John B. Sanfilippo & Son, Inc.

Good day, and welcome to the John B. Sanfilippo & Sons Third Quarter Fiscal 2024 Operating Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 1-1. As a reminder, this call is being recorded. I would like to turn the call over to Jeffrey Sanfilippo, CEO. Please go ahead.

Thank you, Michelle. Good morning, everyone. and welcome to our 2024 Third Quarter Earnings Conference Calls. Thank you for joining us. On the call with me today is Jasper Sanfilippo, our COO, and Frank Pellegrino, our CFO. 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 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. Looking at results, I'm happy to report the Lakeville acquisition increased quarterly sales volume by 18.1 million pounds, or 24.1%, over third quarter of fiscal 2023, and increased our quarterly net sales by approximately $46.9 million, or 19.7% over the third quarter of fiscal 23. Our integration team has made great progress in optimizing the operations in Lakeville, and we currently expect it to become accretive to our operating income during the upcoming fourth quarter, which is significantly ahead of our initial schedule. We also sold in the third quarter approximately $3.2 million of our own internally developed nutrition bars from our Elgin, Illinois manufacturing facility. This complements the snack bars produced in Lakeville. I'd like to personally thank all our employees who have worked with passion, dedication, and a sense of urgency to optimize the operations in Lakeville and continue to drive improvement. The company just held our board of directors meeting in Lakeville where the officers had a chance to tour the plant. I am so proud of the management team in that facility who are now part of the JDSS family. Their commitment to quality, safety, and customer service is remarkable. Even though we continue to operate in an environment of elevated retail selling prices and cautious consumers, our consumer distribution channel delivered strong results. Our private brand business reversed two consecutive quarters of decreasing sales volume. While our branded business sales volume decreased in the quarter, it represented a significant improvement over the decreases we experienced over the last three quarters as we continue to see strong momentum and a major e-commerce customer for our branded products. This time last year, we started seeing signs of a challenging operating and inflationary environment. Despite these headwinds, our company executed our strategies, optimized our cost structure and supply chain, and created capabilities to expand our product offerings. In Q3 of fiscal 23, we started shipping our first private brand bars to a major retailer. Since that time, we have gained new private brand business at many other retailers across the country. We continue to receive favorable feedback from our partners and expect to gain additional new customers in subsequent quarters. And we are working on numerous innovative sales opportunities utilizing our new bar capabilities. Our board of directors met yesterday and approved a dollar per share special cash dividend, reinforcing our goal of creating long-term shareholder value by returning capital to our shareholders. The dividend will be paid on June 20th, 2024 to stockholders of record as of May 31st, 2024. Looking ahead to the fourth quarter and fiscal 25, we are optimistic about the contributions of the Lakeville acquisition to our operating results based on the current performance and ongoing and expected future operational improvements. We initially estimated the current fiscal year dilution due to the Lakeville acquisition to range from 80 cents to a dollar per diluted share, which we have now updated to 25 cents to 50 cents per diluted share as a direct result of our team's excellence in optimizing the operations in Lakeville during the third quarter. Our strong operating results would not be possible without the dedication of our talented team members who continue to exceed expectations and create value for our customers and shareholders. Consumers have reacted to higher retail prices at the shelf and there have been demand destruction because of increased prices. Our insights team has done an extraordinary job understanding price elasticities in the nut and trail and snack bar categories. We are testing price changes based on these insights and achieved significant initial success at a major retailer. We are monitoring this positive trend and are initiating plans to execute this price strategy with other retail partners. In addition to entering new product categories such as the snack and nutrition bars, a long-term growth plan also includes transforming our branded portfolio. Last year, the company relaunched and rebranded our Orchard Valley Harvest product line. The new products and packaging have had mixed results in the market, and we are assessing next steps for the brand. This is a difficult environment for most brands across the snack category, as consumers have tightened their wallets due to current inflationary pressures. But we continue to focus on expanding distribution, building brand awareness, and trial with innovative marketing programs and allocating a portion of the sales of OVH to support our partnership with Conscious Alliance to help end child hunger. I'll now turn the call over to Frank to discuss our financial performance.

Thank you, Jeffrey. Starting with the income statement, net sales for the third quarter of fiscal 2024 increased 33.3 million, or 14%, to 271.9 million, and for net sales of 238.5 million, for the third quarter of fiscal 2023. Net sales for the current third quarter include approximately 46.9 million of net sales in the late flow acquisition. Excluding late flow acquisition, net sales decreased 13.6 million, or 5.7%. The decline was due to a 4.3% decrease in the weighted average sales price per pound, combined with a 1.4% decrease in sales value. which is defined as pounds sold to customers. Decrease in weighted average selling price primarily resulted from lower commodity acquisition costs for all major tree nuts, except walnuts, which was partially offset by higher commodity acquisition costs for peanuts. Sales volume declined for all major nut types in the third quarter. Sales volume increased 33.1% in the consumer distribution channel, primarily due to Lakeville acquisition. whose sales volume is almost exclusively private brand bars. Excluding the impact of the Lakeville acquisition, sales volume increased 0.3% in the consumer distribution channel, primarily due to a 0.5% increase in private brand sales volume. The 0.5% increase in sales volume for our private brand and consumer distribution channel was driven by increased peanut butter and nutrition bar distribution, which was partially offset by a decrease in snack and trail mix volume at a mass merchandising retailer. Additionally, new sales distribution of snack and trail mix at a grocery store retailer was partially offset by lost distribution at a drug channel customer. The 5.8% decrease in sales volume for our branded products, which includes Fisher Recipe Nuts, Fisher Snack Nuts, Horsetail Harvest, and Cellar Style Nuts in the consumer distribution channel was primarily attributable to a 15.8% decrease in sales volume for fish or snack nuts due to lost distribution at a mass merchandising retailer and decreased sales volume at several grocery store retailers. These decreases were partially offset by increased e-commerce sales volume for our branded products. Sales volume decreased 2.4% in the commercial ingredients channel due to competitive pricing pressures and not recurring peanut bar sales at a food service distributor that occurred in the third quarter of fiscal 2023. This decrease was partially offset by new peanut bar business at two other food service distributors and sales volume of loose granola associated with the Lakeville acquisition. Excluding the impact of the Lakeville acquisition, sales volume decreased 3% in the commercial Sales volume decreased 11.3% in the contract packaging distribution channel due to decreased cashew and mixed nut distribution by a major customer due to soft consumer demand. Third quarter gross profit margin as a percentage of net sales decreased to 18.1% compared to 20.9% for a third quarter fiscal 2023 mainly related to higher net sales base from the late goal acquisition. Excluding the impact of the Lakeville acquisition, gross profit margin decreased slightly by 30 basis points due to higher commodity acquisition costs for peanuts and walnuts, reduced production volume, and increased expenditures related to facility repairs and maintenance, non-compliant inventory, and incentive compensation. Gross profit, which was positively impacted by approximately $3 million due to Lakeville acquisition, upwards approximately $1.7 million was related to a partial release of an inventory evaluation reserve, initially reported at the acquisition date, decreased slightly by approximately $600,000, or 1.2%, due to the same reasons contributing to the decrease in gross profit margin. Excluding the impact of the late-fall acquisition, gross profit decreased by 3.6 million, or 7.2%. Total output expenses for the current third quarter increased $2.9 million in the quarterly comparison, of which approximately $1.8 million directly relates to operating expenses associated with the Lakeville acquisition. Excluding the Lakeville acquisition, total operating expenses increased $1.1 million, mainly due to increased incentive compensation, which was partially offset by decreases in freight and advertising expenses. Total operating expenses for the current third quarter decreased to 11.3% of net sales from 11.7% for last year's third quarter due to the reasons cited before and a higher net sales base due to the LACO acquisition. Excluding the impact of the LACO acquisition, total operating expenses as a percentage of net sales increased to 12.9% from 11.7% due to the reasons cited before and a lower net sales base. Interest expense current third quarter increased to $800,000 from $600,000 for the third quarter of fiscal 2023, primarily due to higher average debt levels due to late flow acquisition. Net income for the third quarter of fiscal 2024 was $13.5 million, or $1.15 per diluted share, compared to $15.7 million, or $1.35 per diluted share, for the third quarter of fiscal 2023. Now taking a look at inventory. The total value of inventories on hand at the end of the current third quarter increased 20.3 million, or 10.7%, mainly due to the additional 24.9 million of inventory associated with the Lakeville acquisition. Excluding the Lakeville acquisition, the value of total inventories on hand decreased 4.5 million, or 2.4% year over year. The decrease in the value of total inventories primarily due to lower quantities of finished goods and lower quantities and commodity acquisition costs for work and process, raw materials, cashews, and almonds. This was offset by higher quantities of pecans and walnuts and higher commodity acquisition costs for walnuts. The weighted average cost per pound of raw nut and dried fruit input stock on hand, excluding the impact of the Lakeville acquisition, decreased 11.7% year over year mainly due to higher quantities of peanuts and hinshaw walnuts and peacocks. Moving on to year-to-date results, net sales for the first three quarters of the current year increased 4.1% to $797.2 million compared to the first three quarters of fiscal 2023, primarily due to the Lakeville acquisition. Excluding the impact of the Lakeville acquisition, net sales decreased 5.7% to $721.6 million, primarily attributable to a 3.8% decline in sales volume and a 2% decrease in the weighted average selling price per pound. Sales volume increased 8.8%, primarily due to Lakeville acquisition. Excluding the impact of the Lakeville acquisition, sales volume decreased 3.8%, primarily due to sales volume decreases in the consumer and contract packaging chain. Growth profit margin increased slightly from 20.5% to 20.6% on sales. Total operating expenses for the current year-to-date period increased $5.4 million to $93.6 million. The increase in total operating expenses was mainly due to increases in incentive compensation, incremental operating expenses associated with the local acquisition, advertising expense, and charitable food donation. These increases were partially offset by the one-time bargain purchase gain from the late goal acquisition and the decrease in trade expense. Net income for the first three quarters of fiscal 2024 was $50.2 million, or $4.30 per diluted share, compared to net income of $48.2 million, or $4.14 per diluted share for the first three quarters of fiscal 2023. Please refer to our 10Q which was followed yesterday for additional details regarding our financial performance for the third quarter of fiscal 2024. Now I turn the call back over to Jeffrey to provide additional comments on our operating results for the third quarter of fiscal 2024 and discuss category trends.