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Wednesday, September 15, 2004

Farmer Bros. reports major decline for fiscal year

The Torrance coffee distributor says higher legal and employee benefit costs are to blame for drop in earnings.

By Muhammed El-Hasan
Daily Breeze
 

Torrance-based coffee roaster and distributor Farmer Bros. Co. reported earnings of $12.7 million, or 81 cents a share, in the fiscal year ended June 30, the company said Tuesday.

The results represent a 46 percent drop from last year's earnings of $23.6 million or $1.30 a share.

The annual report also reported a decline in earnings in the fourth fiscal quarter compared with the previous year's fourth quarter. In the most recent quarter, the company earned $2 million, or 11 cents a share, compared with $5.8 million or 32 cents a share a year earlier.

That was the 11th straight quarter of a year-over-year earnings decline.

According to "Note 12" of the annual report filed with the Securities and Exchange Commission, the company actually lost $1.161 million in the fourth quarter when considering only earnings from operations.

The company stayed in the black in the quarter by making a profit on its investments.

"These results do not encourage confidence in management's ability to satisfy shareholder expectations or the needs of employees, who are concerned as much about job security as with their pensions," said Gary Lutin, who runs an investor Web site supported by critics of Farmer Bros.' management.

The company, which sells to institutional customers such as restaurants and hospitals, said the results reflect costs of higher employee benefits, legal expenses and a new companywide computer system.

In addition, green coffee beans cost 15 percent more in fiscal 2004 compared with fiscal 2003, the company said. This greater cost was partly offset by Farmer Bros.' price increases.

To improve sales, the company said, its management has focused on strengthening sales teams "including 'back-to-the-basics' sales training programs."

The company added that its new computer system "soon will be applied to the sales function."

Farmer Bros. reported net sales of $193.6 million in fiscal 2004, down 4 percent from the prior year.

The fourth quarter brought net sales of $47.3 million, 1 percent less than a year earlier.

Traded on Nasdaq, Farmer Bros. shares rose 3 cents on Tuesday to close at $25.01 -- near a 52-week low of $24.50.

 

©2004 Copley Press, Inc. Content may not be reproduced or redistributed without permission.

 

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.

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