Farmer Bros. Co. reports financial results for the third quarter ended March 31, 2015.
Third Quarter Fiscal 2015 Highlights:
- Net sales increased 5.6% to $132.5 million in the third quarter;
- Loss from operations improved $0.7 million to $(1.4) million in the third quarter compared to $(2.1) million;
- Net loss was $(2.6) million, or $(0.16) per common share, in the third quarter compared to net income of $2.5 million, or $0.16 per diluted common share;
- Restructuring and other transition expenses associated with the Company’s recently announced Corporate Relocation Plan were $3.6 million in the third quarter; and
- Non-GAAP Net income excluding restructuring and other transition expenses was $1.0 million, and non-GAAP Net income excluding restructuring and other transition expenses per common share-diluted was $0.06 in the third quarter (these non-GAAP measures are reconciled to the corresponding GAAP measures at the end of this press release).
Third Quarter Fiscal 2015 Results:
Net sales for the third quarter of fiscal 2015 increased $7.0 million, or 5.6%, to $132.5 million from $125.5 million in the third quarter of the prior fiscal year primarily due to increases in sales of our coffee and other beverage products resulting primarily from the effects of pricing and product mix changes.
In the third quarter of fiscal 2015, we processed and sold approximately 20.9 million pounds of green coffee, down 3.9% versus the third quarter of fiscal 2014.
Mike Keown, President and CEO said, “We saw good top-line revenue growth in the third quarter driven primarily by price increases to customers under commodity-based pricing arrangements as well as our DSD-delivered street customers, more than offsetting the coffee volume softness we saw in the quarter.”
Gross profit in the third quarter of fiscal 2015 decreased $(1.5) million, or (3.1)%, to $46.6 million as compared to $48.1 million in the third quarter of fiscal 2014, primarily due to a 30% increase in the average cost of green coffee purchased, partially offset by the increase in net sales. Gross margin decreased 320 basis points to 35.1% in the fiscal quarter ended March 31, 2015 from 38.3% in the comparable period in the prior fiscal year, primarily due to the higher average cost of green coffee purchased.
Operating expenses in the third quarter of fiscal 2015 decreased $(2.1) million, or (4.3)%, to $48.0 million from $50.1 million in the third quarter of the prior fiscal year primarily due to decreases in selling, general and administrative expenses offset by $3.6 million in expenses incurred in relation to the Company’s recently announced Corporate Relocation Plan.
Loss from operations in the third quarter of fiscal 2015 was $(1.4) million compared to $(2.1) million in the third quarter of the prior fiscal year.
Total other expense in the third quarter of fiscal 2015 was $(1.4) million as compared to total other income of $4.8 million in the third quarter of the prior fiscal year. Total other expense in the third quarter included net losses on coffee-related derivative instruments of $(1.8) million, as compared to net gains on coffee-related derivative instruments of $3.7 million in the third quarter of the prior fiscal year.
Income tax benefit in the third quarter of fiscal 2015 was $0.2 million compared to income tax expense of $(0.2) million in the third quarter of the prior fiscal year.
As a result, net loss in the third quarter of fiscal 2015 was $(2.6) million, or $(0.16) per common share, compared to net income of $2.5 million, or $0.16 per diluted common share, in the third quarter of the prior fiscal year.
Non-GAAP Financial Measures:
Non-GAAP Net income excluding restructuring and other transition expenses was $1.0 million, and
Non-GAAP Net income excluding restructuring and other transition expenses per common share—diluted for the third quarter of fiscal 2015 was $0.06 in the third quarter of fiscal 2015.
Adjusted EBITDA in the third quarter of fiscal 2015 decreased to $8.8 million from $11.1 million in the third quarter of the prior fiscal year.
Net income excluding restructuring and other transition expenses per common share—diluted and Adjusted EBITDA are non-GAAP financial measures; reconciliation tables of reported net income per common share—diluted to Net income excluding restructuring and other transition expenses per common share—diluted and reported net income to Adjusted EBITDA are included at the end of this press release.
Update on Corporate Relocation Plan:
On February 5, 2015, the Company announced a plan (“Corporate Relocation Plan”) approved by the Board of Directors of the Company on February 3, 2015, pursuant to which the Company will close its Torrance, California facility and relocate these operations to a new manufacturing, distribution and corporate headquarters facility. The new facility will be located in the Town of Northlake, Denton County, Texas in the Dallas/Ft.Worth area. The Company expects to close its Torrance facility in phases beginning in the summer of 2015. Construction of the new facility and relocation are expected to be completed by the end of the summer of 2016. Approximately 350 positions are impacted as a result of the Torrance facility closure. The Torrance facility is expected to be sold after the relocation.
“We are pleased with the progress we have made in just a short amount of time, having now completed the transition of our Torrance, CA coffee production operations into our existing Houston, TX facility,” said Mike Keown, President and CEO. Mr. Keown continued, “We believe our plans are on track, as we prepare for the next steps in our corporate relocation to our recently announced new site in Northlake, TX.”
Expenses related to the Corporate Relocation Plan in the nine months ended March 31, 2015 consisted of $2.5 million in employee retention and separation benefits, $0.1 million in expenses facility relocation costs related to the relocation of certain distribution centers and $2.0 million in other related costs including travel, legal, consulting and other professional services. Subject to the finalization of certain estimates, the Company estimates that it will incur approximately $25 million in cash costs in connection with the exit of the Torrance facility consisting of $14 million in employee retention and separation benefits, $4 million in facility relocation costs and $7 million in other related costs. The Company may also incur certain other non-cash asset impairment and pension-related costs which have not yet been determined.
Treasurer and CFO, Mark Nelson said, “As we execute our Corporate Relocation Plan, we remain focused on delivering high levels of customer service, while we streamline functions and processes to drive the supply-chain cost synergies we have outlined.”
