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[letterhead]
LUTIN & COMPANY
575 Madison Avenue
New York, New York 10022
Telephone (212) 605-0335
Facsimile (212) 605-0325
July 26, 2004
By telecopier: 310/320-2436
Mr. Roy E. Farmer
Farmer Bros. Co.
20333 South Normandie Avenue
Torrance, California 90502
Dear Mr. Farmer:
Recent
fluctuations in the price of Farmer Bros. stock, particularly its close at
less than $25 per share on Friday, have stirred increased investor concerns
about the company’s management.
You should
understand that the low stock price not only reflects marketplace
uncertainty, but also creates an operational risk in relation to employee
pensions. Based on what you’ve reported about the ESOP funding, the $63
million debt owed by the pension plan would be more than 90% of Friday’s
market value of the stock securing the debt. This is a matter that concerns
every employee with an interest in the ESOP, as well as every shareholder
with an interest in the company’s ability to attract and keep good
employees. It is important for employees and public shareholders alike to
know that management has established provisions to protect employee
retirement plans.
This question
about employee pension security was one of five issues raised in my May 18,
2004 letter to your board of directors. There has so far been no management
response to any of those five questions, other than a newspaper report of a
frivolous comment. I urge you to take these concerns seriously, and to
respond now or at least in your report of June 30th results.
Sincerely yours,
Gary Lutin
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