Good afternoon, ladies and gentlemen, and welcome to the Farmer Brothers Second Quarter Fiscal Year 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] And as a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Jean Young. Please go ahead.

Thank you. Good afternoon everyone. Thank you for joining Farmer Brothers second quarter fiscal year 2018 Earnings Conference Call. Participating on today's call are Mike Keown, President and Chief Executive Officer; and David Robson, Treasurer and Chief Financial Officer. Earlier today, we issued a press release, which is available on the Investor Relations section of our website at www.farmerbros.com. The press release is also included as an exhibit to our Form 8-K available on our website and on the Securities and Exchange Commission's website at www.sec.gov. Please note that all of the financial information presented on this conference call today is unaudited. A replay of this audio-only Webcast will be available approximately two hours after the conclusion of this call. The link to the audio replay will also be available on our website. Before we begin the call, please note, various remarks that we make during this call about our future expectations, plans and prospects may constitute forward-looking statements for purposes of the Safe Harbor provisions under the federal securities laws and regulations. These forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Results could differ materially from those forward-looking statements. Additional information on factors that could cause actual results and other events to differ materially from those forward-looking statements is available in the Company's press release and in our public filings, which are available on the Investor Relations section of our website. On today's call, we use certain non-GAAP financial measures, including non-GAAP net income, non-GAAP net income per common share diluted, EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin, in assessing our operating performance. Reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures is included in our earnings press release, which is available on the Investor Relations section of our website. I will now turn the call over to Mike Keown, President and Chief Executive Officer. Mike, please go ahead.

Thank you, Jean. Hello everyone. Thank you for joining us. On today's call, we will cover the strategic, operational and financial highlights of the quarter and provide an update on our key initiatives and how we continue to execute on long-term growth strategy. We'll then open the call up for questions. We're pleased with our performance in the second quarter which results that reflect the completion of the Boyd's acquisition as well as the continued execution of our strategy, which we believe is creating a solid platform for growth. We continue to see both organic and inorganic growth opportunities and remain focused on leveraging the investments we've made in our roasting facilities, expanding our distribution network, adding new customers and increasing business with existing customers. Touching briefly on the financials, sales in the second quarter increased 20.4% year-over-year, which includes sales related to the newly acquired Boyd's business. Excluding Boyd's sales increased slightly year-over-year in Q2. We processed 29 million pounds of green coffee volume in the second quarter, our highest volume in a single quarter, with Boyd's included volume of green coffee processed and solid increased 18.7% year-over-year in the quarter. Adjusted EBITDA in Q2 increased 15.7% to $12.9 million over the prior year period with the corresponding 7.7% adjusted EBITDA margin. The addition of Boyd helped drive the increase in adjusted EBITDA in the quarter, and we currently expect further contributions to adjusted EBITDA expansion from Boyd's as we integrate businesses and realize additional synergies. As I mentioned, these results were in line with our expectations and we continue to expect fiscal 2018 adjusted EBITDA of $54 million to $58 million, as we deliver synergies related to Boyd, capture benefits from the transformation of our DSD organization to a channel based selling organization, and work to achieve operational…

Thanks Mike. Turning now to some more detail on our results, as all of you had a chance to review the press release, I will only touch on a few key areas, beginning with coffee volumes. Volume of green coffee processed and sold increase 18.7% year-over-year with the inclusion of Boyd's volumes. As Mike mentioned, this is a record quarter for us with coffee volumes increasing by 4.6 million pound over last year. Volume for our base business relatively flat to a year ago driven by a few large customers in line with the expectations we discussed on our last call. To give a better sense of mix to volume across our distribution network during the quarter, approximately 9.9 million coffee founds or 34% of total volume were processed and sold through our DSD network, while direct ship customers represented approximately 18.7 million pound or 64.3% of total volume, and sales through distributors including through new distributor relationship we acquired for Boyd represent approximately 500,000 pounds or 1.7% of total volumes. Now, turning to the income statement; net sales for the quarter were $167.4 million, representing an increase of $28.3 million or 20.4% as compared to the prior year quarter. This increase was driven primarily by a $26.3 million increase in net sales contribution from the acquisition of Boyd. Excluding Boyd, net sales increase $2 million or 1.5% slightly better than our expectations. Excluding Boyd, we expect volume to remain relatively flat in the third quarter but we anticipate stronger growth in both volume and net sales in the fourth quarter of this year with further acceleration in fiscal '19. We believe that the completion of our SQF certification will allow us to increase volume produced for large national customers throughout new facility and we expect to realize top line…

Thanks, David. As always I thank those on the call for your continued interest in Farmer Brothers. It's a midpoint of our fiscal year we are pleased with all that our team has accomplished, but we recognize that we have ways to go to achieve our goals. As we look forward to fiscal '19, we remain focused on executing our differentiating strategies and unlocking Farmer Brothers full potential. We remain optimistic about the opportunities presented in the back half of fiscal 2018 and more importantly in fiscal 2019. We believe that we're well positioned to realize efficiencies and to reap the benefits of the acquisitions we've completed, the new national accounts we've added and the changes we've been implemented in our GST model. And with that, I'd like to open the call up for questions. Operator?

[Operator Instructions] And our first question comes from the line of Kara Anderson with B. Riley. Your line is now open.

So couple of calls ago, you mentioned that you won I think it was a 1.5 million pound to 2.5 million pound of new business from some notable customers, but you didn’t name. And then another bigger corporate win last call. Can you talk about where you are in on-boarding those new accounts? And then maybe just overall recap and new business won in the last year that you've announced?

Sure. So, we -- the two we mentioned on the last call, one is started up, we're in the ramp up process though very early on in it. The other customer quite frankly most of that volume begin to come on this quarter. So we're still where we've said we've been maybe a step or two behind in the customer transition, but nothing out of the norm. So generally we feel good about it. What I'm most excited about is obviously getting the new facility up in running. We have cleared the desktop portion of the SQF and they are going through the second step of the process and that's where I think we can really begin to leverage this facility moving forward. Regarding your question around customers won in the last 12 months, how could I best get it that if just there is a lot of ground to cover there.

Alright, we can take that on off line at another time. Just one other question from me, with respect to your EBITDA guidance to 54 million to 58 million kind of laid out three ways. You think you get there. I think the third way you said it was additional cost savings. I'm wondering if you can elaborate on that and it sounds like that is in addition to synergies with Boyd, if I am understanding it properly?

That’s right Kara. I think it was probably back in May when we kind of gave a view of what we thought the year was going to be look like and we said 5 million to 7 million of cost savings some of those we've realized through our DSD restructuring but others which were operational efficiencies or more of back ended toward the back half of this year, so you are going to start to see that primarily through SG&A leverage.

[Operator Instructions] And our next question comes from the line of Francesco Pellegrino with Sidoti. Your line is now open.

So I just wanted to touch on your organic volumes which were flat year-over-year. Sporadically, we'll get a nice uptick as we've seen in the past couple of quarters a new business and I'm just wondering if at any point during the quarter will you potentially maybe like turning business away, as we're not fully as to up certify that maybe you had some big contracts come your way that you just currently aren't able to handle right now? And that when SQF certification does occur sort of like the floodgates opened because I'm just sort of thinking like you're having a lot of sales guys right now just potentially sitting on their hand waiting for the certification to come through really be able to market the business all of a better?

So what I can tell you is, we certainly had a lot of interest from larger customers, over the last six months on site visits, those types of things. I think the SQF certification is an important step. And then there is typically the certification of the process with the specific customer, but to answer your first part of your question, we're not turning any business away at all, maybe we will be much better poised to bring on that business once we get this fully certified and we remain really exciting about it. You've seen the facility, many of the people on the call have seen the facility, and we think it will be a very powerful tool to help recruit new customers along with our sustainability programs and marketing programs, and all those types of things we do to help our customer to grow.

And then just a one thing we said over the last couple of quarters that a big of our growth that just been flat or a few large customers where softer than we expected, a lot of that of course outside of our control. We don’t think that’s an ongoing thing but certainly happen in the last couple of quarters, which is the nature of our business can be choppy when you have a few big customers that can move around. But as Mike said, the outlook for '19 remains unchanged which we’re pretty bullish once we get passed certification that we have a bigger opportunity to win some business.

I guess just keeping with that comment of wining new business. So recently a large food retailer just divested their convenience store. When we see something like that, is competition? Does that get you guys excited to go after that type of business? Or is that business to supply those C stores sort of understood that they are going to continue to be with the existing coffee manufacturers or rosters that currently supply on those businesses?

I think we're really pleased with the growth that we had in convenience stores over the last five or six years. We're thrilled with some of the awards we won from some of those customers. So without knowing who you're referencing directly, we want to always be at the table assuming that it’s a good price structure and good for the business, and we like to go after it and get it you look at our track record over the last five to six years. We won some considerable business in that channel as well as other service.

And this question is for David and it's everyone favorite topic, the new tax law. You were guiding through your cash tax rate, remains unchanged that 3% to 4%. I thought there was some sort of implications for limitations regarding the amount of the trailing of previous NOL position that you had up to a certain point to offset certain pretax income. Was that anything that went into your unchanged cash rate guidance that you have provided us with?

Yes, I think there is a 20% limitation the amount you can write off. Yes, we took that math into account with respect to our NOLs what we thought our go forward cash tax rate was and still 3% to 4%.

Thank you. And our next question comes from the line of Chris Krueger with Lake Street Capital Markets. Your line is now open.

Just a couple of quick ones. First, was there any lingering hurricane impact in the quarter on your business?

Yes, as a few lumps the hurricane with the fires in California, we have had a small but it's not really a critical part of the story. We have got a sizable business in some of those areas and of course we feel the drag as well as the continued impact of the hurricane in certain parts of Texas, but I wouldn't let that distract from the build out of the new facility, the integration of Boyd's and the restructure of our DSD. We all think are pretty compelling. And then there may be a lingering effect just to those cities and towns which have been through so much continue to rebuild.

And we have had individual employees and branches affected, but the impact was much bigger for us in Q1 which is why we call that out. We certainly measured the effect from our fire and insurance claims but it wasn’t material enough to bring out in the second quarter.

My other question is, now that you have moved from Torrance to Texas. I know some people didn’t make the move and you had to hire a lot of new people. Are all the key people in place now and have you had a good ability to attract talent to your new location?

The answer yes and yes. We are really pleased with the ability to attract talent and relocations going well the key people are in place. As you know we have pretty diverse set of needs since this facility has a headquarter component in the areas like finance and marketing and distribution and so forth and roasting in a distribution center we have been able to meet our needs in all three areas very well.

I think I under that our headquarters and really forward thinking point of view on sustainability in the way we think that it admires good health of those recruits and great talent. [Operator Instructions] And we have no additional questions at this time. So, I would like to turn the call back to management for any closing remarks.

Well, thank you very much, as always I would like to thank those on the call for your continued interest in Farmer Brothers. And we look forward to speaking with you again soon. Thank you very much.

Ladies and gentlemen, thank you for participating in today's call. This does conclude the program and you may all disconnect. Everyone have a great day.