NORTHLAKE, Texas, Feb. 06, 2020 (GLOBE NEWSWIRE) — Farmer Bros. Co. (NASDAQ: FARM) (the “Company”) today reported financial results for its second fiscal quarter ended December 31, 2019.
Second Quarter Fiscal 2020 Highlights:
- Volume of green coffee processed and sold increased by 2.0 million to 29.4 million pounds, a 7.2% increase over the prior year period;
- Green coffee pounds processed and sold through our DSD network were 9.0 million, or 30.6% of total green coffee pounds processed and sold
- Direct ship customers represented 19.9 million, or 67.7%, of total green coffee pounds processed and sold
- Distributor customers represented 0.5 million pounds, or 1.7%, of total green coffee pounds processed and sold
- Net sales were $152.5 million, a decrease of $7.3 million, or 4.6%, from the prior year period;
- Gross margin decreased to 28.8% from 33.3% in the prior year period, while operating expenses as percentage of sales improved to 23.0% from 33.0% in the prior year period;
- Net income was $7.8 million compared to net loss of $10.1 million in the prior year period; and
Adjusted EBITDA was $7.4 million compared to $12.4 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.)
“I am proud of the progress we have made against our turnaround strategy and five key initiatives during my first few months as Farmer Brothers’ CEO,” said Deverl Maserang, President and CEO. “While the Company faces challenges that require time and capital to address, I am confident that we are headed in the right direction and are focused on the right initiatives. We have a clearly defined plan and have laid the groundwork for a successful turnaround, and I am optimistic that the initiatives we are executing with urgency will put Farmer Brothers in a position of strength for the long term. I look forward to continuing to work closely with all our team members to drive growth and deliver enhanced value for our stakeholders.”
Second 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 and six months ended December 31, 2019 and 2018 (unaudited).
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
| Income statement data: | ||||||||||||||||
| Net sales | $ | 152,498 | $ | 159,773 | $ | 291,098 | $ | 307,213 | ||||||||
| Gross margin | 28.8 | % | 33.3 | % | 29.1 | % | 33.0 | % | ||||||||
| Income (loss) from operations | $ | 8,870 | $ | 502 | $ | 15,762 | $ | (1,576 | ) | |||||||
| Net income (loss) | $ | 7,754 | $ | (10,100 | ) | $ | 12,408 | (13,086 | ) | |||||||
| Net income (loss) available to common stockholders per common share-diluted | $ | 0.43 | $ | (0.60 | ) | $ | 0.69 | $ | (0.79 | ) | ||||||
| Operating data: | ||||||||||||||||
| Coffee pounds | 29,360 | 27,398 | 55,318 | 52,845 | ||||||||||||
| EBITDA | $ | 16,852 | $ | (3,188 | ) | $ | 30,292 | $ | 1,470 | |||||||
| EBITDA Margin | 11.1 | % | (2.0 | )% | 10.4 | % | 0.5 | % | ||||||||
| Adjusted EBITDA | $ | 7,448 | $ | 12,443 | $ | 11,464 | $ | 23,410 | ||||||||
| Adjusted EBITDA Margin | 4.9 | % | 7.8 | % | 3.9 | % | 7.6 | % | ||||||||
| Other data: | ||||||||||||||||
| Capital expenditures related to maintenance | $ | 3,107 | $ | 7,105 | $ | 7,459 | $ | 12,567 | ||||||||
| Total capital expenditures | $ | 3,730 | $ | 15,333 | $ | 9,007 | $ | 23,120 | ||||||||
| Depreciation and amortization expense | $ | 7,594 | $ | 7,902 | $ | 15,211 | $ | 15,630 | ||||||||
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 2020 were $152.5 million, a decrease of $7.3 million, or 4.6%, 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, which were impacted by the sale of our office coffee business in July 2019 and net customer attrition. Our direct ship sales were comparable to the prior year period because the increase in direct ship volume was offset by unfavorable customer mix shift and the impact of coffee prices for our cost plus customers.
Gross profit in the second quarter of fiscal 2020 was $44.0 million, a decrease of $9.3 million, or 17.4% from the prior year period and gross margin decreased to 28.8% from 33.3%. The decrease in gross profit was primarily driven by lower net sales of $7.3 million between the periods, unfavorable customer mix and higher write down of slow moving inventories, partially offset by lower freight costs and the impact of coffee prices.
Operating expenses in the second quarter of fiscal 2020 decreased $17.6 million, or 33.4%, to $35.1 million, from $52.7 million, and as a percentage of net sales declined to 23.0% compared to 33.0% 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 Boyds integration expenses, decrease in selling expenses due to efficiencies realized from DSD route optimization, decrease in general and administrative expenses due to reductions in third party costs and lower headcount, partially offset by higher employee incentive costs, proxy contest expenses and one-time severance costs. The three months ended December 31, 2018 includes a one-time credit fo