NORTHLAKE, Texas, Nov. 07, 2019 (GLOBE NEWSWIRE) — Farmer Bros. Co. (NASDAQ: FARM) (the “Company”) today reported financial results for its first fiscal quarter ended September 30, 2019.
First Quarter Fiscal 2020 Highlights:
- Volume of green coffee processed and sold increased by 0.5 million to 26.0 million pounds, a 2.0% increase over the prior year period;
- Green coffee pounds processed and sold through our DSD network were 8.3 million, or 32.0% of total green coffee pounds processed and sold
- Direct ship customers represented 17.4 million, or 67.0%, of total green coffee pounds processed and sold
- Distributor customers represented 0.3 million pounds, or 1.0%, of total green coffee pounds processed and sold
- Net sales were $138.6 million, a decrease of $8.8 million, or 6.0%, from the prior year period;
- Gross margin decreased to 29.3% from 32.7% in the prior year period, while operating expenses as percentage of sales improved to 24.3% from 34.1% in the prior year period;
- Net income was $4.7 million compared to net loss of $3.0 million in the prior year period; and
- Adjusted EBITDA was $4.0 million compared to $11.0 million in the prior year period.*
(*Adjusted EBITDA, a non-GAAP financial measure, is reconciled to its corresponding GAAP measure at the end of this press release.)
“After my first weeks as CEO, I remain excited about joining Farmer Brothers at this critical moment in the Company’s history,” said Deverl Maserang, President and CEO. “I recognize and understand the challenges and the opportunities we face, and I believe we have the assets, the platform, as well as a talented and dedicated employee base to return the Company to growth and profitability.”
Mr. Maserang continued, “Under the leadership of Chris Mottern, solid progress was made towards identifying key priorities aimed at improving and evolving our business for the future. As CEO, I have refined these and am committed to focusing on: optimizing our supply chain, elevating our execution, enhancing our service capability, differentiating our product portfolio through innovation, and engaging our talent. I look forward to working with all our employees to execute with purpose and urgency on our strategic initiatives in order to best position Farmer Brothers to deliver enhanced value for our stakeholders.”
First Quarter Fiscal 2020 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 months ended September 30, 2019 and 2018 (unaudited).
| Three Months Ended September 30, |
||||||||
| 2019 | 2018 | |||||||
| (In thousands, except per share data) | ||||||||
| Income statement data: | ||||||||
| Net sales | $ | 138,600 | $ | 147,440 | ||||
| Gross margin | 29.3 | % | 32.7 | % | ||||
| Income (loss) from operations | $ | 6,892 | $ | (2,078 | ) | |||
| Net income (loss) | $ | 4,654 | $ | (2,986 | ) | |||
| Net income (loss) available to common stockholders per common share-diluted | $ | 0.26 | $ | (0.18 | ) | |||
| Operating data: | ||||||||
| Coffee pounds | 25,958 | 25,449 | ||||||
| EBITDA | $ | 13,440 | $ | 4,658 | ||||
| EBITDA Margin | 9.7 | % | 3.2 | % | ||||
| Adjusted EBITDA | $ | 4,016 | $ | 10,967 | ||||
| Adjusted EBITDA Margin | 2.9 | % | 7.4 | % | ||||
| Other data: | ||||||||
| Capital expenditures related to maintenance | $ | 4,352 | $ | 5,462 | ||||
| Total capital expenditures | $ | 5,276 | $ | 7,787 | ||||
| Depreciation and amortization expense | $ | 7,617 | $ | 7,728 | ||||
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 first quarter of fiscal 2020 were $138.6 million, a decrease of $8.8 million, or 6.0%, from the prior year period. The decrease in net sales was driven primarily by lower sales of coffee and allied products sold through our DSD network, unfavorable customer mix within our direct sales channel, non-recurring sales of industrial soup based products associated with the Boyd’s acquisition which we stopped selling last year and the impact of lower coffee prices for our cost plus customers. Sales through our DSD network was impacted by the sale of our office coffee business in July of this year, higher customer attrition and lower inventory fill rates associated with downtime at our Houston plant.
Gross profit in the first quarter of fiscal 2020 was $40.6 million, a decrease of $7.6 million, or 15.7% from the prior year period and gross margin decreased to 29.3% from 32.7%. The decrease in gross profit was primarily driven by lower net sales of $8.8 million between the periods, unfavorable customer mix, higher production costs associated with certain aging production infrastructure and higher scrap expense, partially offset by lower coffee brewing equipment and labor costs and lower green coffee prices.
Operating expenses in the first quarter of fiscal 2020 decreased $16.6 million, or 32.9%, to $33.7 million, from $50.3 million, and as a percentage of net sales declined to 24.3% compared to 34.1% of net sales, in the prior year period. The decrease in operating expenses was primarily due to increase in net gains from sales of assets, the absence of restructuring and other transition expenses, the conclusion of Boyd Coffee integration at the beginning of October 2018, headcount reductions and other efficiencies realized from DSD route optimization, partially offset by increased severance costs associated with a reduction in force which occurred during the current quarter.
Net gains from sales of assets are primarily associated with the sales of the office coffee assets and the Seattle office branch property of $7.2 million and $6.8 million, respectively.
Interest expense in the first quarter of fiscal 2020 decreased $0.3 million to $2.6 million as compared to $2.9 million in the prior year period principally due to lower pension interest expense.
Other, net in the first quarter of fiscal 2020 decreased by $0.5 million to $0.2 million in the quarter compared to $0.7 million in the prior year period primarily due to reduced employee post retirement benefit gains partially offset by lower mark-to-market losses on coffee-related derivative instruments not designated as accounting hedges.
Income tax benefit was $0.1 million in the first quarter of fiscal 2020 as compared to income tax benefit of $1.3 million in the prior year period. The lower tax benefit is primarily due to the previously recorded valuation allowance and reduction of our estimated deferred tax liability during the three months ended September 30, 2019 as compared to the prior year period.
As a result of the foregoing factors, net income was $4.7 million in the first quarter of fiscal 2020 as compared to net loss of $3.0 million in the prior year period. Net income available to common stockholders was $4.5 million, or $0.26 per common share available to common stockholders-diluted, in the first quarter of fiscal 2019, compared to net loss available to common stockholders of $3.1 million, or $0.18 per common share available to common stockholders-diluted, in the prior year period.
Non-GAAP Financial Measures:
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.
Adjusted EBITDA was $4.0 million in the first quarter of fiscal 2020, as compared to Adjusted EBITDA of $11.0 million in the prior year period, and Adjusted EBITDA Margin was 2.9% in the first quarter of fiscal 2019, as compared to Adjusted EBITDA Margin of 7.4% in the prior year period.
About Farmer Bros. Co.
Founded in 1912, Farmer Bros. Co. is a national coffee roaster, wholesaler and distributor of coffee, tea and culinary products. The Company’s product lines include organic, Direct Trade and sustainably-produced coffee. With a robust line of coffee, hot and iced teas, cappuccino mixes, spices, and baking/biscuit mixes, the Company delivers extensive beverage planning services and culinary products to its U.S. based customers. The Company serves a wide variety of customers, from small independent restaurants and foodservice operators to large institutional buyers like restaurant and convenience store chains, hotels, casinos, healthcare facilities, and gourmet coffee houses, as well as grocery chains with private brand coffee and consumer branded coffee and tea products, and foodservice distributors.
Headquartered in Northlake, Texas, Farmer Bros. Co. generated net sales of $595.9 million in fiscal 2019 and has approximately 1,521 employees nationwide. The Company’s primary brands include Farmer Brothers®, Artisan Collection by Farmer Brothers™, Superior®, Metropolitan™, China Mist® and Boyds®.
Investor Conference Call
Deverl Maserang, CEO, and Scott Lyon, Corporate Controller and Interim Principal Financial and Accounting Officer, will host an audio-only investor conference call today, November 7, 2019, at 5:00 p.m. Eastern time (4:00 p.m. Central time) to review the Company’s financial results for the first quarter ended September 30, 2019. The Company’s earnings press release will be available on the Company’s website at www.farmerbros.com under “Investor Relations.”
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/tqecqeee 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 4967166.
The audio-only webcast will be archived for at least 30 days on the Investor Relations section of the Farmer Bros. Co. website, and will be available approximately two hours after the end of the live webcast.
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 Securities and Exchange Commission (“SEC”). Factors that could cause actual results to differ materially from those in forward-looking statements include, but are not limited to, the success of our corporate relocation plan, the timing and success of implementation of our direct-store-delivery restructuring plan, our success in consummating acquisitions and integrating acquired businesses, the impact of capital improvement projects, the adequacy and availa