Farmer Bros. Co. Reports Fourth Quarter And Fiscal 2016 Financial Results
FORT WORTH, Texas, Sept. 12, 2016 (GLOBE NEWSWIRE) -- Farmer Bros. Co. reported financial results for its fourth quarter and fiscal year ended June 30, 2016.
Fourth Quarter Fiscal 2016 Highlights:
Net sales increased $1.6 million to $134.2 million in the fourth quarter of fiscal 2016, as compared to the prior year period;
Gross profit increased 6.6% to $52.4 million in the fourth quarter of fiscal 2016, as compared to the prior year period;
Net income was $84.2 million in the fourth quarter of fiscal 2016, primarily due to non-cash income tax benefit of $80.3 million from the release of valuation allowance on deferred tax assets, $2.7 million in restructuring and other transition expenses associated with the Company’s corporate relocation plan and $2.8 million in net gains from sales of assets including spice assets, as compared to net losses of $2.2 million, including $5.9 million in restructuring and other transition expenses associated with the Company's corporate relocation plan in the prior year period. Net income per diluted common share was $5.05 in the fourth quarter of fiscal 2016, as compared to a net loss of $0.13 per common share in the prior year period;
Non-GAAP net income, excluding $80.3 million in reversal of deferred tax asset valuation allowance, $2.7 million in restructuring and other transition expenses and $2.8 million in net gains from sales of assets including spice assets, was $3.8 million, and Non-GAAP net income per diluted common share was $0.23 in the fourth quarter of fiscal 2016, as compared to Non-GAAP net income of $3.7 million and Non-GAAP net income per diluted common share of $0.23 in the prior year period; and
Adjusted EBITDA was $9.8 million, and Adjusted EBITDA Margin was 7.3% in the fourth quarter of fiscal 2016, as compared to Adjusted EBITDA of $11.1 million, and Adjusted EBITDA Margin of 8.3% in the prior year period.
President and CEO, Michael Keown said, "We have made substantial progress in the Company's turnaround over the last 12 months, which is reflected in our volume growth, gross margin expansion and improved earnings for the full fiscal year. Our team continues to focus on our key initiatives including expanding our national account base, improving our DSD model and driving more efficient production to strengthen the Company's market position. We have been successful in winning significant new customers and establishing new corporate partnerships in the past year. At the same time, we have already achieved more than half of the expected $18 million to $20 million in annualized cost savings from our corporate relocation. We believe that continued execution of our strategy will create additional value for all of our stockholders.”
Mr. Keown continued, “As we separately announced today, we have signed an agreement to acquire the premium tea business, China Mist Brands, Inc. from the founders Dan Schweiker and John Martinson. Adding the China Mist brand to our business will strengthen our tea offerings, expand into the premium tea segment, add new incremental customers, while also expanding our important distributor relationships."
Fourth Quarter Fiscal 2016 Results:
Net sales in the fourth quarter of fiscal 2016 increased $1.6 million, or 1.2%, to $134.2 million, from $132.6 million in the fourth quarter of fiscal 2015. Net sales from roast and ground coffee were flat as compared to the prior year period. Volume of green coffee processed and sold increased 10.5% in the fourth quarter of fiscal 2016, as compared to the prior year period, while net sales of roast and ground coffee remained flat, driven primarily by price decreases to customers utilizing commodity-based pricing arrangements. Net sales of spice products and tea and culinary products increased in the fourth quarter of fiscal 2016 as compared to the prior year period, partially offset by a decrease in net sales of other beverages.
Gross profit in the fourth quarter of fiscal 2016 increased $3.2 million, or 6.6%, to $52.4 million from $49.2 million recorded in the prior year period. Gross profit as a percentage of net sales increased 200 basis points to 39.1% in the fourth quarter of fiscal 2016, from 37.1% in the prior year period. The increase in gross profit as compared to the same prior year period was primarily due to lower coffee commodity costs, supply chain efficiencies realized primarily through the consolidation of the Company's former Torrance coffee production volumes into its Houston and Portland manufacturing facilities, and other supply chain improvements. Gross profit in the fourth quarter of fiscal 2016 also included the beneficial effect of liquidation of LIFO inventory quantities in the amount of $3.1 million, as compared to $1.8 million in the same period of fiscal 2015 as a result of the reduction in inventories at the end of fiscal 2016. The inventory reduction in fiscal 2016 was primarily due to production consolidation and from the sale of processed and unprocessed inventory to Harris Spice Company upon conclusion of the transition services provided by the Company.
Operating expenses in the fourth quarter of fiscal 2016 decreased $1.2 million, or 2.5%, to $49.4 million, or 36.8% of net sales, from $50.6 million, or 38.2% of net sales in the prior year period. The decrease in operating expenses compared to the prior year period was primarily due to a $3.2 million reduction in restructuring and other transition expenses in connection with the Company's corporate relocation plan and a $2.8 million higher gain on sales of assets including spice assets, primarily real estate, partially offset by increases in selling and general and administrative expenses.
In the fourth quarter of fiscal 2016 selling expenses increased $1.4 million and general and administrative expenses increased $3.4 million, as compared to the prior year period. The increase in both selling expenses and general and administrative expenses was primarily due to $2.2 million in accruals for incentive compensation payments to eligible employees in the fourth quarter of fiscal 2016, or a $0.13 negative impact to net income per diluted common share, as compared to a reversal of $0.3 million in accruals for incentive compensation payments to eligible employees, or a positive impact of $0.02 to net loss per common share, in the prior year period. Additionally, the Company experienced higher retiree medical costs in the fourth quarter of fiscal 2016 as compared to the prior year period.
As a result of the foregoing factors, income from operations in the fourth quarter of fiscal 2016 was $3.1 million compared to loss from operations of $1.4 million in the prior year period.
Total other income in the fourth quarter of fiscal 2016 was $0.8 million as compared to total other expense of $0.6 million in the same period of fiscal 2015, primarily due to net gains from derivative instruments and investments of $0.6 million as compared to net losses from derivative instruments and investments of $0.9 million in the prior year period. The net gains and net losses from derivative instruments and investments in both periods, were primarily due to mark-to-market net gains and net losses, respectively, on coffee-related derivative instruments not designated as accounting hedges.
Income tax benefit was $80.3 million in the fourth quarter of fiscal 2016 as compared to income tax expense of $0.2 million in the fourth quarter of the prior year period. In the fourth quarter of fiscal 2016, 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 $84.2 million, or $5.05 per diluted common share in the fourth quarter of fiscal 2016, as compared to a net loss of $2.2 million, or $0.13 per common share, in the prior year period. Full report.
