Good day, ladies and gentlemen, and thank you for standing by, and welcome to the John B. Sanfilippo & Son Third Quarter Fiscal 2012 Operating Results Conference Call. My name is Britta, and I'll be your operator today. [Operator Instructions] I would now like to hand over the call to the host for today's call, Mr. Mike Valentine, CFO. Go ahead, please.

Thank you, Britta. First, we would like to thank everyone for participating on our quarterly conference call for the third quarter of fiscal 2012. Before we start, we'd like to advise all participants 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 our results are explained in the various SEC filings that we have made, including Forms 10-K and 10-Q. We encourage you all to refer to these filings to learn more about these risks and uncertainties. Starting with a recap of our results. The third quarter net sales increased by 11.9% to $153.8 million from $137.4 million for the third quarter of fiscal 2011. The increase in net sales was mainly attributable to price increases implemented over the last 12 months for nearly all nuts except almonds. Price increases were implemented in response to rising tree nut and peanut acquisition costs. Sales volume, or total pounds sold to customers, was virtually unchanged in the comparison to sales volume for the third quarter of fiscal 2011. Sales volume increases in the commercial ingredients and contract packaging distribution channels, primarily resulting from increased almond sales and new sales of roasting services, were offset by sales volume declines in the consumer and export distribution channels. The declines in sales volumes in these distribution channels were mainly attributable to the unfavorable impact of high cashew, pecan and peanut prices on consumer demand for products containing these nuts. The loss of some low margin private label business in the latter part of fiscal 2011 also contributed to the decline in sales volume in the consumer distribution channel in the quarterly comparison. Current year-to-date net sales increased by 5.1% to…

Thank you, Mike. Good morning, everyone. The fiscal 2012 third quarter net income of $1.4 million marks our strongest third quarter since the third quarter of fiscal 2005. This was a remarkable accomplishment considering that acquisition costs for certain key nuts continue to increase significantly over the historically high acquisition costs that existed in last year's third quarter. You will note 2 important trends that have developed over the past year. First, the changes our management team made to our business and the strategies we are executing allow us to better manage the complexity of volatile commodity shifts in our industry. With focused efforts to maintain alignment of selling prices and acquisition costs, efforts to control manufacturing spending and efforts to optimize inventory positions, our company was successful in returning to normal operating margins. Due to our vertical integration, years of nut procurement expertise, visibility of crop conditions, and what I believe to be a core competency in supply chain proficiencies, JBSS was able to react quickly and effectively. We worked with our key partners to optimize their product portfolios, formulas, pack sizes and merchandising displays to keep them competitive while driving incremental volume. A second trend which impacts our entire industry is that higher selling prices continue to have an unfavorable impact on sales volume in the consumer distribution channel and in the snack category as a whole. The necessary price increases implemented by nut processors and national brands continue to work their way through the market, impacting consumer and customer buying decisions. For example, the average retail prices for cashews increased 7.3% during the 12 weeks ending March 17. When we look at average retail prices for cashews versus last year, they have increased 31.5%. We believe these higher prices have impacted consumption of snack cashews in the…

Okay. Thanks, Jeff. At this point in the call, we will now open the call to questions from participants. Britta, would you be kind enough to queue up the first question?

[Operator Instructions] Sir, you have no question at this time. [Operator Instructions] Your first question from Greg Venit [ph], a private investor.

Is there any update on the real estate within Chicago? The sale of real estate, do you have an expectation that, that might be done sometime this calendar year?

No, we don't have anything to update on that, Greg. As you know, and as we've told everyone, we have a buyer out there. They do have a lengthy political process to go through. And we're just going to -- hopefully get it done this calendar year. But it's really up to both the state and the certain municipality to get that done.

Okay. And I don't know if you can comment on this or not, but the problems at Diamond Foods are having, the -- what expectations do you have as -- would you be able to pick up some of their business from the growers? Or is that something that we won't know until at the end of the summer?

It's our understanding, Greg, that their contract renewal period expires sometime in June. And we don't anticipate that we'll see much progress on that until that date is reached.

Are you able to enter discussions with these people? Or are any of these growers approached you at all as far as wanting to do business with you instead of Diamond?

Jeff?

Yes. Greg, this is Jeffrey. We have had some contact with several growers. We're obviously always looking to gain new growers. And we think there are opportunities with the situation this year to pursue new growers. I will say we picked up a few new growers in the past couple of months. But a lot of that will occur probably in the June time period when grower contracts come up for review.

And it's my understanding you all have the capacity to take on this addition without any more capital expenditure?

Yes. That's correct, Greg. We have quite a bit of excess capacity at our Gustine, California facility.

Our next question from Bruce Baughman, Franklin Advisory Service.

The -- I was interested in the comment in the release that noted that produced pounds increased by 17.8%. Has it -- and that's in contrast with pounds sold decreasing. Can you comment on that? Or give us some insight as to how that comes about? How the flow of product works there?

Sure, Bruce, this is Jeffrey. If you recall, we have 4 shelling plants that process peanuts of all varieties, walnuts and almonds and pecans. In those plants we continued to process the crop that we received throughout September through January. And so that -- those plants are building inventory. Those pounds count as produced pounds against the value-added products that we ship. So you will see variances between what the plants run, the inventories they build versus what we ship to customers.

Is that a function of your own scheduling? Or is it a function of when the product arrives?

So the product typically arrives during the fall. So it's really a function of what certain grade and sizes that we need and how we convert that in-shell material from farmers into sellable needs and then balancing our inventory needs with purchase material from the outside as well.

Okay. In a situation like we had where pounds produced goes up a lot and pounds sold goes down a bit, does that have some kind of effect on the margins in the quarter that might not be typical?

No.

We have our next question from Nick Peters, the company name is Milwaukee Private Wealth.

I was wondering if you can guys can expand a little bit more on the OVH, so far how that's performed compared to your expectations. And have you grown the footprint on the West Coast into new stores?

Yes. This is Jeffrey. We've gained distribution in some areas. We've really looked at this past year as a transitional period for the OVH brand. We really wanted to do a lot of consumer research and understand the dynamics of the produce consumers specifically for snacks and nuts in the category as we look to redesign the brand and create a marketing campaign and create that differentiation. We've gained little pockets here and there, but I would say our main push is going to start now, what with looking at new distribution.

And that new distribution, is that in more produce stores throughout more grocery stores?

Correct. It is the produce section of the grocery store.

We have no question in queue now. We have no question now.

Okay, Britta. Since there are no further questions in the queue, we'll call an end to the call for our third quarter. And we'd like to thank everyone for their interest in JBSS. Have a wonderful day. Thank you.

Thank you for your participation in today's conference call. This concludes the presentation. You may now disconnect and have a very good day. Thank you.