Question-and-Answer Session
Operator
Thank you. (Operator instructions) And we’ll pause for a moment to assemble our roster. Well then we’ll take our first question from Sam McGovern with Credit Suisse. Please go ahead.
Bruce Klein – Credit Suisse
Hi it’s Bruce Klein. Good morning. Just on the Pepsi business, I guess it’s – I’m just not clear, I guess the expected profits in cash are going to be better post the Pepsi lower volume. Is that a function because you expect to replace that business or is that a function of just apples-to-apples? Having lower Pepsi business, by definition, is going to give you higher profits. Was it one or the other? I was –
Michael Hoffman
Yes, I know. And let me make that clear. And I want to be careful how much to say about this because we are still finalizing that deal. But it’s not the result of replacing of any of the business. It’s a result of taking fixed and variable cost out of the business that we’re associated with that volume will allow us to increase the profit and the cash flow associated with the reduced volume. So it’s directly related. It’s getting out of outside warehouses. It’s taking variable cost down. It’s unfortunately a result of layoffs, and we went out to our plants yesterday and began talking to our people about expediting closures of our – we have two plants in Dallas, one of the plants in Dallas, expediting and consolidation of the two plants we have in Orlando, and other activities that will take fixed cost and variable out that was associated with that business, which is a significant amount of money.
Bruce Klein – Credit Suisse
Okay. And the lower Pepsi volume is driven by their needs are changing? Are they more in-house or is it – any other color on that?
Michael Hoffman
It’s really we’re – we settled out. We settled out on a lower base and a different mix. It allows us to provide Pepsi out of our lowest cost plants, to give them the best economics, to take with that as some of our highest cost mix. It’s a various amount of reasons how we landed where we landed, but we’re real pleased with where we came out. Unfortunately, it results in some layoffs, but at the end of the day, we think and our confident that we have a healthier business as a result. And it does provide us with assets that we can target towards the custom growth. And we also have some (inaudible) things going on in that side of business. It took a while to get where we’ve gotten, but I think both parties are very satisfied with where we ended up.
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