Farmer Bros. Co. Reports Second Quarter Fiscal 2021 Financial Results
Second Quarter Fiscal 2021 Highlights:
- Volume of green coffee processed and sold decreased by 8.0 million to 21.4 million pounds, a 27.1% decrease compared to the prior year period primarily due to the impact of the COVID-19 pandemic discussed below;
- Green coffee pounds processed and sold through our DSD network were 5.4 million, or 25.3% of total green coffee pounds processed and sold; and
- Direct ship customers represented 16.0 million, or 74.7%, of total green coffee pounds processed and sold
- Net sales were
$104.6 million , a decrease of$47.9 million , or 31.4%, from the prior year period; - Gross margin decreased to 25.1% from 28.8% in the prior year period;
- Net loss was
$17.7 million compared to net income of$7.8 million in the prior year period; and - Adjusted EBITDA was
$8.3 million compared to$7.4 million in the prior year period.* - As of
December 31, 2020 , total debt outstanding was$82.0 million and cash and cash equivalents was$5.9 million compared to$122.0 million and$60.0 million , respectively, as ofJune 30, 2020 .
(*Adjusted EBITDA, a non-GAAP financial measure, is reconciled to its corresponding GAAP measure at the end of this press release.)
Second Quarter Fiscal 2021 Results:
Selected Financial Data
The selected financial data presented below under the captions “Income statement data,” “Operating data” and “Other data” summarizes certain performance measures for the three and six months ended
Three Months Ended December 31, |
Six Months Ended December 31, |
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2020 | 2019 | 2020 | 2019 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Income statement data: | ||||||||||||||||
Net sales | $ | 104,571 | $ | 152,498 | $ | 201,841 | $ | 291,098 | ||||||||
Gross margin | 25.1 | % | 28.8 | % | 24.1 | % | 29.1 | % | ||||||||
(Loss) income from operations | $ | (10,164 | ) | $ | 8,870 | $ | (21,610 | ) | $ | 15,762 | ||||||
Net (loss) income | $ | (17,725 | ) | $ | 7,754 | $ | (23,997 | ) | 12,408 | |||||||
Net (loss) income available to common stockholders per common share—diluted | $ | (1.02 | ) | $ | 0.43 | $ | (1.39 | ) | $ | 0.69 | ||||||
Operating data: | ||||||||||||||||
Coffee pounds | 21,407 | 29,360 | 42,340 | 55,318 | ||||||||||||
EBITDA(1) | $ | 5,288 | $ | 16,852 | $ | 8,191 | $ | 30,292 | ||||||||
EBITDA Margin(1) | 5.1 | % | 11.1 | % | 4.1 | % | 10.4 | % | ||||||||
Adjusted EBITDA(1) | $ | 8,274 | $ | 7,448 | $ | 13,967 | $ | 11,464 | ||||||||
Adjusted EBITDA Margin(1) | 7.9 | % | 4.9 | % | 6.9 | % | 3.9 | % | ||||||||
Other data: | ||||||||||||||||
Capital expenditures related to maintenance | $ | 2,147 | $ | 3,107 | $ | 3,741 | $ | 7,459 | ||||||||
Total capital expenditures | $ | 5,271 | $ | 3,730 | $ | 9,636 | $ | 9,007 | ||||||||
Depreciation and amortization expense | $ | 7,308 | $ | 7,594 | $ | 14,349 | $ | 15,211 |
(1) EBITDA, EBITDA Margin, 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.
Net sales in the second quarter of fiscal 2021 were
Gross profit in the second quarter of fiscal 2021 was
Operating expenses in the second quarter of fiscal 2021 increased compared to prior year period at
Interest expense in the second quarter of fiscal 2021 was flat at
Other, net in the second quarter of fiscal 2021 increased by
Income tax expense was
As a result of the foregoing factors, net loss was
Our capital expenditures for the six months ended
As of
As of
Non-GAAP Financial Measures:
EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP (
Adjusted EBITDA was
About
Founded in 1912,
Headquartered in
Investor Conference Call
The call will be open to all interested investors through a live audio web broadcast via the Internet at https://edge.media-server.com/mmc/p/iyefemkm and at the Company’s website www.farmerbros.com under “Investor Relations.” The call also will be available to investors and analysts by dialing Toll Free: 1-(844) 423-9890 or international: 1-(716) 247-5805. The passcode/ID is 4784655.
The audio-only webcast will be archived for at least 30 days on the Investor Relations section of the
Forward-Looking Statements
Certain statements contained in this press release 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. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except share and per share data) |
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Three Months Ended |
Six Months Ended |
||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net sales | $ | 104,571 | $ | 152,498 | $ | 201,841 | $ | 291,098 | |||||||
Cost of goods sold | 78,321 | 108,513 | 153,173 | 206,472 | |||||||||||
Gross profit | 26,250 | 43,985 | 48,668 | 84,626 | |||||||||||
Selling expenses | 24,769 | 34,906 | 48,268 | 68,520 | |||||||||||
General and administrative expenses | 11,570 | 11,266 | 21,316 | 24,006 | |||||||||||
Net gains from sales of assets | (1,168 | ) | (11,057 | ) | (549 | ) | (23,662 | ) | |||||||
Impairment of goodwill and intangible assets | — | — | — | — | |||||||||||
Impairment of fixed assets | 1,243 | — | 1,243 | — | |||||||||||
Operating expenses | 36,414 | 35,115 | 70,278 | 68,864 | |||||||||||
(Loss) income from operations | (10,164 | ) | 8,870 | (21,610 | ) | 15,762 | |||||||||
Other (expense) income: | |||||||||||||||
Interest expense | (2,938 | ) | (2,859 | ) | (6,181 | ) | (5,407 | ) | |||||||
Other, net | 9,080 | 1,662 | 17,639 | 1,865 | |||||||||||
Total other expense | 6,142 | (1,197 | ) | 11,458 | (3,542 | ) | |||||||||
(Loss) income before taxes | (4,022 | ) | 7,673 | (10,152 | ) | 12,220 | |||||||||
Income tax expense (benefit) | 13,703 | (81 | ) | 13,845 | (188 | ) | |||||||||
Net (loss) income | $ | (17,725 | ) | $ | 7,754 | $ | (23,997 | ) | $ | 12,408 | |||||
Less: Cumulative preferred dividends, undeclared and unpaid | 143 | 138 | 284 | 275 | |||||||||||
Net (loss) income available to common stockholders | $ | (17,868 | ) | $ | 7,616 | $ | (24,281 | ) | $ | 12,133 | |||||
Net (loss) income available to common stockholders per common share—basic | $ | (1.02 | ) | $ | 0.44 | $ | (1.39 | ) | $ | 0.71 | |||||
Net (loss) income available to common stockholders per common share—diluted | $ | (1.02 | ) | $ | 0.43 | $ | (1.39 | ) | $ | 0.69 | |||||
Weighted average common shares outstanding—basic | 17,531,521 | 17,159,108 | 17,477,268 | 17,127,153 | |||||||||||
Weighted average common shares outstanding—diluted | 17,531,521 | 17,583,335 | 17,477,268 | 17,550,144 | |||||||||||
FARMER BROS. CO. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share and per share data) |
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ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 5,857 | $ | 60,013 | |||
Accounts receivable, net | 41,864 | 40,882 | |||||
Inventories | 80,617 | 67,408 | |||||
Income tax receivable | — | 831 | |||||
Short-term derivative assets | 3,772 | 165 | |||||
Prepaid expenses | 8,303 | 7,414 | |||||
Total current assets | 140,413 | 176,713 | |||||
Property, plant and equipment, net | 159,855 | 165,633 | |||||
Intangible assets, net | 19,457 | 20,662 | |||||
Other assets | 8,700 | 8,564 | |||||
Long-term derivatives assets | — | 10 | |||||
Right-of-use operating lease assets | 27,658 | 21,117 | |||||
Total assets | $ | 356,083 | $ | 392,699 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | 49,797 | 36,987 | |||||
Accrued payroll expenses | 15,769 | 9,394 | |||||
Operating leases liabilities - current | 7,029 | 5,854 | |||||
Short-term derivative liabilities | 1,428 | 5,255 | |||||
Other current liabilities | 7,489 | 6,802 | |||||
Total current liabilities | 81,512 | 64,292 | |||||
Long-term borrowings under revolving credit facility | 82,000 | 122,000 | |||||
Accrued pension liabilities | 56,358 | 58,772 | |||||
Accrued postretirement benefits | 10,309 | 9,993 | |||||
Accrued workers’ compensation liabilities | 3,687 | 4,569 | |||||
Operating lease liabilities - noncurrent | 20,770 | 15,628 | |||||
Other long-term liabilities | 5,254 | 5,532 | |||||
Total liabilities | $ | 259,890 | $ | 280,786 | |||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock, Perpetual Preferred Stock, 21,000 shares authorized; 14,700 shares issued and outstanding as of December 31, 2020 and |
15 | 15 | |||||
Common stock, and outstanding as of |
17,591 | 17,348 | |||||
Additional paid-in capital | 63,739 | 62,043 | |||||
Retained earnings | 84,256 | 108,536 | |||||
Accumulated other comprehensive loss | (69,408 | ) | (76,029 | ) | |||
Total stockholders’ equity | $ | 96,193 | $ | 111,913 | |||
Total liabilities and stockholders’ equity | $ | 356,083 | $ | 392,699 | |||
FARMER BROS. CO. | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | |||||||
(In thousands) | |||||||
Six Months Ended |
|||||||
2020 | 2019 | ||||||
Cash flows from operating activities: | |||||||
Net (loss) income | $ | (23,997 | ) | $ | 12,408 | ||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation and amortization | 14,349 | 15,211 | |||||
Postretirement and Pension benefits gains | (14,577 | ) | — | ||||
Deferred income taxes | 13,472 | — | |||||
Impairment of fixed assets | 1,243 | — | |||||
Net gains from sales of assets | (549 | ) | (23,662 | ) | |||
Net (gains) losses on derivative instruments | (2,093 | ) | 4,075 | ||||
Other adjustments | 1,776 | 1,794 | |||||
Change in operating assets and liabilities: | |||||||
Accounts receivable | (818 | ) | (5,285 | ) | |||
Inventories | (13,209 | ) | 1,804 | ||||
Derivative assets/liabilities, net | 1,761 | 1,965 | |||||
Other assets | 2,418 | 361 | |||||
Accounts payable | 12,430 | (10,608 | ) | ||||
Accrued expenses and other | 3,971 | (258 | ) | ||||
Net cash used by operating activities | $ | (3,823 | ) | $ | (2,195 | ) | |
Cash flows from investing activities: | |||||||
Purchases of property, plant and equipment | (9,636 | ) | (9,007 | ) | |||
Proceeds from sales of property, plant and equipment | 1,926 | 35,247 | |||||
Net cash (used) provided in investing activities | $ | (7,710 | ) | $ | 26,240 | ||
Cash flows from financing activities: | |||||||
Proceeds from revolving credit facility | $ | 21,150 | $ | 38,000 | |||
Repayments on revolving credit facility | (61,150 | ) | (60,000 | ) | |||
Payments of finance lease obligations | (9 | ) | (27 | ) | |||
Payment of financing costs | (2,614 | ) | — | ||||
Proceeds from stock option exercises | — | 129 | |||||
Net cash used by financing activities | $ | (42,623 | ) | $ | (21,898 | ) | |
Net (decrease) increase in cash and cash equivalents | $ | (54,156 | ) | $ | 2,147 | ||
Cash and cash equivalents at beginning of period | 60,013 | 6,983 | |||||
Cash and cash equivalents at end of period | $ | 5,857 | $ | 9,130 | |||
FARMER BROS. CO. | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued) | |||||||
(In thousands) | |||||||
Six Months Ended |
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2020 | 2019 | ||||||
Supplemental disclosure of non-cash investing and financing activities: | |||||||
Non-cash additions to property, plant and equipment | $ | 380 | $ | 284 | |||
Non-cash issuance of 401-K common stock | $ | 185 | $ | 109 | |||
Cumulative preferred dividends, undeclared and unpaid | $ | 284 | $ | 275 | |||
Non-GAAP Financial Measures
In addition to net (loss) income determined in accordance with
“EBITDA” is defined as net (loss) income excluding the impact of:
- income taxes;
- interest expense; and
- depreciation and amortization expense.
“EBITDA Margin” is defined as EBITDA expressed as a percentage of net sales.
“Adjusted EBITDA” is defined as net (loss) income excluding the impact of:
- income taxes;
- interest expense (benefit);
- (loss) income from short-term investments;
- depreciation and amortization expense;
- ESOP and share-based compensation expense;
- non-cash impairment losses;
- non-cash pension withdrawal expense;
- restructuring and other transition expenses;
- severance costs;
- proxy contest-related expenses;
- non-recurring costs associated with the COVID-19 pandemic;
- net gains and losses from sales of assets;
- non-cash pension settlements and postretirement benefits curtailment; and
- acquisition, integration and strategic costs.
“Adjusted EBITDA Margin” is defined as Adjusted EBITDA expressed as a percentage of net sales.
For purposes of calculating EBITDA and EBITDA Margin and Adjusted EBITDA and Adjusted EBITDA Margin, we have excluded the impact of interest expense resulting from the adoption of ASU 2017-07, non-cash pretax pension and postretirement benefits resulting from the amendment and termination of certain
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.
We believe that EBITDA facilitates operating performance comparisons from period to period by isolating the effects of certain items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. These potential differences may be caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense). We also present EBITDA and EBITDA Margin because (i) we believe that these measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry, (ii) we believe that investors will find these measures useful in assessing our ability to service or incur indebtedness, and (iii) we use these measures internally as benchmarks to compare our performance to that of our competitors.
EBITDA, EBITDA Margin, 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 loss to EBITDA (unaudited): | ||||||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
(In thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Net (loss) income, as reported | $ | (17,725 | ) | $ | 7,754 | $ | (23,997 | ) | $ | 12,408 | ||||||
Income tax (benefit) expense | 13,703 | (81 | ) | 13,845 | (188 | ) | ||||||||||
Interest expense (1) | 2,002 | 1,585 | 3,994 | 2,861 | ||||||||||||
Depreciation and amortization expense | 7,308 | 7,594 | 14,349 | 15,211 | ||||||||||||
EBITDA | $ | 5,288 | $ | 16,852 | $ | 8,191 | $ | 30,292 | ||||||||
EBITDA Margin | 5.1 | % | 11.1 | % | 4.1 | % | 10.4 | % | ||||||||
____________ (1) Excludes interest expense related to pension plans and postretirement benefits. |
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Set forth below is a reconciliation of reported net loss to Adjusted EBITDA (unaudited): | ||||||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
(In thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Net (loss) income, as reported | $ | (17,725 | ) | $ | 7,754 | $ | (23,997 | ) | $ | 12,408 | ||||||
Income tax (benefit) expense | 13,703 | (81 | ) | 13,845 | (188 | ) | ||||||||||
Interest expense(1) | 2,002 | 1,585 | 3,994 | 2,861 | ||||||||||||
Depreciation and amortization expense | 7,308 | 7,594 | 14,349 | 15,211 | ||||||||||||
ESOP and share-based compensation expense | 794 | 909 | 1,950 | 1,778 | ||||||||||||
Strategic initiatives (2) | 1,333 | — | 1,675 | — | ||||||||||||
Net losses (gains) from sales of other assets | (1,168 | ) | (11,057 | ) | (549 | ) | (23,662 | ) | ||||||||
Impairment of fixed assets | 1,243 | — | 1,243 | — | ||||||||||||
Non-recurring costs associated with the COVID-19 pandemic | 149 | — | 260 | — | ||||||||||||
Proxy contest-related expenses | — | 259 | — | 259 | ||||||||||||
Severance | 635 | 485 | 1,197 | 2,797 | ||||||||||||
Adjusted EBITDA(3) | $ | 8,274 | $ | 7,448 | $ | 13,967 | $ | 11,464 | ||||||||
Adjusted EBITDA Margin | 7.9 | % | 4.9 | % | 6.9 | % | 3.9 | % | ||||||||
____________ (1) Excludes interest expense related to pension plans and postretirement benefits. (2) Includes initiatives related to the (3) Adjusted EBITDA for the three and six months ended |
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Investor Relations Contact
Ellipsis
Investor.relations@farmerbros.com
(646) 776-0886
Source: Farmer Bros. Co.