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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period from October 1, 2002 to December 31, 2002.
Commission File Number: 0-1375
FARMER BROS. CO.
(Exact name of registrant as specified in its charter)
California 95-0725980
(State of Incorporation) (IRS Employer Identification Number)
20333 S. Normandie Avenue, Torrance, California 90502
(Address of principal executive offices) (Zip Code)
(310) 787-5200
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [ ]
Number of shares of Common Stock outstanding: 1,926,414 as of December 31,
2002.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Dollars in thousands, except per share data)
FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the three months For the six months
ended December 31, ended December 31,
2002 2001 2002 2001
Net sales $54,118 $54,755 $104,507 $104,155
Cost of goods sold 18,964 17,418 37,821 34,249
35,154 37,337 66,686 69,906
Selling expense 22,816 22,064 43,560 42,423
General and administrative
expenses 4,019 3,382 7,453 6,306
26,835 25,446 51,013 48,729
Income from operations 8,319 11,891 15,673 21,177
Other income:
Dividend income 772 793 1,629 1,604
Interest income 1,074 1,922 2,361 4,411
Other, net (573) 1,350 (952) 1,490
1,273 4,065 3,038 7,505
Income before taxes 9,592 15,956 18,711 28,682
Income taxes 3,693 6,223 7,204 11,186
Net income $ 5,899 $ 9,733 11,507 $17,496
Net income per share $3.24 $5.27 $6.26 $9.47
Weighted average shares
outstanding 1,822,296 1,847,445 1,836,747 1,847,348
Dividends declared per share $0.90 $0.85 $1.80 $1.70
The accompanying notes are an integral part of these financial statements.
FARMER BROS. CO.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, June 30,
2002 2002
ASSETS
Current assets:
Cash and cash equivalents $ 14,001 $ 7,047
Short term investments 272,672 285,540
Accounts and notes receivable, net 18,534 14,004
Inventories 36,288 37,361
Income tax receivable - 2,553
Deferred income taxes 1,188 1,188
Prepaid expenses 2,482 741
Total current assets 345,165 348,434
Property, plant and equipment, net 38,596 38,572
Notes receivable 224 224
Other assets 27,988 27,622
Deferred income taxes 2,672 2,672
Total assets $414,645 $417,524
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,708 $ 4,827
Accrued payroll expenses 6,425 6,407
Other 5,478 5,025
Total current liabilities 17,611 16,259
Accrued postretirement benefits 23,705 22,726
Other long term liabilities 5,486 5,486
29,191 28,212
Commitments and contingencies - -
Shareholders' equity:
Common stock, $1.00 par value, authorized
3,000,000 shares; 1,926,414 shares
issued and outstanding 1,926 1,926
Additional paid-in capital 18,215 17,627
Retained earnings 373,943 365,725
Unearned ESOP shares (26,241) (12,225)
Total shareholders' equity 367,843 373,053
Total liabilities and shareholders' equity $414,645 $417,524
The accompanying notes are an integral part of these financial statements.
FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months
ended December 31,
2002 2001
Cash flows from operating activities:
Net income $11,507 $ 17,496
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 2,802 2,759
Gain on sales of assets (383) (100)
ESOP Compensation expense 1,923 1,138
Net (gain) or loss on investments (1,544) 1,153
Change in assets and liabilities:
Short term investments 14,412 28,285
Accounts and notes receivable (4,559) (507)
Inventories 1,073 (756)
Income tax receivable 2,553 2,991
Prepaid expenses and other assets (2,107) (1,057)
Accounts payable 881 (3,518)
Accrued payroll and expenses and other
liabilities 471 (30)
Accrued postretirement benefits 979 972
Total adjustments (16,501) 31,330
Net cash provided by operating activities $ 28,008 $ 48,826
The accompanying notes are an integral part of these financial statements.
FARMER BROS. CO
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Unaudited)
For the six months
ended December 31,
2002 2001
Net cash provided by operating activities: $ 28,008 $ 48,826
Cash flows from investing activities:
Purchases of property, plant and equipment (2,940) (2,301)
Proceeds from sales of property, plant
and equipment 497 154
Notes issued - (35)
Notes repaid 29 2,533
Net cash used in investing activities ( 2,414) 351
Cash flows from financing activities:
Dividends paid ( 3,289) (3,137)
ESOP contributions (15,351) (701)
Net cash used in financing activities (18,640) (3,838)
Net increase in cash and cash equivalents 6,954 45,339
Cash and cash equivalents at beginning
of period 7,047 19,361
Cash and cash equivalents at end of period $ 14,001 $ 64,700
Supplemental disclosure of
cash flow information:
Income tax payments $ 4,502 $ 7,732
The accompanying notes are an integral part of these financial statements.
Notes to Consolidated Financial Statements (Unaudited)
Note 1. Unaudited Financial Statements
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q of Regulation S-
X. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month
period ended December 31, 2002 are not necessarily indicative of the results
that may be expected for the year ended June 30, 2003.
The balance sheet at June 30, 2002 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the
United States for complete financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Farmer Bros Co. annual report on Form 10-K
for the year ended June 30, 2002.
Note 2. Investments
Investments are as follows (in thousands):
December 31, June 30,
2002 2002
Trading securities at fair value
Corporate debt $ - $ 18,863
U.S. Treasury obligations 211,756 184,756
U.S. Agency obligations 5,020 26,983
Preferred stock 47,945 48,873
Other fixed income 5,092 5,181
Futures, options and other
derivative investments 2,859 884
$272,672 $285,540
Note 3. Inventories
(In thousands)
December 31, 2002
Processed Unprocessed Total
Coffee $ 2,767 $11,189 $13,956
Allied products 11,348 5,580 16,928
Coffee brewing equipment 2,207 3,197 5,404
$16,322 $19,966 $36,288
June 30, 2002
Processed Unprocessed Total
Coffee $ 3,438 $10,393 $13,831
Allied products 12,482 5,116 17,598
Coffee brewing equipment 2,528 3,404 5,932
$18,448 $18,913 $37,361
Interim LIFO Calculations
An actual valuation of inventory under the LIFO method can be made only
at the end of each year based on the inventory levels and costs at that
time. Accordingly, interim LIFO calculations must necessarily be based
on management's estimates of expected year-end inventory levels and costs.
Because these are subject to many forces beyond management's control,
interim results are subject to the final year-end LIFO inventory valuation.
Note 4. Recently Issued Accounting Standards
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets," which supercedes SFAS 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." SFAS No. 144 addresses financial accounting and reporting for the
impairment of long-lived assets and for long-lived assets to be disposed of
and is effective for fiscal years beginning after December 15, 2001. SFAS
retains certain fundamental provisions of SFAS No. 121 including recognition
and measurement of the impairment of long-lived assets to be held and used
and measurement of long-lived assets to be disposed of by sale. The adoption
of this standard, effective July 1, 2002, had no material effect on the
Company.
In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 146 ("SFAS 146"), "Accounting for Exit
or Disposal Activities". SFAS 146 addresses significant issues regarding
the recognition, measurement, and reporting of costs that are associated
with exit and disposal activities, including restructuring activities that
are currently accounted for under Emerging Issues Task Force ("EITF") Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." The scope of SFAS 146 also includes costs related to
terminating a contract that is not a capital lease and termination benefits
that employees who are involuntarily terminated receive under the terms of
a one-time benefit arrangement that is not an ongoing benefit arrangement
or an individual deferred-compensation contract. SFAS 146 will be effective
for exit or disposal activities that are initiated after December 31, 2002
but early application is encouraged. The provisions of EITF Issue No. 94-3
shall continue to apply for an exit activity initiated under an exit plan
that met the criteria of EITF Issue No. 94-3 prior to the adoption of SFAS
146. Adopting the provisions of SFAS 146 will change, on a prospective
basis, the timing of when restructuring charges are recorded from a
commitment date approach to when the liability is incurred.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results
of Operations.
Liquidity and Financial Condition
There have been no material changes in the Company's liquidity or financial
condition since the year ended June 30, 2002.
(in thousands) December 31, June 30,
2002 2002
Current assets $345,165 $348,434
Current liabilities 17,611 $ 16,259
Working capital $327,554 $332,175
Total assets $414,645 $417,524
All present and future liquidity needs are expected to be met by internal
sources. The Company tries not to rely on banks or other third parties for
its working capital and other liquidity needs. Our operations are often
affected by the green coffee market. At present the cost of green coffee has
increased more than 30% over costs at the end of fiscal 2002. The market is
volatile and green coffee prices could continue to climb requiring a
substantial additional investment in inventory by the Company. In 2000 the
board of directors authorized an initial loan to the ESOP of up to
$50,000,000 for the purchase of Company stock. As of December 31, 2002 the
ESOP loan balance is $26,394,000 and the ESOP holds 142,779 shares of stock.
The Company is presently converting to a new enterprise resource planning
system. Costs to implement the new system are likely to exceed $2,000,000
over the next two years. The Company also has plans to purchase improved
properties for certain of its branch warehouse locations, and where buildings
are not available, has purchased land and developed the property itself.
Results of Operations
Fiscal 2003
Most operating trends discussed in the Form 10-K for fiscal 2002 have
continued into the second quarter of fiscal 2003. Green coffee costs during
the second quarter of fiscal 2003 were volatile and ended the quarter at a
level 30% greater than green coffee prices at the June 30, 2002 year end.
Concerns about the possibility of a drought in Brazil have fueled a
speculative increase in green coffee costs. The economy continues to be weak
and consumer spending does not seem to have recovered.
Net sales for the second quarter of fiscal 2003 decreased 1% to $54,118,000
as compared to $54,755,000 in the same quarter of fiscal 2002. Net sales for
the first half of fiscal 2003 were even with fiscal 2002, reaching
$104,507,000 and $104,155,000, respectively. Gross profit decreased
6% to $35,154,000 as compared to $37,337,000 in the same quarter of fiscal
2002 due to higher green coffee costs in the current quarter. Gross profit
for the first half of fiscal 2003 decreased 5% to $66,686,000 as compared to
$69,906,000 in the same period of fiscal 2002.
Operating expenses in the second quarter of fiscal 2003, consisting of
selling and general and administrative expenses, increased 5% to $26,835,000
as compared to $25,446,000 in the same quarter of fiscal 2002. The increase
is primarily attributed to employee benefit expenses, including the ESOP, of
more than $900,000. Operating expenses for the first half of fiscal 2003
increased 5% to $51,013,000 as compared to $48,729,000 in the same period of
the prior fiscal year.
Other income in the second quarter of fiscal 2003 decreased 69% to $1,273,000
from $4,065,000 in the second quarter of fiscal 2002. Interest earned
decreased 44% to $1,074,000 as compared to $1,922,000 in the fiscal quarters
ended December 31, 2002 and 2001, respectively, as the result of lower
interest rates during fiscal 2003. During the first half of fiscal 2003, the
Company had realized and unrealized gains (losses) on securities of
approximately $2,965,000 and $(1,421,000), respectively, as compared to
realized and unrealized gains on securities of approximately $207,000 and
$947,000, respectively, in the same period of fiscal 2002. Other income for
the first half of fiscal 2003 decreased 60% to $3,038,000 as compared to
$7,505,000 in the same period of the prior fiscal year.
As the result of the above mentioned factors, net income for the second
quarter of fiscal 2003 decreased 39% to $5,899,000, or $3.24 per share, as
compared to $9,733,000 or $5.27 per share for the second quarter of fiscal
2002. Net income for the first half of fiscal 2003 decreased 34% to
$11,507,000 as compared to $17,496,000 in the same period of the prior fiscal
year. Earnings per share decreased to $6.26 for the first half of fiscal
2003, as compared to $9.47 per share in the same period of fiscal 2002.
Fiscal 2002
Net sales for the second quarter of fiscal 2002 increased 10.8% to
$54,755,000 as compared to $49,400,000 in the first quarter of fiscal 2002 as
the public began to return to restaurants after the September 11 disaster,
but decreased 5.3% as compared to $57,795,000 in the second quarter of fiscal
2001 primarily due to a 6% decrease in roast coffee sales in the current
quarter as compared to the same quarter of fiscal 2001. Although the average
cost of green coffee has declined 36% in the 12 months ended December 31,
2001, gross profit has not similarly improved because of the reduced sales
volume. Gross profit decreased 3% to $37,337,000 as compared to $38,631,000
in the same quarter of fiscal 2001 and increased 15% as compared to
$32,569,000 in the first quarter of fiscal 2002. Gross profit for the first
half of fiscal 2001 decreased 1% to $69,906,000 as compared to $70,934,000 in
the same period of the prior fiscal year.
Operating expenses, consisting of selling and general and administrative
expenses, increased 7% to $25,446,000 in the second quarter of fiscal 2002 as
compared to $23,867,000 in the second quarter of fiscal 2001, and increased
4% to $48,729,000 in the first half of fiscal 2002 as compared to $46,712,000
in the first six months of fiscal 2001. This increase is primarily
attributed to compensation related expenses, including salary increases, the
cost of the ESOP, increases in employee medical claims, and employee
retirement plan costs.
During the first half of fiscal 2001, the Company had realized and unrealized
gains (losses) on securities of approximately $709,000 and $(247,000),
respectively, as compared to realized gains on securities of approximately
$207,000 and $947,000, respectively, in the same period of fiscal 2002.
Lower interest rates in the current fiscal year have resulted in a lesser
amount of interest earned. Interest earned decreased 40% to $1,922,000 as
compared to $3,209,000 in the quarter ended December 31, 2001 and 2000,
respectively, and decreased 29% to $4,411,000 as compared to $6,200,000 for
the first six months of fiscal 2002 and 2001, respectively.
Net income for the second quarter of fiscal 2002 decreased 18% to $9,733,000,
or $5.26 per share, as compared to $11,807,000, or $6.40 per share, in the
second quarter of fiscal 2001, but decreased 11% to $17,496,000, or $9.47 per
share, as compared to $19,408,000, or $10.53 per share in the first six
months of fiscal 2002 and 2001, respectively.
Quarterly Summary of Results (in thousands of dollars):
12/30/01 3/31/02 6/30/02 9/30/02 12/31/02
Net sales $54,755 $51,298 $50,404 $50,389 $54,118
Gross profit 37,337 34,786 33,401 31,532 35,154
Income from operations 11,891 9,843 7,190 7,354 8,319
Net income 9,733 6,406 6,667 5,608 5,899
Net income per common share $5.27 $3.47 $3.60 $3.03 $3.24
Forward Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q regarding
The risks, circumstances and financial trends that may affect our future
operating results, financial position and cash flows may be forward-looking
statements within the meaning of federal securities laws. These statements
are based on management's current expectations, assumptions, estimates and
observations about our business and are subject to risks and uncertainties.
As a result, actual results could materially differ from the forward looking
statements contained herein. These forward looking statements can be
identified by the use of words like "expects," "plans," "believes,"
"intends," "will," "assumes" and other words of similar meanings. These and
other similar words can be identified by the fact that they do not relate
solely to historical or current facts. While we believe our assumptions are
reasonable, we caution that it is impossible to predict the impact of such
factors which could cause actual results to differ materially from predicted
results. We intend these forward-looking statements to speak only at the
time of this report and do not undertake to update or revise these
projections as more information becomes available. For these statements, we
claim the protection of the safe harbor for forward-looking statements
provided by the Private Securities Litigation Reform Act of 1995. Many but
not all of these factors and assumptions are identified in the Company's
Annual Report on Form 10-K for the year ended June 30, 2002.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Financial Markets
We are exposed to market value risk arising from changes in interest rates on
our securities portfolio. Our portfolio of investment grade money market
instruments includes discount commercial paper, medium term notes, federal
agency issues and treasury securities. As of December 31, 2002 over 40% of
these funds were invested in instruments with maturities shorter than 90
days. This portfolio's interest rate risk is not hedged and its average
maturity is approximately 110 days. A 100 basis point increase in the
general level of interest rates would result in a change in the market value
of the portfolio of approximately ($2,295,000).
Our portfolio of preferred securities includes investments in derivatives
that provide a natural economic hedge of interest rate risk. We review the
interest rate sensitivity of these securities and (a) enter into "short
positions" in futures contracts on U.S. Treasury securities or (b) hold put
options on such futures contracts in order to reduce the impact of certain
interest rate changes on such preferred stocks. Specifically, we attempt to
manage the risk arising from changes in the general level of interest rates.
We do not transact in futures contracts or put options for speculative
purposes.
The following table demonstrates the impact of varying interest rate changes
based on the preferred stock holdings, futures and options positions, and
market yield and price relationships at September 30, 2002. This table is
predicated on an instantaneous change in the general level of interest rates
and assumes predictable relationships between the prices of preferred
securities holdings, the yields on U.S. Treasury securities and related
futures and options.
Interest Rate Changes
(In thousands)
Market Value of December 31, 2002 Change in Market
Preferred Futures & Total Value of Total
Stock Options Portfolio Portfolio
- -150 basis points
("b.p.") $52,339 $1 $52,340 $3,513
- -100 b.p. 51,339 18 51,357 2,530
Unchanged 47,945 882 48,827 0
+100 b.p. 43,829 4,506 48,335 (491)
+150 b.p. 41,831 6,482 48,312 (514)
The number and type of future and option contracts entered into depends on,
among other items, the specific maturity and issuer redemption provisions for
each preferred stock held, the slope of the Treasury yield curve, the
expected volatility of Treasury yields, and the costs of using futures and/or
options.
Commodity Price Changes
We are exposed to commodity price risk arising from changes in the market
price of green coffee. We price our inventory on the LIFO basis. In the
normal course of business, we enter into commodity purchase agreements with
suppliers and we purchase green coffee contracts.
The following table demonstrates the impact of changes in the price of green
coffee on inventory and green coffee contracts at December 31, 2002. It
assumes an immediate change in the price of green coffee, and the valuations
of coffee index futures and put options and relevant commodity purchase
agreements at December 31, 2002.
Commodity Risk Disclosure
(In thousands)
Market Value of
Coffee Cost Coffee December 31, 2002 Change in Market Value
Change Inventory Futures & Options Totals Derivatives Inventory
-10% $12,560 $3,604 $16,164 $1,626 ($1,396)
unchanged 13,956 1,978 15,934 - -
10% 15,352 352 15,704 1,626 1,396
At December 31, 2002 the derivatives consisted mainly of commodity futures
with maturities shorter than four months.
Item 4 Controls & Procedures
Based on our most recent evaluation in September, 2002, we have found (a) no
significant deficiencies in the design or operation of internal controls
which could adversely affect our ability to record, process, summarize and
report financial data; and (b) no fraud, whether or not material, that
involves management or other employees who have a significant role in the
registrant's internal controls. No significant changes in the Company's
internal controls or in other factors that could significantly affect these
controls have occurred subsequent to the September 2002, evaluation.
PART II OTHER INFORMATION
Item 1. Legal proceedings. not applicable.
Item 2. Changes in securities none.
Item 3. Defaults upon senior securities. none.
Item 4. Submission of matters to a vote of security holders.
The Annual Meeting of Shareholders of Farmer Bros. Co. was held on December
26, 2002. Holders of the Company's common stock were entitled to one vote
per share of common stock held.
Six directors were elected at the meeting, each to serve for the coming year
and until any successors are elected and qualify. The following persons were
elected as directors: Roy F. Farmer, Roy E. Farmer, John H. Merrell, Lewis A.
Coffman, Guenter W. Berger and John Anglin.
The proposal to appoint Ernst & Young LLP as the independent
accountants for the Company for the year ended June 30, 2003 was
approved with 1,719,876 shares for, 3,246 shares against and 1,513
shares abstaining.
The proposal to amend the Company's bylaws and require the Company to
register as an investment company under the Investment Company Act of
1940 was declined with 506,289 shares for, 1,163,944 shares against and
2,917 shares abstaining.
Item 5. Other information
None.
Item 6. Exhibits and reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
A Form 8-K was filed on December 26, 2002 reporting the initial results of
the proxy voting and presenting the text of a presentation made to the
shareholders who attended the meeting.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Farmer Bros. Co.
Date: February 7, 2003 /s/ John E. Simmons
John E. Simmons
Treasurer and Chief Financial Officer
CERTIFICATIONS
I, John E. Simmons, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Farmer Bros. Co.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: February 7, 2003
/s/ John E. Simmons
John E. Simmons
Chief Financial Officer
I, Roy F. Farmer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Farmer Bros. Co.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: February 7, 2003
/s/ Roy F. Farmer
Roy F. Farmer
Chairman and CEO
15