Highlights from the letter include:
- Under the direction of the current
Farmer Bros. Board of Directors as well as Michael H. Keown, President and CEO, the Company continues to successfully execute a turnaround plan that is improving the Company's operational and financial results, and creating substantial value for all stockholders.
- Meanwhile, the
Waite Groupoverlooks the substantial benefits of Farmer Bros.' corporate relocation plan and other operating initiatives that represent the Farmer Bros. current Board's and management team's focus on continuous improvement – despite the fact that Jonathan Michael Waite, a member of the Waite Groupand son of Carol Farmer Waite, was a proponent of the relocation plan – and fails to acknowledge the thorough review and analysis undertaken by the Board and management prior to announcing the relocation. The Waite Groupmischaracterizes Farmer Bros.' capital allocation decisions, which have been organized under the Company's current Board and management to maximize efficiency and drive stockholder value.
- Contrary to misleading claims by the
Waite Group, the three most recently added independent directors were identified and selected through a rigorous process under the direction of the Nominating Committee and initially introduced to Farmer Bros., and strongly supported by, an independent third-party search firm that was recommended by Jeanne Farmer Grossman.
- Your Board of Directors strongly believes the
Waite Grouphas nominated a slate of unqualified and inexperienced director candidates and failed to articulate any plan for Farmer Bros.' future, let alone one that would create stockholder value, to warrant Board representation in place of the Company's three highly qualified and proven director nominees.
- The future of
Farmer Bros. and your investment are at risk because the election of the Waite Group'sthree nominees, combined with Farmer family representatives already on the Board, would effectively lead to a change of control of the Board and Farmer Bros.
The full text of the letter being mailed to stockholders follows:
VOTE THE ENCLOSED GOLD PROXY CARD TODAY
"FOR" ALL THREE OF FARMER BROS.' HIGHLY QUALIFIED DIRECTOR NOMINEES
Under the leadership and direction of the current Board of Directors (the "Board") of
Stockholders are faced with a critical choice: reelect your Board's three highly qualified nominees, each of whom brings a vast amount of industry expertise, a deep understanding of the business and has helped oversee the Company's successful turnaround strategy – or the
The answer is clear: protect the value of your
LET'S SET THE RECORD STRAIGHT
THE WAITE GROUP IGNORES THE FACT THAT FARMER BROS. CONTINUES
TO EXECUTE A SUCCESSFUL TURNAROUND STRATEGY THAT HAS CREATED
SUBSTANTIAL VALUE FOR ALL STOCKHOLDERS
Your Board and management team are continuing to execute a successful turnaround strategy that is improving the Company's operational and financial results. Further, the
- Increased green coffee pounds sold and processed by over 40%, or achieved compound annual growth of approximately 9%;
- Expanded gross margin by 493 basis points while the industry peer group's gross margin declined by 380 basis points; and
Farmer Bros.' GAAP net loss of $27 millionin fiscal 2012 to GAAP net income of $90 millionin fiscal 2016.i
In contrast, during fiscal 2005 to fiscal 2009 when
THE WAITE GROUP FAILS TO ACKNOWLEDGE THE THOROUGH ANALYSIS UNDERTAKEN OR THE SUBSTANTIAL BENEFITS OF FARMER BROS.' CORPORATE RELOCATION
Contrary to claims made by the
The evaluation began in earnest in
As the Company has previously stated, the corporate relocation is expected to produce annual cost savings of approximately
Notably, Jonathan Michael Waite, the son of Carol Farmer Waite and a member of the Waite Group, has been an ongoing proponent of the relocation, despite the fact that he is part of a group claiming the decision was "hastily made" and not "properly analyzed." Mr. Waite served as a member of the employee team that planned and analyzed the move, was part of a relocation team that presented to the Board as part of the Board's review and analysis, and participated in field visits to help select the new facility site.
THE WAITE GROUP MISLEADS STOCKHOLDERS BY MISCHARACTERIZING
Since fiscal 2012, under the direction of the current Board and management team, the Company's capital allocation policy seeks to maximize efficiency and drive stockholder value. In trying to bolster its campaign, the
THE WAITE GROUP HAS…
THE REALITY IS…
Questioned the Company's decision to transition to Third-Party Logistics ("3PL") following investments in mechanical upgrades and a rebranding of Farmer Bros.' fleet operation.
The transition to 3PL followed careful analysis and is expected to produce annualized cost savings of approximately $2.1 million of the estimated $18-$20 million in total cost savings. Under the terms of the agreement with the 3PL provider, Farmer Bros. is compensated for the use of the fleet as the 3PL provider continues to use the rebranded trucks in transporting Farmer Bros. goods. Additionally, a "rebranding" of Farmer Bros.' fleet was simply placement of new logo panels on trucks aligning with a broader logo refresh to eliminate an outdated slogan and industry award reference, while mechanical upgrades were to improve fuel efficiency.
Overstated an immaterial investment in the Company's e-commerce capabilities.
Like any responsible consumer-branded company operating in today's competitive business environment, Farmer Bros. has made certain strategic investments in its e-commerce business to meet the demands of its customers and consumers and help strengthen the Farmer Bros. brand recognition. The Company's e-commerce initiative consisted of upgrading Farmer Bros.' ERP system and optimizing search engine capability to provide a platform allowing customers to order products online. However, the investment in e-commerce was a relatively immaterial amount, less than $85,000.
Mischaracterized Farmer Bros. energy and sustainability initiatives at the Torrance, CA plant.
To avoid a penalty from its utility company, the Company undertook an initiative to flatten energy demand spikes at its Torrance facility, improving its average power factor (power system's capacity available for productive work) from approximately 75% to above the utility company's required 80%.
Questioned necessary investments in production-line equipment in Torrance and Houston.
To bring its air quality into compliance with California State standards, avoid costly fines and risk potential reduced production capacity from the shut-down of its roasters, Farmer Bros. invested approximately $1.2 million commencing in 2013 to upgrade its roasters and also purchased additional roasters that were not installed in Torrance but can be utilized in other facilities. Investments in Houston of approximately $1.7 million were made to upgrade older, inefficient production lines, to balance volume, and to add a roaster to meet increased capacity requirements. Useable equipment from Torrance was relocated to Houston and the new Northlake, Texas facility to reduce capital expenditures in both facilities. Investments in equipment for the Houston facility, and improvements in efficiency, quality, and safety that accompanied this equipment, are a significant contributor to gross margin improvements that followed the exit of production from Torrance.
The Company's current Board offers superior industry and operational expertise that is driving the Company's turnaround plan, effective independent leadership with
Contrary to false claims by the
In 2011, prior to Mr. Keown joining the Company, Mr. Clark was introduced to
Similarly, Messrs. Marcy and Mottern were brought to the attention of the Nominating Committee and the Board by
Notably, during 2013, when Messrs. Marcy and Mottern were elected to the Board of Directors, the Nominating Committee included members who were appointed by the previous Farmer family regime or were former long-term employees of
WE BELIEVE THAT ELECTING THE WAITE GROUP'S NOMINEES WILL GIVE EFFECTIVE CONTROL OF THE BOARD AND COMPANY TO SELECT MEMBERS OF THE FARMER FAMILY WHOSE INTERESTS ARE NOT ALIGNED WITH ALL STOCKHOLDERS
- The Farmer family is already represented on the board by
Jeanne Farmer Grossman, the sister of Carol Farmer Waiteand the late Roy Edward Farmer, and the daughter of the late Roy F. Farmer.
- Mr. Berger, Chairman Emeritus, has served on the Board since 1980, when he was appointed by the controlling members of the Farmer family, and was an employee of
Farmer Bros. for more than 47 years. Hamideh Assadi, a former manager in the Company's tax department, was appointed to the Board in 2011 upon the recommendation of Richard F. Farmer, Ph.D.
Ms. Assadi has informed the Board that she would resign if Mr. Samore is elected based on her prior negative experiences with Mr. Samore. Should the
THE FUTURE OF YOUR INVESTMENT DEPENDS ON YOUR VOTE
The future of
It is clear that the
In contrast, we are confident that our three nominees –
We encourage you to vote today by signing and dating the enclosed GOLD proxy card and returning it in the postage-paid envelope provided, or by voting over the Internet or by telephone.
On behalf of your Board of Directors, we thank you for your continued support.
Chairman of the Board
Your Vote Is Important, No Matter How Many or How Few Shares You Own
If you have any questions or require any assistance with respect to voting your shares, please contact the Company's proxy solicitor at the contact listed below:
M O R R O W
470 West Avenue
Founded in 1912,
Certain statements in this communication constitute "forward-looking statements." When used in this communication, the words "will," "expects," "anticipates," "estimates" and "believes," and similar expressions and statements that are made in the future tense or refer to future events or developments, are intended to identify such forward-looking statements. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding the expected cost savings relating to the Company's corporate relocation. 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; actual results may differ materially due in part to the risk factors set forth in our most recent annual, periodic and current reports filed with the
Undue reliance should not be placed on the forward-looking statements in this communication, which are based on information available to the Company on the date hereof, and the Company assumes no obligation to update such statements.
Important Additional Information and Where to Find It
THE COMPANY URGES ITS INVESTORS AND STOCKHOLDERS TO READ CAREFULLY AND IN THEIR ENTIRETY THE DEFINITIVE PROXY STATEMENT (INCLUDING ANY SUPPLEMENTS OR AMENDMENTS), THE ACCOMPANYING PROXY CARD AND ANY OTHER DOCUMENTS THAT THE COMPANY MAY FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
Copies of the definitive proxy statement (including any supplements or amendments), the accompanying proxy card, and any other documents filed by the Company with the
i The 2016 fiscal year GAAP net income included non-cash income tax benefit of
ii Stock price appreciation, stockholder value and total stockholder return from
iii Stock price decline from
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