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Farmer Bros. Co.
20333 South Normandie Avenue
Torrance, California 90502
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held November 26, 2001
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Farmers Bros. Co. will be held at the main office of the Company located at
20333 South Normandie Ave., Torrance, California, on Monday, November 26,
2001 at 10:00 o'clock a.m., Pacific Standard Time, for considering and acting
upon the following:
1. The election of a board of six directors to serve until the next
Annual Meeting or until their successors are duly elected and qualify;
2. Approval of the appointment of Ernst & Young, LLP as the independent
public accountants of Farmer Bros. Co. for the fiscal year ending June 30,
2002;
3. Approval of the amendment and restatement of the Company's
Articles of Incorporation; and
4. Any and all other matters that may properly come before the
meeting or any adjournment thereof.
Only holders of common stock of record at the close of business on
October 10, 2001 will be entitled to notice of and to vote at the meeting and
any adjournments thereof.
MANAGEMENT HOPES YOU WILL ATTEND THE MEETING, BUT IF YOU CANNOT BE
THERE, PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.
John E. Simmons,
Secretary and Treasurer
Torrance, California
November , 2001
Farmer Bros. Co.
20333 South Normandie Avenue
Torrance, California 90502
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation
by the Board of Directors (the "Board") of proxies from holders of common
stock of Farmer Bros. Co., a California corporation (hereinafter referred to
as the "Company") for the Annual Meeting of Shareholders of the Company to be
held at 20333 South Normandie Avenue, Torrance, California on Monday,
November 26, 2001 at 10:00 o'clock a.m., Pacific Standard Time, and for any
adjournment thereof.
The cost of soliciting proxies by the Board will be borne by the
Company. Such solicitation will be made primarily by mail. In addition,
certain directors, officers or regular employees of the Company may solicit
proxies by telephone or other device or in person.
The mailing of proxy materials will commence on or about November 2,
2001. The Company will request known nominees to forward proxy materials to
the beneficial owners of the Company's shares.
On the October 3, 2001 record date, the Company had outstanding
1,926,414 shares of common stock. The Company has no other class of
securities outstanding. Only holders of shares of common stock of record at
the close of business on that date will be entitled to notice of and to vote
at the meeting or any adjournment thereof, and each such holder present or
represented at the meeting will be entitled to one (1) vote for each share of
common stock held. In electing directors a shareholder may not cumulate his
or her vote.
Shares of common stock represented by proxies received will be voted:
(1) unless authority is withheld, for the election of the nominees listed on
page 4 as directors; (2) unless otherwise specified, for approval of the
appointment of Ernst & Young LLP as the Company's independent public
accountants for the ensuing year; and (3) unless otherwise specified, for
approval of the amendment and restatement of the Company's Articles of
Incorporation. In the event that one or more of said nominees should become
unavailable to serve as a director for any reason, the proxy holders will
vote the shares for such other person, if any, as shall be designated by the
Board of Directors.
Any proxy delivered in the form enclosed may be revoked by the person
executing it at any time prior to the voting thereof.
OWNERSHIP OF COMMON STOCK
Principal Shareholders
The following are all persons known to management who own beneficially
more than 5% of the Company's common stock (as of October 15, 2001):
Amount and Nature Percent
Name and Address of of Beneficial of
Beneficial Owner Ownership (1) Class
Roy F. Farmer 835,035 shares (2) 43.35%
c/o Farmer Bros. Co.
20333 South Normandie Ave.
Torrance, California 90502
Catherine E. Crowe 203,430 shares (3) 10.56%
c/o Farmer Bros. Co.
20333 South Normandie Ave.
Torrance, California 90502
Franklin Mutual Advisers,LLC 187,488 shares (4) 9.73%
51 John F. Kennedy Parkway
Short Hills, NJ 07078
Attn: Bradley Takahashi
(1) Sole voting and investment power unless indicated otherwise in following
footnotes.
(2) Includes 171,041 shares owned outright by Mr. Farmer and his wife as
trustees of a revocable living trust, 662,121 shares held by various trusts
of which Mr. Farmer is sole trustee, for the benefit of family members, 1,849
shares owned by his wife in which Mr. Farmer disclaims any beneficial
interest and 24 shares beneficially owned by Mr. Farmer through the Company's
Employee Stock Ownership Plan ("ESOP"), rounded to the nearest whole share.
(3) Excludes 9,900 shares held by trusts for Mrs. Crowe's benefit. Mr.
Farmer is sole trustee of said trusts and said shares are included in his
reported holdings.
(4) According to a Schedule 13G filed with the Securities and Exchange
Commission dated November 21, 2000 by Franklin Mutual Advisers, LLC
("Franklin"), Franklin on that date beneficially owned 187,488 shares
(9.73%). Franklin is reported to have sole voting and investment power over
these shares pursuant to certain Investment Advisory contracts with one or
more record shareholders, which advisory clients are the record owners of the
187,488 shares.
Management Shareholdings
The following sets forth the beneficial ownership of the common stock
of the Company by each director and nominee, each executive officer named in
the Summary Compensation Table, and all directors and executive officers as a
group:
Number of Shares and Nature
Name of Beneficial Ownership (1) Percent of Class
Roy F. Farmer (See "Principal Shareholders," supra)
Guenter W. Berger 524(2) *
Lewis A. Coffman 15(3) *
Roy E. Farmer 38,235(4) 1.98%
John M. Anglin None -
Kenneth R. Carson 274(5) *
John E. Simmons 386(6) *
John H. Merrell None -
All directors and exec 874,46945.39%
officers as a group (8 persons)
(1) Sole voting and investment power unless indicated otherwise in following
footnotes.
(2) Held in trust with voting and investment power shared by Mr. Berger and
his wife, includes 24 shares beneficially owned by Mr. Berger through the
Company's ESOP, rounded to the nearest whole share.
(3) Voting and investment power shared with spouse.
(4) Includes 4,000 shares owned outright by Mr. Farmer, 34,211 shares held
by various trusts of which Mr. Farmer is sole trustee and 24 shares
beneficially owned by Mr. Farmer through the Company's ESOP, rounded to the
nearest whole share. Excludes 21,218 shares held in a trust of which Roy F.
Farmer is sole trustee (reported under Roy F. Farmer's name under "Principal
Shareholders," supra) and of which Roy E. Farmer is the beneficiary.
(5) Includes 24 shares beneficially owned by Mr. Carson through the
Company's ESOP, rounded to the nearest whole share.
(6) Voting and investment power shared with spouse, includes 24 shares
beneficially owned by Mr. Simmons through the Company's ESOP, rounded to the
nearest whole share.
* Less than 1%.
PROPOSAL ONE:
ELECTION OF DIRECTORS
Six directors are to be elected at the meeting, each to serve for the
ensuing year and until his successor is elected and qualifies. All of the
nominees are presently directors of the Company. All of the present
directors except Mr. Merrell were elected to their current term by the
shareholders. Mr. Merrell was appointed by the Board of Directors to fill a
vacancy. All of the nominees have consented to be named and have indicated
their intent to serve if elected. None of the nominees is a director of any
other publicly-held company. The names of the nominees for election as
directors are set forth below, and the following information is furnished
with respect to them:
Name Age Served as a Director Principal Occupation
Continuously Since for the Last Five Years
Roy F. Farmer (1) 85 1951 Chairman and Chief Executive Officer
Roy E. Farmer 49 1993 President and Chief Operating Officer
Guenter W. Berger 64 1980 Vice President - Production
Lewis A. Coffman 82 1983 Retired (formerly Vice President - Sales)
John M. Anglin(2) 54 1985 Partner in Law Firm of Walker, Wright, Tyler
& Ward, LLP, Los Angeles, California
John H. Merrell 57 2001 Partner in Accounting Firm of Hutchinson
and Bloodgood LLP, Glendale, California
(1) Roy F. Farmer is the father of Roy E. Farmer.
(2) Walker, Wright, Tyler & Ward, LLP provides legal services to the
Company.
Recommendation:
Your Board of Directors recommends a vote "FOR" approval of the
election of all nominees named above.
PROPOSAL TWO:
APPROVAL OF PUBLIC ACCOUNTANTS
Subject to the approval of the shareholders, the firm of Ernst & Young
LLP has been appointed by the Board as the Company's independent public
accountants for the fiscal year ending June 30, 2002, subject to the Board's
right to change firms should it deem such a change to be in the best
interests of the Company. Ernst & Young LLP was retained in 1997 as the
Company's independent public accountants. It has no direct financial
interest or any material indirect financial interest in the Company or its
subsidiaries. During the past three years, it has had no connection with the
Company or its subsidiaries in the capacity of promoter, underwriter, voting
trustee, director, officer or employee.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting to answer appropriate questions and to make a statement if he
or she desires to do so.
Recommendation:
Your Board of Directors recommends a vote "FOR" approval of the
appointment of Ernst & Young LLP.
PROPOSAL THREE:
AMENDMENT AND RESTATEMENT OF
ARTICLES OF INCORPORATION
It is proposed that the Company's Articles of Incorporation, now
consisting of long-form Articles of Incorporation from 1976 and several
amendments, be consolidated into a new form of Amended and Restated Articles
of Incorporation to facilitate handling and compliance with governmental
filing requirements. No substantive changes are entailed. A copy of the
proposed Amended and Restated Articles of Incorporation is attached as
Appendix 1.
Recommendation:
Your Board of Directors recommends a vote "FOR" approval of the
amendment and restatement of the Company's Articles of Incorporation.
OTHER MATTERS
Voting Requirements
Under the California General Corporation Law and the Company's Bylaws,
the nominees receiving the highest number of votes will be elected as
directors of the Company. The approval of the independent public accountants
requires the affirmative vote of a majority of those shares represented at
the meeting in person or by proxy. The approval of the amendment and
restatement of the Company's Articles of Incorporation requires the
affirmative vote of a majority of the outstanding shares entitled to vote. A
quorum consisting of a majority of the outstanding shares of common stock
must be present at the meeting in person or by proxy to transact business.
Votes will be counted by those persons appointed to act as inspectors of the
election. Abstentions and broker non-votes will not be counted as voted
either "for" or "against" any matter but will be counted in determining
whether a quorum exists.
Director Meetings
The Board met four times during fiscal 2001. Roy F. Farmer attended
two of the four meetings. No director receives fees or expense
reimbursements for his or her attendance at the meetings, except Mr. Anglin
who was paid an hourly fee of $285 for each Board and committee meeting
attended. Effective July 1, 2001 each director who is not a Company employee
will receive an annual retainer fee of $10,000 and the additional sum of
$1,000 for each board meeting and committee meeting (if not held in
conjunction with a board meeting). A director also will receive
reimbursement of travel expenses from outside the greater Los Angeles area to
attend a meeting.
Compensation Committee Report
The Compensation Committee, comprised of Messrs. Anglin, Coffman and
Merrell, met once in fiscal 2001. The Compensation Committee makes all
determinations with respect to executive compensation and administers the
Company's Incentive Compensation Plan.
! Compensation Philosophy and Objectives
The Committee believes that once base salaries of executive officers
are established at competitive levels, increases should generally reflect
cost of living changes and that individual performance should be rewarded by
bonuses or other incentive compensation awards. The Committee believes that
most of the officers will be incentivized to a greater degree by such a
program.
! Chief Executive Officer Compensation
In 1999 the Committee obtained a competitive compensation study
prepared by Ernst & Young LLP relating to Roy F. Farmer's compensation. The
study concluded that the total direct compensation paid to CEO's of companies
deemed comparable by Ernst & Young LLP was in the range of $669,700 to
$1,444,000. The term "total direct compensation", as used in the Ernst &
Young LLP study, does not include retirement benefits (including pension
plans, 401(k) plans, deferred compensation plans and supplemental retirement
plans or split-dollar life insurance programs) typically provided to CEO's of
successful companies. The Committee determined that the retirement benefits
provided to Mr. Farmer were well below those provided to CEO's of comparable
companies.
The Committee determined that Roy F. Farmer's salary for the fiscal
year ended June 30, 2001, excluding the award under the Company's Incentive
Compensation Plan (see below), be $1,000,000. This represents no change from
fiscal 2000.
! Incentive Compensation Plan
The Company made awards under its Incentive Compensation Plan (the
"Plan") for fiscal 2001 to all executive officers. The Committee felt that
awards were justified in light of the Company's performance in 2001.
Under the provisions of the Plan, a percentage of the Company's annual
pre-tax income is made available for cash or deferred awards. The percentage
varies from three percent of pre-tax income over $14 million to six percent
of pre-tax income of $24 million or more. Amounts available for awards but
not awarded are carried forward. The pool available for awards for fiscal
2001 under the Incentive Compensation Plan was in excess of $14 million. Of
the available pool, the Committee awarded a total of $1 million of which
$450,000 was awarded to Roy F. Farmer, the Company's Chief Executive Officer,
and $550,000 in toto was awarded to the other executive officers.
The award to Roy F. Farmer is payable in five annual installments
commencing upon retirement. The unpaid balance of the award is payable upon
death. Under the terms of the Plan, the unpaid balance of deferred awards is
increased by a growth factor keyed to the Company's average return on
invested funds. Under Plan provisions, the unpaid portion of deferred awards
is forfeited in the event the recipient engages in activities competitive
with the Company or is guilty of malfeasance.
In making the award to Roy F. Farmer, the Committee was motivated
primarily by the earnings achieved by the Company in 2001 and Mr. Farmer's
substantial contribution to those earnings.
John M. Anglin
Lewis A. Coffman
John H. Merrell
Audit Committee Report
Messrs. Anglin, Coffman and Merrell constitute the Audit Committee.
The Audit Committee met four times in fiscal 2001. All of the present
members of the Audit Committee are independent as defined by the applicable
NASDAQ rules. The functions of the Audit Committee are set forth in the
Audit Committee Charter adopted by the Board of Directors, a copy of which is
attached as Appendix 2. For fiscal 2001, the Audit Committee has reviewed
and discussed the Company's audited financial statements with management, has
discussed with the independent accountants the matters required to be
discussed by SAS 61, has received the written disclosure and the letter from
the independent accountants required by Independence Standards Board Standard
No.1 and has discussed with the independent accountants the independent
accountants' independence, and based on the foregoing review and discussions,
approved the inclusion of the audited financial statements in the Company's
report on Form 10-K for the year ended June 30, 2001 for filing with the
Securities and Exchange Commission.
John M. Anglin
Lewis A. Coffman
John H. Merrell
Audit and other Fees Paid to Independent Accountants
The aggregate fees billed by Ernst & Young LLP for professional
services rendered for the audit of the Company's annual financial statements
for the fiscal year ended June 30, 2001 and for the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-Q for that
fiscal year were $128,000.
Financial Information Systems Design and Implementation Fees
During the year ended June 30, 2001, Ernst & Young LLP did not provide the
Company with any services related to financial information systems design and
implementation.
All Other Fees
The Company estimates that the aggregate fees for all other services rendered
by Ernst & Young, LLP during the year ended June 30, 2001 were $287,500.
These fees consist mainly of $77,500 relating to pension plan audits and
consultation on accounting matters, and $210,000 relating to review of the
Company's tax returns and tax consulting. The Audit Committee has considered
the effect of providing these services on the independence of Ernst & Young
LLP.
Summary Compensation Table
The following table sets forth all remuneration paid to the Chief
Executive Officer and the four other most highly compensated officers whose
total compensation during the last fiscal year exceeded $100,000, for
services in all capacities to the Company and its subsidiaries.
Annual
Name and Principal Fiscal Compensation Other Annual All Other
Position Year Salary Bonus(2) Compensation Compensation(1)
ROY F. FARMER 2001 $1,000,000 $450,000 $ $117,348 (3)
Chairman and CEO 2000 $1,000,000 $500,000 $ $104,721 (3)
1999 $1,000,000 $3,500,000 $ $ 88,154 (3)
ROY E. FARMER 2001 $309,000 $300,000 $ $
President and COO 2000 $302,933 $250,000 $ $343
1999 $252,542 $250,000 $ 44,800 (4) $305
GUENTER W. BERGER 2001 $224,149 $100,000 $ $
Vice President, Produ 2000 $221,561 $100,000 $ $520
1999 $215,951 $100,000 $ 4,340 (4) $470
KENNETH R. CARSON 2001 $197,080 $75,000 $ $
Vice President, Sales 2000 $194,805 $75,000 $ $331
1999 $189,503 $75,000 $ 5,908 (4) $306
JOHN E. SIMMONS 2001 $178,849 $75,000 $ $
Treasurer 2000 $175,114 $75,000 $ $166
1999 $169,447 $75,000 $ 5,600 (4) $153
(1) Except as stated in footnote (3) the amount shown represents the dollar
value of the benefit to the executive officer for the years shown under the
Company's executive life insurance plan.
(2) Awarded under the Company's Incentive Compensation Plan. The awards for
fiscal 2001 were based primarily upon the Company's earnings achieved that
year. Roy F. Farmer's award has been deferred until death or retirement.
The awards to the other officers were paid currently (See "Compensation
Committee Report" supra.).
(3) The amount shown for Roy F. Farmer represents P.S. 58 costs of the two
split-dollar life insurance policies purchased pursuant to the prior
employment agreement with Mr. Farmer (see footnote (1), supra) plus the
dollar value of the benefit to him under the Company's executive life
insurance plan.
(4) Compensation element of purchase of shares from the Company at a price
below market on the date of purchase.
DRAFT #5 FOR DISCUSSION PURPOSES ONLY
Retirement Plan
The following table shows estimated annual benefits payable under the
Company's retirement plan upon retirement at age 62 to persons at various
average compensation levels and years of credited service based on a straight
life annuity. The retirement plan is a contributory defined benefit plan
covering all non-union Company employees. The following figures assume that
employee contributions (2% of annual gross earnings) are made throughout the
employees' first five years of service and are not withdrawn. After five
years of participation in the plan, employees make no further contributions.
Benefits under a predecessor plan are included in the following figures.
Maximum annual combined benefits under both plans generally cannot exceed the
lesser of $135,000 or the average of the employee's highest three years of
compensation.
Annualized Pension Compensation
for Highest 60 Consecutive Months Credited Years of Service
in Last Ten Years of Employment 20 25 30 35
$100,000 $30,000 $37,500 $45,000 $52,500
125,000 37,500 46,875 56,250 65,625
150,000 45,000 56,250 67,500 76,750
170,000 51,000 63,750 76,500 89,250
200,000 51,000 63,750 76,500 89,250
250,000 51,000 63,750 76,500 89,250
The earnings of executive officers by which benefits in part are
measured consist of the amounts reportable under "Annual Compensation" in the
Summary Compensation Table less certain allowance items (none in 2001).
Credited years of service through December 31, 2000 were as follows:
Guenter W. Berger - 36 years; Roy E. Farmer - 24 years; Kenneth R. Carson -
35 years; John E. Simmons - 19 years. After 37 years of credited service,
Roy F. Farmer began receiving maximum benefits during fiscal 1988.
The above straight life annuity amounts are not subject to deductions
for Social Security or other offsets. Other payment options, one of which is
integrated with Social Security benefits, are available.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee (the "Committee") is comprised of John M.
Anglin, a director, Lewis A. Coffman, a director and retired executive
officer of the Company, and John H. Merrell, a director.
Comparison of Five-Year Cumulative Total
Return*
Farmer Brothers Co., Russell 2000 Index And
Value
Line Food Processing Index
(Performance Results Through 6/30/01)
1996 1997 1998 1999 2000 2001
Farmer Brothers Co. 100.00 93.58 179.46 154.10 135.48 177.27
Russell 2000 Index 100.00 116.33 135.09 136.26 153.99 150.64
Food Processing 100.00 148.25 200.06 191.81 199.12 242.51
Assumes $100 invested at the close of trading 6/30/96 in Farmer Brothers Co.
common stock, Russell 2000 Index,
and Food Processing.
*Cumulative total return assumes reinvestment of dividends.
ource: Value Line,Inc.
Factual material is obtained from sources believed to be reliable, but the
publisher is not responsible for any errors or omissions contained herein.
CLOSING DATE FOR PROPOSALS BY SHAREHOLDERS
Proposals of shareholders intended to be presented at the Company's
2002 Annual Meeting of Shareholders must be submitted, in writing, to the
Secretary of the Company no later than June 27, 2002.
Compliance with Section 16(a) of the Exchange Act
Based on a review of filings received by it and a representation from
Company officers and directors, the Company believes that all filing
requirements applicable to Company officers and directors were met for fiscal
2001.
Other Business
Management does not know of any other matters to be brought before the
meeting. However, if any other matters properly come before the meeting, the
persons named in the enclosed proxy will vote said proxy in accordance with
their judgment on such matters.
By Order of the Board of Directors
John E. Simmons
Secretary and Treasurer
October , 2001
APPENDIX 1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
FARMER BROS. CO.
The undersigned certify that:
1. They are the president and the secretary, respectively, of Farmer Bros.
Co., a California corporation.
2. The Articles of Incorporation of the corporation are hereby amended and
restated to read as follows:
"FIRST: The name of this corporation is Farmer Bros. Co.
SECOND: The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust
company business or the practice of a profession permitted to be incorporated
by the California Corporations Code.
THIRD: The name and address in the State of California of the corporation's
agent for service of process is:
Corporation Service Company -
The Prentice Hall Corporation System, Inc.
2730 Gateway Oaks Drive, Suite 100
Sacramento, CA 95833
FOURTH: The total number of shares of stock which the Corporation is
authorized to issue shall be Three Million (3,000,000) shares, all of which
shall be designated as common stock.
FIFTH:
Section 1. The liability of the directors of the corporation for monetary
damages shall be eliminated to the fullest extent permissible under
California law.
Section 2. The corporation is authorized to provide indemnification of
agents (as defined in Section 317 of the California Corporations Code)
through bylaw provisions, agreements with the agents, vote of shareholders or
disinterested directors, or otherwise, in excess of the indemnification
otherwise permitted by Section 317 of the California corporations Code,
subject only to the limits set forth in Section 204(a)(11) of the California
Corporations Code with respect to actions for breach of duty to the
corporation or its shareholder. The corporation is further authorized to
provide insurance for agents as set forth in Section 317 of the California
Corporations Code, provided that, in cases where the corporation owns all or
a portion of the shares of the company issuing the insurance policy, the
company and /or the policy mustmeet one of the conditions set forth in
Section 317, as amended.
Section 3. Any repeal or modification of the foregoing provisions of this
Article FIFTH by the shareholders of the corporation shall not adversely
affect any right or protection of an agent of this corporation existing at
the time of such repeal or modification."
3. The foregoing Amended and Restated Articles of Incorporation have been
duly approved by the board of directors.
4. The foregoing Amended and Restated Articles of Incorporation have been
duly approved by the required vote of shareholders in accordance with Section
902, of the California Corporations Code. The total number of outstanding
shares of the corporation is 1,926,414. The number of shares voting in favor
of the amendment equaled or exceeded the vote required. The percentage vote
required was more than 50%.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth herein are true and correct of our own
knowledge.
DATED:
ROY E. FARMER, President
JOHN E. SIMMONS, Secretary
APPENDIX 2
Farmer Bros. Co.
AUDIT COMMITTEE CHARTER
Organization
This charter governs the operations of the audit committee. The committee
shall review and reassess the charter at least annually and obtain the
approval of the board of directors. The committee shall be appointed by the
board of directors and shall comprise at least three directors, each of whom,
by June 2001, are independent of management and the Company. Members of the
committee shall be considered independent if they have no relationship that
may interfere with the exercise of their independence from management and the
Company. All committee members shall be financially literate, or shall
become financially literate within a reasonable period of time after
appointment to the committee, and at least one member shall have accounting
or related financial management expertise.
Statement of Policy
The audit committee shall provide assistance to the board of directors in
fulfilling their oversight responsibility to the shareholders, potential
shareholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the annual independent audit of
the Company's financial statements, and the legal compliance and ethics
programs as established by management and the board. In so doing, it is the
responsibility of the committee to maintain free and open communication
between the committee, independent auditors and management of the Company.
In discharging its oversight role, the committee is empowered to investigate
any matter brought to its attention with full access to all books, records,
facilities, and personnel of the Company and the power to retain outsides
counsel, or other experts for this purpose.
Responsibilities and Processes
The primary responsibility of the audit committee is to oversee the Company's
financial reporting process on behalf of the board and report the results of
their activities to the board. Management is responsible for preparing the
Company's financial statements, and the independent auditors are responsible
for auditing those financial statements. The committee in carrying out its
responsibilities believes its policies and procedures should remain flexible,
in order to best react to changing conditions and circumstances. The
committee should take the appropriate actions to set the overall corporate
"tone" for quality financial reporting, sound business risk practices, and
ethical behavior.
Farmer Bros. Co. Audit Committee Charter (continued)
The following shall be the principal recurring processes of the audit
committee in carrying out its oversight responsibilities. The processes are
set forth as a guide with the understanding that the committee may supplement
them as appropriate.
* The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately accountable
to the board and the audit committee, as representatives of the Company's
shareholders. The committee shall have the ultimate authority and
responsibility to evaluate and, where appropriate, replace the independent
auditors. The committee shall discuss with the auditors their independence
from management and the Company and the matters included in the written
disclosures required by the Independence Standards Board. Annually, the
committee shall review and recommend to the board the selection of the
Company's independent auditors, subject to shareholders' approval.
* The committee shall discuss with the independent auditors the overall scope
and plans for their audit including the adequacy of staffing and
compensation. Also, the committee shall discuss with management and the
independent auditors the adequacy and effectiveness of the accounting and
financial controls, including the Company's system to monitor and manage
business risk, and legal and ethical compliance programs. Further, the
committee shall meet separately with the independent auditors, with and
without management present, to discuss the results of their examinations.
* The committee shall review the interim financial statements with management
and the independent auditors prior to the filing of the Company's Quarterly
Report on Form 10-Q. Also, the committee shall discuss the results of the
quarterly review and any other matters required to be communicated to the
committee by the independent auditors under generally accepted auditing
standards. The chair of the committee may represent the entire committee for
the purposes of this review.
* The committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form
10-K, including their judgment about the quality, not just acceptability, of
accounting principles, the reasonableness of significant judgments, and the
clarity of the disclosures in the financial statements. Also, the committee
shall discuss the results of the annual audit and any other matters required
to be communicated to the committee by the independent auditors under
generally accepted auditing standards.
Your Board of Directors recommends a vote "FOR" approval of items 1, 2 and 3.
Item 1. ELECTION OF DIRECTORS
Nominees:
Roy F. Farmer
Roy E. Farmer
Guenter W. Berger
Lewis A. Coffman
John M. Anglin
John H. Merrell
FOR ALL WITHHELD FOR ALL
WITHHELD FOR: (write that nominee's name on the
Discretionary authority is conferred as to matters for
space provided below)
which a grant of such authority is proper.
Item 2. APPROVAL OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS FOR FISCAL YEAR 2002
FOR AGAINST ABSTAIN
Item 3. APPROVAL OF AMENDMENT AND RESTATEMENT OF THE COMPANY'S
ARTICLES OF INCORPORATION
FOR AGAINST ABSTAIN
Signature(s):
Date:
Note: Please sign as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.