Farmer Bros. Co. (NASDAQ: FARM) (the “Company”) today reported
financial results for its fourth quarter and fiscal year ended June
30, 2018.
Fourth Quarter Fiscal 2018 Highlights:
- Volume of green coffee processed and sold increased by 4.1
million pounds, reaching 27.4 million pounds, a 17.7% increase over
the prior year period;
- Gross profit increased $9.8 million to $52.6 million and gross
margin increased 320 basis points to 35.2% over the prior year
period;
- Net income was $0.1 million compared to net loss of $(1.8)
million in the prior year period; and
- Adjusted EBITDA was $14.0 million compared to $6.8 million in
the prior year period.*
- Successfully added 4.1 million pounds of green coffee and $18.2
million in net sales related to the acquisition of Boyd Coffee
Company (“Boyd”).
Fiscal 2018 Highlights:
- Volume of green coffee processed and sold increased by 11.9
million pounds, reaching 107.4 million pounds, a 12.5% increase
over the prior year;
- Gross profit increased $20.2 million to $207.0 million and
gross margin decreased 40 basis points to 34.1% in fiscal
2018;
- Net loss was $(18.3) million in fiscal 2018 compared to net
income of $22.6 million in fiscal 2017, primarily driven by the
sale of the Torrance facility in fiscal 2017; and
- Adjusted EBITDA was $47.6 million compared to $43.0 million in
the prior year.*
(*Adjusted EBITDA, a non-GAAP financial measure, is reconciled
to its corresponding GAAP measure at the end of this press
release.)
“We had a solid fourth quarter and achieved Adjusted EBITDA
results for the fiscal year in line with our expectations,” said
Mike Keown, President and CEO. “As we closed out the year, our team
continued to execute our strategy focused on leveraging the
investments we have made in our roasting facilities, expanding our
distribution network, adding new customers, and increasing business
with existing customers. We ended fiscal 2018 having made terrific
progress on the integration of the Boyd business, bringing a large
portion of the production into our facilities and transitioning all
Boyd DSD routes to our network. We added over 13 million pounds of
green coffee to our business in fiscal 2018 from Boyd's - about 12%
of our total volume for the year. In addition, we are continuing to
convert new customers in our pipeline following the SQF
certification of our Northlake, Texas facility earlier this year.
As we look forward, we are excited about our ability to capitalize
on growth opportunities in the dynamic coffee industry.”
Fourth Quarter and Fiscal 2018 Results:
Selected Financial Data
The selected financial data presented below under the captions
“Income statement data,” “Operating data” and “Other data”
summarizes certain performance measures for the three months and
fiscal years ended June 30, 2018 and 2017 (unaudited). In the
fourth quarter, the Company adopted changes in accounting
principles converting from the last in, first out inventory method
to the first in, first out inventory method and reclassifying and
capitalizing certain freight, warehousing and other expenses as
inventory costs. These changes were adopted retrospectively and all
reported prior periods have been adjusted.
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Fiscal Year Ended June 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
(In thousands,
except per share data) |
|
|
|
|
|
|
|
|
Income statement
data: |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
149,538 |
|
|
$ |
133,800 |
|
|
$ |
606,544 |
|
|
$ |
541,500 |
|
Gross margin |
|
35.2 |
% |
|
32.0 |
% |
|
34.1 |
% |
|
34.5 |
% |
Income (loss) from
operations |
|
$ |
2,001 |
|
|
$ |
(3,096 |
) |
|
$ |
1,124 |
|
|
$ |
39,178 |
|
Net income (loss) |
|
$ |
133 |
|
|
$ |
(1,837 |
) |
|
$ |
(18,280 |
) |
|
$ |
22,551 |
|
Net income (loss)
available to common stockholders per common share-diluted |
|
$ |
— |
|
|
$ |
(0.11 |
) |
|
$ |
(1.11 |
) |
|
$ |
1.34 |
|
|
|
|
|
|
|
|
|
|
Operating data: |
|
|
|
|
|
|
|
|
Coffee pounds |
|
27,396 |
|
|
23,285 |
|
|
107,429 |
|
|
95,499 |
|
EBITDA |
|
$ |
10,015 |
|
|
$ |
3,482 |
|
|
$ |
32,673 |
|
|
$ |
62,521 |
|
EBITDA Margin |
|
6.7 |
% |
|
2.6 |
% |
|
5.4 |
% |
|
11.5 |
% |
Adjusted EBITDA |
|
$ |
13,975 |
|
|
$ |
6,842 |
|
|
$ |
47,562 |
|
|
$ |
42,985 |
|
Adjusted EBITDA
Margin |
|
9.3 |
% |
|
5.1 |
% |
|
7.8 |
% |
|
7.9 |
% |
|
|
|
|
|
|
|
|
|
Other data: |
|
|
|
|
|
|
|
|
Capital expenditures
related to maintenance |
|
$ |
4,409 |
|
|
$ |
1,574 |
|
|
$ |
21,782 |
|
|
$ |
19,246 |
|
Total capital
expenditures |
|
$ |
9,554 |
|
|
$ |
14,115 |
|
|
$ |
37,020 |
|
|
$ |
84,949 |
|
Depreciation and
amortization expense |
|
$ |
7,737 |
|
|
$ |
6,360 |
|
|
$ |
30,464 |
|
|
$ |
22,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 17.7% for
the quarter to 27.4 million pounds, with volume associated with the
Boyd business acquired in October 2017 contributing 4.1 million
pounds of this total volume.
In the fourth quarter of fiscal 2018, green coffee pounds
processed and sold through our DSD network were 9.0 million, or
32.7% of total green coffee pounds processed and sold, while direct
ship customers represented 18.1 million, or 66.0%, of total green
coffee pounds processed and sold. Distributor customers represented
0.4 million pounds, or 1.3% of total green coffee pounds processed
and sold.
Net sales were $149.5 million in the fourth quarter of fiscal
2018, an increase of 11.8%, or $15.7 million, over the prior year
period. The addition of the Boyd business contributed $18.2 million
to net sales, offset by a $2.5 million decline in our base business
primarily due to price decreases to our cost plus customers, a
shortfall in sales from our DSD organization and softness in a few
large direct ship accounts.
Gross profit in the fourth quarter of fiscal 2018 increased $9.8
million, or 23.0%, to $52.6 million from $42.8 million, and gross
margin increased 320 basis points to 35.2% from 32.0% in the prior
year period. The increase in gross profit was primarily due to the
addition of the Boyd business while the increase in gross margin
was largely due to lower coffee prices in the fourth quarter of
fiscal 2018 compared to the fourth quarter of fiscal 2017.
Operating expenses in the fourth quarter of fiscal 2018
increased $4.7 million, or 10.3%, to $50.6 million, or 33.8% of net
sales, from $45.9 million, or 34.3% of net sales, in the prior year
period. The increase in operating expenses during the period was
primarily due to an $8.0 million increase in selling expenses,
including the addition of the Boyd business which added $5.3
million to selling expenses, and an increase in acquisition and
integration costs of $0.8 million. The increase in operating
expenses was partially offset by a decrease in general and
administrative expenses of $2.2 million primarily due to a
reduction in expenses in the base business resulting from cost
reduction initiatives and a $1.1 million decrease in restructuring
and other transition expenses associated with the corporate
relocation plan and the DSD restructuring plan compared to the
prior year period.
Total other expense in the fourth quarter of fiscal 2018 was
$0.6 million, as compared to total other expense of $0.5 million in
the prior year period, an increase of $0.1 million.
Income tax expense was $1.3 million in the fourth quarter of
fiscal 2018 as compared to income tax benefit of $(1.8) million in
the prior year period. The change in income tax was primarily
a result of the change in net (loss) income.
As a result of the foregoing factors, net income was $0.1
million in the fourth quarter of fiscal 2018 as compared to net
loss of $(1.8) million in the prior year period. Net income
available to common stockholders was $1,000, or $0.00 per common
share available to common stockholders—diluted, in the fourth
quarter of fiscal 2018, as compared to net loss available to common
stockholders of $(1.8) million, or $(0.11) per common share
available to common stockholders—diluted, in the prior year
period.
Non-GAAP Financial Measures:
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 Adjusted EBITDA and Adjusted EBITDA Margin to
exclude acquisition and integration costs. Acquisition and
integration costs include legal expenses, consulting expenses and
internal costs associated with acquisitions and integration of
those acquisitions. Beginning in the fourth quarter of fiscal 2017
acquisition and integration 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 Adjusted EBITDA
and Adjusted EBITDA Margin because acquisition and integration
costs in prior periods were not material to the Company’s results
of operations.
Adjusted EBITDA was $14.0 million in the fourth quarter of
fiscal 2018, as compared to $6.8 million in the prior year period,
and Adjusted EBITDA Margin was 9.3% in the fourth quarter of fiscal
2018, as compared to 5.1% 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, department and convenience store chains, hotels,
casinos, healthcare facilities, and gourmet coffee houses, as well
as grocery chains with private brand coffee and consumer branded
coffee and tea products, and foodservice distributors.
Headquartered in Northlake, Texas, Farmer Bros. Co. generated
net sales of over $600 million in fiscal 2018 and has approximately
1,600 employees nationwide. The Company’s primary brands include
Farmer Brothers®, Artisan Collection by Farmer Brothers™,
Superior®, Metropolitan™, China Mist® and Boyds®.
Investor Conference Call
Mike Keown, President and CEO, and David G. Robson, Treasurer
and CFO, will host an audio-only investor conference call today,
September 11, 2018, 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, 2018. 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/dcoohc43 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 2898237.
The audio-only webcast will be archived for at least 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
implementation of our direct-store-delivery restructuring plan, our
success in consummating acquisitions and integrating acquired
businesses, the impact of capital improvement projects, 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, the effectiveness of our hedging strategies
in reducing price risk, changes in consumer preferences, our
ability to provide sustainability in ways that do not materially
impair profitability, 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. The results of
operations for the fourth quarter and fiscal year ended June 30,
2018 are not necessarily indicative of the results that may be
expected for any future period.
FARMER
BROS. CO.CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)(In thousands, except share
and per share data)
|
|
Year Ended June 30, |
|
Three Months Ended June 30, |
|
|
2018 |
|
2017 |
|
2016 |
|
2018 |
|
2017 |
Net sales |
|
$ |
606,544 |
|
|
$ |
541,500 |
|
|
$ |
544,382 |
|
|
$ |
149,538 |
|
|
$ |
133,800 |
|
Cost of goods sold |
|
399,502 |
|
|
354,622 |
|
|
373,214 |
|
|
96,939 |
|
|
91,025 |
|
Gross profit |
|
207,042 |
|
|
186,878 |
|
|
171,168 |
|
|
52,599 |
|
|
42,775 |
|
Selling expenses |
|
154,539 |
|
|
133,329 |
|
|
123,260 |
|
|
41,256 |
|
|
33,230 |
|
General and
administrative expenses |
|
47,863 |
|
|
42,933 |
|
|
41,970 |
|
|
8,856 |
|
|
11,007 |
|
Restructuring and other
transition expenses |
|
662 |
|
|
11,016 |
|
|
16,533 |
|
|
351 |
|
|
1,474 |
|
Net gain from sale of
Torrance facility |
|
— |
|
|
(37,449 |
) |
|
— |
|
|
— |
|
|
— |
|
Net gains from sale of
Spice Assets |
|
(770 |
) |
|
(919 |
) |
|
(5,603 |
) |
|
(115 |
) |
|
(155 |
) |
Net (gains) losses from
sales of other assets |
|
(196 |
) |
|
(1,210 |
) |
|
(2,802 |
) |
|
250 |
|
|
315 |
|
Impairment losses on
intangible assets |
|
3,820 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Operating expenses |
|
205,918 |
|
|
147,700 |
|
|
173,358 |
|
|
50,598 |
|
|
45,871 |
|
Income (loss) from
operations |
|
1,124 |
|
|
39,178 |
|
|
(2,190 |
) |
|
2,001 |
|
|
(3,096 |
) |
Other (expense)
income: |
|
|
|
|
|
|
|
|
|
|
Dividend
income |
|
12 |
|
|
1,007 |
|
|
1,115 |
|
|
— |
|
|
199 |
|
Interest
income |
|
2 |
|
|
567 |
|
|
496 |
|
|
— |
|
|
132 |
|
Interest
expense |
|
(3,177 |
) |
|
(2,185 |
) |
|
(425 |
) |
|
(891 |
) |
|
(755 |
) |
Other,
net |
|
1,071 |
|
|
(1,201 |
) |
|
556 |
|
|
277 |
|
|
(113 |
) |
Total
other (expense) income |
|
(2,092 |
) |
|
(1,812 |
) |
|
1,742 |
|
|
(614 |
) |
|
(537 |
) |
(Loss) income before
taxes |
|
(968 |
) |
|
37,366 |
|
|
(448 |
) |
|
1,387 |
|
|
(3,633 |
) |
Income tax expense
(benefit) |
|
17,312 |
|
|
14,815 |
|
|
(72,239 |
) |
|
1,254 |
|
|
(1,796 |
) |
Net (loss) income |
|
$ |
(18,280 |
) |
|
$ |
22,551 |
|
|
$ |
71,791 |
|
|
$ |
133 |
|
|
$ |
(1,837 |
) |
Less: Cumulative
preferred dividends, undeclared and unpaid |
|
389 |
|
|
— |
|
|
— |
|
|
132 |
|
|
— |
|
Net (loss) income
available to common stockholders |
|
$ |
(18,669 |
) |
|
$ |
22,551 |
|
|
$ |
71,791 |
|
|
$ |
1 |
|
|
$ |
(1,837 |
) |
Net (loss) income
available to common stockholders per common share—basic |
|
$ |
(1.11 |
) |
|
$ |
1.35 |
|
|
$ |
4.35 |
|
|
$ |
— |
|
|
$ |
(0.11 |
) |
Net (loss) income
available to common stockholders per common share—diluted |
|
$ |
(1.11 |
) |
|
$ |
1.34 |
|
|
$ |
4.32 |
|
|
$ |
— |
|
|
$ |
(0.11 |
) |
Weighted average common
shares outstanding—basic |
|
16,815,020 |
|
|
16,668,745 |
|
|
16,502,523 |
|
|
16,855,874 |
|
|
16,697,765 |
|
Weighted average common
shares outstanding—diluted |
|
16,815,020 |
|
|
16,785,752 |
|
|
16,627,402 |
|
|
16,855,874 |
|
|
16,803,299 |
|
FARMER
BROS. CO.CONSOLIDATED BALANCE SHEETS
(UNAUDITED)(In thousands, except share and per
share data)
|
June 30, |
|
2018 |
|
2017 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
2,438 |
|
|
$ |
6,241 |
|
Short-term investments |
— |
|
|
368 |
|
Accounts
receivable, net of allowance for doubtful accounts of $495 and
$721, respectively |
58,498 |
|
|
46,446 |
|
Inventories |
104,431 |
|
|
79,790 |
|
Income
tax receivable |
305 |
|
|
318 |
|
Prepaid
expenses |
7,842 |
|
|
7,540 |
|
Total
current assets |
173,514 |
|
|
140,703 |
|
Property, plant and
equipment, net |
186,589 |
|
|
176,066 |
|
Goodwill |
36,224 |
|
|
10,996 |
|
Intangible assets,
net |
31,515 |
|
|
18,618 |
|
Other assets |
8,381 |
|
|
6,837 |
|
Deferred income
taxes |
39,308 |
|
|
53,933 |
|
Total
assets |
$ |
475,531 |
|
|
$ |
407,153 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
56,603 |
|
|
39,784 |
|
Accrued
payroll expenses |
17,918 |
|
|
17,345 |
|
Short-term borrowings under revolving credit facility |
89,787 |
|
|
27,621 |
|
Short-term obligations under capital leases |
190 |
|
|
958 |
|
Short-term derivative liabilities |
3,300 |
|
|
1,857 |
|
Other
current liabilities |
10,659 |
|
|
9,702 |
|
Total
current liabilities |
178,457 |
|
|
97,267 |
|
Accrued pension
liabilities |
40,380 |
|
|
51,281 |
|
Accrued postretirement
benefits |
20,473 |
|
|
19,788 |
|
Accrued workers’
compensation liabilities |
5,354 |
|
|
7,548 |
|
Other long-term
liabilities |
1,812 |
|
|
1,717 |
|
Total
liabilities |
$ |
246,476 |
|
|
$ |
177,601 |
|
Commitments and
contingencies |
|
|
|
Stockholders’
equity: |
|
|
|
Preferred
stock, $1.00 par value, 500,000 shares authorized; Series A
Convertible Participating Cumulative Perpetual Preferred Stock,
21,000 shares authorized; 14,700 and zero shares issued and
outstanding as of June 30, 2018 and 2017, respectively; liquidation
preference of $15,089 and $0 as of June 30, 2018 and 2017,
respectively |
15 |
|
|
— |
|
Common
stock, $1.00 par value, 25,000,000 shares authorized; 16,951,659
and 16,846,002 shares issued and outstanding at June 30, 2018
and 2017, respectively |
16,952 |
|
|
16,846 |
|
Additional paid-in capital |
55,965 |
|
|
41,495 |
|
Retained
earnings |
220,307 |
|
|
236,993 |
|
Unearned
ESOP shares |
(2,145 |
) |
|
(4,289 |
) |
Accumulated other comprehensive loss |
(62,039 |
) |
|
(61,493 |
) |
Total
stockholders’ equity |
$ |
229,055 |
|
|
$ |
229,552 |
|
Total
liabilities and stockholders’ equity |
$ |
475,531 |
|
|
$ |
407,153 |
|
FARMER
BROS. CO.CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (UNAUDITED)(In thousands)
|
Year Ended June 30, |
|
2018 |
|
2017 |
|
2016 |
Cash flows from
operating activities: |
|
|
|
|
|
Net
(loss) income |
$ |
(18,280 |
) |
|
$ |
22,551 |
|
|
$ |
71,791 |
|
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: |
Depreciation and amortization |
30,464 |
|
|
22,970 |
|
|
20,774 |
|
Provision
for doubtful accounts |
137 |
|
|
325 |
|
|
71 |
|
Impairment losses on intangible assets |
3,820 |
|
|
— |
|
|
— |
|
Change in
estimated fair value of contingent earnout consideration |
(500 |
) |
|
— |
|
|
— |
|
Restructuring and other transition expenses, net of payments |
(1,185 |
) |
|
1,034 |
|
|
(2,697 |
) |
Interest
on sale-leaseback financing obligation |
— |
|
|
681 |
|
|
— |
|
Deferred
income taxes |
17,154 |
|
|
14,343 |
|
|
(72,556 |
) |
Net gain
from sale of Torrance Facility |
— |
|
|
(37,449 |
) |
|
— |
|
Net gains
from sales of Spice Assets and other assets |
(995 |
) |
|
(2,129 |
) |
|
(8,405 |
) |
ESOP and
share-based compensation expense |
3,822 |
|
|
3,959 |
|
|
4,342 |
|
Net
losses (gains) on derivative instruments and investments |
1,982 |
|
|
2,361 |
|
|
16,536 |
|
Change in operating assets and liabilities: |
Restricted cash |
— |
|
|
— |
|
|
1,002 |
|
Purchases
of trading securities |
— |
|
|
(5,136 |
) |
|
(7,255 |
) |
Proceeds
from sales of trading securities |
375 |
|
|
30,645 |
|
|
5,901 |
|
Accounts
receivable |
(4,628 |
) |
|
(14 |
) |
|
(3,476 |
) |
Inventories |
(15,513 |
) |
|
(8,041 |
) |
|
10,063 |
|
Income
tax receivable |
13 |
|
|
(71 |
) |
|
288 |
|
Derivative (liabilities) assets, net |
(7,782 |
) |
|
2,264 |
|
|
(10,295 |
) |
Prepaid
expenses and other assets |
685 |
|
|
(2,506 |
) |
|
(111 |
) |
Accounts
payable |
3,864 |
|
|
8,885 |
|
|
(3,343 |
) |
Accrued
payroll expenses and other current liabilities |
1,766 |
|
|
(2,983 |
) |
|
5,829 |
|
Accrued
postretirement benefits |
(1,924 |
) |
|
(1,020 |
) |
|
(358 |
) |
Other
long-term liabilities |
(4,420 |
) |
|
(8,557 |
) |
|
(473 |
) |
Net cash provided by
operating activities |
$ |
8,855 |
|
|
$ |
42,112 |
|
|
$ |
27,628 |
|
Cash flows
from investing activities: |
Acquisitions of businesses, net of cash acquired |
$ |
(39,608 |
) |
|
$ |
(25,853 |
) |
|
$ |
— |
|
Purchases
of property, plant and equipment |
(35,443 |
) |
|
(45,195 |
) |
|
(31,050 |
) |
Purchases
of assets for construction of New Facility |
(1,577 |
) |
|
(39,754 |
) |
|
(19,426 |
) |
Proceeds
from sales of property, plant and equipment |
1,988 |
|
|
4,078 |
|
|
10,946 |
|
Net cash used in
investing activities |
$ |
(74,640 |
) |
|
$ |
(106,724 |
) |
|
$ |
(39,530 |
) |
FARMER
BROS. CO.CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED) (In
thousands)
|
Year Ended June 30, |
|
2018 |
|
2017 |
|
2016 |
Cash flows
from financing activities: |
Proceeds
from revolving credit facility |
$ |
85,315 |
|
|
$ |
77,985 |
|
|
$ |
405 |
|
Repayments on revolving credit facility |
(23,149 |
) |
|
(50,473 |
) |
|
(374 |
) |
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 |
(947 |
) |
|
(1,433 |
) |
|
(3,147 |
) |
Payment
of financing costs |
(579 |
) |
|
— |
|
|
(8 |
) |
Proceeds
from stock option exercises |
1,342 |
|
|
688 |
|
|
1,694 |
|
Tax
withholding payment - net share settlement of equity awards |
— |
|
|
(38 |
) |
|
(159 |
) |
Net cash
provided by financing activities |
$ |
61,982 |
|
|
$ |
49,758 |
|
|
$ |
17,837 |
|
|
|
|
|
|
|
Net (decrease) increase
in cash and cash equivalents |
$ |
(3,803 |
) |
|
$ |
(14,854 |
) |
|
$ |
5,935 |
|
Cash and cash
equivalents at beginning of year |
6,241 |
|
|
21,095 |
|
|
15,160 |
|
Cash and cash
equivalents at end of year |
$ |
2,438 |
|
|
$ |
6,241 |
|
|
$ |
21,095 |
|
Supplemental disclosure
of cash flow information: |
|
|
|
|
|
Cash paid
for interest |
$ |
3,177 |
|
|
$ |
1,504 |
|
|
$ |
425 |
|
Cash paid
for income taxes |
$ |
144 |
|
|
$ |
567 |
|
|
$ |
324 |
|
Supplemental disclosure
of non-cash investing and financing activities: |
|
|
|
|
|
Equipment
acquired under capital leases |
$ |
— |
|
|
$ |
417 |
|
|
$ |
— |
|
Net
change in derivative assets and liabilities included in other
comprehensive (loss) income, net of tax |
$ |
(5,122 |
) |
|
$ |
(2,390 |
) |
|
$ |
10,644 |
|
Construction-in-progress assets under New Facility lease |
$ |
— |
|
|
$ |
— |
|
|
$ |
8,684 |
|
New
Facility lease obligation |
$ |
— |
|
|
$ |
— |
|
|
$ |
8,684 |
|
Non-cash
additions to property, plant and equipment |
$ |
2,814 |
|
|
$ |
5,517 |
|
|
$ |
441 |
|
Assets
held for sale |
$ |
— |
|
|
$ |
— |
|
|
$ |
7,179 |
|
Non-cash
portion of earnout receivable recognized—Spice Assets sale |
$ |
298 |
|
|
$ |
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 |
|
|
$ |
— |
|
Non-cash
receivable from West Coast Coffee—post-closing final working
capital adjustment |
$ |
218 |
|
|
$ |
— |
|
|
$ |
— |
|
Non-cash
consideration given-Issuance of Series A Preferred Stock |
$ |
11,756 |
|
|
$ |
— |
|
|
$ |
— |
|
Non-cash
Multiemployer Plan Holdback payable recognized—Boyd Coffee
acquisition |
$ |
1,056 |
|
|
$ |
— |
|
|
$ |
— |
|
Option
costs paid with exercised shares |
$ |
— |
|
|
$ |
550 |
|
|
$ |
— |
|
Cumulative preferred dividends, undeclared and unpaid |
$ |
389 |
|
|
$ |
— |
|
|
$ |
— |
|
Non-GAAP Financial Measures
In addition to net (loss) 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:
“EBITDA” is defined as net (loss) 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 (loss) income excluding the
impact of:
- income taxes;
- interest expense;
- (loss) 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.
In the first quarter of fiscal 2017, we modified the calculation
of Adjusted EBITDA and Adjusted EBITDA Margin 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").
This modification to our non-GAAP financial measures was made
because such expenses are not reflective of our ongoing operating
results and adjusting for them will help investors with
comparability of our results.
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 (loss) income from our short-term investments because we
believe excluding (loss) 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 Adjusted EBITDA and Adjusted EBITDA Margin to
exclude acquisition and integration costs. Acquisition and
integration costs include legal expenses, consulting expenses and
internal costs associated with acquisitions and integration of
those acquisitions. Beginning in the fourth quarter of fiscal 2017
acquisition and integration 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 Adjusted EBITDA
and Adjusted EBITDA Margin because acquisition and integration
costs in prior periods were not material to the Company’s results
of operations.
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.
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 (loss)
income to EBITDA (unaudited):
|
|
Year Ended June 30, |
|
Three Months Ended June 30, |
(In
thousands) |
|
2018 |
|
2017 |
|
2016 |
|
2018 |
|
2017 |
Net (loss) income, as
reported |
|
$ |
(18,280 |
) |
|
$ |
22,551 |
|
|
$ |
71,791 |
|
|
$ |
133 |
|
|
$ |
(1,837 |
) |
Income tax expense
(benefit) |
|
17,312 |
|
|
14,815 |
|
|
(72,239 |
) |
|
1,254 |
|
|
(1,796 |
) |
Interest expense |
|
3,177 |
|
|
2,185 |
|
|
425 |
|
|
891 |
|
|
755 |
|
Depreciation and
amortization expense |
|
30,464 |
|
|
22,970 |
|
|
20,774 |
|
|
7,737 |
|
|
6,360 |
|
EBITDA |
|
$ |
32,673 |
|
|
$ |
62,521 |
|
|
$ |
20,751 |
|
|
$ |
10,015 |
|
|
$ |
3,482 |
|
EBITDA Margin |
|
5.4 |
% |
|
11.5 |
% |
|
3.8 |
% |
|
6.7 |
% |
|
2.6 |
% |
Set forth below is a reconciliation of reported net (loss)
income to Adjusted EBITDA (unaudited):
|
|
Year Ended June 30, |
|
Three Months Ended June 30, |
(In
thousands) |
|
2018 |
|
2017 |
|
2016 |
|
2018 |
|
2017 |
Net (loss) income, as
reported |
|
$ |
(18,280 |
) |
|
$ |
22,551 |
|
|
$ |
71,791 |
|
|
$ |
133 |
|
|
$ |
(1,837 |
) |
Income tax expense
(benefit) |
|
17,312 |
|
|
14,815 |
|
|
(72,239 |
) |
|
1,254 |
|
|
(1,796 |
) |
Interest expense |
|
3,177 |
|
|
2,185 |
|
|
425 |
|
|
891 |
|
|
755 |
|
Income from short-term
investments |
|
(19 |
) |
|
(1,853 |
) |
|
(2,204 |
) |
|
(5 |
) |
|
(971 |
) |
Depreciation and
amortization expense |
|
30,464 |
|
|
22,970 |
|
|
20,774 |
|
|
7,737 |
|
|
6,360 |
|
ESOP and share-based
compensation expense |
|
3,822 |
|
|
3,959 |
|
|
4,342 |
|
|
930 |
|
|
963 |
|
Restructuring and other
transition expenses |
|
662 |
|
|
11,016 |
|
|
16,533 |
|
|
351 |
|
|
1,474 |
|
Net gain from sale of
Torrance Facility |
|
— |
|
|
(37,449 |
) |
|
— |
|
|
— |
|
|
— |
|
Net gains from sale of
Spice Assets |
|
(770 |
) |
|
(919 |
) |
|
(5,603 |
) |
|
(115 |
) |
|
(155 |
) |
Net (gains) losses from
sales of other assets |
|
(196 |
) |
|
(1,210 |
) |
|
(2,802 |
) |
|
250 |
|
|
315 |
|
Impairment losses on
intangible assets |
|
3,820 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Non-recurring 2016
proxy contest-related expenses |
|
— |
|
|
5,186 |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and
integration costs |
|
7,570 |
|
|
1,734 |
|
|
— |
|
|
2,549 |
|
|
1,734 |
|
Adjusted EBITDA |
|
$ |
47,562 |
|
|
$ |
42,985 |
|
|
$ |
31,017 |
|
|
$ |
13,975 |
|
|
$ |
6,842 |
|
Adjusted EBITDA
Margin |
|
7.8 |
% |
|
7.9 |
% |
|
5.7 |
% |
|
9.3 |
% |
|
5.1 |
% |
Contact:
Joele Frank, Wilkinson Brimmer
Katcher
Leigh Parrish / Kaitlin Kikalo212-355-4449
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