Farmer Bros. Co. Reports Fourth Quarter and Fiscal 2020 Financial Results
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.)
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
Three Months Ended |
Fiscal Year Ended |
|||||||||||||||
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
Gross profit in the fourth quarter of fiscal 2020 was
As previously announced, we successfully implemented several cost saving initiatives with targeted expense savings of approximately
Operating expenses in the fourth quarter of fiscal 2020 decreased
Interest expense in the fourth quarter of fiscal 2020 decreased
Other, net in the fourth quarter of fiscal 2020 increased by
Income tax expense was
As a result of the foregoing factors, net loss was
Our capital expenditures for the fiscal year ended
As of
Subsequent to the end of the fiscal fourth quarter ended
Non-GAAP Financial Measures:
EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP (
Adjusted EBITDA was
About
Founded in 1912,
Headquartered in
Investor Conference Call
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
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
FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except share and per share data)
Year Ended |
Three Months Ended |
|||||||||||||||||||
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)
2020 | 2019 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 60,013 | $ | 6,983 | |||
Accounts receivable, net of allowance for doubtful accounts of |
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 | |||||
— | 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, |
15 | 15 | |||||
Common stock, |
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 |
|||||||||||
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 |
|||||||||||
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
“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
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 |
Three Months Ended |
|||||||||||||||||||
(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 |
Three Months Ended |
|||||||||||||||||||
(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
(3) Adjusted EBITDA for fiscal 2020 includes
Contact:
212-355-4449
Source: Farmer Bros. Co.