Farmer Bros. Co. Reports Third Quarter Fiscal 2016 Financial Results
Third Quarter Fiscal 2016 Highlights:
- Net sales increased 1.5% to
$134.5 million in the third quarter of fiscal 2016, as compared to the prior year period; - Gross profit increased 12.9% to
$52 .6 million and gross margin increased to 39.1% in the third quarter of fiscal 2016, as compared to the prior year period; - Net income was
$1 .2 million, or$0.07 per diluted common share, in the third quarter of fiscal 2016, as compared to net loss of$2 .6 million, or$0.16 per common share, in the prior year period; - Non-GAAP net income and Non-GAAP net income per diluted common share in the third quarter of fiscal 2016 were
$4 .0 million and$0.24 , respectively, as compared to$1 .1 million and$0.07 , respectively, in the prior year period; and - Adjusted EBITDA and Adjusted EBITDA Margin in the third quarter of fiscal 2016 were
$10 .2 million and 7.6%, respectively, as compared to$8 .9 million and 6.7%, respectively, 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.
Third Quarter Fiscal 2016 Results:
Net sales in the third quarter of fiscal 2016 increased
Gross profit in the third quarter of fiscal 2016 increased
Operating expenses in the third quarter of fiscal 2016 increased
Income from operations in the third quarter of fiscal 2016 was $0.3 million as compared to loss from operations of
Total other income in the third quarter of fiscal 2016 was $0.9 million, which included interest expense of
As a result, net income in the third quarter of fiscal 2016 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 third quarter of fiscal 2016 was
Adjusted EBITDA increased to
Treasurer and CFO,
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Founded in 1912,
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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 March 31, | Nine Months Ended March 31, | ||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||
Net sales | $ | 134,468 | $ | 132,507 | $ | 410,220 | $ | 413,300 | |||||||||||||||||||
Cost of goods sold | 81,908 | 85,938 | 254,173 | 265,468 | |||||||||||||||||||||||
Gross profit | 52,560 | 46,569 | 156,047 | 147,832 | |||||||||||||||||||||||
Selling expenses | 38,447 | 37,653 | 112,741 | 115,702 | |||||||||||||||||||||||
General and administrative expenses | 10,977 | 6,618 | 29,951 | 22,513 | |||||||||||||||||||||||
Restructuring and other transition expenses | 3,169 | 3,596 | 13,855 | 4,570 | |||||||||||||||||||||||
Net gain from sale of spice assets | (335 | ) | — | (5,441 | ) | — | |||||||||||||||||||||
Net (gains) losses from sales of assets | (4 | ) | 107 | (163 | ) | 346 | |||||||||||||||||||||
Operating expenses | 52,254 | 47,974 | 150,943 | 143,131 | |||||||||||||||||||||||
Income (loss) from operations | 306 | (1,405 | ) | 5,104 | 4,701 | ||||||||||||||||||||||
Other income (expense): | |||||||||||||||||||||||||||
Dividend income | 288 | 294 | 840 | 879 | |||||||||||||||||||||||
Interest income | 139 | 364 | 359 | 543 | |||||||||||||||||||||||
Interest expense | (111 | ) | (474 | ) | (341 | ) | (889 | ) | |||||||||||||||||||
Other, net | 613 | (1,569 | ) | 35 | (2,163 | ) | |||||||||||||||||||||
Total other income (expense) | 929 | (1,385 | ) | 893 | (1,630 | ) | |||||||||||||||||||||
Income (loss) before taxes | 1,235 | (2,790 | ) | 5,997 | 3,071 | ||||||||||||||||||||||
Income tax expense (benefit) | 43 | (218 | ) | 318 | 232 | ||||||||||||||||||||||
Net income (loss) | $ | 1,192 | $ | (2,572 | ) | $ | 5,679 | $ | 2,839 | ||||||||||||||||||
Net income (loss) per common share—basic | $ | 0.07 | $ | (0.16 | ) | $ | 0.34 | $ | 0.18 | ||||||||||||||||||
Net income (loss) per common share—diluted | $ | 0.07 | $ | (0.16 | ) | $ | 0.34 | $ | 0.17 | ||||||||||||||||||
Weighted average common shares outstanding—basic | 16,539,479 | 16,223,981 | 16,486,469 | 16,200,747 | |||||||||||||||||||||||
Weighted average common shares outstanding—diluted | 16,647,415 | 16,223,981 | 16,614,275 | 16,343,138 |
FARMER BROS. CO. | |||||||
CONSOLIDATED BALANCE SHEETS (Unaudited) | |||||||
(In thousands, except share and per share data) | |||||||
March 31, 2016 | June 30, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 13,330 | $ | 15,160 | |||
Restricted cash | — | 1,002 | |||||
Short-term investments | 24,814 | 23,665 | |||||
Accounts and notes receivable, net | 46,568 | 40,161 | |||||
Inventories | 54,550 | 50,522 | |||||
Income tax receivable | 605 | 535 | |||||
Short-term derivative assets | 1,039 | — | |||||
Prepaid expenses | 4,091 | 4,640 | |||||
Assets held for sale | 9,326 | — | |||||
Total current assets | 154,323 | 135,685 | |||||
Property, plant and equipment, net | 100,871 | 90,201 | |||||
Goodwill and intangible assets, net | 6,541 | 6,691 | |||||
Other assets | 7,815 | 7,615 | |||||
Deferred income taxes | 751 | 751 | |||||
Total assets | $ | 270,301 | $ | 240,943 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 27,186 | $ | 27,023 | |||
Accrued payroll expenses | 22,863 | 23,005 | |||||
Short-term borrowings under revolving credit facility | 307 | 78 | |||||
Short-term obligations under capital leases | 1,871 | 3,249 | |||||
Short-term derivative liabilities | — | 3,977 | |||||
Deferred income taxes | 1,390 | 1,390 | |||||
Other current liabilities | 6,941 | 6,152 | |||||
Total current liabilities | 60,558 | 64,874 | |||||
Accrued pension liabilities | 47,215 | 47,871 | |||||
Accrued postretirement benefits | 23,087 | 23,471 | |||||
Accrued workers’ compensation liabilities | 11,383 | 10,964 | |||||
Other long-term liabilities—capital leases | 1,247 | 2,599 | |||||
Other long-term liabilities | 19,254 | 225 | |||||
Deferred income taxes | 1,000 | 928 | |||||
Total liabilities | $ | 163,744 | $ | 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; 16,769,029 and | |||||||
16,658,148 issued and outstanding at March 31, 2016 and June 30, 2015, | |||||||
respectively | 16,769 | 16,658 | |||||
Additional paid-in capital | 38,171 | 38,143 | |||||
Retained earnings | 112,543 | 106,864 | |||||
Unearned ESOP shares | (6,434 | ) | (11,234 | ) | |||
Accumulated other comprehensive loss | (54,492 | ) | (60,420 | ) | |||
Total stockholders’ equity | $ | 106,557 | $ | 90,011 | |||
Total liabilities and stockholders’ equity | $ | 270,301 | $ | 240,943 |
Non-GAAP Financial Measures
In addition to net income 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 of tax; and
- net gains and losses from sales of assets, net of tax.
“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 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 Company's 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 2015, we modified previously reported non-GAAP financial measures to exclude net gains and losses on sales of assets because we believe these gains and losses are not reflective of our ongoing operating results. As a result, we began referring to the measures previously titled “Net income excluding restructuring and other transition expenses” and “Net income excluding restructuring and other transition expenses per common share-diluted” as “Non-GAAP net income” and “Non-GAAP net income per diluted common share.” In addition, we redefined “Adjusted EBITDA” to also exclude net gains and losses from sales of assets. The historical presentation of these measures has been recast to conform to the revised definitions and the current year presentation. Non-GAAP net income, Non-GAAP net income per diluted common share, Adjusted EBITDA, 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 per common share—diluted to Non-GAAP net income per diluted common share (unaudited):
Three Months Ended March 31, |
Nine Months Ended March 31, |
|||||||||||||||
($ in thousands, except per share data) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income (loss), as reported(1) | $ | 1,192 | $ | (2,572 | ) | $ | 5,679 | $ | 2,839 | |||||||
Restructuring and other transition expenses, net of tax of zero | 3,169 | 3,596 | 13,855 | 4,570 | ||||||||||||
Net gain from sale of spice assets, net of tax of zero | (335 | ) | — | (5,441 | ) | — | ||||||||||
Net (gains) losses from sales of assets, net of tax of zero | (4 | ) | 107 | (163 | ) | 346 | ||||||||||
Non-GAAP net income | $ | 4,022 | $ | 1,131 | $ | 13,930 | $ | 7,755 | ||||||||
Net income (loss) per common share—diluted, as reported | $ | 0.07 | $ | (0.16 | ) | $ | 0.34 | $ | 0.17 | |||||||
Impact of restructuring and other transition expenses, net of tax of zero | $ | 0.19 | $ | 0.22 | $ | 0.83 | $ | 0.28 | ||||||||
Impact of net gain from sale of spice assets, net of tax of zero | $ | (0.02 | ) | $ | — | $ | (0.32 | ) | $ | — | ||||||
Impact of (gains) losses from sales of assets, net of tax of zero | $ | — | $ | 0.01 | $ | (0.01 | ) | $ | 0.02 | |||||||
Non-GAAP net income per diluted common share | $ | 0.24 | $ | 0.07 | $ | 0.84 | $ | 0.47 |
____________
(1) Includes $0.8 million and
Set forth below is a reconciliation of reported net income (loss) to Adjusted EBITDA (unaudited):
Three Months Ended March 31, |
Nine Months Ended March 31, |
|||||||||||||||
($ in thousands) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income (loss), as reported(1) | $ | 1,192 | $ | (2,572 | ) | $ | 5,679 | $ | 2,839 | |||||||
Income tax expense (benefit) | 43 | (218 | ) | 318 | 232 | |||||||||||
Interest expense | 111 | 474 | 341 | 889 | ||||||||||||
Depreciation and amortization expense(2) | 5,234 | 6,135 | 15,721 | 18,554 | ||||||||||||
ESOP and share-based compensation expense | 837 | 1,414 | 3,488 | 4,294 | ||||||||||||
Restructuring and other transition expenses(3) | 3,169 | 3,596 | 13,855 | 4,570 | ||||||||||||
Net gain from sale of spice assets | (335 | ) | — | (5,441 | ) | — | ||||||||||
Net (gains) losses from sales of assets | (4 | ) | 107 | (163 | ) | 346 | ||||||||||
Adjusted EBITDA | $ | 10,247 | $ | 8,936 | $ | 33,798 | $ | 31,724 | ||||||||
Adjusted EBITDA Margin | 7.6 | % | 6.7 | % | 8.2 | % | 7.7 | % |
____________
(1) Includes $0.8 million and
(2) Excludes in the three and nine months ended
(3) Includes in the three and nine months ended
Investor Contact:Isaac N. Johnston, Jr. (682) 549-6663