Farmer Brothers Company · NASDAQ:FARM
Farmer Brothers — Shareholder Meeting (December 2013)
43 slides from Farmer Brothers's shareholder meeting presentation, Dec 11, 2013
Slide 1: 2013 Annual Stockholders Meeting
2013 Annual Stockholders Meeting December 5, 2013
Slide 2: Agenda
• Key Message Points • Farmer Brothers Business Overview • Recent Accomplishments & Challenges • Strategy Evolution • Aligning Performance to Create Stockholder Value • Financial Overview for FY 2013 and Q1 2014 • Spotlight: Coffee Sourcing/Quality & Sustainability • Questions? Agenda 2
Slide 3: Cautionary Statement Regarding Forward-Looking Statements
3 Certain statements contained in this presentation, including, but not limited to, statements regarding the development and growth of our business, our intent, belief or current expectations, primarily with respect to future operating performance and the products and services we expect to offer and
Slide 4: Key Message Points
Key Message Points 1 •Overall, we continue to make progress in improving the Company’s financial results, with the operating income in Q1 of FY14 the highest in more than ten years. We are building a company which we believe will continue improving, but we have a long way to go. 2 •We have spent con
Slide 5: Farmer Brothers Overview
5 A leading manufacturer, wholesaler, and distributor of coffee, tea, and culinary products • Founded in 1912 • Today, one of the country’s largest direct store delivery (DSD) coffee companies Differentiated business model • One of the most complete local, regional, and national DSD networks in the
Slide 6: Recent Accomplishments
6 • Increased revenue by 3% while expanding gross profit margin by 260 basis points. • The Farmer Brothers brand returned to growth behind the expansion of the Artisan Collection, our first specialty coffee sold through the DSD system. • Further streamlined organization to meet enhance profitability
Slide 7: Experienced Management Team
7 Name Title Prior Experience Mike Keown President and Chief Executive Officer Mark Nelson Chief Financial Officer, Treasurer Mark Harding Senior VP of Operations Tom Mortensen Senior VP of Route Sales Scott Siers Senior VP of National Account Sales Pat Quiggle VP, Human Resources Tom Mattei VP, Cor
Slide 8: Industry Drivers: Cautiously Optimistic
8 Industry Drivers: Cautiously Optimistic HIGHER EXPECTATIONS Consumers demand high quality & sustainability standards 3 COMPETITION MARKET STATUS Financial challenges balanced by improving economy. 1 Consumers 72% struggling/getting by 53% saving/buying basics Revitalized coffee products in coffeeh
Slide 9: Coffee and Tea Category Growth
Iced Coffee Sub-Category Growth Single Cup Coffee Coffee Consumption Growth Tea Segment Growth Foodservice Retail • $6B foodservice sales • 6% CAGR through 2015 (foodservice) • Highest growth among coffee types • $15B foodservice sales • 4% CAGR through 2015 (foodservice)3 • $2.3B retail sales, outp
Slide 10: Farmer Brothers' Strategy
• Review plant/DC base • Refine corporate sustainability plan • Review fleet strategy • Implement technology solutions to lower costs and drive effectiveness • Optimize inventory across system • Review hedging strategy • Continue brand/SKU rationalization • Reduce operating expenses Strategy #3: Dev
Slide 11: Farmer Brothers' Strategy (Continued)
11 • Drive Artisan Collection • Drive hot and iced tea penetration • Drive new in-room program • Create promotions focused on high- margin items • Re-launch Spice • Use culinary portfolio to increase average invoice size • Invest in R&D and Marketing • Tea innovation • Focus on high- growth product
Slide 12: Nationwide Distribution Network
12 Distribution center Manufacturing facility Branch 6 distribution centers and 117 branch warehouses Nationwide Distribution Network
Slide 13: Investing in the Future
13 LOADING THE TRUCK: In September 2012, we launched a new line of specialty coffees, the Artisan Collection™ by Farmer Brothers, and in March 2013, we introduced Farmer Brothers premium flavored iced teas. LEADING WITH EXPERTISE: Focused training for all regional sales personnel – over 1,000 repres
Slide 14: Developing Model to Win New Customers
14 Industry Leadership Paul Thornton, President, SCAA Connections at Origin Large scale direct trade program in 6 countries Risk Management Innovative hedging tools National DSD Unparalleled reach in 48 states Market Insights Relationships with Datassential, Nielsen, Symphony IRI & The Hartman Group
Slide 15: Building a High Performance Culture
We are focused on restoring the culture of Farmer Brothers Building a High Performance Culture 15 • We are now one company. We are aligning work and processes across the entire company. Completing Integration • Ensuring all employees know where we are going, key strategies, and their role. Strategy
Slide 16: Management Process
Management Process Aligning with Key Stakeholders Performance Evaluations Quarterly Priorities Annual Objectives Annual Operating Plan 3-Year Strategic Growth Plan BOD Approved 16
Slide 17: Evolution of the Performance Management Process
17 2011 PA & 2012 Goal Process >50% Completion 2012 PA & 2013 Goal Process 99% Completion Success Factors: Management Support, Live Training Sessions & Tools 2013 PA & 2014 Goal Process Goal: 100% Completion Evolution of the Performance Management Process
Slide 18: Financial Overview
Farmer Brothers Financial Overview
Slide 19: Revenue Growth Trend
19 Acquisition of CBI Acquisition of SL DSD (coffee & Tea) CBI acquisition – April 2007; Sara Lee DSD acquisition – February 2009 Fiscal Year end June 30 Revenue Growth Trend
Slide 20: FY13 Financial Performance vs. FY12 & FY11
20 Fiscal Year end June 30 FY13 Financial Performance vs. FY12 & FY11
Slide 21: Solid EBITDAE Growth
21 EBITDAE is a non-GAAP financial measure* * In addition to net income (loss) determined in accordance with GAAP, we use certain non-GAAP financial measures, such as “EBITDAE,” in assessing our operating performance. We believe this non-GAAP financial measure serves as an appropriate measure to be
Slide 22: Q1 Financial Performance (FY14 vs. FY13 & FY12)
22 Fiscal Quarter end September 30. Q1 Financial Performance (FY14 vs. FY13 & FY12)
Slide 23: Strong Balance Sheet with a Focus on Asset Management
23 ($ in Millions) 30-Sep-13 Cash and Cash Equivalents 11.2 Short-term Investments 20.4 Accounts and Notes Receivable, Net 42.8 Inventories 68.7 Other Current Assets 3.0 Net PP&E 90.2 Other Assets 11.9 Total Assets 248.3 Total Liabilities excluding Credit Facility 144.5 Credit Facility 20.1 Stockhol
Slide 24: Coffee/Tea/Culinary Department: A Strategic Evolution
Coffee/Tea/Culinary Department A Strategic Evolution . . .
Slide 25: Background: Talent, but Needing More Vision and Coordination
• We source coffee from approximately 28 countries around the world and produce well over 50M lbs. of coffee annually. • There was little integration of coffee sourcing, R&D, quality assurance, and regulatory after the Sara Lee/CBI acquisitions. • Our customers and consumers demand excellence in qua
Slide 26: Vision and Mission
Vision To be recognized as the national leader in innovation, quality, and expertise for coffee, tea, and spice Mission To support and drive Farmer Brothers’ business strategy through strategic sourcing, a quality mindset, innovation and product training, all while maintaining products that exceed o
Slide 27: Main Department Functions: Overview
• Coffee Procurement • Coffee Sustainability/Producer Relations • Research and Development (Innovation) • Food Safety and Quality Systems (QA Function) • Regulatory Enforcement/Compliance • Food Security/Traceability (FSMA Compliance) • Coffee Education/Training Main Department Functions: Overview 2
Slide 28: Key Objectives: Overview
• “Best in Class” coffee, tea, and spice resource. • Lead the industry in innovation. • Set the gold standard in quality. • Gain a competitive edge by working directly with growers to maximize sustainability/traceability. • Help drive sales growth through education and training programs, both intern
Slide 29: Structure Then and Now
29 Structure THEN: Duplication and Ineffectiveness Structure NOW: Organizing for Excellence Jonathan Waite VP, Coffee R&D QA Regulatory Sourcing Grower Relations Roasting Plant A QA R&D Regulatory Sourcing Plant B QA R&D Regulatory Sourcing Plant C QA Regulatory Teams now work together from Portland
Slide 30: Key Accomplishments to Date
Reorganizing: keeping critical individuals and upgrading capabilities. Driving system efficiency and cost reduction. Upgrading products: Tea complete, iced coffee in process. Leading the training of over 1,000 sales people. Meeting the quality standards of several large new customers. Ta
Slide 31: Driving Cost Savings & System Efficiency
• Improved Vendor Communication • Strategic Sourcing • Green Coffee Blend SKU Rationalization • Green Coffee Blend Optimization • Expanding to Spice Driving Cost Savings & System Efficiency 31
Slide 32: Coffee/Tea Training
32 Coffee/Tea Training • 5 Regionalized Trainings • Nearly 1,000 New Coffee and Tea Experts • Training Included Sales and Marketing
Slide 33: Commitment to Quality in the Supply Chain
• Roughly 15 trips to origin (growers) per year • Ensure sustainability and certifications • Provide the opportunity for growers to improve their lifestyles and well-being • Quality improvement • Fair pricing • Traceability • Research under way for new Direct Trade program in Colombia Commitment to
Slide 34: Hiring/Developing Great Talent: Examples
34 Hiring/Developing Great Talent: Examples David Pohl Director, R&D Christian Rotsko Roastmaster, Houston Brian Howard Green Coffee Buyer/ Developer Portland • 12 years in the coffee industry; 10 Years Roasting • Experience: – Fair Trade Certification – Head Roaster – Green Coffee Buyer – Plant Man
Slide 35: Industry Leadership
• Specialty Coffee Association of America • Coffee Quality Institute • Cup of Excellence/Alliance for Coffee Excellence • Roasters Guild • Pacific Coast Coffee Association • World Coffee Research • Charitable Support Industry Leadership 35 The marks displayed above are the properties of those organi
Slide 36: Paul Thornton, Director of Coffee, SCAA Presidency
Paul Thornton Director of Coffee SCAA Presidency 36
Slide 37: How Does This Group Build the Business?
37 How Does This Group Build the Business?
Slide 38: 2013 Sustainability Progress
2013 Sustainability Progress December 2013
Slide 39: Sustainability: Background
Do w n s id e Sustainability: Background • Prior to 2012, we had passionate employees doing good work with no overall corporate sustainability strategy. • Working together, our efforts have put Farmer Brothers in the top tier of coffee companies in sustainability. • This initiative is good for our C
Slide 40: Sustainability Categories
Sustainability Categories U p si d e D o w n si d e Easy to quantify Hard to quantify BRAND (intangibles) • Reputation, goodwill • License to operate • Energized workforce • Competitive position REVENUE • Growth and innovation • New revenue streams • Market expansion • Increased differentiation OPER
Slide 41: Sustainability Benefits: Revenue, Brand, Operations, Risk
41 Revenue • Create revenue streams with waste diversion: burlap bags, coffee bags, & chaff • Attract new customers with sustainability focus • Grow volume with existing customers because of sustainability culture Brand • Establish leadership & reputation: councils, boards, & panels • Published firs
Slide 42: 2013 Sustainability Key Accomplishments
Do w n s id e 2013 Sustainability Key Accomplishments • Published first sustainability report for calendar year 2012 and updated content on website with sustainability case study carousel. • Revised corporate stewardship policy to support supply chain stability with a focus on food security in partn
Slide 43: Farmer Brothers
Farmer Brothers NASDAQ: FARM
Farmer Brothers — Shareholder Meeting (December 2013) on 6ix