Farmer Bros. Co.: Farmer Brothers Coffee reports second quarter fiscal 2025 financial results

Second quarter fiscal 2025 net sales of $90 million
Second quarter fiscal 2025 gross margin increase of 270 basis points year-over-year to 43.1%
Reported second quarter net income of $210,000 and improved adjusted EBITDA¹ of $5.9 million

FORT WORTH, Texas, Feb. 06, 2025 (GLOBE NEWSWIRE) -- Farmer Bros. Co. (NASDAQ: FARM) today reported its second quarter fiscal 2025 financial results for the period ended Dec. 31, 2024. The company filed its Form 10-Q, which can be found on the Investor Relations section of the company's website.

"The second quarter was one of our strongest performing quarters in quite some time despite the challenging market environment," said Farmer Brothers President and Chief Executive Officer John Moore. "We saw continued improvements in sales, operating expenses and adjusted EBITDA¹, as well as gross margins above 43% for the second straight quarter. Farmer Brothers' core focus at this time is on driving growth in top line, coffee pounds and customer counts, while continuing to optimize operations."

"Looking ahead, we continue to focus on executing and navigating difficult macroeconomic conditions and believe these results underscore the positive impact of the changes we have made to focus on DSD operations and optimize the business over the last 18 months. We feel we are better positioned than we have been in a long time to realize significant positive gains and long-term growth and profitability once market conditions become more favorable."

Second quarter 2025 business highlights

• Enhanced leadership team in January with the addition of Vice President of Sales Brian Miller to lead the sales force and the transition of Vice President and Chief Field Operations Officer Tom Bauer to an operations-focused leadership role.
• Completed additional milestones related to SKU rationalization and brand pyramid initiatives, which are on track to be completed in the third quarter of fiscal 2025.
• Rolled out specialty tier coffee brand to select customers with a full roll out slated by the end of the third quarter of fiscal 2025.
• Continued progress related to direct store delivery (DSD) route optimization and customer penetration efforts.

Second quarter fiscal 2025 financial results

• Net sales of $90 million compared to $89.5 million in the second quarter of fiscal 2024.
• Gross profit of $38.8 million, or 43.1%, compared to $36.1 million, or 40.4%, in the prior year period. The increase in gross profit was primarily a result of improved pricing compared to the prior year period.
• Operating expenses were $37.8 million, or 42% of net sales, compared to $31.7 million, or 35.4% of net sales, in the prior year period. The $6.1 million increase was primarily driven by a $7.7 million decrease in net gains related to asset disposals as there were no branch sales in the second quarter of fiscal 2025.
• Net income was $210,000, which included a $1.5 million net loss associated with the disposal of assets, compared to $2.7 million for the second quarter of fiscal 2024, which included a $6.1 million net gain associated with disposal of assets.
• Adjusted EBITDA¹ was $5.9 million, an increase of almost $3.6 million, compared to $2.3 million in the second quarter of fiscal 2024.

Balance Sheet and Liquidity
As of Dec. 31, 2024, the company had $5.5 million of unrestricted cash and cash equivalents, $200,000 in restricted cash, $23.3 million in outstanding borrowings and $23.7 million of borrowing availability under its revolving credit facility.

Investor Conference Call
Farmer Brothers published its full second quarter fiscal 2025 financial results for the period ended Dec. 31, 2024, with the filing of its Form 10-Q, which will be available on the Investor Relations section of the company's website after the close of market Thursday, Feb. 6.

The company will also host an audio-only investor conference call and webcast at 5 p.m. Eastern on Thursday, Feb. 6 to provide a review of the quarter and business update. The live audio webcast along with the press release will be available on the Investor Relations section of the company's website. Callers who pre-register will be emailed dial-in details and a unique PIN to gain immediate access to the call and bypass the live operator. An audio-only replay of the webcast will be archived for at least 30 days on the Investor Relations section of farmerbros.com and will be available approximately two hours after the end of the live webcast.

About Farmer Brothers
Founded in 1912, Farmer Brothers Coffee Co. is a national coffee roaster, wholesaler, equipment servicer and distributor of coffee, tea and culinary products. The company's product lines include organic, Direct Trade and sustainably produced coffee, as well as tea, cappuccino mixes, spices and baking/biscuit mixes.

Farmer Brothers Coffee Co. delivers extensive beverage planning services and culinary products to a wide variety of U.S.-based customers, ranging from small independent restaurants and foodservice operators to large institutional buyers, such as 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. The company's primary brands include Farmer Brothers, Boyd's, Cain's, China Mist and West Coast Coffee. You can learn more at farmerbros.com.

Forward-looking Statements
This press release and other documents we file with the Securities and Exchange Commission (the "SEC") contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, that are based on current expectations, estimates, forecasts and projections about us, our future performance, our financial condition, our products, our business strategy, our beliefs and our management's assumptions. In addition, we, or others on our behalf, may make forward-looking statements in press releases or written statements, or in our communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls and conference calls. These forward-looking statements can be identified by the use of words like "anticipates," "estimates," "projects," "expects," "plans," "believes," "intends," "will," "could," "may," "assumes" and other words of similar meaning. These statements are based on management's beliefs, assumptions, estimates and observations of future events based on information available to our management at the time the statements are made and include any statements that do not relate to any historical or current fact. These statements are not guarantees of future performance and they involve certain risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed, implied or forecast by our forward-looking statements due in part to the risks, uncertainties and assumptions set forth in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 filed with the SEC on September 12, 2024, as amended by the Form 10-K/A filed on October 25, 2024 (as amended, the "2024 Form 10-K"), as well as those discussed elsewhere in this Quarterly Report on Form 10-Q and other factors described from time to time in our filings with the SEC.

Factors that could cause actual results to differ materially from those in forward-looking statements include, but are not limited to, severe weather, levels of consumer confidence in national and local economic business conditions, developments related to pricing cycles and volumes, the impact of labor market shortages, the increase of costs due to inflation, an economic downturn caused by any pandemic, epidemic or other disease outbreak, the success of our turnaround strategy, 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, our ability to meet financial covenant requirements in our credit facility, which could impact, among other things, our liquidity, the relative effectiveness of compensation-based employee incentives in causing improvements in our performance, the capacity to meet the demands of our customers, the extent of execution of plans for the growth of our business and achievement of financial metrics related to those plans, our success in retaining and/or attracting qualified employees, our success in adapting to technology and new commerce channels, 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, changes in consumer preferences, our ability to provide sustainability in ways that do not materially impair profitability, changes in the strength of the economy, including any effects from inflation, business conditions in the coffee industry and food industry in general, our 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, uncertainties and assumptions described in the 2024 Form 10-K and other factors described from time to time in our filings with the SEC.

Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results. Any or all of the forward-looking statements contained in this press release and any other public statement made by us, including by our management, may turn out to be incorrect. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise, except as required under federal securities laws and the rules and regulations of the SEC.

Investor Relations Contact
Ellipsis
[e-mail]
646-776-0886

Media contact
Brandi Wessel
Director of Communications
405-885-5176
[e-mail]

FARMER BROS. CO. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except share and per share data)
	Three Months Ended December 31,								Six Months Ended December 31,
		2024				2023				2024				2023
Net sales	$	90,021			$	89,453			$	175,086			$	171,340
Cost of goods sold		51,182				53,344				98,930				104,444
Gross profit		38,839				36,109				76,156				66,896
Selling expenses		26,760				28,141				53,987				54,969
General and administrative expenses		9,534				9,655				20,786				22,486
Net losses (gains) on disposal of assets		1,527				(6,138	)			3,193				(12,922	)
Operating expenses		37,821				31,658				77,966				64,533
Income (loss) from operations		1,018				4,451				(1,810	)			2,363
Other (expense) income:
Interest expense		(1,922	)			(1,907	)			(3,713	)			(4,129	)
Other, net		1,033				324				783				3,195
Total other expense		(889	)			(1,583	)			(2,930	)			(934	)
Income (loss) before taxes		129				2,868				(4,740	)			1,429
Income tax (benefit) expense		(81	)			164				52				32
Net income (loss)	$	210			$	2,704			$	(4,792	)		$	1,397
Net income (loss) available to common stockholders per common share, basic and diluted	$	0.01			$	0.13			$	(0.23	)		$	0.07
Weighted average common shares outstanding-basic		21,314,911				20,728,699				21,289,073				20,565,492
Weighted average common shares outstanding-diluted		22,357,699				20,917,562				21,289,073				20,740,303

FARMER BROS. CO. CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share and per share data)
	December 31, 2024						June 30, 2024
ASSETS
Current assets:
Cash and cash equivalents	$	5,488					$	5,830
Restricted cash		246						175
Accounts receivable, net of allowance for credit losses of $710, in both periods		35,608						35,147
Inventories		52,771						57,230
Short-term derivative assets		550						11
Prepaid expenses		4,829						4,236
Assets held for sale		352						352
Total current assets		99,844						102,981
Property, plant and equipment, net		30,984						34,002
Intangible assets, net		10,133						11,233
Right-of-use operating lease assets		36,858						35,241
Other assets		1,300						1,756
Total assets	$	179,119					$	185,213
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		44,629						48,478
Accrued payroll expenses		10,900						10,782
Right-of-use operating lease liabilities - current		16,090						14,046
Short-term derivative liability		2,624						730
Other current liabilities		3,649						2,997
Total current liabilities		77,892						77,033
Long-term borrowings under revolving credit facility		23,300						23,300
Accrued pension liabilities		11,553						12,287
Accrued postretirement benefits		811						789
Accrued workers' compensation liabilities		2,557						2,378
Right-of-use operating lease liabilities - noncurrent		21,290						21,766
Other long-term liabilities		226						2,111
Total liabilities	$	137,629					$	139,664
Commitments and contingencies
Stockholders' equity:
Common stock, $1.00 par value, 50,000,000 shares authorized; 21,351,396 and 21,264,327 shares issued and outstanding as of December 31, 2024, and June 30, 2024, respectively		21,351						21,265
Additional paid-in capital		80,913						79,963
Accumulated deficit		(35,146			)			(30,354					)
Accumulated other comprehensive loss		(25,628			)			(25,325					)
Total stockholders' equity	$	41,490					$	45,549
Total liabilities and stockholders' equity	$	179,119					$	185,213

FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
	Six Months Ended December 31,
		2024				2023
Cash flows from operating activities:
Net (loss) income	$	(4,792	)		$	1,397
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities
Depreciation and amortization		5,817				5,792
Net losses (gains) on disposal of assets		3,193				(14,136	)
Net losses on derivative instruments		3,183				429
401(k) and share-based compensation expense		1,037				2,970
Provision for credit losses		322				450
Change in operating assets and liabilities:
Accounts receivable, net		(782	)			13,044
Inventories		4,458				(6,193	)
Derivative (liabilities) assets, net		(3,635	)			(779	)
Other assets		(115	)			1,146
Accounts payable		(3,795	)			(15,936	)
Accrued expenses and other		155				949
Net cash provided by (used in) operating activities	$	5,046			$	(10,867	)
Cash flows from investing activities:
Purchases of property, plant and equipment		(5,362	)			(6,853	)
Proceeds from sales of property, plant and equipment		165				20,497
Net cash (used in) provided by investing activities	$	(5,197	)		$	12,430
Cash flows from financing activities:
Proceeds from Credit Facilities		7,000				2,279
Repayments on Credit Facilities		(7,000	)			(2,000	)
Payments of finance lease obligations		(96	)			(96	)
Payment of financing costs		(24	)			(58	)
Net cash (used in) provided by financing activities	$	(120	)		$	125
Net (decrease) increase in cash and cash equivalents and restricted cash		(271	)			1,688
Cash and cash equivalents and restricted cash at beginning of period		6,005				5,419
Cash and cash equivalents and restricted cash at end of period	$	5,734			$	7,107

Supplemental disclosure of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	8,890			$	6,456
Non-cash issuance of ESOP and 401(K) common stock		-				326
Non cash additions to property, plant and equipment		54				52

Non-GAAP Financial Measures

In addition to net income (loss) 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 income (loss) excluding the impact of:

• income tax expense (benefit);
• 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 (loss) excluding the impact of:

• income tax expense (benefit):
• interest expense;
• depreciation and amortization expense;
• 401(k) and share-based compensation expense;
• net losses (gains) on disposal of assets; and
• severance costs.

"Adjusted EBITDA Margin" is defined as Adjusted EBITDA expressed as a percentage of net sales.

For purposes of calculating EBITDA and EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin, we have excluded the impact of interest expense resulting from non-cash pretax pension and postretirement benefits. For purposes of calculating Adjusted EBITDA and Adjusted EBITDA Margin, beginning with the period ended June 30, 2024, and any period thereafter, we are also excluding the impact of the loss related to sale of business, as this item is 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 income (loss) to EBITDA (unaudited):

		Three Months Ended December 31,								Six Months Ended December 31,
(In thousands)			2024				2023				2024				2023
Net income (loss)		$	210			$	2,704			$	(4,792	)		$	1,397
Income tax (benefit) expense			(81	)			164				52				32
Interest expense (1)			694				692				1,258				1,699
Depreciation and amortization expense			2,920				2,844				5,817				5,792
EBITDA		$	3,743			$	6,404			$	2,335			$	8,920
EBITDA Margin			4.2	%			7.2	%			1.3	%			5.2	%
__________
(1) Excludes interest expense related to pension plans and postretirement benefit plans.

Set forth below is a reconciliation of reported net income (loss) to Adjusted EBITDA (unaudited):

		Three Months Ended December 31,								Six Months Ended December 31,
(In thousands)			2024				2023				2024				2023
Net income (loss)		$	210			$	2,704			$	(4,792	)		$	1,397
Income tax (benefit) expense			(81	)			164				52				32
Interest expense (1)			694				692				1,258				1,699
Depreciation and amortization expense			2,920				2,844				5,817				5,792
401(k) and share-based compensation expense			541				1,350				1,037				2,902
Net losses (gains) on disposal of assets			1,527				(7,352	)			3,193				(14,136	)
Loss related to sale of business (2)			---				1,214				----				1,214
Severance costs			88				695				752				2,960
Adjusted EBITDA		$	5,899			$	2,311			$	7,317			$	1,860
Adjusted EBITDA Margin			6.6	%			2.6	%			4.2	%			1.1	%
__________
(1) Excludes interest expense related to pension plans and postretirement benefit plans.
(2) Result of the settlements related to the divestiture of direct ship business which included gains related to coffee hedges and settlement of liabilities.