PROXY
FARMER BROS. CO. ANNUAL MEETING OF SHAREHOLDERS, NOVEMBER 29, 1999
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 November 29, 1999, 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 ALL OF MANAGEMENT'S NOMINEES NAMED BELOW AND FOR ITEM 2.
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)
<PAGE>
The Board of Directors recommends a vote FOR items 1 and 2.
Item 1 - ELECTION OF DIRECTORS
WITHHELD
Nominees: FOR ALL FOR ALL
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 & YOUNG LLP
as the independent
public accountants
Discretionary authority is conferred as to matters for which a grant of such
authority is proper.
<PAGE>
Farmer Bros. Co.
20333 South Normandie Avenue
Torrance, California 90502
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held November 29, 1999
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, November 29, 1999 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, 2000;
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
15, 1999 will be entitled to notice of and to vote at the meeting and any
adjournments 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
November 5, 1999
<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, November 29, 1999 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 November 5, 1999.
The Company will request known nominees to forward proxy materials to the
beneficial owners of the Company's shares.
On the October 15, 1999 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 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 15, 1999):
Amount and Nature Percent
Name and Address of of Beneficial of
Beneficial Owner Ownership(1) Class
Roy F. Farmer 833,162 shares(2) 43.25%
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 June 10, 1999, filed by Franklin Mutual Advisers, LLC,
Franklin Mutual Advisers, LLC at that date owned beneficially 188,988 shares
(9.8%). Franklin Mutual Advisers, LLC, is reported to have sole voting and
investment power over these shares.
(1) Sole voting and investment power.
(2) Includes 171,041 shares owned outright by Mr. Farmer and his wife as
trustees of a revocable living trust and 662,121 shares held by various trusts
of which Mr. Farmer is sole trustee. Mr. Farmer disclaims beneficial ownership
of said 662,121 shares. Excludes 1,849 shares owned by his wife in which Mr.
Farmer disclaims any 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 1995 fiscal year, 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 receives interest at the rate of 8.75% per annum. As of October 16,
1999, a total of $718,429 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 500 (2) 8
Lewis A. Coffman 15 (3) *
Catherine E. Crowe (See "Principal Shareholders," supra)
Roy E. Farmer 38,211 (4) 1.98%
John M. Anglin None -
Kenneth R. Carson 250 *
John E. Simmons 350 (3) *
All directors and executive officers
as a group (9 persons) 1,075,903 55.85%
<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 with spouse.
(4) Includes 4,000 shares owned outright by Mr. Farmer and 34,211 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 qualifies. 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) 83 1951 Chairman and Chief Executive
Officer
Roy E. Farmer(1) 47 1993 President and Chief Operating
Officer
Guenter W. Berger 62 1980 Vice President - Production.
Lewis A. Coffman 80 1983 Retired (formerly Vice
President - Sales)
Catherine E. Crowe(1) 81 1981 Private Investor
John M. Anglin(2) 52 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 Company.
<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, 2000, 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 was retained in 1997 as the Company's independent public
accountants. It has no direct financial interest or any material indirect
financial interest in the Company or its subsidiaries. During the past three
years, it has had no connection with the Company or its subsidiaries 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. 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.
Director and Committee Meetings
The Board of Directors met four times during fiscal 1999. 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 $265 for
each meeting attended.
Messrs. Anglin and Coffman and Mrs. Crowe constitute the Audit Committee
and also constitute the Compensation Committee. The Audit Committee met once in
fiscal 1999. The Compensation Committee met once in fiscal 1999 and three times
shortly thereafter. (See "Report of Compensation Committee on Executive
Compensation", infra.) The functions of the Audit Committee are to recommend to
the Board of Directors the independent public accountants to be retained by the
Company annually, to meet with such accountants to discuss the results of the
audit and the accountants' recommendations concerning accounting and related
functions, and to discuss those recommendations with the Board of Directors.
The Compensation Committee makes all determinations with respect to executive
compensation and administers the Company's Incentive Compensation Plan.
<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 subsidiaries.
Annual
Name and Principal Fiscal Compensation Other Annual All Other
Position Year Salary Bonus(1) Compensation Compensation (8)
ROY F. FARMER 1999 $1,000,000(2)$3,500,000 $ __ $88,154(3)
Chairman and 1998 $________ $________ $997,856(4)(5)$90,891(3)
C.E.O. 1997 $________ $________ (6) $ 3,488
ROY E. FARMER 1999 $ 252,542 $ 250,000 $ 44,800(7) $ 305
President and 1998 $ 233,400 $________ $______ $ 267
C.O.O. 1997 $ 223,800 $________ $______ $ 217
GUENTER W. BERGER 1999 $ 215,951 $ 100,000 $ 4,340(7) $ 470
Vice President, 1998 $ 198,600 $________ $______ $ 420
Production 1997 $ 190,200 $________ $______ $ 375
KENNETH R. CARSON 1999 $ 189,503 $ 75,000 $ 5,908(7) $ 306
Vice President, 1998 $ 174,600 $_______ $______ $ 281
Sales 1997 $ 167,400 $_______ $______ $ 256
JOHN E. SIMMONS 1999 $ 169,447 $ 75,000 $ 5,600(7) $ 153
Treasurer 1998 $ 158,400 $_______ $______ $ 140
1997 $ 151,200 $_______ $______ $ 128
(1) The Company made its first awards since 1987 under its Incentive
Compensation Plan. The awards were based primarily upon the Company's record
earnings achieved in fiscal 1998 and 1999. Roy F. Farmer's award has been
deferred until death or retirement. The awards to the other officers were paid
currently (See "Report of Compensation Committee on Executive Compensation,"
infra).
(2) From January 1, 1988 to January 31, 1998, Mr. Farmer's compensation had been
set pursuant to an Employment Contract with the Company. For fiscal 1999, the
Compensation Committee awarded Mr. Farmer a salary of $1,000,000 inclusive of
all amounts which would be included in income for purposes of the $1 million
deduction limitation under Internal Revenue Code Section 162(m) (See "Report of
Compensation Committee on Executive Compensation," infra).
(3) The amount shown for Roy F. Farmer for 1998 and 1999 represents P.S.58 costs
of the two split-dollar insurance policies purchased pursuant to the prior
employment agreement with Mr. Farmer plus the dollar value of the benefit to him
under the Company's executive life insurance plan.
(4) Includes a payment by the Company of a $688,634 premium on a life insurance
policy insuring Mr. Farmer's life and benefitting Mr. Farmer's family
exclusively and cash payments totaling $309,222.
(5) Excludes an unsecured loan made to Mr. Farmer in September, 1998 in the
principal amount of $252,472 to assist him in paying income taxes, which loan
was fully repaid with interest in September, 1999.
(6) Pursuant to the prior employment agreement with Mr. Farmer, the Company paid
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 for the benefit of Mr. Farmer's family is the owner and 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 in fiscal 1997). Because of the collateral assignment, only the
cash value earned on the policies in excess of the premiums paid by the Company
accrues to Mr. Farmer or his trust. In addition, a cash amount of $150,853
related to these policies was paid to Mr. Farmer in fiscal 1997.
(7) Compensation element of purchase of shares from the Company at a price below
market on the date of purchase.
(8) Except as stated in footnote (3), the amount shown represents the dollar
value of the benefit to the executive officer for the years shown under the
Company's executive life insurance plan.
<PAGE>
Retirement Plan
The following table shows estimated annual benefits payable under the
Company's 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 in the plan, 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 Credited Years of Service
for Highest 60 Consecutive Months
in Last Ten Years of Employment
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 1999).
Credited years of service through December 31, 1998 were as follows:
Guenter W. Berger - 34 years; Roy E. Farmer - 22 years; Kenneth R. Carson - 33
years; John E. Simmons - 17 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.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is comprised of John M. Anglin, a director,
Lewis A. Coffman, a director and retired executive officer of the Company, and
Catherine E. Crowe, a director, principal shareholder (see "Principal
Shareholders," supra) and sibling of Mr. Roy F. Farmer, the Chairman and Chief
Executive Officer of the Company.
Report of Compensation Committee on Executive Compensation
The Compensation Committee is responsible for determining the compensation
of executive officers and administering the Company's Incentive Compensation
Plan. The Committee serves pursuant to grant of authority by the Company's
Board of Directors. The Committee met one time during fiscal year ended June
30, 1999 and three times shortly thereafter to discuss executive compensation
for that year.
Compensation Philosophy and Objectives
The Committee believes that once base salaries of executive officers are
established at competitive levels, increases should generally reflect cost of
living changes and that individual performance should be rewarded by
bonuses or other incentive compensation awards. The Committee believes that
most of the officers will be incentivized to a greater degree by such a program.
Chief Executive Officer Compensation
Since expiration of Roy F. Farmer's employment contract in 1998, the
matter of Roy F. Farmer's compensation was not addressed in a comprehensive
manner until the Committee received a comparative compensation study prepared by
Ernst & Young LLP in October 1998, and supplemented in June, 1999.
<PAGE>
The Committee accepted the conclusion of the Ernst & Young LLP studies
that a competitive range of total direct compensation for Roy F. Farmer, based
on the total direct compensation paid to CEO's of companies deemed comparable by
Ernst & Young LLP, was in the range of $669,700 to $1,444,000. The term "total
direct compensation", as used in the Ernst & Young LLP studies, does not include
retirement benefits (including pension plans, 401(k) plans, deferred
compensation plans and supplemental retirement plans or split-dollar life
insurance programs) typically provided to CEO's of successful companies.
The Committee determined that Roy F. Farmer's compensation for the fiscal
year ended June 30, 1999, excluding the award under the Company's Incentive
Compensation Plan (see below), be $1 million inclusive of all amounts which
would be included in his compensation for purposes of the $1 million limitation
imposed by Internal Revenue Code Section 162(m) on the Company's income tax
deduction for current compensation paid to Mr. Farmer.
Incentive Compensation Plan
For the first time since 1987, awards were made under the Company's
Incentive Compensation Plan (the "Plan"). The Committee felt that awards were
particularly appropriate in light of the record earnings achieved by the
Company in fiscal 1998 and 1999.
Under the provisions of the Plan, a percentage of the Company's annual
pre-tax income is made available for cash or deferred awards. The percentage
varies from 3% of pre-tax income over $14 million to 6% of pre-tax income of $24
million or more. For the period 1993-1999 alone, the pool available for awards
under the Incentive Compensation Plan was $14,316,000, $6 million of which was
due to the Company's record performance in fiscal 1998 and 1999. Of the
available pool, the Committee awarded a total of $4,025,000 of which $3.5
million was awarded to Roy F. Farmer, the Company's Chief Executive Officer, and
$525,000 in toto was awarded to the other executive officers.
The award to Roy F. Farmer is payable in five annual installments
commencing upon retirement. The unpaid balance of the award is payable upon
death. Under the terms of the Plan, the unpaid balance of deferred awards is
increased by a growth factor keyed to the Company's average return on invested
funds. Under Plan provisions, the unpaid portion of deferred awards is
forfeited in the event the recipient engages in activities competitive with the
Company or is guilty of malfeasance.
In making the award to Roy F. Farmer, the Compensation Committee was
motivated primarily by the record earnings achieved by the Company in 1998 and
1999 and Mr. Farmer's substantial contribution to those results. The
Compensation Committee also considered the conclusion reached in the Ernst &
Young LLP comparative compensation studies that for the period 1983-1997, Mr.
Farmer had been undercompensated in the range of approximately $6 million to
$9.5 million. Mrs. Crowe voted against the award to Roy F. Farmer under the
Plan.
(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 the Securities Exchange 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.)
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 Processing Index
1994 1995 1996 1997 1998 1999
Farmer Bros. Co. 100.00 101.24 115.95 108.50 208.09 178.99
Russell 2000 Index 100.00 119.87 148.44 172.67 200.52 202.26
Food Processing 100.00 125.94 149.19 221.17 298.46 286.15
Assumes $100 invested at the close of trading 6/30/94 in Farmer Bros. Co. common
stock, Russell 2000 Index, and the Value Line Food Processing Index.
*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 2000 Annual Meeting must
submit those proposals in writing to the Secretary of the Company no later than
July 1, 2000.
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
1999.
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
November 5, 1999
