Farmer Brothers Company · NASDAQ:FARM
Farmer Brothers — Investor Presentation (March 2016)
36 slides from Farmer Brothers's investor presentation, Mar 10, 2016
Slide 1: March 2016 Investor Presentation
March 2016 INVESTOR 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: Agenda
3 AGENDA Farmer Brothers’ Recent History & Accomplishments Business Strategy and Corporate Relocation Financial Overview Question & Answers
Slide 4: Key Message Points
4 KEY MESSAGE POINTS We continue to develop a leadership reputation in the scale and quality of our sustainability and coffee sourcing programs, which we believe is an important asset of our business. Overall, we continue to make progress in improving the Company’s financial results, with non-GAAP n
Slide 5: Recent History & Accomplishments
March 2016 RECENT HISTORY & ACCOMPLISHMENTS
Slide 6: Farmer Brothers Overview
A well-regarded, national manufacturer, wholesaler, and distributor of foodservice products with over 100 years in the business Founded in 1912 Today, we are a national roaster, manufacturer, wholesaler, and distributor of high-quality branded and private label coffees and distributor of teas, s
Slide 7: Experienced Senior Management Team
EXPERIENCED SENIOR MANAGEMENT TEAM 7 Name Title Prior Experience Mike Keown President and Chief Executive Officer Isaac Johnston Treasurer and Chief Financial Officer Tom Mattei General Counsel Barry Fischetto Senior Vice President of Operations Scott Bixby Senior Vice President/General Manager of D
Slide 8: Industry Association Leadership
Specialty Coffee Association of America Cup of Excellence/Alliance for Coffee Excellence International Society of Sustainability Professionals Roasters Guild Pacific Coast Coffee Association World Coffee Research Charitable Support 8 INDUSTRY ASSOCIATION LEADERSHIP The marks displayed
Slide 9: Nationwide Distribution Network
9 NATIONWIDE DISTRIBUTION NETWORK 5 distribution centers and 110 branch warehouses Manufacturing Facility Distribution Center Branch Location Under Construction
Slide 10: Farmer Brothers Supply Chain
Source Green Coffee Materials Manufacture Coffee Warehouse Transport Local Warehouse Route (DSD) Customer 10 FARMER BROTHERS SUPPLY CHAIN CBI: Specialty Coffee National DSD: Sara Lee Hedging National DSD Sustainable Close Torrance Hedging 2 VMI Sell Spice Assets 3PL Open Ft. Worth Open Ft. Worth Pro
Slide 11: Developing Model to Win New Customers
11 DEVELOPING MODEL TO WIN NEW CUSTOMERS 11 National Customers INNOVATION LAB DEDICATED ACCOUNT MANAGEMENT NATIONAL DSD INDUSTRY LEADERSHIP CONNECTIONS AT ORIGIN PRICE-RISK MANAGEMENT R&D PRODUCT QUALITY MARKET INSIGHTS SUSTAINABILITY PROGRAMS
Slide 12: Recent Accomplishments
Enhanced Experienced Management Team Focused on Supply Chain Rationalization/Simplification — Corporate relocation plan announced in February 2015 included restructuring elements for Torrance and Houston facilities Attracted National Account Customers Enhanced Specialty Coffee Program and Re
Slide 13: Relocation Plan: Improving Our Future
March 2016 RELOCATION PLAN: IMPROVING OUR FUTURE
Slide 14: Next Steps in Improving Financial Results
Since fiscal 2011, we have delivered improving financial results Marked underlying volume growth and operational streamlining over that period Rebounding Non-GAAP Net Income* FY15 was our most profitable year in over a decade 14 NEXT STEPS IN IMPROVING FINANCIAL RESULTS ($m) Non-GAAP Net Income/
Slide 15: Corporate Relocation Plan
15 CORPORATE RELOCATION PLAN On February 5, 2015, we announced a plan ("Corporate Relocation Plan") to close our Torrance, California, facility and relocate those operations to a new state-of-the-art manufacturing, distribution, and corporate headquarters facility. The new facility, located in N
Slide 16: Relocation Timeline of Key Activity
2/15: Announced relocation to Texas or Oklahoma 5/15: Confirmed Northlake, Texas, and offer of local incentive programs 5/15: Successfully wound down coffee production & transferred within FBC System; closed Houston distribution center 7/15: Started up interim HQ in Fort Worth, Texas 7/15:
Slide 17: Timeline Moving Forward
17 TIMELINE MOVING FORWARD 3/16: Completed final design of expanded Ft. Worth building, and warehouse, update lease to reflect final designs 3/16: Firmed offer range for sale of Torrance facility, and misc. assets 4/16: Complete migration to third party logistics or “3PL” Q4/16: Implement ce
Slide 18: Timeline Moving Forward
18 TIMELINE MOVING FORWARD Q1 FY17: Estimated completion of Torrance facility sale. Q1 FY17: Estimated start-up of new Ft. Worth facility, in stages Q2 FY 17: Estimated completion of start-up of new Ft. Worth facility Q2 FY 17: Estimated completion of exit from Torrance facility: DC, IT, War
Slide 19: Financial Overview
March 2016 FINANCIAL OVERVIEW
Slide 20: FY15 Financial Highlights
Net sales increased 3.3% to $545.9M Net income was $0.7M, or $0.04 per diluted common share, including restructuring and other transition expenses associated with the Company’s Corporate Relocation Plan of $10.4M Non-GAAP net income* was $11.5M, and Non-GAAP net income per diluted common share
Slide 21: Consistent Revenue Growth
- 100 200 300 400 500 600 2007 2008 2009 2010 2011 2012 2013 2014 2015 21 CONSISTENT REVENUE GROWTH In millions Acquisition of CBI Acquisition of Sara Lee DSD CBI acquisition – April 2007; Sara Lee DSD acquisition – February 2009 Fiscal Year end June 30
Slide 22: Improving Non-GAAP Net Income
22 IMPROVING NON-GAAP NET INCOME* (1) The impact of income tax expense (benefit) was not material. * Non-GAAP net income (loss) and non-GAAP net income (loss) per diluted common share are non-GAAP financial measures . In addition to net income (loss) and earnings per share determined in accordance w
Slide 23: Solid Adjusted EBITDA
23 SOLID ADJUSTED EBITDA* (1) Includes: (a) $4.9 million in beneficial effect of liquidation of LIFO inventory quantities in fiscal 2015; (b) $1.1 million in beneficial effect of liquidation of LIFO inventory quantities in fiscal 2013; and (c) $1.7 million in beneficial effect of liquidation of LIFO
Slide 24: First Half Fiscal 2016 Financial Results Update
March 2016 FIRST HALF FISCAL 2016 FINANCIAL RESULTS UPDATE
Slide 25: FY16: First Half Financial Highlights
Net sales decreased 1.8% to $276M Net income was $4.5M, or $0.27 per diluted common share, including restructuring and other transition expenses associated with the Company’s Corporate Relocation Plan of $10.7M, and net gain on sale of assets of $5.3M Non-GAAP net income* was $9.9M, and Non-GA
Slide 26: Improving Non-GAAP Net Income
26 IMPROVING NON-GAAP NET INCOME* (1) Includes $0.3 million and $2.5 million in beneficial effect of liquidation of LIFO inventory quantities in the six months ended December 2015 and 2014, respectively. (2) Restructuring and other transition expenses in the six months ended December 31, 2014 repres
Slide 27: Solid Adjusted EBITDA
27 SOLID ADJUSTED EBITDA* (1) Includes $0.3 million and $2.5 million in beneficial effect of liquidation of LIFO inventory quantities in the six months ended December 2015 and 2014, respectively. (2) Excludes in the six months ended December 31, 2015, $0.6 million in depreciation expense associated
Slide 28: 12/31/15 Balance Sheet
28 12/31/15 BALANCE SHEET Numbers presented are rounded Inventory – recorded under LIFO methodology PP&E – includes 54 owned properties (In millions) December 31, 2015 Cash and Cash Equivalents 13.0 Short-Term Investments 24.3 Accounts and Notes Receivable 45.6 Inventories 53.0 Other Current Assets
Slide 29: Relocation Plan: Financial Update
March 2016 RELOCATION PLAN: FINANCIAL UPDATE
Slide 30: Corporate Relocation Plan
30 CORPORATE RELOCATION PLAN Cash or Non-cash 2/15 Range 3/16 Range Comments Relocation and Restructuring Expenses Severance, Retention and One-time Termination Costs C Approx $14M Approx $17M 3PL Conversion, Time Extension, Other Facility Relocation Costs C Approx $4M Approx $5M Other Costs (Consul
Slide 31: Corporate Relocation Plan: Supplemental
Torrance facility sale, and above high end of Feb. 2015 range Expect 70-75% book gain from the sale of Torrance facility and misc. assets for $43M-$44M Expect to close Torrance sale in Q1 2017 Expect Ft. Worth facility start-up timing Q1 2017 through Q2 2017, staggered Increased size and s
Slide 32: Corporate Relocation Plan Supplemental
Increased annual savings range from $12-15M to $18-20M Third Party Logistics (3PL) for long-haul deliveries added Vendor - managed inventories added for select items Other items Restructuring costs increased from $25M to $30M, reflecting increase in total anticipated annual savings Norma
Slide 33: Capital Availability
33 CAPITAL AVAILABILITY Current/Potential Availability Cash & Preferred Portfolio $37.3M As of 12/31/15 Net Proceeds from Torrance, and Misc. Assets $43M - $44M Attempt to Qualify for 1031 Exchange Net Current/Potential $80-81M Ongoing Liquidity Sources Revolving Credit Facility $75M - $125M Current
Slide 34: Summary Strategic Objectives
March 2016 SUMMARY STRATEGIC OBJECTIVES
Slide 35: Key Strategic Objectives
35 KEY STRATEGIC OBJECTIVES Drive to efficient production to improve competitiveness Implement supply chain cost reduction and efficiency initiatives, including Corporate Relocation Plan Further leverage ERP system to understand and reduce unnecessary costs Maintain quality reputation as a c
Slide 36: March 2016
March 2016 INVESTOR PRESENTATION