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 March 31, 1995
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 March 31,
1995.
PAGE 1 OF 9
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<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Dollars in thousands, except per share data)
FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the three months For the nine months
ended March 31, ended March 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $59,514 $48,628 $176,294 $145,191
Cost of goods sold 32,696 21,817 93,483 64,747
26,818 26,811 82,811 80,444
Selling expense 18,958 18,605 56,578 55,825
General and administrative
expenses 3,412 3,527 9,248 8,804
22,370 22,132 65,826 64,629
Income from operations 4,448 4,679 16,985 15,815
Other income (expense):
Dividend income 638 305 1,836 921
Interest income 1,154 879 3,102 2,700
Other 857 655 (418) 1,383
2,649 1,839 4,520 5,004
Income before taxes
and cumulative effect
of accounting change 7,097 6,518 21,505 20,819
Provision for
income taxes 3,075 2,586 8,721 8,326
Income before cumulative
effect of accounting change 4,022 3,932 12,784 12,493
Cumulative effect of
accounting change,
net of income taxes - - (593) -
Net income $ 4,022 $ 3,932 $ 12,191 $ 12,493
Income per share:
Before accounting change $2.09 $2.04 $6.64 $6.49
Cumulative effect of
accounting change - - (.31) -
Net income per share $2.09 $2.04 $6.33 $6.49
<FN>
The accompanying notes are an integral part of these financial statements.
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<CAPTION>
FARMER BROS. CO.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, June 30,
1995 1994
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,249 $ 8,681
Short term investments 86,494 34,839
Accounts and notes receivable, net 18,648 15,975
Tax refund receivable - 5,357
Inventories 36,478 34,910
Deferred income taxes 3,561 2,905
Prepaid expenses and other 1,212 708
Total current assets 155,642 103,375
Property, plant and equipment, net 31,244 28,943
Notes receivable 1,929 1,257
Investments 29,271 71,960
Other assets 15,107 13,649
Deferred taxes and other assets 1,099 719
Total assets $234,292 $219,903
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 6,493 $ 3,372
Accrued payroll expenses 4,540 4,573
Other 4,555 4,543
Total current liabilities 15,588 12,488
Other long term liabilities 11,302 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 569 569
Retained earnings 205,256 195,954
Net unrealized change in
investment securities (349) (1,044)
Total shareholders' equity 207,402 197,405
Total liabilities and
shareholders' equity $234,292 $219,903
<FN>
The accompanying notes are an integral part of these financial statements.
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<CAPTION>
FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months
ended March 31,
1995 1994
<S> <C> <C>
Cash flows from operating
activities:
Net Income $ 12,191 $ 12,493
Adjustments to reconcile net
income to net cash provided
by operating activities:
Cumulative effect of
accounting change 593
Depreciation 3,922 3,717
Deferred income taxes (256)
Other (143) (22)
Net (gain) loss on
investments 841 (1,007)
Change in assets and
liabilities:
Short term investments (10,716) (7,712)
Accounts and notes
receivable (2,667) (2,120)
Inventories (1,568) (1,935)
Tax refund receivable 5,357
Prepaid expenses and other
assets (1,951) (2,467)
Accounts payable 3,121 (1,062)
Accrued payroll expenses
and other liabilities (22) 22
Other long term liabilities 1,292 738
Total adjustments (2,197) (11,848)
Net cash provided by operating
activities $ 9,994 $ 645
<FN>
The accompanying notes are an integral part of these financial statements.
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<CAPTION>
FARMER BROS. CO
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Unaudited)
For the nine months
ended March 31,
<S> <C> <C>
1995 1994
Net cash provided by operating
activities: $ 9,994 $ 645
Cash flows from investing
activities
Purchases of property, plant
and equipment (6,348) (4,553)
Proceeds from sales of property,
plant and equipment 255 201
Purchases of investments (64,695)
Proceeds from sales of
investments 236 20,178
Notes issued (761) (833)
Notes repaid 82 1,025
Net cash (used in)
investing activities (6,536) (48,677)
Cash flows from financing
activities:
Dividends paid (2,890) (2,890)
Net cash used in financing
activities (2,890) (2,890)
Net (decrease) in cash
and cash equivalents 568 (50,922)
Cash and cash equivalents at
beginning of year 8,681 64,742
Cash and cash equivalents at
end of quarter $ 9,249 $ 13,820
Supplemental disclosure of
cash flow information:
Income tax payments $ 6,921 $ 8,363
<FN>
The accompanying notes are an integral part of these financial statements.
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<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
that 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)
March 31, 1995
Coffee $ 3,139 $10,905 $14,044
Allied products 10,143 4,625 14,768
Coffee brewing equipment 1,792 5,874 7,666
$15,074 $21,404 $36,478
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 7,482
$15,289 $19,621 $34,910
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
March 31, 1995, the market value of the Company's trading securities
<PAGE>
C. Accounting Policy Change (CONTINUED)
increased $1,731,000, and for the nine months ended March 31, 1995 reflects
net unrealizable gain of $589,000, 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 1995 as a reduction in shareholders' equity of $546,000,
net of taxes. During the quarter ended March 31, 1995, the fair value of
the Company's available for sale securities increased resulting in an
increase in shareholders equity of $654,000, and an increase for the fiscal
year of $197,000.
Unrealized gains and losses on available for sale investment securities
included in shareholders' equity at March 31, 1995, were fixed income
government securities maturing after one through five years with a cost of
$26,709,000, a fair value of $26,035,000, resulting in a net unrealized
loss of($674,000) and fixed income government backed securities with a
maturity after five through ten years with a cost of $3,203,000, a fair
value of $3,155,000, resulting in a net unrealized loss of ($48,000).
Item 2. Management's Discussion and Analyze of Financial Condition and
Results of Operations
Registrant's operations in the third quarter of fiscal 1995 continue to
reflect the high prices of green coffee. Green coffee costs for the nine
months exceed those of the prior year by more than 140%. Higher sales
prices of roast coffee have passed along most cost increases, but higher
prices result in lower volume and gross profit margins have not been as
strong as in prior years. Gross profit and operating expenses compare
favorably with the same periods of the prior fiscal year. Registrant
cautions that the green coffee market becomes even more volatile as we
approach the traditional Brazilian frost season, and is unable to predict
either the direction of green coffee costs or whether current profit
margins can be maintained in this critical raw material.
Net sales for the second quarter of fiscal 1995 increased 22% to
$59,514,000 as compared to $48,628,000 in the same quarter of the prior
year. Net sales for the first nine months of fiscal 1995 increased 21% to
$176,294,000 from $145,190,000 in the same period of fiscal 1994. Gross
profit in the third quarter was $26,818,000 or 45% of sales, as compared to
$30,084,000 or 48% of sales, in the second quarter of fiscal 1995 and
$26,811,000, or 55% of sales, in the same quarter of fiscal 1994. Gross
profit for the first nine months of fiscal 1995 increased 3% to $82,811,000
from $80,443,000 in the same period of the prior fiscal year. Operating
expenses reached $22,370,00 in the third quarter of fiscal 1995, as
compared to $22,132,000 in the third quarter of fiscal 1994. Operating
expenses for the first three fiscal quarters increased 2% to $65,826,000 in
1995 as compared to $64,629,000 in the same period of the prior fiscal
year.
Income after taxes and before effect of accounting change for the three
months ended March 31, 1995, reached $4,022,000, or $2.09 per share, as
compared to $5,374,000, or $2.79 per share, in the second quarter of fiscal
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, (CONTINUED)
1995, and $3,932,000 or $2.04 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
$(.031) per share. Income after taxes and before the effect of accounting
change for the six months ended December 31, 1994, reached $12,191,000, or
$6.33 per share, as compared to $12,493,000, or $6.49 per share, in the
first nine months of fiscal 1994.
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<CAPTION>
Quarterly Summary of Results
(in thousands of dollars)
03/31/94 06/30/94 09/30/94 12/31/94 03/31/95
<S> <C> <C> <C> <C> <C>
Net sales 48,628 48,671 54,182 62,598 59,514
Gross profit 26,811 13,853 25,908 30,084 26,818
Operating income 4,679 (6,324) 4,514 8,021 4,448
Net income 3,932 (2,163) 2,795 5,374 4,002
(as a percentage of sales)
03/31/94 06/30/94 09/30/94 12/31/94 03/31/95
Net sales 100.00 100.00 100.00 100.00 100.00
Gross profit 55.13 28.46 47.82 48.06 45.06
Operating income 9.62 (12.99) 8.33 12.81 7.47
Net income 8.09 (4.44) 5.16 8.58 6.72
(in dollars)
03/31/94 06/30/94 09/30/94 12/31/94 03/31/95
EPS 2.04 (1.13) 1.45 2.79 2.09
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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 none.
security holders.
Item 5. Other information. none.
<PAGE>
PART II OTHER INFORMATION, (CONTINUED)
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.
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: May 12, 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 9-MOS
<FISCAL-YEAR-END> JUN-30-1995 JUN-30-1995
<PERIOD-END> MAR-31-1995 MAR-31-1995
<CASH> 9249 9249
<SECURITIES> 86494 86494
<RECEIVABLES> 18648 18648
<ALLOWANCES> 445 445
<INVENTORY> 36478 36478
<CURRENT-ASSETS> 155642 155642
<PP&E> 31244 31244
<DEPRECIATION> 49308 49308
<TOTAL-ASSETS> 234292 234292
<CURRENT-LIABILITIES> 15588 12488
<BONDS> 0 0
<COMMON> 1926 1926
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 234292 234292
<SALES> 59514 176294
<TOTAL-REVENUES> 59514 176294
<CGS> 32696 93483
<TOTAL-COSTS> 22370 65826
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 7097 21505
<INCOME-TAX> 3075 8721
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 (593)
<NET-INCOME> 4022 12191
<EPS-PRIMARY> 2.09 2.09
<EPS-DILUTED> 2.09 2.09
</TABLE>
