Forum for Shareholders of Farmer Bros. Co.

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2007 Conclusion

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

Farmer Bros. Home Page


Farmer Bros. Reference


Farmer Bros. Forum

May 2004 Update

An independent “Forum” for shareholders of Farmer Bros. Co. (Nasdaq: FARM) was initiated in early 2002 to address concerns about management's 50 year history of overt indifference to the interests of minority investors, reflected in market discounting of the stock at more than 25% below professional estimates of realizable value.

During its first two years, the Forum conducted surveys of its participants to define and prioritize issues, and then supported actions to obtain the information needed for investment decisions and assure management's understanding of shareholder interests.  Significant changes by the beginning of 2004 included:

§  Provision of information requested by investors

§  Addition of independent directors (before required  by Sarbanes-Oxley)

§  Retirement of CEO

§  Engagement of investment banker to consider strategic options

§ Company purchase of 23% dissident family stake at $25 per share (adjusted for split)

§ 10-for-1 stock split (effective May 2004)

Other conditions in early 2004 remained unresolved.  Management continued to ignore both shareholder and SEC concerns – acknowledged in the company’s annual report and proxy statement – that Farmer Bros. was an unregistered investment company, violating the Investment Company Act of 1940 (“ICA”) and depriving investors of significant regulatory and tax benefits.  And in transactions which the company specifically acknowledged would violate the ICA, management had set up a “leveraged” Employee Stock Ownership Plan (“ESOP”) to buy a 19% block of company stock, which combined with the Farmer family’s  39% holdings gave them voting control to adopt a widely criticized set of management entrenchment provisions that received only 4% support from public shareholders.

Additional investor concerns developed in 2004.  Quarterly reports disclosed a continuing deterioration of the company’s coffee business, which management was unable or unwilling to explain.  The resulting drop in stock price focused attention on the risks associated with employee pensions being concentrated in the company’s stock and burdened by a $63 million ESOP debt.

Responding to the current priorities of Farmer Bros. investors – including employees whose careers as well as pensions depend on competitive growth – Forum attention in 2004 is expected to focus on timely changes required to assure effective management of the company’s commercial opportunities and financial assets.

May 31, 2004

Initiation of Forum

April 2002 Forum Summary

Initial Sponsor Statement

News Articles

§  Los Angeles Business Journal, April 22, 2002: "Plan Shaped to Push Farmer Brothers Stock"

§  Barron's, April 22, 2002: "Percolating Over Perks"

§  New York Times, July 21, 2002: "Another Dimension of Shareholder Activism"

§  Los Angeles Times, November 4, 2002: "Coffee Chief Stirs Unrest"

Progress of Change

Status Report & Situation Analysis

(January 5, 2004)

Report on Shareholder Alternatives

(February 23, 2004)

Report on Meeting Results

(February 24, 2004)

Performance Issues Raised in Annual Report

(September 13, 2004)

Report of Annual Meeting

(December 15, 2004)

Value Enhancement Objectives for 2005

(January 7, 2005)

News Articles

§  The Deal, May 26, 2003: "Investors put heat on Farmer Bros."

§  The Daily Breeze, June 29, 2003 (Sunday four-part feature): “Coffee and controversy…”

§  New York Times, December 21, 2003, Market Watch: "Yes, the Shareholders Can Fight Back"

§  The Deal, February 6, 2004: "Bitter taste"

§  Los Angeles Times, February 24, 2004: "Farmer Files to Reincorporate"

§  Los Angeles Business Journal, May 31, 2004: "Investors See Cup Half Empty Despite Progress at Farmer Bros."

Forum Surveys

Priorities of Farmer Bros. Shareholders

(June 17, 2002)

Ranges of Valuation Estimates

(April 7, 2003)

Shareholder Interests

(December 1, 2003)

Forum Process

Information Demands

Shareholder Proposals & Voting

Legal & Regulatory Actions

Archive Reference

Comprehensive listings (as presented in the initial form of the Forum home page) of:

Forum Records
Published Articles
Workshop Material
Related Cases



Current News Reports

The Daily Breeze, August 25, 2007: "South Bay-based Farmer Bros. names new CEO"

Los Angeles Business Journal, May 14, 2007: "Farmer Brothers Finally Perks Up"

The Oregonian, May 1, 2007: "Farmer Brothers buys Portland's Coffee Bean"

Seeking Alpha, January 22, 2007: "Farmer Brothers: A Double Net/Net Worth Watching"

Los Angeles Times, June 6, 2006: "Farmer Bros. Hires Former Diedrich CEO"

The Daily Breeze, February 16, 2006: "Lutin seeks board probe of Farmer Bros. reports"

See also referenced

February 14, 2006 letter

The, December 30, 2005: "A deal perking up at Farmer Bros.?"

The Daily Breeze, October 8, 2005: "Investors in Farmer Bros. to mull sale"


The, October 7, 2005: "Investors grill coffee roaster"

Los Angeles Business Journal, March 16, 2005: "Farmer Brothers Adopts 'Poison Pill' Plan"

The Daily Breeze, January 15, 2005: "Another Farmer will take charge of coffee company"

SmartMoney, January 14, 2005 article: "Farmer's Market"

The, January 13, 2005: "Future of Farmer Bros. in doubt"

Dow Jones Newswires, January 11, 2005: "Mkt Sees Big Changes At Farmer Bros After CEO Death"

Los Angeles Business Journal, October 11, 2004: "Farmer Brothers Wins Round in Ongoing Battle With Investors"


Recent Developments

Quarterly Report of Continuing Deterioration
(February 12. 2008)

Second Year of New Management's Performance

(November 12, 2007)

Continuing Annual and Quarterly Operating Losses

(September 13, 2007)

Implementation of Planned CEO Succession and Addition of Litigation Lawyer to Board

(August 24, 2007)

Report of Resumed Quarterly Operating Losses

(May 8, 2007)

see also

Management Explanation of Declining Coffee Sales and Resumed Operating Losses

Company Announces Acquisition of Specialty Coffee Roaster

(April 30, 2007)

see also

Management Letter to Employees Explaining Acquisition

Management Reports Vision of Success

(February 9, 2007)

Management Reports Continuing Deterioration of Operating Performance, Plans to Expand

(November 9, 2006)

Company Files Proxy Statement, Excluding Shareholder Proposal with SEC Approval

(October 26, 2006)

Annual Report of Resumed Losses

(September 13, 2006)

Shareholder Proposal to Vote on Director Indemnification for SEC Enforcement

(June 26, 2006)

See also

Management Request for SEC Approval to Prevent Vote on Shareholder Proposal

Company Hiring of Chief Operating Officer

(June 5, 2006)

Directors Approve New Indemnification for Themselves

(May 22, 2006)

Reports from Annual Meeting of Shareholders

(November 28, 2005)

Relevant Court Decision on Investment Company Status

(November 23, 2005)

See also

November 7, 2005 Milwaukee Journal Sentinel:

"Presto loses fight with SEC over investment status"

Management Blames Continuing Decline on Market Conditions and "Computer Project"

(November 8, 2005)

See also

Company Announces Fourth Quarter and Annual Losses

(September 13, 2005)


September 13, 2005 Forum Report:

Farmer Bros. Filing of 10-K Annual Report

Renewed Request for Full Information About Control of Stock

(October 11, 2005)

Forum Engagement of Investment Banker for Coffee Business

(October 7, 2005)

See also

September 21, 2005 Forum Report:

ESOP Issues and Exploration of Strategic Alternatives

Forum Report: Management Action to Adopt Poison Pill

(March 16, 2005)

Response to Requests for Information about Control of Stock

(March 14, 2005)

Quarterly Loss from Hedge Investments

(February 9, 2005)

See also

Company Announces Losses Attributed to Market Volatility

(February 10, 2005)

Company Announces Deceased CEO's Sister Joining Board to "Continue the Legacy"

(January 14, 2005)

Company Press Release of Death of Roy E. Farmer and Appointment of Interim CEO (January 9, 2005)

Forum Reports

of Meeting and Voting Results

(December 15&17, 2004)

Performance Issues Raised in Company's Form 10-K  Annual Report

(September 13, 2004)

(See also Company's September 14, 2004 Press Release)

Request for Management Explanation of Performance and Plans

(May 18, 2004)

(See also July 26, 2004 repeated request to CEO concerning employee pension security)

Forum Report on Meeting Results

(February 24, 2004)

Request for SEC Attention to Investor Interests

(January 8, 2004)


Professional Analyses

Proxy Voting: Glass Lewis & Co.

(November 7, 2005)

Recommends institutional investor clients withhold votes for reelection of directors, stating "[w]e believe that the actions of the board and management over the past two years have been contrary to shareholder interests."

See also previous Glass Lewis reports:

December 3, 2004 "Proxy Paper"

February 13, 2004 "Proxy Review"

February 11, 2004 "Proxy Paper"

Stock Valuation: Standard Investment Chartered

(June 12, 2003)

Sets $43 per share (adjusted for 2004 stock split) target price based on separate valuations of investment funds and coffee business, assuming either going private or accommodation of public investor interests.

(See also May 24, 2004 Market Commentary)




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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