Farmer Bros. Co. Reports Third Quarter Fiscal 2021 Financial Results
Third Quarter Fiscal 2021 Highlights:
Business Update
- Successfully completed key initiatives within its supply chain optimization strategy, including:
- Doubled capacity at the
Northlake ,Texas facility; - Ended production at the aged
Houston, Texas facility; and - Opened a new
West Coast distribution facility inRialto, California ;
- Doubled capacity at the
- Negotiated new credit facilities, effectively increasing borrowing capacity and flexibility while lowering overall borrowing cost;
- Achieved notable improvement in
March 2021 DSD sales compared to January andFebruary 2021 months; and - Seeing strongest DSD sales levels since the start of the pandemic with average weekly DSD sales in the month of
April 2021 down approximately 27% compared to pre-COVID levels.
Financial Results
- Net sales were
$93.2 million , a decrease of$36.0 million , or 27.9%, from the prior year period, primarily due to the impact of COVID-19; - Gross margin decreased to 25.6% from 29.4% in the prior year period;
- Continued improvement trend in gross margin each quarter of fiscal 2021;
- Net loss was
$13.7 million compared to net loss of$39.8 million in the prior year period; and - Adjusted EBITDA was a loss of
$0.8 million compared to income of$6.6 million in the prior year period.* - As of
March 31, 2021 , total debt outstanding was$88.0 million and cash and cash equivalents was$8.5 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.)
Third 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 nine months ended
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Income statement data: | ||||||||||||||||||||
Net sales | $ | 93,152 | $ | 129,139 | $ | 294,993 | $ | 420,237 | ||||||||||||
Gross margin | 25.6 | % | 29.4 | % | 24.6 | % | 29.2 | % | ||||||||||||
Loss from operations | $ | (10,395 | ) | $ | (45,169 | ) | $ | (32,004 | ) | $ | (29,407 | ) | ||||||||
Net loss | $ | (13,684 | ) | $ | (39,777 | ) | $ | (37,680 | ) | (27,369 | ) | |||||||||
Net loss available to common stockholders per common share—diluted | $ | (0.78 | ) | $ | (2.32 | ) | $ | (2.17 | ) | $ | (1.62 | ) | ||||||||
Operating data: | ||||||||||||||||||||
Total green Coffee pounds sold | 18,026 | 25,678 | 60,366 | 80,995 | ||||||||||||||||
Sold through DSD | 5,336 | 8,354 | 15,522 | 25,625 | ||||||||||||||||
Sold through Direct Ship | 12,690 | 17,324 | 44,844 | 55,370 | ||||||||||||||||
EBITDA(1) | $ | (4,800 | ) | $ | (32,272 | ) | $ | 3,391 | $ | (1,980 | ) | |||||||||
EBITDA Margin(1) | (5.2 | ) | % | (25.0 | ) | % | 1.1 | % | (0.5 | ) | % | |||||||||
Adjusted EBITDA(1) | $ | (759 | ) | $ | 6,563 | $ | 13,207 | $ | 18,028 | |||||||||||
Adjusted EBITDA Margin(1) | (0.8 | ) | % | 5.1 | % | 4.5 | % | 4.3 | % | |||||||||||
Other data: | ||||||||||||||||||||
Capital expenditures related to maintenance | $ | 2,042 | $ | 3,163 | $ | 5,783 | $ | 10,622 | ||||||||||||
Total capital expenditures | $ | 3,133 | $ | 4,107 | $ | 12,769 | $ | 13,114 | ||||||||||||
Depreciation and amortization expense | $ | 6,883 | $ | 7,333 | $ | 21,231 | $ | 22,544 |
(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 third quarter of fiscal 2021 were
Our direct ship sales declined 23% compared to the prior year period due to lower coffee volume related to COVID-19 and the impact of coffee prices for our cost plus customers, partially offset by improved volume from our retail business, key grocery stores under their private labels, and third party e-commerce platforms.
Gross profit in the third quarter of fiscal 2021 was
Operating expenses in the third quarter of fiscal 2021 decreased
As a result of the foregoing factors, net loss was
Our capital expenditures for the nine 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 a loss of
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/oao2bjj2 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-(888) 771-4371. The passcode/ID is 50155357.
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)
Three Months Ended |
Nine Months Ended |
||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
Net sales | $ | 93,152 | $ | 129,139 | $ | 294,993 | $ | 420,237 | |||||||
Cost of goods sold | 69,274 | 91,190 | 222,447 | 297,662 | |||||||||||
Gross profit | 23,878 | 37,949 | 72,546 | 122,575 | |||||||||||
Selling expenses | 22,767 | 31,968 | 71,035 | 100,488 | |||||||||||
General and administrative expenses | 11,018 | 8,833 | 32,334 | 32,839 | |||||||||||
Net losses (gains) from sales of assets | 488 | 287 | (62 | ) | (23,375 | ) | |||||||||
Impairment of goodwill and intangible assets | — | 42,030 | — | 42,030 | |||||||||||
Impairment of fixed assets | — | — | 1,243 | — | |||||||||||
Operating expenses | 34,273 | 83,118 | 104,550 | 151,982 | |||||||||||
Loss from operations | (10,395 | ) | (45,169 | ) | (32,004 | ) | (29,407 | ) | |||||||
Other (expense) income: | |||||||||||||||
Interest expense | (2,993 | ) | (2,478 | ) | (9,174 | ) | (7,885 | ) | |||||||
Postretirement benefits curtailment and pension settlement charge | — | 5,760 | — | 5,760 | |||||||||||
Other, net | (356 | ) | 1,076 | 17,283 | 2,941 | ||||||||||
Total other (expense) income | (3,349 | ) | 4,358 | 8,109 | 816 | ||||||||||
Loss before taxes | (13,744 | ) | (40,811 | ) | (23,895 | ) | (28,591 | ) | |||||||
Income tax (benefit) expense | (60 | ) | (1,034 | ) | 13,785 | (1,222 | ) | ||||||||
Net loss | $ | (13,684 | ) | $ | (39,777 | ) | $ | (37,680 | ) | $ | (27,369 | ) | |||
Less: Cumulative preferred dividends, undeclared and unpaid | 144 | 139 | 428 | 414 | |||||||||||
Net loss available to common stockholders | $ | (13,828 | ) | $ | (39,916 | ) | $ | (38,108 | ) | $ | (27,783 | ) | |||
Net loss available to common stockholders per common share—basic | $ | (0.78 | ) | $ | (2.32 | ) | $ | (2.17 | ) | $ | (1.62 | ) | |||
Net loss available to common stockholders per common share—diluted | $ | (0.78 | ) | $ | (2.32 | ) | $ | (2.17 | ) | $ | (1.62 | ) | |||
Weighted average common shares outstanding—basic | 17,756,619 | 17,230,879 | 17,569,026 | 17,161,477 | |||||||||||
Weighted average common shares outstanding—diluted | 17,756,619 | 17,230,879 | 17,569,026 | 17,161,477 | |||||||||||
FARMER BROS. CO.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per share data)
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 8,474 | $ | 60,013 | |||
Accounts receivable, net | 37,100 | 40,882 | |||||
Inventories | 75,151 | 67,408 | |||||
Income tax receivable | — | 831 | |||||
Short-term derivative assets | 1,062 | 165 | |||||
Prepaid expenses | 8,711 | 7,414 | |||||
Assets held for sale | 2,521 | — | |||||
Total current assets | 133,019 | 176,713 | |||||
Property, plant and equipment, net | 154,467 | 165,633 | |||||
Intangible assets, net | 18,854 | 20,662 | |||||
Right-of-use operating lease assets | 25,800 | 21,117 | |||||
Long-term derivatives assets | — | 10 | |||||
Other assets | 8,121 | 8,564 | |||||
Total assets | $ | 340,261 | $ | 392,699 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | 44,610 | 36,987 | |||||
Accrued payroll expenses | 15,380 | 9,394 | |||||
Operating leases liabilities - current | 6,036 | 5,854 | |||||
Short-term derivative liabilities | 1,990 | 5,255 | |||||
Other current liabilities | 6,384 | 6,802 | |||||
Total current liabilities | 74,400 | 64,292 | |||||
Long-term borrowings under revolving credit facility | 88,000 | 122,000 | |||||
Accrued pension liabilities | 56,682 | 58,772 | |||||
Accrued postretirement benefits | 10,381 | 9,993 | |||||
Accrued workers’ compensation liabilities | 3,687 | 4,569 | |||||
Operating lease liabilities - noncurrent | 19,770 | 15,628 | |||||
Other long-term liabilities | 5,352 | 5,532 | |||||
Total liabilities | $ | 258,272 | $ | 280,786 | |||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock, |
15 | 15 | |||||
Common stock, |
17,771 | 17,348 | |||||
Additional paid-in capital | 65,170 | 62,043 | |||||
Retained earnings | 70,428 | 108,536 | |||||
Accumulated other comprehensive loss | (71,395 | ) | (76,029 | ) | |||
Total stockholders’ equity | $ | 81,989 | $ | 111,913 | |||
Total liabilities and stockholders’ equity | $ | 340,261 | $ | 392,699 | |||
FARMER BROS. CO. | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | |||||||
(In thousands) | |||||||
Nine Months Ended |
|||||||
2021 | 2020 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (37,680 | ) | $ | (27,369 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation and amortization | 21,231 | 22,544 | |||||
Postretirement and Pension benefits gains | (14,577 | ) | (5,760 | ) | |||
Deferred income taxes | 13,472 | — | |||||
Impairment of goodwill and intangible assets | — | 42,030 | |||||
Impairment of fixed assets | 1,243 | — | |||||
Net gains from sales of assets | (62 | ) | (23,375 | ) | |||
Net (gains) losses on derivative instruments | (2,875 | ) | 9,830 | ||||
Other adjustments | 3,124 | 3,698 | |||||
Change in operating assets and liabilities: | |||||||
Accounts receivable | 4,210 | 3,745 | |||||
Inventories | (7,744 | ) | 1,004 | ||||
Derivative assets/liabilities, net | 3,309 | (2,472 | ) | ||||
Other assets | 3,184 | 1,510 | |||||
Accounts payable | 6,496 | (13,194 | ) | ||||
Accrued expenses and other | 3,181 | (4,126 | ) | ||||
Net cash (used) provided by operating activities | $ | (3,488 | ) | $ | 8,065 | ||
Cash flows from investing activities: | |||||||
Purchases of property, plant and equipment | (12,796 | ) | (13,114 | ) | |||
Proceeds from sales of property, plant and equipment | 2,009 | 36,733 | |||||
Net cash (used) provided in investing activities | $ | (10,787 | ) | $ | 23,619 | ||
Cash flows from financing activities: | |||||||
Proceeds from revolving credit facility | $ | 27,150 | $ | 48,000 | |||
Repayments on revolving credit facility | (61,150 | ) | (60,000 | ) | |||
Payments of finance lease obligations | (57 | ) | (40 | ) | |||
Payment of financing costs | (3,207 | ) | (367 | ) | |||
Proceeds from stock option exercises | — | 129 | |||||
Net cash used by financing activities | $ | (37,264 | ) | $ | (12,278 | ) | |
Net (decrease) increase in cash and cash equivalents | $ | (51,539 | ) | $ | 19,406 | ||
Cash and cash equivalents at beginning of period | 60,013 | 6,983 | |||||
Cash and cash equivalents at end of period | $ | 8,474 | $ | 26,389 |
FARMER BROS. CO. | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued) | |||||||
(In thousands) | |||||||
Nine Months Ended |
|||||||
2021 | 2020 | ||||||
Supplemental disclosure of non-cash investing and financing activities: | |||||||
Non-cash additions to property, plant and equipment | $ | 297 | $ | 1,130 | |||
Non-cash issuance of 401-K common stock | $ | 347 | $ | 163 | |||
Cumulative preferred dividends, undeclared and unpaid | $ | 428 | $ | 414 |
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 and 2021 severe winter weather;
- net gains and losses from sales of assets;
- non-cash pension settlements and postretirement benefits curtailment; and
- acquisition, integration and strategic initiative 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 |
Nine Months Ended |
|||||||||||||||||||
(In thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
Net (loss) income, as reported | $ | (13,684 | ) | $ | (39,777 | ) | $ | (37,680 | ) | $ | (27,369 | ) | ||||||||
Income tax (benefit) expense | (60 | ) | (1,034 | ) | 13,785 | (1,222 | ) | |||||||||||||
Interest expense (1) | 2,061 | 1,206 | 6,055 | 4,067 | ||||||||||||||||
Depreciation and amortization expense | 6,883 | 7,333 | 21,231 | 22,544 | ||||||||||||||||
EBITDA | $ | (4,800 | ) | $ | (32,272 | ) | $ | 3,391 | $ | (1,980 | ) | |||||||||
EBITDA Margin | (5.2 | ) | % | (25.0 | ) | % | 1.1 | % | (0.5 | ) | % |
____________
(1) Excludes interest expense related to pension plans and postretirement benefits.
Set forth below is a reconciliation of reported net loss to Adjusted EBITDA (unaudited):
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||
(In thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
Net (loss) income, as reported | $ | (13,684 | ) | $ | (39,777 | ) | $ | (37,680 | ) | $ | (27,369 | ) | ||||||||
Income tax (benefit) expense | (60 | ) | (1,034 | ) | 13,785 | (1,222 | ) | |||||||||||||
Interest expense(1) | 2,061 | 1,206 | 6,055 | 4,067 | ||||||||||||||||
Depreciation and amortization expense | 6,883 | 7,333 | 21,231 | 22,544 | ||||||||||||||||
ESOP and share-based compensation expense | 1,611 | 1,418 | 3,561 | 3,197 | ||||||||||||||||
Weather-related event - 2021 severe winter weather | 109 | — | 109 | — | ||||||||||||||||
Strategic initiatives (2) | 1,593 | — | 3,268 | — | ||||||||||||||||
Net losses (gains) from sales of other assets | 488 | 287 | (62 | ) | (23,375 | ) | ||||||||||||||
Impairment of goodwill and intangible assets | — | 42,030 | — | 42,030 | ||||||||||||||||
Impairment of fixed assets | — | — | 1,243 | — | ||||||||||||||||
Non-recurring costs associated with the COVID-19 pandemic | 40 | 129 | 300 | 129 | ||||||||||||||||
Proxy contest-related expenses | — | 204 | — | 463 | ||||||||||||||||
Postretirement benefits curtailment and pension settlement charge | — | (5,760 | ) | — | (5,760 | ) | ||||||||||||||
Severance | 200 | 527 | 1,397 | 3,324 | ||||||||||||||||
Adjusted EBITDA(3) | $ | (759 | ) | $ | 6,563 | $ | 13,207 | $ | 18,028 | |||||||||||
Adjusted EBITDA Margin | (0.8 | ) | % | 5.1 | % | 4.5 | % | 4.3 | % |
____________
(1) Excludes interest expense related to pension plans and postretirement benefits.
(2) Includes initiatives related to the
(3) Adjusted EBITDA for the three and nine months ended
Contact:
Ellipsis
646-776-0886
Source: Farmer Bros. Co.