Farmer Bros. Co. Reports First Quarter Fiscal 2017 Financial Results
First Quarter Fiscal 2017 Highlights
- Volume of green coffee pounds processed and sold increased 8.1% in the first quarter of fiscal 2017 as compared to the first quarter of fiscal 2016.
- Gross profit increased 1.2% to
$51.2 million in the first quarter of fiscal 2017 from$50.6 million in the first quarter of fiscal 2016, and gross margin increased to 39.2% in the first quarter of fiscal 2017 from 37.9% in the first quarter of fiscal 2016. - Income from operations was
$2.5 million in the first quarter of fiscal 2017 as compared to a loss from operations of$(0.6) million in the first quarter of fiscal 2016. - Net income was
$1.6 million , or$0.10 per diluted common share, in the first quarter of fiscal 2017, including net gains of$1.7 million from sales of assets and earnout from last year's sale of spice assets, as compared to a net loss of$(1.1) million , or$(0.07) per common share, in the first quarter of fiscal 2016. - Adjusted EBITDA increased to
$11.6 million in the first quarter of fiscal 2017, from$10.7 million in the first quarter of fiscal 2016, and Adjusted EBITDA Margin increased to 8.9% in the first quarter of fiscal 2017, from 8.0% in the first quarter of fiscal 2016.
The foregoing non-GAAP financial measures are reconciled to their corresponding GAAP measures at the end of this press release.
“We are pleased to see our team’s efforts in strengthening our DSD organization, winning new customers and increasing volume with existing customers, along with enhancing efficiencies in our supply chain reflected in our first quarter results,” said President and CEO,
First Quarter Fiscal 2017 Results
Net sales in the first quarter of fiscal 2017 were
Gross profit in the first quarter of fiscal 2017 increased
In the first quarter of fiscal 2017, operating expenses decreased
Income from operations in the first quarter of fiscal 2017 was
Total other income in the first quarter of fiscal 2017 was $0.2 million which included net gains from investments and lower net losses on derivative instruments, partially offset by higher interest expense, as compared to total other expense of
In the first quarter of fiscal 2017, the Company recorded income tax expense of
Net income was
Non-GAAP Financial Measures
Non-GAAP net income, Non-GAAP net income per diluted common share, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures; a reconciliation of these non-GAAP measures to their corresponding GAAP measures is included at the end of this press release.
Non-GAAP net income in the first quarter of fiscal 2017 was
Adjusted EBITDA increased to
Treasurer and CFO,
Investor Conference Call
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About
Founded in 1912,
Headquartered in
Forward-Looking Statements
Certain statements contained in this press release, including the Company’s plans and expectations regarding the corporate relocation plan, are not based on historical fact and are forward-looking statements within the meaning of federal securities laws and regulations. These statements are based on management's current expectations, assumptions, estimates and observations of future events and include any statements that do not directly relate to any historical or current fact. These forward-looking statements can be identified by the use of words like “anticipates,” “estimates,” “projects, ” “expects, ” “plans, ” “believes, ” “intends, ” “will, ” “could,” “assumes” and other words of similar meaning. Owing to the uncertainties inherent in forward-looking statements, actual results could differ materially from those set forth in forward-looking statements. The Company intends these forward-looking statements to speak only at the time of this press release and does not undertake to update or revise these statements as more information becomes available except as required under federal securities laws and the rules and regulations of the
FARMER BROS. CO. | |||||||
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | |||||||
(In thousands, except share and per share data) | |||||||
Three Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Net sales | $ | 130,488 | $ | 133,445 | |||
Cost of goods sold | 79,290 | 82,866 | |||||
Gross profit | 51,198 | 50,579 | |||||
Selling expenses | 38,438 | 36,441 | |||||
General and administrative expenses | 8,936 | 9,465 | |||||
Restructuring and other transition expenses | 3,030 | 5,450 | |||||
Net gains from sale of spice assets | (158 | ) | — | ||||
Net gains from sales of assets | (1,553 | ) | (214 | ) | |||
Operating expenses | 48,693 | 51,142 | |||||
Income (loss) from operations | 2,505 | (563 | ) | ||||
Other income (expense): | |||||||
Dividend income | 265 | 293 | |||||
Interest income | 129 | 104 | |||||
Interest expense | (389 | ) | (121 | ) | |||
Other, net | 191 | (875 | ) | ||||
Total other income (expense) | 196 | (599 | ) | ||||
Income (loss) before taxes | 2,701 | (1,162 | ) | ||||
Income tax expense (benefit) | 1,083 | (88 | ) | ||||
Net income (loss) | $ | 1,618 | $ | (1,074 | ) | ||
Net income (loss) per common share—basic | $ | 0.10 | $ | (0.07 | ) | ||
Net income (loss) per common share—diluted | $ | 0.10 | $ | (0.07 | ) | ||
Weighted average common shares outstanding—basic | 16,562,984 | 16,269,368 | |||||
Weighted average common shares outstanding—diluted | 16,684,319 | 16,269,368 |
FARMER BROS. CO. | |||||||
CONSOLIDATED BALANCE SHEETS (Unaudited) | |||||||
(In thousands, except share and per share data) | |||||||
September 30, 2016 | June 30, 2016 |
||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 16,502 | $ | 21,095 | |||
Short-term investments | 26,017 | 25,591 | |||||
Accounts and notes receivable, net | 46,914 | 44,364 | |||||
Inventories | 51,102 | 46,378 | |||||
Income tax receivable | 254 | 247 | |||||
Short-term derivative assets | 3,688 | 3,954 | |||||
Prepaid expenses | 4,210 | 4,557 | |||||
Assets held for sale | 7,083 | 7,179 | |||||
Total current assets | 155,770 | 153,365 | |||||
Property, plant and equipment, net | 140,674 | 118,416 | |||||
Goodwill and intangible assets, net | 6,441 | 6,491 | |||||
Other assets | 7,781 | 9,933 | |||||
Deferred income taxes | 79,299 | 80,786 | |||||
Total assets | $ | 389,965 | $ | 368,991 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | 34,837 | 23,919 | |||||
Accrued payroll expenses | 16,499 | 24,540 | |||||
Short-term borrowings under revolving credit facility | 200 | 109 | |||||
Short-term obligations under capital leases | 1,261 | 1,323 | |||||
Sale-leaseback financing obligation | 42,765 | — | |||||
Other current liabilities | 8,042 | 6,946 | |||||
Total current liabilities | 103,604 | 56,837 | |||||
Accrued pension liabilities | 67,522 | 68,047 | |||||
Accrued postretirement benefits | 20,615 | 20,808 | |||||
Accrued workers’ compensation liabilities | 11,459 | 11,459 | |||||
Other long-term liabilities-capital leases | 699 | 1,036 | |||||
Other long-term liabilities | 100 | 28,210 | |||||
Total liabilities | $ | 203,999 | $ | 186,397 | |||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock, $1.00 par value, 500,000 shares authorized and none issued | — | — | |||||
Common stock, $1.00 par value, 25,000,000 shares authorized; 16,793,561 and 16,781,561 shares issued and outstanding at September 30, 2016 and June 30, 2016, respectively | 16,794 | 16,782 | |||||
Additional paid-in capital | 40,109 | 39,096 | |||||
Retained earnings | 198,400 | 196,782 | |||||
Unearned ESOP shares | (6,434 | ) | (6,434 | ) | |||
Accumulated other comprehensive loss | (62,903 | ) | (63,632 | ) | |||
Total stockholders’ equity | $ | 185,966 | $ | 182,594 | |||
Total liabilities and stockholders’ equity | $ | 389,965 | $ | 368,991 |
Non-GAAP Financial Measures
In addition to net income determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we use the following non-GAAP financial measures in assessing our operating performance:
“Non-GAAP net income” is defined as net income (loss) excluding the impact of:
- restructuring and other transition expenses;
- net gains and losses from sales of assets;
- non-cash income tax benefit, including the release of valuation allowance on deferred tax assets;
- non-recurring proxy contest-related expenses; and
- non-cash interest expense accrued on the Torrance facility sale-leaseback financing obligation;
and including the impact of:
- income taxes on non-GAAP adjustments.
“Non-GAAP net income per diluted common share” is defined as Non-GAAP net income divided by the weighted-average number of common shares outstanding, inclusive of the dilutive effect of common equivalent shares outstanding during the period.
“Adjusted EBITDA” is defined as net income (loss) excluding the impact of:
- income taxes;
- interest expense;
- depreciation and amortization expense;
- ESOP and share-based compensation expense;
- non-cash impairment losses;
- non-cash pension withdrawal expense;
- other similar non-cash expenses;
- restructuring and other transition expenses;
- net gains and losses from sales of assets; and
- non-recurring proxy contest-related expenses.
“Adjusted EBITDA Margin” is defined as Adjusted EBITDA expressed as a percentage of net sales.
Restructuring and other transition expenses are expenses that are directly attributable to the corporate relocation plan, consisting primarily of employee retention and separation benefits, facility-related costs and other related costs such as travel, legal, consulting and other professional services.
In the first quarter of fiscal 2017, we modified the calculation of Non-GAAP net income and Non-GAAP net income per diluted common share (i) to exclude non-recurring expenses for legal and other professional services incurred in connection with the 2016 proxy contest that were in excess of the level of expenses normally incurred for an annual meeting of stockholders ("2016 proxy contest-related expenses"), and non-cash interest expense accrued on the Torrance facility sale-leaseback financing obligation which will be included in the computation of the gain on sale upon conclusion of the leaseback arrangement, and (ii) to include income tax expense on the non-GAAP adjustments based on the Company's marginal tax rate of 39.0%. There was no similar adjustment for non-cash income tax expense in the first quarter of fiscal 2016 due to the valuation allowance recorded against the Company’s deferred tax assets at
We believe these non-GAAP financial measures provide a useful measure of the Company’s operating results, a meaningful comparison with historical results and with the results of other companies, and insight into the Company's ongoing operating performance. Further, management utilizes these measures, in addition to GAAP measures, when evaluating and comparing the Company's operating performance against internal financial forecasts and budgets.
Non-GAAP net income, Non-GAAP net income per diluted common share, Adjusted EBITDA and Adjusted EBITDA Margin, as defined by us, may not be comparable to similarly titled measures reported by other companies. We do not intend for non-GAAP financial measures to be considered in isolation or as a substitute for other measures prepared in accordance with GAAP.
Set forth below is a reconciliation of reported net income (loss) to Non-GAAP net income and reported net income (loss) per common share-diluted to Non-GAAP net income per diluted common share (unaudited):
Three Months Ended September 30, | ||||||||
(In thousands) | 2016 | 2015 | ||||||
Net income (loss), as reported | $ | 1,618 | $ | (1,074 | ) | |||
Restructuring and other transition expenses | 3,030 | 5,450 | ||||||
Net gains from sale of spice assets | (158 | ) | — | |||||
Net gains from sales of assets | (1,553 | ) | (214 | ) | ||||
Non-recurring proxy contest-related expenses | 1,270 | — | ||||||
Interest expense on sale-leaseback financing obligation | 310 | — | ||||||
Income tax expense on non-GAAP adjustments | (1,131 | ) | — | |||||
Non-GAAP net income | $ | 3,386 | $ | 4,162 | ||||
Net income (loss) per common share—diluted, as reported | $ | 0.10 | $ | (0.07 | ) | |||
Impact of restructuring and other transition expenses | $ | 0.18 | $ | 0.33 | ||||
Impact of net gains from sale of spice assets | $ | (0.01 | ) | $ | — | |||
Impact of net gains from sales of assets | $ | (0.09 | ) | $ | (0.01 | ) | ||
Impact of non-recurring proxy contest-related expenses | $ | 0.08 | $ | — | ||||
Impact of interest expense on sale-leaseback financing obligation | $ | 0.02 | $ | — | ||||
Impact of income taxes on non-GAAP adjustments | $ | (0.07 | ) | $ | — | |||
Non-GAAP net income per diluted common share | $ | 0.21 | $ | 0.25 |
Set forth below is a reconciliation of reported net income (loss) to Adjusted EBITDA (unaudited):
Three Months Ended September 30, | ||||||||
(In thousands) | 2016 | 2015 | ||||||
Net income (loss), as reported | $ | 1,618 | $ | (1,074 | ) | |||
Income tax expense (benefit) | 1,083 | (88 | ) | |||||
Interest expense | 389 | 121 | ||||||
Depreciation and amortization expense | 5,008 | 5,295 | ||||||
ESOP and share-based compensation expense | 942 | 1,229 | ||||||
Restructuring and other transition expenses | 3,030 | 5,450 | ||||||
Net gains from sale of spice assets | (158 | ) | — | |||||
Net gains from sales of assets | (1,553 | ) | (214 | ) | ||||
Non-recurring proxy contest-related expenses | 1,270 | — | ||||||
Adjusted EBITDA | $ | 11,629 | $ | 10,719 | ||||
Adjusted EBITDA Margin | 8.9 | % | 8.0 | % |
Investor Contact:Isaac N. Johnston, Jr. (682) 549-6663