Regina Russell (J.P. Morgan): If we look at the independent channel and read through to the customer, are you seeing any evidence of additional trading down or anything that’s pressuring the customer with the food inflation or anything like that from the independent channel?
Michael Funk: We’re asking that question to see if the consumers are in fact trading down. The numbers that we have don’t support any evidence of that. We’ve heard some supermarket reports suggesting that there’s some trading down going on in the supermarket channel but as far as our core business is concerned, we’re not seeing it.
Simeon Gutman (Goldman Sachs): With regard to the Sarasota and Portland facility, it sounds like that they’re performing according to your expectations. Is that correct and are they ramping up any quicker or slower?
Michael Funk: All the two newest facilities that are in operations, Sarasota and Portland, are performing according to expectations. There’s nothing there that we’re disappointed with. It’s just taking the normal amount of time to get into optimum efficiencies.
Simeon Gutman (Goldman Sachs): Are there any scale differences between those two facilities and the Moreno Valley and York facilities? Do you expect that same six to nine month ramp up?
Michael Funk: While both of those facilities are much larger, they also represent capacity constrained facilities. They’re replacing two facilities that have had significant capacity issues. We have in both cases several offsite warehouses, which were holding product, not only dry product but refrigerated as well. Thus, the product is being handled several times in a very inefficient way. At some point we will be able to improve efficiencies in a much greater way than was shown with the Portland and Sarasota facilities. As a result of those capacity constraints, we may have a quicker return because we’ll be able to shed a lot of the expense in the offsite warehouses and the extra labor in the double handling of product.
Mark Shamber: We’re hopeful with both of these facilities that we will keep the majority of the workforce as we’re not relocating the facilities too far from the existing facilities. You’ll therefore have an assembled team that’s already experienced in the warehouses moving from one facility to the other and there will be a little bit of regaining familiarity with the layout but it’s the same team that was working in say the Fontana building or the New Oxford building.
Simeon Gutman (Goldman Sachs): Is there anything related to channels or your mix of customers that can help profitability or are those facilities going to have a very representative channel mix relative to the rest of your facilities?
Michael Funk: Yes, they would be representing all channels just like the rest of our buildings do. There is therefore no difference there.
Simeon Gutman (Goldman Sachs): Regarding private label, in fiscal 2008 you didn’t get much done. What’s on plan for 2009? Is it more of a focus on Millbrook or are you going to be consistently pursuing stuff in the private label arena?
Michael Funk: As far as our branded division goes, we have invested in that infrastructure, we’re incurring the expenses of a division that can do a lot more revenue and we plan to continue to look for opportunities to acquire emerging brands and brands that have a good value to our company. We haven’t set our 2009 goals yet. We will be able to communicate those in the next quarter and it’s hard for me to comment on exactly how aggressive we may be on that. However, we still are firmly behind the strategy of building our branded sales to help us create extra margin and provide additional strategic value.
Simeon Gutman (Goldman Sachs): The rationale for evaluating emerging brands hasn’t changed. Would you consider looking at something more established versus emerging or it’s still going to be a focus on emerging better value?
Michael Funk: Generally that’s where we’re going to be. The idea that we have the insight into what trends and what products are emerging before a lot of other people have those brand insights is the best way for us to leverage our dollars by not paying for established companies that have a higher multiple. We can invest more wisely and get a better ROI on some of these newer brands.
Simeon Gutman (Goldman Sachs): It sounded minor that Millbrook missed top line expectations by a little bit this quarter. What is your comment?
Michael Funk: We’ve had some small sales erosion from Millbrook over the first two quarters of the business and it’s something that we were expecting. It’s nothing that we feel is out of our expectations. It was for Q3, Millbrook’s sales numbers were slightly under what we had forecasted.
Glenn Primack (Broadview): Is the Millbrook business able to earn a 3% operating margin over the intermediate term?
Michael Funk: It’s certainly capable of earning that operating margin. I’m not sure what intermediate term is.
Glenn Primack (Broadview): About 12 months to 18 months.
Michael Funk: That’s not out of the realm of possibilities. We were obviously working towards that goal and we’ll be in a better position at our year-end call to give a more clarity on that. However, what you described isn’t totally out of line. Over the next two years, we would plan to have Millbrook throwing off the same operating margin as the rest of our business.
Glenn Primack (Broadview): How often does the customer base in the supermarket come back to the distributors in terms of contracts potentially out for bid?
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