Farmer Bros. Co. (NASDAQ: FARM) (the "Company") today reported
financial results for its second fiscal quarter ended
December 31, 2019.
Second Quarter Fiscal 2020 Highlights:
- Volume of green coffee processed and sold increased by 2.0
million to 29.4 million pounds, a 7.2% increase over the prior year
period;
- Green coffee pounds processed and sold through our DSD network
were 9.0 million, or 30.6% of total green coffee pounds processed
and sold
- Direct ship customers represented 19.9 million, or 67.7%, of
total green coffee pounds processed and sold
- Distributor customers represented 0.5 million pounds, or 1.7%,
of total green coffee pounds processed and sold
- Net sales were $152.5 million, a decrease of $7.3 million, or
4.6%, from the prior year period;
- Gross margin decreased to 28.8% from 33.3% in the prior year
period, while operating expenses as percentage of sales improved to
23.0% from 33.0% in the prior year period;
- Net income was $7.8 million compared to net loss of $10.1
million in the prior year period; andAdjusted EBITDA was $7.4
million compared to $12.4 million in the prior year period.*
(*Adjusted EBITDA, a non-GAAP financial measure, is reconciled
to its corresponding GAAP measure at the end of this press
release.)
“I am proud of the progress we have made against
our turnaround strategy and five key initiatives during my first
few months as Farmer Brothers’ CEO,” said Deverl Maserang,
President and CEO. “While the Company faces challenges that require
time and capital to address, I am confident that we are headed in
the right direction and are focused on the right initiatives. We
have a clearly defined plan and have laid the groundwork for a
successful turnaround, and I am optimistic that the initiatives we
are executing with urgency will put Farmer Brothers in a position
of strength for the long term. I look forward to continuing to work
closely with all our team members to drive growth and deliver
enhanced value for our stakeholders.”
Second Quarter Fiscal 2020 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
and six months ended December 31, 2019 and 2018
(unaudited).
|
|
Three Months Ended December 31, |
|
Six Months Ended December 31, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
(In thousands, except
per share data) |
|
|
|
|
|
|
|
|
Income statement data: |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
152,498 |
|
|
$ |
159,773 |
|
|
$ |
291,098 |
|
|
$ |
307,213 |
|
Gross margin |
|
28.8 |
% |
|
33.3 |
% |
|
29.1 |
% |
|
33.0 |
% |
Income (loss) from
operations |
|
$ |
8,870 |
|
|
$ |
502 |
|
|
$ |
15,762 |
|
|
$ |
(1,576 |
) |
Net income (loss) |
|
$ |
7,754 |
|
|
$ |
(10,100 |
) |
|
$ |
12,408 |
|
|
(13,086 |
) |
Net income (loss) available to
common stockholders per common share—diluted |
|
$ |
0.43 |
|
|
$ |
(0.60 |
) |
|
$ |
0.69 |
|
|
$ |
(0.79 |
) |
|
|
|
|
|
|
|
|
|
Operating data: |
|
|
|
|
|
|
|
|
Coffee pounds |
|
29,360 |
|
|
27,398 |
|
|
55,318 |
|
|
52,845 |
|
EBITDA |
|
$ |
16,852 |
|
|
$ |
(3,188 |
) |
|
$ |
30,292 |
|
|
$ |
1,470 |
|
EBITDA Margin |
|
11.1 |
% |
|
(2.0 |
)% |
|
10.4 |
% |
|
0.5 |
% |
Adjusted EBITDA |
|
$ |
7,448 |
|
|
$ |
12,443 |
|
|
$ |
11,464 |
|
|
$ |
23,410 |
|
Adjusted EBITDA Margin |
|
4.9 |
% |
|
7.8 |
% |
|
3.9 |
% |
|
7.6 |
% |
|
|
|
|
|
|
|
|
|
Other data: |
|
|
|
|
|
|
|
|
Capital expenditures related
to maintenance |
|
$ |
3,107 |
|
|
$ |
7,105 |
|
|
$ |
7,459 |
|
|
$ |
12,567 |
|
Total capital
expenditures |
|
$ |
3,730 |
|
|
$ |
15,333 |
|
|
$ |
9,007 |
|
|
$ |
23,120 |
|
Depreciation and amortization
expense |
|
$ |
7,594 |
|
|
$ |
7,902 |
|
|
$ |
15,211 |
|
|
$ |
15,630 |
|
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.
Net sales in the second quarter of fiscal 2020
were $152.5 million, a decrease of $7.3 million, or 4.6%, from the
prior year period. The decrease in net sales was driven primarily
by lower sales of coffee and allied products sold through our DSD
network, which were impacted by the sale of our office coffee
business in July 2019 and net customer attrition. Our direct ship
sales were comparable to the prior year period because the increase
in direct ship volume was offset by unfavorable customer mix shift
and the impact of coffee prices for our cost plus customers.
Gross profit in the second quarter of fiscal
2020 was $44.0 million, a decrease of $9.3 million, or 17.4% from
the prior year period and gross margin decreased to 28.8% from
33.3%. The decrease in gross profit was primarily driven by lower
net sales of $7.3 million between the periods, unfavorable customer
mix and higher write down of slow moving inventories, partially
offset by lower freight costs and the impact of coffee prices.
Operating expenses in the second quarter of
fiscal 2020 decreased $17.6 million, or 33.4%, to $35.1 million,
from $52.7 million, and as a percentage of net sales declined to
23.0% compared to 33.0% of net sales, in the prior year period. The
decrease in operating expenses was primarily due to increase in net
gains from sales of assets, the absence of Boyds integration
expenses, decrease in selling expenses due to efficiencies realized
from DSD route optimization, decrease in general and administrative
expenses due to reductions in third party costs and lower
headcount, partially offset by higher employee incentive costs,
proxy contest expenses and one-time severance costs. The three
months ended December 31, 2018 includes a one–time credit for
employees incentives costs.
Net gains from sales of assets are primarily
associated with the Houston, Texas manufacturing facility and four
branch properties of $7.3 million and $4.1 million,
respectively.
The pension settlement charge incurred in the
three months ended December 31, 2018 of $10.9 million was due
to the termination of the Farmer Bros. Co. Pension Plan for
Salaried Employees effective December 1, 2018.
Interest expense in the second quarter of fiscal
2020 decreased $0.5 million to $2.9 million as compared to $3.3
million in the prior year period principally due to lower pension
interest expense and less borrowings on our credit facility,
partially offset by a realized loss from the partial unwinding of
our interest rate swap notional amount from $80.0 million to $65.0
million.
Other, net in the second quarter of fiscal 2020
increased by $0.7 million to $1.7 million in the quarter compared
to $1.0 million in the prior year period primarily due to
mark-to-market net gains on coffee-related derivative instruments
not designated as accounting hedges in the three months ended
December 31, 2019 compared to same prior year period
mark-to-market net losses.
Income tax benefit was $0.1 million in the
second quarter of fiscal 2020 as compared to income tax benefit of
$2.7 million in the prior year period. The lower tax benefit is
primarily due to the previously recorded valuation allowance and
change in our estimated deferred tax liability during the three
months ended December 31, 2019 as compared to the prior year
period.
As a result of the foregoing factors, net income
was $7.8 million in the second quarter of fiscal 2020 as compared
to net loss of $10.1 million in the prior year period. Net income
available to common stockholders was $7.6 million, or $0.43 per
common share available to common stockholders-diluted, in the
second quarter of fiscal 2020, compared to net loss available to
common stockholders of $10.2 million, or $0.60 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.
Adjusted EBITDA was $7.4 million in the second
quarter of fiscal 2020, as compared to Adjusted EBITDA of $12.4
million in the prior year period, and Adjusted EBITDA Margin was
4.9% in the second quarter of fiscal 2019, as compared to Adjusted
EBITDA Margin of 7.8% 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, 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 $595.9 million in fiscal 2019 and has
approximately 1,470 employees nationwide. The Company’s primary
brands include Farmer Brothers®, Artisan Collection by Farmer
Brothers™, Superior®, Metropolitan™, China Mist® and Boyds®.
Investor Conference Call
Deverl Maserang, CEO, and Scott Lyon, Corporate
Controller and Interim Principal Financial and Accounting Officer,
will host an audio-only investor conference call today,
February 6, 2020, at 5:00 p.m. Eastern time (4:00 p.m. Central
time) to review the Company’s financial results for the second
fiscal quarter ended December 31, 2019. 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/mmc/p/ycyzhw86 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 1775733.
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 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, stockholder activity and fluctuations in
availability and cost of green coffee, competition,
organizational changes, the effectiveness of our hedging strategies
in reducing price risk, 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 success in attracting
new and retaining existing 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 three and six months
ended December 31, 2019 are not necessarily indicative of the
results that may be expected for any future period.
FARMER
BROS. CO.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)(In thousands, except share
and per share data)
|
Three Months Ended December 31, |
|
Six Months Ended December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net sales |
$ |
152,498 |
|
|
$ |
159,773 |
|
|
$ |
291,098 |
|
|
$ |
307,213 |
|
Cost of goods sold |
108,513 |
|
|
106,529 |
|
|
206,472 |
|
|
205,734 |
|
Gross profit |
43,985 |
|
|
53,244 |
|
|
84,626 |
|
|
101,479 |
|
Selling expenses |
34,906 |
|
|
39,591 |
|
|
68,520 |
|
|
76,901 |
|
General and administrative
expenses |
11,266 |
|
|
12,140 |
|
|
24,006 |
|
|
20,757 |
|
Restructuring and other
transition expenses |
— |
|
|
207 |
|
|
— |
|
|
4,674 |
|
Net gains from sales of
assets |
(11,057 |
) |
|
804 |
|
|
(23,662 |
) |
|
723 |
|
Operating expenses |
35,115 |
|
|
52,742 |
|
|
68,864 |
|
|
103,055 |
|
Income (loss) from
operations |
8,870 |
|
|
502 |
|
|
15,762 |
|
|
(1,576 |
) |
Other (expense) income: |
|
|
|
|
|
|
|
Interest expense |
(2,859 |
) |
|
(3,332 |
) |
|
(5,407 |
) |
|
(6,184 |
) |
Pension settlement charge |
— |
|
|
(10,948 |
) |
|
— |
|
|
(10,948 |
) |
Other, net |
1,662 |
|
|
953 |
|
|
1,865 |
|
|
1,610 |
|
Total other expense |
(1,197 |
) |
|
(13,327 |
) |
|
(3,542 |
) |
|
(15,522 |
) |
Loss before taxes |
7,673 |
|
|
(12,825 |
) |
|
12,220 |
|
|
(17,098 |
) |
Income tax benefit |
(81 |
) |
|
(2,725 |
) |
|
(188 |
) |
|
(4,012 |
) |
Net income (loss) |
$ |
7,754 |
|
|
$ |
(10,100 |
) |
|
$ |
12,408 |
|
|
$ |
(13,086 |
) |
Less: Cumulative preferred
dividends, undeclared and unpaid |
138 |
|
|
134 |
|
|
275 |
|
|
266 |
|
Net earnings (loss) available
to common stockholders |
$ |
7,616 |
|
|
$ |
(10,234 |
) |
|
$ |
12,133 |
|
|
$ |
(13,352 |
) |
Net earnings (loss) available
to common stockholders per common share—basic |
$ |
0.44 |
|
|
$ |
(0.60 |
) |
|
$ |
0.71 |
|
|
$ |
(0.79 |
) |
Net earnings (loss) available
to common stockholders per common share—diluted |
$ |
0.43 |
|
|
$ |
(0.60 |
) |
|
$ |
0.69 |
|
|
$ |
(0.79 |
) |
Weighted average common shares
outstanding—basic |
17,159,108 |
|
|
16,985,157 |
|
|
17,127,153 |
|
|
16,971,995 |
|
Weighted average common shares
outstanding—diluted |
17,583,335 |
|
|
16,985,157 |
|
|
17,550,144 |
|
|
16,971,995 |
|
FARMER
BROS. CO.CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)(In thousands, except share and
per share data)
|
December 31, 2019 |
|
June 30, 2019 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
9,130 |
|
|
$ |
6,983 |
|
Accounts receivable, net |
60,404 |
|
|
55,155 |
|
Inventories |
85,134 |
|
|
87,910 |
|
Income tax receivable |
1,631 |
|
|
1,191 |
|
Short-term derivative assets |
9,051 |
|
|
1,865 |
|
Prepaid expenses |
5,820 |
|
|
6,804 |
|
Assets held for sale |
— |
|
|
— |
|
Total current assets |
171,170 |
|
|
159,908 |
|
Property, plant and equipment,
net |
171,983 |
|
|
189,458 |
|
Goodwill |
36,224 |
|
|
36,224 |
|
Intangible assets, net |
27,673 |
|
|
28,878 |
|
Other assets |
9,520 |
|
|
9,468 |
|
Long-term derivatives assets |
443 |
|
|
674 |
|
Right-of-use operating lease
assets |
19,696 |
|
|
— |
|
Total assets |
$ |
436,709 |
|
|
$ |
424,610 |
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
59,828 |
|
|
72,771 |
|
Accrued payroll expenses |
16,021 |
|
|
14,518 |
|
Operating leases liabilities - current |
5,571 |
|
|
— |
|
Short-term derivative liabilities |
368 |
|
|
1,474 |
|
Other current liabilities |
7,982 |
|
|
7,309 |
|
Total current liabilities |
89,770 |
|
|
96,072 |
|
Long-term borrowings under
revolving credit facility |
70,000 |
|
|
92,000 |
|
Accrued pension liabilities |
45,717 |
|
|
47,216 |
|
Accrued postretirement
benefits |
22,597 |
|
|
23,024 |
|
Accrued workers’ compensation
liabilities |
5,000 |
|
|
4,747 |
|
Operating lease liabilities -
noncurrent |
14,318 |
|
|
— |
|
Other long-term liabilities |
3,147 |
|
|
4,057 |
|
Total liabilities |
$ |
250,549 |
|
|
$ |
267,116 |
|
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 shares issued and outstanding as
of December 31, 2019 and June 30, 2019; liquidation preference of
$15,899 and $15,624 as of December 31, 2019 and June 30, 2019,
respectively |
15 |
|
|
15 |
|
Common stock, $1.00 par value, 25,000,000 shares authorized;
17,177,448 and 17,042,132 shares issued and outstanding as of
December 31, 2019 and June 30, 2019, respectively |
17,180 |
|
|
17,042 |
|
Additional paid-in capital |
59,663 |
|
|
57,912 |
|
Retained earnings |
158,310 |
|
|
146,177 |
|
Unearned ESOP shares |
— |
|
|
— |
|
Accumulated other comprehensive loss |
(49,008 |
) |
|
(63,652 |
) |
Total stockholders’ equity |
$ |
186,160 |
|
|
$ |
157,494 |
|
Total liabilities and stockholders’ equity |
$ |
436,709 |
|
|
$ |
424,610 |
|
FARMER BROS. CO. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) |
(In thousands) |
|
Six Months Ended December 31, |
|
2019 |
|
2018 |
Cash flows from operating
activities: |
|
|
|
Net income (loss) |
$ |
12,408 |
|
|
$ |
(13,086 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
|
Depreciation and amortization |
15,211 |
|
|
15,630 |
|
Restructuring and other transition expenses, net of payments |
— |
|
|
2,457 |
|
Deferred income taxes |
— |
|
|
(3,265 |
) |
Pension settlement charge |
— |
|
|
10,948 |
|
Net gains from sales of assets |
(23,662 |
) |
|
723 |
|
Net losses on derivative instruments |
4,075 |
|
|
6,205 |
|
Other adjustments |
1,794 |
|
|
3,494 |
|
Change in operating assets and liabilities: |
|
|
|
Accounts receivable |
(5,285 |
) |
|
(21,299 |
) |
Inventories |
1,804 |
|
|
(11,326 |
) |
Derivative assets (liabilities), net |
1,965 |
|
|
(9,234 |
) |
Other assets |
361 |
|
|
1,194 |
|
Accounts payable |
(10,608 |
) |
|
21,534 |
|
Accrued expenses and other liabilities |
(258 |
) |
|
(9,621 |
) |
Net cash used in operating
activities |
$ |
(2,195 |
) |
|
$ |
(5,646 |
) |
Cash flows from investing
activities: |
|
|
|
Purchases of property, plant and equipment |
(9,007 |
) |
|
(23,120 |
) |
Proceeds from sales of property, plant and equipment |
35,247 |
|
|
105 |
|
Net cash provided (used) in
investing activities |
$ |
26,240 |
|
|
$ |
(23,015 |
) |
Cash flows from financing
activities: |
|
|
|
Proceeds from revolving credit facility |
$ |
38,000 |
|
|
$ |
40,642 |
|
Repayments on revolving credit facility |
(60,000 |
) |
|
(429 |
) |
Payments of finance lease obligations |
(27 |
) |
|
(137 |
) |
Payment of financing costs |
— |
|
|
(1,027 |
) |
Proceeds from stock option exercises |
129 |
|
|
507 |
|
Net cash (used) provided by
financing activities |
$ |
(21,898 |
) |
|
$ |
39,556 |
|
Net increase in cash and cash
equivalents |
$ |
2,147 |
|
|
$ |
10,895 |
|
Cash and cash equivalents at
beginning of period |
6,983 |
|
|
2,438 |
|
Cash and cash equivalents at
end of period |
$ |
9,130 |
|
|
$ |
13,333 |
|
FARMER BROS. CO. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(continued) |
(In thousands) |
|
Six Months Ended December 31, |
|
2019 |
|
2018 |
Supplemental disclosure of
non-cash investing and financing activities: |
|
|
|
Net change in
derivative assets and liabilities included in other
comprehensive loss, net of tax |
$ |
14,644 |
|
|
$ |
(2,239 |
) |
Non-cash additions to property, plant and equipment |
$ |
284 |
|
|
$ |
2,928 |
|
Non-cash portion of earnout receivable recognized—spice
assets sale |
$ |
— |
|
|
$ |
390 |
|
Non-cash portion of earnout payable recognized—West Coast
Coffee acquisition |
$ |
— |
|
|
$ |
840 |
|
Non-cash issuance of 401-K common stock |
$ |
109 |
|
|
$ |
— |
|
Cumulative preferred dividends, undeclared and unpaid |
$ |
275 |
|
|
$ |
266 |
|
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:
- 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:
- (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;
- restructuring and other transition expenses;
- net gains and losses from sales of assets;
- non-cash pension settlement charges; 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) employee retention
and separation benefits, pension withdrawal expense,
facility-related costs and other related costs such as travel,
legal, consulting and other professional services; and (ii)
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.
For purposes of calculating EBITDA and EBITDA
Margin and Adjusted EBITDA and Adjusted EBITDA Margin, we have
excluded the impact of interest expense resulting from the adoption
of ASU 2017-07, non-cash pretax pension settlement charge resulting
from the amendment and termination of the Farmer Bros. Plan
effective December 1, 2018 and severance because these items are
not reflective of our ongoing operating results.
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.
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.
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 to EBITDA (unaudited):
|
|
Three Months Ended December 31, |
|
Six Months Ended December 31, |
(In
thousands) |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income (loss), as reported |
|
$ |
7,754 |
|
|
$ |
(10,100 |
) |
|
$ |
12,408 |
|
|
$ |
(13,086 |
) |
Income tax expense (benefit) |
|
(81 |
) |
|
(2,725 |
) |
|
(188 |
) |
|
(4,012 |
) |
Interest expense (1) |
|
1,585 |
|
|
1,735 |
|
|
2,861 |
|
|
2,938 |
|
Depreciation and amortization
expense |
|
7,594 |
|
|
7,902 |
|
|
15,211 |
|
|
15,630 |
|
EBITDA |
|
$ |
16,852 |
|
|
$ |
(3,188 |
) |
|
$ |
30,292 |
|
|
$ |
1,470 |
|
EBITDA Margin |
|
11.1 |
% |
|
(2.0 |
)% |
|
10.4 |
% |
|
0.5 |
% |
____________
(1) Excludes interest expense related to pension
plans and postretirement benefits.
Set forth below is a reconciliation of reported
net loss to Adjusted EBITDA (unaudited):
|
|
Three Months Ended December 31, |
|
Six Months Ended December 31, |
(In
thousands) |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income (loss), as
reported |
|
$ |
7,754 |
|
|
$ |
(10,100 |
) |
|
$ |
12,408 |
|
|
$ |
(13,086 |
) |
Income tax expense
(benefit) |
|
(81 |
) |
|
(2,725 |
) |
|
(188 |
) |
|
(4,012 |
) |
Interest expense(1) |
|
1,585 |
|
|
1,735 |
|
|
2,861 |
|
|
2,938 |
|
Depreciation and amortization
expense |
|
7,594 |
|
|
7,902 |
|
|
15,211 |
|
|
15,630 |
|
ESOP and share-based
compensation expense |
|
909 |
|
|
945 |
|
|
1,778 |
|
|
1,857 |
|
Restructuring and other
transition expenses(2) |
|
— |
|
|
207 |
|
|
— |
|
|
4,674 |
|
Net losses (gains) from sales
of other assets |
|
(11,057 |
) |
|
804 |
|
|
(23,662 |
) |
|
723 |
|
Proxy contest-related
expenses |
|
259 |
|
|
— |
|
|
259 |
|
|
— |
|
Acquisition and integration
costs |
|
— |
|
|
2,727 |
|
|
— |
|
|
3,738 |
|
Pension settlement charge |
|
— |
|
|
10,948 |
|
|
— |
|
|
10,948 |
|
Severance |
|
485 |
|
|
— |
|
|
2,797 |
|
|
— |
|
Adjusted EBITDA |
|
$ |
7,448 |
|
|
$ |
12,443 |
|
|
$ |
11,464 |
|
|
$ |
23,410 |
|
Adjusted EBITDA Margin |
|
4.9 |
% |
|
7.8 |
% |
|
3.9 |
% |
|
7.6 |
% |
____________
(1) Excludes interest expense related to
pension plans and postretirement benefits.(2) The six months ended
December 31, 2018, includes $3.4 million, including interest,
assessed by the WC Pension Trust representing the Company’s share
of the Western Conference of Teamsters Pension Plan ("WCTPP")
unfunded benefits due to the Company’s partial withdrawal from the
WCTPP as a result of employment actions taken by the Company in
2016 in connection with the Corporate Relocation Plan.
Contact:Joele Frank, Wilkinson
Brimmer KatcherLeigh Parrish / Kaitlin Kikalo212-355-4449
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