Farmer Bros. Co. Reports Fiscal First Quarter 2022 Financial Results

By: Alexis Rubinstein, Managing Editor - Coffee Network

Thu, 18 Nov 2021, 17:17

Farmer Bros. Co. Reports Fiscal First Quarter 2022 Financial Results

Alexis Rubinstein

Managing Editor

CoffeeNetwork (New York) - Farmer Bros. Co. (NASDAQ: FARM) reported financial results for its first fiscal quarter ended September 30, 2021.

First Quarter Fiscal 2022 Highlights:

Net sales were $108.4 million, an increase of $11.1 million, or 11.4%, from the prior year period due to continued improvement in the direct-store-delivery ("DSD") channel compared to the prior year period
Gross margin increased to 29.0% from 23.0% in the prior year period
Net loss was $2.4 million compared to a net loss of $6.3 million in the prior year period
Adjusted EBITDA was $3.5 million compared to $5.7 million in the prior year period*
As of September 30, 2021, total debt outstanding was $89.0 million and cash and cash equivalents was $6.0 million

Net sales in the first quarter of fiscal 2022 were $108.4 million, an increase of $11.1 million, or 11.4%, from the prior year period. The increase in net sales was driven primarily by continued recovery from the COVID-19 pandemic as local governments across the country eased restrictions and vaccines were distributed and rolled out successfully. During the quarter ended September 30, 2021, our average weekly DSD sales were down 25% compared to pre-COVID levels, which represents continued improvement from the quarter ended June 30, 2021 and quarter ended September 30, 2020 when sales were down 27% and 41%, respectively. Although we experienced improvement in several markets during the first fiscal quarter, the recovery in certain regions and markets was negatively impacted by the recent increase in COVID-19 cases which caused certain government restrictions to be reimplemented.

Direct ship channel sales declined 5.7% during the three months ended September 30, 2021 compared to the prior year period. This was due to accounts we decided to exit during fiscal 2021 because they resulted in lower or negative profit due to the impacts from COVID-19 on their business. These declines were partially offset by the recovery from the COVID-19 impact of some of our other direct ship customers.

Gross profit in the first quarter of fiscal 2022 was $31.5 million, an increase of $9.1 million, or 40.3% from the prior year gross profit of $22.4 million, and gross margin increased 6.0% to 29.0% compared to 23.0% a year ago. This improvement was mostly due to the effect of the continued recovery from COVID-19 on our DSD channel sales since our DSD channel has higher margins. The increase was also attributable to a decline in our unfavorable production variances and inventory scrap write-downs due to the closure of our aged Houston, Texas plant during fiscal 2021.

Operating expenses in the first quarter of fiscal 2022 decreased $0.6 million, or 1.9%, to $33.2 million, from $33.9 million in the prior year period, and decreased as a percentage of net sales to 30.7% compared to 34.8% in the prior year period. The decrease in operating expenses was driven by a $5.2 million increase in net gains from the sales of assets primarily due to the sale of two branch properties during the quarter ended September 30, 2021. This decline was largely offset by a $2.5 million increase in selling expenses and a $2.1 million increase in general and administrative expenses. The increase in selling expenses was primarily due to variable costs, including payroll, associated with the higher sales volumes, as well as operating costs associated with our new distribution center in Rialto, California. The increase in general and administrative expenses was primarily due to payroll and third party costs related to several supply chain optimization initiatives. The increase in payroll in both selling and general and administrative expenses was predominately due to the return of the 15% temporary decline in base salaries and of the 401(k) cash match suspension that were both cost saving actions implemented in fiscal 2020 due to the COVID-19 pandemic.

Interest expense in the first quarter of fiscal 2022 decreased $0.2 million to $3.0 million from $3.2 million in the prior year period. The decrease in interest expense was principally due to the lower interest rate on our Credit Facilities, and fewer losses on our interest rate swap.

Other, net in the three months ended September 30, 2021 decreased by $6.1 million to income of $2.4 million compared to income of $8.6 million in the prior year period. The decrease was primarily a result of lower amortized gains on our terminated postretirement medical benefit plan, partially offset by higher mark-to-market net gains on coffee-related derivative instruments not designated as accounting hedges.

As a result of the foregoing factors, net loss was $2.4 million in the first quarter of fiscal 2022 as compared to a net loss of $6.3 million in the prior year period.

Adjusted EBITDA was $3.5 million in the first quarter of fiscal 2022, as compared to $5.7 million in the prior year period, and Adjusted EBITDA Margin was 3.2% in the first quarter of fiscal 2022, as compared to 5.9% in the prior year period.

Headquartered in Northlake, Texas, Farmer Bros. Co. generated net sales of $397.8 million in fiscal 2021. The Company’s primary brands include Farmer Brothers®, Artisan Collection by Farmer Brothers™, Superior®, Metropolitan™, China Mist® and Boyds®.

Alexis Rubinstein

Coffee

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