Good afternoon, ladies and gentlemen, and welcome to the Farmer Brothers Fourth Quarter and Fiscal Year 2017 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 is being recorded. I would now like to turn the call over to your host, Laurie Little. Please go ahead.

Thank you. Good afternoon, everyone. Thank you for joining Farmer Brothers fourth quarter and fiscal year 2017 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 2 hours after the conclusion of this call. The link to the audio replay will also be available on our website. Before we begin, 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 are available on the company's – 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, go ahead.

Thank you, Laurie. Hello everyone, and thank you for joining us. Before we begin I want to thank you for all of your patience over the past two weeks as we work to complete our financial statement reporting process for the fiscal year. We've been working as quickly and diligently as possible and are glad to be in a position to speak with you all today. On today's call, we will cover the operational and financial highlights of the quarter in the year and provide an update on our key initiatives before opening the call up for questions. 2017 was a transformational year for Farmer Brothers as we made significant changes to our operations and infrastructure on our journey to build sustainable profitable growth and create long-term value for all of our stakeholders. As we look back on the year and all that was successfully accomplished, I believe it is clear that we are making tremendous progress towards achieving our long-term goals and objectives. While we share with you our major projects throughout the year, also made other noteworthy improvements in our operations, including significant improvements in safety, implementation of supply chain projects that drove cost savings, as well as the launch of both fleet tracking and telematics and smart touch tools for our delivery personnel. We also brought onboard new talent in every area of the company and launched a renewed diversity and inclusion program across the organization. All of these projects were initiated with one thing in mind, creating a long-term value. I'm pleased to report that not only have we made significant strides in bringing new customers to the Farmer Brothers family, we also retain key customers and in many cases have extended contracts out several years. Finally, we also launch new products and continue to make…

Thanks, Mike. Before I begin I would just like to briefly expand on Mike comments regarding our delayed earnings report. As we stated in our 8-K okay on September 12, a delay of the announcement of full results is due to the additional time we needed to complete the review, testing and evaluation of internal control procedures for the fiscal year. We have been working as quickly and diligently as possible to conclude this process and be able to report our full and final financial results for the fiscal year. Now that we have completed this work, we will also be filing our 10-K today with the sign up from our auditors. 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 the income statement, net sales for the quarter were a $133.8 million, representing a decrease of $400,000 or 0.3% as compared to the prior year quarter. When you exclude West Coast Coffee, China Mist and the sales we generated last year related to our spice business, we divested net sales increased 0.2%. Green coffee process and sold increased 0.9% and excluding West Coast Coffee volume was flat with last year. As Mike mentioned, our fourth quarter coffee pounds and net sales growth was slower than we anticipated due to the softness in our national account business late in Q4. Going forward, we still expect our business - based business coffee pounds to grow in the 3% to 5% range annually. However, there can be fluctuation between quarters, especially with our large national accounts. This is demonstrated in our full year results for fiscal ’17, where coffee pounds excluding the benefit of West Coast coffee increased 5%…

Thanks, David. As always, I thank those on the call for your continued interest in Farmer brothers. We ended fiscal 2017 better positioned for growth than when we began. We are continuing to rebuild ourselves making significant progress towards our strategic initiatives and position Farmer Brothers for the next hundred years. Our restructuring efforts are showing great success by delivering solid financial results and continued improvements in operations. And with that, I'd like to open up the call for questions. Operator?

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

Good afternoon guys.

How are you?

Good. Good. So just the first thing, just given - just some of the things that have happened to the time line and when you reported your fourth quarter are you still going to have your Analyst Day on October 10? I think those are some tentative conversation about that?

Yeah, this is David. Francesco, we want to make sure the guys had enough notice of a calendar date is probably going to go out in a few days after this call to give you about 30 days time frame to put in your calendar. So it happened a little bit later.

Okay, perfect. This was some nice gross margin expansion. I think part of the concern was during the first three quarters, a lot of the margin expansion was just temporary as a lot of the manufacturing was being consolidated and that we shouldn't really be expecting things to be as rosy. But then it looks as if the product mix sort of helped you out with higher price point products and lower raw material commodity costs. Is this something that we should be seeing is more of a onetime thing or is this something that's going to be catching up to you in the first half of 2018?

You know what we said was it's consistent with the guidance before that our margin will have somewhat of a drag on it because of the DFW facility. But I think you could expect the margin to be maybe up you know, 75 to 100 basis points lower than the 40, its going to get close to 40%.

Okay. Something that is a little bit confusing to me is, look I know we're lapping some great coffee volume pound growth in the year ago period. And if we include West Coast Coffee the acquisition in the fourth quarter this year and if we exclude it, it almost seems as if there was no pound contribution from West Coast Coffee even though they closed on February 7 in the third quarter. So - and if it's the only incremental data point we got when you did the acquisition was that - they had a customer base of 2500 convenience stores. So they're just a little bit of color there and understanding why the volume contribution was in a little bit more?

You know, Francesco we’re getting good growth out of the West Coast Coffee business, we don't plan to break it out, it's not a separate segment. It's going to get integrated into our DSD network. What I can say is that if you go back out West Coast Coffee for the quarter, our pounds growth was about flat. So you can say the 0.9% growth was the delta for the benefit of West Coast Coffee for the quarter.

Right. And I guess that's what I'm getting at. So if we back out the 0.9% growth then Boyd’s was really contributed. We came back into a West Coast coffee contributed on a pound's basis right?

Yeah.

It's just simple - simple math and it just seems as if it's not - it's not much?

Yeah, you know, they have about 2000 customers, it's a growing business. But yeah, relative to the overall DSD business sure its small.

Okay. That right now is it for me, I'll probably jump back in queue. But thanks again.

Okay. Thank you.

Thank you. [Operator Instructions] And we do have a follow up question from Francesco Pellegrino with Sidoti. Your line is open.

All right guys I'm back. So when you guys did the Boyd’s acquisition, you had provided trailing 12 month revenue for Boyd’s and you provided us with post consolidated synergy EBITDA guidance for the business, once you're able to invest in certain product lines. And just when I look at where your EBITDA guidance is for this year a $50 million to $53 million we expect, does it include Boyd’s and if we include Boyd’s it would be an incremental $4 million to about $5 million. The guidance that you had given on the Boyd’s conference call included a lot of assumptions. You expect it to eventually deliver $13 million to $16 million in incremental adjusted EBITDA after approximately $9 million to $11 million of employee related fees and capital expenditures of 8 to 11? Is there - could you give us a longer outlook in regards to when we'll be able to recognize that incremental EBITDA that you had provided on the morning [ph] of the Boyd's acquisition?

Sure. What we said was the integration period is 12 to 18 months. We think it's going to be on the shorter end of that range. And then you're going to see that incremental EBITDA flow through on a run rate basis.

So if the initial guidance was 12 to 18 month and you think it's going to be towards the shorter end of that range then of the $13 million to $16 million then a big chunk of that's going to be coming into in the first quarter of 2019 or that…

On a run rate - the 12 month will happen in the back half - the first quarter 2019, you’re right, a year from the fourth - the second quarter this year.

So if we run with the assumptions that you're using now for your EBITDA guidance excluding the Boyd’s acquisition, which I guess assumes no new customer wins, the 50 to 53 would then be adding on the $13 million to $16 million?

That's right.

So then we're really looking at $63 million to $60 million, $69 million EBITDA business for fiscal 2019 assuming no new account wins.

That’s right. Fiscal year ’20, right, you get a full year.

Okay…

Still full year.

Can you talk about maybe some of your opportunities or how the success rate of your sales team in pursuing some new food service accounts? It assumes that you’ve been doing a pretty good job with just acquiring a higher margin like DSD business. But I would think what's going to really be driving operating leverage for the next four to six quarters is going to be anything that's really high volume business. I'm just wondering how it is the pursuit of that type of business going?

Yeah. Thanks a lot. I’ll take that one…

Could you be able to give us - you've been able to give us like metrics like we have two of the top 20 food service accounts. Maybe you can give us about identifying them like how many of the accounts that you don't - of the 18 that you don't currently have on relationships with like are you having conversations with 10% of them, 20%, 30% just a little bit of color in that regard?

Sure. I think two things are notable, one in the spirit of trying to give you all - a little better insight into the business. We were very pleased to be able to announce that we have two customer wins, both of brands and be recognizable. And obviously we can't speak about the specifics and we put an annualized volume of a $0.5 million to $2.5 million pounds to try to get that going. With some of the other businesses we've won over the last five years, we think there's some potential for ramp up, but it all really is on how you execute. So we try to give you something to react to there. We were very pleased as I commented earlier that we were able to extend contracts of roughly £20 million. And I think a lot of that is testament to the new facility, the team, the capabilities that are in the organization. And as I said the last couple of quarters we believe the pipeline is really robust. I prefer not to get into channel specifics. And I don't think that that's probably the best use of our time to go down that path. So overall I'm very bullish. I mentioned in the call will finish up as QF certification this year to put a rough time to it. We've been consistent, it's approximately the third quarter subject to a lot of work that's occurring here from our operations team and that's an important milestone to enable additional growth in the Dallas facility, although we have some capacity in Houston and a little bit in Portland. So when you put all that together, I know I'm giving a longer answer to the question than you want, but I think it paints a bullish picture for us to go out and continue to execute.

Okay. Your EBITDA guidance, excluding Boyd’s and including Boyd’s. You know we don't really get that much insight into what the depreciation contribution for acquiring Boyd’s is going to cause the run rate to be because you gave the depreciation and amortization range of what was it $8 million to $8.5 million a quarter. But if you didn't acquire the Boyd’s facility and the only incremental investment that you have for Boyd’s is investing in new product lines which have a long appreciable [ph] life. I would think that that $8 million to $8.5 million even though that excludes Boyd’s we're not talking about - inclusive of Boyd’s anything that's significant in regard to incremental depreciation and amortization, am I thinking about that correct?

Well, we we're going to spend $8 million to $11 million dollars in CapEx investment to integrate Boyd's. There's going to be some fair value accounting for goodwill and intangibles which we haven't done yet. So when we go through that work you know we'll give you the calculation. But you know you can use the $8 million to $11 million and it depreciated over a reasonable period of time. It has a longer life because a lot of this is for our plant infrastructure. But I would wait until we do that purchase price accounting to give you a better idea of what that amount is.

Right, Francesco in this period of time we’ve got some other…

Okay, perfect. That’s great. Thank you…

We should take and we can follow on afterwards.

Sure.

Thank you. And our next question comes from the line of Michael Hartman with Community Western [ph]. Your line is open.

Hey, everyone. I'm just wondering if you can -you spoke a little bit about some of the clients you've got on the pipeline, I'm wondering if you can speak to any acquisitions that might be in development if those are kind of closed any major part in future strategic development?

No we really can't speak to any specifics, but I think that if you go back over the last five years you see an evolution where five years ago as this management team came in place that the focus was on driving to profitability, improving the base. And I think we did a pretty good job of that. Then there was a period where we took on and proved we could take on some very demanding new customers. And we began to say – as the balance sheet improved and the financials began to improve and now we’ve – over the last that we proved [ph] to ourselves first with some smaller acquisitions and then more recently the Boyd that we can do. I think somebody's got to train in the background. I'll wrap it up. So I think it's fair to say that we're going to continue to participate in the market. Our first goal is outstanding execution of Boyd’s and then should opportunities come up like Boyd’s. We certainly want to participate and compete vigorously to be a part of those. But it would be inappropriate to share any specifics beyond that.

Okay. That's great. That all I have.

Thank you. And I'm showing no further questions at this time. I know how to turn the call back to Mike Keown for closing remarks.

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 all again very soon. Thank you very much.

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