TORRANCE, Calif.--(BUSINESS WIRE)--Feb. 10,
2005--Farmer Bros. Co. (Nasdaq:FARM) today reported a net loss for its
second fiscal quarter ended Dec. 31, 2004 of $4.07 million or $0.30 per
share, compared with net income of $2.57 million or $0.15 per share in
the same quarter last year.
The results reflect losses caused by a
volatile, sustained increase in world green coffee prices during the
most recent fiscal quarter, which primarily resulted in a decrease in
the value of green coffee futures and options used by the Company to
hedge against a decline in commodity prices. These futures contracts and
options - which the Company reports under "other income and expense" -
become more valuable as coffee prices decline, and lose value as prices
rise. In contrast, the value of the Company's coffee inventory moves
essentially in the same direction as world prices.
For the second quarter of fiscal 2005,
the Company reported that net realized and unrealized coffee trading
losses in the second quarter amounted to $8.82 million, resulting in a
loss of $8.31 million, excluding dividend and interest income. This
compared with a loss in the same quarter of fiscal 2004 of $403,000 and
a gain in the first quarter of fiscal 2005 of $85,000. Other income and
expenses, including dividend and interest income, was a loss of $6.86
million for the second quarter of fiscal 2005, compared with a gain of
$1.05 million for the same period last year.
As management noted during its
presentation to the annual meeting of stockholders on Dec. 14, 2004,
which it filed on Form 8-K, increases in green coffee prices tend to
have two effects on the Company's results, and their impact is felt at
different times. First, when world coffee prices rise, the value of the
Company's hedge against falling prices declines and "we realize that
decline in the quarter in which it occurs." Second, management told
stockholders, "the increase in commodity prices will force us to raise
sales prices, and in future periods we realize the gains that come when
we sell our coffee at the higher prices."
The Company also reported that revenues
in the second quarter were essentially unchanged from the prior year,
with net sales of $51.22 million versus $51.51 million in the second
quarter of last year.
The income from operations declined,
reflecting the near-term direct effect of a volatile, sustained increase
in green coffee prices. Income from operations was $699,000 in the
second quarter of 2005, compared with $3.12 million in the same quarter
of last year. Although the company expects to be able, over time, to
pass on the higher costs of green coffee through higher sales prices, it
noted that the effect of such price increases lagged the increased costs
of green coffee in the quarter. The Company said dividend income and
interest income also were essentially unchanged from the prior year.
At the end of the second quarter, the
Company had cash, cash equivalents and investments of $195.78 million,
compared with $198.71 million on June 30, 2004.
"We believe the losses from our
second-quarter hedging activities are likely to be recovered in part as
we sell our roast coffee in future periods at higher prices," said
Interim Chief Executive Officer Guenter Berger. "Although we were
saddened by the loss in January of Roy E. Farmer, we are pleased that
our operations remain stable and the employee-owners of Farmer Brothers
remain focused on improving the business and creating shareholder value.
"In particular, we continue to make
progress on two ongoing initiatives to fuel our top-line growth: our
'back-to-basics' efforts to energize and improve the effectiveness of
our sales staff, and our program to strengthen our infrastructure with
new information systems that are designed to make our people more
efficient and more effective," said Mr. Berger.
Farmer Bros. Co. is an institutional
coffee roaster that sells a variety of coffee and allied products to the
food service industry. The Company's signature trucks and vans bearing
the "Consistently Good" logo are seen throughout Farmer Brothers'
28-state service area. Farmer Brothers has paid a dividend for 51
consecutive years, increased the dividend in each of the last seven
consecutive years, and its stock price has grown on a split-adjusted
basis from $1.80 a share in 1980.
Forward-Looking Statements
Certain statements contained in this
press release regarding the risks, circumstances and financial trends
that may affect our future operating results, financial position and
cash flows 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," "feels," "estimates," "projects,"
"expects," "plans," "believes," "intends," "will," "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. We intend these
forward-looking statements to speak only at the time of this press
release and do 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 SEC. Factors that
could cause actual results to differ materially from those in
forward-looking statements include, but are not limited to, fluctuations
in availability and cost of green coffee, competition, organizational
changes, the impact of a weaker 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, and weather and special or unusual events, as well as
other risks described from time to time in the Company's filings with
the SEC.
Contact:
Abernathy MacGregor Group
Jim Lucas / Whitney Hays, 213-630-6550