Farmer Bros. Profit Declines 55% in Quarter

Commercial coffee roaster Farmer Bros. Co. continued to see its sales and profit drip away during the latest quarter, as revenue fell to its lowest level in at least a dozen years.

The Torrance-based company, meanwhile, is facing new court challenges from a dissident branch of the company’s founding family that is trying to wrest voting control of its shares from the firm’s management.

Attorneys for Catherine Crowe and her two children have filed petitions in Los Angeles County Superior Court seeking to prevent company Chairman Roy F. Farmer, who is Crowe’s brother, from voting Farmer stock held in trusts. The Crowe family is asking the court to appoint retired Judge Arnold Gold as an interim trustee. A hearing is scheduled for Dec. 24.

The Crowe trusts own 12.5% of the company. If the court grants the family’s petition, the amount of shares Roy Farmer and his supporters on the board could vote would be slashed to roughly 40% of the company. That would give dissident shareholders a chance to block a move by Farmer Bros. to reincorporate the business in Delaware.

Between the trusts and other holdings, Crowe family members own about 23% of the company. They are aligned with another major dissident, Franklin Mutual Advisors, which owns nearly 10% of Farmer Bros. stock.

“Freeing the 12.5% trust votes from management control would not only allow shareholders to block the proposed reincorporation, but would also make it practical to put up a dissident slate of directors,” said Gary Lutin, a New York investment banker who is managing a Franklin-sponsored Internet forum for shareholders.

Late Friday, Farmer Bros. reported that its earnings fell for the eighth consecutive period, this time by 55%. Fiscal first-quarter net income plummeted to $2.5 million, or $1.41 a share, for the quarter ended Sept. 30, compared with $5.6 million, or $3.03, a year earlier. It was the company’s smallest first-quarter profit in a decade.

Sales, too, slipped. Total revenue fell 9% to $45.7 million -- the lowest level of quarterly sales in at least 12 years.

The company blamed the declines on slower consumer spending at restaurants, a decrease in coffee-brewing equipment sales and the expense of upgrading computer systems. Farmer Bros. sells coffee and equipment to restaurants and institutional food companies.

Farmer Bros. also said higher prices for green, unroasted coffee and greater spending for employee benefits, including retirement, health insurance and an employee stock ownership plan, contributed to its worsening financial performance.

The company, which although public is tightly controlled by 87-year-old Roy Farmer and his branch of the founding family, declined to discuss plans for improving operations.

Farmer Bros. shares, which are thinly traded, fell $2.98 to $317.02 on Nasdaq on Monday.