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Farmer Bros. Drop in Profit Continues

The coffee firm has its seventh consecutive decline, as earnings fall 13% to $5.78 million in the fourth quarter.

October 01, 2003|Jerry Hirsch | Times Staff Writer

Coffee roaster Farmer Bros. Co. reported the seventh straight period of earnings decline Tuesday and a drop in both profit and revenue during its fiscal year.

The Torrance-based company also disclosed in a regulatory filing that its 87-year-old chairman, Roy F. Farmer, took a 36% cut in pay and other compensation in the latest fiscal year, as he yielded day-to-day operations to his son, Roy E. Farmer.

The senior Farmer was paid a salary of $850,000, $150,000 less than the prior year, and did not receive the $450,000 bonus he collected the year before.

Roy E. Farmer, who serves as the company's president and chief operating officer, received $636,050 -- about $10,000 more than last year. That included a $300,000 bonus, which he has received for three consecutive years.

Since 1998, when Farmer Bros.' annual sales hit $240 million, the company has seen its revenue gradually decline. Net income, too, has fallen -- from a high of $37.6 million in 2000 to $23.6 million in fiscal 2003.

More than half of the company's earnings may now be coming from more than $294 million it holds in cash and securities rather than its coffee operations, said Gary Lutin, a New York investment banker seeking greater disclosure from Farmer Bros. about its investment and operating strategies.

The thinly traded company, which although public is tightly controlled by Roy F. Farmer and his branch of the founding family, declined to discuss its plans for improving operations.

Executives declined to comment, but the company said in its annual report filed with the Securities and Exchange Commission late Monday that most of its customers were independently owned restaurants or chains that have struggled in recent years, driving down the firm's sales.

"The weak economy is especially hard on these entrepreneurs who do not have the geographic or thematic diversity of the large restaurant chains," the company said.

Higher prices for unroasted green coffee, which were about 25% more than in the prior fiscal year, also have cut into earnings, Farmer Bros. said.

Earnings in the fiscal fourth quarter fell 13% to $5.78 million, or $3.23 a share, from $6.67 million, or $3.60, the previous year. Revenue fell 5% to $47.8 million from $50.4 million.

Net income for the fiscal year ended June 30 was $23.6 million, or $13.02 a share, compared with $30.6 million, or $16.54, the year before. Revenue fell 2% to $201.5 million from $205.9 million in fiscal 2002.

Following its earnings report, Farmer Bros. shares fell $3.50 to close at $320 on the Nasdaq.

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