TreeHouse Foods, Inc. (NYSE:THS) Q1 2024 Earnings Call Transcript

TreeHouse Foods, Inc. (NYSE:THS) Q1 2024 Earnings Call Transcript May 6, 2024

TreeHouse Foods, Inc. misses on earnings expectations. Reported EPS is $-0.21747 EPS, expectations were $-0.08699. THS isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Welcome to the TreeHouse Foods First Quarter 2024 Conference Call. All participants will be in listen-only mode. After today’s presentation there will be an opportunity to ask questions. [Operator Instructions]. Please note that this event is being recorded. At this time, I would like to turn the call over to Matt Siler of TreeHouse Foods for the reading of the Safe Harbor Statement.

Matt Siler: Good morning. And thank you for joining us today. Earlier this morning, we issued our earnings release and posted our earnings deck, both of which are available within the Investment Relations section of our website at treehousefoods.com. Before we begin, I would like to advise you that all forward-looking statements made on today’s call are intended to fall within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and projections and involve risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. Information concerning these risks is contained in the company’s filings with the SEC.

On September 29, 2023, we completed the divestiture of our Snack Bars business. Consistent with prior quarters, we will discuss our results on an adjusted continuing operations basis. A reconciliation of non-GAAP measures to their most direct comparable GAAP measures can be found in the release and the appendix tables of today’s earnings deck. With that, let me now turn the call over to our Chairman, CEO, and President, Mr. Steven Oakland.

Steven Oakland : Thank you, Matt, and good morning everyone. I’m pleased to be with you today to discuss our first quarter financial results and provide an update on our outlook for the remainder of the year. But first, I’d like to take a moment to reflect on our journey and all that we’ve accomplished, to be positioned as a leader in private brands, snacking and beverages. It was just 18 months ago that we sharpened our portfolio focus and began the transformation of the company, and our team has worked tirelessly to create a new TreeHouse. While the absolute results of our transformation are still forthcoming, I am confident that our strategy and execution will drive returns for our shareholders. We remain focused on sustaining and growing leadership and depth across our snacking and beverage categories.

We do this by enhancing our supply chain and delivering superior service. This will in turn drive organic growth and create long-term value for all of our stakeholders. With that, let me start with our first quarter results, which are outlined on slide four. We delivered net sales of $821 million, which, while down 3.9% year-over- year was above the top end of our guidance range of $810 million. In addition, our adjusted EBITDA of $46 million was within our guidance range. These results were burdened by the work to restart our Broth business, which I will speak more about shortly. I’m pleased with our solid start to the year and believe that we are well positioned to deliver on our full year outlook. As a result, we are reaffirming our 2024 guidance.

Pat will provide more detail on our first quarter results and this guidance shortly. Taking a look at slide five, I would like to provide an update on our net sales pipeline and the significant opportunity for TreeHouse to drive organic growth. I’m encouraged by the pipeline that our team has built in tandem with the work undertaken to transform the company over the last 18 months. The size of this pipeline has grown by over 20% during the last quarter as our commercial teams continue to pursue new customer partnerships. We are executing well against our plans for 2024, securing numerous opportunities since the start of the year, including wins in cookies, refrigerated dough, pickles, and pretzels, to name a few. These will drive growth in the second half results and showcase our strategy in action within the categories where we have advantaged capabilities and depth.

Moving on to an update on our Broth facility. As you can see on slide six, our efforts continue to progress as anticipated. We have a plan in place and are tracking against it. We have upgraded our equipment, refined and improved our process, and have trained and maintained our workforce at the facility with the expectation that production will continue to increase in the coming months. This should provide a meaningful lift to our second half profitability. In the meantime, our other broth facility is performing well, and we have been doing our best to provide as much product as possible to our customers in this period. Next, I’d like to briefly discuss our supply chain initiatives. We’ve continued to invest directly in our supply chain to drive consistent execution through our network, enhance our competitive positioning, and strengthen our partnerships with our customers.

Our teams are driving progress around our three priorities of TMOS, procurement, and improving our distribution network. An example of how TMOS is impacting the company can be seen on slide seven, where overall equipment effectiveness, or OEE, has good momentum and continued to improve in the first quarter. Additionally, our TMOS procedures are contributing to further improvements in service levels that we restored in the first half of 2023. We also feel confident in the benefits that we can achieve from our work across procurement, logistics, and distribution. With the timing of these initiatives, we expect to drive significant gross cost savings of roughly $50 million in the latter half of this year. Turning now to an update on the industry, TreeHouse remains attractively positioned at the intersection of two incredibly powerful long-term consumer trends.

The growth of private brand groceries in North America, and the consumers shift towards snacking. As you can see on slide eight, private brands have consistently gained share over the last two decades. Private brands still have significant runway for growth, regardless of the short-term changes in the economic backdrop. Our strategy of deploying capital with a focus to drive market share leadership in consumer trending food and beverage categories should enable TreeHouse to consistently deliver organic growth. Taking a closer look at the first quarter, we saw a continued strength of private brand volume compared to national brands. In the categories in which we operate, private brand unit sales in measured retail channel were modestly positive compared to national brands, which continued to decline.

Additionally, on slide nine, you can see the price gaps between national brands and private brands remain elevated relative to historical levels in our categories, underscoring the value that private brands can offer to consumers. This environment continues to be supportive of private brand unit share, which increased in each month of the quarter. Indeed, our top-line performance is improving and our prospects remain strong with new sales opportunities expected to help our second half volume growth. We have also made meaningful progress with the restart of our broth facility and are well-positioned to deliver against our plans in this business segment in the latter half of the year. We are tracking against our goals with TMOS, procurement and distribution cost savings plans, which should help drive margin expansion in the second half.

Overall, we are well-positioned to capture the strong consumer tailwinds we’re seeing play out, and I’m excited by the trajectory of our business and our positioning within the industry. I will now turn the call over to Pat.

Patrick O’Donnell: Thanks, Steve. Good morning, everyone. I’d like to start by thanking the entire TreeHouse team for their work this past quarter, which has driven a solid start to our fiscal year. I’ll begin with a summary of our first quarter results on slide 11. Net sales and adjusted EBITDA both declined relative to the prior year as expected. Net sales of $821 million exceeded the top end of our first quarter guidance of $810 million. Adjusted EBITDA of $46 million was in line with our expected range. On slide 12, we have provided further detail on our year-over-year net sales drivers. Our first quarter net sales were down 3.9%. Volume and mix was down year-over-year, primarily driven by the carryover of business that we exited last year and planned downtime at our broth facility.

This was partially offset by the volume contribution from our coffee acquisition. Additionally, pricing declined due to targeted commodity-driven pricing adjustments as we expected. On slide 13, I’ll take you through our adjusted EBITDA drivers. Volume and mix, including absorption, was down $35 million in the quarter, primarily driven by unfavorable category mix, including lower volume from our broth business due to the restart that we’ve discussed. PNOC, pricing net of commodities, contributed $13 million. This was driven by overall lower commodity costs compared to the prior year, including coffee where we have passed through arrangements with our customers. As we think about our commodity basket and what we’ve seen year-to-date, there are input costs that have continued to be inflationary, while others have moved lower.

We continue to believe that on the full year, inflation across our basket will be modest. Within the pockets where we are seeing higher inflation, specifically cocoa, we are in the process of taking pricing actions to recover those increased costs as we move through the remainder of the year. Additionally, our procurement and logistics teams are hard at work executing planned initiatives throughout our network to drive profitability improvement. Operations and supply chain were an $8 million headwind versus the prior year, primarily driven by higher labor costs and the impact of our broth facility restart. Lastly, SG&A and other contributed negative $15 million versus last year, primarily due to less TSA income relative to the prior period as we expected.

Our first quarter guidance contemplated these higher operating expenses associated with the TSA arrangement. We have taken the necessary actions to reduce these temporary operating expenses moving forward. Moving on to slide 14, I’ll touch on our capital allocation strategy. The board and management continue to be focused on deploying capital in a manner that enhances returns for shareholders. Our first priority remains investing in our business, which we do organically through CapEx investments and inorganically by strategically adding depth and capabilities, like we recently did with pickles in the first quarter. We also continue to execute on our share repurchase program and opportunistically repurchased $44 million of company stock in the first quarter.

We will continue to be disciplined and look at all capital deployment decisions through a risk-adjusted returns lens while maintaining our balance sheet strength. Turning now to our guidance on slide 15, we are maintaining our full-year net sales outlook of flat to 2% year-over-year growth or a range of $3.43 billion to $3.5 billion. We expect our organic volume and mix to be slightly positive for the year. From a pricing perspective, we are still planning for a modest, commodity-driven decline year-over-year. We continue to anticipate a slight volume and mix benefit from the acquisitions completed in the last year. We expect adjusted EBITDA in a range of $360 million to $390 million. Additionally, we still expect free cash flow of at least $130 million.

Finally, we anticipate net interest expense of $56 million to $62 million and capital expenditures of approximately $145 million. As it relates to the second quarter, we expect net sales to be in the range of $770 million to $800 million, representing a decline of approximately 2% at the midpoint and a sequential improvement versus the first quarter. The year-over-year decline will be driven by organic volume mix, primarily due to the planned downtime at the broth facility. The low single-digit decline in pricing will be largely offset by a positive low single-digit contribution from acquisition volume, primarily related to coffee. Our second quarter adjusted EBITDA is expected to be in the range of $55 million to $65 million. The restart of our broth facility, impacting volume and mix, and the lag on pricing to recover the impact of cocoa inflation, provide headwinds in the period.

I’d also like to provide some additional context on the general net sales and adjusted EBITDA cadence and what you can expect for the remainder of 2024. As we discussed on our prior call with regard to net sales, we typically experience lower sales in the first half of the year, with the second quarter being our seasonally lowest quarter from a volume standpoint, and higher net sales during the second half of the year, which is driven by our seasonally strongest fourth quarter period. The split is slightly more pronounced on adjusted EBITDA, driven by stronger demand and higher utilization, which is also most pronounced in the fourth quarter. There are some differences in this seasonality in 2024, given the constraints impacting us in the first half due to our broth facility.

We still believe our net sales will look relatively close to our historical cadence. However, our adjusted EBITDA performance will likely be closer to a 30/70 split, which is more skewed to the second half than our historical results. More specifically, we believe we will see a sequential improvement in adjusted EBITDA of $45 million to $50 million from the midpoint of our second quarter guidance range to what we earn in the third quarter. We then anticipate another improvement of similar magnitude in adjusted EBITDA between the third and fourth quarter of this year. We are confident in our ability to deliver this strong second half for several reasons. One, net sales should show improvement due to the new distribution partnerships that largely begin in the third quarter.

Two, cost savings initiatives provide the greatest impact to our profitability, beginning in both the third and fourth quarters, with gross savings of roughly $50 million. The savings will be driven by our procurement exercise as well as our ongoing TMOS and continuous improvement initiatives. Three, our efforts to restore one of our broth facilities ahead of the peak broth season should allow us to improve service levels ahead of the fourth quarter. Finally, we have some incremental pricing actions in place to recover our recent commodity inflation related to cocoa, which will benefit us from a timing perspective in the back half. With that, I’ll turn it back over to Steve for closing remarks.

Steven Oakland : Thanks, Pat. Before I open the call up to your questions, I want to thank the entire TreeHouse team for their hard work and dedication in driving our strategic execution as a private brand leader. We continue to prioritize execution, growth, and margin expansion as we capitalize on the industry and consumer trends. As a result, we are well positioned to deliver our full year guidance. Looking ahead, we remain focused on delivering for our customers and consumers, and extending our leadership in private brands. This in turn will create enhanced value for our shareholders. With that, I’ll turn the call over to the operator to open the line for your questions.

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Q&A Session

Operator: We will now begin the question-and-answer session. [Operator Instructions]. The first question comes from Rob Dickerson of Jefferies. Your line is now open.

Rob Dickerson : Great. Thank you so much. I have just two quick questions. First one is just, the slide where you show the price gaps. I’m just curious, Steve, maybe kind of like what your perspective is as to maybe why those price gaps have widened? Just given, even the branded kind of volume decline environment we’ve been experiencing over the past few quarters.

Steven Oakland: Sure. Sure. Good morning. I think there’s a couple things. I think there’s actually a small reset in the data recently to include a larger set of customers. Now, that’s all that data, has the back data in it, so it’s all apples-to-apples data. I think it gives a little clearer perspective. Again one of the largest hard discounters is now in that data. So that’s good news because it gives us a clearer picture. But, I also think it’s an example of the investment the retailer is making in private brand. The retailer understands that the consumer is looking for value, or at least there’s a large segment of consumers looking for value. I think you can look at the national media over the last two weeks, and you’ve seen a couple articles both on our largest customers and the investments they’re making. I think it’s the customer, the retailer, excuse me, investing in private label.

Rob Dickerson : All right. Super. Then just on cocoa, I mean, clearly there’s been a lot of volatility in the commodity. You made some comments around some pricing needs to help offset that. I’m just curious kind of how you’re thinking about that pricing. I mean, some of the larger branded manufacturers clearly have fairly well-defined hedging practices, and they’re trying to wait and see where the commodity goes. Maybe you don’t have as much of a hedging dynamic on that commodity. So, I’m just curious when you think of those pricing needs, like are those pricing needs like 50% higher or kind of take a little bit of pricing and kind of see where that commodity goes over the next, I don’t know nine to 12 months or so? Thank you, that’s all.

Patrick O’Donnell: Yeah, Rob this is Pat. So, I would say we do hedge a little bit, it is much more short-term than what you would see from the national branded players. We tend to tie our hedging with our cycles of when we know we need to go deliver product, and so we bring that back to the customers very factually in terms of where we see inflation. In cocoa in particular is not the largest commodity for us, but the pace of inflation obviously over the last several months was a pause point for us to go realize we need to take some pricing, and have very factual content with our customers which today it has been received well given what’s going on in that market.

Steven Oakland: Yeah I mean I know you — Rob you’ve written a lot about it and the cocoa world is pretty well established in the customer mind. So, it’s not a big commodity for us, and our hedging tends to tie to our contracts, right. So we don’t speculate beyond that, we basically cover that — as Pat said we cover what we need to do on the cycles which we have pricing committed. So, we feel good about the pricing and the response from the customer has been as expected. They know cocoa has moved dramatically.

Rob Dickerson : Super, fair enough, thank you.

Operator: The next question comes from Andrew Lazar of Barclays. Your line is now open.

Andrew Lazar : Good morning everybody.

Steven Oakland: Morning, Andrew.

Andrew Lazar : Hi there. The EBITDA cadence guidance you provided implies second half EBITDA, call it $255 million or so on the more conservative end. Obviously it’s early to get into ‘25 but the back half run rate assuming you get back to your sort of typical 40/60 historical first half, second half split, I guess suggests the full year run rate of closer to about $425 million. I’m just trying to think if that’s the right way to think about it, and if so does that suggest maybe more normalized earnings power of a bit higher than the $400 million that you’ve spoken to now that you’ve sort of de-risked the supply chain quite a bit. Thanks so much.

Patrick O’Donnell: Andrew, I think what that really reflects is the couple reasons that we feel strongly about the back half. In terms of the progress we’re making, on the top line. The cost savings pipeline that we’ve been able to build up in terms of the $50 million, a lot of that related to our procurement exercise. Then our return to service and broth which is a big lap compared to the prior year. So, we feel good about the progress that we’re making, obviously we’ll continue to see what the macro environment looks like headed into next year, and we’ll get back to 2025 when we talk more. But we feel good about the progress that we’re making, as we head into the back half of the year.

Steven Oakland: The only thing I would add — Andrew the only thing I would add is, the only thing that really kept us from being on our algorithm, we thought we would exit last year at $400 million. The only thing that kept us from that is the broth exercise. So with that behind us we’re in a much better place.

Andrew Lazar : Great. Then you may have covered this towards the end, and I apologize if I missed this. Some of the new wins and the 20% increase in the pipeline that you’ve got, what is generally the timing of when some of that can actually start flowing through the P&L? Is it sort of really more fourth quarter so that it’s really much more impactful, obviously to ‘25 or can it — does that give you that much more confidence in the visibility to the back half of this year as well. Thanks so much.

Patrick O’Donnell: Yeah we think that pipeline really starts to deliver in Q3 and Q4. So, you’ll see it in both and so we’ve been very active from that standpoint. I think the environment is very much set up now. We are having very constructive conversations with our retailers there [ph]. Steve made reference to what we’re seeing more broadly in the marketplace in terms of our largest customers continuing to invest in private label. So we’re encouraged by that.

Andrew Lazar : Thanks very much.

Operator: The next question comes from Matt Smith of Stifel. Your line is now open.

Matt Smith : Hi good morning. When you first provided guidance for the year, you talked about the disruption in the broth plant being about a $20 million drag on EBITDA. Is it still trending towards that level and can you give us an idea of how the costs were phased or are phased between the first quarter and the second quarter?

Patrick O’Donnell: Yeah Matt. So, I think you know as we’ve looked at broth, I don’t think it’s materially different from that. We probably are a few million dollars more than what we had anticipated and as we continue to do the work there’s probably a little bit of Q1, Q2 timing we didn’t get quite right, but I would say materially it was on line with what we thought. Given what we were doing in the ramp curve, there was probably a little bit more impact to Q1 than Q2, but that that ramp will continue throughout Q2. We are making product today and so we’re we believe we’re on our glide path as we work through the rest of the quarter, but that’s in terms of how we thought about it and what’s happening today.

Matt Smith : Thank you. And just one more for me. Last quarter you talked about the lift that retailers see when they promote private label as being very positive for their profitability. Are you seeing or are you hearing from your partners that they will become more promotional with private label in the second half of the year, maybe during the seasonal time frame? Thank you.

Steven Oakland: You know Matt, I think we’ll see that in some of the high seasonal categories. Things like refrigerated dough, we’ll see that with coffee. Those kinds of things in the back half and it’s really driven, yes, they want to do it for the margin, but I think they’re more confident in the supply chain this year. Last year they were still a little bit of uncertainty on some ingredients and packaging things etc. I think the fact that that we’ve returned to service will drive a little more promotional activity in the fourth quarter.

Matt Smith : Thanks, Steve. I’ll pass it on.

Operator: Our next question comes from Carla Casella from J.P. Morgan & Chase. Your line is now open.

Carla Casella : Thanks. I have a follow-up on cocoa. With all the bigger movement there is that a category where you could see it going with the way of coffee, where you go into more pass-through contracts or is it still you think better managed through just hedging?

Steven Oakland: Carla hi, I think we will have to see volatility. I think coffee is pass-through because of the volatility. One weather event in Brazil swings the market dramatically. So, the retailers like pass-through because they feel like that’s the truest way for them to participate in both sides of that. If we saw that kind of volatility it appears from what we see now, is there some structural issues that maybe just step change the cost of cocoa. If that in fact is the case, I don’t know that it would be as functional as the pass-through we use for volatile commodities.

Carla Casella : Okay great. Then Walmart announced a big new private label expansion across a bunch of categories. I’m just wondering if you’re seeing any other or if you could just talk to sort of trends. You did give some good — in your slides explanations on private label and how it’s gaining share. But any other key wins or losses you can talk to even if you can’t. [Cross Talk].

Steven Oakland: I think we touched on a couple of them in the prepared remarks. There are a combination of two things. I would take it back one step, and I’d say that 18 months ago we sold 40% of the company right. So for the last year or so the organization’s been focused on you know TSA and reorganization just to run this new business and separate. That was all intertwined in our distribution systems etc. We now have the organization focused solely on building that pipeline and focused on our capabilities and our capacity, and aligning those with the best opportunities for both sales and margins across the industry. So, things like what you saw that announcement of new private label, I think one of the hard discounters had an article in the Wall Street Journal as well.

There’s been a lot out lately, but our team, we are really pleased we can now focus and align that team on those opportunities rather than on the administration of the divestiture. That’s where we see the biggest opportunity and why we think the pipeline is so solid right now.

Carla Casella : Okay, and just one balance sheet — on the working capital side, you talked about the use of cash this quarter. But your payable days were also lower, is that just a decision that you’re making to capture better terms or do we see those kind of expand back to more normal levels in the next few quarters?

Patrick O’Donnell: I think, there was nothing different decisions that we’ve made really on that. So, I think that’s probably just a function of timing, and so we’ll continue to see those be at historical levels. We’re not seeing any pressure on vendor terms or anything as we move forward.

Carla Casella : Okay, and did you – I’m sorry, did guide the working capital for the year like, whether it be a source of use?

Patrick O’Donnell: No we did we did not. We did guide free cash flow of at least $135 million, $130 sorry.

Carla Casella : Great thanks.

Operator: The next question comes from William Reuter from Bank of America. Your line is now open.

William Reuter: Good morning. My first question, on the new business wins that you laid out, were those wins that have been awarded to you since your initial guidance would have been provided. Were these kind of, these are some positive benefits and that they’re being offset by maybe a little bit of a delay in the broth facility? Or are these wins that you already knew you were going to be getting prior to guidance?

Steven Oakland: No this is the natural progression. We guide early in the year and these things tend to materialize as we go. So it’s sort of a rolling cycle. I would say these are probably new news. The broth progress as we spoke to earlier, we think is right on what we guided. We feel really good about that plan and we think it’s right on where we initially thought.

William Reuter : Got it. Is there any change in the competitive bidding environment for some of this private label volumes in terms of is, it becoming more or less competitive such that the profitability is either greater or less than it had been in the past?

Steven Oakland: No, I think there’s areas of volatility. Our business, although simpler than before is still a lot of different categories. So, I think it’s very category specific. I think it’s — we tend to do really well in those areas where we’re deep. Which means we have capability, we have cost structure and we have the assortment necessary, and then those other areas is where we’re investing to build that depth. We tend to find the margins the best in those places where we have all the capabilities and the cost structure appropriately aligned.

William Reuter : Got it. Then just lastly for me on capital allocation, you made some prepared comments about share repurchases. Last year you had a handful of acquisitions. What are you seeing in the M&A landscape and how do you think your capital will be allocated between potential additional acquisitions versus share repurchases?

Steven Oakland: Sure, I think we always said that our first priority for capital is to invest it in our business. The acquisitions you’ve seen of late have all been capability driven. We really addressed our capability gaps in coffee last year. We did that in pickles, here. It actually, we announced it last year but actually closed the first week of January. So, that M&A would be an opportunity to build capabilities in those key businesses where we see growth opportunities. So, I don’t see transformational M&A in the near term, never say never, but I don’t see that in the near term. But following that, then it’s about maintaining our balance sheet. Obviously balance sheet strength and then its returning capital to shareholders. So, we think we can do all three quite frankly.

William Reuter: Great. All right that’s all for me thank you.

Operator: The last question today comes from Jim Salera from Stephens, Inc. Your line is now open.

Jim Salera : Hi guys. Thanks for taking our question.

Steven Oakland: Yeah, good morning.

Jim Salera : Good mooning. I just wanted to ask on the labor front. I know we’ve heard other companies talk about labor being kind of one of the sticky areas of inflation across their input costs. Can you just give us any color you guys are seeing on labor for your manufacturing facilities, and any opportunity to leverage that as you move forward?

Patrick O’Donnell: Sure, Jim this is Pat. So, I would say, we are generally seeing some labor inflation, and that was built into the cost structure in terms of how we thought about the year to go forward. We’ve tried to be very forward in working with our locations to ensure we’ve got the right labor pool and we’re paying the right wages, and we’ve done that over a couple years. So, we think that, well there’s probably challenges depending upon location generally speaking, we feel like we’re in a pretty good place. So the investments we’ve made both from a wage as well as just shift schedules and things like that are trying to make us an attractive employer in those places in which we operate.

Steven Oakland: Yeah the only thing I would add to that — I would just one thing, we talk a lot about the transformation we did that it put us in higher growth, higher margin categories. But the other side of that transformation is it improved our balance sheet and it put us in a position where we can invest and we can target investment in our business. We do have some locations where labor is tight and those are the places where we’re using automation. We’re using cobots and automated forklifts and those kinds of things to supplement our labor, and to put our workforce in higher value, more rewarding positions. I think the other side of our transformation really put us in a place where we can manage the challenges that labor we think will bring over the future, not just the current ones, but the future ones.

Jim Salera : That’s helpful. Maybe if I can ask a follow-up on that. You talked about you know your OEE was ahead of your internal target in 1Q. How much of that is just better visibility in the plants and some of the automation versus maybe lower labor turnover just that you have employees that have worked on the lines for long enough and they don’t make mistakes that somebody who just started might make, and just have better overall grasp of the manufacturing process.

Steven Oakland: I think it’s probably a couple of things Jim. We took some time last year, if you’ll recall to invest in our plants both from a team-ops and ensuring we’re operating consistently across our plants. I think that’s some of the team-ops investment in terms of the ways we work. Then I would say it’s also some of the maintenance activities that we’ve invested in over the years to get our equipment running more reliably. We’ve tried to make sure we could deliver the season and the places where we know that’s important. I think it’s a combination of both our investment in people as well as the investment in equipment that we’ve made over the last year.

Jim Salera : Great, thanks guys.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Steve Oakland for closing remarks.

Steven Oakland: Yes, I’d like to thank you all for being with us today. And Pat and I look forward to speaking with you individually and to next quarter. Have a great day.

Operator: This concludes today’s conference call. You may now disconnect.