Farmer Brothers Company · NASDAQ:FARM
Farmer Brothers — Proxy Contest (November 2019)
38 slides from Farmer Brothers's proxy contest presentation, Nov 19, 2019
Slide 1: Farmer Brothers Returning to Growth and Profitability
Farmer Brothers Returning to Growth and Profitability NOVEMBER 18, 2019 1
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS Certain statements contained in this presentation regarding Farmer Bros. Co. (the “Company”) 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 curre
Slide 3: Agenda
AGENDA Part I: Introduction Part II: Executing a Turnaround Strategy Part III: Enhanced Corporate Governance Part IV: Highly Qualified and Engaged Board Part V: Dissident Candidates Are Not Qualified and Do Not Add Value Part VI: Conclusion 3
Slide 4: Part I: Introduction
PART I: INTRODUCTION NOTE Company logos not owned by Farmer Brothers. 4
Slide 5: New Leadership, Highly Qualified Board, Dissident Group Offers No Plan
New Leadership Highly Qualified Board Dissident Group Focused on & Corporate Offers NO Plan & Turnaround Initiatives Governance Aligned Adds NO Value with Stockholders New CEO appointed September Highly qualified and engaged x The Grossman Group has 2019, new Chief Supply Chain Board of Director
Slide 6: Winning: We are positioning Farmer Brothers to win and grow
WINNING We are positioning Farmer Brothers to WIN AND GROW 6
Slide 7: Farmer Brothers Highlights
FARMER BROTHERS HIGHLIGHTS MARKET INDUSTRY COMPREHENSIVE CAPACITY OPPORTUNITY LEADERSHIP CAPABILITIES TO GROW A significant opportunity = Purposeful leadership in A business model designed Continued focus on to expand market share in sustainability, ethical to effectively and efficiently leveraging
Slide 8: New Management with Clear Vision
NEW MANAGEMENT WITH CLEAR VISION Positive change is underway led by newly Newly appointed Chief Supply Chain appointed President and CEO, Deverl Officer Maserang • Innovative leader with successful record of • Seasoned executive; 30+ years of overseeing complex company operations leadership in busin
Slide 9: Part II: Executing a Turnaround Strategy
PART II: EXECUTING A TURNAROUND STRATEGY NOTE Please see appendix for sources. 9
Slide 10: Farmer Brothers' Transformation and Modernization Journey
FARMER BROTHERS' TRANSFORMATION AND MODERNIZATION JOURNEY Capacity Portfolio Customers Commerce Logistics Sustainability Organization & Roasting Built new DFW Expanded Addressed Optimized routes Outsourced long- Longstanding Integrated large facility and portfolio with premiumization and distributio
Slide 11: Focused on Five Strategic Initiatives
FOCUSED ON FIVE STRATEGIC INITIATIVES Executing Elevating Enhancing Evolving Engaging Our supply chain Our execution Our service Our product Our talent and optimization through enhanced capability and portfolio through re-focusing on processes and building upon our innovation culture systems competi
Slide 12: Executing & Elevating
EXECUTING & ELEVATING EXECUTING OUR SUPPLY CHAIN ELEVATING OUR EXECUTION OPTIMIZATION THROUGH ENHANCED PROCESSES • Completed sale-leaseback of Houston facility AND SYSTEMS • Optimizing manufacturing and roasting network to • Implemented new Business Intelligence tool for improved better serve custom
Slide 13: Enhancing & Evolving
ENHANCING & EVOLVING ENHANCING OUR SERVICE CAPABILITY EVOLVING OUR PRODUCT PORTFOLIO AND CREATING A COMPETITIVE THROUGH INNOVATION ADVANTAGE WITH OUR COFFEE • Restarting our innovation pipeline to focus on customer BREWING EQUIPMENT PROGRAM and consumer needs by delivering new products that will lea
Slide 14: Engaging Our Talent and Re-focusing on People & Culture
ENGAGING ENGAGING OUR TALENT AND RE-FOCUSING ON PEOPLE & CULTURE • Leveraging strong legacy of Farmer Brothers’ 100+ years • Re-invigorating a culture of hard work, recognition and fun based on engagement of entire Farmer Brothers family • Leveraging strong leadership and talent across the organizat
Slide 15: Annual Financial Results FY2016-FY2019
1 1 1 1 (Unaudited) FY 2016 FY 2017 FY 2018 FY 2019 NET SALES $544,382 $541,500 $606,544 $595,942 (In Thousands) GROSS MARGIN2 31.4% 34.5% 34.1% 30.1% ADJUSTED EBITDA2,3 (In Thousands) $31,017 $42,985 $47,562 $31,882 COFFEE VOLUME (GREEN) 90,669 95,499 107,429 108,098 (Pounds In Thousands) COFFEE VO
Slide 16: Quarterly Financial Results
1 1 1 1 (Unaudited) Q2 2019 Q3 2019 Q4 2019 Q1 2020 NET SALES $159,773 $146,679 $142.050 $138,600 (In Thousands) GROSS MARGIN2 33.3% 27.2% 26.6% 29.3% ADJUSTED EBITDA2,3 (In Thousands) $12,443 $4,535 $3,937 $4,016 COFFEE VOLUME (GREEN) 27,398 27,873 27,379 25,958 (Pounds In Thousands) Improvement in
Slide 17: Working Capital
WORKING CAPITAL (as of Sept. 30, 2019) Debt reached peak of $140.0 million on January (in thousands) 10, 2019. By August 31, 2019, reduced to $100.0 million and at September 30, 2019 further reduced to $85.0 million. 250,000 Accounts receivables reached month end peak of 200,000 $79.5 million on Dec
Slide 18: Part III: Enhanced Corporate Governance
PART III: ENHANCED CORPORATE GOVERNANCE 18
Slide 19: Effective Board Leadership
EFFECTIVE BOARD LEADERSHIP • Engaged, independent Board with significant industry and operational expertise that is relevant to the Company’s turnaround strategy • Regular evaluation of skills and experience THEN NOW • Strong gender diversity Customer profile heavily weighted Profitable legacy custo
Slide 20: Corporate Governance Aligned with Stockholder Interests
CORPORATE GOVERNANCE ALIGNED WITH STOCKHOLDER INTERESTS • Since 2018, all long-term incentives are performance-related, taking the form of options (which have no value if the share price doesn’t increase) or performance vesting share units THEN NOW • CompensationOwned fleet of long- haulfor and inte
Slide 21: Committed to Board Refreshment
COMMITTED TO BOARD REFRESHMENT • Farmer Brothers’ Board of Directors recognizes the importance of having the right collection of skills, expertise and experience and is committed to continuously reviewing its capabilities. • In the last two years, we have appointed four new directors, all of whom ar
Slide 22: Declassifying the Board of Directors
The Board continuously evaluates the Company’s corporate governance in order to implement best practices We believe declassifying the Declassifying Board will best serve the Board of interests of stockholders Declassification to take Directors place over a three-year period; entire Board to st
Slide 23: Part IV: Highly Qualified and Engaged Board
PART IV: HIGHLY QUALIFIED AND ENGAGED BOARD 23
Slide 24: Refreshed Board Has Right Mix of Expertise
REFRESHED BOARD HAS RIGHT MIX OF EXPERTISE, KNOWLEDGE AND PERSPECTIVES Other Public Extensive Food and Independent C-Suite Finance Operational M&A Board Beverage Industry Director Experience Experience Experience Experience Experience Experience Randy Clark X Allison Boersma X
Slide 25: Deverl Maserang
DEVERL MASERANG Brings more than 30 years of leadership in turnarounds, global supply-chain transformations, creating shared service structures and integrating transportation and distribution groups Deep experience in the food and beverage industry Most recently served as President and CEO of
Slide 26: Christopher Mottern
CHRISTOPHER MOTTERN Brings over three decades of senior executive experience in the food and beverage industry, spanning manufacturing, supply chain, consumer branding, risk oversight, along with financial and accounting expertise Independent business consultant and served as Interim CEO of Farm
Slide 27: Charles Marcy
CHARLES MARCY Brings over four decades of experience as a senior executive, or advisor, of companies in the food industry, including in his Strategic Planning role at Maxwell House Coffee and overseeing Frozen Dessert DSD Operation for Breyers Ice Cream at Kraft Relevant expertise in the food in
Slide 28: Part V: Dissident Candidates Are Not Qualified and Do Not Add Value
PART V: DISSIDENT CANDIDATES ARE NOT QUALIFIED AND DO NOT ADD VALUE 28
Slide 29: Situation Overview
SITUATION OVERVIEW • Jeanne Farmer Grossman, representing the Grossman Group, has nominated two candidates to stand for election to Farmer Brothers’ Board of Directors at the Company’s 2019 Annual Meeting • Farmer Brothers’ Board and its advisors have held multiple discussions with Ms. Grossman over
Slide 30: The Grossman Group has no plan
The Grossman Group has NO plan – they have simply said that the two dissident candidates will have the trust of employees 30
Slide 31: Grossman Group's Nominees Lack Skills and Experience
GROSSMAN GROUP’S NOMINEES LACK SKILLS AND EXPERIENCE NEEDED TO SUPPORT COMPANY’S PROGRESS TOM MORTENSON JONATHAN WAITE • Previously nominated in 2016 as part of dissident • Ms. Grossman’s nephew and the son of Carol slate put forth by Carol Farmer Waite and was NOT Farmer Waite; was a member of the
Slide 32: Farmer Brothers' Strong Qualified Nominees
FARMER BROTHERS’ STRONG QUALIFIED NOMINEES Extensive Food and Recent CEO Public Board Finance Operational M&A Beverage Company Experience Experience Experience Experience Experience Industry Knowledge Experience Charles Marcy Christopher Mottern Deveral X X Mase
Slide 33: Part VI: Conclusion
PART VI: CONCLUSION 33
Slide 34: Electing the Grossman Group's Nominees Would Put Farmer Brothers at Risk
ELECTING THE GROSSMAN GROUP’S NOMINEES WOULD PUT FARMER BROTHERS AT SIGNIFICANT RISK The Board believes that the actions the Company has taken recently and the actions that the Company continues to take will lead to improved financial performance and enhanced value creation for all Farmer Brothers s
Slide 35: Appendix
APPENDIX 35
Slide 36: Reconciliation of Adjusted EBITDA to GAAP
APENDIX RECONCILIATION OF ADJUSTED EBITDA TO GAAP (Unaudited) THREE MONTHS ENDED YEAR ENDED JUNE 30 SEPTEMBER 30 (IN THOUSANDS) 20151 20161 20171 2018 2019 2018 2019 Net (Loss) Income, As Reported $(9,708) $71,791 $22,551 $(18,280) $(73,595) $(2,986) 4,654 Income Tax Expense (Benefit) 402 (72,239) 1
Slide 37: Important Additional Information and Where to Find It
IMPORTANT ADDITIONAL INFORMATION AND WHERE TO FIND IT Farmer Bros. Co. has filed a definitive proxy statement and accompanying WHITE proxy card with the SEC in connection with the solicitation of proxies from the Company’s stockholders in connection with the matters to be considered at the Company’s
Slide 38: Farmer Brothers
FARMER BROTHERS