<PAGE>
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, 1997
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, 1997.
PAGE 1 OF 9
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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,
1997 1996
Net sales $59,497 $52,785
Cost of goods sold 30,171 25,369
29,326 27,416
Selling expense 19,755 20,181
General and administrative 1,919 1,518
expenses 21,674 21,699
Income from operations 7,652 5,717
Other income:
Dividend income 658 686
Interest income 1,842 1,444
Other 313 140
2,813 2,270
Income before taxes 10,465 7,987
Income taxes 4,237 3,328
Net income $ 6,228 $ 4,659
Net income per share $3.23 $2.42
Cash dividends declared per share $.60 $.60
The accompanying notes are an integral part of these financial statements.
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FARMER BROS. CO.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, June 30,
1997 1997
ASSETS
Current assets:
Cash and cash equivalents $ 23,615 $ 34,174
Short term investments 95,444 77,791
Accounts and notes receivable, net 18,465 18,401
Inventories 34,844 35,176
Income tax receivable 97 2,216
Deferred income taxes 1,804 1,804
Prepaid expenses and other 930 784
Total current assets 175,199 170,346
Property, plant and equipment, net 31,479 32,526
Notes receivable 2,977 2,977
Long term investments, net 56,756 51,341
Other assets 18,261 18,035
Deferred taxes 1 453 1,624
Total assets $286,125 $276,849
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,118 $ 7,510
Accrued payroll expenses 4,396 4,247
Other 6,557 4,623
Total current liabilities 20,071 16,380
Accrued postretirement benefits 14,703 14,347
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 247,980 242,907
Investment valuation allowance 877 721
Total shareholders' equity 251,351 246,122
Total liabilities and
shareholders' equity $286,125 $276,849
The accompanying notes are an integral part of these financial statements.
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FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months
ended September 30,
1997 1996
Cash flows from operating
activities:
Net Income $ 6,228 $ 4,659
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 1,347 1,430
Deferred income taxes (24) (15)
Net (gain) on investments (167) (20)
Changes in assets and
liabilities:
Accounts and notes receivable (74) 1,685
Inventories 332 1,629
Income tax receivable 2,119 971
Prepaid expenses and other assets (382) (453)
Accounts payable 1,609 1,984
Accrued payroll expenses
and other liabilities 2,083 2,743
Other long term liabilities 356 286
Total adjustments 7,199 10,240
Net cash provided by operating
activities $ 13,427 $ 14,899
The accompanying notes are an integral part of these financial statements.
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FARMER BROS. CO
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Unaudited)
For the three months
ended September 30,
1997 1996
Net cash provided by operating
activities: $ 13,427 $ 14,899
Cash flows from investing
activities:
Purchases of property, plant
and equipment (339) (1,308)
Proceeds from sales of property,
plant and equipment 72 35
Purchases of investments ( 83,646) (72,417)
Proceeds from sales of
investments 61,073 79,155
Notes repaid 10 9
Net cash (used in) provided by
investing activities (22,830) 5,474
Cash flows from financing
activities:
Dividends paid (1,156) (1,156)
Net cash used in financing
activities (1,156) (1,156)
Net (decrease) increase in cash
and cash equivalents (10,559) 19,217
Cash and cash equivalents at
beginning of period 34,174 28,165
Cash and cash equivalents at
end of quarter $ 23,615 $ 47,382
Supplemental disclosure of
cash flow information:
Income tax payments $ 29 $ 579
The accompanying notes are an integral part of these financial statements.
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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
The Company hedges interest rate risk in its portfolio of preferred stock.
Deferred losses associated with the hedge are $1,883,000 and $1,081,000 at
September 30 and June 30, 1997, respectively.
(In thousands) Gross Gross
Unrealized Unrealized Fair
September 30, 1997 Cost Loss Gain Value
Current Assets
Commercial Paper $32,636 - 136 $32,772
U.S. Government
Obligations 62,782 (116) 6 $62,672
$95,418 (116) 142 $95,444
Non-Current Assets
U.S. Government
Obligations $13,130 (87) 21 $13,064
Other debt 1,695 (17) - 1,678
Preferred stocks 36,381 (22) 3,496 39,855
Liquid asset fund
and other 2,471 (326) 14 2,159
$53,677 (452) $3,531 $56,756
(In thousands) Gross Gross
Unrealized Unrealized Fair
June 30, 1997 Cost Loss Gain Value
Current Assets
Commercial Paper $14,814 - 129 $14,943
U.S. Government
Obligations 63,059 (211) - 62,848
$77,873 (211) 129 $77,791
Non-Current Assets
U.S. Government
Obligations $10,453 (169) - $10,284
Preferred stocks 36,816 (22) 2,574 39,368
Liquid asset fund
and other 1,689 - - 1,689
$48,958 (191) 2,574 $51,341
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B. Investments, CONTINUED
The contractual maturities of debt securities classified as current and non-
current available for sale are as follows:
Fair Value
Maturities 09/30/97 06/30/97
(In thousands)
Within 1 year $ 95,444 $ 77,791
After 1 year through 5 years 14,742 10,284
$110,186 $ 88,075
Gross realized gain from available for sale securities were $255,000 and
$405,000 at September 30, 1997 and 1996, respectively.
C. Inventories
(In thousands) Processed Unprocessed Total
September 30, 1997
Coffee $ 3,704 $ 9,223 $12,927
Allied products 9,815 4,769 14,584
Coffee brewing equipment 2,185 5,148 7,333
$15,704 $19,140 $34,844
June 30, 1997
Coffee $ 3,564 $10,024 $13,588
Allied products 10,551 3,794 14,345
Coffee brewing equipment 2,310 4,933 7,243
$16,425 $18,751 $35,176
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Registrant's financial condition is substantially the same as at its most
recent fiscal year end. The volatile market for green coffee always has an
effect on operating results. The higher cost of green coffee has resulted
in higher roast coffee prices, lower gross profit margins and lower sales
volume.
Net sales for the first quarter of fiscal 1998 increased 13% to $59,497,000
from $52,785,000 in the same quarter of fiscal 1997. Gross profit
increased 5% during the first quarter of fiscal 1998 to $29,326,000 or 49%
of sales, as compared to $27,416,000 or 52% of sales, in the same quarter
of the prior fiscal year.
Operating expenses, composed of selling and general and administrative
expenses, reached $21,674,000 in the most recent quarter, compared to
$21,699,000 in the same quarter of fiscal 1997. Other income increased 24%
to $2,813,000 in the first quarter of fiscal 1997 as compared to $2,270,000
in the same quarter of the prior fiscal year, primarily the result of
higher interest income.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, (CONTINUED)
Income before taxes increased 31% to $10,465,000 or 18% of sales, in the
first quarter of the 1998 fiscal year as compared to $7,987,000 or 14% of
sales in the same quarter of fiscal 1997. Net income for the first quarter
of fiscal 1998 increased 34% to $6,228,000 or $3.23 per share, from
$4,659,000 or $2.42 per share, recorded in the first quarter of fiscal
1997.
Quarterly Summary of Results
(In thousands of dollars)
09/30/96 12/31/96 03/31/97 06/30/97 09/30/97
Net sales 52,785 57,460 55,336 59,221 59,497
Gross profit 27,416 31,506 21,896 26,974 29,326
Operating income 5,717 8,633 (71) 2,510 7,652
Net income 4,659 6,834 1,595 3,602 6,228
(As a percentage of sales)
09/30/96 12/31/96 03/31/97 06/30/97 09/30/97
Net sales 100.00 100.00 100.00 100.00 100.00
Gross profit 51.94 54.83 39.57 45.55 49.29
Operating income 10.83 15.02 (.13) 4.24 12.86
Net income 8.82 11.89 2.88 6.08 10.47
(In dollars)
09/30/96 12/31/96 03/31/97 06/30/97 09/30/97
EPS 2.42 3.55 .83 1.86 3.23
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.
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PART II OTHER INFORMATION, (CONTINUED)
(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
Registrant filed a report reporting
a change in accountant. April 14, 1997.
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 13, 1997 FARMER BROS. CO.
(Registrant)
John E. Simmons
John E. Simmons
Treasurer and
Chief Financial Officer
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