-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, W1J+n6zHrq64dZoqlYSoUzb8XuBxBD798g3dvGd7wUBdOvLkciXP6u12F8I9ZwMj 2Mccx6J0cDsuvSXrI9aX/g== 0000034563-01-000001.txt : 20010214 0000034563-01-000001.hdr.sgml : 20010214 ACCESSION NUMBER: 0000034563-01-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010213 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FARMER BROTHERS CO CENTRAL INDEX KEY: 0000034563 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090] IRS NUMBER: 950725980 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-01375 FILM NUMBER: 1535390 BUSINESS ADDRESS: STREET 1: 20333 S NORMANDIE AVE CITY: TORRANCE STATE: CA ZIP: 90502 BUSINESS PHONE: 3107875200 MAIL ADDRESS: STREET 1: 20333 SOUTH NORMANDIE AVENUE CITY: TORRANCE STATE: CA ZIP: 90502 10-Q 1 0001.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended December 31, 2000 Commission file number 0-1375 FARMER BROS. CO. California 95-0725980 State of Incorporation Federal ID Number 20333 S. Normandie Avenue, Torrance, California 90502 Registrant's Address Zip (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, 2000. PAGE 1 OF 11 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, 2000 1999 2000 1999 Net sales $57,795 $56,303 $109,810 $109,371 Cost of goods sold 19,164 23,400 38,876 43,698 38,631 32,903 70,934 65,673 Selling expense 21,253 20,230 41,234 40,160 General and administrative expenses 2,614 2,214 5,478 4,205 23,867 22,444 46,712 44,365 Income from operations 14,764 10,459 24,222 21,308 Other income: Dividend income 746 654 1,504 1,269 Interest income 3,209 2,384 6,200 4,654 Other, net 795 363 666 109 4,750 3,401 8,370 6,032 Income before taxes 19,514 13,860 32,592 27,340 Income taxes 7,707 5,544 12,874 10,936 Income before cumulative effect of accounting change 11,807 8,316 19,718 16,404 Cumulative effect of accounting change, net of income taxes - - (310) - Net income $11,807 $ 8,316 $ 19,408 $ 16,404 Income per common share: Before cumulative effect of accounting change $ 6.40 $ 4.45 $10.70 $ 8.77 Cumulative effect of accounting change - - (.17) - Net income per share $ 6.40 $ 4.45 $10.53 $ 8.77 Weighted average shares outstanding 1,842,807 1,870,134 1,842,554 1,870,444 Dividends declared per share $0.80 $0.75 $1.60 $1.50 The accompanying notes are an integral part of these financial statements. FARMER BROS. CO. CONSOLIDATED BALANCE SHEETS (Unaudited) December 31, June 30, 2000 2000 ASSETS Current assets: Cash and cash equivalents $ 22,427 $ 15,504 Short term investments 224,081 114,346 Accounts and notes receivable, net 19,809 18,494 Inventories 35,959 36,770 Income tax receivable 1,340 1,340 Deferred income taxes 1,224 1,224 Prepaid expenses 482 882 Total current assets 305,322 188,560 Property, plant and equipment, net 39,514 38,741 Notes receivable 3,160 3,081 Long term investments - 94,243 Other assets 25,240 23,975 Deferred income taxes 3,104 4,867 Total assets $376,340 $353,467 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 6,271 $ 5,921 Accrued payroll expenses 6,153 5,953 Other 7,412 5,092 Total current liabilities 19,836 16,966 Accrued postretirement benefits 19,934 19,198 Other long term liabilities 4,190 4,190 24,124 23,388 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 16,408 16,359 Retained earnings 327,614 311,153 Unearned ESOP shares (13,568) (13,679) Accumulated other comprehensive income - (2,646) Total shareholders' equity 332,380 313,113 Total liabilities and shareholders' equity $376,340 $353,467 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, 2000 1999 Cash flows from operating activities: Net income $ 19,408 $ 16,404 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting change 310 - Depreciation 2,717 2,872 Deferred income taxes 1,763 - Loss on sales of assets (19) 43 ESOP Contribution expense 549 - Net loss (gain) on investments (462) 182 Net unrealized loss on investments reclassified as trading 2,336 - Change in assets and liabilities: Investments classified as trading (15,030) - Accounts and notes receivable (1,352) (3,545) Inventories 811 (5) Income tax receivable - 249 Prepaid expenses and other assets (897) (1,633) Accounts payable 350 2,310 Accrued payroll and expenses and other liabilities 2,520 705 Other long term liabilities 736 805 Total adjustments (5,668) 1,983 Net cash provided by operating activities $ 13,740 $ 18,387 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, 2000 1999 Net cash provided by operating activities: $13,740 $18,387 Cash flows from investing activities: Purchases of property, plant and equipment (3,517) (7,722) Proceeds from sales of property, plant and equipment 79 175 Purchases of investments - (162,031) Proceeds from sales of investments - 162,636 Notes issued (78) - Notes repaid 36 68 Net cash used in investing activities (3,480) (6,874) Cash flows from financing activities: Dividends paid (2,947) (2,809) Purchase of common stock - 3,160 ESOP loan (390) - Net cash used in financing activities (3,337) (5,969) Net decrease in cash and cash equivalents 6,923 5,544 Cash and cash equivalents at beginning of period 15,504 4,404 Cash and cash equivalents at end of period $22,427 $ 9,948 Supplemental disclosure of cash flow information: Income tax payments $10,257 $ 9,993 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 the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. It is our opinion that all adjustments of a normal recurring nature necessary for a fair statement of the results of operations for the interim periods have been made. The results of operations in the six month period ended December 31, 2000 are not necessarily indicative of the results that may be expected in the fiscal year ending June 30, 2001. Note 2. Summary Significant Accounting Policies Derivatives In June 1998 the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by Statements 137 and 138. The Statement requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is immediately recognized in earnings. The adoption of Statement No. 133, as amended, on July 1, 2000, resulted in a cumulative effect of an accounting change of $515,000 being recognized in the Statement of Net Income, net of taxes, and a corresponding credit in other comprehensive income. The Company purchases various derivative instruments as investments or to create natural economic hedges of its interest rate risk and commodity price risk. At December 31, 2000 derivative instruments are not designated as accounting hedges as defined by Statement 133. The fair value of derivative instruments is based upon broker quotes. Investments, consisting of marketable debt and equity securities and money market instruments, are held for trading purposes and are stated at fair value. Gains and losses, both realized and unrealized, are included in other income and expense. Note 3 Investments On July 1, 2000 the Company transferred all of its investments classified as "available for sale" at June 30, 2000 into the "trading" category. Accordingly, the Company recognized the accumulated unrealized loss of $3,894,000 in the consolidated statement of net income for the period ended September 30, 2000 as other income and a corresponding amount in other comprehensive income for the period ended September 30, 2000. The following is a summary of trading investments at December 31, 2000. (In thousands) Fair Value Corporate debt $ 58,263 U.S. Treasury obligations 60,978 U.S. Agency obligations 52,197 Preferred stock 44,127 Other fixed income 8,002 Futures, options and other and derivative investments 514 $224,081 Net unrealized holding gains on trading securities included in earnings is $2,336,000 at December 31, 2000. Note 4. Inventories (In thousands) Processed Unprocessed Total December 31, 2000 Coffee $ 3,912 $ 9,282 $13,194 Allied products 11,601 5,117 16,718 Coffee brewing equipment 2,101 3,946 6,047 $17,614 $18,345 $35,959 June 30, 2000 Coffee $ 4,007 $ 9,239 $13,246 Allied products 11,922 5,210 17,132 Coffee brewing equipment 2,034 4,358 6,392 $17,963 $18,807 $36,770 Note 5. Employee Stock Ownership Plan During the three month period ended December 31, 2000 the Company loaned the ESOP $326,000 which the ESOP used to purchase additional shares, and the Company charged $261,000 to compensation expense related to the ESOP. The difference between cost and fair market value of committed to be released shares is recorded as additional paid-in capital. The ESOP shares as of December 31, 2000 are as follows: Allocated shares 5,858 Committed to be released shares - Unallocated shares 82,917 Total ESOP shares 88,775 Note 6. Comprehensive Income (In thousands) For the three months For the six months ended December 31, ended December 31, 2000 1999 2000 1999 Net income $11,807 $ 8,316 $19,408 $16,404 Unrealized investment gains (losses), net - (1,010) 2,646 (1,392) Total comprehensive income $11,807 $ 7,306 $22,054 $15,012 Management's Discussion and Analysis of Financial Condition and Results of Operations Net sales for the second quarter of fiscal 2001 increased 2.7% to $57,795,000 as compared to $56,303,000 in the same quarter of fiscal 2000 and 2.5% as compared to $56,408,000 in the same quarter of fiscal 1999 primarily because of higher sales prices of roast coffee and increased sales of allied products. The cost of green coffee has declined in 1999 and 2000. As a result, gross profit increased 17% to $38,631,000 as compared to $32,903,000 in the same quarter of fiscal 2000 and increased 20% as compared to $32,095,000 in the same quarter of fiscal 1999. Operating expenses in the second quarter of fiscal 2001, consisting of selling and general and administrative expenses, increased 6.3% to $23,867,000 as compared to $22,444,000 in the same quarter of fiscal 2000, and increased 9.7% as compared to $21,750,000 in the same quarter of fiscal 1999. The increase is primarily attributed to compensation related expenses, higher gasoline and diesel costs and larger coffee brewing equipment costs. On July 1, 2000 we adopted the Financial Accounting Standards Board (FASB) Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by Statements 137 and 138. The statement requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not designated as hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The adoption of Statement No. 133 and 138 on July 1, 2000 resulted in $3,894,000 recognized in "Other expense," and $515,000 recognized as the "Cumulative effect of accounting change", adjusted for income taxes. The after tax cumulative effect adjustment of $310,000 represents approximately $0.17 per share. Income after taxes for the second quarter of fiscal 2001 reached $11,807,000, or $6.40 per share, as compared to $8,316,000, or $4.45 per share, in the second quarter of fiscal 2000 and $7,905,000, or $4.10 per share, in the same quarter of fiscal 1999. Net income for the first half of fiscal 2001 before the cumulative effect of accounting change increased 20% to $19,718,000, or $10.69 per share, as compared to $16,404,000 or $8.77 per share in fiscal 2000 and increased 28% as compared to $15,444,000 or $8.02 per share in the same period of fiscal 1999. Quarterly Summary of Results (In thousands of dollars) 12/31/99 03/31/00 06/30/00 09/30/00 12/31/00 Net sales 56,303 56,354 52,963 52,015 57,795 Gross profit 32,903 38,230 37,816 32,303 38,631 Operating income 10,459 13,913 13,744 9,458 14,764 Net income 8,316 10,364 10,808 7,601 11,807 As a percentage of sales 12/31/99 03/31/00 06/30/00 09/30/00 12/31/00 Net sales 100.00 100.00 100.00 100.00 100.00 Gross profit 58.44 67.84 71.40 62.10 66.84 Operating income 18.58 24.69 25.95 18.18 25.55 Net income 14.77 18.39 20.41 14.61 20.43 In dollars 12/31/99 03/31/00 06/30/00 09/30/00 12/31/00 Net income per share 4.45 5.60 5.85 4.13 6.40 Market Risk Disclosures Financial Markets Our portfolio of investment grade money market instruments includes bankers acceptances, discount commercial paper, medium term notes and federal agency and treasury securities. As of December 31, 2000, over 62% of these funds were invested in instruments with maturities shorter than one hundred eighty one days. The portfolio's interest rate risk is not hedged. Its average maturity is approximately 170 days and a 100 basis point move in the Fed Funds Rate is illustrated in the following table. Interest Rate Changes (In thousands) Change in Market Market Value of December 31, 2000 Value of Fixed Fixed Income Investments Income Investments - -100 b.p. $201,234 2,012 unchanged 201,234 - +100 b.p. 201,234 (2,012) We are exposed to market value risk arising from changes in interest rates on our portfolio of preferred stock. 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 stock. Specifically, we attempt to manage the risk arising from changes in the general level of interest rates. 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 December 31, 2000. This table is predicated on an instantaneous change in the general level of interest rates and assumes predictable relationships between the prices of preferred stock holdings, the yields on U.S. Treasury securities, and related futures and options. Interest Rate Changes (In thousands) Market Value of December 31, 2000 Change in Market Preferred Futures & Total Value of Total Stock Options Portfolio Portfolio - -200 basis points $50,463.9 $0.0 $50,463.9 $6,002.9 ("b.p.") - -100 b.p. 47,684.4 .2 47,684.6 3,223.6 Unchanged 44,127.4 333.6 44,461.0 0.0 +100 b.p. 40,403.4 3,560.6 43,964.0 (497.0) +200 b.p. 36,915.2 7,063.3 43,978.5 (482.5) 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. At December 31, 2000 and 1999 the derivatives consisted entirely of put options on a U.S. Treasury Bond futures contract. 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, 2000. 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, 2000. Commodity Risk Disclosure (In thousands) Market Value of Coffee Cost Coffee December 31, 2000 Change in Market Value Change Inventory Futures & Options Totals Derivatives Inventory - -10% $11,875 $166 $12,040 $98 ($1,319) unchanged 13,194 68 13,262 - - +10% 14,513 (30) 14,483 (98) 1,319 At December 31, 2000 the derivatives consisted mainly of commodity futures with maturities shorter than three months. 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 November 27, 2000. 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, Catherine E. Crowe, Lewis A. Coffman, Guenter W. Berger and John M. Anglin. There were 1,499,396 shares for election and 156,548 shares against election. The proposed amendment to Article III, Section 2 of the Bylaws of the Company to provide for a variable number of directors of five to nine from the presently authorized six. By a vote of 1,557,320 shares for, 97,054 shares against and 1,570 shares abstaining the resolution was adopted. The proposal to appoint Ernst & Young LLP as the independent accountants for the Company for the year ended June 30, 2001 was approved with 1,655,233 shares in favor of the resolution, 560 shares against and 151 shares abstaining. Item 5. Other information none. Item 6. Exhibits and reports on Form 8-K. (a) Exhibits. (2) Plan of acquisition, reorganization, arrangement, liquidation or succession. not applicable. (4) Instruments defining the right of security holders, including indentures. not applicable. (11) Statement re computation of per share earning. not applicable. (15) Letter re unaudited interim financial information not applicable. (18) Letter re change in accounting principles. not applicable. (19) Report furnished to security holders. not applicable. (22) Published report regarding matters submitted to vote of security holders. not applicable. (23) Consents of experts and counsel. not applicable. (24) Power of attorney. not applicable. (27) Financial Data Schedule See attached Form EX-27. (99) Additional exhibits. not applicable. 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. Date: February 14, 2001 Farmer Bros. Co. (Registrant) /s/ John E. Simmons John E. Simmons Treasurer and Chief Financial Officer EX-27 2 0002.txt
5 1000 3-MOS JUN-30-2001 DEC-31-2000 22427 224081 19809 420 35959 305322 39514 60756 376340 19836 0 0 0 1926 330454 376340 57795 57795 19164 23867 0 0 0 19514 7707 11807 0 0 0 11807 6.40 6.40
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