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, 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 December 31,
1996.
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 For the six months
ended December 31, ended December 31,
1996 1995 1996 1995
Net sales $57,460 $58,571 $110,245 $113,609
Cost of goods sold 25,954 27,706 51,323 55,217
31,506 30,865 58,922 58,392
Selling expense 20,743 20,798 40,924 40,018
General and administrative
expenses 2,130 2,060 3,648 3,953
22,873 22,858 44,572 43,971
Income from operations 8,633 8,007 14,350 14,421
Other income (expense):
Dividend income 659 648 1,345 1,273
Interest income 1,694 1,722 3,138 2,930
Other 261 190 401 344
2,614 2,560 4,884 4,547
Income before taxes 11,247 10,567 19,234 18,968
Income taxes 4,413 3,994 7,741 7,603
Net income $ 6,834 $ 6,573 $ 11,493 $ 11,365
Net income per share $3.55 $3.41 $5.97 $5.90
The accompanying notes are an integral part of these financial statements.
<PAGE>
FARMER BROS. CO.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, June 30,
1996 1996
ASSETS
Current assets:
Cash and cash equivalents $ 44,755 $ 28,165
Short term investments 75,564 74,937
Accounts and notes receivable, net 17,626 18,822
Inventories 38,950 40,818
Income tax receivable - 1,000
Deferred income taxes 2,616 2,616
Prepaid expenses and other 710 701
Total current assets $180,221 $167,059
Property, plant and equipment, net 33,134 33,343
Notes receivable 1,841 1,841
Long term investments, net 40,707 40,058
Other assets 17,662 17,320
Deferred taxes 1,147 1,269
Total assets $274,712 $260,890
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,939 $ 4,635
Accrued payroll expenses 4,144 4,153
Other 5,288 5,542
Total current liabilities 18,371 14,330
Accrued postretirement benefits 13,428 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 568 568
Retained earnings 240,022 230,840
Investment valuation allowance 397 334
Total shareholders' equity 242,913 233,668
Total liabilities and
shareholders' equity $274,712 $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 six months
ended December 31,
1996 1995
Cash flows from operating
activities:
Net Income $ 11,493 $ 11,365
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 2,858 2,177
Deferred income taxes - 213
Other (60) (131)
Net (gain) loss on
investments (128) (16)
Change in assets and
liabilities:
Accounts and notes
receivable 1,177 (609)
Inventories 1,867 1,377
Income tax receivable 1,000 1,266
Prepaid expenses and other
assets (504) (520)
Accounts payable 4,304 1,053
Accrued payroll expenses
and other liabilities (263) 931
Other long term liabilities 536 882
Total adjustments $ 10,787 $ 6,623
Net cash provided by operating
activities $ 22,280 $ 17,988
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,
1996 1995
Net cash provided by operating
activities: $22,280 $17,988
Cash flows from investing
activities:
Purchases of property, plant
and equipment (2,527) (3,439)
Proceeds from sales of property,
plant and equipment 92 206
Purchases of investments (195,863) (101,540)
Proceeds from sales of
investments 194,900 100,545
Notes repaid 20 62
Net cash (used in) provided by
investing activities (3,378) (4,166)
Cash flows from financing
activities:
Dividends paid (2,312) (2,023)
Net cash used in financing
activities (2,312) (2,023)
Net (decrease) in cash
and cash equivalents 16,590 11,799
Cash and cash equivalents at
beginning of year 28,165 8,321
Cash and cash equivalents at
end of quarter $44,755 $20,120
Supplemental disclosure of
cash flow information:
Income tax payments $ 8,196 $ 5,601
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,
1996 1996
Fair Fair
(In thousands) Cost Value Cost Value
Current Assets
Commercial Paper $44,344 $44,220 $34,609 $34,775
U.S. Government
Obligations 31,410 31,344 40,129 40,162
$75,754 $75,564 $74,738 $74,937
Non-Current Assets
U.S. Government
Obligations $ 2,090 $ 2,052 $ 2,096 $ 2,043
Corporate Debt - - 1,400 1,350
Preferred stocks 34,015 36,181 34,475 35,114
Liquid asset fund
and other 2,287 2,475 1,551 1,551
$38,392 $40,708 $39,522 $40,058
The gross unrealized gains and (losses) on securities classified as
available for sale were $2,380,000 and ($442,000), respectively, at
December 31, 1996, and $1,263,000 and ($528,000), respectively, at June 30,
1996. Gross realized gains from available for sale securities were $128,000
and $16,000 at December 31, 1996 and 1995, respectively.
The Company hedges interest rate risk in its portfolio of preferred stock.
Deferred losses associated with the hedge are $1,179,000 and $162,000 at
December 31 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) 12/31/96 06/30/96
Within 1 year $75,564 $74,937
After 1 year through 5 years 2,052 2,043
After 5 years through 10 years - 1,350
After 10 years - -
$77,616 $78,330
<PAGE>
C. Inventories
(In thousands) Processed Unprocessed Total
December 31, 1996
Coffee $ 5,571 $12,269 $17,840
Allied products 9,125 4,759 13,884
Coffee brewing equipment 2,257 4,969 7,226
$16,953 $21,997 $38,950
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
Registrant's second quarter operations are consistent with prior year
results. During the past three years the green coffee market has been
especially volatile. During the most recent quarter, coffee prices were
comparatively stable. During January, 1997, the green coffee market
entered a bullish phase similar to that seen during the Brazilian frosts of
1994. Green coffee prices have recently increased 50% and reached prices
in excess of $1.80 per pound after closing out the calendar year a little
below $1.20 per pound. As Registrant's coffee inventory is replaced with
higher priced coffee, higher roast coffee prices and a corresponding
decrease in sales volume is likely to result.
Net sales for the second quarter of fiscal 1997 decreased 2% to $57,460,000
from $58,571,000 in the same quarter of the prior fiscal year. Net sales
for the first half of fiscal 1997 decreased 3% to $110,245,000 from
$113,609,000 in the first half of fiscal 1996. Gross profit in the second
quarter increased 2% to $31,506,000 or 55% of sales, as compared to
$30,865,000, or 53% of sales, in the same quarter of fiscal 1996.
Operating expenses reached $22,873,000 in the second quarter of fiscal 1997
as compared to $22,858,000 in the second quarter of fiscal 1996 and
$21,699,000 in the first quarter of fiscal 1997.
Income after taxes for the three months ended December 31, 1995, reached
$6,834,000, or $3.55 per share, as compared to $4,659,000, or $2.42 per
share, in the first quarter of fiscal 1997 and $6,573,000, or $3.41 per
share, in the same quarter of fiscal 1996. Net income for the first half
of fiscal 1997 reached $11,493,000, or $5.97 per share, as compared to
$11,365,000, or $5.90 per share, in the first six months of fiscal 1996.
<PAGE>
Quarterly Summary of Results
(in thousands of dollars)
12/31/95 03/31/96 06/30/96 09/30/96 12/31/96
Net sales 58,571 56,774 53,692 52,785 57,460
Gross profit 30,865 30,885 29,534 27,416 31,506
Operating income 8,007 7,939 6,839 5,717 8,633
Net income 6,573 6,391 5,608 4,659 6,834
(as a percentage of sales)
12/31/95 03/31/96 06/30/96 09/30/96 12/31/96
Net sales 100.00 100.00 100.00 100.00 100.00
Gross profit 52.69 54.40 55.00 51.94 54.83
Operating income 13.67 13.98 12.74 10.83 15.02
Net income 11.22 11.26 10.44 8.82 11.89
(in dollars)
12/31/95 03/31/96 06/30/96 09/30/96 12/31/96
EPS 3.41 3.32 2.91 2.42 3.55
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 December 2, 1996. 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
1,417,281 shares for election and 9,244 shares against.
The proposal to appoint Coopers & Lybrand L.L.P.as the
independent accountants for the Company for the year ended
June 30, 1997 was approved with 1,426,359 shares in favor of
the resolution, 16 shares against and 150 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, 1997 FARMER BROS. CO.
(Registrant)
John E. Simmons
John E. Simmons
Treasurer and
Chief Financial Officer
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