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, 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 March 31,
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 For the nine months
ended March 31, ended March 31,
1996 1995 1996 1995
Net sales $56,774 $59,514 $170,383 $176,294
Cost of goods sold 25,889 32,696 81,106 93,483
30,885 26,818 89,277 82,811
Selling expense 20,972 18,958 60,990 56,578
General and administrative
expenses 1,974 3,412 5,927 9,248
22,946 22,370 66,917 65,826
Income from operations 7,939 4,448 22,360 16,985
Other income (expense):
Dividend income 619 638 1,892 1,836
Interest income 1,656 1,154 4,586 3,102
Other 463 (857) 807 (991)
2,738 935 7,285 3,947
Income before taxes 10,677 5,383 29,645 20,932
Provision for
income taxes 4,286 2,163 11,889 8,249
Net income per share $ 6,391 $ 3,220 $ 17,756 $ 12,683
Income per share:
Net income per share $3.32 $1.67 $9.22 $6.58
The accompanying notes are an integral part of these financial statements.
<PAGE>
FARMER BROS. CO.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, June 30,
1996 1995
ASSETS
Current assets:
Cash and cash equivalents $ 12,035 $ 8,321
Short term investments 94,139 80,530
Accounts and notes receivable, net 19,734 18,481
Inventories 34,283 36,761
Income tax receivable - 1,265
Deferred income taxes 3,577 3,577
Prepaid expenses and other 1,313 871
Total current assets 165,081 149,806
Property, plant and equipment, net 34,125 33,213
Notes receivable 1,880 1,880
Long term investments, net 44,118 43,337
Other assets 16,472 15,887
Deferred taxes 217 217
Total assets $261,893 $244,340
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,535 $ 9,408
Accrued payroll expenses 5,861 4,711
Other 5,980 4,605
Total current liabilities 20,376 18,724
Accrued postretirement benefits 12,506 11,505
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 568 568
Retained earnings 226,293 211,619
Investment valuation allowance 224 (2)
Total shareholders' equity 229,011 214,111
Total liabilities and
shareholders' equity $261,893 $244,340
The accompanying notes are an integral part of these financial statements.
<PAGE>
FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months
ended March 31,
1996 1995
Cash flows from operating
activities:
Net Income $ 17,756 $ 12,683
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 3,518 3,922
Deferred income taxes (472) -
Other (164) (143)
Net (gain) loss on
investments (351) 1,430
Change in assets and
liabilities:
Accounts and notes
receivable (1,331) (2,667)
Inventories 2,478 (1,568)
Income tax receivable 1,265 5,357
Prepaid expenses and other
assets (1,041) (1,951)
Accounts payable (873) 3,121
Accrued payroll expenses
and other liabilities 2,525 (750)
Other long term liabilities 1,323 1,292
Total adjustments 6,877 8,043
Net cash provided by operating
activities $ 24,633 $ 20,726
The accompanying notes are an integral part of these financial statements.
<PAGE>
FARMER BROS. CO
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Unaudited)
For the nine months
ended March 31,
1996 1995
Net cash provided by operating
activities: $ 24,633 $ 20,726
Cash flows from investing
activities:
Purchases of property, plant
and equipment (4,499) (6,348)
Proceeds from sales of property,
plant and equipment 246 255
Purchases of investments (165,351) (103,227)
Proceeds from sales of
investments 151,689 92,730
Notes issued (761)
Notes repaid 78 83
Net cash (used in)provided by
investing activities (17,837) (17,268)
Cash flows from financing
activities:
Dividends paid (3,082) (2,890)
Net cash used in financing
activities (3,082) (2,890)
Net increase in cash
and cash equivalents 3,714 568
Cash and cash equivalents at
beginning of period 8,321 8,681
Cash and cash equivalents at
end of quarter $ 12,035 $ 9,249
Supplemental disclosure of
cash flow information:
Income tax payments $ 10,013 $ 6,921
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
March 31 June 30,
1996 1995
Fair Fair
Cost Value Cost Value
(In thousands)
Current Assets
U.S. Government
Obligations $88,168 $88,146 $80,608 $80,530
Corp. Debt Securities 6,029 5,993 - -
$94,197 $94,139 $80,608 $80,530
Non-Current Assets
U.S. Government
Obligations $ 3,696 $ 3,695 $ 8,616 $ 8,610
Corp. Debt Securities 4,958 4,935 1,599 1,569
Preferred stocks 32,737 33,339 30,456 31,896
Liquid asset fund
and other 1,999 2,149 1,263 1,262
$43,390 $44,118 $41,934 $43,337
The Company hedges interest rate risk in its portfolio of preferred stock.
Deferred losses associated with the hedge are $148,000 and $1,329,000 at
March 31 and June 30, 1995, respectively.
The contractual maturities of debt securities classified as current and non-
current available for sale are as follows:
Fair Value
03/31/96 06/30/95
(In thousands)
Within 1 year $ 94,139 $ 80,530
After 1 year through 5 years 7,253 8,610
After 5 years through 10 years 1,377 1,569
After 10 years - -
$102,769 $ 90,709
<PAGE>
C. Inventories
Processed Unprocessed Total
(In thousands)
March 31, 1996
Coffee $ 3,272 $10,728 $14,000
Allied products 8,752 4,668 13,420
Coffee brewing equipment 2,185 4,678 6,863
$14,209 $20,074 $34,283
June 30, 1995
Coffee $ 3,093 $10,809 $13,902
Allied products 11,308 4,096 15,404
Coffee brewing equipment 2,120 5,335 7,455
$16,521 $20,240 $36,761
Item 2. Management's Discussion and Analyze of Financial Condition and
Results of Operations
The green coffee market always has an effect on Registrant's operations.
During the most recent quarter, the price of the March coffee contract traded
on the CSCE ranged from $0.9040 to $1.3150 per pound, as compared to a range
from $1.5075 to $1.8725 per pound during the same period of the prior fiscal
year. The lower price of green coffee during fiscal 1996 has contributed
to Registrant's improved gross profit, but high selling prices over the past
two years have dampened demand. The restaurant and lodging industries
continue to be sluggish with no signs of strong growth.
Registrant cautions that the green coffee market can become more volatile
during the traditional Brazilian frost season (June-July), and is unable to
predict either the direction of green coffee costs or whether current
profit margins can be maintained.
Net sales for the second quarter of fiscal 1995 increased 5% to $56,774,000
as compared to $59,514,000 in the same quarter of the prior year. Net
sales for the first nine months of fiscal 1996 decreased 3% to $170,383,000
from $176,294,000 in the same period of fiscal 1995. Gross profit in the
third quarter was $30,885,000 or 54% of sales, as compared to $30,885,000,
or 53% of sales, in the second quarter of fiscal 1996 and $26,818,000, or
45% of sales, in the third same quarter of fiscal 1995. Gross profit for
the first nine months of fiscal 1996 increased 8% to $89,277,000, from
$82,811,000, in the same period of the prior fiscal year. Operating
expenses for the first three fiscal quarters increased 2% to $66,917,000 in
1996 as compared to $65,826,000 in the same period of the prior fiscal
year.
Income after taxes for the three months ended March 31, 1996, reached
$6,391,000, or $3.32 per share, as compared to $6,573,000, or $3.41 per
share, in the second quarter of fiscal 1996, and $3,220,000 or $1.67 per
share in the third quarter of fiscal 1995.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, (CONTINUED)
Quarterly Summary of Results
(in thousands of dollars)
03/31/95 06/30/95 09/30/95 12/31/95 03/31/96
Net sales 59,514 58,368 55,038 58,571 56,774
Gross profit 26,818 30,088 27,527 30,865 30,885
Operating income 4,448 8,250 6,413 8,007 7,939
Net income 3,220 6,834 4,791 6,573 6,391
(as a percentage of sales)
03/31/95 06/30/95 09/30/95 12/31/95 03/31/96
Net sales 100.00 100.00 100.00 100.00 100.00
Gross profit 45.06 51.55 50.01 53.00 54.40
Operating income 7.47 14.13 11.65 13.67 13.98
Net income 5.41 11.71 8.70 11.22 11.26
(in dollars)
03/31/95 06/30/95 09/30/95 12/31/95 03/31/96
EPS 1.67 3.55 2.49 3.41 3.32
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.
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: May 14, 1996 FARMER BROS. CO.
(Registrant)
John E. Simmons
John E. Simmons
Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 12035
<SECURITIES> 94139
<RECEIVABLES> 19734
<ALLOWANCES> 545
<INVENTORY> 34283
<CURRENT-ASSETS> 165081
<PP&E> 34125
<DEPRECIATION> 51186
<TOTAL-ASSETS> 261893
<CURRENT-LIABILITIES> 20376
<BONDS> 0
0
0
<COMMON> 1926
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 56774
<TOTAL-REVENUES> 56774
<CGS> 25889
<TOTAL-COSTS> 22946
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10677
<INCOME-TAX> 4286
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6391
<EPS-PRIMARY> 3.41
<EPS-DILUTED> 3.41
</TABLE>
