10
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1994
Commission file number 0-1375
FARMER BROS. CO.
California 95-0725980
State of Incorporation Federal ID Number
20333 S. Normandie Avenue, Torrance, California 90502
Registrant's Address Zip
(310) 787-5200
Registrant's telephone number
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [ ]
Number of shares of Common Stock outstanding: 1,926,414 as of December 31,
1994.
PAGE 1 OF 10
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Dollars in thousands, except per share data)
FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the six months
ended December 31, ended December 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales $62,598 $49,564 $116,780 $96,562
Cost of goods sold 32,514 21,943 60,788 42,930
30,084 27,621 55,992 53,632
Selling expense 19,199 18,979 37,621 37,220
General and administrative
expenses 2,864 2,753 5,836 5,278
22,063 21,732 43,457 42,498
Income from operations 8,021 5,889 12,535 11,134
Other income (expense):
Dividend income 646 306 1,198 616
Interest income 990 947 1,948 1,822
Other (907) 203 (1,276) 728
729 1,456 1,870 3,166
Income before taxes
and cumulative effect
of accounting change 8,750 7,345 14,405 14,300
Provision for
income taxes 3,376 3,149 5,646 5,739
Income before cumulative
effect of accounting change 5,374 4,196 8,759 8,561
Cumulative effect of
accounting change,
net of income taxes - - (593) -
Net income $ 5,374 $ 4,196 $ 8,166 $ 8,561
Income per share:
Before accounting change $2.79 $2.18 $4.55 $4.44
Cumulative effect of
accounting change - - (.31) -
Net income per share $2.79 $2.18 $4.24 $4.44
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
FARMER BROS. CO.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
December 31, June 30,
1994 1994
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,899 $ 8,681
Short term investments 83,693 34,839
Accounts and notes receivable, net 20,416 15,975
Tax refund receivable 5,357
Inventories 36,333 34,910
Deferred income taxes 3,561 2,905
Prepaid expenses and other 692 708
Total current assets 152,594 103,375
Property, plant and equipment, net 30,462 28,943
Notes receivable 1,193 1,257
Investments 28,729 71,960
Other assets 14,823 13,649
Deferred taxes and other assets 1,099 719
Total assets $228,900 $219,903
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,710 $ 3,372
Accrued payroll expenses 4,174 4,573
Other 5,537 4,543
Total current liabilities 14,421 12,488
Other long term liabilities 10,790 10,010
Commitments and contingencies
Shareholders' equity:
Common stock, $1.00 par value,
authorized 3,000,000 shares; issued
and outstanding 1,926,414 shares 1,926 1,926
Additional paid-in capital 569 568
Retained earnings 202,196 195,955
Net unrealized change in
investment securities (1,002) (1,044)
Total shareholders' equity 203,689 197,405
Total liabilities and
shareholders' equity $228,900 $219,903
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the six months
ended December 31,
1994 1993
<S> <C> <C>
Cash flows from operating
activities:
Net Income $ 8,166 $ 8,561
Adjustments to reconcile net
income to net cash provided
by operating activities:
Cumulative effect of
accounting change 593
Depreciation 2,631 2,444
Deferred income taxes (256)
Other (141) 13
Net (gain) loss on
investments 1,603 (485)
Change in assets and
liabilities:
Short term investments (8,677) (26,855)
Accounts and notes
receivable (4,429) (2,302)
Inventories (1,423) (2,849)
Tax refund receivable 5,357
Prepaid expenses and other
assets (1,144) (1,245)
Accounts payable 1,339 (2,468)
Accrued payroll expenses
and other liabilities 595 (500)
Other long term liabilities 780 492
Total adjustments (3,172) (33,755)
Net cash provided by operating
activities $ 4,994 ($ 25,194)
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
FARMER BROS. CO
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Unaudited)
<CAPTION>
For the six months
ended December 31,
1994 1993
<S> <C> <C>
Net cash provided by operating
activities: $ 4,994 ($ 25,194)
Cash flows from investing
activities
Purchases of property, plant
and equipment (4,199) (2,940)
Proceeds from sales of property,
plant and equipment 173 147
Purchases of investments (37,921)
Proceeds from sales of
investments 124 12,938
Notes issued (20) (833)
Notes repaid 72 461
Net cash (used in)
investing activities (3,850) (28,148)
Cash flows from financing
activities:
Dividends paid (1,926) (1,926)
Net cash used in financing
activities (1,926) (1,926)
Net (decrease) in cash
and cash equivalents (782) (55,268)
Cash and cash equivalents at
beginning of year 8,681 64,742
Cash and cash equivalents at
end of quarter $ 7,899 $ 9,474
Supplemental disclosure of
cash flow information:
Income tax payments $ 2,627 $ 5,502
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. Unaudited Financial Statements
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. It is Management's opinion
tht all adjustments of a normal recurring nature necessary for a fair
statement of the results of operations for the interim periods have been
made.
B. Inventories
Processed Unprocessed Total
(In thousands)
December 31, 1994
Coffee $ 3,344 $10,750 $14,094
Allied products 9,853 4,166 14,019
Coffee brewing equipment 1,859 6,361 8,220
$15,056 $21,277 $36,333
June 30, 1994
Coffee $ 3,182 $10,829 $14,011
Allied products 10,395 3,022 13,417
Coffee brewing equipment 1,712 5,770 7,483
$15,289 $19,621 $34,911
C. Accounting Policy Change
The Company adopted the provisions of the Statement of Financial Accounting
Standards No. 115 ("SFAS 115"), "Accounting for Certain Investments in Debt
& Equity Securities" for such securities held as of or acquired after July
1, 1994. In accordance with SFAS 115, prior period financial statements
have not been restated. Currently, a portion of the Company's investments
have been classified as trading securities and are carried at fair value
with unrealized gains and losses reported in earnings. The balance of the
Company's investments are currently classified as available for sale and
are carried at fair value with unrealized gains or losses excluded from
earnings and reported as a separate component of shareholders' equity. The
cost of investments sold is determined on the specific identification
method. Investments are reported at fair value. Investments designated
trading securities are carried as current assets. Available-for-sale
investments are carried as current or non-current assets as appropriate.
The Company has not identified any held-to-maturity investments at this
time. Dividend and interest income are accrued as earned.
Registrant has reported the cumulative effect of the change in accounting
principle relating to trading securities in the first quarter of fiscal
1995 as an expense of $593,000, net of taxes. During the quarter ended
September 30, 1994, the market value of the Company's trading securities
declined $615,000 and is included in Other income (expense). The Company
has reported the cumulative effect of the change in accounting principle
relating to available for sale securities in the first quarter of fiscal
<PAGE>
C. Accounting Policy Change (CONTINUED)
1995 as a reduction in shareholders' equity of $546,000, net of taxes.
During the quarter ended December 31, 1994, the fair value of the Company's
available for sale securities declined resulting in an additional reduction
in shareholders' equity of $441,000.
Unrealized gains and losses on available for sale investment securities
included in shareholders' equity at December 31, 1994 were fixed income
government securities maturing after one through five years with a cost of
$26,721,000, a fair value of $25,576,000, resulting in a net unrealized
loss of($1,145,000) and fixed income government backed securities with a
maturity after five through ten years with a cost of $3,303,000, a fair
value of $3,072,000, resulting in a net unrealized loss of ($231,000).
Item 2. Management's Discussion and Analyis of Financial Condition and
Results of Operations
The volatile the green coffee market continues to effect Registrant's
operations. Green coffee costs have decreased from the 20 year highs
reached this past summer. The members of the Association of Coffee
Producing Countries (ACPC) are again trying to establish a voluntary coffee
retention program to provide a mechanism to support green coffee prices at
or above current levels. Green coffee costs for the first half of fiscal
1995 have exceeded those during the same period of fiscal 1994 by nearly
100%. Increases in the sales prices of roast coffee during this period
brought operating margins in line with historic averages by the end of the
quarter ending in December. Registrant cautions against predicting whether
these margins can be sustained given the uncertain cost of its primary raw
material and the competitive pressures of its market.
Net sales for the second quarter of fiscal 1995 increased 26%, as the
result of higher sales prices of roast coffee, to $62,598,000 as compared
to $49,564,000 in the same quarter of the prior year. Net sales for the
first half of fiscal 1995 increased 21% to $116,780,000 from $96,562,000 in
the same period of fiscal 1994. Gross profit in the second quarter was
$30,084,000, or 48% of sales, as compared to $25,908,000, or 48% of sales,
in the first quarter of fiscal 1995 and $27,621,000, or 56% of sales, in
the same quarter of fiscal 1994. Operating expenses reached $22,063,000 in
the second quarter of fiscal 1995, as compared to $21,394,000 in the first
quarter of fiscal 1995 and $21,372,000 in the second quarter of fiscal
1994.
Income after taxes and before effect of accounting change for the three
months ended December 31, 1994, reached $5,374,000, or $2.79 per share, as
compared to $4,514,000, or $2.34 per share, in the first quarter of fiscal
1995, and $4,196,000 or $2.18 per share in the second quarter of fiscal
1994.
Net income for the first half of fiscal 1995 has been reduced as a result
of adopting the provisions of SFAS 115 in the first quarter of fiscal 1995.
The cumulative effect of its adoption, net of tax, was $(593,000) or
$(0.31) per share. Income after taxes and before the effect of accounting
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, (CONTINUED)
change for the six months ended December 31, 1994, reached $8,759,000, or
$4.55 per share, as compared to $8,561,000, or $4.44 per share, in the
first six months of fiscal 1994.
<TABLE>
<CAPTION>
Quarterly Summary of Results
(in thousands of dollars)
12/31/93 03/31/94 06/30/94 09/30/94 12/31/94
<S> <C> <C> <C> <C> <C>
Net sales 49,564 48,628 48,671 54,182 62,598
Gross profit 27,621 26,811 13,853 25,908 30,084
Operating income 5,889 4,679 -6,324 4,514 8,021
Net income 4,196 3,932 -2,163 2,795 5,374
(as a percentage of sales)
12/31/93 03/31/94 06/30/94 09/30/94 12/31/94
Net sales 100.00 100.00 100.00 100.00 100.00
Gross profit 55.73 55.13 28.46 47.82 48.06
Operating income 11.88 9.62 -12.99 8.33 12.81
Net income 8.47 8.09 -4.44 5.16 8.58
(in dollars)
12/31/93 03/31/94 06/30/94 09/30/94 12/31/94
EPS 2.18 2.04 -1.13 1.45 2.79
</TABLE>
PART II OTHER INFORMATION
Item 1. Legal proceedings. not applicable.
Item 2. Changes in securities. none.
Item 3. Defaults upon senior securities. none.
Item 4. Submission of matters to a vote of
security holders.
The Annual Meeting of Shareholders of Farmer Bros. Co. was
held on November 28, 1994. Holders of the Company's common
stock were entitled to one vote per share of common stock
held.
The proposal to amend the Company's Bylaws to eliminate
cumulative voting was adopted, with 1,259,385 shares in
favor, 45,240 shares against and 3,524 shares abstaining.
<PAGE>
PART II OTHER INFORMATION, (CONTINUED)
Six directors were elected at the meeting, each to serve for
the coming year and until any successors are elected and
qualify. The following persons were elected as directors:
Roy F. Farmer, Roy E. Farmer, Catherine E. Crowe, Lewis A.
Coffman, Guenter W. Berger and John M. Anglin. There were
1,341,853 shares for the election of directors, 2,582 shares
against and 3,696 shares abstaining.
The proposal to appoint Coopers & Lybrand as the independent
accountants for the Company for the year ended June 30, 1995
was approved with 1,347,539 shares in favor of the
resolution, 10 shares against and 583 shares abstaining.
Item 5. Other information. none.
Item 6. Exhibits and reports on Form 8-K.
(a) Exhibits.
(2) Plan of acquisition, reorganization,
arrangement, liquidation or
succession not applicable.
(4) Instruments defining the rights of
security holders, including
indentures. not applicable.
(11) Statement re computation of per
share earnings. not applicable.
(15) Letter re unaudited interim financial
information. not applicable.
(18) Letter re change in accounting
principles. not applicable.
(19) Report furnished to security holders not applicable.
(22) Published report regarding matters
submitted to vote of security holders. not applicable.
(23) Consents of experts and counsel. not applicable.
(24) Power of attorney. not applicable.
(27) Financial Data Schedule See attached Form EX-27.
(99) Additional exhibits. not applicable.
(b) Reports on Form 8-K none.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 14, 1995 FARMER BROS. CO.
(Registrant)
John E. Simmons
John E. Simmons
Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1995 JUN-30-1995
<PERIOD-END> DEC-31-1994 DEC-31-1994
<CASH> 7899 7899
<SECURITIES> 83693 83693
<RECEIVABLES> 20416 20416
<ALLOWANCES> 445 445
<INVENTORY> 36333 36333
<CURRENT-ASSETS> 152594 152594
<PP&E> 30462 30462
<DEPRECIATION> 49308 49308
<TOTAL-ASSETS> 228900 228900
<CURRENT-LIABILITIES> 14421 14421
<BONDS> 0 0
<COMMON> 1926 1926
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 228900 228900
<SALES> 62598 116780
<TOTAL-REVENUES> 62598 116780
<CGS> 32514 60788
<TOTAL-COSTS> 22063 43457
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 8750 14405
<INCOME-TAX> 3376 5646
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 (593)
<NET-INCOME> 5374 8166
<EPS-PRIMARY> 2.79 4.24
<EPS-DILUTED> 2.79 4.24
</TABLE>
