Q4 2021 Calavo Growers Inc Earnings Call

Good afternoon, and welcome to the fourth quarter and fiscal year 2021, Colorado Growers earnings conference call and webcast. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero I will now turn the conference over to your host Julie casually Investor Relations for <unk>.

Speaker 1: and fiscal year 2021 Calabo Growers Earnings Conference Call and Webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. I will now turn the conference over to your host Julie Keagli, Investor Relations for Calabo. Thank you. You may be...

Oh. Thank you you may begin.

Speaker 2: Good afternoon and thank you for joining us today to discuss Colombo Growers' fourth quarter in fiscal year 2021 financial year.

Good afternoon, and thank you for joining us today to discuss Colorado, Growers' fourth quarter and fiscal year 2021 financial results. This afternoon, we issued our earnings release. It is available in the Investor Relations section of our website at IR Dot Colaba Dot com.

Speaker 2: This afternoon we issued our earnings release and it is available in the investor relations section of our website at ir.colabo.com.

Speaker 2: With me on today's call are Steve Hollister, Interim Chief Executive Officer of Collabo, and Mariela Matute, Chief Financial Officer.

With me on today's call are Steve Hollister interim Chief Executive Officer of Colorado, and Mario limit you Jay Chief Financial Officer, We will begin with their prepared remarks, and then open up the call for your questions.

Speaker 2: We will begin with their prepared remarks and then open up the call for your...

Speaker 2: Before we begin, I would like to remind you that today's comments will include forward-looking statements under the federal statute.

Before we begin I would like to remind you that today's comments will include forward looking statements under the federal Securities laws.

Speaker 2: Forward-looking statements are identified by words such as will, be, intend, believe, expect, anticipate, or other comparable words and phrases.

Forward looking statements are identified by words, such as will be intend believe expect anticipate or other comparable words and phrases.

Speaker 2: Statements that are not historical facts, such as statements about expected improvement in revenue and operating profit are also forward looking.

Statements that are not historical facts, such as statements about expected improvement in revenue and operating profit are also forward looking statements. Our actual results may vary materially from those contemplated by such forward looking statements discussion of the factors that could cause a material difference in our results compared with both these forward looking statements are.

Speaker 2: Our actual results may vary materially from those contemplated by such forward-looking states.

Speaker 2: discussion of the factors that could cause a material difference in our results compared to these forward-looking statements are contained in our SEC filings, including our report on Form 10-K and 10-Q. With that, I will now turn the call over to Steve Hollister.

Contained in our SEC filings, including our report on Form 10-K, and 10-Q with that I will now turn the call over to Steve Hollister.

Thank you Julie and good afternoon, everyone.

We appreciate you joining us today.

Speaker 3: 2021 was a difficult and challenging year, but we finished the year strong and we're off to a good start in fiscal 2020.

2021 was a difficult and challenging year, but we finished the year strong and we're off to a good start in fiscal 2022.

Speaker 3: As we entered the fourth quarter, market conditions that we experienced in the third quarter continued. Labor shortages, suboptimal raw materials at higher prices, and high freight costs weighed on the business.

As we entered the fourth quarter market conditions that we experienced in the third quarter continued.

Labor shortages suboptimal raw materials at higher prices and higher freight costs weighed on the business.

Throughout the quarter as we predicted market conditions improved along with our ability to manage that we.

Speaker 3: market conditions improved along with our ability to manage them.

Speaker 3: We saw sequential improvement from August through October , and we continue to see this improvement as we sit today about halfway through Q&A.

We saw sequential improvement from August through October and we've continued to see this improvement as we sit today about halfway through Q1.

Speaker 3: Despite the difficult year, we remain committed to paying it.

Despite the difficult year, we remain committed to paying a dividend we announced the $1 15 per share annual dividend consistent with last year and continued the tradition of paying a dividend every year since the company became public in 2002.

Speaker 3: we announced the $1.15 per share annual dividend. Consistent with last year.

Speaker 3: continued the tradition of paying a dividend every year since the company became public in 2002.

Speaker 3: Now, I'd like to spend some time discussing the overall trends affecting each of our business segments. Friends, for our...

Now I'd like to spend some time discussing the overall trends affecting each of our business segments.

Trends for our core avocado business are favorable U S. Avocado demand continues to grow with per capita consumption exceeding nine pounds per person, which was double the consumption rate from 10 years ago.

Speaker 3: U.S. avocado demand continues to grow with per capita consumption exceeding nine pounds per person, which is double the consumption.

Speaker 3: We believe that healthy eating trends will continue in the U.S. and that avocados, with their favorable nutrition profile, will continue.

We believe that healthy eating trends will continue in the U S. And then avocado with their favorable nutrition profile will continue to be popular among health conscious consumers.

Speaker 3: We also believe that year-round availability of imported avocados and changing U.S. demographics will favor increasing...

We also believe that year round availability of imported avocados and changing U S demographics will favor increased demand.

Speaker 3: As an example, approximately 19% of the US population is Hispanic.

As an example, approximately 19% of the U S population is the Spanish.

Speaker 3: and that population count is expected to double by 2050.

And that population count is expected to double by 2050.

Speaker 3: with avocados being a staple among Hispanic consumers. Overall, avocados are a staple among Hispanic consumers.

With avocados being a staple among Hispanic consumers.

Brawl avocado consumption is expected to continue trending upward, which would naturally benefit our fresh and food segments.

Speaker 3: to continue trending upward, which would naturally benefit our fresh and food...

Speaker 3: Value-added fruits and vegetables have also continued to grow faster than their broader produce category.

Value added fruits and vegetables have also continued to grow faster than their broader produce categories. We continued to see improved demand for our products that are popular with health conscious and time constrained consumers, who place a premium on convenience foods like those produced and our RFG segment in.

Speaker 3: We continue to see improved demand for our products that are popular with health-conscious and time-constrained consumers who place a premium on convenience foods like those produced in our RFG segment. In addition,

In addition, our guacamole and salsa products, while being affected by the pandemic and foodservice channel have strong long term prospects as well.

Speaker 3: while being affected by the pandemic in food service channel have strong long-term prospects as well.

Speaker 3: And here's some recent news. A couple of weeks ago, the state of police Mexico was verbally approved to ship fresh avocados into the United States, beginning around the middle of next week.

Turning to some recent news a couple of weeks ago. The state of police Mexico was verbally approved to ship fresh avocados into the United States beginning around the middle of next year.

Speaker 3: And as many of you know, Palabo has a state-of-the-art packing facility in Jalisco.

And as many of you know level has a state of the art packing facility and police go.

Speaker 3: From what we understand, individual groves and packing sheds will have to be recertified before shipments are allowed, and we believe that only Jalisco and Michoacan are Mexican states that currently have the facilities that comply with certification requirements.

From what we understand individual groups and packing sheds will have to be recertified or shipments are allowed and we believe so.

And mutual cod or <unk>.

In states that currently have the facilities that comply with certification requirements.

Speaker 3: While we have international customers for the avocados packed in Jalisco, opening up to the U.S. will give us more flexibility to manage the changing market dynamics by better balancing supply with demand, which should translate into higher margin opportunities. I would now like to provide an update on Project Juno.

While we have international customers for the Avocados back then police go opening up to the U S will give us more flexibility to manage the changing market dynamics by better balancing supply with demand.

Which should translate into higher margin opportunities.

I would now like to provide an update on project Juno, which picked up speed in the fourth quarter.

To date key actions have included.

Speaker 3: realizing price increases across our RFT and foods customer base.

Realizing price increases across our RFG and foods customer base.

Speaker 3: continued unification of our supply chain across our three divisions to drive synergies from operating as one company

Continued unification of our supply chain across our three divisions to drive synergies from operating as one company.

Speaker 3: and locating approximately 5% of less profitable SKUs.

Hello, leaving approximately 5% of less profitable skus.

Speaker 3: and consolidating RFG's food processing operations in Florida into our Georgia facility, which will improve capacity utilization.

And consolidating RFG as food processing operations in Florida into our Georgia facility, which will improve capacity utilization.

Speaker 3: We're optimistic with our Project DUNO initiatives as we are beginning to see improvements in systems with automation and sourcing.

We're optimistic with our project do know initiatives as we are beginning to see improvements in systems with automation and sourcing.

Speaker 3: we expect the total annualized EBITI increase of 70 million as compared to the current run rate, which we expect to be fully realized by early to mid-pascal 2020.

We expect the total annualized EBITDA increase of $70 million as compared to the current run rate, which.

Which we expect to be fully realized by early to mid fiscal 2023.

Speaker 3: As I said on our last call, total one-time cost of the program expected to be approximately thirty-

As I said on our last call.

Total one time cost of the program are expected to be approximately $30 million, which include professional fees restructuring costs and capital investments.

Speaker 3: which include professional fees, restructuring costs, and capital investments.

On the corporate governance front, we confirmed our plans to reduce the size of our board over time from 11 to nine directors from a high of 13, which was more in line with our company our size.

Speaker 3: We confirmed our plans to reduce the size of our board over time from 11 to 9 directly.

Speaker 3: from a high of 13, which is more in line with our company, our size.

Speaker 3: We recently welcomed Adriana Mendezabo to our board as an independent director, and Scott Vanderkar has decided to retire from the board effective January 3rd after 27 years of service.

We recently welcomed Adriana Mendes Abel to our board as an independent director and Scott Bad Burkart has decided to retire from the board effective January 3rd after 27 years of service.

Speaker 3: I know many of you listening today are interested in our search for a new CEO . The process is nearly complete as we are in the final rounds of interviews for several.

I know many of you listening today are interested in our search for a new CEO.

The process is nearly complete as we are in the final rounds of interviews with several strong candidates all with a breadth of skills and experience.

Speaker 3: I'm honored to serve as interim CEO as long as I'm needed, but I believe we will have a new leader in place in the very near future.

I'm honored to serve as interim CEO as long as I'm needed, but I believe we will have a new leader in place in the very near future.

Speaker 3: And finally, I would like to welcome two new members to Colabo's executive leadership.

And finally I would like to welcome two new members to club his executive leadership team.

Speaker 3: Graciela Montgomery, our first Chief Human Resources Officer.

CLO Montgomery, our first chief Human Resources Officer and me.

Speaker 3: I'm Mariela Matute, our new Chief Financial Officer.

All of them are too thick.

<unk>, New Chief Financial Officer.

So that's Taylor brings 30 years of.

Speaker 3: HR experience to the table and she will play a key role for our next major phase of the growth.

Of HR experience to the table and she will play a key role for our next major phase of the growth.

Speaker 3: Mariela Matute has an impressive background of financial expertise and agricultural and food industry experience that uniquely qualifies her for the role of Calabo's CFO .

Multi element today has an impressive background of financial expertise and agricultural and food industry experience, they're uniquely qualifies her for the role of <unk> CFO.

Speaker 3: Mariella is already effecting change and has embraced Project UNO by streamlining processes and procedures within the Finance Department.

Muddy Ela is already affecting change and has embraced project uno by streamlining processes and procedures within the finance group.

Speaker 3: She is focused on improving our methods of planning, forecasting, and measuring results to enable the long-term growth of Colavo. We're very happy she joined our team and we're glad to have her with us on the call today.

She is focused on improving our methods of planning forecasting and measuring results to enable the long term growth of collateral.

We're very happy she joined our team and we're glad to have her with us on the call today.

With that I'll now turn the call over commodity yellow.

Speaker 4: Thank you Steve and good afternoon everyone. It has been a pleasure working with Steve and the rest of Calagos management team in the two months since I came aboard.

Thank you, Steve and good afternoon, everyone. It has been a pleasure working with Steve and the rest of this management team in the two months since I came on board.

Speaker 4: While the company has made progress in its efforts to counter the market disruptions caused by COVID, there is more work to be done.

While the company has made put all goodness in athletics two pounds per the market disruptions caused by party that is more work to do and I'm excited to lead the finance team and dose athletes.

Speaker 4: And I'm excited to lead the finance team in those areas.

Speaker 4: I also look forward to connecting with all of you, our investors, and Anna.

I look forward to connecting with all of you our investors and analysts in the coming quarters as we communicate our progress towards being produced.

Speaker 4: In the coming quarters, as we communicate our progress towards improved profitability and return on investment.

Profitability and return on investment.

Speaker 4: Following our press release, let me provide you with further insight. I will start with Revit.

Well no. We're not we're press release, let me provide you with part of that insight I well, let's start with revenue.

Speaker 4: on a consolidated basis, first quarter revenue increased by 17% year-over-year. The increase was mainly driven by a 26% increase in the fresh sediments, where we achieved a 37% increase higher average selling price for avocados.

On a consolidated basis fourth quarter revenue increased by 17% year over year. The increase was mainly driven by a 26% increase in the fresh segment, where we achieved a 37% higher average selling price for avocados.

Speaker 4: This was offset by a 7% decline in volume. The higher pricing was due to a better

Less upset by a 7% decline in volume.

The higher pricing, but to get to a better market than vitamin that lower volume was due to a sub optimal size. This early in the quarter, which affected our product mix.

Speaker 4: The lower volume was due to a suboptimal fruit sizes early in the quarter, which affected our product mix.

Speaker 4: Revenue was up 7% at

Revenue was up.

Our son at RFG did even by two person hired volume and 5% average selling price due to both a favorable product mix and price increases.

Speaker 4: driven by 2% higher volume and 5% average selling price.

Speaker 4: due to both a favorable product mix and price increases. Our food settlement delivered.

Our slots that men the levered.

For Sun, Hi, yourself in the quarter, mostly due to higher volume from food service customers. In addition to put I think pieces of Chi.

Speaker 4: monthly due to higher volumes from food service costs.

Speaker 4: in addition to price increases achieved on a certain product line. With respect to our

So I can proudly flying.

With respect to what we're probably at all in your pricing initiatives.

Speaker 4: As Steve mentioned, we have been successful in implementing price increases across our customer base in both out of key.

As Steve mentioned, we have been successful in implementing price increases and that's how our customer base in both out of him.

Speaker 4: which contributed most of our benefits we recognized in the fourth quarter.

You can see with lots of forward benefits, we recognized in the fourth quarter.

Speaker 4: we expect to see an additional revenue lift in the first quarter of 2022 from this price initiative.

But the C and the addition of revenue leave in the first quarter of 2022 from these price initiatives.

Now turning to gross margin our year.

Speaker 4: Our year-over-year decline in gross profit and margins was mainly due to the same factors that affected our third quarter revenues.

Year over year decline in gross profit margin was mainly due to the same factors that affected our third quarter results.

Speaker 4: In fresh, it was driven by lower volume and lower per carton margin.

Fresh it was driven by lower volume and lower part Tarzan margins margins combine front I, just slowly where we were selling core on the smaller avocados from the end of Mexico summer crop.

Speaker 4: margins climb from August close, where we were selling fewer and smaller avocados from the end of Mexico's summer crop. By October , Mexico's regular crop was in full swing and producing larger...

By your toddler Mexico's regular crop was in full swing and producing larger food and.

Speaker 4: under four with experience margins at the high end of our historical averages. This dynamic continues.

Therefore, with speed and smartest margins at the high end of always thought he collaboration.

This is Nick contained.

Continuing to November and December, which gave us confidence that we would see improved results in our fresh salmon for the first quarter of 'twenty to 'twenty two.

Speaker 4: give us confidence that we will see improved results in our fresh settlement for the first quarter of 2021.

Speaker 4: At RFG, gross profit was down nearly $8 million year-over-year due to market-wide pressures of higher labor, materials, and freight.

At RFG, but else profit was down nearly 8 million year over year due to market pressures of higher labor material and freight costs.

Speaker 4: We are starting to see positive traction from our Project UNO initiative.

We are starting to see positive traction from our project for new initiatives, including pricing could he says okay. You originally station on facility consolidation.

Speaker 4: including price increases, SKU rationalization, and facility consolidation. This has begun to show...

It has to be done to showing that where we sold as we delivered a $5 4 million sequential improvement in gross profit from the third quarter.

Speaker 4: we delivered a 5.4 million sequential improvement in gross profits from the third quarter.

Speaker 4: In the food segment, margin were pressure as well. Mainly due to higher year over year avocado and...

In this segment.

We're pressure as well mainly due to higher year over year I will pass on labor cost.

Speaker 4: Turning to SCNA, which was basically in line with our expectations for the quarter. After adjusting for approximately 1.7 million of restructuring expenses, which are aligned in the adjusted EBITDA reconciliation in our present.

Turning to SG&A, which was basically in line with our expectations for the quarter. After adjusting for the approximately 1.7 million of restructuring expenses, which are aligned in the adjusted EBIT a reconciliation in our press release.

Speaker 4: During the quarter, we also recorded $9.7 million in charges related to asset impairments and other anticipated restructuring costs.

During the quarter. We also recorded $9 7 million in charges related to asset impairment and all of that anticipated restructuring cost with respect to that if he florida facility closure as parts of stride yet.

Speaker 4: with respect to the RFG Florida facility closure as part of Project UNO.

Speaker 4: The cash component of this charge is approximately $350,000.

That cash can find enough discharge is approximately $350000 as a result of these actions combined with moving production to other locations. We anticipate and then my life profit improvement of approximately four to 6 million.

Speaker 4: As a result of this action, combined with moving production to other locations, we anticipate an analyzed profit improvement of approximately $1.5 billion.

Speaker 4: With respect to Project UNO, we realized approximately $2 million of profit improvements in the fourth quarter from our estimate.

With respect to put I guess, the only known we'd realize approximately 2 million of profit improvement in the fourth quarter from that where athletes with spectra see gradual increase and improvement in each quarter of the current fiscal year and we will update you on a quarterly basis as we make progress.

Speaker 4: We expect to see gradual and increasing improvement in each quarter of the current fiscal year, and we will update you on a quarterly basis as we make progress. Now turning to our next webinar.

Now turning to our financial position, we ended the quarter with 141 million of cash liquid investments and available debt capacity. We continue to have some finance, let's see Shang.

Speaker 4: We ended the quarter with $141 million of cash, liquid investments, and available.

Speaker 4: We continue to have a strong finance position and low levels.

Right.

Speaker 4: That allows us to invest in our current infrastructure to drive future growth and improve profitability.

That allow us to invest in our current infrastructure to drive future growth and improved profitability.

Speaker 4: Despite the challenging circumstances, we generated cash-run operations of $13.6 million for the year, doing a good job on money.

Despite the challenging circumstances, we generated cash from operations of $13 6 million for the year doing a good job of managing our working capital.

Speaker 4: In December , we amended our credit facility to reflect our lower adjusted.

In December we amended our credit facility to reflect our lower adjusted EBITA and the gradual return to historical levels of profitability as parts of the amendment. We have received temporary relief in our financial covenants in consideration for these amended terms we agreed.

Speaker 4: and the graduate return to historical levels of profitability.

Speaker 4: As part of the amendment, we have received temporary relief in our financial coverage.

Speaker 4: In consideration for these amended terms, we agreed to a 50 basis point increase in our interest rate and pledge our limoneras to Ox stop andAMS

Plus 50 basis point increase in our interest rate I'm pledge I won't even net of churn. So that's a whole lot that.

Speaker 4: As of today's date and based on the amendment facility, our current liquidity

As of today's date and based on the Amendment facility. Our current liquidity is temporarily with us by approximately 25 million given the pledge enough our Lehman there a shares.

Speaker 4: temporarily reduced by approximately $25 million, given the pledging of our Limonera shares.

Now turning to our outlook as Steve said, the long term outlook of the business remain favorable.

Speaker 4: As Steve said, the long-term outlook of the business remains favorable.

Speaker 4: With the current market conditions, it is difficult to predict when industry-wide inflationary pressures on materials, freight, and labor will ease. We believe that our

With the current market conditions, it is difficult to predict when industrywide inflationary pressures on material freight and labor with east.

We really have met our operational initiatives and ongoing price increases will offset this pressure.

Speaker 4: and ongoing price increases will offset this pressure.

Speaker 4: We're optimistic about the early returns that we're seeing from Project UNO and are confident that we will generate improved quarterly results on a sequential basis as we move into fiscal year 2021.

We're optimistic about the early returns that we're seeing from trying to get the O&M.

We're confident that we will generate improved quarterly results on a sequential basis as we move into fiscal year 2022 with that I would have a good time to call. It two operators over for questions. Thank you.

Speaker 4: With that, I will return the call to operators over for questions. Thank you.

Speaker 1: At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.

At this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Formation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Speaker 1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys. One moment, please.

Speaker 1: Our first question is from Ben Bienvenu with Stevens. Please proceed with your question.

Our first question is from that end up being the new with Stephens. Please proceed with your question.

Speaker 5: Hey, good afternoon, everybody. And Mariella, thanks for the color. Nice to meet you via the phone.

Hey, good afternoon, everybody and Mariella. Thanks for the color nice to meet you via the phone.

Speaker 5: I want to ask on following up on that commentary around gradual improvement sequentially as we move through fiscal 2022, recognizing that you do have reduced visibility.

Uh huh.

I wanted to ask on following up on that commentary around gradual improvement sequentially as we move through fiscal 2022, recognizing that you do have reviews reduced visibility at the moment.

Speaker 5: Is there any incremental disclosure of color that you could offer around how we should think about the progression as we move forward?

Is there any incremental disclosure of color that you could offer around how we should think about the progression as we moved through.

Speaker 5: fiscal 22, and then also what are the major milestones in either Project UNO or otherwise in achieving improved profitability as we move forward?

Through fiscal 'twenty, two and then also.

What are the major milestones and neither project, you know or otherwise and achieving improved profitability as we move through the fiscal year.

Speaker 4: Hi, Ben. Thank you, and nice to meet you over the phone.

Hi, Ben Thank you and nice to meet you over the phone.

Speaker 4: We expect Project Uno to deliver proportional benefits every quarter sequentially as we roll out our pricing initiatives, our SKU rationalization program, and our asset optimization. What we expect to come from LOADED is the investments that we have to do to roll out Project Uno and realize the benefits.

With that well known to the lever proportional then if they are.

Every quarter sequentially as we went out with our pricing initiatives.

Are you arresting illustration put all of them and know where asset optimization, while we expect to come from load at ease that the investments that we have to do to rollout, but I did not realize the benefit.

Speaker 4: So I will model Project UNO benefits as sequential improvement on a prorated basis with investment at the beginning of the program.

So I wouldn't model, probably I don't know Ben if it said sequential improvement on a prorated basis, where the investment at the beginning of the program.

Okay.

Hello.

Speaker 1: Ben, do you have any more questions? Oh, I'm sorry. Can you hear me?

And do you have any more questions Oh, I'm, sorry can you hear me.

Speaker 5: Yes, we hear you. Okay, perfect. Steve, you made some comments around the favorable development associated with Jalisco. Can you give us some sense of the size of that facility and if you are able to start to ship by middle of next year?

Yes, we sure can now okay, okay perfect Steve.

You made some comments around the favorable development associated with police go.

Okay can you give us some sense of the size of that facility and if if you are able to start to ship by middle of next year.

Speaker 5: Give us a sense of the timeline or the timeframe for ramping that facility to what you would expect to be a targeted capacity utilization and maybe just kind of unfold for us how you would expect that to... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...

Give us a sense of the timeline or the timeframe for ramping that facility to what you would expect to be a targeted capacity utilization, maybe just kind of unfold for us how you would expect that to mature.

Sure well as it stands right now leasco is going to be approved as of April next year.

For shipments into the United States and as anybody who has done business down at least windows there their crop matures.

Speaker 3: at a different time of year than the Metrocon crop does. And in fact, April would be about the perfect time to start it up because that's when their crop is.

It is a different time of year.

And then the Metro Alcon crop does and in fact April would be about the perfect time to start it up because that's where their crop is going to start hitting full stride now majority of the process.

Speaker 3: going to start in full stride. Now, the majority of the process that's done there, and it's a large facility, but it's probably half the size of our facility in Michoacan, but that facility

Done there and it is it's a large facility.

But it's probably half the size of our facility in the Metro Con.

But that facility will still.

Speaker 3: primarily handle fruit going out of out of the country to the Far East and to Europe . And so you know that all it's going to do there is it's going to allow us to have another avenue to come into the United States you know to help with maybe some irregularities in sourcing and pricing. And so we're we're looking at it as just a total win-win for us you know being able to utilize that we have growers down there that are very excited about this happening. So it's a

Primarily handled fruit going out of out of the country to the far east and to Europe.

And so you know that all of that's going to do there is it's going to allow us to have another avenue to come into the United States to help with maybe some magee wrote irregularities in sourcing and pricing.

And so where we're looking at is just a total win win for us being able to utilize it we have growers down there that are very excited about this happening so.

It's very it's a big positive.

Speaker 5: And just as a quick follow-up to that, should we be thinking of this, even if we can't put hard numbers around it, should we be thinking about it more as a margin opportunity for you all or a volume?

Okay, Great and just as a quick follow up to that should we be thinking of this even if we can't put hard numbers around it should we be thinking about it more as a margin opportunity for you all or a volume opportunity for you all.

Speaker 3: Yeah, that's a good question, Ben, I would probably say both. It's going to allow us to certainly move a lot more product out of there. But you know, the

Yeah. That's a good question Ben I would probably say boats, it's going to allow us to certainly the move a lot more product out of there but.

But you know the.

Speaker 3: The production in Jalisco is probably akin to what you would find in the United States, so it's not a volume that you would get out of Michoacán. It will just be another avenue for us to fulfill the needs of the United States as far as shipping in the United States, but it's definitely a great step in the right direction.

The protection and police goes probably akin to what you would find in the United States. So it's not a volume that you would get out of out of Mitchell Con. So it will just be another avenue for us to to fulfill the needs of the United States as part of shipping in the United States, but it's definitely a great step in the right direction too.

Speaker 3: to have another state in Mexico open up for shipments into the US. From our standpoint.

Have another state Mexico opened up for shipments into the U S. A.

From our standpoint.

Speaker 3: Being able to have two sources of product, if not three or four, during that time of year is just going to benefit the consumer, and it's going to benefit us by providing a stable supply of avocados. We work on margin anyway. We don't take positions in the fruit, so it's a positive for our organization, definitely.

Being able to have two sources of a product if not three or four during that time of year is just going to benefit the consumer and it's going to benefit us by providing a stable.

Supply of avocado.

We worked on margin anyway, we don't take positions in fruit.

So so it's it's a it's a positive for our organization definitely.

Okay, great. Thanks, so much best of luck.

Oh, Thanks Pam.

Speaker 1: Our next question is from Mitch Pinera with Sturdivant. Please proceed with your question.

Our next question is from Mitch Pinheiro with sort of then please proceed with your question.

Mitch Your line is now open.

Mitch are you there.

Can you hear me now.

Speaker 1: Yes, go ahead with your question. Sorry, sorry about that.

Yes, Yes go ahead with your question, Yeah, sorry, sorry about that.

Speaker 6: So just staying on avocados for a little bit.

<unk>.

So.

Just staying on avocados.

We're a little bit.

Speaker 6: So pricing is up. And you still see some challenges. You said you're seeing improvement. Are you seeing improvement in the mix?

Yes.

So pricing pricing is up.

And you still see some challenges you said youre seeing improvement are you seeing improvement in the.

The mix.

Speaker 6: You know the grades are you seeing where where is the improvement coming from?

You know the grades are you seeing where is the improvement coming from.

Speaker 3: Primarily in the avocados, which right now the US hasn't really started yet, that'll start next month. So everything we get right now is still out of Michoacán. The improvement is that we're into the new crop, whereas the last earnings call we were just starting the new crop. So we're well into it at this point in time. And the price is up primarily because the...

Primarily in the avocados, which right now the U S hasn't really started yet that will start next month. So everything we get right now is still a lot of metro Con the improvement is it we're into the new crop, whereas the last earnings call. We were just starting the new crop. So we're well into it at this point in time.

And the prices up primarily because the.

Speaker 3: Nobody's really sure exactly what the crop's going to be in Mexico. It fluctuates widely from predictions to actuals, and there's a lot of factors at play as well. From a sizing standpoint,

It was really sure exactly what the crop is going to be in Mexico. You know it fluctuates why widely from predictions to actuals and there's a lot of factors at play as well.

From a sizing standpoint.

Speaker 3: Earlier in the season, we were getting a lot more small fruit, and now that fruit has had a chance to mature as we moved into some of the different picking areas, and so we're getting the larger sizes that are more desirable. But we haven't really...

Earlier in the season, we were getting a lot more small fruit and now that fruit has had a chance to mature as we moved into some of the different picking areas and so we're getting the larger sizes that are more desirable and but we haven't really.

Speaker 3: hit a stride with the the Mexican growers as far as a regularity of picking schedule and so their

Hit a stride with the the Mexican growers as far as irregularity picking schedule and so.

There.

Speaker 3: The variances each day can be fairly wide from what we think is going to happen to what actually gets picked. So that's why you see the continuing pressure on pricing to remain high. We think that's going to change here in the near future as they start to pick a little more and of course we have Super Bowl coming up and that's always a big event for the fresh avocado market.

The variance is each day could be fairly wide for what we think is going to happen to what actually gets picked so that's that's why you see the continuing pressure on pricing to.

To remain high we think that's going to change here in the near future as a start to pick a little more and of course, we have Super Bowl coming up and that's always a big event for for the fresh avocado market.

Speaker 6: So do you, so with the larger supply, I mean, you're anticipating maybe pricing pulling back a bit, but is it?

So.

So with the largest supply I mean youre anticipating.

Maybe pricing pulling back a bit but is it.

Speaker 6: Is it at the point where you can have decent visibility on your gross margins?

Is it at the point, where you can.

<unk> had decent visibility on your gross margins.

Speaker 3: Oh, absolutely. And in fact, when prices are higher, you know, again, we work on percentage margins, you know, the

Oh, absolutely and in fact with prices are higher.

Again, we work on percentage margins.

The.

Speaker 3: I guess, theoretically, we should be making more money at higher prices, but we like to move a lot of volume. That lowers our packing costs and everything else, too, so there's always going to be a sweet spot in there that you try to hit. But I expect, though, as we start really getting the volume ramping up and seeing some of the other production areas around the world come in, that the added increase in volume is going to benefit at least as much as the increase in prices that we're seeing right now.

I guess theoretically we should be making more money at higher prices, but we like to we'd like to move a lot of volume, though that lowers our packing costs and everything else too. So there's always going to be a sweet spot in there that you try to hit.

Yeah, but I expect though as we start really getting the volume ramping up and seeing some of the other production areas around the world come in yet.

The added increase in volume is going to benefit at least as much of the increase in prices that we're seeing right now.

Speaker 6: And when it comes to, you know,

Okay and does.

And when it comes to.

Speaker 6: I know the projections vary, but California should have a stronger year-over-year. It's an on-year for California, so that'll help volume. Is Mexico going to have a better crop for the full year as well?

I know the projections vary but.

California should have a stronger year over year, you know year on year for California, So that'll help volume.

Is Mexico is Mexico Gonna have I think it's gonna have a better a better crop.

For the full year as well.

Speaker 3: There's that's been actually debated quite a bit recently whether it's going to be a higher or lower or the same So it's going to be one of those. I tend to believe it's probably gonna be closer to what we've seen in the last year or two

There that's been actually debated quite a bit recently, whether it's gonna be higher lower or the same so it's going to be one of those.

I tend to believe it's probably going be closer to what we've seen in the last year or two.

Speaker 6: And what's the issue there? Is it...

And what what's the issue there is it is it.

Speaker 6: Is it agronomics, is it a grower-packer tug-of-war? What's happening? Why wouldn't Mexico be showing a little more growth than it is?

Hum.

Is it isn't agronomics.

Is it a grower packer tug of war, what's what's happening why wouldn't Mexico would be showing a little more growth than it is.

With volume.

Speaker 3: And I haven't, I'm actually planning on going down to Mexico here shortly to kind of take a look around and meet with some growers.

And I haven't I'm actually planning on going down in Mexico here shortly to kind of take a look around and meet with some growers, but what I think we're seeing at this point in time, because it's mostly agronomic the growths in the metropolitan area, we're picking.

Speaker 3: What I think we're seeing at this point in time is mostly agronomic. The groves in the metropolitan area were picking...

Speaker 3: benefits our plant are anywhere from, say, 5,000 foot elevation up to about 7,500 feet. And so it's very high, and you get wide variances in the weather and microclimates and that, but a lot of it is also naturally irrigated.

Benefits our plants are anywhere from say 5000 foot elevation up to about 7500 feet and so that's very high you get wide variances in and and whether in microclimates in that but it's a lot of it is also naturally irrigated and so youre going to see naturally see a wide swing in production.

Speaker 3: And so you're going to naturally see a wide swing in production capacity.

Speaker 3: And again, we don't know how much of it's going to move into the domestic market down there as well.

<unk>.

And again, we don't know how much of it is kind of moved into the domestic market down there as well.

Speaker 3: So I would say that's for MetroCon. I know there are a lot of plannings out there that should be coming into production here shortly and ramping up. But there's other places around the world that are increasing their production capacity as well.

So I.

I would say that's for Metro Con there I know there are a lot of plantings out there that should be coming into production here shortly.

And wrapping up but there's other places around the world that are increasing their production capacity as well so.

Speaker 6: Moving on to RFG, when it comes to

Okay.

Moving on to RFG.

When it comes to.

Speaker 6: you know, you've closed Jacksonville, that, you know, increase in your facility utilization.

You know you've closed Jacksonville.

Increase in your facility utilization.

Speaker 6: We should start to see that have an impact on gross margin right away, or am I missing something?

Yeah.

We should start to see that have an impact on on gross margin.

Right away or am I missing something.

Speaker 4: No, you're spot on. In fact, you know, I don't want to hog the airways. Mariela, would you like to address that? Sure. Hi, Mitch. Yes, so the savings expected from the closure are between $4 and $6 million annualized, and you're correct. As we move the production to our Georgia facility, we will see those benefits as we serve those customers.

No you're spot on in fact that you know I don't want to hog the airwaves mattioli would you like to address that.

Sure.

And yes, so they let's say even suspected from the close sure are between four and $6 million on my life and you are correct as we move to the production to our to our debt facility. We will see those badness. It says we serve those customers.

Speaker 6: And so what are your customers saying right now? I mean, a year and a half ago, everybody was converting to prepackaged items. And certainly with the easing of the pandemic.

And and what.

So.

What are your customers.

Saying right now I mean, you know.

A year and a half ago everybody was.

Converting to you know pre packaged items and yeah certainly.

With the easing of the pandemic.

Speaker 6: So, we think it looks like, you know, I've seen much more open, back to open, you know, containers, self-serve kind of things happening. Where are we in that? Is it going to be a mixture? Do you guys benefit one way or the other based on how it's delivered? Can you talk a little bit about, like, what you're seeing sort of from a, you know, a product point of view?

So we think.

It looks like you know I've seen much more open back to open.

Containers self serve kind of things happening, where where are we in that.

Is it going to be a mixture.

Do you guys Dennis State, one way or the other based on when and how it's delivered.

Can you talk a little bit about like what you're seeing sort of permit.

<unk> point of view.

Speaker 4: Mitch, yes, if I can take this one, we continue to see fruits and vegetables in these pre-packaged forms to continue to grow faster than the broader produce categories, and we will capitalize on that improved demand. So over the long term, I see this as a mega-trend that will benefit RFG.

And mix, yes, if I can take this one and we continue to see a fluid some basketball in these pre packaged forums to continue to grow faster than the broader Proteus category.

And we will capitalize on that improved demand, so oh, well the long term I see this as a mega trend that will benefit <unk>.

Speaker 6: Well, sorry about that. We've got a dog here. So what about, I mean, you're talking, what about like packaged sandwiches and wraps and some of those pie.

Sorry about that he got a job here.

So what about I.

I mean, you're talking about like you know package sandwiches, and wraps and and and and some of those high.

Speaker 6: I mean, is that still a growth avenue for you, or is this part of – or are we seeing some SKU rationalization in some of these areas? Oh, I'll take care of that.

Products I mean is that still.

A growth Avenue for you or is this part of our.

Where are we seeing some SKU rationalization and in some of these areas.

I'll I'll take care of that model.

Speaker 3: Mitch, what we do is, you know, all of our plants are equipped to handle a variety of different products that our retail partners would want, be it from, you know, just cut veggies and fruits to prepared fruits and vegetables and meals and things like that.

Mitch what we do as you know all of our plants are equipped to handle a variety of different products that are there are retail partners would want to be at from kind of just just to cut veggies and fruits to two prepared paired fruits and vegetables and meals and things like that so.

Speaker 3: The consumers have made it known that they like.

The consumers have made it known that they like.

Speaker 3: convenience foods. They just like healthy

The convenience foods, they just like healthy options when it's coming to that.

Speaker 3: And so I don't think we're ever going to go backwards in that regard. And in fact, we plan for that in some of our strategy and we see it with our competitors out there as well. And our retail partners are asking us for more and more solutions. So we're hoping it comes down to a margin thing. So we're just...

So I don't think we're ever going to go backwards in that regard.

And in fact, we plan for that in some of our strategy.

And we see it with our competitors out there as well and our retail partners are asking us for more and more solutions. So yeah, where we're hoping it comes down to a margin thing. So we're just.

Speaker 3: We're all trying to deal with the increased costs that we're having to address on a regular basis.

We're all trying to deal with the increased cost that we're having to having to address on a regular basis.

Speaker 3: and we know our competitors are as well, so it's something that everybody's trying to get their hands on at this point in time to figure out exactly where we're all going to make money in this regard, and that's the SKU rationalization had to do with a number of items that

We know our competitors are as well so it's a it's something that everybody's trying to get their hands on at this point in time to figure out exactly where we're all going to make money in this regard and that's C. S. SKU rationalization had to do with with a number of items that are.

Speaker 3: maybe we weren't selling very much of, and you take a look at the contribution margins, a number of different things. But it's really been a very good cooperative relationship with our retail partners and ourselves as to coming to profitability things that work for them and also work for us.

Maybe we weren't selling very much oven.

Take a look the contribution margins a number of different things, but it's it's really been a very good cooperative relationship with with our retail partners and ourselves is to coming to <unk>.

Profitability things that work for them and also work for us.

Speaker 6: And just one more is just on the Clavo Foods business. When do we, when should we expect to see that margin normalize?

Okay and just one more is just on the on the club of Foods business.

When do we when should we expect to see that margin normal lives.

Speaker 6: You know, you typically had been pushing a 30% gross margin in that business. And I know, you know, for variety of factors, the last couple of quarters, it's been below that. But is this something where we just need to see fruit costs come down?

You know you typically had been pushed in the 30% gross margin in that business and I know.

A variety of factors last couple of quarters, it's been below that but is this something where we just need to see food costs come down.

Speaker 3: Well, let me take a swing at that one. Obviously, fruit cost is one of our two major opponents, that and labor down in Mexico and the ability to get fruit in there. Again, that stretches back to what I was talking about with fresh avocados as well, is that being able to get a real steady supply of fruit in there. We can deal with pricing fluctuations and the cost of the fruit,

Well, let me take a swing at that one.

Obviously, Peru Costa is is one of our two major point is that you know that in labor down in Mexico.

The ability to get crude in there again that kind of stretches back to what I was talking about with fresh avocados as well as it being able to get.

Real steady supply of fruit in there we could we could deal with pricing fluctuations in the cost of the fruit.

Speaker 3: When it's constantly changing and without having the ability in real time to go to your retail partners and change the pricing that you need, it's taken us a little while to adapt to this realization, but from what we're seeing right now, we're more approaching where we were historically, and we're looking forward to getting back to that on a regular basis.

But.

When it's when it's constantly changing and without having the ability to in real time to go to your retail partners in and change the pricing that you need.

It's taken us a little while to adapt to this this realization, but from what we're seeing right now where we're more approaching where we were historically yeah. We're looking forward to get back to that in a regular basis.

Speaker 4: Jessica, if I cannot, it's moving in the right direction.

Yes, if I can now it is moving in the right direction.

Speaker 1: Thank you. Our next question is from Ben Cleave with Lake Street Capital Markets. Please proceed with your question.

Thank you. Our next question is from Van Cleef with Lake Street Capital markets. Please proceed with your question.

Speaker 7: All right, thanks for taking my questions. Just a couple for me. First, the kind of building on the Jalisco opportunity here. Wondering if you can elaborate on that facility currently, if it's operating kind of at or near capacity. And then also elaborate on if this news affects your kind of CapEx outlook for that segment specifically, if you see an opportunity here to increase the capacity of that plant. Excuse me.

Alright, Thanks for taking my questions just a couple for me first on the <unk>.

Building on the whole Wesco opportunity here wondering if you can elaborate on the.

On on that facility currently if it's scarp rating kind of at or near capacity and.

Then also elaborate on if you know this news affects your capex outlook.

For for that segment, specifically, if there isn't if you see an opportunity here to increase the utilization.

Do you have that plant excuse me.

Speaker 3: Well, let me address the utilization of the plant and then Mariela can address the capex portion of it. We've been a partner in that with the growers for a number of years now, and it hasn't been operating close to capacity. There's currently a lot more opportunities there to really add value-added products.

Well, let me address the AR the utilization of that plant and muddy that can address the capex portion of it.

You know what we'd been a partner in that with our growers for for.

A number of years now and it hasn't been operating close to capacity. There's currently a lot more opportunities there to really add value added products to our mix and particularly as we start doing more overseas.

Speaker 3: to our mix, and particularly as we start doing more overseas, that facility is just made for that. As far as what it's going to do in the U.S.,

That facility has just made for that as far as what is going to do in the U S on the weekend.

Speaker 3: we can start ramping it up and having that as just another outlet for us. I think the opportunities there are endless for us really at this point in time, certainly greater than what we've been taking advantage of.

No we could start ramping it up and having that as just another outlet for us.

I think the opportunities there are are endless force really at this point in time.

Certainly greater than what we've been taking advantage of it.

Speaker 4: And for the capital investments question, we have a plan to invest up to the levels we have invested in the last year. Most of the investments are planned for increasing automation across our facilities, both in Mexico and the US.

Okay.

And for the capital investment question, and we have a plan to invest.

Up to the levels, we have invested in the last year and most of the investments are planned for increasing automation across our facilities, both in Mexico and the U S.

Got it.

Got it perfect.

Speaker 7: And the only other question for me on kind of a high level here, with all these various initiatives that you're undertaking,

And the only other question for me on.

On kind of a high level here you know with all these various initiatives that you're that you're undertaking you know them.

Speaker 7: Are you and the board comfortable doing currently versus maybe waiting until you have a permanent CEO in place? Is there anything that you guys are holding back on from a restructuring perspective here until you have a full CEO in place? Or is it kind of full steam ahead and whoever you bring in will just inherit whatever has been done?

What are you and the board comfortable doing.

Doing currently.

Versus versus maybe waiting until you have a permanent CEO in places there is there anything that you guys are holding back on from a restructuring perspective here until you have a full CEO in place or is it kind of full steam ahead, and and whoever you bring in well well just inherent whatever has been done.

Yeah.

Speaker 3: Well, let me take an answer to that one. When I came in and sat at the desk, my goal was to further the Project UNO.

Well, let me take a taken answer at that one.

When I came in and sat in the desk. My goal was to further the project Uno.

Speaker 3: things that had already begun, and to keep things moving forward. I just didn't want to be a warm body.

The things that they already had already begun and keep things moving forward I just didn't want to be a warm body.

Speaker 3: in the chair. So we've been full speed ahead trying to make all the improvements necessary to increase our profitability, reduce our expenses, all the things that a good business would do on a regular basis.

In the chair so we'd been upholstery full speed ahead trying to make all the improvements necessary to increase our profitability reduce our expenses all the things that he could this was due on a regular basis.

Speaker 3: And my goal was to have those initiatives all in place, up and running, so that when we had a new CEO come in, which I think will be very soon, that he would be able to just take the reins and put his stamp on it moving forward. So all the things that we've talked about are already underway.

And my goal was to have those initiatives all in place up and running so that whenever we have a new CEO come in which I think will be very soon that that he would be able to just take the reins and I'd take it and put his stamp on it moving forward. So all the things that.

We've talked about are already underway.

Speaker 4: Ben, and if I could add to Steve's comment, that we do have in the ground more than 40 initiatives resulted from our Project UNO, and we're not waiting. So one of my primary priorities is to execute on Project UNO, and they are all profit improvements initiatives that will make RFG and the entire network just stronger for what's coming.

Then if I could add to Steve's comment that we do having to go down more than 40 initiatives and we saw no I probably get the Ono and we are not waiting. So one of my primary priorities is to execute it sounds like it's well known and there.

Oh, the profit improvement initiatives that will make Odyssey and Italian network is stronger for what's coming.

Speaker 7: Got it. That's good to hear from both of you. Very good. That does it for me. I'll jump back in queue. Best of luck here in the new year.

Got it that's good to hear from both of you very good that that does it for me I'll jump back in queue, Bob Best of luck here in the new year.

Great. Thanks, a lot.

Speaker 1: Our next question is from Eric Larson with Seaport Research Partners. Please proceed with your question.

Our next question is from Eric Larson with Seaport Research Partners. Please proceed with your question.

Speaker 8: Yes, thank you everyone for the question. Mariela, I extend my congratulations to you. I look forward to working with you and I wish you absolutely the best of success at Collado. So my first question

Yeah. Thank you everyone for the question.

Mary Allen I extend my congratulations to you I look forward to working with you and I wish you absolutely the best of success at collateral so.

My first question really is is.

Speaker 8: is this, it's more of a strategic question. So.

It is yeah, it's more of a strategic question so.

Speaker 8: Under your previous CEO , you started Project UNO.

Under your previous C. E O you started project Uno.

Speaker 8: right at the top, well, just before COVID hit.

Right at the top you all just before Covid.

Covid yet.

Speaker 8: And was the timing of trying to consolidate three supply chains into one, or thereabouts, you know, something similar to that argument, was that just poor timing, or was it good timing? Can you give us a flavor of that?

And what's the timing of trying to consolidate three supply chains into one or thereabouts something similar to that argument.

Was that was that just for timing or was it good timing can you give us a flavor of Av.

Speaker 8: where you'd be if you were without Project UNO or not? I mean, I guess it's a difficult question to answer because it's very broad-based, but.

Where you'd be either if you will without project. We don't we're not I mean, I guess, it's a difficult question to answer because it's very broad based but.

Speaker 8: The question is, was it good or poor timing to start a project going on?

The question is you know was it was it good or poor timing to start project Kunal.

Speaker 3: Let me answer that a little bit, and then, Mariel, you can chime in if you'd like. When we did Project Duna, we were already under the

Let me answer that a little bit and then Marty all you can chime in if you'd like.

Well, we did project sooner we were already under the.

Speaker 3: under the plan for one Colavo, which was to bring everything under the Colavo name and utilize it that way, including bringing our various business units under it and consolidating some management and some SG&A expenses and the like.

Under the plan for one Calaba, which was to bring everything under the club a name and and utilize it that way and including bringing our various business units under it and consolidating some management and some some SG&A expenses and alike.

Speaker 3: When we started Project UNO, all it did was just say maybe there's some other things that we need to be taking a look at and now would be a good time to do it.

When we started project Duenow all it did was it just say maybe maybe there's some other things that we need to be taking a look at hand, and now would be a good time to do it I mean, COVID-19, who predicted COVID-19 kill and of course, all the supply changes is that everybody has had to deal with those those have been challenging it up but we also saw the opportunities by doing the project.

Speaker 3: COVID. Who predicted COVID? And of course, all the supply chain issues that everybody's had to deal with. Those have been challenging enough. But we also saw the opportunities by doing the Project UNO with Teneo and having to come in and do a deep dive into some of our processes and take a look at our business from all different angles to see how we might be able to improve it. And I have to say, having been

No with today, Oh, and having them come in and do a deep dive into some of our processes and are in and take a look at our business from all different angles to see how we might be able to improve it and I have to say, having having been.

Speaker 3: at the forefront of this thing and seeing it from my desk, that it's been a very worthwhile project for us. And while it hasn't necessarily been inexpensive.

At the forefront of this thing and seeing it from my desk that it's been a very worthwhile project for us.

And while it hasn't necessarily been inexpensive.

Speaker 3: We're gonna be reaping the benefits of their work for many, many years to come. So I would say that the timing is excellent on our behalf and we continue to think that.

We're gonna be reaping the benefits of their work for many many many years to come so I would say that the timing is excellent.

On our behalf and we continue to think that.

Speaker 8: So Steve, when you say it hasn't been inexpensive, has it not been inexpensive from a capital basis, or from a margin basis, or from a growth basis? So can you elaborate on the inexpensive part of your comment?

So Steve when you say it hasnt been inexpensive.

Is it has it has it not been inexpensive from a capital basis or from a margin basis or from a gross basis. So.

Can you elaborate on the inexpensive part of your comment.

Speaker 3: Well, when I said it hasn't been inexpensive, it's cost us, you know, closing facilities are never easy, and they're never

Well when I said it hasn't been inexpensive, but it's cost US you know closing facilities are never easy and there never.

Speaker 3: You know, they're never something that you do in haste because it affects people's lives as well as your customers and everybody involved. But sometimes we have to do things like that in order to make a step forward. And that's been what we've recognized with the Jacksonville facility, is that we were able to move the production there up to our Georgia facility, and now that facility is operating at full speed.

You know, they're never something that that you do in haste because it affects people's lives as well as your customers and everybody involved but sometimes we have to do things like that in order to make a step forward and that's been that's been what we've recognized with the Jacksonville facility is that we were able to move the production there up to our Georgia facility.

And now that that facility is operating at full speed.

Speaker 3: And what I also meant as far as costs go, when you hire a consulting company to come in, there's costs associated with that. But they're also giving you the ability to focus on things that you wouldn't do in your normal day-to-day activities just because you're trying to run a business. And so we've utilized them to help us get a better understanding of all the things that go into our RFG operations.

And what I also meant as far as Costco when you hire consulting companies would come in there there's costs associated with that but.

But they're also giving you the ability to focus on things that you would do in your normal day to day activities, just because you're trying to you're trying to run the business and so we've utilize them to help us get a better understanding of all the things that go into our RFG operation.

Speaker 3: as well as some of the other things we do regarding transportation and the like.

As well as some of the other things, we do regarding transportation and the like so that the costs as we outlined as we projected it to be $30 million over two years.

Speaker 3: So, the cost, as we outlined, is we project it to be $30 million over two years, and a fair amount of that's already been recognized. So closing facilities and looking at our cap-ex expenditures, so we're well underway. So the results you're seeing are taking into account some of those costs that we had already told you we were going to be bearing.

You know a fair amount of that has already been recognized so closing facilities and looking at our capex expenditures and so it's so we're well under way. So the results you're seeing are taking into account some of those costs that we had already told you that we're gonna be we're gonna be bearing.

Speaker 8: So, as part of this ability to reduce your labor costs, you know, you're dealing with our, you're dealing with RFG. I think, I think one of the major strengths of the company is your fresh avocado business. You've proven that you can manage that business through inflationary and deflationary times. RFG is a little bit different in that, you know, you're still dealing with gross margins on average that are pretty well below your fresh margins.

So as part of this.

No need to reduce your labor costs.

You know you're dealing with her you're dealing with RFG I I think I think one of them are made pursuant to the company's your fresh avocado business, you've proven that you can manage that business.

Through inflationary and deflationary times RFG is a little bit different in that you know you're still dealing with gross margins on average that are pretty well below your fresh margins.

Speaker 8: and those margins are well below the average packaged food industry. So with all the increased labor costs and all the things that we're talking about, and I understand you're taking pricing.

Margins are well below the average packaged food industry. So with all the increased labor cost and all the things that we're talking about at night and I understand you're taking pricing.

Speaker 8: And that's good, but with, you know, let's say average 7, 8, 9% margins in RFG, are you going to be able to hold those or improve them? Is, you know, because it's a competitive, it's a really competitive industry out there. You don't have a lot of market share in that business. So, I guess is there something structural here that we should be paying attention to that we're not really sure?

And that's good but with no, let's say averaged 789% margins in RFG.

Are you going to be able to hold those or improve them is because it's a competitor.

Really competitive industry out there you don't have a lot of market share in that business. So I guess is there something structural here that we should be paying attention to that.

That we're not really talking about.

Speaker 3: We utilize automation any chance we can, and we're always taking a look to see what new equipment out there makes financial sense for us, a good return on invested capital. The problem we've had is that for a lot of the processes that we do, and I think our competitors would say the same thing, some of it just has to be hand-cut and hand-processed. Automation does not take care of everything that you're looking to do.

We utilize a Ottoman automation any chance, we can and we're always taking a look to see what new equipment out there. It makes financial sense for us a good return on invested capital.

Yeah.

The problem. We've had is that for a lot of the processes that we do and I think our competitors would say the same thing.

Some of it just has to be hand cut and processed in the automation does not take care of everything that youre looking to do.

Speaker 3: So, when I say that we're looking at trying to get a hold of our costs and labor, obviously labor costs have gone up. I would say since the last earnings call I had three months ago, our labor force has come back.

So.

When I say that you know, we're looking at trying to get a hold of our costs and labor, obviously labor costs have gone up.

I would say since the last earnings call I had three months ago or her labor force has come back.

Speaker 3: more towards normal levels than what we were dealing with during the massive amount of COVID departures.

More towards normal levels than what we were dealing with turned the massive amount of COVID-19 departures.

Speaker 3: So our labor has stabilized to a certain degree. From a costing standpoint, all of our retail partners have been amenable to the price increases, and they continue to be amenable to it, recognizing the real cost involved. Now, what we have to do there is make sure that we're good stewards of their money as well as our own, and acting judicially to be the best partner we can.

So our labor has stabilized to a certain degree from a costing standpoint, all of our retail partners have been amenable to the price increases and they continue to be amenable to it.

Recognizing the real cost involved now what we'd have to do there is make sure that we're good stewards of their money as well as our own.

And.

Acting judicially to be the best partner, we can.

Alright. Thank you I appreciate the comments.

My pleasure.

Speaker 1: We have reached the end of the question-and-answer session, and I will now turn the call over to Mr. Steve Hollister for closing remarks.

We have reached the end of the question and answer session and I will now turn the call over to Mr. Steve Hollister for closing remarks.

Speaker 3: Thank you. I'd like to thank everybody for attending our conference today and we were pleased to be able to present our quarterly results and fiscal year results and looking forward to visiting with you all again in the new year with the next quarterly earnings call. Thanks again. We'll talk to you soon.

Thank you I'd like to thank everybody for attending our conference today, and we were pleased to be able to present, our quarterly results and fiscal year results and looking forward to visiting with you all again in the new year with the next quarterly earnings call.

Again, we will talk to you soon.

Speaker 1: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Yes.

This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

[music].

Speaker 9: The.