Farmer Bros. Co.
Farmer Bros. Co.’s relocation to Northlake is on track, company officials said during a conference call announcing the coffee and beverage company’s most recent earnings.
“Currently we continue to expect to begin our move into the new facility in the second quarter of fiscal 2017 and to be operational in the third quarter,” said Mike Keown, CEO of the company, currently based in Torrance, California.
Along with announcing fourth quarter and year-end result, Farmer Bros. also announced it will move into the tea market by acquiring all the assets of premium tea manufacturer and distributor China Mist Brands Inc. for $10.8 million, plus a performance-based payment of $0.5 million if certain sales levels are achieved in calendar years 2017 and 2018.
Farmer Brothers plans to operate China Mist as an independent subsidiary, continuing to operate from its Scottsdale, Arizona, offices.
The tea expansion comes as the coffee company ground out a profit of $89.9 million, or $5.41 per share for its fiscal year, which ended June 30. Revenue was $544.4 million.
Farmer Brothers shares have increased nearly 4 percent since the beginning of the year. Shortly after announcing the results on Sept. 12, the company’s shares, which trade on the NASDAQ under the FARM symbol, hit $33.46 – an increase of 26 percent in the last 12 months.
Farmer Brothers Co. reported fiscal fourth-quarter net income of $84.2 million, after reporting a loss in the same period a year earlier.
On a per-share basis, the company said it had net income of $5.05. Earnings, adjusted for non-recurring gains, came to 23 cents per share.
The results fell short of Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for earnings of 33 cents per share.
The company announced earlier this year it planned to relocate its headquarters to Northlake.
Company officials say they plan to build a LEED-certified facility on land near Interstate 35W and Texas Motor Speedway. The facility will include water conservation equipment, energy-saving climate-control systems and a 1,000-square-foot teaching lab designed to host training classes for industry associations such as the Specialty Coffee Association of America.
Developing the facility is Dallas-based Stream Realty Partners. Farmers Bros. began hiring in late June, with employees sought in finance, accounting, human resources, information technology, purchasing and marketing.
About 350 staff members are expected to work at the facility.
Assisting the company in recruiting and hiring is Futurestep, a Korn Ferry company specializing in talent acquisition solutions.
But the move has not been without tension, particularly among some members of the Farmer Bros. founding family.
A stockholder group led by Carol Farmer Waite and other members of the founding family, which owns about 23 percent of outstanding shares of the company’s stock, recently delivered a letter to the board of directors saying the group had concerns about the company’s strategic direction.
The group, called Save Farmer Bros., has sent a letter to the company calling into question many decisions by the company’s current management, including what the group calls a “misguided decision to quickly move Farmer Bros.’ headquarters to Texas.” The group plans to nominate a slate of candidates for election at the company’s 2016 annual meeting of stockholders, expected to occur in November, to replace Keown and two other members of the board.
In the earnings call, company officials noted that management’s business strategy and initiatives such as relocating to North Texas have been undertaken with the support of the board and are “designed to continue creating value for our stockholders.”
Also in the call, CFO Isaac Johnston said the company has upgraded plans for the headquarters.
“As you know last year we entered into a lease agreement for an approximate 538,000 square foot facility being constructed on just over 28 acres of land located in the city of Northlake, Texas, which will include corporate offices, areas for manufacturing and distribution, in addition to housing a coffee lab,” he said.
In March 2016, the company updated the cost and size of the facility, with the cost increasing to between $55 million and $60 million and machinery and equipment capital expenditures ranging from $35 million to $39 million, he said.
“In June 2016, the company exercised its purchase option to purchase the new facility under construction in Northlake, Texas, and expects to close on the purchase option in the first quarter of 2017,” Johnston said.
Founded in 1912, Farmer Bros. sells organic, direct trade and sustainably produced coffee for restaurants, hotels, casinos, offices, quick service restaurants, convenience stores, health care facilities and other foodservice providers as well as private brand retailers. The company has over 1,600 employees nationwide. – This reports includes information from FWBP archives and the Associated Press. Conference call transcript was courtesy Seeking Alpha.