Farmer Bros. Co. (NASDAQ: FARM) (the “Company”) today reported
financial results for its fourth quarter and fiscal year ended June
30, 2019.
Fourth Quarter Fiscal 2019 Highlights:
- Volume of green coffee processed and sold was flat at 27.4
million pounds compared to the prior year period.• Green coffee
pounds processed and sold through our DSD network were 8.9 million,
or 32.4% of total green coffee pounds processed and
sold• Direct ship customers represented 18.2 million, or
66.5%, of total green coffee pounds processed and
sold• Distributor customers represented 0.3 million pounds, or
1.1%, of total green coffee pounds processed and sold
- Net sales were $142.1 million, a decrease of $7.5 million, or
5.0%, from the prior year period;
- Gross margin decreased to 26.6% from 35.3% in the prior year
period, while operating expenses as percentage of sales improved to
31.5% from 33.9% in the prior year period;
- Net loss was $8.8 million compared to net income of $0.1
million in the prior year period; and
- Adjusted EBITDA was $3.9 million compared to $14.0 million in
the prior year period.*
Fiscal 2019 Highlights:
- Volume of green coffee processed and sold increased by 0.7
million pounds, reaching 108.1 million pounds, a 0.6% increase over
the prior year;• Green coffee pounds processed and sold
through our DSD network were 39.4 million, or 36.4% of total green
coffee pounds processed and sold• Direct ship customers
represented 67.5 million, or 62.4%, of total green coffee pounds
processed and sold• Distributor customers represented 1.2
million pounds, or 1.2%, of total green coffee pounds processed and
sold
- Net sales were $595.9 million, a decrease of $10.6 million, or
1.7%, from the prior year period;
- Gross margin decreased to 30.1% from 34.2% in the prior year
period, while operating expenses as percentage of sales improved to
32.5% from 34.0% in the prior year period;
- Net loss was $73.6 million compared to net loss of $18.3
million in the prior year period; and
- Adjusted EBITDA was $31.9 million compared to $47.6 million in
the prior year period.*
(*Adjusted EBITDA, a non-GAAP financial measure, is reconciled
to its corresponding GAAP measure at the end of this press
release.)
“During the fourth quarter and entering fiscal
2020, we took significant steps to address recent issues in the
business and put the Company back on a path of improved financial
results,” said Chris Mottern, Interim CEO. “With strategic intent
and contributions from across the Company, we developed five key
priorities that the team is executing against with urgency. These
priorities are: effective cash management and debt reduction;
customer retention and acquisition; efficiently managing coffee
brewing equipment, installation and service; enhancing processes
and systems; and reducing our SKU counts, and achieving 100%
product availability. We entered the new fiscal year in a stronger
financial position and have formed a solid foundation on which the
Company will be able to stabilize, move forward with momentum and
be positioned for long-term success.”
Mr. Mottern, continued, “As announced separately
today, we have appointed Deverl Maserang as CEO and look forward to
him joining the Company later this month. With more than three
decades of innovative leadership in turnarounds, supply chain
management expertise, along with deep experience in the food and
beverage industry, we believe he is the ideal executive to lead
Farmer Brothers into its next stage of growth in the future. The
Company remains committed to improving execution and new business
generation, with the goal to deliver enhanced value to
shareholders.”
Fourth Quarter and Fiscal 2019 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
months and fiscal years ended June 30, 2019 and 2018 (unaudited).
In the fourth quarter, the Company adopted changes in accounting
principles converting from the last in, first out inventory method
to the first in, first out inventory method and reclassifying and
capitalizing certain freight, warehousing and other expenses as
inventory costs. These changes were adopted retrospectively and all
reported prior periods have been adjusted.
|
|
Three Months Ended June 30, |
|
Fiscal Year Ended June 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
(In thousands, except
per share data) |
|
|
|
|
|
|
|
|
Income statement data: |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
142,050 |
|
|
$ |
149,538 |
|
|
$ |
595,942 |
|
|
$ |
606,544 |
|
Gross margin |
|
26.6 |
% |
|
35.3 |
% |
|
30.1 |
% |
|
34.2 |
% |
(Loss) income from
operations |
|
$ |
(7,024 |
) |
|
$ |
1,984 |
|
|
$ |
(14,702 |
) |
|
$ |
1,053 |
|
Net (loss) income |
|
$ |
(8,760 |
) |
|
$ |
133 |
|
|
$ |
(73,595 |
) |
|
$ |
(18,280 |
) |
Net income (loss) available to
common stockholders per common share-diluted |
|
$ |
(0.52 |
) |
|
$ |
— |
|
|
$ |
(4.36 |
) |
|
$ |
(1.11 |
) |
|
|
|
|
|
|
|
|
|
Operating data: |
|
|
|
|
|
|
|
|
Coffee pounds |
|
27,379 |
|
|
27,396 |
|
|
108,098 |
|
|
107,429 |
|
EBITDA |
|
$ |
1,508 |
|
|
$ |
10,015 |
|
|
$ |
3,617 |
|
|
$ |
32,673 |
|
EBITDA Margin |
|
1.1 |
% |
|
6.7 |
% |
|
0.6 |
% |
|
5.4 |
% |
Adjusted EBITDA |
|
$ |
3,937 |
|
|
$ |
13,975 |
|
|
$ |
31,882 |
|
|
$ |
47,562 |
|
Adjusted EBITDA Margin |
|
2.8 |
% |
|
9.3 |
% |
|
5.3 |
% |
|
7.8 |
% |
|
|
|
|
|
|
|
|
|
Other data: |
|
|
|
|
|
|
|
|
Capital expenditures related
to maintenance |
|
$ |
4,087 |
|
|
$ |
4,409 |
|
|
$ |
21,088 |
|
|
$ |
21,782 |
|
Total capital
expenditures |
|
$ |
4,366 |
|
|
$ |
9,554 |
|
|
$ |
34,759 |
|
|
$ |
37,020 |
|
Depreciation and amortization
expense |
|
$ |
7,835 |
|
|
$ |
7,737 |
|
|
$ |
31,065 |
|
|
$ |
30,464 |
|
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 fourth quarter of fiscal 2019
were $142.1 million, a decrease of $7.5 million, or 5.0%, from the
prior year period. The decrease in net sales was driven primarily
by lower sales of coffee and allied products sold through our DSD
network, offset by slightly positive growth within our direct sales
channel, net of the impact of lower coffee prices for our cost plus
customers. Net sales for our direct ship channel continued to
improve as we ramped volume of our new large global convenience
store retailer and trends improved from one of our largest
customers. Sales through our DSD network was impacted by higher
customer attrition related to the Boyd Business integration, route
optimization and lower inventory fill rates associated with
downtime at our Houston plant.
Gross profit in the fourth quarter of fiscal
2019 was $37.7 million, a decrease of $15.0 million, or 28.5% from
the prior year period and gross margin decreased to 26.6% from
35.3%. The decrease in gross profit was primarily driven by lower
net sales of $7.5 million between the periods and higher cost of
goods sold. The higher cost of goods sold is attributed to higher
mark downs on slow moving inventory, higher manufacturing costs
driven by downtime associated with certain aging production
infrastructure, higher coffee brewing equipment and labor costs,
and unfavorable shift in customer mix. Margin impact was partially
offset by lower green coffee prices.
Operating expenses in the fourth quarter of
fiscal 2019 decreased $6.0 million, or 11.8%, to $44.7 million,
from $50.7 million, and as a percentage of net sales declined to
31.5% compared to 33.9% of net sales, in the prior year period. The
decrease in operating expenses was primarily due to synergies
achieved through the Boyd Business acquisition, headcount
reductions and other efficiencies from DSD route optimization,
lower acquisition and integration costs, and a reduction in bonus
expense.
As a result of the foregoing factors, loss from
operations in the fourth quarter of fiscal 2019 was $7.0 million,
as compared to income from operations of $2.0 million in the prior
year period.
Interest expense in the fourth quarter of fiscal
2019 increased $0.3 million to $2.8 million as compared to $2.5
million in the prior year period principally due to higher
outstanding borrowings on our revolving credit facility primarily
related to the Boyd Business acquisition.
Other, net in the fourth quarter of fiscal 2019
increased by $0.2 million to $2.1 million in the quarter compared
to $1.9 million in the prior year period primarily due to decreased
mark-to-market losses on coffee-related derivative instruments not
designated as accounting hedges.
Income tax expense was $1.0 million in the
fourth quarter of fiscal 2019 as compared to $1.3 million in the
prior year period. The lower tax expense of $0.3 million in the
current year quarter is primarily due to losses from operations in
the fourth quarter of fiscal 2019 as compared to income from
operations for the same period in 2018.
As a result of the foregoing factors, net loss
was $8.8 million in the fourth quarter of fiscal 2019 as compared
to net income of $0.1 million in the prior year period. Net loss
available to common stockholders was $8.9 million, or $0.52 per
common share available to common stockholders-diluted, in the
fourth quarter of fiscal 2019, compared to break even net income
available to common stockholders in the prior year period.
Non-GAAP Financial
Measures:
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.
In fiscal 2019, 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, a non-cash pretax pension
settlement charge resulting from the amendment and termination of
the Farmer Bros. Pension Plan for Salaried Employees (the "Farmer
Bros Plan") effective December 1, 2018 and severance costs because
we believe that these items are not reflective of our ongoing
operating results and we believe that excluding these items will
help investors compare our results across periods.
Adjusted EBITDA was $3.9 million in the fourth
quarter of fiscal 2019, as compared to $14.0 million in the prior
year period, and Adjusted EBITDA Margin was 2.8% in the fourth
quarter of fiscal 2019, as compared to 9.3% 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, department 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 over $595.9 million in fiscal 2019 and
has approximately 1,521 employees nationwide. The Company’s primary
brands include Farmer Brothers®, Artisan Collection by Farmer
Brothers™, Superior®, Metropolitan™, China Mist® and Boyds®.
Investor Conference Call
Chris Mottern, Interim CEO, and David G. Robson,
Treasurer and CFO, will host an audio-only investor conference call
today, September 10, 2019, at 5:00 p.m. Eastern time (4:00
p.m. Central time) to review the Company’s financial results for
the fourth quarter and fiscal year ended June 30, 2019. 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/jhjjhw7b 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 7019529.
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, the
success of our corporate relocation plan, the timing and success of
implementation of our direct-store-delivery restructuring plan, our
success in consummating acquisitions and integrating acquired
businesses, the impact of capital improvement projects, the
adequacy and availability of capital resources to fund our existing
and planned business operations and our capital expenditure
requirements, the capacity to meet the demands of the Company’s
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 effect of the
capital markets, stockholder activity and fluctuations in
availability and cost of green coffee, competition,
organizational changes, the effectiveness of our hedging strategies
in reducing price risk, 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, the Company's 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 press release and other factors
described from time to time in the Company's filings with the SEC.
The results of operations for the fourth quarter and fiscal year
ended June 30, 2018 are not necessarily indicative of the results
that may be expected for any future period.
Contact: Joele Frank,
Wilkinson Brimmer KatcherLeigh Parrish / Mary
Aiello212-355-4449
FARMER
BROS. CO.CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)(In thousands, except share
and per share data)
|
|
Year Ended June 30, |
|
Three Months Ended June 30, |
|
|
2019 |
|
2018 |
|
2017 |
|
2019 |
|
2018 |
Net sales |
|
$ |
595,942 |
|
|
$ |
606,544 |
|
|
$ |
541,500 |
|
|
$ |
142,050 |
|
|
$ |
149,538 |
|
Cost of goods sold |
|
416,840 |
|
|
399,155 |
|
|
354,649 |
|
|
104,327 |
|
|
96,806 |
|
Gross profit |
|
179,102 |
|
|
207,389 |
|
|
186,851 |
|
|
37,723 |
|
|
52,732 |
|
Selling expenses |
|
139,647 |
|
|
153,391 |
|
|
133,534 |
|
|
28,324 |
|
|
40,655 |
|
General and administrative
expenses |
|
48,959 |
|
|
49,429 |
|
|
42,945 |
|
|
16,896 |
|
|
9,607 |
|
Restructuring and other
transition expenses |
|
4,733 |
|
|
662 |
|
|
11,016 |
|
|
33 |
|
|
351 |
|
Net gain from sale of Torrance
facility |
|
— |
|
|
— |
|
|
(37,449 |
) |
|
— |
|
|
— |
|
Net gains from sale of Spice
Assets |
|
(593 |
) |
|
(770 |
) |
|
(919 |
) |
|
— |
|
|
(115 |
) |
Net losses (gains) from sales
of other assets |
|
1,058 |
|
|
(196 |
) |
|
(1,210 |
) |
|
(506 |
) |
|
250 |
|
Impairment losses on
intangible assets |
|
— |
|
|
3,820 |
|
|
— |
|
|
— |
|
|
— |
|
Operating expenses |
|
193,804 |
|
|
206,336 |
|
|
147,917 |
|
|
44,747 |
|
|
50,748 |
|
Income (loss) from
operations |
|
(14,702 |
) |
|
1,053 |
|
|
38,934 |
|
|
(7,024 |
) |
|
1,984 |
|
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
Dividend income |
|
— |
|
|
12 |
|
|
1,007 |
|
|
— |
|
|
— |
|
Interest income |
|
— |
|
|
2 |
|
|
567 |
|
|
— |
|
|
— |
|
Interest expense |
|
(12,000 |
) |
|
(9,757 |
) |
|
(8,601 |
) |
|
(2,835 |
) |
|
(2,536 |
) |
Pension settlement charge |
|
(10,948 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Other, net |
|
4,166 |
|
|
7,722 |
|
|
5,459 |
|
|
2,061 |
|
|
1,939 |
|
Total other (expense) income |
|
(18,782 |
) |
|
(2,021 |
) |
|
(1,568 |
) |
|
(774 |
) |
|
(597 |
) |
(Loss) income before
taxes |
|
(33,484 |
) |
|
(968 |
) |
|
37,366 |
|
|
(7,798 |
) |
|
1,387 |
|
Income tax expense |
|
40,111 |
|
|
17,312 |
|
|
14,815 |
|
|
962 |
|
|
1,254 |
|
Net (loss) income |
|
$ |
(73,595 |
) |
|
$ |
(18,280 |
) |
|
$ |
22,551 |
|
|
$ |
(8,760 |
) |
|
$ |
133 |
|
Less: Cumulative preferred
dividends, undeclared and unpaid |
|
535 |
|
|
389 |
|
|
— |
|
|
135 |
|
|
132 |
|
Net (loss) income available to
common stockholders |
|
$ |
(74,130 |
) |
|
$ |
(18,669 |
) |
|
$ |
22,551 |
|
|
$ |
(8,895 |
) |
|
$ |
1 |
|
Net (loss) income available to
common stockholders per common share—basic |
|
$ |
(4.36 |
) |
|
$ |
(1.11 |
) |
|
$ |
1.35 |
|
|
$ |
(0.52 |
) |
|
$ |
— |
|
Net (loss) income available to
common stockholders per common share—diluted |
|
$ |
(4.36 |
) |
|
$ |
(1.11 |
) |
|
$ |
1.34 |
|
|
$ |
(0.52 |
) |
|
$ |
— |
|
Weighted average common shares
outstanding—basic |
|
16,996,354 |
|
|
16,815,020 |
|
|
16,668,745 |
|
|
17,038,829 |
|
|
16,855,874 |
|
Weighted average common shares
outstanding—diluted |
|
16,996,354 |
|
|
16,815,020 |
|
|
16,785,752 |
|
|
17,038,829 |
|
|
16,855,874 |
|
FARMER
BROS. CO.CONSOLIDATED BALANCE SHEETS
(UNAUDITED)(In thousands, except share and per
share data)
|
June 30, |
|
2019 |
|
2018 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
6,983 |
|
|
$ |
2,438 |
|
Accounts receivable, net of allowance for doubtful accounts of
$1,324 and $495, respectively |
55,155 |
|
|
58,498 |
|
Inventories |
87,910 |
|
|
104,431 |
|
Income tax receivable |
1,191 |
|
|
305 |
|
Short-term derivative assets |
1,865 |
|
|
— |
|
Prepaid expenses |
6,804 |
|
|
7,842 |
|
Total current assets |
159,908 |
|
|
173,514 |
|
Property, plant and equipment,
net |
189,458 |
|
|
186,589 |
|
Goodwill |
36,224 |
|
|
36,224 |
|
Intangible assets, net |
28,878 |
|
|
31,515 |
|
Other assets |
9,468 |
|
|
8,381 |
|
Long-term derivative assets |
674 |
|
|
— |
|
Deferred income taxes |
— |
|
|
39,308 |
|
Total assets |
$ |
424,610 |
|
|
$ |
475,531 |
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
72,771 |
|
|
56,603 |
|
Accrued payroll expenses |
14,518 |
|
|
17,918 |
|
Short-term borrowings under revolving credit facility |
— |
|
|
89,787 |
|
Short-term obligations under capital leases |
34 |
|
|
190 |
|
Short-term derivative liabilities |
1,474 |
|
|
3,300 |
|
Other current liabilities |
7,309 |
|
|
10,659 |
|
Total current liabilities |
96,106 |
|
|
178,457 |
|
Long-term borrowings under
revolving credit facility |
92,000 |
|
|
— |
|
Accrued pension liabilities |
47,216 |
|
|
40,380 |
|
Accrued postretirement
benefits |
23,024 |
|
|
20,473 |
|
Accrued workers’ compensation
liabilities |
4,747 |
|
|
5,354 |
|
Other long-term liabilities |
4,023 |
|
|
1,812 |
|
Total liabilities |
$ |
267,116 |
|
|
$ |
246,476 |
|
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 June 30, 2019 and 2018, respectively; liquidation preference of
$15,624 and $15,089 as of June 30, 2019 and 2018, respectively |
15 |
|
|
15 |
|
Common stock, $1.00 par value, 25,000,000 shares authorized;
17,042,132 and 16,951,659 shares issued and outstanding at
June 30, 2019 and 2018, respectively |
17,042 |
|
|
16,952 |
|
Additional paid-in capital |
57,912 |
|
|
55,965 |
|
Retained earnings |
146,177 |
|
|
220,307 |
|
Unearned ESOP shares |
— |
|
|
(2,145 |
) |
Accumulated other comprehensive loss |
(63,652 |
) |
|
(62,039 |
) |
Total stockholders’ equity |
$ |
157,494 |
|
|
$ |
229,055 |
|
Total liabilities and stockholders’ equity |
$ |
424,610 |
|
|
$ |
475,531 |
|
FARMER BROS. CO. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) |
(In thousands) |
|
Year Ended June 30, |
|
2019 |
|
2018 |
|
2017 |
Cash flows from operating
activities: |
|
|
|
|
|
Net (loss) income |
$ |
(73,595 |
) |
|
$ |
(18,280 |
) |
|
$ |
22,551 |
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities: |
Depreciation and amortization |
31,065 |
|
|
30,464 |
|
|
22,970 |
|
Provision for doubtful accounts |
1,363 |
|
|
137 |
|
|
325 |
|
Impairment losses on intangible assets |
— |
|
|
3,820 |
|
|
— |
|
Change in estimated fair value of contingent earnout
consideration |
— |
|
|
(500 |
) |
|
— |
|
Restructuring and other transition expenses, net of payments |
1,172 |
|
|
(1,185 |
) |
|
1,034 |
|
Interest on sale-leaseback financing obligation |
— |
|
|
— |
|
|
681 |
|
Deferred income taxes |
41,654 |
|
|
17,155 |
|
|
14,343 |
|
Pension settlement cost |
10,948 |
|
|
— |
|
|
— |
|
Net gain from sale of Torrance Facility |
— |
|
|
— |
|
|
(37,449 |
) |
Net gains from sales of Spice Assets and other assets |
466 |
|
|
(995 |
) |
|
(2,129 |
) |
ESOP and share-based compensation expense |
3,674 |
|
|
3,822 |
|
|
3,959 |
|
Net losses on derivative instruments and investments |
9,196 |
|
|
1,982 |
|
|
2,361 |
|
Change in
operating assets and liabilities: |
Accounts receivable |
2,757 |
|
|
(4,628 |
) |
|
(14 |
) |
Inventories |
16,192 |
|
|
(15,513 |
) |
|
(8,041 |
) |
Derivative (liabilities) assets, net |
(18,901 |
) |
|
(7,782 |
) |
|
2,264 |
|
Other assets |
114 |
|
|
1,073 |
|
|
22,932 |
|
Accounts payable |
16,546 |
|
|
3,864 |
|
|
8,885 |
|
Accrued expenses and other liabilities |
(7,201 |
) |
|
(4,579 |
) |
|
(12,560 |
) |
Net cash provided by operating activities |
$ |
35,450 |
|
|
$ |
8,855 |
|
|
$ |
42,112 |
|
Cash flows from
investing activities: |
Acquisitions of businesses, net of cash acquired |
$ |
— |
|
|
$ |
(39,608 |
) |
|
$ |
(25,853 |
) |
Purchases of property, plant and equipment |
(34,760 |
) |
|
(35,443 |
) |
|
(45,195 |
) |
Purchases of assets for construction of New Facility |
— |
|
|
(1,577 |
) |
|
(39,754 |
) |
Proceeds from sales of property, plant and equipment |
2,399 |
|
|
1,988 |
|
|
4,078 |
|
Net cash used in investing activities |
$ |
(32,361 |
) |
|
$ |
(74,640 |
) |
|
$ |
(106,724 |
) |
Cash flows from
financing activities: |
Proceeds from revolving credit facility |
$ |
50,642 |
|
|
$ |
85,315 |
|
|
$ |
77,985 |
|
Repayments on revolving credit facility |
(48,429 |
) |
|
(23,149 |
) |
|
(50,473 |
) |
Proceeds from sale-leaseback financing obligation |
— |
|
|
— |
|
|
42,455 |
|
Proceeds from New Facility lease financing obligation |
— |
|
|
— |
|
|
16,346 |
|
Repayments of New Facility lease financing |
— |
|
|
— |
|
|
(35,772 |
) |
Payments of capital lease obligations |
(215 |
) |
|
(947 |
) |
|
(1,433 |
) |
Payment of financing costs |
(1,049 |
) |
|
(579 |
) |
|
— |
|
Proceeds from stock option exercises |
507 |
|
|
1,342 |
|
|
688 |
|
Tax withholding payment - net share settlement of equity
awards |
— |
|
|
— |
|
|
(38 |
) |
Net cash provided by financing
activities |
$ |
1,456 |
|
|
$ |
61,982 |
|
|
$ |
49,758 |
|
Net (decrease) increase in
cash and cash equivalents |
$ |
4,545 |
|
|
$ |
(3,803 |
) |
|
$ |
(14,854 |
) |
Cash and cash equivalents at
beginning of year |
2,438 |
|
|
6,241 |
|
|
21,095 |
|
Cash and cash equivalents at
end of year |
$ |
6,983 |
|
|
$ |
2,438 |
|
|
$ |
6,241 |
|
FARMER BROS. CO. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- (continued) |
(In thousands) |
|
Year Ended June 30, |
|
2019 |
|
2018 |
|
2017 |
Supplemental disclosure of
cash flow information: |
|
|
|
|
|
Cash paid for interest |
$ |
5,512 |
|
|
$ |
3,177 |
|
|
$ |
1,504 |
|
Cash paid for income taxes |
$ |
107 |
|
|
$ |
144 |
|
|
$ |
567 |
|
Supplemental disclosure of
non-cash investing and financing activities: |
|
|
|
|
|
Equipment acquired under capital leases |
$ |
— |
|
|
$ |
— |
|
|
$ |
417 |
|
Net change in derivative assets and liabilities included in other
comprehensive (loss) income, net of tax |
$ |
(2 |
) |
|
$ |
(5,122 |
) |
|
$ |
(2,390 |
) |
Construction-in-progress assets under New Facility lease |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Non-cash additions to property, plant and equipment |
$ |
2,619 |
|
|
$ |
2,814 |
|
|
$ |
5,517 |
|
Non-cash portion of earnout receivable recognized—Spice Assets
sale |
$ |
— |
|
|
$ |
298 |
|
|
$ |
419 |
|
Non-cash portion of earnout payable recognized—China Mist
acquisition |
$ |
— |
|
|
$ |
— |
|
|
$ |
500 |
|
Non-cash portion of earnout payable recognized—West Coast Coffee
acquisition |
$ |
400 |
|
|
$ |
— |
|
|
$ |
600 |
|
Non-cash working capital adjustment payable recognized—China Mist
acquisition |
$ |
— |
|
|
$ |
— |
|
|
$ |
553 |
|
Non-cash receivable from West Coast Coffee—post-closing final
working capital adjustment |
$ |
— |
|
|
$ |
218 |
|
|
$ |
— |
|
Non-cash Issuance of 401-K shares of Common Stock |
$ |
37 |
|
|
$ |
— |
|
|
$ |
— |
|
Non-cash consideration given-Issuance of Series A Preferred
Stock |
$ |
— |
|
|
$ |
11,756 |
|
|
$ |
— |
|
Non-cash post-closing working capital adjustment—Boyd Coffee
acquisition |
$ |
2,277 |
|
|
$ |
1,056 |
|
|
$ |
— |
|
Option costs paid with exercised shares |
|
|
$ |
— |
|
|
$ |
550 |
|
Cumulative preferred dividends, undeclared and unpaid |
$ |
534 |
|
|
$ |
389 |
|
|
$ |
— |
|
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;
- (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
- net gains and losses from sales of assets;
- non-cash pension settlement charges; and
- acquisition and integration costs.
“Adjusted EBITDA Margin” is defined as Adjusted
EBITDA expressed as a percentage of net sales.
Restructuring and other transition expenses are
expenses that are directly attributable to (i) the Corporate
Relocation Plan, consisting primarily of employee retention and
separation benefits, pension withdrawal expense, facility-related
costs and other related costs such as travel, legal, consulting and
other professional services; and (ii) the DSD Restructuring Plan,
consisting primarily of severance, prorated bonuses for bonus
eligible employees, contractual termination payments and
outplacement services, and other related costs, including legal,
recruiting, consulting, other professional services, and
travel.
In fiscal 2019, 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, a non-cash pretax pension
settlement charge resulting from the amendment and termination of
the Farmer Bros. Plan effective December 1, 2018 and severance
costs because we believe that these items are not reflective of our
ongoing operating results and we believe that excluding these items
will help investors compare our results across periods.
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.
Prior year periods set forth in the tables below have been
retrospectively adjusted to reflect the impact of the adoption of
new accounting standards, ASU 2017-07.
Set forth below is a reconciliation of reported net (loss)
income to EBITDA (unaudited):
|
|
Year Ended June 30, |
|
Three Months Ended June 30, |
(In
thousands) |
|
2019 |
|
2018 |
|
2017 |
|
2019 |
|
2018 |
Net (loss) income, as
reported |
|
$ |
(73,595 |
) |
|
$ |
(18,280 |
) |
|
$ |
22,551 |
|
|
$ |
(8,760 |
) |
|
$ |
133 |
|
Income tax expense
(benefit) |
|
40,111 |
|
|
17,312 |
|
|
14,815 |
|
|
962 |
|
|
1,254 |
|
Interest expense |
|
6,036 |
|
|
3,177 |
|
|
2,185 |
|
|
1,471 |
|
|
891 |
|
Depreciation and amortization
expense |
|
31,065 |
|
|
30,464 |
|
|
22,970 |
|
|
7,835 |
|
|
7,737 |
|
EBITDA |
|
$ |
3,617 |
|
|
$ |
32,673 |
|
|
$ |
62,521 |
|
|
$ |
1,508 |
|
|
$ |
10,015 |
|
EBITDA Margin |
|
0.6 |
% |
|
5.4 |
% |
|
11.5 |
% |
|
1.1 |
% |
|
6.7 |
% |
Set forth below is a reconciliation of reported net (loss)
income to Adjusted EBITDA (unaudited):
|
|
Year Ended June 30, |
|
Three Months Ended June 30, |
(In
thousands) |
|
2019 |
|
2018 |
|
2017 |
|
2019 |
|
2018 |
Net (loss) income, as
reported |
|
$ |
(73,595 |
) |
|
$ |
(18,280 |
) |
|
$ |
22,551 |
|
|
$ |
(8,760 |
) |
|
$ |
133 |
|
Income tax expense |
|
40,111 |
|
|
17,312 |
|
|
14,815 |
|
|
962 |
|
|
1,254 |
|
Interest expense |
|
6,036 |
|
|
3,177 |
|
|
2,185 |
|
|
1,471 |
|
|
891 |
|
Income from short-term
investments |
|
— |
|
|
(19 |
) |
|
(1,853 |
) |
|
— |
|
|
(5 |
) |
Depreciation and amortization
expense |
|
31,065 |
|
|
30,464 |
|
|
22,970 |
|
|
7,835 |
|
|
7,737 |
|
ESOP and share-based
compensation expense |
|
3,723 |
|
|
3,822 |
|
|
3,959 |
|
|
628 |
|
|
930 |
|
Restructuring and other
transition expenses |
|
4,733 |
|
|
662 |
|
|
11,016 |
|
|
33 |
|
|
351 |
|
Net gain from sale of Torrance
Facility |
|
— |
|
|
— |
|
|
(37,449 |
) |
|
— |
|
|
— |
|
Net gains from sale of Spice
Assets |
|
(593 |
) |
|
(770 |
) |
|
(919 |
) |
|
— |
|
|
(115 |
) |
Net (gains) losses from sales
of other assets |
|
1,058 |
|
|
(196 |
) |
|
(1,210 |
) |
|
(506 |
) |
|
250 |
|
Impairment losses on
intangible assets |
|
— |
|
|
3,820 |
|
|
— |
|
|
— |
|
|
— |
|
Pension settlement charge |
|
10,948 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Non-recurring 2016 proxy
contest-related expenses |
|
— |
|
|
— |
|
|
5,186 |
|
|
— |
|
|
— |
|
Acquisition and integration
costs |
|
6,123 |
|
|
7,570 |
|
|
1,734 |
|
|
1 |
|
|
2,549 |
|
Severance |
|
2,273 |
|
|
— |
|
|
— |
|
|
2,273 |
|
|
— |
|
Adjusted EBITDA |
|
$ |
31,882 |
|
|
$ |
47,562 |
|
|
$ |
42,985 |
|
|
$ |
3,937 |
|
|
$ |
13,975 |
|
Adjusted EBITDA Margin |
|
5.3 |
% |
|
7.8 |
% |
|
7.9 |
% |
|
2.8 |
% |
|
9.3 |
% |
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