Pactiv Evergreen Inc. (NASDAQ:PTVE) Q3 2023 Earnings Call Transcript

Pactiv Evergreen Inc. (NASDAQ:PTVE) Q3 2023 Earnings Call Transcript November 5, 2023

Operator: Good day, and thank you for standing by. Welcome to the Pactiv Evergreen Conference Call. At this time, all participants are in a listen only mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Curt Worthington. Curt, you have the floor.

Curt Worthington: Thank you, operator, and good morning, everyone. Thank you for your interest in Pactiv Evergreen and welcome to our third quarter 2023 earnings call. With me on the call today, we have Michael King, President and CEO, and John Baksht, CFO. Please visit the events section of our Investor Relations website at www.pactivevergreen.com and access our supplemental earnings presentation. Managements remarks today should be heard in tandem with reviewing this presentation. Before we begin, our formal remarks, we want to remind everyone that our discussions today will include forward looking statements, including those regarding our guidance for 2023. These forward looking statements are not guarantees of future performance and actual results could differ materially from those contemplated by our forward looking Therefore, you should not put undue reliance on those statements.

These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our recent SEC filings including our annual report on Form 10-K for the year ended December 31, 2022 and our quarterly reports on Form 10-Q for the quarter ended March 31, June 30, and September 30, 2023 for more detailed discussions of those risks. The forward looking statements we make on this call are based on information available to us as of today’s date, and we disclaim any obligation to update any forward looking statements, except as required by law. Lastly, during today’s call, we will discuss certain GAAP and non-GAAP financial measures, which we believe can be useful in evaluating our performance.

Our non-GAAP measures should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliations to the most directly comparable GAAP measures are available in our earnings release and in the appendix to today’s presentation. Unless otherwise stated, all figures discussed during today’s call are for continuing operations only. With that, let me turn the call over to Pactiv Evergreen’s President and CEO, Michael King. Mike?

Mike King: Thank you, Curt, and good morning everyone. Thank you for joining us today. Turning to Slide 4, we’ll begin with an overview of the progress we’ve made against our strategic priorities, discuss our performance during the quarter and then provide updates on our key financial metrics. At the end of the call, we will open the line for Q&A. Turning your attention to Slide 5. I’m proud of the steady progress we’ve made toward our targets for 2023. Our solid performance during the third quarter would not have been possible without our dedicated team, We delivered 21% adjusted EBITDA growth during the quarter with adjusted EBITDA margin increasing to 16.5%. In addition, we generated $176 million in free cash flow and made further progress reducing our net leverage.

Our teams continue to execute at a high level navigating challenging market dynamics. Our solid third quarter results reflected resilience of our business and the company’s ability to deliver sustainable returns. As a result, we are revising our guidance upwards, which Jon will discuss in greater detail. We continue to leverage our broad range of product offerings, channel coverage and distribution network to generate improved margins and free cash flow. We remain focused on our strategy of value over volume and continue to make progress emphasizing our higher margin products, focusing on operational excellence and improving our balance sheet. We are confident and focusing on these strategic priorities will allow us to enhance shareholder value.

Next, recall that last quarter we introduced the implementation of the Pactiv Evergreen Production System, also known as PEPS which promotes best practices and continuous improvement. During the second quarter, we shared that we anticipate 8 plans to reach bronze status by year end. I’m pleased to share that we are ahead of that target. And during the third quarter, three of our facilities became PEPS certified, increasing the number of our plans sharing ground status from 6 to 9. Longer term, we expect 3 to 5 of our plan to achieve silver status next year, with our goal of having our first site become gold certified before 2025. While we are still early in the PEPS journey, The progress we have made since the second quarter is meaningful. We are enthusiastic about the impact this will have throughout the organization and waste elimination and improving our operation scalability.

We continue to win with our key strategic customers. As we highlighted during our second quarter earnings call, our business is outperforming its end markets, partially valued, aligning with customers that are well positioned for long term growth. We benefit when our customers succeed and our strong partnership to provide better insight into their needs. In addition, our team has been able to adapt to broader changes in demand, enabling us to better align with our customers. Although, we’re in markets are moderating, here at Pactiv Evergreen, we are seeing positive momentum as we continue to strategically align with our key customers. Meanwhile, we remain committed to effectively balancing production costs with demand levels. And we are pleased with the progress we’ve made to control costs and improve efficiencies.

Foot traffic and QSRs and full-service restaurants was down slightly compared to last year. However, our alignment with key strategic customers allowed our Foodservice segment to outperform the market. Over the past year, as consumers transitioned to lower cost calories, they have continue to shift their spending from restaurants to the grocery store. And within the store, we’ve allocated their budgets to product categories that benefit Pactiv Evergreen. Outside of those elements, we’ve also been disciplined in our value over volume approach, which has supported our price realizations during the quarter. In addition, we’ve been successful in reducing our manufacturing costs to drive higher profits and improve our margin profile. We’ve made considerable progress on the beverage merchandising restructuring during the year, including the closure of our Canton Mill, at our Olmsted Falls converting facility.

The reorganization of our management structure and the related combination of our legacy food merchandising and beverage merchandising businesses into a single segment, we remain confident these actions will reduce our capital intensity and overhead costs and position us to remain competitive in the liquid packaging market. Moving to Slide 7. This past year has demonstrated the resilience of our business model and our ability to grow adjusted EBITDA and free cash flow through the economic cycle. Last quarter, I highlighted the operational excellence aspect of our transformational journey. This quarter, I will highlight our diversified end market exposure, our broad product offering and our nationwide distribution footprint as these are critical areas that support our value proposition and provide the foundation that our transformational journey is built upon.

Today, we are uniquely positioned to provide sustainable product solutions to our customers, with scale and reach unlike any other food service or beverage packaging provider. Starting with our diversified end market exposure. We sell across full-service restaurants, QSRs, convenient stores, broadline distributors, food processors, grocery stores, and beverage companies. This means that no matter where consumers spend, whether it be inside or outside the home, we have the scale to meet their needs. This partially insulates us against macroeconomic headwinds as consumers shift the behavior to favor one channel over another. This is especially important in the current environment as consumers have altered their buying patterns to adapt to the impact of inflation.

As mentioned previously, higher menu prices have caused consumers to trade down from higher end restaurants to QSRs to lower tier fast food restaurants. Our Foodservice business serves the full spectrum within the restaurant channel, so it has a shift from one outlet to another, which gives us the opportunity to capture net foot traffic. Higher menu prices have also forced some consumers to shift their spend from the drive thru window to the grocery store. With our presence throughout the grocery store from the fresh food and beverage options at the perimeter of the store to other options in the center aisle. Our food and beverage merchandising segment is able to capitalize on mi shift and secure those volumes as they migrate over from Foodservice.

In this dynamic economic environment, with ever changing consumer trends, we expect that our diverse end market exposure will allow us to continue to realize profitable growth, even with shifts in consumer behavior. Turning your attention to Slide 8. We believe that we offer the broadest array of products in substrates within the food and beverage packaging industry, and we’re constantly working to innovate and develop the highest quality environmentally friendly products. This is a sustainable competitive advantage for us and it offers convenience and peace of mind for our customers. The breadth of our product offering enables us to respond quickly to changing customer needs. We can pivot to where the demand is and insulate ourselves from any singular trend at the product or customer level.

We are considered a solutions provider with a host of technical and supply chain services which has afforded us the ability to build strong strategic partnerships with our customers and become a critical component of their supply chain and future strategies. In many cases, we are the supplier of choice to help our customers meet their packaging related sustainability goals. Because we play such a vital role in our customer supply chains and cover such a wide spectrum of their packaging needs our customers had a strong incentive to work with us to develop next generation products in substrates. We have the expertise and the know how to engineer sustainable solutions, impact of evergreen minimizes disruption for our customers with the convenience of a turnkey solution provider.

Turning to Slide 9, our strategically located distribution footprint is another key differentiator that allows us to offer best in class service to our customers. It also gives us an exclusive vantage point into the value chain from upstream packaging production to downstream packaging consumption in all the stages in between. Not only do we have a broad national manufacturing footprint, we also have a strategically located hub-and-spoke network distribution centers that allow us to deliver our products quickly and efficiently, while meeting the precise needs of our customers. Many of our distribution centers are also close to our largest, most strategically important customers, ensuring we deliver products in a timely manner. As a result, while a lot of other packaging companies rely on just in time delivery, our customers can count on us for just in case inventory management Our distribution centers carry stock across all categories to enable us to adapt quickly to changing customer needs.

We work closely with our customers on demand forecasting, which allows us to better anticipate changes and adjust our production and inventory levels accordingly. Our manufacturing operations benefit from reducing variability costs by changing demand levels and our sales teams benefit from the competitive advantage of playing a critical role and our customer supply chains. We remain committed to further optimizing and improving our distribution network to operate more efficiently and meet the evolving needs of our customers while also supporting the long term sustainable value creation. Turning to Slide 10, the market backdrop remains challenging as elevated inflation continues to impact consumers purchasing decisions. More recently, we are beginning to see encouraging signs of moderating volumes on both a sequential and year-over-year basis.

In general, consumers continue to allocate spending to adjust for higher food prices and prioritize channels and product categories that we participate in. We continue to position ourselves so that we are strategically aligned with customers that are industry leaders. We believe they are winning in their respective markets, so we benefit when they succeed. On that front, we have seen limited promotional activity by some of our customers, which contributed to our third quarter volumes. Although we have not seen large scale promotional pricing yet. To the extent that overall customer promotional activity picks up, that would be a net positive for the sector as well as Pactiv Evergreen. Regarding the raw material cost environment, the trend in 2023 has been lower cost in 2022.

We’ve made a concentrated effort to reduce our lag and our contractual pass through mechanisms. And we don’t expect the recent commodity price volatility to have a material impact on the results through the rest of the year. Finally, we continue to manage our controllable costs by improving efficiency and productivity across the organization. As a result of our operational efficiencies, we are seeing significant benefits to our adjusted EBITDA and free cash flow. And as a result, we’ve been able to strategically allocate cash to pay down debt, reducing our interest expense and improving our overall net leverage. Our beverage merchandising restructuring continues to progress on schedule. And we remain on pace to achieve our operational milestones that we communicated from the onset.

As a reminder, this is an effort to streamline our physical footprint to focus on converting operations, resulting in lower operational costs in a more capital light operating structure. Both of which support increased cash flow generation, overall, it’s taken a tremendous effort from all of our employees. Particularly at the impact of facilities to help us continue to execute according to this plan. And I’m also very proud of the dedication and commitment and hard work along the way. With that, I would now like to turn the call over to Jon to discuss our third quarter results in more detail. Jon?

Jon Baksht: Thanks, Mike. I’ll start with our third quarter highlights on Slide 12. We reported net revenues of $1.4 billion for the quarter, while this represents a decrease of $230 million compared to last quarter, most of the decline reflects the restructuring and portfolio optimization we have carried out. This includes the shutdown in the Canton Mill in May of this year and the sale of our Asia operations last August. Excluding those actions, Our revenue was down approximately $87 million which was mostly due to the lower raw material cost environment compared to last year, as well as strategic value over volume decisions. Third quarter adjusted EBITDA was $227 million compared to $187 million in the year ago period. The increase reflects our success with improving our mix while maintaining cost discipline across the organization.

Our efforts delivered adjusted EBITDA margin expansion of 120 basis points compared to the last quarter and 480 basis points compared to the year ago period to 16.5%. As we’ve discussed in prior quarters, we remain focused on managing our control over costs to maximize profitability and free cash flow. We increased free cash flow to $176 million in the quarter despite $34 million in restructuring related cash outflows, we continue to make progress better aligning inventory with our customers and have been successful in maintaining more normalized inventory levels, which in turn frees up cash. Our ability to generate strong cash flow continues to help us pay down debt. And during the quarter, we reduced our net debt by $160 million. Due to our improved adjusted EBITDA performance and debt reduction, our net leverage has improved to 4.2 times, which is ahead of our goal to be in the low 4s by year end.

We effectively achieved that goal during the third quarter. Continuing on Slide 13, I’ll cover our third quarter year-over-year results. As a backdrop, last year benefited from historically favorable spreads driven by attractive supply demand dynamics and the timing of our contractual pass throughs. Those spreads began to normalize into this year as raw material costs moderated while volumes remained under pressure due to elevated inflation levels. Starting with net revenue, we saw a decline of 14%. Mainly due to the closure of the Canton Mill within our Food and Beverage Merchandising segment. Excluding the Canton closure and the divestiture of our beverage merchandising Asia business, revenue declined by 5%. Volumes are down 4% in the third quarter, primarily driven by strategic value over volume decisions in Food and Beverage Merchandising.

Price mix was down 2%, mainly due to lower contractual pass throughs as the overall raw material cost environment is lower than last year. As I’ll cover in greater detail with the segment results, we continue to outperform relative to our end markets and our financial performance in the quarter reflects this. We delivered an adjusted EBITDA increase of 21% to $227 million. We benefited from lower material costs and we were able to offset lower overall volumes and pricing by managing our manufacturing and transportation costs. We are also seeing the benefits of our productivity initiatives and restructuring efforts. Free cash flow increased mostly due to improved operating results and a net working capital benefit, including the impact of working down the prior year strategic inventory build.

Partially offset by restructuring related cash outflows and higher capital expenditures and interest paid. Moving to Slide 14, for a sequential quarter comparison. Net revenues were $1.4 billion, down 3% from the prior quarter. The slight decrease was mostly due to the volume impact from the Canton Mill closure and value over volume decisions in our Food and Beverage Merchandising segment. We also experienced slightly lower price mix driven by the contractual past dues of lower material costs. Adjusted EBITDA was $227 million for the quarter, a $10 million increase from the second quarter. We benefited from lower manufacturing costs, which were partially offset by higher material costs, net of cost pass through and unfavorable product mix. Free cash flow increased compared to the second quarter, mainly due to improved operating results, the timing of interest payments, and continued optimization of inventory levels, partially offset by higher capital expenditures.

Turning to Slide 15. We’ll look at our results by segments. Our Foodservice segment continues to perform well against the challenging market backdrop. Volumes were essentially flat versus last year, which is constructive given that our end markets were down low single digits. Our customers have implemented targeted promotions that these had been somewhat limited. At the same time, some of our key customers have gained share and we have benefited from that dynamic. As in previous quarters, we continue to emphasize value over volume on a year-over-year basis, price mix was down 5%. The decrease primarily reflects lower raw material costs most of which were due to contractual pass throughs and mix as we’ve been successful in balancing profitability and volumes.

Our adjusted EBITDA increased 9% due to lower transportation and material costs, net of costs factor. On a quarter over quarter basis, volumes reflected similar seasonal factors as observed in the second quarter with cold cuffs and back to school products increasing sequentially. Net revenues increased $19 million or 3% primarily due to higher volume and favorable price mix. Adjusted EBITDA was down $11 million or 9% due to higher material costs, net of costs past year and higher manufacturing costs. Turning to Slide 16, Food and Beverage Merchandising experienced similar trends as in the second quarter with customers responding to elevated inflation by reallocating their budgets to categories like protein and eggs. In addition, the severe weather in California that delayed the fruit harvest in the first half of the year reduced overall fresh fruit quality in the third quarter.

This resulted in reduced fresh fruit availability for packaging as a larger portion of the harvest was used for frozen fruits and other uses. On a year-over-year basis, revenue was down 23%. However, most of that was due to the Canton Mill closure and the divestiture beverage merchanded in Asia. Apart from those factors, volume was down 6%, which included our strategic decision to exit select low margin customer relationships, as we reevaluated our overall book of business following the closure of the Canton Mill. Excluding those factors, underlying volumes were down in the low single digits. Adjusted EBITDA increased by 27%, mainly due to lower material costs, net of costs pass-through and lower transportation costs partially offset by the closure of the Canton Mill and lower sales line.

On a sequential basis, net revenue was down by 12%, 8% of which was due to the Canton shutdown. Volume was down 2% due to value over volume decisions. Price mix was down 2% mostly due to contractual pass throughs. Adjusted EBITDA increased by 19%, primarily due to lower manufacturing costs including the impact from a cold mill outage in the prior quarter, partially offset by unfavorable product mix. Our margins for the segment increased 470 basis points sequentially, demonstrating the benefits of the restructuring. Turning to Slide 17. We continue to make progress on reducing our leverage profile and maximizing our free cash flow. Our net leverage ratio declined to 4.2 times in the third quarter, driven by a reduction in net debt and a sequential improvement in adjusted EBITDA over the last 12 months.

Thus we expect to make further improvements to our net leverage ratio by year end and are confident that we’ll be in the 30s in 2024. In terms of free cash flow, we generated $176 million in the third quarter and $275 million year-to-date, which is ahead of our previous guidance. Our cash flow generation has allowed us to reduce debt by $523 million year-to-date, including $229 million of debt reduction during the third quarter. Based on current interest rates, this quarter’s repayments would reduce our annual interest expense by approximately $20 million. A key contributor to future free cash flow growth. Factoring in the $1 billion of interest rate swaps we entered into during the fourth quarter of 2022, we now have 81% of our debt fixed with the total average interest rate of 6.35% as of quarter end.

Regarding our capital allocation priorities, our approach aligns well with our long-term strategy and underlying consumer trends. We remain confident in our position as a market leader and our long-standing customer relationships support future growth. We are committed to delivering profitable growth which in turn would allow us to meet our aggressive goals to de-lever the balance sheet and preserve liquidity. As we make further progress on the beverage merchandising restructuring, we expect our business profile benefit from lower capital intensity and reduced earnings volatility. Importantly, we have demonstrated our willingness to optimize our portfolio by exiting non-core businesses to help us focus resources on growing our core markets.

As we continue our transformational journey, we expect the next stages to be less transformational as the beverage merchandising restructuring and more incremental, including some cost structure optimization and rightsizing. We expect that this may require incremental investments in the near term, generating cost benefits in the future and making our business model more adaptable. As we consider additional cost reduction initiatives, our strong cash flow generating capabilities provide us with the opportunity to reinvest in our business for growth. We believe these actions will enable us to serve our customer base more effectively and operate more efficiently while enhancing returns to stakeholders. Turning to Slide 18 and our updated outlook.

We are pleased with our solid performance this quarter and year-to-date. Our company continues to execute at an elevated level across both business units, and we remain well position to capitalize on future growth opportunities. As we have highlighted, the outlook for the US economy remains uncertain. As higher interest rates and still elevated inflation weigh on consumer spending, which may also impact our customers purchasing decisions and order patterns in the near-term. Despite these headwinds, our third quarter results demonstrate the resilience of our business and the company’s ability to deliver sustainable results. To account for our strong performance year-to-date, we are updating our full year fiscal 2023 guidance to the following.

Adjusted EBITDA is now expected to be between $825 million and $835 million compared to the range of $775 million to $800 million we provided earlier this year. Similarly, our free cash flow is now expected to exceed $250 million which primarily reflects the increased guidance for full year adjusted EBITDA. We believe this demonstrates the excellent free cash flow generating ability of our business and anticipate this will help us further reduce our net leverage ratio. Our full year guidance for capital spending remains $280 million and we have tightened the range for total cash restructuring costs by bringing the low end of the range up to $150 million as we further refine our estimates. I’ll also point out that that range does not include the benefits of any cash proceeds from the possible sales in property and equipment from the facilities impacted by the beverage merchandising instruction.

As we have highlighted previously, we anticipate approximately $120 million of cash restructuring costs will occur in 2023. I’ll now turn it back to Mike for closing comments.

Mike King: Thanks, Jon. At Pactiv Evergreen we are committed to sustainability across our product portfolio, our manufacturing and supply chain and our communities. We take immense pride in what we do and we continue to invest in our ESG strategy to hold ourselves accountable in all areas of our business and operations. We know firsthand at delivering innovative, sustainable products at the scale we envision can’t happen without innovative, sustainable operations. Innovation is key to our goal of increasing sustainable materials in our products. This quarter, we announced a partnership with ExxonMobil, to offer customers certified circular polypropylene packaging products made with ExxonMobil’s Exxtend, advanced recycling technology.

This collaboration allows us to offer our customers even more innovative packaging options, expanding our portfolio of circular packaging. We are also excited to announce the upcoming release of our new ESG report. Our first based on internationally recognized GRI’s sustainability reporting standards. The report will provide detailed updates on our initiatives across our ESG focus areas, of planet, product, people, and governance, as well as a comprehensive set of ESG metrics. Also the report will include the results of our first materiality assessment and the third party assurance report for our scope 1 into re health gas emissions and energy consumption. Our teams across the enterprise are eager to share the stories of their work to fulfill our purpose of packaging a better future.

While we are early in our sustainability journey, we are proud of the progress we have made to-date. And our progress in other ESG initiatives. Lastly, I again want to highlight our team’s execution and thank each of them for their continued dedication and hard work. We remain committed to leveraging the solid foundation we have established over the years. With the ongoing objective of delivering sustainable long-term value of our stockholders. That concludes our prepared remarks. With that, let’s open it up for questions. Operator?

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Q&A Session

Operator: Thank you. [Operator Instructions]. Our first question comes from Ghansham Panjabi with Baird. Ghansham, please go ahead with your question.

Ghansham Panjabi: Yes, good morning. Thank you, operator. Hey, guys. Good morning. I guess first off, as we kind of think about 3Q and the upgraded outlook for the fourth quarter, can you give us some specific parameters as to exactly what’s driving that upside? Is it just progress on restructuring savings, maybe end markets were a little bit better than you thought? What’s driving that?

Mike King: Yeah. I think you got it right, Ghansham. We’re seeing better flow through of our cost out initiatives in our operations as we work on waste elimination. So that’s flowing through. And then I do think, stronger performance, both on the value over volume side as well as just our key strategic initiatives flowing through as I mentioned before.

Ghansham Panjabi: Okay. And then just related to that, maybe you could just quantify. So the $40 million increase in EBITDA year-over-year during the third quarter, how much of that was from cost savings. And at this point, are you able to share any sort of flow through effect into 2024?

Jon Baksht: Yeah. So if you look at, the various cost saving initiatives it’s hard to disaggregate exactly where do we — what do we get from things like PEPS and all the operational improvements, some of the different initiatives around streamlining our supply chain and then the string itself. But what I would say let’s say in terms of quantifying going into next year and just reiterating prior guidance that we’ve given, as it relates to the restructuring itself, we guided to $30 million of benefits on a run rate basis going into 2024. So we are on track to deliver those going into next year. And you are seeing some of those benefits hit in Q3 and some of the Q4 guidance that we’re providing.

Ghansham Panjabi: Okay. Perfect. Thanks so much.

Operator: Please standby for our next question. Our next question comes from George Staphos with Bank of America. George, please go ahead with your question.

George Staphos: My first question would be this. You know, you’ve done a wonderful job in terms of leveraging what Pactiv has already always had, you know, the distribution network, the diversified manufacturing, and pushing value over volume. Could you quantify for us, if possible what you think your ASP has moved up in your segments, say, this quarter versus last year’s quarter or year to date this year versus last year adjusted for inflation. So if we try to figure out how you’re doing, how the value or volume is coming through, is there a way for us to map that progress in that way? Second question I had, if we go to slide 21, and look at your — in the index, the appendix, your cost performance. Is there a way to break out how the $94 million of COGS year-on-year in the quarter, split out between raw manufacturing productivity and the like. Thank you, guys.

Jon Baksht: Sure, George. This is Jon. And just to check, can you hear me okay?

George Staphos: I can hear you guys now. And it’s funny. My associate [Cashen] (ph) was hearing you on the webcast, but you were not coming through on the phone line. So I don’t know if I was the only one, but just want to mention it just in case.

Jon Baksht: Okay. No. We can check into that while we do the call. I think Ghansham was able to hear us. So let me start. I think you asked a lot of questions. So let me try and unpack it all, and let me know, if I’m hitting your topic. So, you know, the first one, I think you’re getting to our average sales price, what are we seeing in the market? How was that? We don’t get into pricing, on these calls for obvious reasons. I I think what I would tell you is there’s an element of the value over volume approach where on a blended basis, we’re certainly looking at that. And we were really focused on margins and spread. And as we are getting a better at really assessing which products, which customers categories are more profitable.

We are focusing our efforts on really supporting those customers that drive that better profitability for us. And I think you’re seeing that come through in our margins as we really focus on, as we focus on, building our overall margins and spreads across the business. And so, but within that there’s obviously puts and takes. And in some cases, we have more seen more normalization on pricing in this market. But, the big picture as I highlighted in the opening remarks, our margins overall are improving.

George Staphos: Yeah. Jon, no doubt on that. and again, congratulations on the margin performance. I was just thinking if there was a way that you could somehow, not by product line, But somehow maybe index how you’re either again your revenue per unit on average or maybe your spread per unit or per pound has moved up because of what you’re doing, that’d also be helpful along with the margin. But, yeah, clearly, you’re getting the progress here. I’m sorry. Keep going ahead.

Jon Baksht: Yeah. And again, we’re not going to break out exactly our average sales price, but I would say that, just to reiterate our — you know, what you’re seeing a bit too in pricing is the commodity price environment has been coming down. And so there’s been a corresponding bring down in price but again, we’ve got past dues as you know. So we’re seeing some of that get more normalized.

George Staphos: And on the $94 million of COGS, if you can parse that in terms of raws, process, productivity, PEPS, that would be great. Thank you, Mike. Thank you, Jon.

Jon Baksht: Yeah. So, and if you’re looking at the slide you referenced on our investor presentation, there is a — if you break that out looking at, kind of the — and I think you’re focused on the sequential, the bridge year-over-year. Is that the right one?

George Staphos: It’s the year-over-year, 3Q versus 3Q and COGS in particular.