Fiscal year 2004 was rough for Tree Top. Tonnage processed was the lowest since fiscal 1996. Little inventory was available to meet customer commitments. Spot purchasers tested member compliance. Hard decisions were made to shut down operations and curtail hours. But with resourcefulness, ingenuity and plenty of elbow grease, the managers and employees of our cooperative were able to boost profits over last year’s levels. Average total return per ton of $88.33 is a 15% increase over the $76.78 returned in fiscal 2003. As usual, Tree Top will pay out all member profits in cash.

More importantly, Tree Top was able to preserve its production capacity and its ability to process large quantities of processor grade fruit. This capacity doesn’t appear very valuable when crops are small and fruit is dear, as in the last few years. In fact, the downside of such capacity in short crop years is a hit to profitability. But when fruit is plentiful, as is expected in the coming year, Tree Top’s willingness and ability to take all contracted processing grade fruit is a godsend. Indeed, having a guaranteed home for fruit was the prime reason growers formed Tree Top 44 years ago. To me, this remains Tree Top’s greatest source of value.

But guaranteeing a home for fruit is difficult business today. The world is more complex, the stakes higher. Standing still is not an option. We see this on the fresh side of the business. The same rules apply for Tree Top. Over time, changes in Tree Top’s marketplace, in its competitive environment, even in the volatility and location of its fruit supply have mandated strategic and operational changes. So over the last decade, your Board has supported a slew of changes - moves into new products, new distribution arrangements, new geographies, a two-division structure, and a string of acquisitions. The constancy of change is also why we are enthusiastically supporting three key initiatives going forward.

The first of these is a thorough evaluation of Tree Top’s assets and asset utilization. Our Cooperative’s long term viability depends on having the right capacity in the right place. We need to match our production capabilities to management’s best assessment of future supply and demand. And we must ensure that we employ the technologies that can keep us competitive in the global economy. Understanding what we have is the first step. Hard, but necessary, decisions will follow. Indeed, capital investments will be limited until the results of this asset survey are available.

The second initiative involves a change in Tree Top’s organization. The business issues facing Tree Top today have changed enough to warrant reunifying the Consumer Packaged Goods and Ingredient Divisions. We feel this new organization structure is better suited to the challenges ahead. Unfortunately, that means that Ray Dilschneider, head of the Ingredient Division, will be leaving. Ray, we thank you for all you’ve done and will miss you.