Farmer Bros. Co. Reports Fourth Quarter and Fiscal 2016 Financial Results
Fourth Quarter Fiscal 2016 Highlights:
- Net sales increased
$1.6 million to $134.2 million in the fourth quarter of fiscal 2016, as compared to the prior year period; - Gross profit increased 6.6% to
$52.4 million in the fourth quarter of fiscal 2016, as compared to the prior year period; - Net income was
$84.2 million in the fourth quarter of fiscal 2016, primarily due to non-cash income tax benefit of$80 .3 million from the release of valuation allowance on deferred tax assets,$2.7 million in restructuring and other transition expenses associated with the Company’s corporate relocation plan and$2.8 million in net gains from sales of assets including spice assets, as compared to net losses of$2.2 million , including$5.9 million in restructuring and other transition expenses associated with the Company's corporate relocation plan in the prior year period. Net income per diluted common share was$5.05 in the fourth quarter of fiscal 2016, as compared to a net loss of$0.13 per common share in the prior year period; - Non-GAAP net income, excluding
$80.3 million in reversal of deferred tax asset valuation allowance,$2.7 million in restructuring and other transition expenses and$2.8 million in net gains from sales of assets including spice assets, was$3.8 million , and Non-GAAP net income per diluted common share was$0.23 in the fourth quarter of fiscal 2016, as compared to Non-GAAP net income of$3.7 million and Non-GAAP net income per diluted common share of$0.23 in the prior year period; and - Adjusted EBITDA was
$9.8 million , and Adjusted EBITDA Margin was 7.3% in the fourth quarter of fiscal 2016, as compared to Adjusted EBITDA of$11.1 million , and Adjusted EBITDA Margin of 8.3% in the prior year period.
(The foregoing non-GAAP financial measures are reconciled to their corresponding GAAP measures at the end of this press release).
President and CEO,
Mr. Keown continued, “As we separately announced today, we have signed an agreement to acquire the premium tea business,
Fourth Quarter Fiscal 2016 Results:
Net sales in the fourth quarter of fiscal 2016 increased
Gross profit in the fourth quarter of fiscal 2016 increased
Operating expenses in the fourth quarter of fiscal 2016 decreased
In the fourth quarter of fiscal 2016 selling expenses increased
As a result of the foregoing factors, income from operations in the fourth quarter of fiscal 2016 was
Total other income in the fourth quarter of fiscal 2016 was
Income tax benefit was
As a result of the foregoing factors, 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. In the fourth quarter of fiscal 2016, we modified the calculation of Non-GAAP net income and Non-GAAP net income per diluted common share to exclude the non-cash income tax benefit from the release of valuation allowance on deferred tax assets. We believe this non-cash income tax benefit is not reflective of our ongoing operating results and that excluding the income tax benefit will help investors with comparability of our results. The historical presentation of the non-GAAP measures was not affected by this modification.
Non-GAAP net income in the fourth quarter of fiscal 2016 was
Adjusted EBITDA was
Treasurer and Chief Financial Officer,
Fiscal 2016 Highlights:
- Net sales decreased 0.3% to
$544.4 million in fiscal 2016, as compared to fiscal 2015; - Gross profit increased 5.8% to
$208.5 million , in fiscal 2016, as compared to fiscal 2015; - Gross margin increased to 38.3% in fiscal 2016 from 36.1% in fiscal 2015;
- Income from operations increased 149.1% to
$8.2 million in fiscal 2016 from$3.3 million in fiscal 2015; - Net income in fiscal 2016 was
$89.9 million , or$5.41 per diluted common share, primarily due to non-cash income tax benefit of$80.3 million from the release of valuation allowance on deferred tax assets, as compared to$0.7 million , or$0.04 per diluted common share, in fiscal 2015; - Non-GAAP net income was
$17.6 million in fiscal 2016, as compared to$11.5 million in fiscal 2015, an increase of approximately 53%; and - Non-GAAP net income per diluted common share was
$1.06 in fiscal 2016, as compared to$0.71 in fiscal 2015.
Update on Corporate Relocation Plan:
Mr. Keown continued, “Our corporate relocation remains on-track. We look forward to realizing the expected benefits of the new facility as we position
Of the estimated
In
China Mist Acquisition:
The Company separately announced today that it has entered into an agreement to acquire substantially all of the assets of
About
Founded in 1912,
Headquartered in
Investor Conference Call
The audio-only webcast will be archived for approximately 30 days on the Investor Relations section of the
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 | |||||||||||
(In thousands, except share and per share data) (unaudited) | |||||||||||
Year Ended June 30, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Net sales | $ | 544,382 | $ | 545,882 | $ | 528,380 | |||||
Cost of goods sold | 335,907 | 348,846 | 332,466 | ||||||||
Gross profit | 208,475 | 197,036 | 195,914 | ||||||||
Selling expenses | 150,198 | 151,753 | 155,088 | ||||||||
General and administrative expenses | 41,970 | 31,173 | 35,724 | ||||||||
Restructuring and other transition expenses | 16,533 | 10,432 | — | ||||||||
Net gains from sale of spice assets | (5,603 | ) | — | — | |||||||
Net (gains) losses from sales of assets | (2,802 | ) | 394 | (3,814 | ) | ||||||
Operating expenses | 200,296 | 193,752 | 186,998 | ||||||||
Income from operations | 8,179 | 3,284 | 8,916 | ||||||||
Other income (expense): | |||||||||||
Dividend income | 1,115 | 1,172 | 1,073 | ||||||||
Interest income | 496 | 381 | 429 | ||||||||
Interest expense | (425 | ) | (769 | ) | (1,258 | ) | |||||
Other, net | 556 | (3,014 | ) | 3,677 | |||||||
Total other income (expense) | 1,742 | (2,230 | ) | 3,921 | |||||||
Income before taxes | 9,921 | 1,054 | 12,837 | ||||||||
Income tax (benefit) expense | (79,997 | ) | 402 | 705 | |||||||
Net income | $ | 89,918 | $ | 652 | $ | 12,132 | |||||
Net income per common share—basic | $ | 5.45 | $ | 0.04 | $ | 0.76 | |||||
Net income per common share—diluted | $ | 5.41 | $ | 0.04 | $ | 0.76 | |||||
Weighted average common shares outstanding—basic | 16,502,523 | 16,127,610 | 15,909,631 | ||||||||
Weighted average common shares outstanding—diluted | 16,627,402 | 16,267,134 | 16,014,587 | ||||||||
FARMER BROS. CO. | |||||||
CONSOLIDATED BALANCE SHEETS | |||||||
(In thousands, except share and per share data) (unaudited) | |||||||
June 30, 2016 | June 30, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 21,095 | $ | 15,160 | |||
Restricted cash | — | 1,002 | |||||
Short-term investments | 25,591 | 23,665 | |||||
Accounts and notes receivable, net of allowance for doubtful accounts of $714 and $643, respectively | 44,364 | 40,161 | |||||
Inventories | 46,378 | 50,522 | |||||
Income tax receivable | 247 | 535 | |||||
Short-term derivative assets | 3,954 | — | |||||
Prepaid expenses | 4,557 | 4,640 | |||||
Assets held for sale | 7,179 | — | |||||
Total current assets | 153,365 | 135,685 | |||||
Property, plant and equipment, net | 118,416 | 90,201 | |||||
Goodwill and intangible assets, net | 6,491 | 6,691 | |||||
Other assets | 9,933 | 7,615 | |||||
Deferred income taxes | 80,786 | 751 | |||||
Total assets | $ | 368,991 | $ | 240,943 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | 23,919 | 27,023 | |||||
Accrued payroll expenses | 24,540 | 23,005 | |||||
Short-term borrowings under revolving credit facility | 109 | 78 | |||||
Short-term obligations under capital leases | 1,323 | 3,249 | |||||
Short-term derivative liabilities | — | 3,977 | |||||
Deferred income taxes | — | 1,390 | |||||
Other current liabilities | 6,946 | 6,152 | |||||
Total current liabilities | 56,837 | 64,874 | |||||
Accrued pension liabilities | 68,047 | 47,871 | |||||
Accrued postretirement benefits | 20,808 | 23,471 | |||||
Accrued workers’ compensation liabilities | 11,459 | 10,964 | |||||
Other long-term liabilities-capital leases | 1,036 | 2,599 | |||||
Other long-term liabilities | 28,210 | 225 | |||||
Deferred income taxes | — | 928 | |||||
Total liabilities | $ | 186,397 | $ | 150,932 | |||
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; 16,781,561 and 16,658,148 shares issued and outstanding at June 30, 2016 and 2015, respectively | 16,782 | 16,658 | |||||
Additional paid-in capital | 39,096 | 38,143 | |||||
Retained earnings | 196,782 | 106,864 | |||||
Unearned ESOP shares | (6,434 | ) | (11,234 | ) | |||
Accumulated other comprehensive loss | (63,632 | ) | (60,420 | ) | |||
Total stockholders’ equity | $ | 182,594 | $ | 90,011 | |||
Total liabilities and stockholders’ equity | $ | 368,991 | $ | 240,943 | |||
FARMER BROS. CO. | ||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
(In thousands, except share and per share data) | ||||||||
(unaudited) | ||||||||
Three Months Ended June 30, | ||||||||
2016 | 2015 | |||||||
Net sales | $ | 134,162 | $ | 132,582 | ||||
Cost of goods sold | 81,734 | 83,378 | ||||||
Gross profit | 52,428 | 49,204 | ||||||
Selling expenses | 37,457 | 36,051 | ||||||
General and administrative expenses | 12,019 | 8,660 | ||||||
Restructuring and other transition expenses | 2,678 | 5,862 | ||||||
Net gains from sale of spice assets | (162 | ) | — | |||||
Net (gains) losses from sales of assets | (2,639 | ) | 48 | |||||
Operating expenses | 49,353 | 50,621 | ||||||
Income (loss) from operations | 3,075 | (1,417 | ) | |||||
Other income (expense): | ||||||||
Dividend income | 275 | 293 | ||||||
Interest income | 137 | 102 | ||||||
Interest expense | (84 | ) | (144 | ) | ||||
Other, net | 521 | (851 | ) | |||||
Total other income (expense) | 849 | (600 | ) | |||||
Income (loss) before taxes | 3,924 | (2,017 | ) | |||||
Income tax (benefit) expense | (80,315 | ) | 170 | |||||
Net income (loss) | $ | 84,239 | $ | (2,187 | ) | |||
Net income (loss) per common share—basic | $ | 5.09 | $ | (0.13 | ) | |||
Net income (loss) per common share—diluted | $ | 5.05 | $ | (0.13 | ) | |||
Weighted average common shares outstanding—basic | 16,551,040 | 16,255,980 | ||||||
Weighted average common shares outstanding—diluted | 16,664,846 | 16,255,980 | ||||||
Non-GAAP Financial Measures
In addition to net income (loss) determined in accordance with GAAP, we use the following non-GAAP financial measures in assessing our operating performance:
“Non-GAAP net income” is defined as net income excluding the impact of:
- restructuring and other transition expenses;
- net gains and losses from sales of assets; and
- income tax benefit from the release of valuation allowance on deferred tax assets.
“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; and
- net gains and losses from sales of assets.
“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.
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.
In the fourth quarter of fiscal 2016, we modified the calculation of Non-GAAP net income and Non-GAAP net income per diluted common shares to exclude the non-cash income tax benefit from the release of valuation allowance on deferred tax assets. We believe this non-cash income tax benefit is not reflective of our ongoing operating results and that excluding the income tax benefit will help investors with comparability of our results. The historical presentation of the non-GAAP measures was not affected by this modification.
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 to Non-GAAP net income and reported net income per common share—diluted to Non-GAAP net income per diluted common share:
Year Ended June 30, | Three Months Ended June 30, | |||||||||||||||||||
(In thousands) | 2016 | 2015 | 2014 | 2016 | 2015 | |||||||||||||||
Net income, as reported | $ | 89,918 | $ | 652 | $ | 12,132 | $ | 84,239 | $ | (2,187 | ) | |||||||||
Restructuring and other transition expenses | 16,533 | 10,432 | — | 2,678 | 5,862 | |||||||||||||||
Net gains from sale of spice assets | (5,603 | ) | — | — | (162 | ) | — | |||||||||||||
Net (gains) losses from sales of assets | (2,802 | ) | 394 | (3,814 | ) | (2,639 | ) | 48 | ||||||||||||
Non-cash income tax benefit, including release of valuation allowance on deferred tax assets | (80,439 | ) | — | — | (80,315 | ) | — | |||||||||||||
Non-GAAP net income | $ | 17,607 | $ | 11,478 | $ | 8,318 | $ | 3,801 | $ | 3,723 | ||||||||||
Net income (loss) per common share—diluted, as reported | $ | 5.41 | $ | 0.04 | $ | 0.76 | $ | 5.05 | $ | (0.13 | ) | |||||||||
Impact of restructuring and other transition expenses | $ | 1.00 | $ | 0.64 | $ | — | $ | 0.16 | $ | 0.36 | ||||||||||
Impact of net gains from sale of spice assets | $ | (0.34 | ) | $ | — | $ | — | $ | (0.01 | ) | $ | — | ||||||||
Impact of net (gains) losses from sales of assets | $ | (0.17 | ) | $ | 0.03 | $ | (0.24 | ) | $ | (0.15 | ) | $ | — | |||||||
Impact of release of valuation allowance on deferred tax assets | $ | (4.84 | ) | $ | — | $ | — | $ | (4.82 | ) | $ | — | ||||||||
Non-GAAP net income per diluted common share | $ | 1.06 | $ | 0.71 | $ | 0.52 | $ | 0.23 | $ | 0.23 | ||||||||||
Set forth below is a reconciliation of reported net income to Adjusted EBITDA:
Year Ended June 30, | Three Months Ended June 30, | |||||||||||||||||||
(In thousands) | 2016 | 2015 | 2014 | 2016 | 2015 | |||||||||||||||
Net income, as reported | $ | 89,918 | $ | 652 | $ | 12,132 | $ | 84,239 | $ | (2,187 | ) | |||||||||
Income tax (benefit) expense | (79,997 | ) | 402 | 705 | (80,315 | ) | 170 | |||||||||||||
Interest expense | 425 | 769 | 1,258 | 84 | 144 | |||||||||||||||
Depreciation and amortization expense | 20,774 | 24,179 | 27,334 | 5,053 | 5,625 | |||||||||||||||
ESOP and share-based compensation expense | 4,342 | 5,691 | 4,692 | 854 | 1,397 | |||||||||||||||
Restructuring and other transition expenses | 16,533 | 10,432 | — | 2,678 | 5,862 | |||||||||||||||
Net gains from sale of spice assets | (5,603 | ) | — | — | (162 | ) | — | |||||||||||||
Net (gains) losses from sales of assets | (2,802 | ) | 394 | (3,814 | ) | (2,639 | ) | 48 | ||||||||||||
Adjusted EBITDA | $ | 43,590 | $ | 42,519 | $ | 42,307 | $ | 9,792 | $ | 11,059 | ||||||||||
Adjusted EBITDA Margin | 8.0 | % | 7.8 | % | 8.0 | % | 7.3 | % | 8.3 | % | ||||||||||
Investor Contact:Isaac N. Johnston, Jr. (682) 549-6663