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, 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 December 31,
1995.
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 six months
ended December 31, ended December 31,
1995 1994 1995 1994
Net sales $58,571 $62,598 $113,609 $116,780
Cost of goods sold 27,706 32,513 55,217 60,787
30,865 30,085 58,392 55,993
Selling expense 20,798 19,199 40,018 37,621
General and administrative
expenses 2,060 2,863 3,953 5,835
22,858 22,062 43,971 43,456
Income from operations 8,007 8,023 14,421 12,537
Other income (expense):
Dividend income 648 646 1,273 1,199
Interest income 1,722 990 2,930 1,948
Other 190 (381) 344 (134)
2,560 1,255 4,547 3,013
Income before taxes
and cumulative effect
of accounting change 10,567 9,278 18,968 15,550
Provision for
income taxes 3,994 3,572 7,603 6,087
Net income per share $ 6,573 $ 5,706 $ 11,365 $ 9,463
Income per share:
Net income per share $3.41 $2.96 $5.90 $4.91
The accompanying notes are an integral part of these financial statements.
<PAGE>
FARMER BROS. CO.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, June 30,
1995 1995
ASSETS
Current assets:
Cash and cash equivalents $ 20,120 8,321
Short term investments 81,746 80,530
Accounts and notes receivable, net 19,027 18,481
Inventories 35,384 36,761
Income tax receivable 1,265
Deferred income taxes 3,577 3,577
Prepaid expenses and other 991 871
Total current assets 160,845 149,806
Property, plant and equipment, net 34,410 33,213
Notes receivable 1,880 1,880
Long term investments, net 43,747 43,337
Other assets 16,277 15,887
Deferred taxes 217 217
Total assets $257,376 $244,340
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,460 $ 9,408
Accrued payroll expenses 5,202 4,711
Other 5,046 4,605
Total current liabilities 20,708 18,724
Accrued postretirement benefits 12,846 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 220,962 211,619
Investment valuation allowance 366 (2)
Total shareholders' equity 223,822 214,111
Total liabilities and
shareholders' equity $257,376 $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 six months
ended December 31,
1995 1994
Cash flows from operating
activities:
Net Income $11,365 $ 9,463
Adjustments to reconcile net
income to net cash provided
by operating activities:
Cumulative effect of
accounting change
Depreciation 2,177 2,631
Deferred income taxes 213
Other (131) (141)
Net (gain) loss on
investments (16) 461
Change in assets and
liabilities:
Accounts and notes
receivable (609) (4,429)
Inventories 1,377 (1,423)
Income tax receivable 1,266 5,357
Prepaid expenses and other
assets (520) (1,144)
Accounts payable 1,053 1,339
Accrued payroll expenses
and other liabilities 931 778
Other long term liabilities 882 780
Total adjustments 6,623 4,209
Net cash provided by operating
activities $17,988 $13,672
The accompanying notes are an integral part of these financial statements.
<PAGE>
FARMER BROS. CO
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Unaudited)
For the six months
ended December 31,
1995 1994
Net cash provided by operating
activities: $17,988 $13,672
Cash flows from investing
activities:
Purchases of property, plant
and equipment (3,439) (4,199)
Proceeds from sales of property,
plant and equipment 206 173
Purchases of investments (101,540) (78,153)
Proceeds from sales of
investments 100,545 69,599
Notes issued (20)
Notes repaid 62 72
Net cash (used in) provided by
investing activities (4,166) (12,528)
Cash flows from financing
activities:
Dividends paid (2,023) (1,926)
Net cash used in financing
activities (2,023) (1,926)
Net (decrease) in cash
and cash equivalents 11,799 (782)
Cash and cash equivalents at
beginning of year 8,321 8,681
Cash and cash equivalents at
end of quarter $20,120 $ 7,899
Supplemental disclosure of
cash flow information:
Income tax payments $ 5,601 $ 2,627
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
December 31, June 30,
1995 1995
Fair Fair
Cost Value Cost Value
(In thousands)
Current Assets
U.S. Government
Obligations $76,606 $76,712 $80,608 $80,530
Corp. Debt Securities 5,034 5,034 - -
$81,640 $81,746 $80,608 $80,530
Non-Current Assets
U.S. Government
Obligations $ 3,692 $ 3,878 $ 8,617 $ 8,610
Corp. Debt Securities 5,075 5,077 1,599 1,569
Preferred stocks 31,862 34,040 30,456 31,896
Liquid asset fund
and other 1,224 752 1,262 1,262
$41,853 $43,747 $41,934 $43,337
The Company hedges interest rate risk in its portfolio of preferred stock.
Deferred losses associated with the hedge are $1,862,000 and $1,329,000 at
September 30 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
12/31/95 06/30/95
(In thousands)
Within 1 year $81,746 $80,530
After 1 year through 5 years 7,454 8,610
After 5 years through 10 years 1,501 1,569
After 10 years - -
$90,701 $90,709
<PAGE>
C. Inventories
Processed Unprocessed Total
(In thousands)
December 31, 1995
Coffee $ 3,884 $ 9,935 $13,819
Allied products 9,723 4,972 14,695
Coffee brewing equipment 1,508 5,361 6,869
$15,115 $20,268 $35,383
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 Analysis of Financial Condition and
Results of Operations
Registrant's operations during the second quarter have returned to more
normal operating margins. During the past two years the green coffee
market exhibited a volatility that has not been seen for more than a
decade. Prices of green coffee tripled, then fell off. During the most
recent quarter green coffee costs fell below $1.00 per pound for the first
time in more than two years, from intermediate prices of about $1.25 per
pound. Now in February the cost of green coffee has again reached $1.25
per pound. As green coffee costs have come down, the Company has effected
price decreases on roast coffee. The Company continues to find lethargic
demand. Registrant's customers (hotels and restaurants) continue to feel
the pinch of reduced spending. Consumers have reduced the number of times
they eat out and business travel and entertainment has been reduced (as the
result of corporate belt tightening, reduced tax deductions and high tech
communications).
Net sales for the second quarter of fiscal 1996 decreased 6% to $58,571,000
as compared to $62,598,000 in the same quarter of the prior year. Net
sales for the first half of fiscal 1996 decreased 2.7% to $113,609,000 from
$116,780,000 in the same period of fiscal 1995. Gross profit in the second
quarter was $30,865,000, or 53% of sales, as compared to $27,527,000, or
50% of sales, in the first quarter of fiscal 1996 and $30,085,000, or 48%
of sales, in the same quarter of fiscal 1995. Operating expenses reached
$22,858,000 in the second quarter of fiscal 1996, as compared to
$21,114,000 in the first quarter of fiscal 1996 and $22,062,000 in the
second quarter of fiscal 1995.
Income after taxes for the three months ended December 31, 1995, reached
$6,573,000, or $3.41 per share, as compared to $4,791,000, or $2.49 per
share, in the first quarter of fiscal 1996, and $5,706,000 or $2.96 per
share in the second quarter of fiscal 1995.
Net income for the first half of fiscal 1996 reached $11,365,000, or $5.90
per share, as compared to $9,463,000, or $4.91 per share, in the first six
months 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)
12/31/94 03/31/95 06/30/95 09/30/95 12/31/95
Net sales 62,598 59,514 58,368 55,038 58,571
Gross profit 30,085 26,818 30,088 27,527 30,865
Operating income 8,023 4,448 8,250 6,413 8,007
Net income 5,706 3,220 6,834 4,791 6,573
(as a percentage of sales)
12/31/94 03/31/95 06/30/95 09/30/94 12/31/95
Net sales 100.00 100.00 100.00 100.00 100.00
Gross profit 48.06 45.06 51.55 50.01 52.69
Operating income 12.82 7.47 14.13 11.65 13.67
Net income 9.12 5.41 11.71 8.70 11.22
(in dollars)
12/31/93 03/31/94 06/30/94 09/30/94 12/31/95
EPS 2.96 1.67 3.55 2.49 3.41
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 27, 1995. Holders of the Company's common
stock were entitled to one vote per share of common stock
held.
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
1,075,052 shares for the election of directors, 3,693 shares
against and 3,720 shares abstaining.
The proposal to appoint Coopers & Lybrand L.L.P.as the
independent accountants for the Company for the year ended
June 30, 1996 was approved with 1,531,031 shares in favor of
the resolution, 153 shares against and 396 shares
abstaining.
<PAGE>
PART II OTHER INFORMATION, (CONTINUED)
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.
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 13, 1996 FARMER BROS. CO.
(Registrant)
John E. Simmons
John E. Simmons
Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 20120
<SECURITIES> 81746
<RECEIVABLES> 19027
<ALLOWANCES> 545
<INVENTORY> 35384
<CURRENT-ASSETS> 160845
<PP&E> 34410
<DEPRECIATION> 50315
<TOTAL-ASSETS> 257270
<CURRENT-LIABILITIES> 20708
<BONDS> 0
<COMMON> 1926
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 257376
<SALES> 58571
<TOTAL-REVENUES> 58571
<CGS> 27706
<TOTAL-COSTS> 22858
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10567
<INCOME-TAX> 3994
<INCOME-CONTINUING> 6573
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6573
<EPS-PRIMARY> 3.41
<EPS-DILUTED> 3.41
</TABLE>
