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Press Release Source: Farmer Bros. Co.

Farmer Bros. Reports Loss Per Share of $0.30 for Second Quarter
Thursday February 10, 7:30 am ET

TORRANCE, Calif.--(BUSINESS WIRE)--Feb. 10, 2005--Farmer Bros. Co. (Nasdaq:FARM) today reported a net loss for its second fiscal quarter ended Dec. 31, 2004 of $4.07 million or $0.30 per share, compared with net income of $2.57 million or $0.15 per share in the same quarter last year.

The results reflect losses caused by a volatile, sustained increase in world green coffee prices during the most recent fiscal quarter, which primarily resulted in a decrease in the value of green coffee futures and options used by the Company to hedge against a decline in commodity prices. These futures contracts and options - which the Company reports under "other income and expense" - become more valuable as coffee prices decline, and lose value as prices rise. In contrast, the value of the Company's coffee inventory moves essentially in the same direction as world prices.

For the second quarter of fiscal 2005, the Company reported that net realized and unrealized coffee trading losses in the second quarter amounted to $8.82 million, resulting in a loss of $8.31 million, excluding dividend and interest income. This compared with a loss in the same quarter of fiscal 2004 of $403,000 and a gain in the first quarter of fiscal 2005 of $85,000. Other income and expenses, including dividend and interest income, was a loss of $6.86 million for the second quarter of fiscal 2005, compared with a gain of $1.05 million for the same period last year.

As management noted during its presentation to the annual meeting of stockholders on Dec. 14, 2004, which it filed on Form 8-K, increases in green coffee prices tend to have two effects on the Company's results, and their impact is felt at different times. First, when world coffee prices rise, the value of the Company's hedge against falling prices declines and "we realize that decline in the quarter in which it occurs." Second, management told stockholders, "the increase in commodity prices will force us to raise sales prices, and in future periods we realize the gains that come when we sell our coffee at the higher prices."

The Company also reported that revenues in the second quarter were essentially unchanged from the prior year, with net sales of $51.22 million versus $51.51 million in the second quarter of last year.

The income from operations declined, reflecting the near-term direct effect of a volatile, sustained increase in green coffee prices. Income from operations was $699,000 in the second quarter of 2005, compared with $3.12 million in the same quarter of last year. Although the company expects to be able, over time, to pass on the higher costs of green coffee through higher sales prices, it noted that the effect of such price increases lagged the increased costs of green coffee in the quarter. The Company said dividend income and interest income also were essentially unchanged from the prior year.

At the end of the second quarter, the Company had cash, cash equivalents and investments of $195.78 million, compared with $198.71 million on June 30, 2004.

"We believe the losses from our second-quarter hedging activities are likely to be recovered in part as we sell our roast coffee in future periods at higher prices," said Interim Chief Executive Officer Guenter Berger. "Although we were saddened by the loss in January of Roy E. Farmer, we are pleased that our operations remain stable and the employee-owners of Farmer Brothers remain focused on improving the business and creating shareholder value.

"In particular, we continue to make progress on two ongoing initiatives to fuel our top-line growth: our 'back-to-basics' efforts to energize and improve the effectiveness of our sales staff, and our program to strengthen our infrastructure with new information systems that are designed to make our people more efficient and more effective," said Mr. Berger.

Farmer Bros. Co. is an institutional coffee roaster that sells a variety of coffee and allied products to the food service industry. The Company's signature trucks and vans bearing the "Consistently Good" logo are seen throughout Farmer Brothers' 28-state service area. Farmer Brothers has paid a dividend for 51 consecutive years, increased the dividend in each of the last seven consecutive years, and its stock price has grown on a split-adjusted basis from $1.80 a share in 1980.

Forward-Looking Statements

Certain statements contained in this press release regarding the risks, circumstances and financial trends that may affect our future operating results, financial position and cash flows 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 events and include any statements that do not directly relate to any historical or current fact. These forward-looking statements can be identified by the use of words like "anticipates," "feels," "estimates," "projects," "expects," "plans," "believes," "intends," "will," "assumes" and other words of similar meaning. Owing to the uncertainties inherent in forward-looking statements, actual results could differ materially from those set forth in forward-looking statements. We intend these forward-looking statements to speak only at the time of this press release and do not undertake to update or revise these statements as more information becomes available except as required under federal securities laws and the rules and regulations of the SEC. Factors that could cause actual results to differ materially from those in forward-looking statements include, but are not limited to, fluctuations in availability and cost of green coffee, competition, organizational changes, the impact of a weaker economy, business conditions in the coffee industry and food industry in general, the Company's continued success in attracting new customers, variances from budgeted sales mix and growth rates, and weather and special or unusual events, as well as other risks described from time to time in the Company's filings with the SEC.


     Abernathy MacGregor Group
     Jim Lucas / Whitney Hays, 213-630-6550

Source: Farmer Bros. Co.


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