Good day, ladies and gentlemen. Welcome to the John B. Sanfilippo & Son, Inc. Fourth Quarter and Fiscal 2019 Year-End Operating Results 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]I would now like to introduce your host for today's conference call, Mr. Mike Valentine, Chief Financial Officer. You may begin.

Thank you, Kevin. Good morning, everyone, and welcome to our 2019 fourth quarter and fiscal year earnings conference call. We thank you all for joining us today. On the call with me is Jeffrey Sanfilippo, our CEO; and Jasper Sanfilippo, our COO.Before we start, we want to alert you that we may make some forward-looking statements today. These statements are based on our current expectations and involve certain risks and uncertainties that are inherent in our business. The factors that could negatively impact results are explained in the various SEC filings that we have made, including Form 10-K and on occasion Form 10-Q. We encourage you to refer to these filings to learn more about these risks and uncertainties.I'll start the call by covering financial highlights for the 2019 fourth quarter and fiscal year. The current fourth quarter net sales increased by 2.4% to $216.8 million compared to net sales of $211.7 million for the fourth quarter of fiscal 2018. Increase in net sales in the quarterly comparison was primarily due to a 7.3% increase in sales volume which we define as pounds sold to customers. Impact on net sales from the sales volume increase was largely offset by lower selling prices, mainly for products containing cashews, pecans and walnuts. Reduction in selling prices for these nuts resulted from lower acquisition costs that we passed on to customers.Sales volume increased in the consumer distribution channel by 13.8% and that was primarily due to increased sales of private brand trail mixes and snack nuts from distribution gains at new and existing customers. Also, increased sales of Southern Style Nuts products contributed to the sales volume increase. Sales volume declined by 1.9% in our commercial ingredients distribution channel and that was due to lower sales of bulk products to other food manufacturers.…

Thank you, Mike. Good morning, everyone.After reporting record results for our third quarter of fiscal 2019, the Company finished very strong with record results for the fourth quarter and for the year, which we achieved record fourth quarter net income of $11.3 million and earnings per share of $0.98. We also reported record performance for the year with net income of $39.5 million and earnings per share of $3.43. Sales volume increased over 7% in the quarter and 1.4% for the year.Our strong financial position allowed us to pay a cash dividend of $29.1 million in August of 2018. And we increased the annual regular dividend by 9% to $0.60 per share, and supplemented that with a special dividend of $2.40 per share, both of which were just paid this week on August 20, 2019. These most recent dividend payments mark the eighth consecutive year that JBSS has paid dividends. And we are pleased to return cash to our stockholders early in the fiscal year through these dividends.I am very proud of these results and I thank our management team and all of our employees for their dedication, hard work and leadership. This success is possible because we have talented people across our organization, and we invest in them to do what matters most for our customers, our consumers and our shareholders. We are executing our growth strategies, implementing continuous improvement projects throughout the organization to optimize our cost structure. And we continue to invest in our people, brands and processes to better serve our customers and consumers.We experienced a major shift in volume for consumer sales channel this past year, as we continued to grow our brand and build upon private brand opportunities. Sales in the consumer distribution channel reached 70% of our total net sales in fiscal 2019…

Thank you, Jeffrey. At this time, we will open the call to questions. Kevin, can you please queue up the first question?

[Operator Instructions] Our first question comes from Chris McGinnis with Sidoti & Company.

Good morning. Thanks for taking my questions, and nice quarter. I was just wondering, just on the structure of the margin profile for 2019. Can you maybe just talk about how much of that is sustainable due to the shifts to the consumer brand, and maybe some thoughts around 2020 and where that may shake out? Thank you.

Certainly, we had a benefit from a shift from contract packaging to consumer, especially private label, but really the major driver on the margin improvement was volume increase and those lower commodity costs.

And I’ve just been thinking about 2020 the rate that you had in 2019, pressure there or do you think that that's possible to kind of keep in that level?

That will be primarily dependent upon what we pay for new crop nuts this fall, because that certainly impacts the back half of 2020. So, it's difficult to say. But certainly -- as far as the first half of 2020 goes, we expect to have the same cost structure and pricing structure that we've had over the last two quarters.

We're going to continue to invest in the brands as we have. Obviously, we're taking some ownership of new private brand business as opportunities came up and helping those retailers build their private brand programs. We're also really focused on our branded business. And as Mike mentioned, our visibility right now with the crops, very optimistic; we don't see any dramatic changes as of today. So, we're optimistic that we can continue the success of our margins this coming year.

It’s great news. Can you allow me to dig in a little bit on the Southern Style growth, and seemingly that -- obviously that acquisition is playing out like you thought, maybe some comments there? But also, just the growth with the new customer versus the new packaging gains at the grocery store? Thanks.

Sure. So Southern Style, part of the growth is because it wasn't recorded in the back half of fiscal ‘18, so -- yes, fiscal ‘18. And so, we're benefiting from just that volume that had added to the consumer channel. But also, the team has done a good job expanding distribution at the existing accounts that Squirrel Brand had at the time, and also gaining some new distribution and launching new items at new retailers. So, it's really a combination of new product launches, gaining some distribution and enhancing some of the promotions that we've had with the existing customers that Squirrel had at the time. We're launched two new items in that brand portfolio this year. And we’ll continue to look at gaining new distribution, especially in the grocery channel where Squirrel did not have that much distribution when we purchased them.

Okay. And just one more question, and I'll jump back in queue. But, I don't know if you can do this for a competitive reason. But, you mentioned new products; obviously you had a pretty successful run there. Can you maybe just talk a little bit about what you have in kind of introductions for 2020?

So, we look at the nut butter space, and that's been a growing area for consumption. And so, we've built on our Orchard Valley Harvest brand portfolio and added nut butters to that lineup. And we just shipped our first orders at the beginning of Q1 of fiscal 2020. We've gotten very good feedback from buyers and initial consumer reception is positive. So, that was one of the new launches, and then also looking at plant proteins, expanding into chip isle which we've never been in before. So, again plant protein snacks is another area that was focused on.

Thank you. Our next question comes from Tim Call with Capital Management.

Congratulations on a strong quarter. Do you expect the momentum in Southern Style Nuts to continue?

So, actually, Tim, we’re really just getting started with the brand. It's been in our portfolio for a little over a year now. We've done a lot of consumer testing, a lot of consumer insight studies. As I mentioned in the call, trail mixes and savory and health wellness snacks is continuing to grow. Consumers are looking for more innovative snack mixes. And so, we just think there is a great opportunity to continue to really expand that line. And as I said, we focus on the grocery channel. And then, we haven't even touched the convenience store channel, nor the drug store channel, so all opportunities in those two channels that are just beginning to be looked at.

Is it possible that transportation costs will continue to decline slightly in the next six months?

Yes. This is Jasper, Tim. We are cycling against lower cost this year versus last year. We started turning favorable in February of this year. And so, I think you’d probably continue to see that trend, and so we start cycling against the lower cost that we paid, starting in February of ‘19.

Some peanut crushing facilities were offline in the first two fiscal quarters. And if they are operating well in the next two quarters, will they have a meaningful impact on earnings?

I think, Tim, you're referring to the fact that, a couple quarters back, we talked about how our Bainbridge shelling plant was down as we refitted it. And as a result of that peanut crushing stock sales volume had fallen. I believe that's what you're referring to. And if that's the case, we sell peanut crushing stock for roughly $0.20 to $0.25 per pound. It's really more of a byproduct than it is our main product line and it doesn't really generate a lot of gross profit dollars. So, whether volume goes up or down, it really has an immaterial impact on our profitability.

And about a year ago, there was a loss of recipe nut line at a customer. Has that annualized or is that still having effects going forward?

So, it was a customer that decided to build their own private brand recipe nut category, which took some shelf space away from our Fisher brand. So, that's -- we're still cycling against that even in this coming quarter and next two quarters actually, you'll see that continue within the next two quarters that potential loss of some of the distribution and volume.

Is that a declining headwind over the next six months?

We've done a great job making that distribution volume loss up in the grocery channel with other retailers. So, it won't have as negative an impact, I believe as we've seen over the last year. I think we've made up a lot of that volume.

And Tim, this is Mike. I would add that that started about a year ago and has ramped up throughout the fiscal year. But, it is slowing, the amount of shelf space we're losing. So, as Jeff said, we will be a bit unfavorable but the magnitude of it won't be anything like what we've seen over the last three or four quarters.

Great quarter, and thanks for managing the Company so well.

Thank you, Tim. I appreciate it.

[Operator Instructions] I’m not showing any further questions at this time. I'd like to turn the call back over to Mike.

Okay. Thank you, Kevin. Again, thank you everyone for your interest in JBSS. And this concludes the call for our fourth quarter and fiscal 2019 operating results.

Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day.