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 September 30, 1996
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 September 30,
1996.
PAGE 1 OF 9
<PAGE>
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
ended September 30,
1996 1995
Net sales $52,785 $55,038
Cost of goods sold 25,369 27,511
27,416 27,527
Selling expense 20,181 19,220
General and administrative expenses 1,518 1,894
21,699 21,114
Income from operations 5,717 6,413
Other income (expense):
Dividend income 686 625
Interest income 1,444 1,208
Other, net 140 154
2,270 1,987
Income before taxes 7,987 8,400
Income taxes 3,328 3,609
Net income $ 4,659 $ 4,791
Net income per share $2.42 $2.49
The accompanying notes are an integral part of these financial statements.
<PAGE>
FARMER BROS. CO.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, June 30,
1996 1996
ASSETS
Current assets:
Cash and cash equivalents $ 47,382 $ 28,165
Short term investments 67,108 74,937
Accounts and notes receivable, net 17,128 18,822
Inventories 39,188 40,818
Income tax receivable 29 1,000
Deferred income taxes 2,616 2,616
Prepaid expenses 906 701
Total current assets 174,357 167,059
Property, plant and equipment, net 33,279 33,343
Notes receivable 1,841 1,841
Long term investments 40,514 40,058
Other assets 17,491 17,320
Deferred income taxes 1,521 1,269
Total assets $269,003 $260,890
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,619 $ 4,635
Accrued payroll expenses 4,111 4,153
Other 8,326 5,542
Total current liabilities 19,056 14,330
Accrued postretirement benefits 13,178 12,892
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 234,343 230,840
Investment valuation allowance (69) 334
Total shareholders' equity 236,769 233,668
Total liabilities and
shareholders' equity $269,003 $260,890
The accompanying notes are an integral part of these financial statements.
<PAGE>
FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months
ended September 30,
1996 1995
Cash flows from operating
activities:
Net Income $ 4,659 $ 4,791
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 1,430 1,253
Deferred income taxes - 33
Other (15) (32)
Net (gain) loss on
investments (20) (46)
Change in assets and
liabilities:
Short term investments - -
Accounts and notes
receivable 1,685 (275)
Inventories 1,629 1,734
Income tax receivable 971 1,266
Prepaid expenses and other
assets (453) (486)
Accounts payable 1,984 (3,730)
Accrued payroll expenses
and other liabilities 2,743 2,338
Accrued postretirement
benefits 286 441
Total adjustments 10,240 2,496
Net cash provided by operating
activities $14,899 $ 7,287
The accompanying notes are an integral part of these financial statements.
<PAGE>
FARMER BROS. CO
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Unaudited)
For the three months
ended September 30,
1996 1995
Net cash provided by operating
activities: $14,899 $ 7,287
Cash flows from investing
activities:
Purchases of property, plant
and equipment (1,308) (2,809)
Proceeds from sales of property,
plant and equipment 35 72
Purchases of investments (72,417) (26,777)
Proceeds from sales of
investments 79,155 29,693
Notes issued - -
Notes repaid 9,000 50,000
Net cash provided by
(used in) investing
activities 5,474 229
Cash flows from financing
activities:
Dividends paid (1,156) (963)
Net cash used in financing
activities (1,156) (963)
Net increase (decrease) in cash
and cash equivalents 19,217 6,553
Cash and cash equivalents at
beginning of year 28,165 8,321
Cash and cash equivalents at
end of quarter $47,382 $14,874
Supplemental disclosure of
cash flow information:
Income tax payments $ 579 $ 215
The accompanying notes are an integral part of these financial statements.
<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. Investments
September 30, June 30,
1996 1996
Fair Fair
(In thousands) Cost Value Cost Value
Current Assets
Commercial Paper $24,446 $24,148 $34,609 $34,775
U.S. Government
Obligations $42,976 $42,960 $40,129 $40,162
$67,422 $67,108 $74,738 $74,937
Non-Current Assets
U.S. Government
Obligations $ 2,085 $ 2,066 $ 2,096 $ 2,043
Corporate bonds 1,300 1,265 1,400 1,350
Preferred stocks 35,011 35,721 34,475 35,114
Liquid asset fund
and other 1,858 1,463 1,551 1,551
$40,254 $40,515 $39,522 $40,058
The gross unrealized gains and (losses) on securities classified as available
for sale were $1,026,000 and ($1,079,000), respectively, at September 30,
1996, and $1,263,000 and ($528,000), respectively, at June 30, 1996. Gross
realized gains from available for sale securities were $23,000 and $25,000 at
September 30, 1995 and 1996, respectively.
The Company hedges interest rate risk in its portfolio of preferred stock.
Deferred gains associated with the hedge are $424,000 and $162,000 at
September 30 and June 30, 1996, respectively.
The contractual maturities of debt securities classified as current and non-
current available for sale are as follows:
Maturities Fair Value
(In thousands) 09/30/96 06/30/96
Within 1 year $67,108 $74,937
After 1 year through 5 years 2,066 2,043
After 5 years through 10 years 1,265 1,350
After 10 years - -
$70,439 $78,330
<PAGE>
C. Inventories
Processed Unprocessed Total
(In thousands)
September 30, 1996
Coffee $ 5,147 $12,308 $17,455
Allied products 9,285 4,881 14,166
Coffee brewing equipment 2,291 5,276 7,567
$16,723 $22,465 $39,188
June 30, 1996
Coffee $ 5,302 $12,259 $17,561
Allied products 10,846 4,847 15,693
Coffee brewing equipment 2,475 5,089 7,564
$18,623 $22,195 $40,818
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Market trends from the fiscal 1996 continued into fiscal 1997, with higher
coffee prices and higher roast coffee costs contributing to improved gross
profit and lower sales volume. Net sales decreased 4% to $52,785,000 in the
quarter ending September 30, 1996 as compared to $55,038,000 in the same
quarter of fiscal 1996. Gross profit decreased in the first quarter of
fiscal 1997 to $27,416,000 as compared to $27,527,000 in same quarter of
fiscal 1996.
Operating expenses, composed of selling and general and administrative
expenses, increased 3% to $21,699,000 in the current quarter compared to
$21,114,000 in the same quarter of the prior fiscal year. This increase is
primarily the result of higher employee benefits and increased coffee brewing
equipment related expenses.
Other income increased 14% to $2,270,000 in the first quarter of fiscal 1997
as compared to $1,987,000 in the same quarter of the prior fiscal year
primarily resulting from an improved interest rate environment.
Income before taxes decreased 5% to $7,987,000, or 15% of sales, in the first
quarter of the 1997 fiscal year as compared to $8,400,000, or 15% of sales,
in the same quarter of 1996. Net income for the first quarter of fiscal 1997
decreased 3% to $4,659,000 or $2.42 per share, from $4,791,000, or $2.49 per
share, recorded in the first quarter of fiscal 1996.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, Continued
Quarterly Summary of Results
(in thousands of dollars)
09/30/95 12/31/95 03/31/96 06/30/96 09/30/96
Net sales 55,038 58,571 56,774 53,692 52,785
Gross profit 27,527 30,865 30,885 29,534 27,416
Operating income 6,413 8,007 7,939 6,839 5,717
Net income 4,791 6,573 6,391 5,608 4,659
(as a percentage of sales)
09/30/95 12/31/95 03/31/96 06/30/96 09/30/96
Net sales 100.00 100.00 100.00 100.00 100.00
Gross profit 50.01 52.69 54.40 55.00 51.94
Operating income 11.65 13.67 13.98 12.74 10.83
Net income 8.70 11.22 11.26 10.44 8.82
(in dollars)
09/30/95 12/31/95 03/31/96 06/30/96 09/30/95
EPS 2.49 3.41 3.32 2.91 2.42
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. none.
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.
<PAGE>
Part II Other Information, Continued
(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: November 14, 1996 FARMER BROS. CO.
(Registrant)
John E. Simmons
John E. Simmons
Treasurer and
Chief Financial Officer
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