Farmer Brothers Company · NASDAQ:FARM
Farmer Brothers — Investor Presentation (May 2017)
31 slides from Farmer Brothers's investor presentation, May 24, 2017
Slide 1: Investor Presentation May 2017
May 2017INVESTOR PRESENTATION
Slide 2: Forward-looking statements
Certain statements contained in this presentation 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 even
Slide 3: Corporate Overview
* Source : 2016 Nielsen Retail Report 61% 7% 5% 10% 7% 11% FY16 Net Sales - $544M Coffee (Roast & Ground) Coffee (Frozen Liquid) Tea (Iced & Hot) Culinary Spice Other beverages National manufacturer, wholesaler, and distributor of foodservice products with over 100 years in the business Founded
Slide 4: Coffee Consumption Trends
4 COFFEE CONSUMPTION TRENDS Sources : The Hartman Group, SCAA, Datassential, Mintel CONSUMPTION & OCCASION Gourmet penetration has surpassed traditional coffee among Millennials Specialty coffee consumption surpassed “traditional” coffee in 2014 and has remained steady “SPECIALTY”IZATION COLD BR
Slide 5: 2017 Mega Coffee Trends
5 2017 MEGA COFFEE TRENDS Source : Datassential Foodbytes; June 2015; July 2015 Reuse & Upcycle Farmers use the coffee cherry skins to produce coffee flour so they can use it for baking Consumers enjoyed steeped skins (Cascara) as an emerging specialty beverage Next: Cascara sodas and adult be
Slide 6: Multi-Tier Coffee & Tea Portfolio
6 MULTI-TIER COFFEE & TEA PORTFOLIO TRADITIONAL — Traditional coffees for the classic consumer SPECIALTY — Handcrafted. Fresh. Sustainable. Product Categories PREMIUM — Fresh. Contemporary. Diverse. SPECIALTY — Handcrafted. Fresh. Sustainable. TRADITIONAL — Traditional coffees for the classic consum
Slide 7: Private Brand Program Development
7 PRIVATE BRAND PROGRAM DEVELOPMENT
Slide 8: Nationwide Distribution Network
8 NATIONWIDE DISTRIBUTION NETWORK 7 Manufacturing Facilities/Distribution Centers and 114 branch warehouses Manufacturing Facility Distribution Center Branch Location
Slide 9: Our Sustainability Programs
9 OUR SUSTAINABILITY PROGRAMS Our focused sustainability programs are a key component to winning new business ENVIRONMENTAL SOCIAL First roaster in the Northwest to be LEED® Silver Certified Innovative direct trade program pays farmers more for quality and invests in their long term coffee productiv
Slide 10: Experienced Senior Management Team
Name Title Prior Experience Mike Keown President and Chief Executive Officer David Robson Treasurer and Chief Financial Officer Tom Mattei General Counsel and Assistant Secretary Ellen Iobst Chief Operations Officer Scott Bixby Senior Vice President/General Manager of DSD Scott Siers Senior Vice Pre
Slide 11: Industry Association Leadership
World Coffee Research Mike Keown appointed Vice Chairman of the Board of Directors Specialty Coffee Association of Sustainability Council Council Member Pacific Coast Coffee Association Board Member Roasters Guild Charitable Support Coalition for Coffee Communities Board Member F
Slide 12: Moving Forward
May 2017MOVING FORWARD
Slide 13: Current Strategic Objectives
13 CURRENT STRATEGIC OBJECTIVES Increase production efficiency to improve competitiveness Completed Corporate Relocation Plan Implement supply chain cost reduction and efficiency initiatives Leverage ERP system to reduce unnecessary costs Maintain quality reputation as a competitive streng
Slide 14: Positive industry trends ~3-5% aggregate annual growth rates expected with specialty coffee
Positive industry trends ~3-5% aggregate annual growth rates expected with specialty coffee and iced coffee beverages growing at higher rates1 Consumption dynamic changing Large addressable market Potential market share improvement through new customers and territory objectives Currently
Slide 15: Recent Accomplishments
Strengthened management team Adding talent to manage for future growth Expertise in turnaround stories Recently announced supply chain rationalization/simplification DSD restructure targets annual savings of $2.0 million - $2.6 million to be realized fully by fiscal Q2-18 after incurring 1
Slide 16: Corporate Relocation Update
New HQ and distribution center in Northlake, Texas up and running Effectively transitioned all remaining key functions into the new facility Installed roasters in new state-of-the-art facility Expect to be fully operational by fiscal year end 2017 Annual savings estimated $18 million - $20
Slide 17: Recent Acquisitions
China Mist Brands, Inc. Acquired October 2016 for ~$11.2 million including working capital adjustments (before earnout) Strong premium tea brand Fast growing market segment National distribution in over 20,000 foodservice locations Strong management team West Coast Coffee Acquired in
Slide 18: Financial Overview
May 2017FINANCIAL OVERVIEW
Slide 19: Strong Balance Sheet
STRONG BALANCE SHEET Numbers presented are rounded Inventory – recorded under LIFO methodology PP&E – includes 52 owned properties 19 (In millions) March 31, 2017 Cash and Cash Equivalents $ 5.7 Short-Term Investments 26.5 Accounts and Notes Receivable 50.4 Inventories 60.7 Other Current Assets 5.1
Slide 20: Delivering Volume and Profitability Growth
20 DELIVERING VOLUME AND PROFITABILITY GROWTH • Coffee pounds CAGR of 7.4% from FY 2011 through March 2017 • Non GAAP net income CAGR of 15.1% from FY 2014 – March 2017(1) (1) See reconciliation of non GAAP measure to most comparable GAAP measure at the end of this presentation
Slide 21: FY Outlook
21 FY 18 OUTLOOK We believe we can grow coffee pounds at market rates or faster Our acquisition of China Mist provides new opportunities to expand tea products across our existing customer base as well as increase coffee penetration within China Mist’s existing customer base Net revenues outsi
Slide 22: Key Activities to Propel Future Growth
Strong product market with growing categories Increased coffee and tea consumption Upgrading manufacturing facilities and distribution practices New Northlake facility can initially increase system wide roasting capacity by up to 25% to support increased demand with longer term potential to
Slide 23: Investor Presentation May 2017
May 2017INVESTOR PRESENTATION
Slide 24: Appendix
APPENDIX a
Slide 25: Most Recent Results – Q3 2017 vs Q3 2016
25 MOST RECENT RESULTS – Q3 2017 VS Q3 2016 Green coffee pounds increased 6.9% Revenue increased 2.8% Solid margins of 38.9%, essentially flat with last year when excluding start up costs for our new Northlake facility EBITDA increased 52.7% Adjusted EBITDA increased 24.0% Adjusted EBITD
Slide 26: Selected Financial Data
Three Months Ended March 31, (In thousands, except per share data) 2017 2016 Y-o-Y Change Income statement data: Net sales $ 138,187 $ 134,468 2.80% Gross margin 38.9% 39.1% -20 bps Income from operations $ 2,058 $ 306 572.50% Net income $ 1,594 $ 1,192 33.70% Net income per common share—diluted $ 0
Slide 27: Q3 FY17 Statements of Operations
Q3 FY17 STATEMENTS OF OPERATIONS Three Months Ended March 31, Nine Months Ended March 31, ($ in thousands, except per share data) 2017 2016 2017 2016 Net sales $ 138,187 $ 134,468 $ 407,700 $ 410,220 Cost of goods sold 84,367 81,908 247,586 254,173 Gross profit 53,820 52,560 160,114 156,047 GM 38.9
Slide 28: Reconciliation of Reported Net Income to EBITDA
RECONCILIATION OF REPORTED NET INCOME TO EBITDA Three Months Ended March 31, Nine Months Ended March 31, ($ in thousands) 2017 2016 2017 2016 Net income, as reported $ 1,594 $1,192 $ 23,288 $ 5,679 Income tax expense 1,411 43 15,910 318 Interest expense 517 111 1,430 341 Depreciation & amortization
Slide 29: Reconciliation of Reported Net Income to Adjusted EBITDA
RECONCILIATION OF REPORTED NET INCOME TO ADJUSTED EBITDA Three Months Ended March 31, Nine Months Ended March 31, ($ in thousands) 2017 2016 2017 2016 Net income, as reported $ 1,594 $ 1,192 $ 23,288 $ 5,679 Income tax expense 1,411 43 15,910 318 Interest expense 517 111 1,430 341 Investment income
Slide 30: Reconciliation of Reported Net Income to Non-GAAP Net Income
RECONCILIATION OF REPORTED NET INCOME TO NON-GAAP NET INCOME 30 ($ in thousands) 2017 2016 2017 2016 Net income, as reported 1,594$ 1,192$ 23,288$ 5,679$ Non-recurring proxy contest-related expense 196 — 5,186 — Restructuring and other transition expenses 2,547 3,169 9,542 13,855 Net gain from sales
Slide 31: Investor Presentation May 2017
May 2017INVESTOR PRESENTATION