Farmer Bros. Co. (NASDAQ: FARM) (the "Company") today reported
financial results for its second fiscal quarter ended
December 31, 2020.
Second Quarter Fiscal 2021
Highlights:
- Volume of green coffee processed and
sold decreased by 8.0 million to 21.4 million pounds, a 27.1%
decrease compared to the prior year period primarily due to the
impact of the COVID-19 pandemic discussed below;
- Green coffee pounds processed and sold
through our DSD network were 5.4 million, or 25.3% of total green
coffee pounds processed and sold; and
- Direct ship customers represented 16.0
million, or 74.7%, of total green coffee pounds processed and
sold
- Net sales were $104.6 million, a
decrease of $47.9 million, or 31.4%, from the prior year
period;
- Gross margin decreased to 25.1% from
28.8% in the prior year period;
- Net loss was $17.7 million compared to
net income of $7.8 million in the prior year period; and
- Adjusted EBITDA was $8.3 million
compared to $7.4 million in the prior year period.*
- As of December 31, 2020, total
debt outstanding was $82.0 million and cash and cash equivalents
was $5.9 million compared to $122.0 million and $60.0 million,
respectively, as of June 30, 2020.
(*Adjusted EBITDA, a non-GAAP financial measure, is
reconciled to its corresponding GAAP measure at the end of this
press release.)
Deverl Maserang, President and CEO said, “As I
previously communicated last quarter, despite COVID-19, we are
cautiously optimistic as we see measurable progress and completion
of key initiatives. As announced earlier this week, our West Coast
distribution center is now operational and we are excited to return
to California, where we expect to see improved service for our
customers and distribution efficiencies on the West Coast. Further,
our handheld technology has been fully implemented across our DSD
network and we will complete the transition out of our Houston,
Texas facility in the coming quarter. I want to personally thank
all the team members across the organization that have worked so
hard to bring these projects to completion. All of these efforts
will allow us to better serve our customers and position Farmer
Brothers for success as we recover from the pandemic.”
Second Quarter Fiscal 2021
Results:
Selected Financial Data
The selected financial data presented below
under the captions “Income statement data,” “Operating data” and
“Other data” summarizes certain performance measures for the three
and six months ended December 31, 2020 and 2019
(unaudited).
|
|
Three Months Ended December 31, |
|
Six Months Ended December 31, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
(In thousands, except per share data) |
|
|
|
|
|
|
|
|
Income statement data: |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
104,571 |
|
|
$ |
152,498 |
|
|
$ |
201,841 |
|
|
$ |
291,098 |
|
Gross margin |
|
25.1 |
% |
|
28.8 |
% |
|
24.1 |
% |
|
29.1 |
% |
(Loss) income from operations |
|
$ |
(10,164 |
) |
|
$ |
8,870 |
|
|
$ |
(21,610 |
) |
|
$ |
15,762 |
|
Net (loss) income |
|
$ |
(17,725 |
) |
|
$ |
7,754 |
|
|
$ |
(23,997 |
) |
|
12,408 |
|
Net (loss) income available to
common stockholders per common share—diluted |
|
$ |
(1.02 |
) |
|
$ |
0.43 |
|
|
$ |
(1.39 |
) |
|
$ |
0.69 |
|
|
|
|
|
|
|
|
|
|
Operating data: |
|
|
|
|
|
|
|
|
Coffee pounds |
|
21,407 |
|
|
29,360 |
|
|
42,340 |
|
|
55,318 |
|
EBITDA(1) |
|
$ |
5,288 |
|
|
$ |
16,852 |
|
|
$ |
8,191 |
|
|
$ |
30,292 |
|
EBITDA Margin(1) |
|
5.1 |
% |
|
11.1 |
% |
|
4.1 |
% |
|
10.4 |
% |
Adjusted EBITDA(1) |
|
$ |
8,274 |
|
|
$ |
7,448 |
|
|
$ |
13,967 |
|
|
$ |
11,464 |
|
Adjusted EBITDA Margin(1) |
|
7.9 |
% |
|
4.9 |
% |
|
6.9 |
% |
|
3.9 |
% |
|
|
|
|
|
|
|
|
|
Other data: |
|
|
|
|
|
|
|
|
Capital expenditures related to maintenance |
|
$ |
2,147 |
|
|
$ |
3,107 |
|
|
$ |
3,741 |
|
|
$ |
7,459 |
|
Total capital expenditures |
|
$ |
5,271 |
|
|
$ |
3,730 |
|
|
$ |
9,636 |
|
|
$ |
9,007 |
|
Depreciation and amortization expense |
|
$ |
7,308 |
|
|
$ |
7,594 |
|
|
$ |
14,349 |
|
|
$ |
15,211 |
|
(1) EBITDA, EBITDA Margin, Adjusted EBITDA and
Adjusted EBITDA Margin are non-GAAP financial measures; a
reconciliation of these non-GAAP measures to their corresponding
GAAP measures is included at the end of this press release.
Net sales in the second quarter of fiscal 2021
were $104.6 million, a decrease of $47.9 million, or 31.4%, from
the prior year period. The decrease in net sales was driven
primarily by lower sales of coffee, beverage and allied products
sold through our DSD network due to the COVID-19 pandemic. During
our fiscal first quarter ended September 30, 2020, sales from our
DSD customers declined by 41% compared to prior year same quarter
due to COVID-19. Although we experienced improvements early in the
current quarter ended December 31, 2020 to where our weekly
sales were down 32% from pre-COVID levels, due to the surge in the
U.S. of COVID-19 cases later in the quarter, our DSD revenues
deteriorated back to approximately 40% compared to prior year same
quarter. The largest DSD revenue declines were from restaurants,
hotels and casino channels. This still represents significant
improvement since the worst effects on our business from COVID-19
in April 2020 when DSD sales were down by approximately 65% to 70%.
Our direct ship sales declined 13% compared to the prior year
period due to lower coffee volume related to COVID-19 and the
impact of coffee prices for our cost plus customers, partially
offset by improved volume from our retail business, key grocery
stores under their private labels, and third party e-commerce
platforms.
Gross profit in the second quarter of fiscal
2021 was $26.3 million, a decrease of $17.7 million, or 40.3% from
the prior year period and gross margin decreased to 25.1% from
28.8% from the prior year period. The decrease in gross profit was
primarily driven by lower net sales of $47.9 million partially
offset by lower cost of goods sold. The decrease in gross margin
was impacted by COVID-19 and the unfavorable impact it had on our
customer mix, partially offset by lower production variances, lower
write-down of slow moving inventories, lower freight costs and
lower coffee brewing equipment costs resulting from the various
costs savings initiatives we have implemented.
Operating expenses in the second quarter of
fiscal 2021 increased compared to prior year period at $36.4
million, from $35.1 million, and as a percentage of net sales
increased to 34.8% compared to 23.0% of net sales, in the prior
year period. Operating expenses were impacted by a $9.9 million
decrease in net gains realized from sales of assets, a $0.3 million
increase in general and administrative expenses and a $1.2 million
of fixed assets impairment, partially offset by a $10.1 million
decrease in selling expenses. During the current quarter, we
completed the sale of two branch properties for a net gains of $1.2
million compared to the prior year quarter sales of the Houston
manufacturing facility and four branch properties for total gains
of $11.4 million. The increase in general and administrative
expenses was associated primarily with one-time severance and
strategic costs saving action taken during the current quarter,
partially offset by reductions in third party costs and reductions
in headcount due to COVID-19. The fixed assets impairment is
primarily related to the write-off of the remaining balance of our
previous route handheld equipment since we completed the
implementation of new route handheld equipment. The decrease in
selling expenses was primarily driven by reductions in headcount,
lower DSD sales commissions and lower travel expenses.
Interest expense in the second quarter of fiscal
2021 was flat at $2.9 million principally due to the write-off of
deferred finance cost related to our debt amendment and the
amortization of de-designated interest rate swap costs, offset by
lower pension interest expense.
Other, net in the second quarter of fiscal 2021
increased by $7.4 million to $9.1 million in the quarter compared
to $1.7 million in the prior year period. The increase in Other,
net was primarily a result of higher amortized gains on our
postretirement medical benefit plan due to the curtailment
announced in March 2020 and higher mark-to-market net gains on
coffee-related derivative instruments not designated as accounting
hedges.
Income tax expense was $13.7 million in the
second quarter of fiscal 2021 as compared to income tax benefit of
$0.1 million in the prior year period. The income tax expense for
the three months ended December 31, 2020 included $13.5
million of previously deferred non-cash tax expense in accumulated
other comprehensive income associated with gains on the
postretirement medical plan in prior years. Upon termination of
this plan on December 31, 2020, the deferred non-cash tax expense
was recognized in net income in the second quarter of fiscal 2021.
The tax benefit in the three months ended December 31, 2019
was primarily driven by change in previously recorded valuation
allowance and change in our estimated deferred tax liability.
As a result of the foregoing factors, net loss
was $17.7 million in the second quarter of fiscal 2021 as compared
to net income of $7.8 million in the prior year period. Net loss
available to common stockholders was $17.9 million, or $1.02 per
common share, in the second quarter of fiscal 2021, compared to net
income available to common stockholders of $7.6 million, or $0.44
per common share, in the prior year period.
Our capital expenditures for the six months
ended December 31, 2020 were $9.6 million, representing lower
maintenance capital spend of $3.7 million, a 49.8% reduction
compared to the prior year period, and various capital investment
spending of $5.9 million. The spending reductions were driven by
several key initiatives put in place, including a focus on
refurbished CBE equipment to drive cost savings, and reductions
across some capital categories due to additional cost controls
implemented during the COVID-19 pandemic.
As of December 31, 2020, the outstanding
debt on our revolver was $82.0 million, a decrease of $40.0 million
since June 30, 2020. Our cash balance decreased by $54.2 million,
from $60.0 million as of June 30, 2020, to $5.9 million as of
December 31, 2020. These changes resulted from the repayments
on our revolver completed under the terms of our amended credit
facility. The net deterioration in our liquidity was due to our
investment in inventory, capital expenditures to fund certain key
growth initiatives, and pension funding requirements that were
previously deferred under the Coronavirus Aid, Relief, and Economic
Security Act.
As of January 26, 2021, our total debt was
$82.0 million and we had cash on hand of $6.6 million and $38.7
million of availability on our amended credit facility.
Non-GAAP Financial
Measures:
EBITDA, EBITDA Margin, Adjusted EBITDA and
Adjusted EBITDA Margin are non-GAAP (U.S. generally accepted
accounting principles) financial measures within the meaning of the
rules of the Securities and Exchange Commission (“SEC”). See the
Non-GAAP Financial Measures section on why the Company believes
these supplemental measures are useful, reconciliations to the most
directly comparable GAAP measure, and the limitations on the use of
these supplemental measures.
Adjusted EBITDA was $8.3 million in the second
quarter of fiscal 2021, as compared to Adjusted EBITDA of $7.4
million in the prior year period, and Adjusted EBITDA Margin was
7.9% in the second quarter of fiscal 2020, as compared to Adjusted
EBITDA Margin of 4.9% in the prior year period.
About Farmer Bros. Co.
Founded in 1912, Farmer Bros. Co. is a national
coffee roaster, wholesaler and distributor of coffee, tea and
culinary products. The Company’s product lines include organic,
Direct Trade and sustainably-produced coffee. With a robust line of
coffee, hot and iced teas, cappuccino mixes, spices, and
baking/biscuit mixes, the Company delivers extensive beverage
planning services and culinary products to its U.S. based
customers. The Company serves a wide variety of customers, from
small independent restaurants and foodservice operators to large
institutional buyers like restaurant and convenience store chains,
hotels, casinos, healthcare facilities, and gourmet coffee houses,
as well as grocery chains with private brand coffee and consumer
branded coffee and tea products, and foodservice distributors.
Headquartered in Northlake, Texas, Farmer Bros.
Co. generated net sales of $501.3 million in fiscal 2020. The
Company’s primary brands include Farmer Brothers®, Artisan
Collection by Farmer Brothers™, Superior®, Metropolitan™, China
Mist® and Boyds®.
Investor Conference Call
Deverl Maserang, Chief Executive Officer, and
Scott Drake, Chief Financial Officer, will host an audio-only
investor conference call today, February 4, 2021, at 5:00 p.m.
Eastern time (4:00 p.m. Central time) to review the Company’s
financial results for the second fiscal quarter ended
December 31, 2020. The Company’s earnings press release will
be available on the Company’s website at www.farmerbros.com under
“Investor Relations.”
The call will be open to all interested
investors through a live audio web broadcast via the Internet at
https://edge.media-server.com/mmc/p/iyefemkm and at the Company’s
website www.farmerbros.com under “Investor Relations.” The
call also will be available to investors and analysts by dialing
Toll Free: 1-(844) 423-9890 or international: 1-(716) 247-5805. The
passcode/ID is 4784655.
The audio-only webcast will be archived for at
least 30 days on the Investor Relations section of the Farmer Bros.
Co. website, and will be available approximately two hours after
the end of the live webcast.
Forward-Looking Statements
Certain statements contained in this press
release are not based on historical fact and are forward-looking
statements within the meaning of federal securities laws and
regulations. These statements are based on management's current
expectations, assumptions, estimates and observations of future
events and include any statements that do not directly relate to
any historical or current fact. These forward-looking statements
can be identified by the use of words like “anticipates,”
“estimates,” “projects,” “expects,” “plans,” “believes,” “intends,”
“will,” “could,” “assumes” and other words of similar meaning.
Owing to the uncertainties inherent in forward-looking statements,
actual results could differ materially from those set forth in
forward-looking statements. The Company intends these
forward-looking statements to speak only at the time of this press
release and does not undertake to update or revise these statements
as more information becomes available except as required under
federal securities laws and the rules and regulations of the
Securities and Exchange Commission (“SEC”). Factors that could
cause actual results to differ materially from those in
forward-looking statements include, but are not limited to,
duration of the COVID-19 pandemic’s disruption to the Company’s
business and customers, levels of consumer confidence in national
and local economic business conditions, the duration and magnitude
of the pandemic’s impact on unemployment rates, the success of the
Company’s strategy to recover from the effects of the pandemic, the
success of the Company's turnaround strategy, the execution of the
five key initiatives, the impact of capital improvement projects,
the adequacy and availability of capital resources to fund the
Company’s existing and planned business operations and the
Company’s capital expenditure requirements, the relative
effectiveness of compensation-based employee incentives in causing
improvements in Company performance, the capacity to meet the
demands of our large national account customers, the extent of
execution of plans for the growth of Company business and
achievement of financial metrics related to those plans, the
success of the Company to retain and/or attract qualified
employees, the success of the Company’s adaptation to technology
and new commerce channels, the effect of the capital markets as
well as other external factors on stockholder value, fluctuations
in availability and cost of green coffee, competition,
organizational changes, the effectiveness of our hedging strategies
in reducing price and interest rate risk, changes in consumer
preferences, our ability to provide sustainability in ways that do
not materially impair profitability, changes in the strength of the
economy, business conditions in the coffee industry and food
industry in general, our continued success in attracting new
customers, variances from budgeted sales mix and growth rates,
weather and special or unusual events, as well as other risks
described in this report and other factors described from time to
time in our filings with the SEC. The results of operations for the
three and six months ended December 31, 2020 are not
necessarily indicative of the results that may be expected for any
future period.
|
FARMER BROS. CO.CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)(In thousands, except share and per
share data) |
|
|
Three Months Ended December 31, |
|
Six Months Ended December 31, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net sales |
$ |
104,571 |
|
|
$ |
152,498 |
|
|
$ |
201,841 |
|
|
$ |
291,098 |
|
Cost of goods sold |
78,321 |
|
|
108,513 |
|
|
153,173 |
|
|
206,472 |
|
Gross profit |
26,250 |
|
|
43,985 |
|
|
48,668 |
|
|
84,626 |
|
Selling expenses |
24,769 |
|
|
34,906 |
|
|
48,268 |
|
|
68,520 |
|
General and administrative expenses |
11,570 |
|
|
11,266 |
|
|
21,316 |
|
|
24,006 |
|
Net gains from sales of assets |
(1,168 |
) |
|
(11,057 |
) |
|
(549 |
) |
|
(23,662 |
) |
Impairment of goodwill and intangible assets |
— |
|
|
— |
|
|
— |
|
|
— |
|
Impairment of fixed assets |
1,243 |
|
|
— |
|
|
1,243 |
|
|
— |
|
Operating expenses |
36,414 |
|
|
35,115 |
|
|
70,278 |
|
|
68,864 |
|
(Loss) income from operations |
(10,164 |
) |
|
8,870 |
|
|
(21,610 |
) |
|
15,762 |
|
Other (expense) income: |
|
|
|
|
|
|
|
Interest expense |
(2,938 |
) |
|
(2,859 |
) |
|
(6,181 |
) |
|
(5,407 |
) |
Other, net |
9,080 |
|
|
1,662 |
|
|
17,639 |
|
|
1,865 |
|
Total other expense |
6,142 |
|
|
(1,197 |
) |
|
11,458 |
|
|
(3,542 |
) |
(Loss) income before taxes |
(4,022 |
) |
|
7,673 |
|
|
(10,152 |
) |
|
12,220 |
|
Income tax expense (benefit) |
13,703 |
|
|
(81 |
) |
|
13,845 |
|
|
(188 |
) |
Net (loss) income |
$ |
(17,725 |
) |
|
$ |
7,754 |
|
|
$ |
(23,997 |
) |
|
$ |
12,408 |
|
Less: Cumulative preferred dividends, undeclared and unpaid |
143 |
|
|
138 |
|
|
284 |
|
|
275 |
|
Net (loss) income available to common stockholders |
$ |
(17,868 |
) |
|
$ |
7,616 |
|
|
$ |
(24,281 |
) |
|
$ |
12,133 |
|
Net (loss) income available to
common stockholders per common share—basic |
$ |
(1.02 |
) |
|
$ |
0.44 |
|
|
$ |
(1.39 |
) |
|
$ |
0.71 |
|
Net (loss) income available to
common stockholders per common share—diluted |
$ |
(1.02 |
) |
|
$ |
0.43 |
|
|
$ |
(1.39 |
) |
|
$ |
0.69 |
|
Weighted average common shares
outstanding—basic |
17,531,521 |
|
|
17,159,108 |
|
|
17,477,268 |
|
|
17,127,153 |
|
Weighted average common shares
outstanding—diluted |
17,531,521 |
|
|
17,583,335 |
|
|
17,477,268 |
|
|
17,550,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
FARMER BROS. CO.CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)(In
thousands, except share and per share data) |
|
|
December 31, 2020 |
|
June 30, 2020 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
5,857 |
|
|
$ |
60,013 |
|
Accounts receivable, net |
41,864 |
|
|
40,882 |
|
Inventories |
80,617 |
|
|
67,408 |
|
Income tax receivable |
— |
|
|
831 |
|
Short-term derivative assets |
3,772 |
|
|
165 |
|
Prepaid expenses |
8,303 |
|
|
7,414 |
|
Total current assets |
140,413 |
|
|
176,713 |
|
Property, plant and equipment, net |
159,855 |
|
|
165,633 |
|
Intangible assets, net |
19,457 |
|
|
20,662 |
|
Other assets |
8,700 |
|
|
8,564 |
|
Long-term derivatives assets |
— |
|
|
10 |
|
Right-of-use operating lease assets |
27,658 |
|
|
21,117 |
|
Total assets |
$ |
356,083 |
|
|
$ |
392,699 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
49,797 |
|
|
36,987 |
|
Accrued payroll expenses |
15,769 |
|
|
9,394 |
|
Operating leases liabilities - current |
7,029 |
|
|
5,854 |
|
Short-term derivative liabilities |
1,428 |
|
|
5,255 |
|
Other current liabilities |
7,489 |
|
|
6,802 |
|
Total current liabilities |
81,512 |
|
|
64,292 |
|
Long-term borrowings under revolving credit facility |
82,000 |
|
|
122,000 |
|
Accrued pension liabilities |
56,358 |
|
|
58,772 |
|
Accrued postretirement benefits |
10,309 |
|
|
9,993 |
|
Accrued workers’ compensation liabilities |
3,687 |
|
|
4,569 |
|
Operating lease liabilities - noncurrent |
20,770 |
|
|
15,628 |
|
Other long-term liabilities |
5,254 |
|
|
5,532 |
|
Total liabilities |
$ |
259,890 |
|
|
$ |
280,786 |
|
Commitments and contingencies |
|
|
|
Stockholders’ equity: |
|
|
|
Preferred stock, $1.00 par value, 500,000 shares authorized; Series
A Convertible Participating Cumulative Perpetual Preferred Stock,
21,000 shares authorized; 14,700 shares issued and outstanding as
of December 31, 2020 and June 30, 2020; liquidation preference of
$16,463 and $16,178 as of December 31, 2020 and June 30, 2020,
respectively |
15 |
|
|
15 |
|
Common stock, $1.00 par value, 25,000,000 shares authorized;
17,591,084 and 17,347,774 shares issued and outstanding as of
December 31, 2020 and June 30, 2020, respectively |
17,591 |
|
|
17,348 |
|
Additional paid-in capital |
63,739 |
|
|
62,043 |
|
Retained earnings |
84,256 |
|
|
108,536 |
|
Accumulated other comprehensive loss |
(69,408 |
) |
|
(76,029 |
) |
Total stockholders’ equity |
$ |
96,193 |
|
|
$ |
111,913 |
|
Total liabilities and stockholders’ equity |
$ |
356,083 |
|
|
$ |
392,699 |
|
|
|
|
|
|
|
|
|
FARMER BROS. CO. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
(In thousands) |
|
Six Months Ended December 31, |
|
2020 |
|
2019 |
Cash flows from operating activities: |
|
|
|
Net (loss) income |
$ |
(23,997 |
) |
|
$ |
12,408 |
|
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
Depreciation and amortization |
14,349 |
|
|
15,211 |
|
Postretirement and Pension benefits gains |
(14,577 |
) |
|
— |
|
Deferred income taxes |
13,472 |
|
|
— |
|
Impairment of fixed assets |
1,243 |
|
|
— |
|
Net gains from sales of assets |
(549 |
) |
|
(23,662 |
) |
Net (gains) losses on derivative instruments |
(2,093 |
) |
|
4,075 |
|
Other adjustments |
1,776 |
|
|
1,794 |
|
Change in operating assets and liabilities: |
|
|
|
Accounts receivable |
(818 |
) |
|
(5,285 |
) |
Inventories |
(13,209 |
) |
|
1,804 |
|
Derivative assets/liabilities, net |
1,761 |
|
|
1,965 |
|
Other assets |
2,418 |
|
|
361 |
|
Accounts payable |
12,430 |
|
|
(10,608 |
) |
Accrued expenses and other |
3,971 |
|
|
(258 |
) |
Net cash used by operating activities |
$ |
(3,823 |
) |
|
$ |
(2,195 |
) |
Cash flows from investing activities: |
|
|
|
Purchases of property, plant and equipment |
(9,636 |
) |
|
(9,007 |
) |
Proceeds from sales of property, plant and equipment |
1,926 |
|
|
35,247 |
|
Net cash (used) provided in investing activities |
$ |
(7,710 |
) |
|
$ |
26,240 |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Proceeds from revolving credit facility |
$ |
21,150 |
|
|
$ |
38,000 |
|
Repayments on revolving credit facility |
(61,150 |
) |
|
(60,000 |
) |
Payments of finance lease obligations |
(9 |
) |
|
(27 |
) |
Payment of financing costs |
(2,614 |
) |
|
— |
|
Proceeds from stock option exercises |
— |
|
|
129 |
|
Net cash used by financing activities |
$ |
(42,623 |
) |
|
$ |
(21,898 |
) |
Net (decrease) increase in cash and cash equivalents |
$ |
(54,156 |
) |
|
$ |
2,147 |
|
Cash and cash equivalents at beginning of period |
60,013 |
|
|
6,983 |
|
Cash and cash equivalents at end of period |
$ |
5,857 |
|
|
$ |
9,130 |
|
|
|
|
|
|
|
|
|
FARMER BROS. CO. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(continued) |
(In thousands) |
|
Six Months Ended December 31, |
|
2020 |
|
2019 |
Supplemental disclosure of non-cash investing and financing
activities: |
|
|
|
Non-cash additions to property, plant and equipment |
$ |
380 |
|
|
$ |
284 |
|
Non-cash issuance of 401-K common stock |
$ |
185 |
|
|
$ |
109 |
|
Cumulative preferred dividends, undeclared and unpaid |
$ |
284 |
|
|
$ |
275 |
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
In addition to net (loss) income determined in
accordance with U.S. generally accepted accounting principles
(“GAAP”), we use the following non-GAAP financial measures in
assessing our operating performance:
“EBITDA” is defined as net (loss) income
excluding the impact of:
- income taxes;
- interest expense; and
- depreciation and amortization expense.
“EBITDA Margin” is defined as EBITDA expressed
as a percentage of net sales.
“Adjusted EBITDA” is defined as net (loss)
income excluding the impact of:
- income taxes;
- interest expense (benefit);
- (loss) income from short-term investments;
- depreciation and amortization expense;
- ESOP and share-based compensation expense;
- non-cash impairment losses;
- non-cash pension withdrawal expense;
- restructuring and other transition expenses;
- severance costs;
- proxy contest-related expenses;
- non-recurring costs associated with the COVID-19 pandemic;
- net gains and losses from sales of assets;
- non-cash pension settlements and postretirement benefits
curtailment; and
- acquisition, integration and strategic costs.
“Adjusted EBITDA Margin” is defined as Adjusted
EBITDA expressed as a percentage of net sales.
For purposes of calculating EBITDA and EBITDA
Margin and Adjusted EBITDA and Adjusted EBITDA Margin, we have
excluded the impact of interest expense resulting from the adoption
of ASU 2017-07, non-cash pretax pension and postretirement benefits
resulting from the amendment and termination of certain Farmer
Bros. pension and postretirement benefits plans and severance
because these items are not reflective of our ongoing operating
results.
We believe these non-GAAP financial measures
provide a useful measure of the Company’s operating results, a
meaningful comparison with historical results and with the results
of other companies, and insight into the Company’s ongoing
operating performance. Further, management utilizes these measures,
in addition to GAAP measures, when evaluating and comparing the
Company’s operating performance against internal financial
forecasts and budgets.
We believe that EBITDA facilitates
operating performance comparisons from period to period by
isolating the effects of certain items that vary from period to
period without any correlation to core operating performance or
that vary widely among similar companies. These potential
differences may be caused by variations in capital structures
(affecting interest expense), tax positions (such as the impact on
periods or companies of changes in effective tax rates or net
operating losses) and the age and book depreciation of facilities
and equipment (affecting relative depreciation expense). We also
present EBITDA and EBITDA Margin because (i) we believe
that these measures are frequently used by securities analysts,
investors and other interested parties to evaluate companies in our
industry, (ii) we believe that investors will find these measures
useful in assessing our ability to service or incur indebtedness,
and (iii) we use these measures internally as benchmarks to
compare our performance to that of our competitors.
EBITDA, EBITDA Margin, Adjusted EBITDA and
Adjusted EBITDA Margin, as defined by us, may not be comparable to
similarly titled measures reported by other companies. We do not
intend for non-GAAP financial measures to be considered in
isolation or as a substitute for other measures prepared in
accordance with GAAP.
Set forth below is a reconciliation of reported net loss to EBITDA
(unaudited): |
|
|
|
Three Months Ended December 31, |
|
Six Months Ended December 31, |
(In thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net (loss) income, as reported |
|
$ |
(17,725 |
) |
|
$ |
7,754 |
|
|
$ |
(23,997 |
) |
|
$ |
12,408 |
|
Income tax (benefit) expense |
|
13,703 |
|
|
(81 |
) |
|
13,845 |
|
|
(188 |
) |
Interest expense (1) |
|
2,002 |
|
|
1,585 |
|
|
3,994 |
|
|
2,861 |
|
Depreciation and amortization expense |
|
7,308 |
|
|
7,594 |
|
|
14,349 |
|
|
15,211 |
|
EBITDA |
|
$ |
5,288 |
|
|
$ |
16,852 |
|
|
$ |
8,191 |
|
|
$ |
30,292 |
|
EBITDA Margin |
|
5.1 |
% |
|
11.1 |
% |
|
4.1 |
% |
|
10.4 |
% |
____________(1) Excludes interest expense related to pension plans
and postretirement benefits. |
|
Set forth below is a reconciliation of reported net loss to
Adjusted EBITDA (unaudited): |
|
|
|
Three Months Ended December 31, |
|
Six Months Ended December 31, |
(In thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net (loss) income, as reported |
|
$ |
(17,725 |
) |
|
$ |
7,754 |
|
|
$ |
(23,997 |
) |
|
$ |
12,408 |
|
Income tax (benefit) expense |
|
13,703 |
|
|
(81 |
) |
|
13,845 |
|
|
(188 |
) |
Interest expense(1) |
|
2,002 |
|
|
1,585 |
|
|
3,994 |
|
|
2,861 |
|
Depreciation and amortization expense |
|
7,308 |
|
|
7,594 |
|
|
14,349 |
|
|
15,211 |
|
ESOP and share-based compensation expense |
|
794 |
|
|
909 |
|
|
1,950 |
|
|
1,778 |
|
Strategic initiatives (2) |
|
1,333 |
|
|
— |
|
|
1,675 |
|
|
— |
|
Net losses (gains) from sales of other assets |
|
(1,168 |
) |
|
(11,057 |
) |
|
(549 |
) |
|
(23,662 |
) |
Impairment of fixed assets |
|
1,243 |
|
|
— |
|
|
1,243 |
|
|
— |
|
Non-recurring costs associated with the COVID-19 pandemic |
|
149 |
|
|
— |
|
|
260 |
|
|
— |
|
Proxy contest-related expenses |
|
— |
|
|
259 |
|
|
— |
|
|
259 |
|
Severance |
|
635 |
|
|
485 |
|
|
1,197 |
|
|
2,797 |
|
Adjusted EBITDA(3) |
|
$ |
8,274 |
|
|
$ |
7,448 |
|
|
$ |
13,967 |
|
|
$ |
11,464 |
|
Adjusted EBITDA Margin |
|
7.9 |
% |
|
4.9 |
% |
|
6.9 |
% |
|
3.9 |
% |
|
____________(1) Excludes interest expense related to pension plans
and postretirement benefits.(2) Includes initiatives related to the
Houston facility exit and opening of the Rialto distribution
center.(3) Adjusted EBITDA for the three and six months ended
December 31, 2020 includes $7.2 million and $14.4 million,
respectively, of higher amortized gains resulting from the
curtailment of the postretirement medical plan in March 2020. These
higher gains will continue until the plan sunset on January 1,
2021. See Note 10, Employee Benefit Plans, of the Notes to
Unaudited Condensed Consolidated Financial Statements included in
our quarterly ended December 31, 2020, on Form 10-Q for
details. |
|
Investor Relations
ContactEllipsisJeff Majtyka & Kyle
KingInvestor.relations@farmerbros.com (646) 776-0886
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