Good afternoon ladies and gentlemen and welcome to the Farmer Brothers Fiscal Year End 2014 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) As a reminder this conference call is being recorded. I’d now like to turn the conference over to Ms. Jennifer Matuschek [ph]. Please go ahead.

Good afternoon everyone and thank you for joining Farmer Brothers fourth quarter and fiscal year end 2014 earnings conference call. With me today are Mike Keown, President and Chief Executive Officer and Mark Nelson, Treasurer and Chief Financial Officer. Earlier today we issued our earnings press release which is available on the Investor Relations section of our Web site at www.farmerbros.com. In addition an investor presentation that accompanies prepared remarks is also available on the Investor Relations section of our Web site as well as the webcast link. The press release and investor presentation are also provided as attachments to our Form 8-K filing available on our Web site and on the Securities and Exchange Commission’s Web site at www.sec.gov. Please note that all of the financial information presented on this call is unaudited. This call is being simultaneously webcast and a link to this is available on the investor relations section of our Web site. Additionally, a replay of the audio webcast will be available approximately two to three hours after the conclusion of this call. The link to the webcast replay will also be available on our Web site. Before we begin the call please note various remarks that we make during this call about the Company’s future expectations, plans and prospects may constitute forward-looking statements for purposes of the Safe Harbor provisions under the Federal Securities Laws and regulations. The Company’s actual results could differ materially from what is described in those statements. Additional information on factors that could cause actual results to differ materially from those forward-looking statements is available in the Company’s press release and in our public filing, each of which are available on the investor relations portion of our Web site at www.farmerbros.com. In addition, any 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. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. Therefore you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. Additionally, please note that the Company uses certain non-GAAP financial measures including adjusted EBITDA and adjusted EBITDA margin in assessing its operating performance. A reconciliation from these non-GAAP financial measures to the most directly comparable GAAP measures is available in our press release, which is available on the Investor Relations portion of our website at www.farmerbros.com. I will now turn the call over to Mike Keown. Mike?

Thank you Jennifer. Hello everyone and thank you for joining us this afternoon. This is the first earnings call for Farmer Brothers. So we are making history here today. For those of you not familiar with our story, I will start with an overview of Farmer Brothers, our history and what we’ve achieved over the past few years with a top line review of our fiscal 2014 results. I will then turn it over to Mark Nelson our CFO, who will discuss our financial results in greater detail. Finally, I will conclude with some commentary on the overall business. So first, a bit of history. Farmer Brothers began in 1912 when a young man named Roy E. Farmer decided to open up his own coffee business to make it easy for restaurants to pour a great cup of coffee. He was an entrepreneur and won several patents for an array of coffee making equipment and other products as well. Over the next century, the Company evolved and flourished through a series of product line expansions and acquisitions and a relentless commitment to continually invest in customers. Today, Farmer Brothers is a leading national roaster, manufacturer, wholesaler and distributor of high quality branded and private label coffees, teas, ice-coffee, cappuccino, spices and other culinary products which we sell to food service operators, convenience stores and grocery retailers. Our growth is predicated on a differentiated business model. We currently provide one of the most complete local, regional and national direct store delivery or DSD systems in the industry and have concurrently built production capability at all three coffee quality tiers, that being value, premium and specialty. Along the way, Farmer Brothers developed substantial knowledge of coffee sourcing, procurement, roasting and blending, all of which makeup the backbone of our business model. Today,…

Thanks, Mike and hello everybody. I'll spend the next few minutes discussing our financial performance for the fourth quarter and fiscal year 2014. As Mike mentioned, we have continued to make positive financial progress over the last few years. However this growth did not come without some challenges that impacted our operating efficiency. With the addition of substantial volume growth as demonstrated by the 45% increase in coffee we processed throughout the last two years. A new layer of cost and complexity was added to our operations and that was not well forecasted. Additionally, we fell short of an efficient transition to our Oklahoma City brewer refurbishment facility which took longer than expected. These two, combined with the negative impact of the Q3 winter-storms and customer disruptions dampened our financial results in the second half of the fiscal year. Despite these operating inefficiencies brought about from these growing pains, we were still able to deliver stronger financial results in 2014 and now I will get into some of those details. On the income statement, net sales in the fourth quarter of fiscal 2014 were $130.2 million, representing a 0.3% increase from net sales in the fourth quarter of 2013. For the full year fiscal 2014, net sales increased $14.5 million or 2.8% to $528.4 million from $513.9 million in fiscal 2013. This increase was primarily due to increases in sales of our roast and ground coffee products. It is important to note that the decline in coffee cost, masks a very large growth in the underlying volume because a large portion of our business, primarily our national account business is largely on a commodity pass-through cost plus model. In fact, year-over-year we saw a 14.5% increase in the volume of green coffee we processed and sold over the prior fiscal…

Thanks Mark. As you can see in fiscal 2014, we continued to improve our operational and financial performance. The turnaround continues and sometimes that path is not as linear as we would like while we faced some headwinds in the second half of the year, the year-over-year trends point to our continued progress. As a point of perspective, looking back at fiscal 2011, we had an operating loss of $70.7 million and that can be juxtaposed versus an operating profit of $8.9 million in fiscal 2014 as Mark just mentioned. Let me now provide you with some other highlights from the year. Over last two years our national account business has seen strong growth with the addition of notable customers such as Bay Valley Foods, which is a division of TreeHouse Foods and Kehe distributors among others and we believe there is real opportunity for expansion. For a perspective, we current count just three of the top 100 restaurant chains as customers, two of the top 20 convenience store chains and five of the top 20 supermarket chains. So we are encouraged by the prospects for new customers and the opportunity to win more business. These customers value the breadth of services we provide from world class coffee to our price risk management strategies, industry leadership, product innovation and connections at coffee origins. These are things we weren’t able to bring to the table as confidently just a few years ago. Today because of what I’d like to call the authentic coffee geek factor inherent in our DNA and culture, we are more competitive when these customers are making decisions. So while the sales cycle is longer with national accounts, we believe the value add we provide gives us a better chance or a seat at the table and ultimately…

Thank you, Mr. Keown. (Operator Instructions) Our first question is from Tony Brenner with ROTH Capital Partners. Your line is open.

I have a couple of questions. First of all, Mark you just stated that for the full year there was a disparity between the double digit volume growth and the double coffee price decline. So for the fourth quarter you reported a revenue increase of less than 1%. I wonder if you could provide the same sort of breakdown as to what that number hides in the way of real growth in the quarter.

Tony, good to hear from you. This is Mark. So I mentioned about $1.8 million that was linked to those costs plus pass through commodity pricing contracts. Many of our larger customers have that type of a pricing arrangement. We estimated that about $1.8 million was driven by the year-over-year change, Q4 to Q4, about 140 basis point erosion in revenues. There were also two very notable other items, one was a customer that we had resigned from was an unprofitable customer in our second quarter of fiscal 2014. That drove roughly 210 basis point of revenue erosion in our fiscal fourth quarter versus the fiscal fourth quarter of 2013.

And is that a national account or is state account?

That is a national account. So it’s a large national account. As we have been upgrading our national account profitability, we have had to make some tough choices on some of those accounts. And finally, we had some lingering issues on another large national account that experienced some customer disruptions in the third quarter. Some of that carried over into our fiscal fourth quarter as well. That drove roughly 150 basis point erosion versus where they were in the prior year. And so if you add up those, it’s about 140 basis points on cost plus, 210 basis points on the customer that we elected to resign from and 150 basis points on the final customer that experienced some disruption. That’s about a 5% aggregate impact in our fourth quarter revenue versus the prior year. So we understand the cost plus impact and as we rationalize some of our less profitable customers, we're going to see some of these impacts.

Sure, but in addition to that, Mark, your green coffee costs were down, your pricing was down for national accounts, Okay, so that’s the 1.8 correct?

That’s 1.8, yes, that’s correct.

Okay, why then was that percentage difference less than for the full year? It looks like it’s a slower percentage volume increase in the fourth quarter than it was for the nine months?

Yes, so the 14.5% I think was the total year decline in coffee prices. It wasn’t as pronounced -- I'm sorry, 14.2% decline in our purchased commodity cost. It was much more pronounced through the entire year. The quarter-over-quarter change was not that pronounced.

Okay. Second question, is the inefficiency stemming from the volume growth continuing into the new fiscal year? Are there still the sort of operating inefficiencies that affected your recent quarters?

Tony, its Mike. I will take that. So, if you traced back through, there were couple of the key drivers of the inefficiency. The way I would call it is they are still the right thing to do but we do not execute them up to our standards. The first was some issues we had as we've taken on such a significant amount of volume. Next we didn’t execute our move to the Oklahoma City Refurbishment Center as well as we'd like and frankly we've had some hiring issues in our Houston facility. I believe we have addressed those now. We are not seeing the lingering impact of that but it just reminds us that there are some growing pains when you take on this kind of volume growth and we need to do a better job of reacting to it in the future.

So that's no, right?

Yes.

It's not an ongoing problem?

Thank you, Tony, yes.

My last question, your new ERP system, there is obviously a lot to do. You mentioned route optimization, SKU optimization and a number of other things I'm sure. Could you give me a sense of a short-term timeline in terms of what’s on the front burner in terms of efficiencies that that new system might provide over the very short term?

Tony, I'll take the first shot at this and then turn it over to Mark. I don’t think we're in any position to make any kind of clear financial assessment of what it would be. However, we are seeing gains as we undertake efforts like cutting the number of SKUs we have. If you look over the last three years, I believe we have removed a third of the shelf keeping units out of our system, which simplifies our supply chain. We are looking at implementing a mobile sales solution to help our route sales organization manage customers more efficiently and frankly move more quickly throughout the day. And we think that could save significantly but it’s very hard to put a dollar figure on that. And then I still think we're in the infancy of seeing our supply chain as one. As you may recall, we were running our three manufacturing facilities somewhat independently just a few years ago. We're now seeing that as we manage it as one organism if you will. There are considerable benefits but I can’t quantify it for you right now.

I'll add on to that. Tony, I think the real -- the base bone of the ERP system being ported on one platform is very important. It serves as really the springboard for things like mobile sales, supply chain kind of common operating platform. I really think that the mobile sales tool will provide us with another level of efficiency and productivity. We're excited about that, to bring that on.

When is that going to be driven out?

We’re -- without really committing where we’re hopeful that it’s in our fiscal ‘15 year, that we have the ability to at least start rolling it out and it really will revolutionize or at least improve the tool that our over 500 route sales folks used to go do business every day. So there is a lot hope and optimism on that, complete with a scanning solution. We don’t have barcode scanning, which is kind of basic thing, but we don’t have that all the way through into our branches and our route trucks. So just a lot of new efficiency tools that we'll bring it forward and we are looking forward to the supply chain efficiency that we get from those tools.

Our next question comes from Mitchell Sacks with Grand Slam. Your line is open.

In talking a little bit about some of the asset sales that you’ve done over the years and most recently I guess the idled LA refurbishment facility, is there much less for you guys to realize over the next 12 to 24 months?

Let me start with that Mitch. I think we’re really just in the infancy of understanding where we can improve the efficiency of our supply chain. That’s the basis we use to look at these types of moves in real estate or said another way, we’re not looking just to sell it for selling sake, but if we can make a change in the supply chain which lowers our cost, then it will be a smart thing to do. I’d like to give you more concrete answer, but we’re still on our infancy of assessing our supply chain as one group. So I think that there is more to do, which I just couldn’t quantify it for you or give you a forward looking view of that.

And then during the call you talked a little bit about your hedging strategy and shifting down the number of contracts that you’re currently utilizing to hedge inventory, how do we think about that as investors in terms of trying to make our own projections going forward?

Hi, Mitch. This is Mark. So the decision to kind of slowly drain some of our futures portfolio, that was not just on the futures that we hold for our street business, but also many of our large national customers also had the exact same rationale. We were locking in pricing when coffee was under $1.50 and as coffee kind of went up, the natural inclination was to get a little bit shorter and kind of lead down. I think what we see, specifically when we’re out purchasing the commodity is somewhat different than the market is telling us when we’re looking at those futures market. So there was a lot of speculation in the third and fourth quarter. At least we believe, there was speculation in that coffee futures market which helped to drive prices back over $2 and you can see that they’ve kind of bounced around a little bit, but softened some since then. So it’s really -- we act independently and then we also act at the request of our customers as to how many futures and how far out we go and collectively we evolved in choosing to kind of come a little bit shorter as prices went up. And we’ll continue to assess that. I mean futures market for us really provides a reaction period where we can react within to choose to take pricing actions to the customers. Ultimately, if coffee is at $2 and stays at $2 or goes higher, we ultimately have to take pricing to the customer to reflect that change in the commodity price. The hedging portfolio just provides a certain amount of time within which to react.

And then the final question has to do more with asset strategy. So you have a clean balance sheet at this point with no debt. Is there any thought to selective tuck-in acquisitions or are you still at a point in terms of rolling out your ERP and your sales force optimization that it doesn’t quite make sense yet?

Mitch, I’ll go ahead and I take that one. We’re looking at all sorts of opportunities as we have a healthier balance sheet to strengthen our company. When it comes to acquisitions, I would say we’re probably looking at smaller acquisitions that can be quickly and efficiency tucked-in to our overall business. And I think that what we’d like to do is find those, get some experience in successfully integrating them and then move on; or said another way, I wouldn’t want to see us taking on a significant risk as we do have momentum in the marketplace. On the other hand, we do see opportunities. So I hope that gives you some sense of how we’re thinking about it.

Our next question comes from Carter Dunlap with Dunlap Equity Management. Your line is open.

Most of my questions have been asked but just to answer -- just to sort of go back to Mitch’s comment about the hedging, I obviously misunderstood. I thought it was going to be much more of a steady state function for the national account business, but having said that, so using your example, if coffee were to stabilize at $2 per pound green -- I guess what I’m trying to figure out is what would bring the volume of hedging back on that you had said a year ago? Would it be -- if you saw a stability going forward, would we stay at this low level?

If the market was at $2 and stayed at $2, then definitely you wouldn’t need to hedge at all, but I think we only control or I should say it a different way. We have -- a large portion of our hedging portfolio is directed by our customers and so they have chosen to get shorter, the national account customers. We’ve also kind of followed suite, maybe not quite as much as them but to the extent that call it our portfolio was very full in through the second fiscal quarter of 2014. A lot of our customers have directed us to hold off and not acquire futures contracts, not go out as far. It’s really a question of how far out you hedge as opposed to the number of contracts, you’re hedging out 369 and in some cases over 12 months and so some customers choose to go longer and some choose to go shorter. We tend to think of it as a buffer. Like I said for the change in prices, if coffee prices changed dramatically like they did in Q3 and Q4, it gives us a reaction time to ultimately contemplate when and how much pricing we have to take to our non-cost plus pricing customers. So that’s primarily our DST and our street customers.

And just -- I said one question but actually I was knocked off at the beginning of the call. You made some reference it sounds like to your SKU optimization. Did you make any statements about where you are in terms of progress so far?

The only comment we made, and I think we might have even touched on it at our annual shareholder meeting, we felt we could cut about a third of the SKUs out from where they were in our fiscal 2011. We ended up doing slightly better than that as we finish the year and right now we’re looking at really the next level of how we can simplify the supply chain, yet still meet the needs of our customers. One of the byproducts of these integrations is that we have several -- more than several -- quite a few coffee formulas if you will that are relatively similar. So the process we try to go through is to align on those but there is some work to work with the customer even when there is a small change in the formula. I personally believe we’ve got a significant way to go but we’re really reassessing now after the last wave was successfully completed.

That’s all the time we have for questions today. I will now turn it back over to Mr. Keown for concluding remarks.

Well, thank you everyone for being part of Farmer Brother's inaugural earnings conference call. We appreciate your interest in our story and are excited about the future. We look forward to continuing the progress we’ve made in fiscal 2014 and telling you more about our accomplishments on our fiscal 2015 first earnings call in early November and at our annual shareholders meeting in early December. Thank you very much and have a great day.

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation and have a wonderful day. You may all disconnect.