Q3 2020 Calavo Growers Inc Earnings Call
And welcome to the Calavo growers incorporated third quarter 2020 earnings call.
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And it's now my pleasure to introduce your host leased some youre investor relations for Calavo growers. Thank you Ms. Smith you may begin.
Thank you operator, and thank you all for joining us today to discuss Calavo growers third quarter 2020 financial results.
Good afternoon, we issued our earnings release and this document is available in the Investor Relations section of our website at <unk> IR Dot Calavo Dot com I'm here today with Jim Gibson, Chief Executive Officer of Cabo and cabin Mannion, Chief Financial Officer on today's call management will provide prepared remarks, and then we will.
Open up the call for your questions in order to maximize participation, while keeping our call to an hour we will be observing a two question limit during the Q and a portion of the call participants can reenter the queue. If you have follow up questions.
Before we begin I would like to remind you that today's comments will include forward looking statements under the federal Securities laws.
Looking statements are identified by words, such as will be intend believe expect anticipate or other comparable words and phrases statements that are not historical facts, but just statements about our outlook and adjusted EBITDA are also forward looking statements.
Our actual financial condition results of operations may vary materially from those contemplated by such forward looking statements discussion other factors that could cause our results to differ materially from these forward looking statements are contained in our FCC filings.
Putting all reports on form 10-K and 10-Q.
With that I would now like to turn the call over to Jim Gibson Jim. Please go ahead.
Thank you Lisa good afternoon, and welcome to Calamos third quarter earnings call I want to thank our entire team across our global operation for all their hard work and navigating through the prolonged pandemic their resilience and resolved have allowed us to maintain or supply chain and remain a trusted partner to our customers.
Consumer demand probably titles remains robust our third quarter volume was up 18% year over year and well above our historical third quarter averages. This growth growth is reflective of the upward trend in industry volumes, which continues to signal that all because those are becoming a staple for.
Customers.
And we're pleased to see our supply chain continuing to meet demand even in the face of sustained pandemic environment on a daily basis, we're working closely with our longstanding relationships in Mexico, California, Peru to ensure that we maintain the supply of high quality fruit to our cut.
Comers year round, we're also ensuring that our own plant and facilities remain a safe working environment for our employees. While we were operating in a very dynamic environment, we remain confident in our abilities as a strong operator.
The growing demand for all because those are robust supply chain and strong.
Long term relationships with growers around the globe continued to position segments of our business for long term success.
Turning to the third quarter, our results were impacted by seasonal supply dynamics as well as coven 19, despite or an increased volumes year over year, lower all cattle prices due to higher aggregate supply compared to last year weighed on our performance. It was also a challenging quarter on the demand side for our ours GE and.
Segment.
At the beginning of the quarter consumer demand in store openings rebounded from crisis lows at certain states gradually be open then in late June Spike in co that cases slowed sales momentum the closure of our Midwest co Packer partner earlier in the year also continued to have a negative impact on Archie sale.
But even with these shortfalls gross margin for both of these segments improved over the year ago period in fact, arb G.'s margins hit its highest point in the past three years from the increased operating leverage our own facility.
And continued improvement in manufacturing efficiencies, Kevin will cover all the detail later in his remarks.
As it is difficult to predict when consumer buying patterns and the food service sector will fully returned to normal we remain nimble ready to adapt and focused on the things that we can control to that end I'd like to outlined several near term priorities that we are actively working tupper positioned the company.
For long term success.
This includes one.
Consolidating the organizational structures of our three business segments to optimizing these segments to grow to drive growth and profitability threed fully developing the potential of our people for advancing art U.S.G. program and five continuing our commitment to provide transparency investor community.
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First a key priorities that we move forward as one company.
Our fresh foods, and Archie business segments reflect the evolution and expansion of our business.
First branching out from our legacy avocado business to avocado food products, and then to fresh and prepared foods with the Archie acquisition.
Although these business segments are highly complimentary they have operated in silos.
As a result, we have a real opportunity to enhance synergies and streamline our entire business by reducing redundancies, we're working towards operating as one entity with a centralized leadership team overseeing finance and operations and a unified approach to sales and marketing this will provide us greater visibility on how.
To maximize our operating synergies across the organization and generate cost savings, both and then in the intermediate and long term.
We've also identified opportunities to drive organic growth and profitability in each of our operating segment.
For the fresh segment, we're focused on controlling our inventory positions and relying on a strong supply chain into the U.S. to optimize sell through in margin profile for internal international markets, we're working towards utilizing our whole leaseco packing house in Mexico to drive incremental sales and margin in the region.
For the Archie segment, we're close we focused on increasing the utilization of our own facilities well driving additional production efficiencies as I've mentioned before our transition out of the co Packer partner model and into the company owned asset model has continued to benefit our operational margins in 2000.
The 17.
We invested significant capital in building our own facility and now it's time to optimize these investments there is still substantial room to expand revenue and profitability, especially in our newer facilities in Georgia and the Pacific Northwest, which are currently below the average capacity utilization of our other facilities. We're also partnering with.
Our retail and foodservice customers to expand our portfolio of solutions oriented products. In addition, our entry into the hospitality industry through the acquisition of simply fresh fruit earlier. This year presents a great opportunity for growth once we're out of the woods with Coke.
Turning to the food segment, we're beginning to integrate our aabaco products, such as guacamole and sauces into the Archie supply chain, thereby leveraging its robust infrastructure to further scale distribution. We will also continue to invest in our portfolio of high margin.
Hello branded product lines, and establish new channels to market in hospitality convenience and international.
As part of our overall growth plan will be leveraging our strong balance sheet and financial flexibility to evaluate strategic acquisitions opportunistically.
Critical to our long term success is our continued focus on human capital U.S.G. and transparency with the reorganization our leadership will be centralized for greater operational efficiency and resource allocation, we one half continuous learning through employee development training and career advancement and these efforts.
Also support Talladega identification for future leadership and succession planning.
We've already made some headway in this initiative with the recent promotions of Mark watch to Chief operations Officer, overseeing all production facilities in the U.S. and Mexico.
And Rob would deem to eat VP of fresh failed responsible for all commodity sales in procurement in the organization.
We're also committed to building a comprehensive E.S.G. program sustainability is the key is key to every aspect of our business and we've been working hard to deliver on our environmental social and governance commitments.
We recently published our second annual sustainability report the detailed our 2019 performance in 2020 initiatives I encourage you to take a look and see how our focus on energy and admissions water and waste fair labor worker health and safety food safety community engagement.
And ethics can translate to generating long term value for all stakeholders well we were still in the early stages of our SG program, we're making meaningful progress.
Next year will be conducting our first carbon footprint analysis, which is a big step into right direction.
Our corporate governance, we're committed to increasing board independence and diversity, while reducing the size of the board overtime.
As you may have seen earlier today, we announced that two of our board members Dorcas steel and gene Carboni have decided not to stand for reelection. It next year shareholder meeting we want to thank dorcas in June for their many years of leadership and guidance. The calavo their contributions will benefit our company for years to come we also appointed a new.
Independent director, who will also be a member of the audit Committee Farah Aslam effective at the start of the new year Farah has a strong background in investment and advisory for the agriculture energy and food processing industries. She was also previously the managing director at Stephens leading.
Its food and agriculture equity research team.
Parents background and expertise will be invaluable to our board and management team and we're thrilled to have her as part of our team.
We are we strongly believe in maintaining active and transparent dialogue with the investment community, especially as we report progress on our strategic plan.
And when we finally turned the corner with on Kobin 19, we look forward to hosting an inaugural investor and analyst day at our headquarters in Santa Paula, California.
In summary, Calavo has the right building blocks in place to become a stronger more efficient and unified organization, our strategic initiatives reflect immediate opportunities to increase the operating leverage and synergies across our entire organization. It also reaffirms our commitment to shareholder alignment our employees community.
These and the environment, we believe the steps we're taking today will not only create value in the near term, but also in the long term as it will provide the foundation for our plans to accelerate growth growth in the years ahead.
Over the next few months, we'll be focused on executing and delivering on our commitments and as we work through our objectives, we will be highly disciplined capital allocation and keenly sensitive to ongoing new rip and new risks that will emerge from coated well, we're certainly navigating through the challenging times we're on track.
To emerge as a stronger more resilient company. We continued to have a long term view on our business and our industry with that I will turn the call over to Kevin.
Thank you Jim and good afternoon, everyone on the call for the second time, we welcome you from scenic Santa Paula, California.
I'll start by discussing our financial results for the third quarter, followed by our balance sheet and outlook.
Please note that all comparisons are year over year, unless otherwise noted.
We will also be discussing non-GAAP results and a reconciliation of non-GAAP financial measures is included in our earnings release.
On a consolidated basis third quarter revenue declined 25% year over year avocado volume increased 18% year over year, which is a sign of the category strength. The lower avocado prices resulted from increased supply compared to last year led to decline in revenue versus last year.
I'd like to point out that avocado pricing and margins were at or near historical highs in Q3 2019.
We've been pleased to see sequential improvement in the business over the course of the quarter and through August.
This dynamic operating environment, we have been successfully evolving our business to meet new challenges.
Our teams have been mobilized to find creative solutions for our customers and end consumers.
I still feeling the brunt of cobot 19, and the ongoing impact of Cobot 19 has impacted our fresh foods and our chief segment differently as I will discuss.
Gross profit declined 14% year over year to 30.8 million from 35.8 million in the third quarter of 2019.
Lower gross gross profit in the fresh segment drove the decline overall and math gross profit increases in both Archie and foods relative to the third quarter of 2019.
As we noted on our second quarter call profitability trends improved at the end of the second quarter and into the third quarter. Accordingly, gross profit increased 40% sequentially from the second quarter due to higher profitability in all three segments and especially in our up T. and fresh.
Our third quarter 2020, gross profit margin as a percentage of revenue expanded to 11.4% up from 10% in the third quarter up 2019.
Higher gross margins in RFP and foods more than offset lower margins and fresh.
Sequentially gross margins improved 355 basis points from the second quarter.
As seen a expenses declined 6.3%.
To 13.4 million from 14.3 million in the year ago quarter as a percentage of sales estimate rose by 100 basis points to 5% of sales in the third quarter of 2020 from 4% one year ago due to lower revenues.
Lower asking expense was primarily due to a decrease in the accrual for performance based compensation and reduction in headcount implemented implemented at the end of the second quarter of 2020.
Operating profit fell to 17.5 million into third quarter of 2020 down 19% from 21.6 million in the same quarter last year.
This decline in operating profit resulted from lower gross profit in the fresh segment, which more than offset improvement in Archie and foods.
Or added perspective operating profit increased 130% sequentially from the prior quarter. However.
Our income statement reflects 37.2 million dollar noncash charge related to fresh realm.
As we noted in our earnings release, we fully reserved our note receivable and trade accounts receivable and took a full charge for impairment.
On our equity investment.
We do not intend to provide any additional capital depressed realm in the foreseeable future and any recovery of the receivables or equity investment that we eventually might we see would be recognized on a cash basis.
We incurred a pretax loss of $19.1 million prior to the impact of losses from unconsolidated entities down from 17.1 million a pre tax earnings in the third quarter of 2019.
Net losses from unconsolidated entities were 1.2 million in the third quarter more modest than the 2.5 million net loss in the quarter year ago.
Net loss in the third quarter was 15.6 million or 89 cents per share.
Adjusted net income, which for this quarter also excluded the impact of the pressure from reserve was 12.9 million or 73 cents per share.
As we did last quarter, we provided a reconciliation of EBITDA and adjusted EBITDA, which accounts for adjustments for unconsolidated entities and onetime items.
We believe adjusted EBITDA provides a good representation of our cash flow generation, excluding the impact of noncash and onetime items.
We plan to continue providing this reconciliation moving forward given the alignment of adjusted EBITDA and the manner in which we manage our business.
Adjusted EBITDA for the third quarter was 23.1 million down 13% from 26.6 million in the third quarter of 2019.
On a sequential basis, adjusted EBITDA improved 60% from 14.4 million in the prior quarter.
Now moving onto our three business segments.
Sales in the fresh segment decreased 22% year over year to 162.1 million from 207.7 million in the third quarter of 2019.
Importantly, while revenue decline avocado volume increased 18% from the third quarter up 2019 as consumer demand for avocados continues to grow.
This higher volume was offset by 37% decline in the average selling price during the quarter as a result increased supply into the retail market. During this time of year.
Unlike last year, when foodservice and wholesalers that serve smaller retailers and restaurants help absorb supply sales to these customers were greatly constrained this year due to the pandemic.
It is also important to note again that last year supply was unusually low due to a smaller harvest from Mexico, and California, which led to near historically high prices and gross profit per case.
Gross profit in the fresh segment declined to 17.7 million or 11% of revenue down from 25.4 million or 12% of revenue in the third quarter of 2019.
Lower avocado pricing weighed on gross profit and gross profit per carton relative to the year ago quarter.
That said gross profit per carton was still in line with our historical target range, though it is still down from last year's third quarter gross profit per carton rose to historically high levels.
In our achieved sales declined to $90.9 million in the third quarter of 2020 from 127.5 million in the third quarter of 2019.
This decrease resulted primarily from the ending our co packer relationship in the Midwest and to a lesser extent the impact from slower sales and this cobot environment.
As a reminder, our Midwest co Packer relationship ended in March of this year. So we will lap. This comparison during the second quarter of 2021.
While sales declined in the quarter overall volumes returned to pre covered levels in July and continued into August.
With the product mix weighed towards fresh cut fruit and vegetables as compared to prepared foods.
As many of you know from experience the glass deli counters that most grocery stores have been shut down or rationalize due to covert.
So we have partnered with them to reconfigure the deli salad bar items into easy Premixed grab and go packages and also develop family size meal solutions, including salad mixes fresh cut fruit and vegetables that will will be available in the fourth quarter.
These packaged solutions will allow shoppers to continue to purchase our products and the most convenient can safest way possible.
Gross profit for the third quarter was $8.1 million or 9% of sales up from 7.5 billion or 6% of sales in the same period last year.
The improvement in gross margin reflects the benefit of the shift in production to our company owned production facilities and increased manufacturing efficiencies from longer production runs a fresh cut fruit and vegetables, and maturation of the Oregon, and Georgia facilities, which have now been opened in one year, we expect to see these favorable trends continue.
For the foods segment sales continued to be impacted by slower sales activity in the foodservice channel along with lower volumes in retail as consumer buying habits have not returned to normalized level for the quarter sales declined to 19 million from 25.8 million in the year ago quarter.
However, gross profit rose to 5 million or 26.3% of sales up from 2.8 million or 10.9% of sales in the third quarter of 2019, primarily due to lower avocado prices plus lower cost from our manufacturing efficiencies.
During the quarter, if we saw sequential improvement with retail sales approaching pre corporate level at the end of the quarter.
Turning to our balance sheet, we ended the quarter with $132 million of cash liquid investments and available debt capacity.
Total debt for the third quarter was $32 million and our leverage ratio was <unk> 0.6.
We have a clean balance sheet with very low leverage, allowing us to be opportunistic and the M&A landscape and be prepared for changes due to the pandemic.
As we look to the fourth quarter of 2020, we continue to see the recovery in our sales activity with improving trends across all three segments.
Like other consumer facing businesses have indicated though is a challenging time to predict buying trends. So we're not going in position to provide specific guidance.
However, we have more than a month into the fourth quarter. We can say that we expect to see returned to year over year growth in adjusted EBITDA for the quarter.
With that I'll turn the call over to the operator for questions.
Thank you.
We'll now have our question answer session.
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One moment, please while we now poll for questions.
Our first question comes from Rob Dickerson Analyst. Please proceed with your question.
Great. Thanks, so much from Jefferies.
Anyway.
Well I guess, all things considered a great job the quarter.
Couple of quick questions stick to my too.
First question is I guess Jan you know, there's kind of a lot.
So your commentary just around.
The addition that FARA so welcome for probably sand cars, which is great add to the board.
On board member stepping off while at the same time.
Theres some additional promotions.
And the management structure and then you're also speaking to sounds like increase potential around productivity and further efficiency. Your as you streamline the business.
So I guess kind of that first question is just is this kind of this more holistic approach around.
Board oversight different management structure.
Vis-a-vis, they're kind of more of a push for your better streamlined business opportunity with higher kind of margin expansion potential over time. They over the next one to three years Im just trying to gauge kind of wherever you set.
In terms of trying to the new clavo versus the old slottow. Thanks.
Sure Rob Thanks for the question absolutely.
I think the first the first thing I would say is that.
And you noticed with the promotion.
Of Mark Lodge to Chief operations Officer.
The idea there is along with decentralized organization is to begin to take advantage of the of the ability to operate as the single entity certainly packing houses our manufacturing operations just like.
Food Opper food manufacturing operations and so there are many things that we can do inside of the of both of those entities that all line and be able to take advantage of than the other part of that is that we can begin to align our metrics. So that we're measuring the same thing.
And beginning to establish opportunities to improve those performance objectives as we move through time. So so I think the idea is that we bring calavo together as a as a single management team over all three segments of the business and then we begin to match.
Manage those segments, taking advantage of the synergies between them and then where we can eliminating the redundancies that maley, mainly like a silo type entity would would bring to bear.
As far as.
Oh I'm sorry.
Go ahead, I said, okay, great. Yes. Please go ahead.
No I was just going to say, yes, we absolutely are excited about Farah coming.
Onto the board I think she is.
Just a great addition to our board she is bringing.
At least from my perspective a different.
Viewpoint, which is always a benefit for us.
Then just as you kind of mentioned it is our ongoing kind of effort to continue to bring diversity to the board and at the same time.
Kind of shift a little bit of the independence and then overtime begin to work on the size of the board. So so yes. So thats an initial move for us and we're excited about it at the same time, we're really.
Sorry to see Dorcas and gene go and we just.
All those years of experience the things that they bring to the border invaluable in the and we're going to have to take those with us, but we are we wish them a lot of great look going forward.
Okay got it and then I guess, just secondly are kind of you know more near term in terms of.
The avocado pricing environment seems like maybe things started to improve a little bit just recently.
In the last call you know kind of talked about hopefully being able to kind of get through that excess supply that might become the answered Peru, and then yes, the better harvests in California in some excess in Mexico. So kind of the first part is just.
How do you see that excess supply kind of coming through August and September.
How that could impact pricing in the near term.
And just kind of like the general commentary around.
Just foodservice demand in the.
Near term.
And how that could impact.
Avocado pricing overall, it's in the next three to six months like site.
Okay. Thanks.
Sure well I think I think generally we're feeling that a favorable benefit associated with a little bit of consolidation now that.
The California crop is ending up for US Peru is ending and so we're focused at this point on on a lot of Mexican product, which allows us to to really orient on that supply and focus on cost and inventory control laying in our supply chain and then and then price.
Thing over the top so.
The pricing environment, it's a little difficult to.
To feel at this point, but but certainly we can focus on margin and volume inside of that.
And then just in terms of foodservice like just any perspective as it sounds like you're saying there is.
Rebalance that occurred maybe touching go away.
Hi, the the feel our expectation is hopefully it's yeah. It's more go then.
Yes, I think it's I think it's a general favorable trend.
Certainly there are we see it everyday in the news there are parts of the country that are.
That are still severely impacted.
And that certainly impacts us.
Our large foodservice customers, we believe our our operating fairly well, but the broad diversity of smaller operations are certainly impacted still impacted in this environment.
Alright, great. Thanks ill pass it on.
Thank you.
Our next question comes from Ben Ben view with Stephens I ANSI. Please proceed with your question.
Thanks, Good afternoon guys.
Hi, Ben.
I want us starting the Archie business in particular, the margins, which were really impressive in the quarter I know that's been a focus.
For your as you work to streamline some of the.
Operational components that business and work through filling up the capacity that you haven't place.
Can you give us a sense for the various components of the margin.
Improvement and then I know I know that the back half of the year is typically seasonally higher margin type environment. But is this is this kind of a go forward reasonable baseline for whats say threeq margin could look like because this is this is a notable recovery and I think.
Pretty encouraging as it relates to the long term for this business and in light of how significant the recovery us.
Yes, I think.
I think we can begin to count on this kind of deal in the in the third quarter certainly.
And you've heard me talk about it before is that.
This effort now to convert ourselves more too.
Who owned facility type operations is beginning to to bear the fruit that we expect it to just as I was mentioning a little bit before on the operational side. It allows us to really get into the metrics to focus on continuous improvement I know our teams have have really and we've actually installed info.
A structure on continue continuous improvement. So we have people into facilities that are working on specific things and then the obviously the plants are being compared side by side and even our youngest plants are beginning to benefit from that continuous comparison, it's kind of no a best practice kind of concept so weak.
And really lever our own plants as we do that and then we still enjoy the co packing environment. We use it strategically obviously, where we don't have operations and we're still benefiting from that regard, but yes, I would expect that that we would continue to benefit from that.
Certainty in the third quarter.
On our raw materials sides, we generally have better raw material costing and thats a benefit that will go forward, but the long term effect of labor improvements will continued to benefit as we move from quarter to quarter, and we're feeling that even into the fourth quarter.
Right now.
Okay. That's great. Thanks for the color.
I want to my second question is getting a follow up on Rob's question around.
Fresh avocado kind of thing and supply demand knowing that demand, that's typical forecast and the ebb and flow foodservice.
In the covet environment any insight you can give us on supply because I know, we do asset heavier supply and and that's weighed on prices you mentioned the transition near term, but do you have any sense of achieving the transition of supply near term.
In Mexico.
Can you give us any sense of what the crop is looking like for next year Q extent, you have insight into it and are we expecting another big crop and the 2021.
Well I think as we're making the transition we're certainly feeling that.
That the Mexican summer crop is strong and the the quality of the crop seems to be very good as well. So we're really satisfied with with that we believe that that.
That supply will be.
Equally strong going into the into the fourth quarter and enable us to being a good position to meet consumer demand.
It's the sheer right it's very difficult.
To to discuss and trying to determine the forward look on on this because you know even I don't know if you notice the the heat wave that rolled through California over the last couple days.
Was in the avocado areas for is up over 110 degrees and that.
That has yet to be determined that what the impact will be and so it's kind of that kind of scenario that we face in this kind of world.
Understood. Thanks for the time and I thought.
Thank you.
Thank you.
Our next question comes from Mitch Pinheiro, but Sturtevant. Please proceed with your question.
Hi, good afternoon.
So.
Question on.
You talked about your near term priorities.
It did not a lot of numbers around it I know.
Obviously.
A lot of stuff.
Soft benefits in the near term but.
Anything.
Anything that you do in the near term.
You know have an impact on gross profit or just general profitability.
Third quarter fourth quarter or early next year or these really.
Efforts long term efforts.
In terms of synergies.
And one company and things like that.
Right well I think as as we were just kind of talking and in.
The prior questions.
I think that.
The concept of centralized control.
Even having an impact as we roll up the it's almost like.
The first piece of it on the Renaissance side was the central the the creation of.
Company owned facilities that we can manage.
Across the board see their performance managed them side by side established common metrics get best practice going in place and now.
As we move Mark lodge into the central position in Calavo, we begin to expand that effort in into our other operations and begin to measure them in similar way. So we expect to take operational efficiencies.
Fairly early as we go forward through the fourth quarter in the first quarter next year.
On the on the organizational piece, which is maybe not necessarily gross margin is that we expect that we're going to find.
As a result as centralization the opportunity to take care of some redundancy in the up in the operation have impacts.
That are long term and go forward.
Okay.
And then.
So.
As you think about.
I'd be avocado business and.
How does.
Suits.
The impact of the food service being down.
Sure.
How does that affect I mean, obviously, we're seeing more volume tick up.
At the retail level.
There's obviously excess volume.
Coming.
From the lack of food service sales, so how does that affect your pricing how does that affect margins.
How would you describe like.
This quarter.
Yeah.
Any changes in mix that affected.
The business you can share with us.
Right well I mean the.
The idea on the on the avocado side is that we're selling.
All the sizes that are coming out of the harvest and so that is from the smallest 84 count to the largest 32 count and then in number one grade and number two grade.
And so if if the the harvest matches, our customer base in volume and in size than we're very successful and if we have gaps in that scenario, meaning that were larger in number two count.
Number two great I'm, sorry, and we don't have the right customer to match than that begins to degrade our margin because we have to move that product in some fashion and so overtime the impact of foodservice is that we lose.
Some flexibility in our in our ability to.
To shift our sizes into that customer base and so it has an impact on margin if the if if the growing season and the harvest and I would mention like right now coming out of Mexico. The harvest is very clean it looks good.
And the number two count will say is not as as heavy than its not as big of an impact, but if the number two count gets bigger and we don't have enough location forward into the foodservice area then it hinders margin.
And this past quarter.
How did that play out was it was it.
Your margins were good in the quarter.
On the fresh side so.
How did that happen does that happen because you had the right mix or there was less impact on food service.
It would that this quarter was a was pretty dynamic in that.
There was a co bid kinda for lack of a better term relax tour.
So in effect in the early part of the quarter and then.
Things began to change kind of in the middle part of the quarter and it locked back down again on the on the restaurants side by side of things in certain parts of the country.
Peru was coming into play and came in with heavy supply.
Ed Ed.
You know pretty.
Pretty competitive prices and so all of that was in play in the quarter. So as we rolled through in the early part of the quarter. Yeah. Our distribution was that was very good our margins were very strong.
And then we were challenged by.
The spectra, Peru in the second part of the quarter, but we were able to hold ourselves together to maintain a fairly.
[music].
In our world a good margin for the quarter. It was just a rough comparison to a really high margin last year.
Okay. Thank you for the color.
Thank you.
Our next question comes from Mark Smith with Lake Street Capital Markets. Please proceed with your question.
Hi, guys.
Maybe a little early on this but can you talk about kind of attributes are segments that you're looking at for potential acquisitions and in that same banks can you give us anymore update on simply fresh fruit, how that business is paying off.
Hi, It's Kevin mentioned on the M&A front, certainly there's a lot of things to look at and we've been.
Looking at a lot of stuff. So we've gone to with the board our M&A strategy and I think there are several passed to go down tenants are probably appropriate to talk about them as we've gone down one of those past specifically.
And then.
To simply fresh fruit, you know timing was difficult for us as we close that acquisition at the end of February and that was one that went into the hospitality industry and it was ideal for us because those are regional business in which we were able to copy their.
Manufacturing models and customers across America, but the shutdown due to co but as you can see a hospitality industry has not opened up so it's an opportunity that is waiting for us when the market gets there, but the market is not there at the moment.
The interesting part on on that side of things those.
Is that Renaissance is a solution based organization and so as a as things have changed on the hospitality side of.
Distribution, they're working on products.
That may be able to.
Kind of worked through the Cobot environment is an example in the in the hotel kind of scenario, where instead of doing a salad bar or fruit bar in the mornings, they're beginning to establish or develop products that could be of the grab and go style and so they're continuing to.
Work with those customers I know we have.
A couple Rollouts that are planned I think there just holding them until they believe that the environment is right. So so we continue to go forward I think theres, a big opportunity for Renaissance to leverage that channel to market. As we go forward and this is kind of really forcing us to innovate which is.
Generally a bad thing.
Okay, and then last last one for me any interruptions during the quarter to operations in any of your facilities from cobot outbreaks.
No we were.
I think every one of our facilities.
Has been operating in environments that have been challenging meaning that.
The co that has been in the in the cities and towns that they operate but.
I think as we've talked.
At different times earlier, maybe last quarter is that we've really focused on establishing.
The operating environment for those facilities really focusing on the on lunch and and break areas spacing.
And establishing the way that employees entered the facilities and.
We do every morning, the the tool box safety meetings, where we talk about how people are feeling and things like that so.
Really the teams to focus very hard on on operating in the environment and.
And do their credit have have operated very successfully in it.
Okay, great. Thank you.
Thank you.
Ladies and gentlemen. This concludes todays conference you may now disconnect your lines at this time.
Thank you for your participation and have a great day.