Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Heather Jones - BB&T Capital Markets.
Heather Jones - BB&T Capital Markets
On this potato/peanut issue, I’m wondering when it became an issue because I went back to the Q2 conference call and we had asked you about that at that point because Frito Lay had pointed it out, our spot market pricing data showed significant increases. At that point you had indicated that you didn’t seem like it was a problem and also that’s when you gave guidance. So I’m just wondering when potatoes and peanuts became such an issue that it caused you to take down guidance this dramatically that you had just given in late July?
David V. Singer
The issue that really hit us is that we had contracted to purchase almost all of our potatoes at prices that were about 1/3 of what they ultimately ended up being. We did not anticipate that the specific farmers with whom we contracted would be hit as bad as they were hit. That’s really what got us. It just happened to be very specific farmers that got hit that had contracted to sell us potatoes at lower prices. So when we were giving guidance and we were projecting, we weren’t worried about the open market because we hadn’t anticipated having to buy that much in the open market when we gave you the guidance.
Heather Jones - BB&T Capital Markets
So you had to end up buying a lot in August on the open market?
David V. Singer
Yes. At least half of our overall volume was bought in the open market.
Heather Jones - BB&T Capital Markets
And you said now things are back to normal. Does the potato crop recover that quickly?
David V. Singer
It’s not so much the potato crop recovery. We buy from different farmers at different times in the year so we’re back under our contracts from farmers that weren’t flooded out. The ones that we had contracted to buy from during that period of time just happened to be the ones that got flooded out.
Heather Jones - BB&T Capital Markets
Are there any weather issues that have happened that could potentially hit the farmers that you use during Q4?
David V. Singer
There’s nothing that we anticipate but on the other hand we didn’t anticipate that issue either. This is very unusual. It’s not something that’s happened in the experience of the folks that we have around here, anything to this magnitude.
- To read the full transcript on Seeking Alpha, click here »
