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Forum activities relating to Farmer Bros. Co. were suspended in 2007, following the second year of new management.

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Forum Report: Resumed Quarterly Operating Losses

(May 8, 2007)

 

 

Sent: Tuesday, May 08, 2007 5:33 PM
Subject: Report of resumed quarterly operating losses

 
In its quarterly report on Form 10-Q just filed with the SEC, Farmer Bros reported a return to operating losses for the three months ended March 31, 2007.  Their summary of quarterly financial data from the "Item 2" section of the report, "Managementís Discussion and Analysis of Financial Condition and Results of Operations," is copied below.
 
Management also reported further declines in coffee sales, in spite of their geographic expansion and new marketing initiatives, stating on page 9 of the report that "A decline in coffee sales during  the third quarter of fiscal 2007 and the first nine months of fiscal 2007 was offset by an increase in sales of allied products in each period, resulting in the modest sales increase."
 
Income from investments also declined, but the total $2,783,000 was still enough to offset the $2,247,000 operating loss.  Management offered the following explanation on page 9 of the MD&A, attributing the decline to "interest sensitive investments" which are presumed to be the derivatives referred to on page 5:
 

Total other income, net in the third quarter of fiscal 2007 decreased to $2,783,000 from $3,318,000 in the same period of fiscal 2006.  Higher interest rates during the third quarter of fiscal 2007 compared favorably with interest rates in the same quarter of the prior fiscal year, but investment income, composed primarily of realized and unrealized gains and losses on interest sensitive investments, was  $318,000 in the third quarter of fiscal 2007 as compared to $1,226,000 in the same quarter of fiscal 2006.  Total other income in the first nine months of fiscal 2007 increased to $9,333,000 from $5,525,000 in the same period of fiscal 2006.  This increase is largely the result of higher interest rates and investment income in the first nine months of fiscal 2007 as compared to the first nine months of fiscal 2006.

 
The report did not provide any additional information about the company's acquisition of Coffee Bean International, or about that company's current or past financial performance.
 
Please let me know if you have any questions.
 
           GL
 
Gary Lutin
Lutin & Company
575 Madison Avenue, 10th Floor
New York, New York 10022
Tel: 212-605-0335
Email: gl@shareholderforum.com
 
 

 
Farmer Bros. Co. Form 10-Q filed 5/8/07, page 10:
 
***
 

Quarterly Financial Data

(In thousands except per share data)

 

September 30,
2006

 

December 31,
2006

 

March 31,
2007

 

Net sales

 

$

48,264

 

$

55,476

 

$

54,382

 

Gross profit

 

$

28,083

 

$

32,481

 

$

31,664

 

(Loss) income from operations

 

$

(2,737

)

$

1,140

 

$

(2,247

)

Net income

 

$

1,013

 

$

2,953

 

$

1,512

 

Net income per common share

 

$

0.07

 

$

0.21

 

$

0.11

 

 

 

September 30,
2005

 

December 31,
2005

 

March 31,
2006

 

June 30,
2006

 

Net sales

 

$

48,424

 

$

54,950

 

$

53,561

 

$

50,518

 

Gross profit

 

$

28,885

 

$

33,154

 

$

32,039

 

$

28,465

 

(Loss) income from operations

 

$

(1,124

)

$

3,149

 

$

67

 

$

(5,057

)

Net (loss) income

 

$

(1,079

)

$

4,164

 

$

2,463

 

$

(792

)

Net (loss) income per common share

 

$

(0.08

)

$

0.30

 

$

0.18

 

$

(0.06

)

 

 

The Forum is open to all Farmer Bros. shareholders, whether institutional or individual, and to professionals concerned with their investment decisions.  Its purpose is to provide shareholders with access to information and a free exchange of views on issues relating to their evaluations of alternatives.  As stated in the Forum's Conditions of Participation, participants are expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

There is no charge for participation.  Franklin Mutual Advisers, LLC, the manager of funds owning approximately 12.6% of Farmer Bros. shares, provided initial sponsorship for the Forum and arranged for it to be chaired by Gary Lutin.  Continuing support and guidance of the Forum is provided by an Advisory Panel of actively interested shareholders.

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