PROXY
FARMER BROS. CO. ANNUAL MEETING OF SHAREHOLDERS, DECEMBER 1, 1997
This proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints ROY F. FARMER, GUENTER W. BERGER and LEWIS
A. COFFMAN, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote as designated below, all the
shares of common stock of Farmer Bros. Co. held of record by the undersigned,
at the annual meeting of shareholders to be held on December 1, 1997, and
any adjournments thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS YOU HAVE INDICATED.
IF NO INDICATION HAS BEEN MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED IN FAVOR OF EACH OF THE BELOW PERSONS AND PROPOSALS.
You are requested to date and sign this proxy and return it in the enclosed
envelope. This proxy will not be used if you attend the meeting and vote in
person.
SHARES OF COMMON STOCK
NOTE: Please date this Proxy and sign it exactly as your name or names appear
hereon, and return promptly in the enclosed envelope. Executors,
administrators, trustees, etc., should so indicate when signing. If the
signature is for a corporation, please sign full corporate name by authorized
officer. If shares are registered in more than one name, all holders must sign.
(Continued, and to be marked, dated and signed, on the other side)
FOLD AND DETACH HERE
<PAGE>
The Board of Directors recommends a vote FOR items 1, 2 and 3.
WITHHELD
Item 1-ELECTION OF DIRECTORS FOR FOR ALL
Nominees:
Roy F. Farmer
Roy E. Farmer
Guenter W. Berger
Lewis A. Coffman
Catherine E. Crowe
John M. Anglin
WITHHELD FOR: (Write that nominee's name
on the space provided below).
Item 2-APPOINTMENT OF ERNST FOR AGAINST ABSTAIN
& YOUNG LLP as the
independent public
accountants
Item 3-In their discretion,
the proxies are
authorized to vote
upon other such
business as may
properly come before
the meeting.
Signature(s) ___________________________________ Date_______________________
NOTE: Please sign as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
<PAGE>
Farmer Bros. Co.
20333 SOUTH NORMANDIE AVENUE
TORRANCE, CALIFORNIA 90502
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held December 1, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Farmer
Bros. Co. will be held at the main office of the Company located at 20333
South Normandie Ave., Torrance, California, on Monday, December 1, 1997, at
10:00 o'clock a.m., Los Angeles time, for considering and acting upon the
following:
1. The election of a board of six directors to serve until the next Annual
Meeting or until their successors are duly elected and qualify;
2. Approval of the appointment of Ernst & Young LLP as the independent
public accountants of Farmer Bros. Co. for the year ending June 30, 1998;
and
3. Any and all other matters that may properly come before the meeting or
any adjournment thereof.
Only holders of common stock of record at the close of business on
October 17, 1997, will be entitled to notice of and to vote at the meeting
and any adjournment thereof.
MANAGEMENT HOPES YOU WILL ATTEND THE MEETING, BUT IF YOU CANNOT BE THERE,
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.
DAVID W. UHLEY
Secretary
Torrance, California
October 30, 1997
<PAGE>
Farmer Bros. Co.
20333 SOUTH NORMANDIE AVENUE
TORRANCE, CALIFORNIA 90502
PROXY STATEMENT
This proxy statement is furnished in connection with the
solicitation by the Board of Directors of proxies from holders of common
stock of Farmer Bros. Co. (hereinafter called the "Company") for the Annual
Meeting of Shareholders of the Company to be held at 20333 South Normandie
Avenue, Torrance, California, on Monday, December 1, 1997, at 10:00 o'clock
a.m., and for any adjournment thereof.
The cost of soliciting proxies by the Board of Directors will be
borne by the Company. Such solicitation will be made primarily by mail. In
addition, certain directors, officers or regular employees of the Company
may solicit proxies by telephone or other device or in person.
The mailing of proxy materials will commence on or about October
30, 1997. The Company will request known nominees to forward proxy
materials to the beneficial owners of the Company's shares.
On the October 17, 1997 record date, the Company had outstanding
1,926,414 shares of common stock. The Company has no other class of
securities outstanding. Only holders of shares of common stock of record at
the close of business on that date will be entitled to notice of and to vote
at the meeting or any adjournment thereof, and each such holder present or
represented at the meeting will be entitled to one vote for each share of
common stock held. In electing directors this year, a shareholder may not
cumulate his or her vote. Shareholders are entitled to only one vote per
share with the six nominees receiving the highest number of votes being
elected.
Shares of common stock represented by proxies received will be
voted: (1) unless authority is withheld, for the election of the nominees
listed on page 3 as directors; and (2) unless otherwise specified, for
approval of the appointment of Ernst & Young LLP as the Company's
independent public accountants for the ensuing year. In the event that one
or more of said nominees should become unavailable to serve as a director
for any reason, the proxy holders will vote the shares for such other
person, if any, as shall be designated by the Board of Directors.
Any proxy delivered in the form enclosed may be revoked by the
person executing it at any time prior to the voting thereof.
<PAGE>
OWNERSHIP OF COMMON STOCK
Principal Shareholders
The following are all persons known to management who own beneficially
more than 5% of the Company's common stock (as of October 17, 1997):
Amount and Nature Percent
Name and Address of of Beneficial of
Beneficial Owner Ownership (1) Class
Roy F. Farmer 833,739 shares (2) 43.28%
c/o Farmer Bros. Co.
20333 South Normandie Ave.
Torrance, California 90502
Catherine E. Crowe 203,430 shares (3)(4) 10.56%
c/o Farmer Bros. Co.
20333 South Normandie Ave.
Torrance, California 90502
According to a Schedule 13G filing with the Securities and Exchange
Commission dated February 12, 1997, filed by Franklin Resources, Inc.,
Franklin Resources, Inc. at that date owned beneficially 117,238 shares
(6.1%). Franklin Resources, Inc. is reported to have sole voting and
investment power over these shares.
According to a Schedule 13G filing with the Securities and Exchange
Commission dated March 6, 1997, filed by Everett Harris & Co., Everett
Harris & Co. at that date owned beneficially 141,990 shares (7.37%).
Everett Harris is reported to have investment power over these shares.
__________________________
(1) Sole voting and investment power.
(2) Includes 171,618 shares owned outright by Mr. Farmer and his wife as
trustees of a revocable living trust, 577,258 shares held by various
trusts of which Mr. Farmer is sole trustee and 84,863 shares previously
held in the estate Mrs. Elizabeth H. Farmer of which Mr. Farmer was the
sole executor, that were distributed during fiscal year 1995 to various
trusts, to which such shares Mr. Farmer disclaims beneficial ownership.
Excludes 1,849 shares owned by his wife in which Mr. Farmer disclaims
beneficial interest, and excludes shares held by a family trust of
which Mr. Farmer formerly was trustee and which shares formerly were
reported by Mr. Farmer.
(3) Excludes 9,900 shares held by trusts for Mrs. Crowe's benefit. Mr.
Farmer is sole trustee of said trusts and said shares are included in
his reported holdings.
(4) During the Company's fiscal year 1995, a loan in the amount of $739,500
was made to Steven Crowe, son of Catherine Crowe, a director of the
Company. The loan was made for the purpose of enabling him to purchase a
residence. The loan is collateralized by a deed of trust against the
residence and a pledge of 2,400 shares of Farmer Bros. Co. stock held in
trust for Steven Crowe. The Company will receive interest at a
competitive rate of 8.75% per annum. As of October 28, 1997, a total of
$729,961 remains outstanding.
Management Shareholdings
The following sets forth the beneficial ownership of the common stock of
the Company by each director and nominee, each executive officer named in the
Summary Compensation Table and all directors and executive officers as a
group:
Number of Shares Percent
and Nature of of
Name Beneficial Ownership (1) Class
Roy F. Farmer (See "Principal Shareholders," supra)
Guenter W. Berger 212 (2) *
Lewis A. Coffman 15 (3) *
Catherine E. Crowe (See "Principal Shareholders," supra)
Roy E. Farmer 36,034 (4) 1.87%
John M. Anglin None -
Kenneth R. Carson 89 *
John E. Simmons 150 *
All directors and
executive officers
as a group
(9 persons) 1,073,669 55.73%
<PAGE>
(1) Sole voting and investment power unless indicated otherwise in following
footnotes.
(2) Held in trust with voting and investment power shared by Mr. Berger and
his wife.
(3) Voting and investment power shared by Mr. Coffman and his wife.
(4) Includes 2,400 shares owned outright by Mr. Farmer and 33,634 shares
held by various trusts of which Mr. Farmer is sole trustee.
*less than 1%.
PROPOSAL ONE:
ELECTION OF DIRECTORS
Six directors are to be elected at the meeting, each to serve for the
ensuing year and until his or her successor is elected and qualify. All of
the nominees are presently directors of the Company. All of the present
directors were elected to their current term by the shareholders. All of the
nominees have consented to be named and have indicated their intent to serve
if elected. None of the nominees is a director of any other publicly-held
company. The names of the nominees for election as directors are set forth
below, and the following information is furnished with respect to them:
Served as a Director Principal
Name Age Continuously Since Occupation
Roy F. Farmer (1) 81 1951 Chairman and Chief Executive
Officer, Farmer Bros. Co.
Roy E. Farmer (1) 45 1993 President and Chief Operating
Officer, Farmer Bros. Co.
Guenter W. Berger 60 1980 Vice President - Production,
Farmer Bros. Co.
Lewis A. Coffman 78 1983 Retired (formerly Vice
President - Sales, Farmer
Bros. Co.)
Catherine E. Crowe (1) 79 1981 Private Investor
John M. Anglin (2) 50 1985 Partner in Law Firm of Walker,
Wright, Tyler & Ward,
Los Angeles
(1) Roy F. Farmer is the father of Roy E. Farmer. Roy F. Farmer and
Catherine E. Crowe are siblings.
(2) Walker, Wright, Tyler & Ward provides legal services to the corporation.
<PAGE>
PROPOSAL TWO:
APPROVAL OF PUBLIC ACCOUNTANTS
Subject to the approval of the shareholders, the firm of Ernst & Young
LLP has been appointed by the Board as the Company's independent public
accountants for the year ending June 30, 1998, subject to the Board's right
to change firms should it deem such a change to be in the best interests of
the Company. Ernst & Young LLP has audited the accounts of the Company since
1997. It has no direct financial interest or any material indirect financial
interest in the Company or its subsidiary. During the past three years, it
has had no connection with the Company or its subsidiary in the capacity of
promoter, underwriter, voting trustee, director, officer or employee.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting to answer appropriate questions and to make a statement if he
or she desires to do so.
Recommendation
The Board of Directors recommends a vote "FOR" approval of the
appointment of Ernst & Young LLP.
OTHER MATTERS
Voting Requirements
Under the California General Corporation Law and the Company's Bylaws,
the nominees receiving the highest number of votes will be elected as
directors of the Company; and the approval of the public accountants requires
the affirmative vote of a majority of those shares represented at the meeting
in person or by proxy. A quorum consisting of a majority of the outstanding
shares of common stock must be present at the meeting in person or by proxy
to transact business. Votes will be counted by those persons appointed to
act as inspectors of the election. Abstentions and broker non-votes will not
be counted as voted either "for" or "against" any matter but will be counted
in determining whether a quorum exists.
Directors Meetings and Related Matters
The Board of Directors met four times during fiscal 1997. No director
receives fees or expense reimbursements for his or her attendance at the
meetings, except Mr. Anglin who was paid an hourly fee of $250 for each
meeting attended. The Company has an Incentive Compensation Plan Committee
which is currently composed of Mrs. Crowe and Messrs. Berger and Coffman.
Its function is to administer the Company's Incentive Compensation Plan.
This committee did not meet in fiscal 1997.
Messrs. Anglin and Coffman and Mrs. Crowe constitute the Audit
Committee. This committee met once in fiscal 1997.
<PAGE>
Summary Compensation Table
The following table sets forth all remuneration paid to the Chief
Executive Officer and the four other most highly compensated officers whose
total compensation during the last fiscal year exceeded $100,000, for
services in all capacities to the Company and its subsidiary.
Name and Principal Annual Compensation (1) All Other
Position Fiscal Year Salary Other Compensation (2)
ROY F. FARMER 1997 $------ $150,853(3) $3,488
President and C.E.O. 1996 $------ $131,735 $3,213
1993; Chairman 1995 $------ $123,825 $2,960
and C.E.O.
1994-1997
ROY E. FARMER 1997 $223,800 $------- $217
Vice President 1996 $214,406 $------- $177
1993; President 1995 $206,003 $------- $148
and C.O.O.
1994-1997
GUENTER W. BERGER 1997 $190,200 $------- $375
Vice President, 1996 $182,303 $------- $335
Production 1995 $175,103 $------- $302
KENNETH R. CARSON 1997 $167,400 $------- $256
Vice President, Sales 1996 $160,499 $------- $236
1995 $154,500 $------- $221
JOHN E. SIMMONS 1997 $151,200 $------- $128
Treasurer 1996 $144,756 $------- $117
1995 $139,055 $------- $108
(1) The Company has an Incentive Compensation Plan under which current or
deferred bonuses may be granted to key management employees. The size
of the award is keyed to profit levels and the amount of previous
awards. No awards have been made since 1987. The Company has no other
long term incentive compensation plan, no stock option plan and no stock
appreciation rights plan or similar plan.
(2) For all officers listed, the amount shown represents the dollar value of
the benefit to the executive officer during fiscal 1997 under the
Company's executive life insurance plan.
(3) Cash payment made to Mr. Farmer pursuant to his employment contract with
the Company. The $150,853 includes reimbursements to Mr. Farmer for
premiums paid for term life insurance coverage under the split-dollar
policies maintained by the Company under its employment contract with
Mr. Farmer. See "Employment Agreement," infra.
<PAGE>
Employment Agreement
Effective as of February 1, 1988, the Company and Roy F. Farmer,
Chairman and Chief Executive Officer of the Company, entered into a ten-year
employment contract. The benefits provided by the Company under the contract
are in lieu of both salary payments to Mr. Farmer and further awards to him
under the Incentive Compensation Plan. Pursuant to the terms of the
contract, as amended, the Company pays premiums on two split-dollar insurance
policies, one insuring the life of Mr. Farmer and the other insuring the
joint lives of Mr. Farmer and his wife. A trust created for the benefit of
Mr. Farmer's family is both the owner and the beneficiary of these policies,
subject to an assignment to the Company of a collateral interest in the
policies designed to refund to the Company the aggregate premiums paid by it
($606,066 paid in fiscal 1997). Because of this collateral assignment, no
part of the cash value of these policies has yet accrued to Mr. Farmer or his
trust. Under the terms of the employment contract, the Company also makes an
annual cash payment to Mr. Farmer (see footnote (3) to Summary Compensation
Table) sufficient to reimburse him for his contribution to the insurance plan
and to enable him to pay his personal income taxes arising from the
employment contract benefits.
The employment contract expires January 31, 1998. The Company and Mr. Farmer
intend to review the employment contract during the third quarter of fiscal
year ending June 30, 1998.
Retirement Plan
The following table shows estimated annual benefits payable under the
Retirement Plan upon retirement at age 62 to persons at various average
compensation levels and years of credited service based on a straight life
annuity. The Retirement Plan is a contributory defined benefit plan covering
all non-union Company employees. The following figures assume that employee
contributions (2% of annual gross earnings) are made throughout the
employees' first five years of service and are not withdrawn. After five
years of participation, employees make no further contributions.
Benefits under a predecessor plan are included in the following figures.
Maximum annual combined benefits under both plans generally cannot exceed the
lesser of $120,000 or the average of the employee's highest three years of
compensation.
Annualized Pension Compensation
for Highest 60 Consecutive Months
in Last Ten Years of Employment
Credited Years of Service
15 20 25 30 35
$100,000 $22,500 $30,000 $37,500 $ 45,000 $52,500
125,000 $28,125 $37,500 $46,875 $ 56,250 $65,625
150,000 $33,750 $45,000 $56,250 $ 67,500 $78,750
175,000 $39,375 $52,500 $65,625 $ 78,750 $91,875
200,000 $45,000 $60,000 $75,000 $ 90,000 $105,000
225,000 $50,625 $67,500 $84,375 $101,250 $118,125
250,000 $56,250 $75,000 $93,750 $112,500 $120,000
Note: Table does not reflect Internal Revenue Code Section 401(a)(17)
restrictions that might limit benefits in the future.
The earnings of executive officers by which benefits in part are
measured consist of the amounts reportable under "Annual Compensation" in the
Summary Compensation Table less certain allowance items (none in 1997).
Credited years of service through December 31, 1997 were as follows:
Guenter W. Berger - 32 years; Roy E. Farmer - 20 years; Kenneth R. Carson -
31 years; John E. Simmons - 15 years. After 37 years of credited service,
Roy F. Farmer began receiving maximum benefits during fiscal 1988.
The above straight life annuity amounts are not subject to deductions
for Social Security or other offsets. Other payment options, one of which is
integrated with Social Security benefits, are available.
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Company has no compensation committee. The Board of Directors
determines executive compensation. Roy F. Farmer and Guenter W. Berger,
executive officers and directors of the Company, and Lewis A. Coffman, a
director and retired executive officer of the Company, participate in the
Board's deliberations concerning executive compensation.
Report of Board of Directors on Executive Compensation
Compensation for all executive officers of the Company other than Roy F.
Farmer, Chairman and Chief Executive Officer of the Company, is determined
annually by the Board of Directors. Since 1988 Mr. Farmer's compensation has
been determined by the terms of his employment contract with the Company (see
"Employment Agreement," supra). Accordingly, there was no direct
relationship between Mr. Farmer's compensation and the Company's performance
in fiscal 1997. However, the Board believes that Mr. Farmer's substantial
shareholdings in the Company (see "Ownership of Common Stock," supra) provide
substantial incentive to Mr. Farmer with respect to his efforts as Chairman
and Chief Executive Officer.
In 1988 when the Company and Mr. Farmer entered into the employment
contract, the Board took into consideration, among other things, Mr. Farmer's
previous compensation history, the quality and extent of his prior services,
the success the Company had achieved under his leadership, the desirability
of retaining Mr. Farmer's services for an additional ten years, and the
amount of compensation being paid to chief executive officers of other
publicly-held companies of similar size. The Board also conferred with
independent consultants concerning the reasonableness and anticipated future
cost to the Company of Mr. Farmer's compensation package under the employment
contract.
With respect to the other executive officers of the Company,
compensation has been primarily in the form of annual salaries. The Company
has an Incentive Compensation Plan under which discretionary bonuses measured
in part by Company profitability can be made (see footnote (1) to Summary
Compensation Table), but awards are rarely made under this Plan (none in
fiscal 1997). The Board sets annual salaries by reference primarily to each
executive officer's job performance during the preceding year, the Company's
profitability and cost of living changes. The Board receives and considers
recommendations from the Company's operating officers. Under procedures
adopted in 1993, no director who is also an executive officer makes
recommendations or participates in the Board's deliberations with respect to
that officer's compensation.
The Board monitors the executive compensation paid by the Company's
publicly-held competitors. However, the Company to date has not found it
necessary to match the pay levels of these competitors, many of whom are
substantially larger than the Company.
(The foregoing report will not be deemed to be incorporated by reference
by any general statement incorporating this Proxy Statement into any filing
by the Company under the Securities Act of 1933 or under the Securities Act
of 1934 unless the Company specifically incorporates this report by
reference. This report shall not otherwise be deemed soliciting material or
be deemed filed under such Acts).
Roy F. Farmer
Roy E. Farmer
Guenter W. Berger
Lewis A. Coffman
Catherine E. Crowe
John M. Anglin
<PAGE>
Performance Graph
Comparison of Five-Year Cumulative Total Return*
Farmer Bros. Co., Russell 2000 Index And Value Line Food
Proc's:Sm.Cap Index
(Performance Results Through 6/30/97)
1992 1993 1994 1995 1996 1997
Farmer Bros. Co. $100.00 $132.05 $109.06 $110.41 $126.45 $118.33
Russell 2000 Index $100.00 $125.96 $131.51 $157.64 $195.20 $227.07
Food Proc's: Sm. Cap $100.00 $108.43 $111.78 $133.19 $148.27 $201.29
Assumes $100 invested at the close of trading 6/30/92 in Farmer
Brothers Co. common stock, Russell 2000 Index, and Food Proc's: Small Cap.
*Cumulative total return assumes reinvestment of dividends.
Source: Value Line, Inc.
Factual material is obtained from sources believed to be reliable,
but the publisher is not responsible for any errors or omissions
contained herein.
<PAGE>
CLOSING DATE FOR PROPOSALS BY SHAREHOLDERS
Shareholders who wish to present proposals at the 1998 Annual Meeting
must submit those proposals in writing to the Secretary of the Company no
later than June 30, 1998.
Compliance with Section 16(a) of the Exchange Act
Based on a review of filing received by it and a representation from
Company officers and directors, the Company believes that all filing
requirements applicable to Company officers and directors were met for fiscal
1997.
Other Business
Management does not know of any other matters to be brought before the
meeting. However, if any other matters properly come before the meeting, the
persons named in the enclosed proxy will vote said proxy in accordance with
their judgment on such matters.
By Order of the Board of Directors
David W. Uhley
Secretary
October 30, 1997
