TORRANCE, Calif.--(BUSINESS WIRE)--May 9,
2006--Farmer Bros. Co. (Nasdaq:FARM) today reported net income of $2.5
million or $0.18 per share for its third fiscal quarter ended March 31,
2006, compared with $0.9 million or $0.06 per share in the same quarter
last year. For the first nine months, the Company reported net income of
$5.5 million or $0.40 per share in fiscal 2006, up from a net loss of
$1.7 million or $0.13 per share last year.
"We are pleased to maintain operations in
our historic ranges, and we are encouraged by the continuing progress of
our initiatives to strengthen our operations and stimulate sales," said
Guenter Berger, Chairman and CEO.
Sales for the quarter increased to $53.6
million, a gain of 7% over last year, and increased to $156.9 million
for the first nine months, a 6% gain. These gains primarily reflected
price increases in the wake of last year's sharp rise in the costs of
green coffee. While the cost of goods sold rose, the Company's gross
profit increased in the third quarter by 9% over last year, improving
its gross profit margins to 60%, up from 58% a year ago.
Selling, general and administrative
expenses in the third quarter were 1% higher than last year and 7%
higher than in the second quarter of this fiscal year. Fuel costs
accounted for 6% of SG&A in the first nine months of 2006, rising 28%
over the same nine-month period last year. The SG&A expenses also
reflected the effects of continuing changes to the Company's operations,
including ongoing initiatives to improve the sales and marketing
programs and distribution networks.
Other Net Income (Expense) in the third
quarter was income of $1.2 million compared with last year's loss of
$3.0 million. The 2005 result reflected a volatile increase in green
coffee costs, which led to a decrease in the value of futures and
options contracts that the Company used to hedge against a decline in
coffee prices in the future.
The Company ended the quarter with cash
and short-term investments of $179.1 million, up 5% from $170.1 million
at Dec. 31, 2005.
Management continues to implement the
initiatives described during the annual stockholders' meeting in
November:
- New packaging has been designed for
all product lines, and will be implemented during fiscal 2007. The
Company is rolling out new point-of-sale materials that mirror the new
packaging. The updated branding can be viewed on the Company's web
site.
- The newly formed National Accounts
organization is fully staffed and has begun seeking business from
larger customers, including fast-growing chain restaurants. Management
expects these initiatives to add more than $1 million in SG&A expenses
during fiscal 2007. This organization has been staffed with some of
the Company's most experienced sales people, most of whom had been
serving as branch office managers. As a result of their moves,
approximately 20% of the Company's branch managers are new to their
jobs.
- Some branch offices and sales routes
have been realigned to better reflect business requirements and to
make the sales and distribution system more efficient. This has led to
the elimination of certain positions. Management expects the
reductions in force to result in a payroll savings of approximately
$900,000 by fiscal 2007.
- With higher-than-normal employee
turnover in the wake of the organization-wide changes, management is
directing its efforts on training and hiring programs. As previously
announced, the Company has delayed the implementation of the
sales-focused component of its information systems to the second half
of fiscal 2007.
- New products are being launched.
Management expects these products to generate $800,000 in incremental
new revenue in 2007, and believes they will create new opportunities
for the sales team to engage with customers and cross-sell other
products.
- The Company plans to expand to new
geographical markets east of its current service area.
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 52
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. For more information, go to:
www.farmerbroscousa.com.
Forward-Looking Statements
Certain statements contained in this
report 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 report 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 in this
report and the quarterly report filed by the Company on Form 10-Q and
other factors described from time to time in the Company's filings with
the SEC.
FARMER BROS. CO.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share data)
Three months ended Nine months ended
March 31, March 31,
-----------------------------------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Net sales $53,561 $50,271 $156,935 $148,199
Cost of goods sold 21,522 20,928 62,857 59,319
----------- ----------- ----------- -----------
Gross profit $32,039 $29,343 $94,078 $88,880
----------- ----------- ----------- -----------
Selling expenses 26,017 23,943 75,102 68,492
General and
administrative
expenses 5,955 7,567 16,884 20,854
----------- ----------- ----------- -----------
Operating expenses $31,972 $31,510 $91,986 $89,346
----------- ----------- ----------- -----------
Income from operations $67 $(2,167) $2,092 $(466)
----------- ----------- -----------------------
Other income
(expense):
Dividend income 911 850 2,661 2,584
Interest income 1,181 738 3,061 1,799
Other, net income
(expense) 1,226 (3,019) (197) (11,241)
----------- ----------- -----------------------
Total other income
(expense) $3,318 $(1,431) $5,525 $(6,858
----------- ----------- -----------------------
Income (loss) before
taxes 3,385 (3598) 7,617 (7,324)
Income tax expense
(benefit) 922 (4,454) 2,069 (5,609)
----------- ----------- -----------------------
Net income (loss) $2,463 $856 $5,548 $(1,715)
=========== =========== =======================
Net income (loss) per
common share $0.18 $0.06 $0.40 $(0.13)
=========== =========== =======================
Weighted average
shares outstanding 13,910,523 13,687,840 13,865,637 13,621,390
Dividends declared per
share $0.105 $0.100 $0.315 $0.300