The coffee firm's sales fall 9% to their lowest level in at least 12
years. Dissidents step up their fight with management.
By Jerry Hirsch
Times Staff Writer
November 18, 2003
Commercial coffee roaster Farmer Bros. Co. continued to see
its sales and profit drip away during the latest quarter, as revenue fell to
its lowest level in at least a dozen years.
The Torrance-based company, meanwhile, is facing new court challenges from a
dissident branch of the company's founding family that is trying to wrest
voting control of its shares from the firm's management.
Attorneys for Catherine Crowe and her two children have filed petitions in
Los Angeles County Superior Court seeking to prevent company Chairman Roy F.
Farmer, who is Crowe's brother, from voting Farmer stock held in trusts. The
Crowe family is asking the court to appoint retired Judge Arnold Gold as an
interim trustee. A hearing is scheduled for Dec. 24.
The Crowe trusts own 12.5% of the company. If the court grants the family's
petition, the amount of shares Roy Farmer and his supporters on the board
could vote would be slashed to roughly 40% of the company. That would give
dissident shareholders a chance to block a move by Farmer Bros. to
reincorporate the business in Delaware.
Between the trusts and other holdings, Crowe family members own about 23% of
the company. They are aligned with another major dissident, Franklin Mutual
Advisors, which owns nearly 10% of Farmer Bros. stock.
"Freeing the 12.5% trust votes from management control would not only allow
shareholders to block the proposed reincorporation, but would also make it
practical to put up a dissident slate of directors," said Gary Lutin, a New
York investment banker who is managing a Franklin-sponsored Internet forum
for shareholders.
Late Friday, Farmer Bros. reported that its earnings fell for the eighth
consecutive period, this time by 55%. Fiscal first-quarter net income
plummeted to $2.5 million, or $1.41 a share, for the quarter ended Sept. 30,
compared with $5.6 million, or $3.03, a year earlier. It was the company's
smallest first-quarter profit in a decade.
Sales, too, slipped. Total revenue fell 9% to $45.7 million — the lowest
level of quarterly sales in at least 12 years.
The company blamed the declines on slower consumer spending at restaurants,
a decrease in coffee-brewing equipment sales and the expense of upgrading
computer systems. Farmer Bros. sells coffee and equipment to restaurants and
institutional food companies.
Farmer Bros. also said higher prices for green, unroasted coffee and greater
spending for employee benefits, including retirement, health insurance and
an employee stock ownership plan, contributed to its worsening financial
performance.
The company, which although public is tightly controlled by 87-year-old Roy
Farmer and his branch of the founding family, declined to discuss plans for
improving operations.
Farmer Bros. shares, which are thinly traded, fell $2.98 to $317.02 on
Nasdaq on Monday.
Copyright 2003 Los Angeles Times
The
Forum is open to all Farmer Bros. shareholders, whether institutional or
individual, and to professionals concerned with their investment decisions.
Its purpose is to provide shareholders with access to information and a free
exchange of views on issues relating to their evaluations of alternatives.
As stated in the Forum's
Conditions of Participation, participants are expected to make independent use
of information obtained through the Forum, subject to the privacy rights of
other participants. It is a Forum rule that participants will not be
identified or quoted without their explicit permission.
There is no charge for
participation. Franklin Mutual Advisers, LLC, the manager of funds
owning approximately 12.6% of Farmer Bros. shares, provided initial
sponsorship for the Forum and arranged for it to be chaired by
Gary
Lutin. Continuing support and guidance of the Forum is provided by an
Advisory Panel of actively interested shareholders.
For additional information or to be included in an email
distribution list, send an inquiry to
farm@shareholderforum.com.
