Farmer Bros. Co. (NASDAQ: FARM) (the “Company”) today reported
financial results for its fourth quarter and fiscal year ended June
30, 2020.
Fourth Quarter Fiscal 2020 Highlights:
- Volume of green coffee processed and sold decreased by 7.7
million pounds to 19.7 million pounds, a 28.0% decrease compared to
the prior year period ended June 30, 2019, partially due to the
impact of the COVID-19 pandemic (“COVID-19”) discussed below;
- Green coffee pounds processed and sold through our DSD network
were 5.4 million, or 27.5% of total green coffee pounds processed
and sold; and
- Direct ship customers represented 14.3 million, or 72.5%, of
total green coffee pounds processed and sold.
- Net sales were $81.1 million, a decrease of $61.0 million, or
42.9%, from the prior year period;
- Gross margin decreased to 19.2% from 26.6% in the prior year
period;
- Operating expenses decreased to $29.1 million from $44.7
million in the prior year period, an increase as a percentage of
sales to 35.9% from 31.5% in the prior year period;
- Net loss was $9.7 million compared to net loss of $8.8 million
in the prior year period;
- Adjusted EBITDA was $0.7 million compared to $3.9 million in
the prior year period;* and
- As of June 30, 2020, the total debt outstanding was $122.0
million and cash and cash equivalents was $60.0 million compared to
$92.0 million and $7.0 million, respectively, in the prior year
period.
Fiscal 2020 Highlights:
- Volume of green coffee processed and sold decreased by 7.4
million pounds to 100.7 million pounds, a 6.8% decrease over the
prior year ended June 30, 2019, partially due to the impact of the
COVID-19 pandemic discussed below;
- Green coffee pounds processed and sold through our DSD network
were 31.0 million, or 30.8% of total green coffee pounds processed
and sold; and
- Direct ship customers represented 69.7 million, or 69.2%, of
total green coffee pounds processed and sold.
- Net sales were $501.3 million, a decrease of $94.6 million, or
15.9%, from the prior year;
- Gross margin decreased to 27.6% from 30.1% in the prior
year;
- Operating expenses decreased to $181.1 million from $193.8
million in the prior year period, and as percentage of sales,
inclusive of a $42.0 million intangible asset impairment charge,
increased to 36.1% from 32.5% in the prior year;
- Net loss was $37.1 million compared to net loss of $73.6
million in the prior year; and
- Adjusted EBITDA was $18.7 million compared to $31.9 million in
the prior year.*
(*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, “I’m
proud of the way Farmer Brothers has continued to make good
progress in executing our turnaround strategy during the fourth
quarter, despite the challenges associated with the COVID-19
environment. We continued to focus on three priorities including:
protecting the health and safety of our employees and customers;
preserving liquidity and supporting the long-term sustainability of
our business; and pivoting our business to accelerate certain
operating initiatives. We successfully exceeded our previously
announced targeted expense savings of approximately $6.5 million
per month during the quarter and we have continued to actively
manage costs as areas of the business partially return to
pre-pandemic sales levels. Further, our recently announced credit
facility amendment provides us with increased flexibility to
proactively manage our liquidity and working capital - supporting
continued execution of key strategic initiatives through what
remains an uncertain business environment - while maintaining
compliance with our debt financial covenants. Moving forward, we
continue to take steps to enhance our operational and financial
strength and ensure our long-term sustainability, while focusing on
executing on our key strategic initiatives.”
Fourth Quarter and Fiscal 2020 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, 2020 and 2019
(unaudited).
|
|
Three Months EndedJune 30, |
|
Fiscal Year Ended June 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
(In thousands, except
per share data) |
|
|
|
|
|
|
|
|
Income statement data: |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
81,083 |
|
|
$ |
142,050 |
|
|
$ |
501,320 |
|
|
$ |
595,942 |
|
Gross margin |
|
19.2 |
% |
|
26.6 |
% |
|
27.6 |
% |
|
30.1 |
% |
Loss from operations |
|
$ |
(13,595 |
) |
|
$ |
(7,024 |
) |
|
$ |
(43,002 |
) |
|
$ |
(14,702 |
) |
Net loss |
|
$ |
(9,718 |
) |
|
$ |
(8,760 |
) |
|
$ |
(37,087 |
) |
|
$ |
(73,595 |
) |
Net loss available to common
stockholders per common share—diluted |
|
$ |
(0.57 |
) |
|
$ |
(0.52 |
) |
|
$ |
(2.19 |
) |
|
$ |
(4.36 |
) |
|
|
|
|
|
|
|
|
|
Operating data: |
|
|
|
|
|
|
|
|
Coffee pounds |
|
19,706 |
|
|
27,379 |
|
|
100,700 |
|
|
108,098 |
|
EBITDA (1) |
|
$ |
184 |
|
|
$ |
1,508 |
|
|
$ |
(1,796 |
) |
|
$ |
3,617 |
|
EBITDA Margin (1) |
|
0.2 |
% |
|
1.1 |
% |
|
(0.4 |
)% |
|
0.6 |
% |
Adjusted EBITDA (1) |
|
$ |
713 |
|
|
$ |
3,937 |
|
|
$ |
18,742 |
|
|
$ |
31,882 |
|
Adjusted EBITDA Margin
(1) |
|
0.9 |
% |
|
2.8 |
% |
|
3.7 |
% |
|
5.3 |
% |
|
|
|
|
|
|
|
|
|
Other data: |
|
|
|
|
|
|
|
|
Capital expenditures related
to maintenance |
|
$ |
1,223 |
|
|
$ |
4,087 |
|
|
$ |
11,845 |
|
|
$ |
21,088 |
|
Total capital
expenditures |
|
$ |
4,446 |
|
|
$ |
4,366 |
|
|
$ |
17,560 |
|
|
$ |
34,759 |
|
Depreciation and amortization
expense |
|
$ |
7,352 |
|
|
$ |
7,835 |
|
|
$ |
29,896 |
|
|
$ |
31,065 |
|
(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 fourth quarter of fiscal 2020
were $81.1 million, a decrease of $61.0 million, or 42.9%, 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 COVID-19, as well as the sale of our office
coffee business in July 2019, and net customer attrition. At the
height of COVID-19 in April 2020, DSD sales declined 65% to 70%
from the pre–COVID weekly average sales. However, due to several
management initiatives, lifting of some government restrictions,
and reopening of some of our customers’ businesses, our DSD
revenues have improved throughout the quarter to approximately a
45% decline from pre-COVID-19 levels by June 30, 2020, and remained
at these levels through the end of August 2020. The largest DSD
sales declines were from restaurants, hotels and casino channels,
while demand from healthcare and C-stores channels were impacted
less. Our direct ship sales declined 18.5% 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, products sold
to key grocery stores under their private labels, and third party
e-commerce platforms.
Gross profit in the fourth quarter of fiscal
2020 was $15.5 million, a decrease of $22.2 million, or 58.8% from
the prior year period and gross margin decreased to 19.2% from
26.6%. The decrease in gross profit was primarily driven by lower
net sales of $61.0 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 reserves for slow moving inventories, lower freight costs,
lower coffee brewing equipment costs, and improved production
variances resulting from the various costs savings initiatives
implemented.
As previously announced, we successfully
implemented several cost saving initiatives with targeted expense
savings of approximately $6.5 million per month. This goal was
exceeded during the fourth fiscal quarter which mitigated the
COVID-19 impact on gross profit and reduced operating expenses. We
continue to actively manage costs as areas of the business
partially return to pre-COVID-19 sales levels.
Operating expenses in the fourth quarter of
fiscal 2020 decreased $15.6 million, or 34.9%, to $29.1 million,
from $44.7 million, and as a percentage of net sales increased to
35.9% compared to 31.5% of net sales, in the prior year period. The
decrease in operating expenses was primarily due to a $7.2 million
decrease in general and administrative expenses, and a $7.1 million
decrease in selling expenses which includes a portion of the
aforementioned cost savings initiatives. The decrease in general
and administrative expenses was associated primarily with
reductions in third party costs and lower headcount, partially
offset by COVID-19 related severance costs. The decrease in selling
expenses was primarily driven by lower headcount, lower DSD fleet
costs, less sales commissions, lower travel expenses and other
savings realized from our initiatives.
Interest expense in the fourth quarter of fiscal
2020 decreased $0.2 million to $2.6 million as compared to $2.8
million in the prior year period principally due to lower pension
related interest expense, partially offset by higher interest
expense on higher outstanding borrowings on our revolving credit
facility. In April 2020, we borrowed an additional $42.0 million
from the revolving credit facility as a precautionary measure to
increase our cash position, and preserve financial flexibility. We
repaid a total of $50.0 million of the borrowings in July 2020 in
connection with the amendment discussed above.
Other, net in the fourth quarter of fiscal 2020
increased by $5.4 million to $7.5 million in the quarter compared
to $2.1 million in the prior year period primarily due to higher
amortized gains on our postretirement medical benefit plan,
partially offset by mark-to-market net losses on coffee-related
derivative instruments not designated as accounting hedges.
Income tax expense was $1.0 million in each of
the fourth quarter of fiscal 2020 and prior year period. The tax
expense in the fourth quarter of fiscal 2020 was primarily due to
changes in accumulated other comprehensive income, while the prior
year period was driven by state income tax expense.
As a result of the foregoing factors, net loss
was $9.7 million in the fourth quarter of fiscal 2020 as compared
to net loss of $8.8 million in the prior year period. Net loss
available to common stockholders was $9.9 million, or $0.57 per
common share, in the fourth quarter of fiscal 2020, compared to net
loss available to common stockholders of $8.9 million, or $0.52 per
common share, in the prior year period.
Our capital expenditures for the fiscal year
ended June 30, 2020 were $17.6 million, representing lower
maintenance capital spend of $11.8 million, a 49.5% reduction
compared to the prior year period. These 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 put
in place due to COVID-19.
As of June 30, 2020, the outstanding debt
on our revolver was $122.0 million, an increase of $30.0 million
since June 30, 2019. However, our cash increased by $53.0
million to $60.0 million as of June 30, 2020, compared to $7.0
million as of June 30, 2019. We continue to focus on prudent
working capital management, and the liquidity improvements
resulting from these actions will provide additional financial and
operational flexibility during and after COVID-19.
Subsequent to the end of the fiscal fourth
quarter ended June 30, 2020, in July 2020, we amended our existing
senior secured revolving credit facility. As of September 1,
2020, the Company’s total debt was $66.8 million and the Company
had cash on hand of $8.2 million and $31.8 million of availability
on its 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 $0.7 million in the fourth
quarter of fiscal 2020, as compared to $3.9 million in the prior
year period, and Adjusted EBITDA Margin was 0.9% in the fourth
quarter of fiscal 2020, as compared to 2.8% 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 $501.3 million in fiscal 2020 and has
approximately 1,210 employees nationwide. 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, September 10, 2020, 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, 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/ugsarwnu 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 5273545.
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 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
fourth quarter and fiscal year ended June 30, 2020 are not
necessarily indicative of the results that may be expected for any
future period.
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, |
|
|
2020 |
|
2019 |
|
2018 |
|
2020 |
|
2019 |
Net sales |
|
$ |
501,320 |
|
|
$ |
595,942 |
|
|
$ |
606,544 |
|
|
$ |
81,083 |
|
|
$ |
142,050 |
|
Cost of goods sold |
|
363,198 |
|
|
416,840 |
|
|
399,155 |
|
|
65,536 |
|
|
104,327 |
|
Gross profit |
|
138,122 |
|
|
179,102 |
|
|
207,389 |
|
|
15,547 |
|
|
37,723 |
|
Selling expenses |
|
121,762 |
|
|
139,647 |
|
|
153,391 |
|
|
21,274 |
|
|
28,324 |
|
General and administrative
expenses |
|
42,569 |
|
|
48,959 |
|
|
49,429 |
|
|
9,730 |
|
|
16,896 |
|
Restructuring and other
transition expenses |
|
— |
|
|
4,733 |
|
|
662 |
|
|
— |
|
|
33 |
|
Net (gains) losses from sales
of assets |
|
(25,237 |
) |
|
465 |
|
|
(966 |
) |
|
(1,862 |
) |
|
(506 |
) |
Impairment of goodwill and
intangible assets |
|
42,030 |
|
|
— |
|
|
3,820 |
|
|
— |
|
|
— |
|
Operating expenses |
|
181,124 |
|
|
193,804 |
|
|
206,336 |
|
|
29,142 |
|
|
44,747 |
|
(Loss) income from
operations |
|
(43,002 |
) |
|
(14,702 |
) |
|
1,053 |
|
|
(13,595 |
) |
|
(7,024 |
) |
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
Dividend income |
|
— |
|
|
— |
|
|
12 |
|
|
— |
|
|
— |
|
Interest income |
|
— |
|
|
— |
|
|
2 |
|
|
— |
|
|
— |
|
Interest expense |
|
(10,483 |
) |
|
(12,000 |
) |
|
(9,757 |
) |
|
(2,598 |
) |
|
(2,835 |
) |
Postretirement benefits curtailment gains and pension settlement
(charge) |
|
5,760 |
|
|
(10,948 |
) |
|
— |
|
|
— |
|
|
— |
|
Other, net |
|
10,443 |
|
|
4,166 |
|
|
7,722 |
|
|
7,502 |
|
|
2,061 |
|
Total other income (expense) |
|
5,720 |
|
|
(18,782 |
) |
|
(2,021 |
) |
|
4,904 |
|
|
(774 |
) |
Loss before taxes |
|
(37,282 |
) |
|
(33,484 |
) |
|
(968 |
) |
|
(8,691 |
) |
|
(7,798 |
) |
Income tax (benefit)
expense |
|
(195 |
) |
|
40,111 |
|
|
17,312 |
|
|
1,027 |
|
|
962 |
|
Net loss |
|
$ |
(37,087 |
) |
|
$ |
(73,595 |
) |
|
$ |
(18,280 |
) |
|
$ |
(9,718 |
) |
|
$ |
(8,760 |
) |
Less: Cumulative preferred
dividends, undeclared and unpaid |
|
554 |
|
|
535 |
|
|
389 |
|
|
140 |
|
|
135 |
|
Net loss available to common
stockholders |
|
$ |
(37,641 |
) |
|
$ |
(74,130 |
) |
|
$ |
(18,669 |
) |
|
$ |
(9,858 |
) |
|
$ |
(8,895 |
) |
Net loss available to common
stockholders per common share—basic |
|
$ |
(2.19 |
) |
|
$ |
(4.36 |
) |
|
$ |
(1.11 |
) |
|
$ |
(0.57 |
) |
|
$ |
(0.52 |
) |
Net loss available to common
stockholders per common share—diluted |
|
$ |
(2.19 |
) |
|
$ |
(4.36 |
) |
|
$ |
(1.11 |
) |
|
$ |
(0.57 |
) |
|
$ |
(0.52 |
) |
Weighted average common shares
outstanding—basic |
|
17,205,849 |
|
|
16,996,354 |
|
|
16,815,020 |
|
|
17,339,939 |
|
|
17,038,829 |
|
Weighted average common shares
outstanding—diluted |
|
17,205,849 |
|
|
16,996,354 |
|
|
16,815,020 |
|
|
17,339,939 |
|
|
17,038,829 |
|
FARMER
BROS. CO.CONSOLIDATED BALANCE SHEETS
(UNAUDITED)(In thousands, except share and per
share data)
|
June 30, |
|
2020 |
|
2019 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
60,013 |
|
|
$ |
6,983 |
|
Accounts receivable, net of allowance for doubtful accounts of
$1,796 and $1,324, respectively |
40,882 |
|
|
55,155 |
|
Inventories |
67,408 |
|
|
87,910 |
|
Income tax receivable |
831 |
|
|
1,191 |
|
Short-term derivative assets |
165 |
|
|
1,865 |
|
Prepaid expenses |
7,414 |
|
|
6,804 |
|
Total current assets |
176,713 |
|
|
159,908 |
|
Property, plant and equipment,
net |
165,633 |
|
|
189,458 |
|
Goodwill |
— |
|
|
36,224 |
|
Intangible assets, net |
20,662 |
|
|
28,878 |
|
Other assets |
8,564 |
|
|
9,468 |
|
Long-term derivative assets |
10 |
|
|
674 |
|
Right-of-use operating lease
assets |
21,117 |
|
|
— |
|
Total assets |
$ |
392,699 |
|
|
$ |
424,610 |
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
36,987 |
|
|
72,771 |
|
Accrued payroll expenses |
9,394 |
|
|
14,518 |
|
Operating leases liabilities - current |
5,854 |
|
|
— |
|
Short-term derivative liabilities |
5,255 |
|
|
1,474 |
|
Other current liabilities |
6,802 |
|
|
7,309 |
|
Total current liabilities |
64,292 |
|
|
96,072 |
|
Long-term borrowings under
revolving credit facility |
122,000 |
|
|
92,000 |
|
Accrued pension liabilities |
58,772 |
|
|
47,216 |
|
Accrued postretirement
benefits |
9,993 |
|
|
23,024 |
|
Accrued workers’ compensation
liabilities |
4,569 |
|
|
4,747 |
|
Operating lease liabilities -
noncurrent |
15,628 |
|
|
— |
|
Other long-term liabilities |
5,532 |
|
|
4,057 |
|
Total liabilities |
$ |
280,786 |
|
|
$ |
267,116 |
|
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, 2020 and 2019, respectively; liquidation preference of
$16,178 and $15,624 as of June 30, 2020 and 2019, respectively |
15 |
|
|
15 |
|
Common stock, $1.00 par value, 25,000,000 shares authorized;
17,347,774 and 17,042,132 shares issued and outstanding at
June 30, 2020 and 2019, respectively |
17,348 |
|
|
17,042 |
|
Additional paid-in capital |
62,043 |
|
|
57,912 |
|
Retained earnings |
108,536 |
|
|
146,177 |
|
Accumulated other comprehensive loss |
(76,029 |
) |
|
(63,652 |
) |
Total stockholders’ equity |
$ |
111,913 |
|
|
$ |
157,494 |
|
Total liabilities and stockholders’ equity |
$ |
392,699 |
|
|
$ |
424,610 |
|
FARMER BROS. CO. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) |
(In thousands) |
|
Year Ended June 30, |
|
2020 |
|
2019 |
|
2018 |
Cash flows from operating
activities: |
|
|
|
|
|
Net loss |
$ |
(37,087 |
) |
|
$ |
(73,595 |
) |
|
$ |
(18,280 |
) |
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities: |
Depreciation and amortization |
29,896 |
|
|
31,065 |
|
|
30,464 |
|
Provision for doubtful accounts |
1,379 |
|
|
1,363 |
|
|
137 |
|
Impairment of goodwill and intangible assets |
42,030 |
|
|
— |
|
|
3,820 |
|
Change in estimated fair value of contingent earnout
consideration |
— |
|
|
— |
|
|
(500 |
) |
Restructuring and other transition expenses, net of payments |
— |
|
|
1,172 |
|
|
(1,185 |
) |
Deferred income taxes |
(300 |
) |
|
41,654 |
|
|
17,155 |
|
Postretirement benefits and pension settlement cost |
(5,760 |
) |
|
10,948 |
|
|
— |
|
Net (gains) losses from sales of assets |
(25,237 |
) |
|
466 |
|
|
(995 |
) |
ESOP and share-based compensation expense |
4,309 |
|
|
3,674 |
|
|
3,822 |
|
Net losses on derivative instruments and investments |
9,818 |
|
|
9,196 |
|
|
1,982 |
|
Change in
operating assets and liabilities: |
Accounts receivable |
12,893 |
|
|
2,757 |
|
|
(4,628 |
) |
Inventories |
19,530 |
|
|
16,192 |
|
|
(15,513 |
) |
Derivative (liabilities) assets, net. |
(1,082 |
) |
|
(18,901 |
) |
|
(7,782 |
) |
Other assets |
990 |
|
|
114 |
|
|
1,073 |
|
Accounts payable |
(35,784 |
) |
|
16,546 |
|
|
3,864 |
|
Accrued expenses and other |
(14,140 |
) |
|
(7,201 |
) |
|
(4,579 |
) |
Net cash provided by operating activities |
$ |
1,455 |
|
|
$ |
35,450 |
|
|
$ |
8,855 |
|
Cash flows from
investing activities: |
Acquisitions of businesses, net of cash acquired |
$ |
— |
|
|
$ |
— |
|
|
$ |
(39,608 |
) |
Purchases of property, plant and equipment |
(17,560 |
) |
|
(34,760 |
) |
|
(35,443 |
) |
Purchases of assets for construction of New Facility |
— |
|
|
— |
|
|
(1,577 |
) |
Proceeds from sales of property, plant and equipment. |
39,477 |
|
|
2,399 |
|
|
1,988 |
|
Net cash provided (used) in investing activities |
$ |
21,917 |
|
|
$ |
(32,361 |
) |
|
$ |
(74,640 |
) |
Cash flows from
financing activities: |
Proceeds from revolving credit facility |
$ |
90,000 |
|
|
$ |
50,642 |
|
|
$ |
85,315 |
|
Repayments on revolving credit facility |
(60,000 |
) |
|
(48,429 |
) |
|
(23,149 |
) |
Payments of finance lease obligations |
(53 |
) |
|
(215 |
) |
|
(947 |
) |
Payment of financing costs |
(418 |
) |
|
(1,049 |
) |
|
(579 |
) |
Proceeds from stock option exercises |
129 |
|
|
507 |
|
|
1,342 |
|
Net cash provided by financing
activities |
$ |
29,658 |
|
|
$ |
1,456 |
|
|
$ |
61,982 |
|
Net increase (decrease) in
cash and cash equivalents |
$ |
53,030 |
|
|
$ |
4,545 |
|
|
$ |
(3,803 |
) |
Cash and cash equivalents at
beginning of year |
6,983 |
|
|
2,438 |
|
|
6,241 |
|
Cash and cash equivalents at
end of year |
$ |
60,013 |
|
|
$ |
6,983 |
|
|
$ |
2,438 |
|
FARMER BROS. CO. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- (continued) |
(In thousands) |
|
Year Ended June 30, |
|
2020 |
|
2019 |
|
2018 |
Supplemental disclosure of
cash flow information: |
|
|
|
|
|
Cash paid for interest |
$ |
4,426 |
|
|
$ |
5,512 |
|
|
$ |
3,177 |
|
Cash paid for income taxes |
$ |
21 |
|
|
$ |
107 |
|
|
$ |
144 |
|
Supplemental disclosure of
non-cash investing and financing activities: |
|
|
|
|
|
Non-cash additions to property, plant and equipment |
$ |
446 |
|
|
$ |
2,619 |
|
|
$ |
2,814 |
|
Non-cash portion of earnout receivable recognized—Spice Assets
sale |
$ |
— |
|
|
$ |
— |
|
|
$ |
298 |
|
Non-cash portion of earnout payable recognized—West Coast Coffee
acquisition |
$ |
— |
|
|
$ |
400 |
|
|
$ |
— |
|
Non-cash receivable from West Coast Coffee—post-closing final
working capital adjustment |
$ |
— |
|
|
$ |
— |
|
|
$ |
218 |
|
Non-cash Issuance of 401-K shares of Common Stock |
$ |
266 |
|
|
$ |
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 |
|
Cumulative preferred dividends, undeclared and unpaid |
$ |
554 |
|
|
$ |
535 |
|
|
$ |
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;
- 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.
Restructuring and other transition expenses are
expenses that are directly attributable to (i) 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)
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.
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 the 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)
income to EBITDA (unaudited):
|
|
Year Ended June 30, |
|
Three Months EndedJune 30, |
(In
thousands) |
|
2020 |
|
2019 |
|
2018 |
|
2020 |
|
2019 |
Net loss, as reported |
|
$ |
(37,087 |
) |
|
$ |
(73,595 |
) |
|
$ |
(18,280 |
) |
|
$ |
(9,718 |
) |
|
$ |
(8,760 |
) |
Income tax (benefit)
expense |
|
(195 |
) |
|
40,111 |
|
|
17,312 |
|
|
1,027 |
|
|
962 |
|
Interest expense(1) |
|
5,590 |
|
|
6,036 |
|
|
3,177 |
|
|
1,523 |
|
|
1,471 |
|
Depreciation and amortization
expense |
|
29,896 |
|
|
31,065 |
|
|
30,464 |
|
|
7,352 |
|
|
7,835 |
|
EBITDA |
|
$ |
(1,796 |
) |
|
$ |
3,617 |
|
|
$ |
32,673 |
|
|
$ |
184 |
|
|
$ |
1,508 |
|
EBITDA Margin |
|
(0.4 |
)% |
|
0.6 |
% |
|
5.4 |
% |
|
0.2 |
% |
|
1.1 |
% |
____________
(1) Excludes interest expense related to
pension plans and postretirement benefits.
Set forth below is a reconciliation of reported net (loss)
income to Adjusted EBITDA (unaudited):
|
|
Year Ended June 30, |
|
Three Months EndedJune 30, |
(In
thousands) |
|
2020 |
|
2019 |
|
2018 |
|
2020 |
|
2019 |
Net loss, as reported |
|
$ |
(37,087 |
) |
|
$ |
(73,595 |
) |
|
$ |
(18,280 |
) |
|
$ |
(9,718 |
) |
|
$ |
(8,760 |
) |
Income tax (benefit)
expense |
|
(195 |
) |
|
40,111 |
|
|
17,312 |
|
|
1,027 |
|
|
962 |
|
Interest expense(1) |
|
5,590 |
|
|
6,036 |
|
|
3,177 |
|
|
1,523 |
|
|
1,471 |
|
Income from short-term
investments |
|
— |
|
|
— |
|
|
(19 |
) |
|
— |
|
|
— |
|
Depreciation and amortization
expense |
|
29,896 |
|
|
31,065 |
|
|
30,464 |
|
|
7,352 |
|
|
7,835 |
|
ESOP and share-based
compensation expense |
|
4,329 |
|
|
3,723 |
|
|
3,822 |
|
|
1,132 |
|
|
628 |
|
Restructuring and other
transition expenses(2) |
|
— |
|
|
4,733 |
|
|
662 |
|
|
— |
|
|
33 |
|
Strategic initiatives |
|
523 |
|
|
— |
|
|
— |
|
|
523 |
|
|
— |
|
Net (gains) losses from sales
of assets |
|
(25,237 |
) |
|
465 |
|
|
(966 |
) |
|
(1,863 |
) |
|
(506 |
) |
Impairment of goodwill and
intangible assets |
|
42,030 |
|
|
— |
|
|
3,820 |
|
|
— |
|
|
— |
|
Non-recurring costs associated
with the COVID-19 pandemic |
|
362 |
|
|
— |
|
|
— |
|
|
233 |
|
|
— |
|
Postretirement benefits gains
curtailment and pension settlement charge |
|
(5,760 |
) |
|
10,948 |
|
|
— |
|
|
— |
|
|
— |
|
Proxy contest-related
expenses |
|
463 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and integration
costs |
|
— |
|
|
6,123 |
|
|
7,570 |
|
|
— |
|
|
1 |
|
Severance |
|
3,828 |
|
|
2,273 |
|
|
— |
|
|
504 |
|
|
2,273 |
|
Adjusted EBITDA (3) |
|
$ |
18,742 |
|
|
$ |
31,882 |
|
|
$ |
47,562 |
|
|
$ |
713 |
|
|
$ |
3,937 |
|
Adjusted EBITDA Margin |
|
3.7 |
% |
|
5.3 |
% |
|
7.8 |
% |
|
0.9 |
% |
|
2.8 |
% |
________
(1) Excludes interest expense related to pension
plans and postretirement benefits.
(2) Fiscal year ended June 30, 2019, includes
$3.4 million, including interest, assessed by the WC Pension Trust
representing the Company’s share of the WCTPP unfunded benefits due
to the Company’s partial withdrawal from the WCTPP as a result of
employment actions taken by the Company in 2016 in connection with
the Corporate Relocation Plan, net of payments of $0.8 million.
(3) Adjusted EBITDA for fiscal 2020 includes
$7.2 million 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 13, Employee Benefit Plans, of the Notes to
Consolidated Financial Statements included in our year ended June
30, 2020, Annual Report on Form 10‑K.
Contact: Joele Frank, Wilkinson Brimmer
KatcherLeigh Parrish 212-355-4449
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