Farmer Bros. (US:FARM)2019-02-11 22:22Financial Performance - Green coffee pounds processed and sold decreased by 5.8% in Q3 2018 but increased by 1.0% in the first half of 2018 compared to the same periods in 2017[242]. - Gross profit decreased by $3.0 million to $53.2 million in Q3 2018 from $56.3 million in Q3 2017, and decreased by $0.9 million to $101.5 million in the first half of 2018 from $102.4 million in the first half of 2017[243]. - Net loss available to common stockholders was $(10.2) million, or $(0.60) per share, in Q3 2018, compared to a net loss of $(17.2) million, or $(1.03) per share, in Q3 2017[245]. - Net sales in Q3 2018 decreased by $(7.6) million, or (4.5)%, to $159.8 million from $167.4 million in Q3 2017, primarily due to lower volume in direct ship business and a decline in revenues sold through the DSD network[248]. - Net sales in the first half of 2018 increased by $8.1 million, or 2.7%, to $307.2 million from $299.1 million in the first half of 2017, driven by a $7.3 million increase in net sales of roasted coffee products[249]. - Adjusted EBITDA increased by 18.4% to $12.4 million in Q3 2018, with an Adjusted EBITDA Margin of 7.8%, compared to $10.5 million and 6.3% in Q3 2017[246]. - Unit sales decreased by 6.8% in Q3 2018, while average unit price increased by 2.4%, resulting in a net sales decrease of (4.5)%[250]. - EBITDA decreased by 136.8% to $(3.2) million in Q3 2018, with an EBITDA Margin of (2.0)%, compared to $8.7 million and 5.2% in Q3 2017[246]. - The net loss for the three months ended December 31, 2018, was $(10.1) million, an improvement from a net loss of $(17.1) million for the same period in 2017, representing a 41% reduction[276]. - Net loss available to common stockholders for the six months ended December 31, 2018, was $(13.4) million, or $(0.79) per share, compared to $(16.3) million, or $(0.98) per share, in the prior year, indicating a 17.8% improvement[276]. Sales and Revenue - The Boyd Business contributed $44.6 million in net sales for the first half of 2018, compared to $26.3 million in the same period of 2017[249]. - Net sales for the three months ended December 31, 2018, were $159.8 million, a decrease of 4.3% from $167.4 million in the same period of 2017[254]. - For the six months ended December 31, 2018, net sales increased to $307.2 million, up 2.1% from $299.1 million in the prior year[255]. Costs and Expenses - Cost of goods sold for the three months ended December 31, 2018, decreased by $4.6 million, or 4.1%, to $106.5 million, representing 66.7% of net sales[257]. - Gross profit for the three months ended December 31, 2018, decreased by $3.0 million, or 5.4%, to $53.2 million, with a gross margin of 33.3%[259]. - Operating expenses for the three months ended December 31, 2018, decreased by $3.5 million, or 6.3%, to $52.7 million, representing 33.0% of net sales[261]. - Loss from operations for the six months ended December 31, 2018, was $(1.6) million, compared to income from operations of $1.9 million in the same period of 2017[268]. - Total other expense for the six months ended December 31, 2018, was $(15.5) million, compared to $(0.7) million in the prior year period, primarily due to a pension settlement charge of $10.9 million[269]. Debt and Financing - The company entered into a new $150.0 million senior secured revolving credit facility on November 6, 2018, which includes an accordion feature allowing for an additional $75.0 million in commitments[294]. - The new revolving facility matures on November 6, 2023, with the option to extend the maturity date for up to two additional years under certain conditions[294]. - As of December 31, 2018, the company had outstanding borrowings of $130.0 million under the New Revolving Facility, with a weighted average interest rate of 3.94%[296]. - Interest expense for the three months ended December 31, 2018, increased by $0.8 million to $3.3 million, driven by higher borrowings related to the Boyd Business acquisition[271]. Cash Flow and Investments - For the six months ended December 31, 2018, net cash used in operating activities was $5.6 million, an increase from $1.5 million in the same period of 2017, primarily due to increased accounts receivable and inventory purchases[302]. - Net cash used in investing activities during the six months ended December 31, 2018 was $23.0 million, a decrease of $32.8 million compared to $55.8 million in the same period of 2017, mainly due to the prior year's acquisition of the Boyd Business[303]. - The company incurred $2.7 million in acquisition and integration costs related to the Boyd Business acquisition during the three months ended December 31, 2018[310]. - Total capital expenditures for the six months ended December 31, 2018 were $23.1 million, including $10.6 million for machinery and equipment related to the Expansion Project[318]. Market and Inventory - The average Arabica "C" market price of green coffee decreased by 5.2% in the three months ended December 31, 2018, and by 6.7% in the six months ended December 31, 2018[257][258]. - The company has committed to purchase green coffee inventory totaling $68.0 million under fixed-price contracts as of December 31, 2018[330]. - A hypothetical 10% increase in coffee commodity prices could increase net income by $747,000 and AOCI by $3.51 million[342]. Restructuring and Charges - Restructuring and other transition expenses increased by $4.4 million in the six months ended December 31, 2018, primarily due to costs associated with the DSD Restructuring Plan[266]. - The DSD Restructuring Plan is expected to incur approximately $4.9 million in pretax restructuring charges by the end of fiscal 2019[312]. - The company recorded net losses of $(4.2) million on coffee-related derivative instruments designated as cash flow hedges for the six months ended December 31, 2018[340]. Pension and Tax - The company recognized a non-cash pension settlement charge of $8.1 million after-tax due to the termination of the Farmer Bros. Plan, reducing the projected benefit obligation by approximately $24.4 million[324]. - The company had a net underfunded status of $46.7 million for its pension plans as of December 31, 2018, an increase of $6.7 million from June 30, 2018[324]. - The company recorded an income tax benefit of $(2.7) million for the three months ended December 31, 2018, compared to an income tax expense of $16.8 million in the same period of 2017, reflecting a significant change due to the Tax Cut and Jobs Act[275].