Fourth Quarter HighlightsGreen Coffee Pounds
Increased 0.9%Gross Margin Improved 100 bps to 40.1%Income from
Operations Declined $1.4 millionNet Income Decreased to $1.1
millionAdjusted EBITDA Increased 30.7% to $11.6 million
Farmer Bros. Co. (NASDAQ:FARM) (the "Company") today reported
financial results for its fourth quarter and fiscal year ended June
30, 2017.
Fourth Quarter Fiscal 2017 Highlights:
- Volume of green coffee pounds processed and sold increased
0.9%;
- Gross profit increased $1.2 million and gross margin increased
100 basis points to 40.1%, year-over-year;
- Income from operations declined by $1.4 million to $1.7 million
due to higher one-time costs and fewer one-time benefits;
- Net income decreased to $1.1 million from $84.2 million
primarily due to the non-cash income tax benefit of $80.3 million
from the release of valuation allowance on deferred tax assets in
the fourth quarter of the prior fiscal year; and
- Adjusted EBITDA increased 30.7% to $11.6 million, and Adjusted
EBITDA Margin was 8.7%, an increase of 210
basis points.*
Fiscal 2017 Highlights:
- Volume of green coffee pounds processed and sold increased
5.3%;
- Gross profit increased $5.3 million and gross margin increased
120 basis points to 39.5%;
- Income from operations increased 415.5% to $42.2 million from
$8.2 million, including $37.4 million in net gain from the sale of
our Torrance facility in fiscal 2017;
- Net income was $24.4 million, or $1.45 per common
share—diluted, compared to $89.9 million, or $5.41 per common
share—diluted, last year, including non-cash income tax benefit of
$80.3 million from the release of valuation allowance on deferred
tax assets in fiscal 2016; and
- Adjusted EBITDA increased 11.1% to $46.0 million and Adjusted
EBITDA Margin was 8.5%, an increase of 90 basis points.*(*The
foregoing non-GAAP financial measures are reconciled to their
corresponding GAAP measures at the end of this press release).
"Overall, it was a very solid quarter to close
a transformational year and one that we believe further
positions Farmer Brothers for future success," said Mike
Keown, President and CEO. "Our continued progress in
gross margin and Adjusted EBITDA improvement shows
the ongoing benefits of our restructure. During the
fourth quarter, we extended contracts with key customers
covering approximately 20 million pounds of green coffee and won
approximately 2 million pounds of new business, which is currently
expected to begin shipping in the second quarter of fiscal
2018. We believe this demonstrates the
industry's support for our talented organization and new
capabilities."
Recent Operational Updates
- Initiated roasting production at Northlake, Texas facility with
current production levels at 6 million pounds, on an annual run
rate basis;
- Announced agreement to acquire substantially all the assets of
Boyd Coffee Company with a combination of cash and stock;
- Developed Artisan Direct Trade Coffee Line; and
- Launched several new products, including the New China Mist
Naturally Flavored Iced Tea product line, Artisan Hot Tea and
Artisan Cold Brew Coffee.
Fourth Quarter and Fiscal 2017 Results:
Selected Financial Data
The selected financial data presented below under the captions
"Income statement data," "Operating data" and "Balance sheet and
other data" summarizes certain performance measures for the three
months and fiscal years ended June 30, 2017 and 2016
(unaudited).
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Fiscal Year Ended June 30, |
|
|
2017 |
|
2016 |
|
Y-o-YChange |
|
2017 |
|
2016 |
|
Y-o-YChange |
(In thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
Income
statement data: |
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
$ |
133,800 |
|
$ |
134,162 |
|
- 0.3% |
|
$ |
541,500 |
|
$ |
544,382 |
|
- 0.5% |
Gross
margin |
|
40.1% |
|
39.1% |
|
+ 100
bps |
|
|
39.5% |
|
|
38.3% |
|
+ 120
bps |
Income
from operations |
|
$ |
1,693 |
|
$ |
3,075 |
|
- 44.9% |
|
$ |
42,166 |
|
$ |
8,179 |
|
+ 415.5% |
Net
income |
|
$ |
1,112 |
|
$ |
84,239 |
|
- 98.7% |
|
$ |
24,400 |
|
$ |
89,918 |
|
- 72.9% |
Net
income per common share—diluted |
|
$ |
0.07 |
|
$ |
5.05 |
|
-
$4.98 |
|
$ |
1.45 |
|
$ |
5.41 |
|
-
$3.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
data: |
|
|
|
|
|
|
|
|
|
|
|
|
Coffee
pounds |
|
23,285 |
|
23,088 |
|
+ 0.9% |
|
95,499 |
|
90,669 |
|
+ 5.3% |
Non-GAAP
net income |
|
$ |
3,166 |
|
$ |
3,801 |
|
- 16.7% |
|
$ |
11,614 |
|
$ |
17,607 |
|
- 34.0% |
Non-GAAP
net income per diluted common share |
|
$ |
0.19 |
|
$ |
0.23 |
|
-
$0.04 |
|
$ |
0.70 |
|
$ |
1.06 |
|
-
$0.36 |
EBITDA |
|
$ |
8,268 |
|
$ |
9,061 |
|
- 8.8% |
|
$ |
65,509 |
|
$ |
31,120 |
|
+ 110.5% |
EBITDA
Margin |
|
6.2% |
|
6.8% |
|
- 60
bps |
|
12.1% |
|
5.7% |
|
+ 640
bps |
Adjusted
EBITDA |
|
$ |
11,629 |
|
$ |
8,900 |
|
+ 30.7% |
|
$ |
45,973 |
|
$ |
41,386 |
|
+ 11.1% |
Adjusted
EBITDA Margin |
|
8.7% |
|
6.6% |
|
+ 210
bps |
|
8.5% |
|
7.6% |
|
+ 90
bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
sheet and other data: |
|
|
|
|
|
|
|
|
|
|
|
|
Total
capital expenditures excluding new facility |
|
$ |
1,574 |
|
$ |
10,889 |
|
- 85.8% |
|
$ |
19,246 |
|
$ |
26,606 |
|
- 27.8% |
Total
capital expenditures |
|
$ |
14,115 |
|
$ |
19,332 |
|
- 27.0% |
|
$ |
84,949 |
|
$ |
50,475 |
|
+ 68.3% |
Depreciation and amortization expense |
|
$ |
6,357 |
|
$ |
5,053 |
|
+ 25.8% |
|
$ |
22,970 |
|
$ |
20,774 |
|
+ 10.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income, Non-GAAP net income per diluted common
share, EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA
Margin are non-GAAP financial measures; a reconciliation of these
non-GAAP measures to their corresponding GAAP measures is included
at the end of this press release.
Volume of green coffee processed and sold increased 0.9% for the
quarter. Excluding the impact of West Coast Coffee, net coffee
pounds processed and sold were flat. Pound growth was slower
than anticipated primarily due to softness in several of our large
national accounts during the quarter.
Net sales were $133.8 million in the fourth quarter, a decrease
of 0.3%, or $0.4 million, over the prior year period, primarily due
to a decline in net sales of spice products of $3.8 million, a
decline in net sales of frozen liquid coffee of $0.6 million, and a
decline in net sales of other beverages of $0.4 million, partially
offset by an increase in net sales of roast and ground coffee of
$2.8 million, and an increase in net sales of tea of $1.2
million.
Gross profit in the fourth quarter of fiscal 2017 increased $1.2
million, or 2.3%, to $53.6 million from $52.4 million and gross
margin increased 100 basis points to 40.1% from 39.1%. The increase
is gross margin was primarily due to the combination of higher
pricing and lower raw materials costs which contributed 146 basis
points, and the benefit from the contribution of new sales volume
in fiscal 2017 from China Mist and West Coast Coffee which carry a
higher gross margin than the base business by 46 basis points,
offset by higher depreciation expense for our new Northlake, Texas
production facility of 45 basis points, with the remaining offset
of 47 basis points primarily due to sales mix with higher net sales
from our national accounts which carry a lower gross
margin.
Operating expenses in the fourth quarter of fiscal 2017
increased $2.5 million (or 520 basis points), to $51.9 million, or
38.8% of net sales, from $49.4 million, or 36.8% of net sales in
the prior year period. The increase in operating expenses in the
fourth quarter of fiscal 2017 as compared to the prior year period
was primarily due to $1.8 million in higher selling expenses, and
$3.0 million in higher expense due to net losses from sales of
assets, as compared to net gains in the prior year period, offset
by a decline in restructuring costs of $1.2 million and a decline
in general and administrative expenses of $1.0 million.
Operating expenses, excluding restructuring and other transition
expenses, net gains and losses from sales of assets, and
acquisition costs were $48.8 million or 36.5% of sales this year as
compared to $49.5 million or 36.9% of sales, a decline of 40 basis
points.
The higher selling expense of $1.8 million were primarily
associated with the addition of the China Mist and West Coast
Coffee operations. The lower general and administrative expenses of
$1.0 million were primarily due to lower payroll and benefits of
$2.7 million, partially offset by expenses associated with a
special stockholders meeting and costs associated with the Boyd
Coffee Company transaction.
In the fourth quarter of fiscal 2017, we incurred net losses of
$0.3 million from sales of assets, primarily equipment, as compared
to net gains of $2.6 million from sales of assets, primarily real
estate, in the prior year period. The restructuring costs of $1.5
million in the fourth quarter primarily relate to expenses
associated with the DSD restructuring plan.
As a result of the foregoing factors, income from operations in
the fourth quarter of fiscal 2017 was $1.7 million, as compared to
$3.1 million in the prior year period.
Total other expense in the fourth quarter of fiscal 2017 was
$0.5 million, as compared to total other income of
$0.8 million in the prior year period, an increase in expense
of $1.3 million, primarily due to $0.7 million in higher interest
expense and $0.6 million in higher "Other, net" due to net losses
from derivative instruments and investments, as compared to net
gains in the prior year period. The net losses and net gains from
derivative instruments and investments in both periods, were
primarily due to mark-to-market adjustments on coffee-related
derivative instruments not designated as accounting hedges.
Income tax expense was $44,000 in the fourth quarter of fiscal
2017 as compared to income tax benefit of $80.3 million in the
fourth quarter of the prior year period. In the fourth quarter of
the prior fiscal year, the Company released valuation allowance
previously recorded against deferred tax assets, resulting in a
non-cash reduction in income tax expense, or an income tax benefit
of $80.3 million.
As a result of the foregoing factors, net income was $1.1
million, or $0.07 per common share—diluted in the fourth quarter of
fiscal 2017, as compared to $84.2 million, or $5.05 per common
share—diluted in the prior year period.
Non-GAAP Financial Measures:
Non-GAAP net income, Non-GAAP net income per diluted common
share, EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA
Margin are non-GAAP financial measures; a reconciliation of these
non-GAAP measures to their corresponding GAAP measures is included
at the end of this press release.
Beginning in the fourth quarter of fiscal 2017, we modified the
calculation of Non-GAAP net income, Non-GAAP net income per diluted
common share, Adjusted EBITDA and Adjusted EBITDA Margin to exclude
acquisition costs. Acquisition costs include legal expenses,
consulting expenses and internal costs associated with acquisitions
and integration of those acquisitions. In the fourth quarter of
fiscal 2017 acquisition costs were significant and, we believe,
excluding them will help investors to better understand our
operating results and more accurately compare them across periods.
We have not adjusted the historical presentation of Non-GAAP net
income, Non-GAAP net income per diluted common share, Adjusted
EBITDA and Adjusted EBITDA Margin because acquisition costs in
prior periods were not material to the Company’s results of
operations.
Non-GAAP net income in the fourth quarter of fiscal 2017 was
$3.2 million, as compared to $3.8 million in the fourth quarter of
the prior fiscal year. Non-GAAP net income per diluted common share
was $0.19 in the fourth quarter of fiscal 2017, as compared to
$0.23 per diluted common share in the fourth quarter of the prior
fiscal year.
Adjusted EBITDA was $11.6 million in the fourth quarter of
fiscal 2017, as compared to $8.9 million in the prior year period,
and Adjusted EBITDA Margin was 8.7% in the fourth quarter of fiscal
2017, as compared to 6.6% in the prior year period.
About Farmer Bros. Co.
Founded in 1912, Farmer Bros. Co. is a national coffee roaster,
wholesaler and distributor of coffee, tea and culinary products.
The Company's product lines include organic, Direct Trade and
sustainably-produced coffee. With a robust line of coffee, hot and
iced teas, cappuccino mixes, spices, and baking/biscuit mixes, the
Company delivers extensive beverage planning services and culinary
products to its U.S. based customers. The Company serves a wide
variety of customers, from small independent restaurants and
foodservice operators to large institutional buyers like restaurant
and convenience store chains, hotels, casinos, hospitals, and
gourmet coffee houses, as well as grocery chains with private brand
coffee and consumer-facing branded coffee and tea products.
Headquartered in Northlake, Texas, Farmer Bros. Co. generated
net sales of over $500 million in fiscal 2017 and has over 1,600
employees nationwide. The Company’s primary brands include Farmer
Brothers®, Superior®, Metropolitan™, Cain’s™ and McGarvey®
and China Mist®. For more information,
visit: www.farmerbros.com.
Investor Conference Call
Michael Keown, President and CEO and David G. Robson, Treasurer
and CFO, will host an audio-only investor conference call today,
September 28, 2017, at 5:00 p.m. Eastern time (4:00 p.m. Central
time) to review the Company’s financial results for the fourth
quarter and fiscal year ended June 30, 2017. The Company’s earnings
press release will be available on the Company’s website at
www.farmerbros.com under “Investor Relations.”
The call will be open to all interested investors through a live
audio web broadcast via the Internet
at—https://edge.media-server.com/m6/p/fd2c53su—and at the Company’s
website www.farmerbros.com under “Investor Relations.” The
call also will be available to investors and analysts by dialing
Toll Free: 1-(844) 423-9890 or international: 1-(716)
247-5805. The passcode/ID is 89203163.
The audio-only webcast will be archived for approximately 30
days on the Investor Relations section of the Farmer Bros. Co.
website, and will be available approximately two hours after the
end of the live webcast.
Forward-Looking Statements
Certain statements contained in this press release, are not
based on historical fact and are forward-looking statements within
the meaning of federal securities laws and regulations. These
statements are based on management's current expectations,
assumptions, estimates and observations of future events and
include any statements that do not directly relate to any
historical or current fact. These forward-looking statements can be
identified by the use of words like “anticipates,” “estimates,”
“projects, ” “expects, ” “plans, ” “believes, ” “intends, ” “will,
” “could,” “assumes” and other words of similar meaning. Owing to
the uncertainties inherent in forward-looking statements, actual
results could differ materially from those set forth in
forward-looking statements. The Company intends these
forward-looking statements to speak only at the time of this press
release and does not undertake to update or revise these statements
as more information becomes available except as required under
federal securities laws and the rules and regulations of the
Securities and Exchange Commission (“SEC”). Factors that could
cause actual results to differ materially from those in
forward-looking statements include, but are not limited to, the
success of our corporate relocation plan, the timing and success of
our direct-store-delivery restructuring plan, our success in
consummating acquisitions and integrating acquired businesses, the
adequacy and availability of capital resources to fund our existing
and planned business operations and our capital expenditure
requirements, the relative effectiveness of compensation-based
employee incentives in causing improvements in Company performance,
the capacity to meet the demands of the Company’s large national
account customers, the extent of execution of plans for the growth
of Company business and achievement of financial metrics related to
those plans, the success of the Company to retain and/or attract
qualified employees, the effect of the capital markets as well as
other external factors on stockholder value, fluctuations in
availability and cost of green coffee, competition,
organizational changes, changes in the strength of the economy,
business conditions in the coffee industry and food industry in
general, the Company's continued success in attracting new
customers, variances from budgeted sales mix and growth rates,
weather and special or unusual events, as well as other risks
described in this press release and other factors described from
time to time in the Company's filings with the SEC.
|
|
|
FARMER BROS. CO.CONSOLIDATED
STATEMENTS OF OPERATIONS(In thousands, except
share and per share data) (unaudited) |
|
|
|
|
|
Three Months Ended June 30, |
|
|
2017 |
|
2016 |
Net sales |
|
$ |
133,800 |
|
|
$ |
134,162 |
|
Cost of goods sold |
|
80,179 |
|
|
81,734 |
|
Gross profit |
|
53,621 |
|
|
52,428 |
|
Selling expenses |
|
39,286 |
|
|
37,457 |
|
General and
administrative expenses |
|
11,008 |
|
|
12,019 |
|
Restructuring and other
transition expenses |
|
1,474 |
|
|
2,678 |
|
Net gains from sale of
spice assets |
|
(155 |
) |
|
(162 |
) |
Net losses (gains) from
sales of other assets |
|
315 |
|
|
(2,639 |
) |
Operating expenses |
|
51,928 |
|
|
49,353 |
|
Income from
operations |
|
1,693 |
|
|
3,075 |
|
Other (expense)
income: |
|
|
|
|
Dividend
income |
|
199 |
|
|
275 |
|
Interest
income |
|
132 |
|
|
137 |
|
Interest
expense |
|
(755 |
) |
|
(84 |
) |
Other,
net |
|
(113 |
) |
|
521 |
|
Total
other (expense) income |
|
(537 |
) |
|
849 |
|
Income before
taxes |
|
1,156 |
|
|
3,924 |
|
Income tax expense
(benefit) |
|
44 |
|
|
(80,315 |
) |
Net income |
|
$ |
1,112 |
|
|
$ |
84,239 |
|
Net income per common
share—basic |
|
$ |
0.07 |
|
|
$ |
5.09 |
|
Net income per common
share—diluted |
|
$ |
0.07 |
|
|
$ |
5.05 |
|
Weighted average common
shares outstanding—basic |
|
16,697,765 |
|
|
16,551,040 |
|
Weighted average common
shares outstanding—diluted |
|
16,803,299 |
|
|
16,664,846 |
|
|
|
|
FARMER BROS. CO.CONSOLIDATED
STATEMENTS OF OPERATIONS(In thousands, except
share and per share data) (unaudited) |
|
|
|
|
|
Year Ended June 30, |
|
|
2017 |
|
2016 |
|
2015 |
Net sales |
|
$ |
541,500 |
|
|
$ |
544,382 |
|
|
$ |
545,882 |
|
Cost of goods sold |
|
327,765 |
|
|
335,907 |
|
|
348,846 |
|
Gross profit |
|
213,735 |
|
|
208,475 |
|
|
197,036 |
|
Selling expenses |
|
157,198 |
|
|
150,198 |
|
|
151,753 |
|
General and
administrative expenses |
|
42,933 |
|
|
41,970 |
|
|
31,173 |
|
Restructuring and other
transition expenses |
|
11,016 |
|
|
16,533 |
|
|
10,432 |
|
Net gain from sale of
Torrance facility |
|
(37,449 |
) |
|
— |
|
|
— |
|
Net gains from sale of
spice assets |
|
(919 |
) |
|
(5,603 |
) |
|
— |
|
Net (gains) losses from
sales of other assets |
|
(1,210 |
) |
|
(2,802 |
) |
|
394 |
|
Operating expenses |
|
171,569 |
|
|
200,296 |
|
|
193,752 |
|
Income from
operations |
|
42,166 |
|
|
8,179 |
|
|
3,284 |
|
Other (expense)
income: |
|
|
|
|
|
|
Dividend
income |
|
1,007 |
|
|
1,115 |
|
|
1,172 |
|
Interest
income |
|
567 |
|
|
496 |
|
|
381 |
|
Interest
expense |
|
(2,185 |
) |
|
(425 |
) |
|
(769 |
) |
Other,
net |
|
(1,201 |
) |
|
556 |
|
|
(3,014 |
) |
Total
other (expense) income |
|
(1,812 |
) |
|
1,742 |
|
|
(2,230 |
) |
Income before
taxes |
|
40,354 |
|
|
9,921 |
|
|
1,054 |
|
Income tax expense
(benefit) |
|
15,954 |
|
|
(79,997 |
) |
|
402 |
|
Net income |
|
$ |
24,400 |
|
|
$ |
89,918 |
|
|
$ |
652 |
|
Net income per common
share—basic |
|
$ |
1.46 |
|
|
$ |
5.45 |
|
|
$ |
0.04 |
|
Net income per common
share—diluted |
|
$ |
1.45 |
|
|
$ |
5.41 |
|
|
$ |
0.04 |
|
Weighted average common
shares outstanding—basic |
|
16,668,745 |
|
|
16,502,523 |
|
|
16,127,610 |
|
Weighted average common
shares outstanding—diluted |
|
16,785,752 |
|
|
16,627,402 |
|
|
16,267,134 |
|
|
|
|
|
|
FARMER
BROS. CO.CONSOLIDATED BALANCE
SHEETS (In thousands, except share and per
share data) (unaudited) |
|
|
|
|
|
|
|
June 30,2017 |
|
June 30,2016 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
6,241 |
|
|
$ |
21,095 |
|
Short-term investments |
|
368 |
|
|
25,591 |
|
Accounts
receivable, net of allowance for doubtful accounts of $721 and
$714, respectively |
|
46,446 |
|
|
44,364 |
|
Inventories |
|
56,251 |
|
|
46,378 |
|
Income
tax receivable |
|
318 |
|
|
247 |
|
Short-term derivative assets |
|
— |
|
|
3,954 |
|
Prepaid
expenses |
|
7,540 |
|
|
4,557 |
|
Assets
held for sale |
|
— |
|
|
7,179 |
|
Total
current assets |
|
117,164 |
|
|
153,365 |
|
Property, plant and
equipment, net |
|
176,066 |
|
|
118,416 |
|
Goodwill |
|
10,996 |
|
|
272 |
|
Intangible assets,
net |
|
18,618 |
|
|
6,219 |
|
Other assets |
|
6,837 |
|
|
9,933 |
|
Deferred income
taxes |
|
63,055 |
|
|
80,786 |
|
Total
assets |
|
$ |
392,736 |
|
|
$ |
368,991 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts
payable |
|
$ |
39,784 |
|
|
$ |
23,919 |
|
Accrued
payroll expenses |
|
17,345 |
|
|
24,540 |
|
Short-term borrowings under revolving credit facility |
|
27,621 |
|
|
109 |
|
Short-term obligations under capital leases |
|
958 |
|
|
1,323 |
|
Short-term derivative liabilities |
|
1,857 |
|
|
— |
|
Other
current liabilities |
|
9,702 |
|
|
6,946 |
|
Total
current liabilities |
|
97,267 |
|
|
56,837 |
|
Accrued pension
liabilities |
|
51,281 |
|
|
68,047 |
|
Accrued postretirement
benefits |
|
19,788 |
|
|
20,808 |
|
Accrued workers’
compensation liabilities |
|
7,548 |
|
|
11,459 |
|
Other long-term
liabilities—capital leases |
|
237 |
|
|
1,036 |
|
Other long-term
liabilities |
|
1,480 |
|
|
28,210 |
|
Total
liabilities |
|
$ |
177,601 |
|
|
$ |
186,397 |
|
Commitments and
contingencies |
|
|
|
|
Stockholders’
equity: |
|
|
|
|
Preferred
stock, $1.00 par value, 500,000 shares authorized and none
issued |
|
$ |
— |
|
|
$ |
— |
|
Common
stock, $1.00 par value, 25,000,000 shares authorized; 16,846,002
and 16,781,561 shares issued and outstanding at June 30, 2017
and 2016, respectively |
|
16,846 |
|
|
16,782 |
|
Additional paid-in capital |
|
41,495 |
|
|
39,096 |
|
Retained
earnings |
|
221,182 |
|
|
196,782 |
|
Unearned
ESOP shares |
|
(4,289 |
) |
|
(6,434 |
) |
Accumulated other comprehensive loss |
|
(60,099 |
) |
|
(63,632 |
) |
Total
stockholders’ equity |
|
$ |
215,135 |
|
|
$ |
182,594 |
|
Total
liabilities and stockholders’ equity |
|
$ |
392,736 |
|
|
$ |
368,991 |
|
|
FARMER BROS. CO.CONSOLIDATED STATEMENTS
OF CASH FLOWS (Unaudited)(In thousands) |
|
|
|
Year Ended June 30, |
|
|
2017 |
|
2016 |
|
2015 |
Cash flows from
operating activities: |
|
|
|
|
|
|
Net
income |
|
$ |
24,400 |
|
|
$ |
89,918 |
|
|
$ |
652 |
|
Adjustments
to reconcile net income to net cash provided by operating
activities: |
|
|
Depreciation and amortization |
|
22,970 |
|
|
20,774 |
|
|
24,179 |
|
Provision
for (recovery of) doubtful accounts |
|
325 |
|
|
71 |
|
|
(8 |
) |
Restructuring and other transition expenses, net of payments |
|
1,034 |
|
|
(2,697 |
) |
|
6,608 |
|
Interest
on sale-leaseback financing obligation |
|
681 |
|
|
— |
|
|
— |
|
Deferred
income taxes |
|
15,482 |
|
|
(80,314 |
) |
|
123 |
|
Net gain
from sale of Torrance facility |
|
(37,449 |
) |
|
— |
|
|
— |
|
Net
(gains) losses from sales of spice assets and other assets |
|
(2,129 |
) |
|
(8,405 |
) |
|
394 |
|
ESOP and
share-based compensation expense |
|
3,959 |
|
|
4,342 |
|
|
5,691 |
|
Net
(gains) losses on derivative instruments and investments |
|
(205 |
) |
|
12,910 |
|
|
(950 |
) |
Change in
operating assets and liabilities: |
|
|
Restricted cash |
|
— |
|
|
1,002 |
|
|
(1,002 |
) |
Purchases
of trading securities |
|
(5,136 |
) |
|
(7,255 |
) |
|
(3,661 |
) |
Proceeds
from sales of trading securities |
|
30,645 |
|
|
5,901 |
|
|
2,358 |
|
Accounts
receivable |
|
(14 |
) |
|
(3,476 |
) |
|
2,078 |
|
Inventories |
|
(8,504 |
) |
|
3,608 |
|
|
20,470 |
|
Income
tax receivable |
|
(71 |
) |
|
288 |
|
|
(307 |
) |
Derivative assets (liabilities), net |
|
2,305 |
|
|
(10,583 |
) |
|
(7,269 |
) |
Prepaid
expenses and other assets |
|
(2,506 |
) |
|
(111 |
) |
|
(1,332 |
) |
Accounts
payable |
|
8,885 |
|
|
(3,343 |
) |
|
(16,841 |
) |
Accrued
payroll expenses and other current liabilities |
|
(2,983 |
) |
|
5,829 |
|
|
(4,606 |
) |
Accrued
postretirement benefits |
|
(1,020 |
) |
|
(358 |
) |
|
(1,507 |
) |
Other
long-term liabilities |
|
(8,557 |
) |
|
(473 |
) |
|
1,860 |
|
Net cash
provided by operating activities |
|
$ |
42,112 |
|
|
$ |
27,628 |
|
|
$ |
26,930 |
|
Cash flows
from investing activities: |
|
|
Acquisitions of businesses, net of cash acquired |
|
$ |
(25,853 |
) |
|
$ |
— |
|
|
$ |
(1,200 |
) |
Purchases
of property, plant and equipment |
|
(45,195 |
) |
|
(31,050 |
) |
|
(19,216 |
) |
Purchases
of construction-in-progress assets for new facility |
|
(39,754 |
) |
|
(19,426 |
) |
|
— |
|
Proceeds
from sales of property, plant and equipment |
|
4,078 |
|
|
10,946 |
|
|
273 |
|
Net cash
used in investing activities |
|
$ |
(106,724 |
) |
|
$ |
(39,530 |
) |
|
$ |
(20,143 |
) |
Cash flows
from financing activities: |
|
|
Proceeds
from revolving credit facility |
|
$ |
77,985 |
|
|
$ |
405 |
|
|
$ |
63,376 |
|
Repayments on revolving credit facility |
|
(50,473 |
) |
|
(374 |
) |
|
(63,947 |
) |
Proceeds
from sale-leaseback financing obligation |
|
42,455 |
|
|
— |
|
|
— |
|
Proceeds
from new facility lease financing obligation |
|
16,346 |
|
|
19,426 |
|
|
— |
|
Repayments of new facility lease financing |
|
(35,772 |
) |
|
— |
|
|
— |
|
Payments
of capital lease obligations |
|
(1,433 |
) |
|
(3,147 |
) |
|
(3,910 |
) |
Payment
of financing costs |
|
— |
|
|
(8 |
) |
|
(571 |
) |
Proceeds
from stock option exercises |
|
688 |
|
|
1,694 |
|
|
1,548 |
|
Tax
withholding payment - net share settlement of equity awards |
|
(38 |
) |
|
(159 |
) |
|
(116 |
) |
Net cash provided by
(used in) financing activities |
|
$ |
49,758 |
|
|
$ |
17,837 |
|
|
$ |
(3,620 |
) |
Net (decrease) increase
in cash and cash equivalents |
|
$ |
(14,854 |
) |
|
$ |
5,935 |
|
|
$ |
3,167 |
|
Cash and cash
equivalents at beginning of year |
|
21,095 |
|
|
15,160 |
|
|
11,993 |
|
Cash and cash
equivalents at end of year |
|
$ |
6,241 |
|
|
$ |
21,095 |
|
|
$ |
15,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure
of cash flow information: |
|
|
|
|
|
|
Cash paid
for interest |
|
$ |
1,504 |
|
|
$ |
425 |
|
|
$ |
769 |
|
Cash paid
for income taxes |
|
$ |
567 |
|
|
$ |
324 |
|
|
$ |
858 |
|
Supplemental disclosure
of non-cash investing and financing activities: |
|
|
|
|
|
|
Equipment
acquired under capital leases |
|
$ |
417 |
|
|
$ |
— |
|
|
$ |
55 |
|
Net
change in derivative assets and liabilities |
|
$ |
(3,933 |
) |
|
$ |
8,249 |
|
|
$ |
(18,506 |
) |
included in other comprehensive income (loss), net of
tax |
|
Construction-in-progress assets under new facility lease |
|
$ |
— |
|
|
$ |
8,684 |
|
|
$ |
— |
|
New
facility lease obligation |
|
$ |
— |
|
|
$ |
8,684 |
|
|
$ |
— |
|
Non-cash
additions to property, plant and equipment |
|
$ |
5,517 |
|
|
$ |
441 |
|
|
$ |
51 |
|
Assets
held for sale |
|
$ |
— |
|
|
$ |
7,179 |
|
|
$ |
— |
|
Non-cash
portion of earnout receivable recognized-spice assets sale |
|
$ |
419 |
|
|
$ |
496 |
|
|
$ |
— |
|
Non-cash
portion of earnout payable recognized-China Mist acquisition |
|
$ |
500 |
|
|
$ |
— |
|
|
$ |
— |
|
Non-cash
portion of earnout payable recognized-West Coast Coffee
acquisition |
|
$ |
600 |
|
|
$ |
— |
|
|
$ |
— |
|
Non-cash
working capital adjustment payable recognized-China Mist
acquisition |
|
$ |
553 |
|
|
$ |
— |
|
|
$ |
— |
|
Option
costs paid with exercised shares |
|
$ |
550 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
In addition to net income determined in accordance with U.S.
generally accepted accounting principles (“GAAP”), we use the
following non-GAAP financial measures in assessing our operating
performance:
“Non-GAAP net income” is defined as net income excluding the
impact of:
- restructuring and other transition expenses;
- net gains and losses from sales of assets;
- non-cash income tax expense (benefit), including the release of
valuation allowance on deferred tax assets;
- non-recurring 2016 proxy contest-related expenses;
- non-cash interest expense accrued on the Torrance facility
sale-leaseback financing obligation;
- acquisition and integration costs;
and including the impact of:
- income taxes on non-GAAP adjustments.
“Non-GAAP net income per diluted common share” is defined as
Non-GAAP net income divided by the weighted-average number of
common shares outstanding, inclusive of the dilutive effect of
common equivalent shares outstanding during the period.
“EBITDA” is defined as net income excluding the impact of:
- income taxes;
- interest expense; and
- depreciation and amortization expense.
“EBITDA Margin” is defined as EBITDA expressed as a
percentage of net sales.
“Adjusted EBITDA” is defined as net income excluding the impact
of:
- income taxes;
- interest expense;
- income from short-term investments;
- depreciation and amortization expense;
- ESOP and share-based compensation expense;
- non-cash impairment losses;
- non-cash pension withdrawal expense;
- other similar non-cash expenses;
- restructuring and other transition expenses;
- net gains and losses from sales of assets;
- non-recurring 2016 proxy contest-related expenses; and
- acquisition and integration costs.
“Adjusted EBITDA Margin” is defined as Adjusted EBITDA expressed
as a percentage of net sales.
Restructuring and other transition expenses are expenses that
are directly attributable to (i) the corporate relocation plan,
consisting primarily of employee retention and separation benefits,
facility-related costs and other related costs such as travel,
legal, consulting and other professional services; and (ii)
beginning in the third quarter of fiscal 2017, the DSD
restructuring plan, consisting primarily of severance, prorated
bonuses for bonus eligible employees, contractual termination
payments and outplacement services, and other related costs,
including legal, recruiting, consulting, other professional
services, and travel.
Beginning in the first quarter of fiscal 2017, we modified the
calculation of Non-GAAP net income and Non-GAAP net income per
diluted common share (i) to exclude non-recurring expenses for
legal and other professional services incurred in connection with
the 2016 proxy contest that were in excess of the level of expenses
normally incurred for an annual meeting of stockholders ("2016
proxy contest-related expenses") and non-cash interest expense
accrued on the Torrance facility sale-leaseback financing
obligation which has been included in the computation of the gain
on sale upon conclusion of the leaseback arrangement, and (ii) to
include income tax expense (benefit) on the non-GAAP adjustments
based on the Company’s marginal tax rate of 39.0%. There was no
similar adjustment for non-cash income tax expense in the
comparable period of the prior fiscal years due to the valuation
allowance recorded against the Company’s deferred tax assets. We
also modified Adjusted EBITDA and Adjusted EBITDA Margin to exclude
2016 proxy contest-related expenses. These modifications to our
non-GAAP financial measures were made because such expenses are not
reflective of our ongoing operating results and adjusting for them
will help investors with comparability of our results. The
historical presentation of the non-GAAP financial measures was not
affected by these modifications.
Beginning in the third quarter of fiscal 2017 and for all
periods presented, we include EBITDA in our non-GAAP financial
measures. We believe that EBITDA facilitates operating
performance comparisons from period to period by isolating the
effects of certain items that vary from period to period without
any correlation to core operating performance or that vary widely
among similar companies. These potential differences may be caused
by variations in capital structures (affecting interest expense),
tax positions (such as the impact on periods or companies of
changes in effective tax rates or net operating losses) and the age
and book depreciation of facilities and equipment (affecting
relative depreciation expense). We also
present EBITDA and EBITDA Margin because (i) we believe
that these measures are frequently used by securities analysts,
investors and other interested parties to evaluate companies in our
industry, (ii) we believe that investors will find these measures
useful in assessing our ability to service or incur indebtedness,
and (iii) we use these measures internally as benchmarks to
compare our performance to that of our competitors.
Beginning in the third quarter of fiscal 2017, we modified the
calculation of Adjusted EBITDA and Adjusted EBITDA Margin to
exclude income from our short-term investments because we believe
excluding income generated from our investment portfolio is a
measure more reflective of our operating results. The historical
presentation of Adjusted EBITDA and Adjusted EBITDA Margin was
recast to be comparable to the current period presentation.
Beginning in the fourth quarter of fiscal 2017, we modified the
calculation of Non-GAAP net income, Non-GAAP net income per diluted
common share, Adjusted EBITDA and Adjusted EBITDA Margin to
exclude acquisition costs. Acquisition costs include legal
expenses, consulting expenses and internal costs associated with
acquisitions and integration of those acquisitions. Prior to the
fourth quarter of fiscal 2017, acquisition costs were not material
to the Company’s results of operations and were included in
operating expenses. In the fourth quarter of fiscal 2017
acquisition costs were significant and excluding them, we believe,
will help investors to better understand our operating results and
more accurately compare them across periods. The historical
presentation of Non-GAAP net income, Non-GAAP net income per
diluted common share, Adjusted EBITDA and Adjusted EBITDA Margin
was not affected by this modification.
We believe these non-GAAP financial measures provide a useful
measure of the Company’s operating results, a meaningful comparison
with historical results and with the results of other companies,
and insight into the Company's ongoing operating performance.
Further, management utilizes these measures, in addition to GAAP
measures, when evaluating and comparing the Company's operating
performance against internal financial forecasts and budgets.
Non-GAAP net income, Non-GAAP net income per diluted common
share, EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA
Margin, as defined by us, may not be comparable to similarly titled
measures reported by other companies. We do not intend for non-GAAP
financial measures to be considered in isolation or as a substitute
for other measures prepared in accordance with GAAP.
Set forth below is a reconciliation of reported net income to
Non-GAAP net income and reported net income per common
share—diluted to Non-GAAP net income per diluted common share
(unaudited):
|
|
|
|
|
|
|
Year Ended June 30, |
|
Three Months EndedJune 30, |
(In
thousands) |
|
2017 |
|
2016 |
|
2015 |
|
2017 |
|
2016 |
Net income, as
reported |
|
$ |
24,400 |
|
|
$ |
89,918 |
|
|
$ |
652 |
|
|
$ |
1,112 |
|
|
$ |
84,239 |
|
Restructuring and other
transition expenses |
|
11,016 |
|
|
16,533 |
|
|
10,432 |
|
|
1,474 |
|
|
2,678 |
|
Net gain from sale of
Torrance facility |
|
(37,449 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Net gains from sale of
spice assets |
|
(919 |
) |
|
(5,603 |
) |
|
— |
|
|
(155 |
) |
|
(162 |
) |
Net (gains) losses from
sales of other assets |
|
(1,210 |
) |
|
(2,802 |
) |
|
394 |
|
|
315 |
|
|
(2,639 |
) |
Non-recurring 2016
proxy contest-related expenses |
|
5,186 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Non-cash income tax
benefit, including release of valuation allowance on deferred tax
assets |
|
— |
|
|
(80,439 |
) |
|
— |
|
|
— |
|
|
(80,315 |
) |
Interest expense on
sale-leaseback financing obligation |
|
681 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and
integration costs(1) |
|
1,734 |
|
|
— |
|
|
— |
|
|
1,734 |
|
|
— |
|
Income tax expense
(benefit) on non-GAAP adjustments |
|
8,175 |
|
|
— |
|
|
— |
|
|
(1,314 |
) |
|
— |
|
Non-GAAP net
income(1) |
|
$ |
11,614 |
|
|
$ |
17,607 |
|
|
$ |
11,478 |
|
|
$ |
3,166 |
|
|
$ |
3,801 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share—diluted, as reported |
|
$ |
1.45 |
|
|
$ |
5.41 |
|
|
$ |
0.04 |
|
|
$ |
0.07 |
|
|
$ |
5.05 |
|
Impact of restructuring
and other transition expenses |
|
$ |
0.66 |
|
|
$ |
1.00 |
|
|
$ |
0.64 |
|
|
$ |
0.09 |
|
|
$ |
0.16 |
|
Impact of net gain from
sale of Torrance facility |
|
$ |
(2.23 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Impact of net gains
from sale of spice assets |
|
$ |
(0.05 |
) |
|
$ |
(0.34 |
) |
|
$ |
— |
|
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
Impact of net (gains)
and losses from sales of other assets |
|
$ |
(0.07 |
) |
|
$ |
(0.17 |
) |
|
$ |
0.03 |
|
|
$ |
0.02 |
|
|
$ |
(0.15 |
) |
Impact of non-recurring
2016 proxy contest-related expenses |
|
$ |
0.31 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Impact of non-cash
income tax benefit, including release of valuation allowance on
deferred tax assets |
|
$ |
— |
|
|
$ |
(4.84 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(4.82 |
) |
Impact of interest
expense on sale-leaseback financing obligation |
|
$ |
0.04 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Impact of acquisition
and integration costs(1) |
|
$ |
0.10 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
0.10 |
|
|
$ |
— |
|
Impact of income tax
expense (benefit) on non-GAAP adjustments |
|
$ |
0.49 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(0.08 |
) |
|
$ |
— |
|
Non-GAAP net income per
diluted common share(1) |
|
$ |
0.70 |
|
|
$ |
1.06 |
|
|
$ |
0.71 |
|
|
$ |
0.19 |
|
|
$ |
0.23 |
|
_____________(1) Acquisition costs related to Boyd Coffee
Company transaction only. Includes $244 and $1,490 incurred in the
third and fourth quarters of fiscal 2017, respectively. In the
interim disclosures, while the Boyd Coffee Company transaction
remained confidential, the expenses incurred in the third quarter
were included in operating expenses and described as consulting
expenses. Total acquisition costs related to the Boyd Coffee
Company transaction incurred in fiscal 2017 are included in
the fourth quarter of fiscal 2017 for a complete presentation of
the acquisition costs related to the Boyd Coffee Company
transaction. Acquisition costs incurred in prior periods were not
material to the Company’s results of operations.
Set forth below is a reconciliation of reported net income to
EBITDA (unaudited):
|
|
Year Ended June 30, |
|
Three Months Ended June 30, |
(In
thousands) |
|
2017 |
|
2016 |
|
2015 |
|
2017 |
|
2016 |
Net income, as
reported |
|
$ |
24,400 |
|
|
$ |
89,918 |
|
|
$ |
652 |
|
|
$ |
1,112 |
|
|
$ |
84,239 |
|
Income tax expense
(benefit) |
|
15,954 |
|
|
(79,997 |
) |
|
402 |
|
|
44 |
|
|
(80,315 |
) |
Interest expense |
|
2,185 |
|
|
425 |
|
|
769 |
|
|
755 |
|
|
84 |
|
Depreciation and
amortization expense |
|
22,970 |
|
|
20,774 |
|
|
24,179 |
|
|
6,357 |
|
|
5,053 |
|
EBITDA |
|
$ |
65,509 |
|
|
$ |
31,120 |
|
|
$ |
26,002 |
|
|
$ |
8,268 |
|
|
$ |
9,061 |
|
EBITDA Margin |
|
12.1 |
% |
|
5.7 |
% |
|
4.8 |
% |
|
6.2 |
% |
|
6.8 |
% |
Set forth below is a reconciliation of reported net income to
Adjusted EBITDA (unaudited):
|
|
Year Ended June 30, |
|
Three Months EndedJune 30, |
(In
thousands) |
|
2017 |
|
2016 |
|
2015 |
|
2017 |
|
2016 |
Net income, as
reported |
|
$ |
24,400 |
|
|
$ |
89,918 |
|
|
$ |
652 |
|
|
$ |
1,112 |
|
|
$ |
84,239 |
|
Income tax expense
(benefit) |
|
15,954 |
|
|
(79,997 |
) |
|
402 |
|
|
44 |
|
|
(80,315 |
) |
Interest expense |
|
2,185 |
|
|
425 |
|
|
769 |
|
|
755 |
|
|
84 |
|
Income from short-term
investments |
|
(1,853 |
) |
|
(2,204 |
) |
|
(1,251 |
) |
|
(970 |
) |
|
(892 |
) |
Depreciation and
amortization expense |
|
22,970 |
|
|
20,774 |
|
|
24,179 |
|
|
6,357 |
|
|
5,053 |
|
ESOP and share-based
compensation expense |
|
3,959 |
|
|
4,342 |
|
|
5,691 |
|
|
963 |
|
|
854 |
|
Restructuring and other
transition expenses |
|
11,016 |
|
|
16,533 |
|
|
10,432 |
|
|
1,474 |
|
|
2,678 |
|
Net gain from sale of
Torrance facility |
|
(37,449 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Net gains from sale of
spice assets |
|
(919 |
) |
|
(5,603 |
) |
|
— |
|
|
(155 |
) |
|
(162 |
) |
Net (gains) losses from
sales of other assets |
|
(1,210 |
) |
|
(2,802 |
) |
|
394 |
|
|
315 |
|
|
(2,639 |
) |
Non-recurring 2016
proxy contest-related expenses |
|
5,186 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and
integration costs(1) |
|
1,734 |
|
|
— |
|
|
— |
|
|
1,734 |
|
|
— |
|
Adjusted EBITDA(1) |
|
$ |
45,973 |
|
|
$ |
41,386 |
|
|
$ |
41,268 |
|
|
$ |
11,629 |
|
|
$ |
8,900 |
|
Adjusted EBITDA
Margin(1) |
|
8.5 |
% |
|
7.6 |
% |
|
7.6 |
% |
|
8.7 |
% |
|
6.6 |
% |
_____________(1) Acquisition costs related to Boyd Coffee
Company transaction only. Includes $244 and $1,490 incurred in the
third and fourth quarters of fiscal 2017, respectively. In the
interim disclosures, while the Boyd Coffee Company transaction
remained confidential, the expenses incurred in the third quarter
were included in operating expenses and described as consulting
expenses. Total acquisition costs incurred in fiscal 2017 are
included in the fourth quarter of fiscal 2017 for a complete
presentation of the acquisition costs related to the Boyd Coffee
Company transaction. Acquisition costs incurred in prior
periods were not material to the Company’s results of
operations.
Investor Contact:Laurie LittleThe
Piacente Group, Inc.212-481-2050farmerbros@tpg-ir.com
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