Farmer Bros. Co. (FARM) - 500 Beiträge pro Seite

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Profile:Farmer Bros. Co. manufactures and distributes coffee and spices to the institutional food service segment. Its product line includes roasted coffee; coffee related products, such as coffee filters, sugar, and creamers; assorted teas; cocoa; spices; and soup and beverage bases. The company primarily offers its products to restaurants and other institutional food service establishments that prepare and market meals that include hotels, hospitals, convenience stores, and fast food outlets. Farmer Bros was founded in 1912 and is based in Torrance, California.


http://www.farmerbroscousa.com/

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Farmer Brothers: A Double Net/Net Worth Watching
Posted on Jan 22nd, 2007 with stocks: FARM

Clyde Milton submits: We hope Ben Graham wouldn't take offense if we loosened up a bit, and took a gander at some "double net/nets," or companies trading at less than two times their net current asset value. After all, we've already taken liberties with Ben's philosophy; he preferred companies trading at less than 2/3 of net current asset value, and we tend to focus on those trading below 1 times NCAV. Truth be told, it's slim pickings these days to find these companies (not unusual), but we'd thought it would be interesting to see what we could dig up at 2 times NCAV.

What we found was a list of about 300 companies, and one of the most interesting name we found was that of Farmer Brothers (FARM), a manufacturer and distributor of coffee. We remember this company as a thinly traded issue, trading at $400 per share a years ago. After a 10 for 1 split, and some difficult times, this company currently trades around $20--and shareholders are not happy. More on that later.

California-based Farmer Brothers was founded in the 1920's, and sells coffee and other products primarily to restaurants and other institutions. Coffee accounts for about half of sales, but the company also provides 300 other products, many of which are coffee related. The company's primary raw material is green coffee, an agricultural commodity subject to many different factors that can cause wide and severe price swings. The company does utilize derivatives to hedge risk.

The Controversy
Lets face it, business at Farmer Bros has not been all that great in recent years, and sales have been flat. Investors have not been happy either. Five year total returns are in negative territory, and after looking at the balance sheet, you'd wonder whether this is a coffee company, or a very bad money market fund. Much of the problem has been attributed to company insiders, who own more than half of the outstanding shares.

Tons of Cash and Marketable Securities
Farmer Brothers has $180 million in cash and marketable securities, mainly comprised of treasuries ($113.5 million) and preferred stock($61.7 million). That amount might not be that remarkable, except for the fact that the current market cap is $323 million, leaving the company with an enterprise value of just $143 million. Or in per share terms, thats $11 in cash and ms, while the stock trades at $20. The company currently yields 2.2%, hence the reference to being a "very bad money market fund."

The Numbers
Revenue for 2006 (year ended 6/30/06) was $207.5 million, up 4.5 % from 2005 ($198.4 million). The company managed net income of $4.75 million in 2006, up from a loss of $5.4 million in 2005. However, all of 2006's net income is attributable to dividends and interest from the companies cash and S/T investment hoard, an amount which exceeded $8 million. In other words, the operating business is not profitable.

Shareholder Revolt
Dismayed by poor operating performance, the poor use of excess capital, and disdain shown for minority shareholders, Farmer Brother's investors have become increasingly active over the years. For more on this, visit the Forum for Shareholders of Farmer Bros. Co.

Conclusion
This is one we'll be following. Frankly, we are intrigued by what might be an excellent business, with a relatively large amount of working capital. Shareholder influence can ultimately force change, and that's what it will take to right this ship.

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Farmer Brothers: Brewing Potential
Posted on Jun 26th, 2007 with stocks: FARM

Hilary Kramer (AOL Money and Finance) submits: While the stock market is going strong right now, I'm not as hopeful about its prospects as this year moves forward. I think we're starting to see what will be serious fallout from the sub-prime market collapse.

That said, I have been researching and searching for unique opportunities in 2007 where we can find undervalued companies serving niche markets that won't dip -- even with a market dip. What sectors are less impacted? How about things like institutional coffee?

Hotels still need to offer it, delis will still sell it, offices supply it. This is why when there seems to be rocky times ahead, I look to companies like Farmer Brothers Co. (FARM) to make a buck.

An institutional coffee roaster that sells a variety of coffee, spices, flavored drinks, soup bases and related products like filters, creamers, teas, and cups to restaurants, hotel/motels, convenience stores, health care facilities, and offices in 28 states, Farmer Brothers is family run and has been around since 1912. It knows its business inside and out, and 60% of it comes from coffee sales. When the economy takes a hit, people may tighten their wallets in terms of high-end coffee purchases --perhaps the $4 lattes will go -- but institutions still need to provide the requisite thermos of coffee with the accompanying creamers and cups. While Farmer has been underperforming of late, it has hired a new COO, Roger M. Laverty III, and is investing in a big brand-awareness push this year.

In April, FARM bought Coffee Bean International (CBI), a specialty coffee roaster in Oregon, for about $22 million in cash, with promised near-term investments to ramp up CBI's production. CBI will continue to be a separate company under its current management, but its synergistic overlap with FARM will allow it to improve its margins while retaining an artisan feel. This is a smart purchase in my opinion, one that allows FARM greater growth and improves its reach, pushing it into the fastest growing segment in the coffee market -- that of specialty coffees -- while at the margins enjoyed by its larger scale production and distribution mechanisms of its institutional, traditional coffee sales.

Of course, I like a dividend, too. Farmer Brothers has paid a dividend to its shareholders every year since 1953.

Type of stock: A small-cap niche stock in the food manufacturing industry, FARM dreives 60% of its revenues from coffee sales to institutional outfits, and recently bought specialty coffee roaster, Coffee Bean International.

Stock Price: Currently trading at $21.14, with solid fundamentals, I don't think FARM will be negatively affected by any market dip. Hotels and hospitals still need to offer coffee, after all. We could see this one hit $30 by year's end.

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