Good day ladies and gentlemen and welcome to the John B. Sanfilippo & Son Inc. First Quarter and Fiscal 2016 Operating Results Conference Call. My name is Sue and I am your investor operator. At this time, all parties are on listen-only mode. We will conduct a question-and-answer session towards the end of this conference. [Operator Instructions]. I’d now turn the call over to Mr. Michael Valentine, Chief Financial Officer. Please proceed, sir.

Thank you, Sue. Good morning everyone and welcome to our 2016 first quarter earnings call. We thank you all for joining us today. On the call with me is Jeffery Sanfilippo, our CEO and Jasper Sanfilippo, Jr., our COO. Before we start, we want to remind you that we may make some forward-looking statements today. These statements are based on our current expectations and they involve certain risks and uncertainties. The factors that could negatively impact results are explained in the various SEC filings that we have made, including on Forms 10-K and 10-Q. We encourage you to refer to these filings to learn more about these risks and uncertainties that are inherent in our business. Taking a look at the operating results, net sales for the first quarter of fiscal 2016 increased by 10.1% to $225.8 million, in comparison to net sales for the first quarter of last year of $205 million. The increase in net sales came from higher selling prices. Selling prices were higher from most major nut types, due to higher commodity acquisition cost. Sales volume which is defined as pound sold to customers was relatively unchanged in the quarterly comparison. Sales volumes decreased in the consumer channel, but was offset by sales volume increase in the contract packaging distribution channel. Sales volume was relatively unchanged in the commercial ingredients and export distribution channels. The sales volume decrease in the consumer distribution channel was mainly due to a 28.7% decline in volume for almonds. The decline in almond sales occurred primarily with existing private brand customers, but the decline in almond volume was also contributing factored to 1.4% decline in Fisher recipe net sales volume. The Almond decline was attributable to the overall negative impact on consumer demand from significantly higher retail prices this quarter compared…

Thank you, Mike, good morning, everyone. This is the third consecutive quarter the company has reported record operating results for net income and diluted earnings per share. As Mike mentioned EPS in the Q1 of fiscal 2016 increased by 34% to a record $0.71 per share diluted and net income was a record $8 million increasing 35.1%. Top-line sales growth was strong as well increasing 10.1% to a record $225.8 million. These results demonstrate a focused commitment by the company to create shareholder value and provide relevant profitable value added products and services to our customers and consumers. I want to thank our management team and all of our dedicated employees for their leadership and congratulate them on a great start to our fiscal 2016 year. As Jasper mentioned on the last earnings call, we ended fiscal 2015 with strong momentum and we continue now to execute our plans to grow JBSS brands, expand globally and provide best in class integrated net solutions to key partners. One significant trend we’ve started to see in the marketplace is consumers appear to be reacting negatively to high almond prices. For example according to IRI data for the quarterly comparison, retail price increases for almonds range between 15% and 20%, while almond pound volume declined by approximately 11% in the snack category, 22% in the recipe nut category and 13% in the produce category. We anticipate that sales volume declines for almond will continue for the remainder of fiscal 2016, due to historically high almond prices. Despite significant sales volume challenges for almonds JBSS was able to maintain sales volume in the quarterly comparison primarily as a result of strong volume performance in our contract packaging distribution channel. It is worth noting that the sales volume increase in the contract packaging channel, mainly…

Thanks Jeff. At this time we will open the call to questions. Sue can you please queue up the first question?

Thank you. [Operator Instructions]. Your first question comes from the line of Francesco Pellegrino of Sidoti. Please go ahead.

Good morning, guys. Just wanted to start off by asking you about the consumer distribution channel, Mike told that high almond prices affect the both private label and branded label sales, did either private label or Fisher take a larger margin hit during the quarter?

Hey, Francesco its Jeffery. No it’s pretty consistent with the total category. There was no specific hit versus private brand or Fisher, it was pretty consistent with the rest of the category.

Okay. I guess just another thing, you guys referred to a lot about the timing of promotional activity when it came to the Fisher snack nuts, and I was just wondering because I know during the second quarter of last year this was something that came through as trade spending. Could you maybe just elaborate a little bit more on this timing issue?

So Francesco this is Jeffery again. So we were heavily spending in trade last year at this time. A lot of it was gaining new distribution with new products that we launched. I will say that we cut back a little bit in our trade spending this quarter at this time period. However, what we’re seeing is timing for first quarter versus volume in second quarter. I can tell you our October numbers are relatively strong. So I think we’ll make up some of the gap that we saw in the first quarter from a volume standpoint.

When you say relatively strong volume are we still talking about flat volume year-over-year or we talking about since you’re doing less trade spending that your net sales would just be higher in I guess with volume sales flat, since you’re doing less of that trade spending, which sort of is your reconciliation from gross sales to net sales.

Francesco this is Mike. What we’re saying is that some of the promotional activity that took place in the first quarter of last year is taking place in the second quarter of this year. So that’s going to drive additional volume.

Additional more profitable volume or additional inline profitable volume that was -- we need to be doing more spending.

No it’s just timing of promotional activity. I wouldn’t read anything else into it.

Okay. Talking about the promotional activity that you’re doing, anything further on the Fisher Nut Exactly snack bite launch are you gaining any additional distribution during the quarter? Going forward what type of growth that we really would be expecting? And I know you came out very strong during the fourth quarter I believe it was.

So we gained five new retailers in this current our fiscal first quarter the 2016. So we’re still gaining distribution. We’re seeing a lot stronger activity with retailers that we work with that actually merchandise the product. It is a new product in the marketplace. And so we got to get trial and sampling with retailers. So we see great success with retailers that do put product on the floor merchandising and support the brand. So we’re continuing to focus on expanding distribution there is still a lot of retailers that we’re not in yet with the brand. So we anticipate gaining further distribution and then working with the existing customers that do carry the brand now and continue to promote it, sampling is important at this stage as well.

Is there a way you said five new retailers additional distribution at current retailers, anyway to see how many doors you gain during the quarter?

Yeah we don’t think -- I haven’t calculated the actual number of stores with those five retailers, collected the total amount, sorry.

Looks like for the first time Fisher snack underperformed at retail compared to the rest of the industry plain and simple is this another way to say just say you’re losing market share for the first time?

No, that is -- part of that is specifically timing with two major retailers. Promotions were pushed out from Q1 to Q2. So that is mainly a timing issue there, not that we’re losing distribution or market share. We lost market share because of those volume, but that was a timing issue.

So going back to what Mike said a couple of minutes ago when he said I would have looked too much into more promotional activity that we’re doing now in the second quarter. You’re telling me right now something about another timing issue, could there be a wind fall -- a slight wind fall from additional spending right now as compared to a year earlier or…

Remember we only talk about Fisher snack specifically. So Fisher snack is not a huge portion of our total top-line sales. But when you slice it down the promotional activity is very important to the volume for that brand in that category.

Yeah Francesco this is Jeffery. One of our strategies in the coming years is to expand beyond our current retail distribution base for our Fisher snack program. Right now we’re highly leveraged in two major retailers with our Fisher snack program. So thus the reason to expand our product portfolio with the Nut Exactly program, but also looking outside of our current base of existing customers to expand our Fisher snack program, because we’re relying on two major retailers and we got to diversify that customer base.

Okay. Noticed that during the first quarter it higher manufacturing cost per pound due to higher manufacture spending, but then when I look at where your inventory is I see that your finished goods inventory was down, but your work in process is up, going into the second quarter could we see this manufacturing cost per pound statistic possibly be driven down since we’re sitting on less finished goods?

Yeah Francesco this is Jasper I think you can expect that. With the higher pound throughput through the plant, we got to leverage the fixed costs so to speak that we have in manufacturing.

Right. With everything now on a per pound basis and operating in a flat volume environment, as the overall industry sort of contraction side you’re stealing share and just sort of maintaining the flat volume that you have, are there any -- are you guys looking at cost cutting at all, I know during periods of time when volume was up 10% or 11% year-over-year you were sort of growing not necessarily expecting volume to continue at that rate, but you took on more employees, you took on additional cost and now that you’re operating in this flat environment have you thought about maybe any sort of cost cutting that could drive gross margins or operating leverage going forward?

Yeah Francesco this is Jasper again, when we started calculated the additional cost of healthcare on the employees, certain CapEx projects that wouldn’t necessarily meet our hurdles in years past are starting to actually meet our hurdles now. And so as we look at CapEx projects one of the big areas that we’re focusing on are reducing headcounts by using automation as well as investing in projects that also increased our yield. Remember good chunk about costs of goods is raw material, so we can get a half a point or a percent improvement in yield, is worth a lot more than say reducing headcount by 5 or 10 people.

So right now going forward operating expenses in a flat volume operating environment for JBSS should pretty much be consistent with where it was probably a year earlier slightly up a little bit just given where it was in the first quarter?

Francisco you’re talked about SG&A, right when you talk about operating expense?

Yeah.

Yeah we have no plans of making any significant changes on those two lines.

Okay. Finally I know you touched on this at the very end about what’s happening in the M&A space and with this whole Diamond and Kellogg acquisition potentially there being reported on Friday. Was there ever a level of interest by JBSS for maybe one of the brands, I mean the California or the Emerald brand and look, I get it you’re not just acquiring a brand you’re also acquiring like walnut shelling facilities something that you might not necessarily need, so when I ask was there any consideration was it maybe just a consideration of approaching them about acquiring the brands that are shelling operations was there ever a level of interest on JBSS as part to maybe get into this -- jump into this M&A activity?

Francesco this is Jeffrey. So we have we’re constantly looking at M&A activity whether it’s another nut brand or some other product line that we believe make sense strategically for the company. And so there has been activity obviously as I mentioned with M&A in the market between Diamond, ConAgra out there as well there’s a couple of other brands. So we have reached out and we’re constantly looking at brands like Emerald and Diamond to see if they would fit with our portfolio. So those conversations are at least interest has been made.

So I know back couple of years ago you acquired Orchard Valley Harvest, I would think that the Emerald and Diamond of California brands would come at a lot higher of a price point and not to say that it would be transformative because you wouldn’t necessarily be entering into a new industry, but you consider levering up the balance sheet to the extent that it would probably take to get one of those two brands?

Francesco this is Mike. We would consider doing that, but in this case unlike the Orchard Valley Harvest where we entered into a completely new category that had a lot of float potential. Between the Fisher recipe nut brand and the Diamond brand both brands combined have roughly about a 50 shares on the recipe category. It’s pretty difficult to grow share beyond that especially when the remaining shares held by private label. So that does tend to put kind of lower the valuation at least from our point of view.

Alright. Very helpful. Right now that’s all from me I’ll jump back in queue if I have any more question, I’ll queue up again. Thanks, again guys.

Thanks, Francesco.

Thank you. So at this time we have no questions waiting. [Operator Instructions]. Thank you I would now like to turn the call over to Michael Valentine for closing remarks.

Thank you, Sue. Again we’d like to thank everyone for their interest in JBSS. And this concludes our first quarter fiscal 2016 earnings call.

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Thank you for joining and have a very good day.