NORTHLAKE, Texas, May 07, 2019 (GLOBE NEWSWIRE) — Farmer Bros. Co. (NASDAQ: FARM) (the “Company”) today reported financial results for its third fiscal quarter ended March 31, 2019.
Third Quarter Fiscal 2019 Highlights:
- Volume of green coffee processed and sold increased by 0.1 million pounds to 27.9 million pounds, a 0.5% increase over the prior year period;
- Green coffee pounds processed and sold through our DSD network were 9.2 million, or 33.2% of total green coffee pounds processed and sold
- Direct ship customers represented 17.9 million, or 64.1%, of total green coffee pounds processed and sold
- Distributor customers represented 0.8 million pounds, or 2.7%, of total green coffee pounds processed and sold
- Net sales were $146.7 million, a decrease of $11.2 million, or 7.1%, from the prior year period;
- Gross margin decreased to 27.2% from 33.1% in the prior year period, while operating expenses as percentage of sales improved to 31.4% from 34.9% in the prior year period;
- Net loss was $51.7 million compared to net loss of $2.2 million in the prior year period; and
- Adjusted EBITDA was $4.5 million compared to $10.6 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.)
“The Company’s third quarter results are not acceptable in terms of what we aim to deliver for our shareholders,” said Chris Mottern, Interim CEO. “There were a number of unexpected costs and execution issues in the period that negatively impacted the Company’s financial results. Given these issues and our year-to-date results, we are taking a cautious approach in our outlook and are updating our targeted Adjusted EBITDA range for fiscal 2019 to $34 million to $36 million.”
Mottern continued, “We have already begun taking corrective actions, putting new operational controls and processes in place, and will be working to determine what additional steps we need to take to put Farmer Brothers on the path to improved results and enhanced value for our shareholders. We continue to believe in the underlying long-term earnings power of Farmer Brothers’ business, and we are operating with a sense of urgency.”
Third Quarter Fiscal 2019 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 March 31, 2019 and 2018 (unaudited). Reported prior periods have been retrospectively adjusted to reflect the impact of certain changes in accounting principles and corrections to previously issued financial statements adopted in the fourth quarter of fiscal 2018, and the adoption of new accounting standards in the three and nine months ended March 31, 2019 that required retrospective application.
Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Income statement data: | ||||||||||||||||
Net sales | $ | 146,679 | $ | 157,927 | $ | 453,892 | $ | 457,006 | ||||||||
Gross margin | 27.2 | % | 33.1 | % | 31.1 | % | 33.8 | % | ||||||||
Loss from operations | $ | (6,102 | ) | $ | (2,785 | ) | $ | (7,678 | ) | $ | (931 | ) | ||||
Net loss | $ | (51,749 | ) | $ | (2,193 | ) | $ | (64,835 | ) | $ | (18,414 | ) | ||||
Net loss available to common stockholders per common share-diluted | $ | (3.05 | ) | $ | (0.14 | ) | $ | (3.84 | ) | $ | (1.12 | ) | ||||
Operating data: | ||||||||||||||||
Coffee pounds | 27,873 | 27,733 | 80,719 | 80,034 | ||||||||||||
EBITDA | $ | 639 | $ | 4,785 | $ | 2,109 | $ | 22,657 | ||||||||
EBITDA Margin | 0.4 | % | 3.0 | % | 0.5 | % | 5.0 | % | ||||||||
Adjusted EBITDA | $ | 4,535 | $ | 10,644 | $ | 27,945 | $ | 33,600 | ||||||||
Adjusted EBITDA Margin | 3.1 | % | 6.7 | % | 6.2 | % | 7.4 | % | ||||||||
Other data: | ||||||||||||||||
Capital expenditures related to maintenance | $ | 4,434 | $ | 5,621 | $ | 17,001 | $ | 17,373 | ||||||||
Total capital expenditures | $ | 7,274 | $ | 11,217 | $ | 30,394 | $ | 27,466 | ||||||||
Depreciation and amortization expense | $ | 7,600 | $ | 7,397 | $ | 23,230 | $ | 22,727 |
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 2019 were $146.7 million, a decrease of $11.2 million, or 7.1%, from the prior year period. The decrease in net sales was driven primarily by declines in revenues and volume of green coffee processed and sold through the DSD network, the impact of lower coffee prices for our cost plus customers and a reduction in revenues due to higher customer attrition related to the Boyd Business integration and route optimization.
Gross profit in the third quarter of fiscal 2019 was $39.9 million, a decrease of $12.4 million, or 23.7% from the prior year period and gross margin decreased to 27.2% from 33.1%. The decrease in gross profit was primarily driven by lower net sales of $11.2 million between the periods and higher cost of goods sold. Margin was negatively impacted by higher mark downs on slow moving inventory, higher manufacturing costs driven by downtime associated with certain aging production infrastructure, higher coffee brewing equipment and labor costs associated with increased installation activities during the period, higher manufacturing variances due to lower volumes and unfavorable shift in customer mix. Margin impact was partially offset by lower green coffee prices.
Operating expenses in the third quarter of fiscal 2019 decreased $9.1 million, or 16.5%, to $46.0 million, from $55.1 million, and as a percentage of net sales declined to 31.4% compared to 34.9% of net sales, in the prior year period. The reduction was primarily due to the absence of a $3.8 million in impairment losses on intangible assets reported in the third quarter of fiscal 2018, a $3.3 million decrease in selling expenses and a $2.9 million decrease in general and admini