Farmer Bros. Co.
20333 South Normandie Avenue
Torrance, California 90502
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held November 27, 2000
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 27, 2000 at 10:00
o'clock a.m., Pacific Standard 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. The amendment of the bylaws of Farmer Bros. Co. to provide for a
variable number of directors of five to nine;
3. Approval of the appointment of Ernst & Young LLP as the independent
public accountants of Farmer Bros. Co. for the fiscal year ending
June 30, 2001; and
4. 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 20,
2000 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
October 27, 2000
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 (the "Board") of proxies from holders of common stock of
Farmer Bros. Co., a California corporation (hereinafter referred to as the
"Company") for the Annual Meeting of Shareholders of the Company to be held at
20333 South Normandie Avenue, Torrance, California on Monday, November 27, 2000
at 10:00 o'clock a.m., Pacific Standard Time, and for any adjournment thereof.
The cost of soliciting proxies by the Board 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 31, 2000. The
Company will request known nominees to forward proxy materials to the beneficial
owners of the Company's shares.
On the October 20, 2000 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 (1) 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 (1) 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; (2) unless otherwise specified, for approval of amendment of the
bylaws to provide for a variable number of directors; and (3) 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.
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 20, 2000):
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-A 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. 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, was
secured, and bore interest at the rate of 8.75% per annum. The loan was repaid
in full during fiscal 2000.
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) *
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) 1,075,938 55.85%
___________________________
(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 Roy E. Farmer is sole trustee. Excludes shares held
by trusts of which Roy F. Farmer is sole trustee (reported under "Principal
Shareholders," supra) and of which Roy E. Farmer is a beneficiary.
* 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) 84 1951 Chairman and Chief Executive
Officer
Roy E. Farmer (1) 48 1993 President and Chief Operating
Officer
Guenter W. Berger 63 1980 Vice President - Production
Lewis A. Coffman 81 1983 Retired
(formerly Vice President-Sales)
Catherine E. Crowe (1) 82 1981 Private Investor
John M. Anglin (2) 53 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.
PROPOSAL TWO:
AMENDMENT OF BYLAWS
The Board of Directors is recommending that Article III, Section 2 of the Bylaws
of the Company be amended to provide for a variable number of directors of five
to nine, with the exact number to be determined within that range by the Board
or by the shareholders. Article III, Section 2 of the Bylaws as proposed to be
amended appears in Appendix A hereto. The Bylaws presently authorize six
directors. This proposed amendment is prompted by new NASDAQ rules regarding
the independence of directors who serve on audit committees. These rules will
require the appointment of at least one additional director of the Company by
June, 2001. To provide flexibility, the Board recommends a variable number of
directors.
Recommendation:
Your Board of Directors recommends a vote "FOR" approval of the amendment of the
Bylaws.
PROPOSAL Three:
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 fiscal year ending June 30, 2001, 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
Your 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 amendment of the Company's Bylaws requires the affirmative
vote of a majority of the outstanding shares entitled to vote. 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 met six times during fiscal 2000. 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 $285 for each Board and committee 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 2000. The Compensation Committee met three times in fiscal 2000. (See
"Report of Compensation Committee on Executive Compensation", infra.) The
functions of the Audit Committee are to recommend to the Board 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. The Compensation Committee makes all
determinations with respect to executive compensation and administers the
Company's Incentive Compensation Plan.
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(7)
ROY F. FARMER 2000 $1,000,000 $ 500,000 $ ---- $ 104,721 (2)
Chairman and C.E.O. 1999 $1,000,000 $3,500,000 $ ---- $ 88,154 (2)
1998 $ ---- $ ---- $997,856(3)(4)(5)$ 90,891 (2)
ROY E. FARMER 2000 $ 302,933 $ 250,000 $ ---- $ 343
President and C.O.O. 1999 $ 252,542 $ 250,000 $ 44,800 (6) $ 305
1998 $ 233,400 $ ---- $ ---- $ 267
GUENTER W. BERGER 2000 $ 221,561 $ 100,000 $ ---- $ 520
Vice President, 1999 $ 215,951 $ 100,000 $ 4,340 (6) $ 470
Production 1998 $ 198,600 $ ---- $ ---- $ 420
KENNETH R. CARSON 2000 $ 194,805 $ 75,000 $ ---- $ 331
Vice President, 1999 $ 189,503 $ 75,000 $ 5,908 (6) $ 306
Sales 1998 $ 174,600 $ ---- $ ---- $ 281
JOHN E. SIMMONS 2000 $ 175,114 $ 75,000 $ ---- $ 166
Treasurer 1999 $ 169,447 $ 75,000 $ 5,600 (6) $ 153
1998 $ 158,400 $ ---- $ ---- $ 140
____________________________
(1) Awarded under the Company's Incentive Compensation Plan. 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) The amount shown for Roy F. Farmer represents P.S.58 costs of the two
split-dollar insurance policies purchased pursuant to an employment agreement
(since expired) with Mr. Farmer (see footnote (5), infra) plus the dollar value
of the benefit to him under the Company's executive life insurance plan.
(3) 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.
(4) 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.
(5) Pursuant to an 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.
(6) Compensation element of purchase of shares from the Company at a price
below market on the date of purchase.
(7) Except as stated in footnote (2), 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.
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. The maximum
annual benefit under this plan generally cannot exceed the lesser of $135,000 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 $131,250
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, 1999 were as follows: Guenter W.
Berger - 35 years; Roy E. Farmer - 23 years; Kenneth R. Carson - 34 years; John
E. Simmons - 18 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 (the "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 Committee is responsible for determining the compensation of executive
officers and administering the Company's Incentive Compensation Plan. The
Committee serves pursuant to a grant of authority by the Board. The Committee
met three times during fiscal 2000.
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
In 1999 the Committee obtained a competitive compensation study prepared by
Ernst & Young LLP relating to Roy F. Farmer's compensation. The study concluded
that 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 study, 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 the retirement benefits provided to Mr. Farmer were
well below those provided to CEO's of comparable companies.
The Committee determined that Roy F. Farmer's salary for the fiscal year ended
June 30, 2000, excluding the award under the Company's Incentive Compensation
Plan (see below), be $1,000,000. This represents no change from fiscal 1999.
Incentive Compensation Plan
The Company made awards under its Incentive Compensation Plan (the "Plan") for
fiscal 2000 to all executive officers. The Committee felt that awards were
particularly appropriate in light of the earnings achieved by the Company in
fiscal 2000.
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 three percent of pre-tax income over $14,000,000 to six percent of pre-tax
income of $24,000,00 or more. Amounts available for awards but not awarded are
carried forward. The pool available for awards for fiscal 2000 under the
Incentive Compensation Plan was in excess of $13,000,000. Of the available
pool, the Committee awarded a total of $1,050,000 of which $500,000 was awarded
to Roy F. Farmer, the Company's Chief Executive Officer, and $550,000 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 Committee was motivated primarily by
the earnings achieved by the Company in 2000 and Mr. Farmer's substantial
contribution to those results. 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
Performance Graph
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS*
Farmer Bros. Co., Russell 2000 Index and Value Line Food Processing Index
(Performance Results Through 6/30/99)
FARMER BROS. CO. $100.00 $114.53 $107.17 $205.53 $176.49 $155.16
Russell 2000 Index $100.00 $123.83 $144.04 $167.28 $167.73 $190.68
Value Line Food
Processing Index $100.00 $118.46 $175.62 $236.99 $227.21 $250.89
Assumes $100 invested at the close of trading 6/30/95 in Farmer Bros. Co. common
stock, Russell 2000 Index, and Value Line Food Processing Index.
*Cumulative total return assumes reinvestment of dividends.
Source: Value Line, Inc.
Factual material obtained from sources believed to be reliable, but the
publisher is not responsible for any errors or omissions contained herein.
CLOSING DATE FOR PROPOSALS BY SHAREHOLDERS
Proposals of shareholders intended to be presented at the Company's 2001 Annual
Meeting of Shareholders must be submitted, in writing, to the Secretary of the
Company no later than July 3, 2001.
Compliance with Section 16(a) of the Exchange Act
Based on a review of filings 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 2000.
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 27, 2000
APPENDIX A
Proposed Amended Article III, Section 2 of the Company's Bylaws
"Section 2. The number of directors of the Corporation shall be not fewer
than five (5) nor more than nine (9). The board of directors or the
shareholders shall fix the exact number of directors within the limit specified
above. The board of directors can fix the exact number of directors by
resolution adopted at any duly held meeting of the board or by their unanimous
written consent. The shareholders can fix the exact number of directors by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
constitute at least a majority of the required quorum) or by the written consent
of the holders of a majority of the then outstanding shares entitled to vote.
An amendment of this Section 2 reducing the minimum number of directors to fewer
than five (5) cannot be adopted if the votes cast against its adoption at a
meeting of shareholders or the shares not consenting in the case of action by
written consent, equal or exceed sixteen and two-thirds percent (16 2/3%) of the
then outstanding shares entitled to vote."
FARMER BROS. CO. ANNUAL MEETING OF SHAREHOLDERS, NOVEMBER 27, 2000
PROXY
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 27, 2000, 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 ITEMS
2 AND 3.
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 DETATCH HERE
Your Board of Directors recommends a vote "FOR"
approval of items two (2) and three (3).
Item 1-ELECTION OF DIRECTORS WITHHELD
FOR ALL 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-AMENDMENT OF FOR AGAINST ABSTAIN
ARTICLE III, SECTION 2
OF THE COMPANY'S
BYLAWS.
ITEM 3-APPROVAL OF ERNST & FOR AGAINST ABSTAIN
YOUNG LLP AS THE
COMPANY'S
INDEPENDENT PUBLIC
ACCOUNTANTS FOR
FISCAL YEAR 2001.
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.
