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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2004
Commission file number: 0-1375
FARMER BROS. CO.
(exact name of registrant as specified in its charter)
Delaware 95-0725980
(State of Incorporation) (I.R.S. Employer Identification No.)
20333 South Normandie Avenue, Torrance, California 90502
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310)787-5200
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which
registered
Common stock, $1.00 par value NASDAQ
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). YES [X] NO [ ]
The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the closing price at which the Farmer
Bros. Co. common stock was sold on June 30, 2004 was approximately $181
million.
On September 13, 2004 Registrant had 16,075,080 shares outstanding of its
common stock, par value $1.00 per share, which is the registrant's only class
of common stock.
PART I
Item 1. Business
General: Farmer Bros. Co. (the "Company", "we", "our" or "FBC") is a
manufacturer and distributor of coffee and spices to the institutional food
service segment. The Company was incorporated in California in 1923, and
reincorporated in Delaware in 2004.
Our product line is specifically focused on the needs of our market segment:
restaurants and other institutional food service establishments that prepare
and market meals, including hotels, hospitals, convenience stores and fast
food outlets. The product line includes roasted coffee, coffee related
products such as coffee filters, sugar and creamers, assorted teas, cocoa,
spices, and soup and beverage bases. The product line presently includes over
300 items. Roasted coffee products make up about 50% of total sales. No
single product other than coffee accounts for 10% or more of revenue. Coffee
purchasing, roasting and packaging takes place at our Torrance, California
plant, which is also the distribution hub for our branches.
Sales are made "off-truck" to our institutional food service customers at
their places of business by our own sales representatives who are responsible
for soliciting, selling, collecting from and otherwise maintaining our
customer accounts.
Raw Materials and Supplies: Our primary raw material is green coffee, an
agricultural commodity. Coffee is mainly grown outside the United States and
can be subject to volatile price fluctuations. Weather, political events,
labor actions and armed conflict in coffee producing nations, and government
actions, including treaties and trade controls between the US and coffee
producing nations, can affect the price of green coffee.
Green coffee prices can also be affected by the actions of producer
organizations. The most prominent of these are the Colombian Coffee
Federation (CCF), the Association of Coffee Producing Countries (ACPC) and the
International Coffee Organization (ICO). These organizations seek to increase
green coffee prices largely by attempting to restrict supplies, thereby
limiting the availability of green coffee to coffee consuming nations. In
recent years the green coffee market has been influenced by additional
production from a variety of producers, notably Vietnam and Brazil. These
additional supplies have had the tendency to hold prices down.
Other raw materials used in the manufacture of allied products include a
wide variety of spices, including pepper, chilies, oregano & thyme, as well as
cocoa, dehydrated milk products, salt and sugar. These agricultural products
can be subject to wide cost fluctuation. Cost fluctuations of these other
products historically have not had a material effect on operating results.
Trademarks & Patents: We own approximately 38 registered U.S. trademarks,
which are integral to customer identification of our products. It is not
possible to assess the impact of the loss of such identification.
Seasonality: We experience some seasonal influences. The winter months are
the best sales months. However, our product line and geographic diversity
provide some sales stability during the warmer months when coffee consumption
ordinarily decreases. Additionally, the summer months usually experience an
increase in sales to seasonal businesses located in vacation areas.
Distribution: Our selling divisions distribute our products to our
institutional food service customers at their places of business by our sales
representatives. These distribution trucks are replenished from warehouses
located in most large cities in the western United States. We operate our own
long haul trucking fleet to more effectively control the supply of products to
these warehouses. Inventory levels are maintained at each location
sufficient to provide each branch warehouse with a complete product line and
sufficient safety stocks to accommodate a modest interruption in supply.
Customers: No customer represents a significant concentration of sales.
The loss of one or more of our larger customer accounts would have no
material adverse effect on our operations. Customer contact and service
quality, which are integral to our sales effort, are often secondary to
product pricing for customers with their own distribution systems. Such
customers can be very price sensitive.
Competition: We face competition from many sources, including the
institutional food service divisions of multi-national manufacturers of retail
products such as Procter & Gamble (Folgers Coffee), Kraft Foods (Maxwell House
Coffee) and Sara Lee Foods (Superior Coffee), wholesale grocery distributors
such as Sysco and US Food Service and regional institutional coffee roasters
such as Boyd Coffee Company and Lingle Bros. Coffee. We may have some
competitive advantages due to our longevity, strong regional roots and sales
and service force. Our customer base is price sensitive and we are often
faced with price competition.
Working Capital: We finance our operations internally, and we believe that
working capital from internal sources will be adequate for the coming year.
Foreign Operations: We have no material revenues that result from foreign
operations.
Other: On June 30, 2004, we employed 1,104 employees; 461 are subject to
collective bargaining agreements. The effects of compliance with
government provisions regulating discharge of materials into the
environment have not had a material effect on our financial condition or
results of operations. The nature of our business does not provide for
maintenance of or reliance upon a sales backlog.
We file reports electronically with the Securities and Exchange Commission,
including Forms 10-K, 10-Q, 8-K and amendments thereto. The public may read
and copy any materials filed with the SEC at the SEC's Public Reading Room at
450 Fifth Street, NW, Washington, DC 20549. The public may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-
0330. The SEC maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC; the site address is http://www.sec.gov.
Registrant's Internet website address was http://www.farmerbroscousa.com. The
site has been closed for upgrading. When the site reopens, Registrant's Forms
3,4 and 5 as well as its Annual Report to Stockholders, Forms 10-K, 10-Q and 8-
K reports and amendments thereto will be available on the website. Until that
time, SEC reports are available to the public on a real time basis on the
Commission's EDGAR website described above. For those unable to access the
Commission's website, the Company will make paper copies of its form 10-K, 10-
Q and 8-K filings and amendments thereto available without charge upon written
request addressed to Mr. John E. Simmons, Chief Financial Officer, Farmer
Bros. Co., 20333 S. Normandie Avenue, Torrance, CA 90502.
Item 2. Properties
Our largest and most significant facility is the roasting plant, warehouses
and administrative offices in Torrance, California. This facility is our
primary manufacturing facility and the distribution hub for our fleet.
We stage products in 100 small branch warehouses throughout our service area.
These warehouses, taken together, represent a vital part of our business, but
no individual warehouse is material to the group as a whole; most warehouses
vary in size from 2,500-12,000 sq. feet. We believe the existing plant and the
distribution warehouses will continue to provide adequate capacity for the
foreseeable future.
A complete list of facilities is found in Exhibit (99).
Item 3. Legal Proceedings
We are both defendant and plaintiff in various legal proceedings incidental
to our business which are ordinary and routine. It is our opinion that the
resolution of these lawsuits will not have a material impact on our financial
condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Executive Officers of Registrant
Name Age Position Last Five Years
Roy E. Farmer 52 Chairman since June 16, 2004, President, Chief
Executive since 2003, Chief Operating Officer
previously.
Guenter W. Berger 67 Vice President - Production
Michael J. King 59 Vice President - Sales since August 2004,
National Sales Manager previously
John E. Simmons 53 Treasurer, Chief Financial Officer
John M. Anglin (1) 57 Secretary since 2003, and Partner in Law Firm of
Anglin, Flewelling, Rasmussen, Campbell &
Trytten, LLP, Pasadena, California since 2002;
partner in Law Firm of Walker, Wright, Tyler
and Ward, LLP, Los Angeles, California,
previously.
(1) Anglin, Flewelling, Rasmussen, Campbell & Trytten LLP provides legal
services to the Company.
All officers are elected annually by the Board of Directors and serve at the
pleasure of the Board.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
We have one class of common stock which is traded on the NASDAQ national
market under the symbol "FARM". On March 4, 2004, a ten-for-one stock split in
the form of a one-time stock dividend was declared. Each stockholder of record
on April 23, 2004 received nine additional shares for every share of Farmer
Bros. common stock held. The new shares were registered on the books of the
Corporation at the close of business on May 10, 2004. Share and per share
amounts have been restated to reflect the split. The following table sets
forth the high and low sales prices of the shares of Common Stock of the
Company. Prices are as reported on the NASDAQ National Market and represent
prices between dealers, without including retail mark up, mark down or
commission, and do not necessarily represent actual trades.
2004 2003
High Low Dividend High Low Dividend
1st Quarter $35.478 $31.750 $0.095 $35.600 $30.400 $0.090
2nd Quarter $33.349 $30.520 $0.095 $33.500 $30.101 $0.090
3rd Quarter $36.200 $30.100 $0.095 $31.999 $30.350 $0.090
4th Quarter $39.394 $25.110 $0.095 $36.599 $30.324 $0.090
There were 3,017 holders of record on September 10, 2004. Holders of record is
based upon the number of record holders and individual participants in security
position listings.
Item 6. Selected Financial Data
(In thousands, except per share data)
2004 2003 2002 2001 2000
Net sales $193,589 $201,558 $205,857 $215,431 $218,688
Income from operations $ 3,763 $23,888 $38,210 $42,115 $48,965
Net Income $12,687 $23,629 $30,569 $36,178 $37,576
Net income per share (b) $0.81 $1.30 $1.65 $1.96 $2.02
Proforma net income (a) $36,488 $35,445
Proforma net income per share (b) $1.98 $1.91
Total assets $317,871 $416,415 $417,524 $390,395 $353,467
Dividends per share (b) $0.38 $0.36 $0.34 $0.32 $0.30
(a) Upon adoption of Statements of Financial Accounting Standards ("SFAS") No.
133 on July 1, 2000, the Company reclassified its investments held as
"available for sale" to the "trading" category which resulted in an entry to
recognize the accumulated unrealized loss of $3,894,000. The "proforma"
amounts above summarize the effect on earnings and earnings per share on prior
years' results as if the change had been in effect for those periods presented.
(b) All share and per share disclosures have been split-adjusted.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Management's Discussion and Analysis discusses the results of operations as
reflected in the Company's consolidated financial statements. The following
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of many factors.
The results of operations for the years ended June 30, 2004, 2003 and 2002 are
not necessarily indicative of the results that may be expected for any future
period. The following discussion should be read in combination with the
consolidated financial statements and the notes thereto included in Item 8 of
this report and with the "Risk Factors" described below.
Critical Accounting Policies
Management's discussion and analysis of financial condition and results of
operations is based upon our consolidated financial statements, which have
been prepared in accordance with U.S. generally accepted accounting
principles. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, we evaluate our estimates,
including those related to inventory valuation, including LIFO reserves, the
allowance for doubtful accounts, deferred tax assets, liabilities related to
retirement benefits, liabilities resulting from self-insurance of our worker's
compensation liabilities, and litigation. We base our estimates on historical
experience and other relevant factors that are believed to be reasonable under
the circumstances.
While we believe that the historical experience and other factors considered
provide a meaningful basis for the accounting policies applied in the
preparation of the consolidated financial statements, actual results may
differ from these estimates, which could require the Company to make
adjustments to these estimates in future periods.
Investments: Our investments consist of investment grade marketable debt
instruments issued by the US Government and major US and foreign corporations,
equity securities, primarily preferred stock, and various derivative
instruments, primarily exchange traded treasury futures and options, green
coffee forward contracts and commodity purchase agreements. All derivatives
not designated as accounting hedges are marked to market and changes are
recognized in current earnings. The fair value of derivative instruments is
based upon broker quotes where possible.
Allowance for Doubtful Accounts: We maintain an allowance for estimated
losses resulting from the inability of our customers to meet their
obligations. Our ability to maintain a relatively small reserve is directly
related to our ability to collect from our customers when our sales people
regularly interact with our customers in person. This method of operation has
provided us with a historically low bad debt experience.
Inventories: Inventories are valued at the lower of cost or market and the
costs of coffee and allied products are determined on the last in, first out
(LIFO) basis. Costs of coffee brewing equipment manufactured are accounted
for on the first in, first out (FIFO) basis. We regularly evaluate these
inventories to determine that market conditions are correctly reflected in the
recorded carrying value.
Self-Insurance Retention: We are self-insured for California workers'
compensation insurance and use historical analysis to determine and record
the estimates of expected future expenses resulting from worker's compensation
claims. Additionally, we accrue for estimated losses not covered by insurance
for liability, auto, medical and fire up to the deductible amounts.
Retirement Plans: We have two defined benefit plans that provide retirement
benefits for the majority of our employees (the balance of our employees are
covered by union defined benefit plans). We obtain actuarial valuations for
both plans and at present we discount the pension obligations using 5.60%
discount rate and we estimate an 8% return on plan assets. Our retiree
medical plan is not funded and shares the same discount rate as the defined
benefit plans. We also project an initial medical trend rate of 10%
ultimately reducing to 5.5% in 6 years.
The performance of the stock market and other investments as well as the
overall health of the economy can have a material effect on pension investment
returns and these assumptions. A change in these assumptions could have an
effect on operating results.
Income Taxes: Deferred income taxes are determined based on the temporary
differences between the financial reporting and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which
differences are expected to reverse. We do not presently have a valuation
allowance for our deferred tax assets as we currently believe it is more
likely than not that we will realize our deferred tax assets.
Liquidity and Capital Resources
We have been able to maintain a strong working capital position, and
believe that our short and long term cash requirements for the coming
year will be provided by internal sources.
As reported in the Form 10-Q/A dated February 18, 2004, on December 24, 2003,
the Company purchased 443,845 shares (pre-split) of its common stock held by
the Crowe Family and related trusts for approximately $111 million, or
approximately $250 per share (pre-split). Concurrently with this purchase, the
Company offered its Employee Stock Ownership Plan (ESOP) the opportunity to
acquire 124,939 shares (pre-split) at the same price. This portion of the
transaction was completed on January 11, 2004 when the Company issued said
shares to the ESOP. This fulfilled a previously announced commitment to fund
the ESOP with 300,000 shares (pre-split) by completing the purchase at a
significant discount to market price. The closing price for Farmer Bros. Co.
common stock on December 24, 2003 was $316 per share (pre-split). Please
review Note 11 to the accompanying financial statements for additional
information.
The transaction can be summarized as follows:
Cost of shares purchased $ 111,161,000
Cost of shares retired 79,926,000
Cost of shares transferred to ESOP 31,235,000
The ESOP, established in 2000 for all Farmer Bros. Co. employees, is a
leveraged ESOP. This compensation plan allocates shares to employees as the
Company makes its annual benefit contribution to the plan. The shares are held
for employees by a third party trustee. When employees retire or leave the
Company, they can receive the stock or cash. Cash amounts are based on the
market price of the stock. The Company must make a market in the stock for
the ESOP participants. At this time, based on allocated shares, the Company
has a re-funding liability of approximately $10,000,000.
Our working capital is composed of the following:
(In thousands)
2004 2003 2002
Current assets $252,720 $346,617 $348,434
Current liabilities $21,189 $16,659 $16,259
Working capital $231,531 $329,958 $332,175
Capital expenditures $ 7,683 $9,089 $5,039
We have no major commitments for capital expenditures at this time. The
following projects will require a commitment of funds:
1. We have started construction of a warehouse in Chico, California and
expect to begin construction shortly of another building in Bakersfield,
California to replace existing facilities in those locations. We expect to
complete construction in time to occupy both new warehouses before the end of
fiscal 2005. The combined cost of improvements for the two warehouses is not
expected to exceed $4,000,000.
2. We have completed the second year of a multi-year upgrading of our
internal management information system. To date we have expended $13.9
million for hardware, software, infrastructure, training, consulting and on-
going support. Our financial systems (general ledger, accounts receivable,
accounts payable, fixed assets and payroll) were converted to the new system
on July 1, 2003. On September 1, 2004, we converted our manufacturing systems
and expect to convert our sales systems before the end of fiscal 2005. Costs
to complete this project, including software, hardware and consulting &
configuration of software in 2005, may exceed $7,000,000, not including the
added fixed costs to maintain the new system.
Results of Operations
Years ended June 30, 2004 and 2003
Net sales in fiscal 2004 decreased $7,969,000, or 4%, to $193,589,000 from
$201,558,000 in fiscal 2003. This includes a decrease in coffee brewing
equipment sales during fiscal 2004 of $3.9 million.
Our sales force has persisted in its efforts throughout this recession. We
expect better results as the economy begins to improve. Some improvement has
been noted. Comparing fourth quarter 2004 to fourth quarter 2003, two of our
ten selling divisions had sales declines of less than 1% and one, in the
Mississippi Valley, had a 2.6% sales increase. Some trade reports as well as
published operating results from some restaurant operators seem to indicate
that restaurant sales have improved. The National Restaurant Association has
forecasted that industry sales will increase 4.4% for calendar 2004. A trade
publication, The Restaurant News, reports that restaurant sales in the first
four months of calendar 2004 were 3.4 percent higher than during the same
period of calendar 2003. We have not kept pace with this trend but we note
that regional results often do not reflect national averages. Our California
operations, representing our largest marketing area, continue to show limited
improvement.
Consumer sentiment and spending patterns are not enhanced by rising commodity
prices (leading to higher grocery store and menu prices), record high gasoline
prices (which can have an emotional effect on discretionary spending), and
uncertainty about job stability, terrorism and the Iraq war (which can lead to
just staying home).
Cost of goods sold in fiscal 2004 increased 1% to $71,405,000, or 37% of
sales, as compared to $70,662,000, or 35% of sales, in 2003. The average cost
of green coffee throughout fiscal 2004 has exceeded that of fiscal 2003 by
15%. Through price adjustments we were, on average, able to maintain margins
for the current year, although shrinking gross profit margins were experienced
during the last half of the fiscal year. Selling and General & Administrative
Expenses in 2004 increased 11% to $118,421,000 from $107,008,000 in fiscal
2003.
This increase is primarily attributed to costs associated with employee
benefits, including actuarially derived pension and retiree medical costs, the
cost of the ESOP, legal expenses, including those related to a stockholder
lawsuit during 2004 and reincorporation in Delaware, and our multiyear program
to update our information systems as well as the direct costs of our
Sarbanes-Oxley Act of 2002 ("SOX") compliance work related to Section 404.
2004 2003
Employee benefits $14,104 $11,578
ESOP 6,298 4,637
Legal expenses 2,267 650
IT project expenses 3,400 698
SOX compliance 360 0
total $26,429 $17,563
As a result of these factors, operating income in 2004 decreased 83% to
$3,763,000 from $23,888,000 in the prior fiscal year.
Other income decreased 11% to $12,219,000 in fiscal 2004 as compared to
$13,683,000 in fiscal 2003. Low interest rates have limited investment
returns, and the expenditure of more than $100 million to purchase stock
reduced the amount available for investment. Additionally, the Company's
Chairman, Roy F. Farmer, who guided the Company for more than 50 years, died
on March 16, 2004 (as more fully described in a Form 8-K filed March 16,
2004). The Company received payment of a key man life insurance policy on Mr.
Farmer that is not taxable and paid the deferred compensation due Mr. Farmer.
The Company prevailed in a lawsuit against the California Franchise Tax Board
regarding taxability of dividends. As a result we received a tax refund of
$811,000 and interest income of $629,000. The Company received another court
award, as a plaintiff in a class-action lawsuit regarding price-fixing by
sellers of monosodium glutamate. The non-recurring items in other income
include the following.
Key man life insurance $4,088,000
Court award 1,061,000
Interest on state tax refunds 629,000
Total $5,778,000
Net income for fiscal 2004 decreased 46% to $12,687,000 as compared to
$23,629,000 in fiscal 2003. Income per share decreased 38% in fiscal 2004 to
$0.81 per share as compared to $1.30 per share in fiscal 2003.
Years ended June 30, 2003 and 2002
Net sales in fiscal 2003 decreased 2.1% to $201,558,000 as compared to
$205,857,000 in fiscal 2002. During this period the Company continued to
experience a decline in coffee sales. There are a number of trends that we
believe affect this result.
Fiscal 2003 was the third year of an economic downturn that has been especially
hard on our core service area of California. Our entire 28 state service area
has felt the combination of lay-offs, job uncertainty and the high cost of
living that can restrict consumer spending. Our primary market is the
independently owned and operated restaurant and restaurant chains. A weaker
economy is especially hard on these entrepreneurs who do not have the
geographic or "thematic" diversity of the large restaurant chains. The
success of coffee shops selling specialty coffees has spawned many imitators.
Although we compete favorably with our own line of specialty coffees, our
customers feel the effect of fewer sales dollars (in part because of the
recession) being divided among more direct competitors.
Green coffee costs for fiscal 2003 increased approximately 25% over those of
fiscal 2002. As a result gross profit decreased 5.2% to $130,896,000, or 65%
of sales, in fiscal 2003 as compared to $138,093,000, or 67% of sales, in
fiscal 2002.
Selling expenses for the 2003 fiscal year increased 3.1% to $88,658,000 as
compared to $86,025,000 in fiscal 2002. General and administrative expenses
increased 32.4% in fiscal 2003 to $18,350,000 as compared to $13,858,000 in
fiscal 2002. Operating expenses, composed of selling and general and
administrative expenses, increased $7,125,000, or 7.1%, to $107,008,000 during
fiscal 2003, or 53% of sales, as compared to $99,883,000, or 49% of sales, in
fiscal 2002. This increase primarily reflects additional costs in the
following order: ESOP $1,886,000; computer consulting and training $1,309,000;
insurance (including workers compensation) $1,300,000; life insurance
$1,045,000; defined benefit and post retirement benefit plan costs $997,000;
and the cost of coffee brewing equipment $897,000. These were partially offset
by decreases in legal expenses $941,000 and payroll $815,000.
Other income in fiscal 2003 increased $2,533,000 or 22.7% to $13,683,000 as
compared to $11,150,000 in fiscal 2002. This is primarily the result of the
volatility of the capital markets introduced by an accounting change in 2001
that required unrealized gains and losses on investments to be realized as
incurred. Prior to that time our hedging efforts reduced much of this
volatility. Interest rates declined throughout fiscal 2003. The major
components of this change from 2002 included an increase in unrealized gains of
$5,607,000, offset by decreases in interest income of $3,287,000 and realized
losses $1,897,000 and realized gains $1,864,000.
Pretax income in fiscal 2003 decreased 23.9% to $37,571,000, or 18.6% of
sales, as compared to $49,360,000, or 24% of sales, in fiscal 2002. Net
income in fiscal 2003 decreased 22.7% to $23,629,000, or 11.7% of sales, as
compared to $30,569,000, or 14.9% of sales in fiscal 2002. Earnings per share
in fiscal 2003 decreased 21.3% to $13.02 as compared to $16.54 in fiscal 2002.
Risk Factors
Certain statements contained in this Annual Report on Form 10-K 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.
Factors that could cause our actual results to materially differ from those
expressed or implied by any forward-looking statements described herein
include:
Green coffee price volatility.
Our results of operations can vary dramatically with the volatility of the
green coffee market. Coffee is mainly grown outside the United States and can
be subject to volatile price fluctuations. Weather, real or perceived
shortages, labor actions and political unrest in coffee producing nations, and
government actions, including treaties and trade controls between the US and
coffee producing nations, can affect the price of green coffee. Price
volatility can result in dramatic cost increases that cannot, because of
competition and market conditions, be immediately passed on to our customers.
Competition.
Competition comes in many forms. We compete with other coffee companies,
include multi-national firms with vast financial resources. Large roasters
like Folgers (Proctor & Gamble) and Maxwell House (Kraft) have volumes far in
excess of ours, with a business model and information and distribution
technologies that are substantially different from ours. We compete for a
wide variety of customers, from small restaurants and donut shops to large
institutional buyers like hospitals, hotels, contract food services and
convalescent hospitals. At Farmer Bros. we differentiate ourselves from our
competitors by the quality of our products and customer service. Some
customers are "price" buyers, seeking the low cost provider with little
concern about service; others find great value in the service programs we
provide. We compete well when service is valued, and are less effective when
only price matters. Some of our competitors do not do their own distribution,
and some customers do.
We also compete with other beverages. There are many beverages, hot and cold,
competing for the same restaurant dollar. Our restaurant customers report that
competition from such beverages continues to dilute demand for coffee.
Consumers who choose soft drinks, bottled water, and flavored coffees and teas
are all reducing the restaurant dollar formerly spent on a "standard" cup of
coffee. Some restaurants that only sell coffee and flavored coffee products
may have expanded the beverage market somewhat, but these coffee shops have
also taken market share from existing Farmer Bros. customers. Although we
have a line of products that compares favorably with products sold in such
"specialty coffee" stores, most of our customers are restaurants that do not
specialize in coffee drinks.
Sales and Distribution Network.
We believe our sales and distribution network is one of the best in the
industry. This network is costly to maintain. Costs include the fluctuating
cost of gasoline, diesel and oil, the costs associated with managing,
purchasing, maintaining and insuring a fleet of delivery vehicles, the costs of
maintaining distribution warehouses throughout the country, the costs of
hiring, training and managing our route sales professionals. Many of these
costs are beyond our control, and others are more in the nature of fixed than
variable costs. Some competitors use alternate methods of distribution that
eliminate some of the costs associated with our method of distribution.
General economic and market conditions.
Our primary market is restaurants and other food service establishments. We
also provide coffee and related products to offices. We believe the success
of our market segment is dependent upon personal and business expenditures in
restaurants and other food service businesses. In a slow economy, businesses
and individuals scale back their discretionary spending on travel and
entertainment, including "dining out." Economic conditions may also cause
businesses to reduce travel and entertainment expenses, and even cause office
coffee benefits to be eliminated.
Self insurance.
We are self-insured for many risks up to significant deductible amounts.
The premiums associated with our insurance have recently increased
substantially. General liability, fire, workers' compensation, directors and
officers liability, life, employee medical, dental and vision and automobile
present a large potential liability. While we accrue for this liability based
on historical experience, future losses may exceed losses we have incurred in
the past.
Risks from possible acquisitions and new business ventures.
The Company regularly evaluates opportunities that may enhance stockholder
value. There is no assurance that any such venture, should we decide to enter
into one, will accrue the projected returns. It is possible that such
ventures could result in losses or returns that would have a negative impact
on operating income.
ESOP.
The Farmer Bros. Co. Employee Stock Ownership Plan was designed to help us
attract and retain employees and to better align the efforts of our employees
with the interests of our stockholders. To that end, the Company has
purchased 300,000 shares (pre-split) of stock for the ESOP to allocate to
employees over the next 14 years. It is possible that additional shares could
be acquired that might deplete the Company's cash. We expect that the future
re-funding liability of the existing shares in the ESOP will increase and
require additional investment as the ESOP matures and individual holdings grow.
When employees vested in the ESOP leave the Company, they have the right to
"put" their shares to the Company for cash. This requires the Company to
repurchase the shares at the current market value. When shares are fully
distributed, the Company's refunding liability is approximately $75,000,000 at
current share prices.
Natural disasters.
Over half of our business is conducted in California, Oregon and Washington.
This area is prone to seismic activity and a major earthquake could have a
significant negative effect on our operations. Our major manufacturing
facility and distribution hub is in Los Angeles, and a serious interruption to
highway arteries, gas mains or electrical service could restrict our ability
to supply our branches with product.
Labor actions.
We have union contracts relating to our employees serving our California,
Oregon, Washington and Nevada markets. Although we believe union relations
have been amicable in the past, there is no assurance that this will continue
in the future. There are potential adverse effects of labor disputes with our
own employees or by others who provide transportation (shipping lines, truck
drivers) or cargo handling (longshoremen), both domestic and foreign, of our
raw materials or other products. These actions could restrict our ability to
obtain, process and/or distribute our products.
Pension Plan Viability.
We participate in two multi-employer defined benefit plans for certain union
employees. The management and funding status and future viability of these
plans is not known at this time. The nature of the contract with these plans
allows for future funding demands that are outside our control or ability to
estimate.
ERP System Conversion.
During fiscal 2003 the Company began a multiyear program to update its
management information systems. This has proven to be a challenging
conversion. It is possible that continuing conversion costs, potential
complications resulting from the conversion itself and system problems related
to our use of the new software could have a material impact on our future
operating results.
Depth of management.
There is limited management depth in certain key positions throughout the
Company, and the unexpected loss of one or more of these key employees could
have a material adverse effect on our operations and competitive position.
Purchasing activities.
The most important aspect of our operation is to secure a consistent supply
of coffee. Maintaining a steady supply of green coffee is essential to keep
inventory levels low and sufficient stock to meet customer needs. To help
ensure future supplies, we purchase much of our coffee on forward contracts
for delivery as long as six months in the future. In the event of non-
performance by the counter parties, the Company could be exposed to credit and
supply risk. The Company monitors the financial viability of the counter
parties in an attempt to minimize this risk.
Entering into such future commitments leaves the Company subject to purchase
price risk. Various techniques are used to hedge these purchases against
untoward price movement. Competitive factors make it difficult for the
Company to "pass through" such price fluctuation to its customers. Therefore,
unpredictable price changes can have an immediate effect on operating results
that cannot be corrected in the short run.
Futures contracts not designated as hedges, and terminations of contracts
designated as hedges, are marked to market and changes are recognized in
current earnings. Open contracts at June 30, 2004 are addressed in the
following Item 7A.
Contractual obligations.
The following table contains supplemental information regarding total
contractual obligations as of June 30, 2004.
(In thousands) Less Than More Than
Total One Year 2-3 Years 4-5 Years 5 years
Operating lease obligations $1,711 $631 $828 $252 $ -
Off-Balance Sheet Arrangements.
The Company has no so-called off-balance sheet arrangements.
Item 7A. Qualitative and Quantitative Disclosures About Market Risk
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 can include discount commercial paper, medium term notes,
federal agency issues and treasury securities. As of June 30, 2004 over 90%
of these funds were invested in treasury securities and more than 50% of these
issues have maturities shorter than 113 days. This portfolio's interest rate
risk is not hedged and its average maturity is approximately 90 days. A 100
basis point move in the general level of interest rates would result in a
change in the market value of the portfolio of approximately $1,200,000.
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 June 30, 2004. 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.
The number and type of futures and options contracts entered into depends
on, among other items, the specific maturity and issuer redemption
provisions for each preferred security held, the slope of the Treasury
yield curve, the expected volatility of Treasury yields, and the costs of
using futures and/or options.
Interest Rate Changes
(In thousands) Market Value at June 30, 2004 Change in Market
Preferred Futures and Total Value of Total
Securities Options Portfolio Portfolio
- -150 basis points $63,010 $0 $63,010 $5,558
- -100 basis points 61,140 15 $61,155 3,702
Unchanged 56,020 1,432 $57,453 0
+100 basis points 50,787 6,417 $57,204 (249)
+150 basis points 48,269 8,802 $57,070 (382)
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 exchange traded green coffee contracts. The
following table demonstrates the impact of changes in the price of green
coffee on inventory and green coffee contracts at June 30, 2004. It
assumes an immediate change in the price of green coffee, and the valuations
of coffee futures and relevant commodity purchase agreements at June 30, 2004.
Commodity Risk Disclosure
(In thousands)
Market Value
Coffee Futures & Change in Market Value
Coffee Cost Change Inventory Options Total Derivatives Inventory
-20% $11,020 $798 $11,818 $798 ($2,750)
unchanged 13,770 ($314) 13,456 0 0
20% 16,520 ($1,112) 15,408 ($798) $2,750
At June 30, 2004 the derivatives consisted mainly of commodity futures with
maturities shorter than three months.
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of Farmer Bros. Co. and Subsidiary
We have audited the accompanying consolidated balance sheets of Farmer Bros.
Co. and Subsidiary (the 'Company') as of June 30, 2004 and 2003, and the
related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended June 30, 2004. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Farmer Bros. Co.
and Subsidiary at June 30, 2004 and 2003, and the consolidated results of
their operations and their cash flows for each of the three years in the
period ended June 30, 2004, in conformity with U.S. generally accepted
accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
September 1, 2004
FARMER BROS. CO.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
June 30, 2004 June 30, 2003
ASSETS
Current assets:
Cash and cash equivalents $21,807 $18,986
Short term investments 176,903 274,444
Accounts and notes receivable, net 14,565 13,756
Inventories 35,579 34,702
Income tax receivable 408 2,878
Deferred income taxes 775 -
Prepaid expenses 2,683 1,851
Total current assets $252,720 $346,617
Property, plant and equipment, net 42,300 41,753
Notes receivable 143 193
Other assets 21,609 26,390
Deferred income taxes 1,099 1,462
Total assets $317,871 $416,415
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $9,589 $3,321
Accrued payroll expenses 6,999 7,362
Deferred income taxes - 976
Other 4,601 5,000
Total current liabilities $21,189 $16,659
Accrued postretirement benefits $26,984 $25,041
Other long term liabilities - 5,570
Total Liabilities $48,173 $47,270
Commitments and contingencies
Stockholders' equity:
Common stock, $1.00 par value;
authorized 25,000,000 shares and
16,075,080 issued and outstanding
at June 30, 2004; authorized
3,000,000 shares and 1,926,414
issued and outstanding at
June 30, 2003 $16,075 $1,926
Additional paid-in capital 32,248 18,798
Retained earnings 283,654 382,831
Unearned ESOP shares (61,542) (33,364)
Less accumulated comprehensive loss ( 737) (1,046)
Total stockholders' equity $269,698 $369,145
Total liabilities and
stockholders' equity $317,871 $416,415
The accompanying notes are an integral part of these financial statements.
FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share and per share data)
2004 2003 2002
Net sales $193,589 $201,558 $205,857
Cost of goods sold 71,405 70,662 67,764
Gross profit 122,184 130,896 138,093
Selling expense 92,029 88,658 86,025
General and administrative expenses 26,392 18,350 13,858
Operating expenses 118,421 107,008 99,883
Income from operations 3,763 23,888 38,210
Other income:
Dividend income 3,396 3,246 3,198
Interest income 2,518 3,974 7,261
Other, net 6,305 6,463 691
Total other income 12,219 13,683 11,150
Income before taxes 15,982 37,571 49,360
Income taxes 3,295 13,942 18,791
Net income $12,687 $23,629 $30,569
Net income per common share $0.81 $1.30 $1.65
Weighted average shares outstanding 15,576,450 18,145,910 18,483,950
The accompanying notes are an integral part of these financial statements.
FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Years ended June 30,
2004 2003 2002
Cash flows from operating activities:
Net income $12,687 $23,629 $30,569
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 7,098 5,776 5,493
Deferred income taxes (1,536) 3,989 495
Gain on sales of assets (94) (498) (239)
ESOP compensation expense 5,516 4,269 2,529
Net gain on investments (706) (5,625) (51)
Change in assets and liabilities:
Short term investments (12,914) 16,721 (51,310)
Accounts and notes receivable (801) 224 1,220
Inventories (877) 2,659 (1,581)
Income tax receivable 2,470 (325) 438
Prepaid expenses and other assets 4,064 (1,128) (1,421)
Accounts payable 6,268 (1,506) (326)
Accrued payroll expenses
other liabilities (762) 930 (1,070)
Accrued postretirement benefits 2,285 1,904 1,926
Other long term liabilities (5,570) 84 594
Total adjustments 4,441 27,474 (43,303)
Net cash provided by (used in)
operating activities $17,128 $51,103 ($12,734)
Cash flows from investing activities:
Purchases of property, plant and equipment (7,683) (9,089) (5,039)
Proceeds from sales of property,
plant and equipment 132 630 307
Notes issued - - (35)
Notes repaid 42 55 2,640
Net cash used in investing activities ($7,509) ($8,404) ($2,127)
Cash flows from financing activities:
Dividends paid (5,621) (6,523) (6,278)
ESOP contributions (32,412) (24,237) (815)
Proceeds from sale of short
term investments 111,161
Purchase of capital stock (111,161)
Sale of capital stock 31,235
Net cash used in financing activities ($ 6,798) ($30,760) ($7,093)
Net increase (decrease) in cash
and cash equivalents $2,821 $11,939 ($21,954)
Cash and cash equivalents at beginning of year 18,986 7,047 29,001
Cash and cash equivalents at end of year $21,807 $18,986 $7,047
The accompanying notes are an integral part of these financial statements.
FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share and per share data)
Code of Ethics
As the Chief Executive Officer, Chief Financial Officer or the
holder of such other position to which Farmer Bros. Co. (the
"Company") has applied this code, I recognize that financial
managers hold an important and elevated role in corporate
governance. I certify that I will adhere to the following
principles and responsibilities:
Act with honesty and integrity, avoiding actual or apparent
conflicts of interest between personal and professional
relationships;Provide in the Company's reports to the Securities
and Exchange Commission and other public communications with
information that is accurate, objective, relevant, timely and
understandable;Comply with applicable rules and regulations of
federal, state and local governments and other private and public
regulatory agencies, including exchanges where the Company's
securities might be listed; Act in good faith, responsibly, with
due care, competence and diligence, and without misrepresenting
material facts or allowing my independent judgment to be
subordinated; Maintain the confidentiality of information
acquired in the course of my work except when authorized or
otherwise legally obligated to disclose. Confidential
information acquired in the course of my work will not be used
for personal advantage; Share my knowledge and maintain skills
important and relevant to my constituents' needs.
Promote ethical behavior as a responsible partner among peers in
my work environment; Achieve responsible use of and control over
all assets and resources employed or entrusted to me; Report
known or suspected violations of this Code to the Audit Committee
and in accordance with all applicable rules. Report to the Audit
Committee any actual or apparent conflicts of interest between me
and the Company and between any Company officer or director and
the Company of which I become aware. I understand that I will be
accountable for adhering to this Code of Ethics and that
violations will not be tolerated by the Company and will result
in consequences which may include reprimand, suspension,
dismissal or legal action.
/s/ Roy E. Farmer
Dated: September 26, 2003 _________________________
Roy E. Farmer, President
and Chief Executive Officer
/s/ John E. Simmons
Dated: September 26, 2003 _________________________
John E. Simmons, Treasurer
and Chief Financial Officer
Farmer Bros. Co. Subsidiaries: FBC Finance Co., a California corporation 20333 S. Normandie Avenue Torrance, CA 90502
Exhibit 31.1
Certification Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
I, Roy E. Farmer, President and Chief Executive Officer of Farmer Bros.
Co.("Registrant"), certifies that:
1. I have reviewed this Annual Report on Form 10-K of Registrant;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other
financial information included in this 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 report;
4. The Registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the
Registrant and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, 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 report is being prepared;
(b) Evaluated the effectiveness of the Registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and
(c) Disclosed in this report any change in the Registrant's
internal control over financial reporting that occurred
during the Registrant's most recent fiscal quarter (the
Registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely
to materially affect, the Registrant's internal control over
financial reporting; and
5. The Registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Registrant's auditors and the audit
committee of the Registrant's board of directors (or persons performing
the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
Registrant's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Registrant's internal control over financial reporting.
Date: September 9, 2004
/s/ Roy E. Farmer
Roy E. Farmer
President and Chief Executive Officer
(principal executive officer)
Exhibit 31.2
Certification Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
I, John E. Simmons, Treasurer and Chief Financial Officer of Farmer
Bros. Co. ("Registrant"), certifies that:
1. I have reviewed this Annual Report on Form 10-K of Registrant;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other
financial information included in this 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 report;
4. The Registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the
Registrant and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, 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 report is being
prepared;
(b) Evaluated the effectiveness of the Registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(c) Disclosed in this report any change in the Registrant's
internal control over financial reporting that occurred
during the Registrant's most recent fiscal quarter (the
Registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely
to materially affect, the Registrant's internal control over
financial reporting; and
5. The Registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Registrant's auditors and the audit
committee of the Registrant's board of directors (or persons performing
the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
Registrant's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Registrant's internal control over financial reporting.
Date: September 9, 2004
/s/ John E. Simmons
John E. Simmons
Treasurer and Chief Financial Officer
(principal financial and accounting officer)
Exhibit 32.1 CERTIFICATION of Chief Executive Officer Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 In connection with the annual report of Farmer Bros. Co. (the "Company") on Form 10-K for the fiscal year ended June 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Roy E. Farmer, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. Dated: September 9, 2004 /s/ Roy E. Farmer Roy E. Farmer President & Chief Executive Officer (principal executive officer)
Exhibit 32.2 CERTIFICATION of Chief Financial Officer Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 In connection with the annual report of Farmer Bros. Co. (the "Company") on Form 10-K for the fiscal year ended June 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John E. Simmons, Treasurer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. Dated: September 9, 2004 /s/ John E. Simmons John E. Simmons Treasurer and Chief Financial Officer (principal financial and accounting officer
Farmer Bros Co. Offices Warehouses and Plants: The Corporation, Farmer Bros. Co., headquartered in Torrance, California, roasts and packages coffee, processes spices and other restaurant supplies at that location, and manufactures a complete line of coffee-brewing equipment at its Brewmatic Division plant in Los Angeles. The Corporation's primary business is conducted through its internal divisions: Restaurant and Institutional Sales Division, Brewmatic Division, Spice Products Division and Custom Coffee Plan Division; and one subsidiary, FBC Finance Company. Executive Offices: Farmer Bros. Co. 20333 South Normandie Avenue, Torrance, California Restaurant and Institutional Sales Division 20401 South Normandie Avenue, Torrance, California Brewmatic Company Division 20333 South Normandie Avenue, Torrance, California Spice Products Company Division 20333 South Normandie Avenue, Torrance, California Custom Coffee Plan Division 20333 South Normandie Avenue, Torrance, California FBC Finance Co. 20333 South Normandie Avenue, Torrance, California RESTAURANT AND INSTITUTIONAL SALES BRANCHES Arizona FLAGSTAFF 2385 N. Walgreen Street LAKE HAVASU 1880 Commander Dr., Suite C PHOENIX 1060 W. Alameda Dr. Tempe TUCSON 3818 South Evans Blvd. YUMA 3320 E. Gila Ridge Rd. Arkansas FAYETTEVILLE 3901-D Kelly Springdale LITTLE ROCK 7630 Hardin Drive North Little Rock California BAKERSFIELD 1135 W. Columbus BISHOP 324 E. Clarke Street CASTROVILLE 11460 Commercial Parkway CHICO 252 East Avenue, Suite F EUREKA 1825 3rd Street FRESNO 4576 N. Bendel LANCASTER 42138 7th Street West OAKLAND 9844 Kitty Lane PALM SPRINGS 72205 Corporate Way Thousand Palms RIVERSIDE 12101 Madera Way SACRAMENTO 2450 Boatman Ave. SAN DIEGO 7855 Ostrow St., B SAN GABRIEL 859 Meridian St. Duarte SAN JOSE 1462 Seareel Pl. SAN LUIS OBISPO 3415 Miguelito Ct. SANTA Ana 3921 W. Segerstrom Ave. SANTA ROSA 470 E. Todd Rd. STOCKTON 4243 Arch Road TORRANCE 20401 S. Normandie Ave. VALLEY 9373 Remick Ave. Arleta VENTURA 1350 Stellar Dr. Oxnard VICTORVILLE 17190 Yuma ST. Victorville Colorado COLORADO SPRINGS 337 Manitou Ave. Manitou Springs DENVER 5595 Joliet Street FORT COLLINS 4500 Innovation Drive GRAND JUNCTION 2848 Chipeta Ave., #B Idaho BOISE 1625 South Curtis IDAHO FALLS 805 S. Saturn Ave. TWIN FALLS 445 5th Ave. W Resident Branch Illinois CHICAGO 31W280 Diehl Rd., Unit 103 Naperville MOLINE 2950 38th Avenue SPRINGFIELD 3430 Constitution Dr. #122 Indiana EVANSVILLE 1905 N. Kentucky Ave. INDIANAPOLIS 1123 Country Club Rd. Iowa DES MOINES 1662 N.E. 55th Ave. OMAHA 3217 Nebraska Ave. Council Bluffs Kansas WICHITA 2355 S. Edwards, Suite B Minnesota DULUTH 4314 Enterprise Cr. MINNEAPOLIS 3074 84th Lane N E Blaine Missouri COLUMBIA 4881 B I-70 Drive SW KANSAS CITY 9 N.E. Skyline Dr. Lee's Summit SPRINGFIELD 450 M S. Union ST. LOUIS 12832 Pennridge Dr. Montana BILLINGS 2625 Enterprise Ave. GREAT FALLS 2600 16th St. N.E. Black Eagle MISSOULA 2751 Charlo St. Nebraska NORTH PLATTE 601 Sioux Meadow Nevada ELKO 460 S. A Street LAS VEGAS 3417 Losee Rd. CARSON CITY 3880 Technology Way New Mexico ALBUQUERQUE 5911 Office Blvd. FARMINGTON 1414 Schofield Lane Resident Branch ROSWELL 710 East College North Dakota BISMARCK 3800 Commerce Drive, Suite C FARGO 710 38th St. N.W. Unit C Oklahoma OKLAHOMA CITY 4611 S.W. 20th St. TULSA 804 S. 8th St. Broken Arrow Oregon BEND 20409 N. W. Cady Way Resident Branch EUGENE 2545-F Prairie Rd. MEDFORD 777 East Vilas Rd. Central Point PORTLAND 7515 N.E. 33rd Dr. SALEM 3790-G Silverton Rd. NE South Dakota RAPID CITY 2030 Creek Dr. SIOUX FALLS 2405 W. 5th St. Tennessee MEMPHIS 5753 E. Shelby Dr., Ste 1 Texas AMARILLO 1415 S. Johnson St. AUSTIN 2004 Lamar Dr. Round Rock CORPUS CHRISTI 3909 Wow Road DALLAS/FT. WORTH 744 Avenue H East Arlington EL PASO 1325 Don Haskins Dr. HOUSTON 6638 Rupley Circle LUBBOCK 1608 D No. University Resident Branch McALLEN 1312 E. Laurel ODESSA 2017 W. 7th SAN ANTONIO 4930 Center Park WICHITA FALLS 1404 Beverly Drive Utah SALT LAKE CITY 2230 So. 2000 West Washington SEATTLE 8660 Willows Rd. Redmond SPOKANE E. 10915 Montgomery Dr. TACOMA 9412 Front Street Lakewood YAKIMA 2301 S. 18th Street Union Gap Wisconsin GREEN BAY 1227 S. Maple Ave. LA CROSSE 1232 Clinton St. MADISON 1017 Jonathan Dr. MILWAUKEE W. 182 S8335-A Racine Ave. Muskego Wyoming CASPER 2170 N. Old Salt Creek Hwy. CUSTOM COFFEE PLAN BRANCHES: California NORTH HOLLYWOOD 7419 Bellaire Ave. SAN DIEGO 7855-A Ostrow St. SAN LEANDRO 3041 Teagarden TORRANCE 20333 S. Normandie Ave. Colorado DENVER 5595 Joliet Street, #B Texas ARLINGTON 722 Avenue H East HOUSTON 11519 South Petropark Drive 9/12/2004