefferies LLC -- Analyst

Got it. And the other thing that was -- so first, I mean, congratulations on getting the margins to inflect. So, I had two questions related to that. Number one, I believe you have these sales meetings every whatever three, four years, I don't know how often; and then we see a bump up in...

Gerald B. Shreiber -- Chairman and Chief Executive Officer

More frequent than that, we had that big gala that you referred to.

Gerard G. Law -- Senior Vice President and Assistant to the President

We have one every year.

Akshay Jagdale -- Jefferies LLC -- Analyst

Yes. But there's -- apparently there was a similar margin related meeting. I don't know how big a gala that was, but recently...

Gerald B. Shreiber -- Chairman and Chief Executive Officer

The margin meetings was not a gala. Gerry Law initiated these meetings and he had all of our production and management teams from all of our plants at two different locations and we were driving home the projects and the tasks that needed to be done to not only control our costs, but to seek some margin improvements across the board. And guess what, Akshay, they seem to be working.

Akshay Jagdale -- Jefferies LLC -- Analyst

Can we call it a boot camp maybe?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Yes. Because there were some -- there were several boots kicking ass if they didn't achieve it.

Akshay Jagdale -- Jefferies LLC -- Analyst

All right. So my question related to that is so the margin performance so this quarter was better than we've seen in several quarters so that's good news. So where -- in the context of the initiatives that have just begun in this boot camp, I mean how far are we down the road on that and how much of that is what we're seeing in the numbers? And then I have a follow up.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

You're seeing very little in the numbers right now with respect to efficiencies. But even though there was 60 basis points improvement in manufacturing, we certainly expect that to continue and there'll be some other improvements.

Gerard G. Law -- Senior Vice President and Assistant to the President

And you're seeing the benefits from Labriola being turned around, we've had some improvements with our funnel cake and our Churro cost of goods as a result of the new line. So you are seeing some benefit, I can't quantify it right now.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

But Akshay, Labriola which we looked at about five years ago, six years ago, but it was too pricey for us. So by that, I mean we bid on the business; we didn't get it, it went to somebody else, they struggled with it. Finally, I think at the risk of bankruptcy, we acquired -- they put it up for sale and we wound up acquiring all of the assets for a fraction of the price that we were willing to pay five or six years ago. I think was about $6 million, is that right, Dennis?

Dennis G. Moore -- Chief Financial Officer and Senior Vice President

Yes.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

And it's going to be a winner. We've made some improvements here, we've transferred some production into there, we've transferred some production out. But we seem to be -- that seems to be working out and it will continue to reflect in our performance for the balance of this year.

Akshay Jagdale -- Jefferies LLC -- Analyst

Got it. And one -- just one last one again on margins. It was unique in the quarter and some of what I'm asking about, I guess you just answered, but I'd like more color. Usually the mix of your products if it's skewed more toward bakery like it was this quarter, you don't see a margin benefit, right? I mean usually when I think about which products are the more profitable ones, obviously I think about pretzels, I think about churros. So this quarter obviously bakery was leading the charge yet your margins went up. So how do I connect the dots? And going back to the boot camp, how does mix play -- where does mix play a role in your overall margin progression plan? Thanks.

Gerard G. Law -- Senior Vice President and Assistant to the President

I mean the benefit, I wouldn't think about the mix, I would think about the change in efficiencies and what we've done at the plants to improve our performance and that is where the bang for the buck is coming from.

Akshay Jagdale -- Jefferies LLC -- Analyst

But how about -- have you talked about mix as a driver going forward? Because I mean not all products are equal margin, right. So is that something we should expect?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

To comment on Gerry Law's comment. He had his engineering and manufacturing people at these meetings in here and we were primarily talking about what we -- what are we running and how do we make that better. So I think that what we've achieved during this year-end and this quarter, you could put a multiple on that for the balance of the year.

Akshay Jagdale -- Jefferies LLC -- Analyst

Got it, perfect. I'll pass it on. Thank you.

Operator

And a question from Brian Rafn.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Hi, Brian.

Brian Rafn -- Morgan Dempsey Capital Management -- Analyst

Hey, Gerry. Good morning. I hope you're sitting near your fireplace.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

I'm sorry.

Brian Rafn -- Morgan Dempsey Capital Management -- Analyst

I said I hope you're sitting near your fireplace. Just a question. What are you -- and maybe one for Dennis. What are you guys seeing on commodity feedstock pressures; eggs, butter, shortening, whole wheat, flour, sugar?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Pretty much flat right now.

Brian Rafn -- Morgan Dempsey Capital Management -- Analyst

Okay.

Dennis G. Moore -- Chief Financial Officer and Senior Vice President

Flat to moderately up so , it's not significant.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Don't count that.

Brian Rafn -- Morgan Dempsey Capital Management -- Analyst

Okay. What -- you guys talk in the press release about sales from new products in the last 12 months. How is that -- how is it relative to budgets on new product launches? How is your -- versus budgets, how is kind of your reflection on how successful those new products have been?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Better than our projections. And now to the point that we're taking a look at that and how can we make that even better, better to our projections.

Brian Rafn -- Morgan Dempsey Capital Management -- Analyst

Okay. When you look at the new product pipeline, Gerry, is it spread across frozen beverages and Churros and funnel cakes and bakery or is it bulked or is it consolidated in any one specific product area?

Most of them are coming into Food Service, which is our biggest group where we have the most experience. We -- with one exception, we saw -- I think we saw -- Dan, you still on the line?

Daniel Fachner -- President of ICEE Group

Yes, I am, Gerry.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Wasn't Taco Bell a big buyer of machine -- beverage machines?

Daniel Fachner -- President of ICEE Group

They were. They are one of the largest in this past quarter and that will probably continue throughout this year.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Okay, good. And some of these efforts began three and four years ago and it's satisfying to say that they're coming through now.

Brian Rafn -- Morgan Dempsey Capital Management -- Analyst

Okay. When you look, you guys talked you guys had a very, very nice quarter in machine sale installations in that. Are a lot of those machines sales in new product areas or cinemas or convenience stores or are you actually upgrading the technology of the machine and it's more of a technology retrofit?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Primarily more of the former. But with our ICEE Group and our service group, we're getting specialty projects, some of which include something as mundane as flavor changes and also some are design and engineering changes.

Brian Rafn -- Morgan Dempsey Capital Management -- Analyst

Got you. Over on the grocery side, Gerry, when you see these consolidations, whether it'd be Albertsons or Safeway or Kroger, and you're making M&A. How tough is it in shelf space in that? Do you lose shelf space when you see consolidations in the grocery industry or is it really -- does it transition fairly smoothly when you see that -- those transactions on the grocery side?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Well, you outlined some of the challenges in the retail grocery business for us. Bob Pape is here. And although we didn't have a great quarter in our Retail Supermarkets, we seem to think that most of it is past us now right. Bob, is that right? You want to comment?

Robert J. Pape -- Senior Vice President-Sales

That's correct. I mean some of the softness on the pretzel category, we see some trending up in this quarter here. And back to your question, it's really based on product performance and what you're adding to the consumer as far as value added. So, our products are well received by consumers and we think that we could hold our shelf space and continue to expand in certain product lines that are consumer friendly.

Brian Rafn -- Morgan Dempsey Capital Management -- Analyst

Got you. Anything on -- again on new product iterations, flavors, and anything on the pretzel side, Gerry?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Well, yes. Some of the new products in Food Service are taken while it was a regular soft pretzel and three loops and putting it and including some other flavors in there. Some of it have a fried element to it and a different taste. And we have a lot of these fast food and casual dining restaurants that are looking for a signature item that they can have, whether it'd be a pretzel or a different serving for churro, and we're working with them very closely. They want a signature item, we'll get it down into product form for them.

Robert J. Pape -- Senior Vice President-Sales

Got you. And then just on the M&A side, Gerry, you've always been very disciplined with the war chest in that X multiples of EBITDA or cost of the transaction. Are you seeing any differences in the scale and size of revenues or niche products and do you have any aversion between making a small niche acquisition that you can organically grow versus something that maybe they want a much larger sales contribution?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

I'd be happy to look at something in the early stages that would have a larger positive impact on our business. I am relatively risk aversive, I want to make sure that the product fits within our plethora of niche products. And so, we're not going to do anything that's stupid and we're not going to do anything that's too far out of our range. But we're constantly looking and hopefully, we will be continuing to add to our niche products.

Brian Rafn -- Morgan Dempsey Capital Management -- Analyst

Does that pipeline, Gerry, is that as robust as it's been in the past or is it ebb and flow, where we are in the economy. Just give me a sense as to where that is today versus maybe in the past?

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Well, every once in a while I mentioned Labriola. We looked at it five years ago, we bought it two years ago after it had been through. But a lot of the things that we've looked at are when I say they're repeats, they're dressed a little bit differently but they have the same negative possibilities that we looked at years ago. They seem to come oftentimes in rushes and I'm content to continue to look and we have our own people to look at that. But again I don't want to do anything that may be reckless or careless.

Brian Rafn -- Morgan Dempsey Capital Management -- Analyst

Yes. With that comment, Gerry, do you see conversations that you might have had several years ago come back where maybe there's a death of the owner or the family or a transaction pressor or were you are in the cycle where they end up coming back and you see kind of a recycling of the conversation.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

There is some and we do look at the obituaries every day. There are people -- no, I don't mean that, but -- and there are people, we have some scouts out there too. But I -- we don't waste a lot of time. And I've mentioned this before, we're not going to go too far from our nucleus, the things that we do well.

Brian Rafn -- Morgan Dempsey Capital Management -- Analyst

All right. Stay warm, guys. We'll see you.

Gerald B. Shreiber -- Chairman and Chief Executive Officer

You too stay warm, stay healthy.

Operator

(Operator Instructions). And Gerry, it looks like we have no more questions.

Gerard G. Law -- Senior Vice President and Assistant to the President

All right. I want to thank everybody for their time today and participating. Look forward to talking to you again after the results of our second quarter. Stay warm, be well, be healthy. Thank you very much.

Operator

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

Duration: 38 minutes

Call participants:

Gerald B. Shreiber -- Chairman and Chief Executive Officer

Michael Gallo -- CL King & Associates, Inc. -- Analyst

Brian Holland -- Consumer Edge Research -- Analyst

Gerard G. Law -- Senior Vice President and Assistant to the President

Jon Anderson -- William Blair & Company -- Analyst

Dennis G. Moore -- Chief Financial Officer and Senior Vice President

Daniel Fachner -- President of ICEE Group

Akshay Jagdale -- Jefferies LLC -- Analyst

Brian Rafn -- Morgan Dempsey Capital Management -- Analyst

Robert J. Pape -- Senior Vice President-Sales

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