FORT WORTH, Texas, Feb. 05, 2016 (GLOBE NEWSWIRE) — Farmer Bros. Co. (NASDAQ:FARM) (the “Company”) today reported financial results for the second quarter ended December 31, 2015.
Second Quarter Fiscal 2016 Highlights:
- Net sales decreased 1.7% to $142.3 million in the second quarter of fiscal 2016, as compared to the prior year period;
- Net income was $5.6 million, or $0.34 per diluted common share, in the second quarter of fiscal 2016, as compared to $2.9 million, or $0.18 per diluted common share in the prior year period;
- Non-GAAP net income and Non-GAAP net income per diluted common share in the second quarter of fiscal 2016 were $5.7 million and $0.35, respectively, as compared to $3.9 million and $0.24, respectively, in the prior year period; and
- Adjusted EBITDA and Adjusted EBITDA Margin in the second quarter of fiscal 2016 were $12.8 million and 9.0%, respectively, as compared to $12.1 million and 8.4%, 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).
Second Quarter Fiscal 2016 Results:
Net sales in the second quarter of fiscal 2016 decreased $2.5 million, or 1.7%, to $142.3 million from $144.8 million in the second quarter of the prior fiscal year primarily due to decreases in sales of our coffee, tea and culinary products, resulting primarily from the effects of pricing and product mix changes offset, in part, by an increase in unit sales of coffee (roast & ground). In the second quarter of fiscal 2016, green coffee processed and sold was approximately 23.2 million pounds, compared to approximately 23.1 million pounds in the second quarter of fiscal 2015.
Gross profit in the second quarter of fiscal 2016 decreased $0.2 million, or 0.4%, to $52.9 million as compared to $53.1 million in the second quarter of fiscal 2015. Gross margin increased 50 basis points to 37.2% in the second quarter of fiscal 2016 from 36.7% in the second quarter of fiscal 2015. The decrease in gross profit was primarily due to the decrease in net sales. The increase in gross margin was primarily due to supply chain efficiencies realized primarily through the consolidation of our former Torrance coffee production volumes into our Houston manufacturing facility, partially offset by the decrease in net sales. Gross profit in the second quarter of fiscal 2016 and 2015, respectively, also included the beneficial effect of the liquidation of LIFO inventory quantities in the amount of $0.3 million and $2.2 million.
Michael H. Keown, President and CEO said, “Overall, I am pleased with the continued progress we are making across the business, and the transition to Northlake, Texas. He added, “Increases in supply chain efficiencies are paying off in enhanced profitability. We executed well during a period of high throughput allowing us to maintain our high quality and customer service standards while ramping up several new customers during the quarter.”
Operating expenses in the second quarter of fiscal 2016 decreased $2.1 million, or 4.2%, to $47.5 million, as compared to $49.6 million, in the second quarter of the prior fiscal year primarily due to $5.1 million in net gain from the sale of the spice assets, $1.7 million decrease in selling expenses and $0.4 million decrease in general and administrative expenses, partially offset by $5.2 million in restructuring and other transition expenses relating to the Company’s corporate relocation plan. The decrease in selling expenses in the second quarter of fiscal 2016 was primarily due to lower fuel and freight expenses and lower depreciation expense as compared to the same period in the prior fiscal year. The decrease in the general and administrative expenses in the second quarter of fiscal 2016 was primarily due to lower accrual for anticipated bonus payments to eligible employees and consulting expense, partially offset by an increase in retiree medical costs, as compared to the same period in the prior fiscal year.
Income from operations in the second quarter of fiscal 2016 was $5.4 million as compared to $3.5 million in the second quarter of the prior fiscal year, primarily due to the $5.1 million net gain from the sale of spice assets, offset by restructuring and other transition expenses of $5.2 million incurred in connection with the Company’s corporate relocation plan.
Total other income in the second quarter of fiscal 2016 was $0.6 million, primarily due to lower interest expense of $0.1 million and net gains on coffee-related derivative instruments of $32,000, as compared to total other expense of $0.4 million in the second quarter of fiscal 2015 which included higher interest expense of $0.2 million and net losses on coffee-related derivative instruments of $0.9 million.
As a result, net income in the second quarter of fiscal 2016 was $5.6 million, or $0.34 per diluted common share, compared to net income of $2.9 million, or $0.18 per diluted common share, in the second quarter of the prior fiscal year.
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 second quarter of fiscal 2016 was $5.7 million, as compared to Non-GAAP net income of $3.9 million in the prior year period. Non-GAAP net income per diluted common share was $0.35 in the second quarter of fiscal 2016, as compared to Non-GAAP net income per diluted common share of $0.24 in the prior year period.
Adjusted EBITDA increased to $12.8 million in the second quarter of fiscal 2016, from $12.1 million in the prior year period, and Adjusted EBITDA Margin increased to 9.0% in the second quarter of fiscal 2016, from 8.4% in the prior year period.
Treasurer and CFO, Isaac N. Johnston, Jr. said, “The financial results for the second quarter were strong, and we are pleased with the progress in improving Non-GAAP net income, along with the positive change in volume growth. We will continue to focus on driving efficiencies from the corporate relocation plan and on accelerating volume growth.”
About Farmer Bros. Co.
Founded in 1912, Farmer Bros. Co. is a manufacturer, wholesaler and distributor of coffee, and distributor of tea and culinary products. The Company’s customers include restaurants, hotels, casinos, offices, quick service restaurants (“QSR’s”), convenience stores, healthcare facilities and other foodservice providers, as well as private brand retailers in the QSR, grocery, drugstore, restaurant, convenience store, and independent coffee house channels. The Company’s product line includes roasted coffee, liquid coffee, coffee-related products such as coffee filters, sugar and creamers, assorted iced and hot teas, cappuccino, cocoa, spices, gelatins and puddings, soup bases, dressings, gravy and sauce mixes, pancake and biscuit mixes, and jellies and preserves.
Headquartered in Fort Worth, Texas, Farmer Bros. Co. generated net sales of over $500 million in fiscal 2015 and has approximately 1,750 employees nationwide. The Company’s primary brands include Farmer Brothers®, Artisan Collection by Farmer Brothers™, Superior®, Metropolitan™ , Cain’s™ and McGarvey®. For more information, visit: www.farmerbros.com.
Investor Conference Call
Michael H. Keown, President and CEO, and Isaac N. Johnston, Jr., Treasurer and CFO will host an investor conference call today, February 5, 2016, at 5:00 p.m. Eastern time (4:00 p.m. Central time) to review the Company’s results for the second quarter ended December 31, 2015 and to provide an update on the Company’s second quarter events. The call will be open to all interested investors through a live audio web broadcast via the Internet at-http://edge.media-server.com/m/p/rjvnpfon-and at the Company’s website www.farmerbros.com under “Investor Relations.” The call also will be available to investors and analysts by dialing (844) 423-9890. The passcode/ID is 31083663 within the U.S. and Canada.
The audio-only webcast will be archived for approximately 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, 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 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 timing and success of implementation of the Company’s corporate relocation plan, the timing and success of the Company in realizing estimated savings from third party logistics and vendor managed inventory, the realization of the Company’s cost savings estimates, the extent to which the Company’s final budget for the new facility may exceed the estimated preliminary budget and result in an increase in the rent payments or the option exercise price under the lease agreement for the facility, the relative effectiveness of compensation-based employee incentives in causing improvements in Company performance, the capacity to meet the demands of the Company’s large national account customers, the extent of execution of plans for the growth of Company business and achievement of financial metrics related to those plans, the success of the Company to retain and/or attract qualified employees, the effect of the capital markets as well as other external factors on stockholder value, fluctuations in availability and cost of green coffee, competition, organizational changes, changes in the strength of the economy, business conditions in the coffee industry and food industry in general, the Company’s continued success in attracting new customers, variances from budgeted sales mix and growth rates, weather and special or unusual events, changes in the quality or dividend stream of the third parties’ securities and other investment vehicles in which the Company has invested its assets, as well as other risks described in this press release and other factors described from time to time in the Company’s filings with the SEC.
| FARMER BROS. CO. | |||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | |||||||||||||||
| (In thousands, except share and per share data) | |||||||||||||||
| Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||||
| Net sales | $ | 142,307 | $ | 144,809 | $ | 275,752 | $ | 280,793 | |||||||
| Cost of goods sold | 89,399 | 91,667 | 172,265 | 179,530 | |||||||||||
| Gross profit | 52,908 | 53,142 | 103,487 | 101,263 | |||||||||||
| Selling expenses | 37,853 | 39,599 | 74,294 | 78,049 | |||||||||||
| General and administrative expenses | 9,509 | 9,860 | 18,974 | 16,869 | |||||||||||
| Restructuring and other transition expenses | 5,236 | – | 10,686 | – | |||||||||||
| Net gain from sale of spice assets | (5,106 | ) | – | (5,106 | ) | – | |||||||||
| Net losses (gains) from sales of assets | 55 | 178 | (159 | ) | 239 | ||||||||||
| Operati | |||||||||||||||