Earnings Labs

Farmer Bros. Co. (FARM)

Q4 2016 Earnings Call· Mon, Sep 12, 2016

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Transcript

Operator

Operator

Good afternoon, ladies and gentlemen and welcome to the Farmer Brothers Fourth Quarter and Full Fiscal Year 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a brief question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded Monday, September 12, 2016. I would now like to turn the call over to your host, Tom Mattei. Please go ahead sir.

Tom Mattei

Analyst

Good afternoon, everyone. Thank you for joining Farmer Brothers' fourth quarter and full fiscal year 2016 earnings conference call. I'm the Company's General Counsel. With me today are Mike Keown, President and Chief Executive Officer; and Isaac Johnston, Treasurer and Chief Financial Officer. Earlier today we issued our financial results and the China Mist transaction press releases, which are both available on the Investor Relations section of our website at www.farmerbros.com. The press release for our financial results are also included as an exhibit to our Form 8-K available on our website and on the Securities and Exchange Commission's website at www.sec.gov. Please note that all of the financial information presented on this conference call today is unaudited. A replay of this audio-only webcast will be available approximately 24 hours after the conclusion of this call. The link to the audio replay will also be available on our website. Before we begin the call, please note various remarks that we make during this call about our future expectations, plans and prospects may constitute forward-looking statements for purposes of the Safe Harbor provisions under the Federal Securities Laws and Regulations. These forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Results could differ materially from those forward-looking statements. Additional information on factors that could cause actual results and other events to differ materially from those forward-looking statements is available in the company's press release and in our public filings, which are available on the Investor Relations section of our website. On today's call, we use certain non-GAAP financial measures including non-GAAP net income, non-GAAP net income per common share diluted, adjusted EBITDA and adjusted EBITDA margin in assessing our operating performance. Reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures is included in our earnings press release, which is available on the Investor Relations section of our website. I will now turn the call over to Mike Keown, our President and Chief Executive Officer. Mike?

Mike Keown

Analyst

Thank you, Tom. Hello everyone, and thank you for joining us this afternoon. Here’s our plan for the call today. I will start by highlighting our financial results for the quarter and the fiscal year. Then I’d like to bring you up-to-date on our Corporate Relocation Plan, and as a part of that, the cost-reduction initiatives we have been successfully initiating over the past one to two years. And finally, I’ll touch on our exciting acquisition of China Mist, before turning the call over to Isaac who will discuss our financial results in greater detail. So let’s take a look at the fourth quarter and the year at a high level. We are pleased with our results for the fourth quarter and full fiscal year 2016. We ended the fiscal year strongly with positive results in the fourth quarter from a variety of perspectives. Our balance sheet remains strong, providing us with the financial flexibility to continue to grow our business. We expect continued improvement in the company's performance as we look forward to fiscal 2017 and believe we are well positioned to continue creating value for all of our stockholders. To touch on some of our highlights; first, volume was strong. Gross margin improved and net income results were solid. Coffee volume was up 10.5% with improvements in our direct ship and DSD channels. We are pleased that our quality and value proposition is translating into volume growth, driven by existing and new customers. Second, our team continue to execute well operationally. As we look at our business today, we feel like our plans have been running very effectively and have been very dialed in. At the same time, we are not stopping there and the team is continuing to identify new ways to take cost out of this…

Isaac Johnston

Analyst

Thank you, Mike, and hello. I'll spend the next few minutes discussing our financial performance for the fourth quarter and full year of fiscal 2016. We are pleased with the continued improvement in our financial performance achieved for the quarter and fiscal year. We continue to successfully execute against our objectives of driving improved volume growth and creating efficiencies in supply chain management. Now, let me go into some of those details of our results. Net sales in our fourth quarter of fiscal 2016 were $134.2 million, representing a 1.2% increase compared to net sales in the fourth quarter of fiscal 2015. This increase was primarily driven by a 10.5% increase in coffee pounds sold, which were offset by lower prices driven primarily by customers in cost-plus pricing arrangement where changes in the green coffee commodity cost are passed on to the customer. Most cost-plus customers are covered under coffee hedging contracts which help insulate them from immediate changes in green coffee commodity prices. Gross margin for the fourth quarter of fiscal 2016 was 39.1% or 200 basis points higher than the 37.1% we reported in fiscal 2015. The improvement in gross margin was primarily driven by lower green coffee costs as well as improvements in conversion and leverage as we move production from our Torrance, California manufacturing site. The gross margin includes a benefit from LIFO layer reductions in the fourth quarter of fiscal 2016 of $3.1 million compared to a benefit of $1.8 million in Q4 of 2015. Overall, we experienced a very strong quarter in gross margin improvement. Operating expenses in the fourth quarter were $49.4 million, representing a decrease of $1.2 million as compared to the $50.6 million recorded in the prior-year period. The decrease was primarily due to restructuring and other transition expenses in connection…

Mike Keown

Analyst

Thanks, Isaac. As always, I thank those on the call for your continued interest in Farmer Brothers. We are pleased with the progress we are making in our turnaround as we continue to focus on creating value for our stockholders. Before we turn to questions I'd like to briefly comment on the recent development. As you likely saw, a stockholder group led by Carol Farmer Waite, recently published the letter to the Company's Board and indicated they plan to nominate candidates to stand for election to the Farmer Brothers board at our annual meeting for 2016. As noted in the recently updated 13-D filing, the stockholder group has submitted their three nominees. First I note that we appreciate the views of all of our stockholders and remain to open to ideas that will advance the company success and enhance stockholder value. The Board will consider these nominations in due course. After the Board completes its nominating process, the Board will present its formal recommendation regarding director nomination in the company's definitive proxy statement which will be filed with the SEC and distributed to all stockholders eligible to vote at the company's 2016 annual meeting. Our Board and Management team are committed to acting in the best interest of the company and our stakeholders and we will continue to take actions that we believe enable us to enhance stockholder value. Our Board today is composed of seven actively engaged directors who collectively represent a strong mix of independent executive experience, industry expertise, deep understanding of the company’s business and Farmer family representation. Six of our seven directors are outside, non-employee directors. Five are independent and five were appointed within the last five years. Four of the Board's independent directors are former Chief Executives of public and private companies in the food…

Operator

Operator

[Operator Instructions] Our first question comes from the line of Tony Brenner with ROTH Capital Partners. Your questions, please.

Tony Brenner

Analyst

Thank you. A couple of questions. First of all, Isaac, what will your tax rate be going forward on a book basis?

Isaac Johnston

Analyst

On a book basis it will be the normalized tax rate in the 34% range. There will not be a cash flow impact, but it - from a book basis it will be about 34%.

Tony Brenner

Analyst

Beginning in the first quarter?

Isaac Johnston

Analyst

Beginning in the first quarter of fiscal 2017 we had actually a little bit in fourth quarter of 2016, but yes, in 2017 and beyond.

Tony Brenner

Analyst

Okay. You mentioned that the accruals for incentives was what inflated G&A expense and that was above plan in the quarter. Could you give some guidance as to what kind of a step-up in G&A or as a percent of revenues a decline we might anticipate in fiscal 2017?

Isaac Johnston

Analyst

Okay. Let me give you a couple of numbers if you look at the accrual versus prior year, the accrual, last year was a credit. [Indiscernible] accruals were negative and then this year there was an expense. The difference between those two, they are roughly $0.14 - right at $0.15 a share difference. If you look at it versus a normalized number, so you say, look you pay normal bonus each year, it’s about $0.04 per share and then the legacy loan, we took a reserve on a legacy loan and that was about $0.04 per share also.

Tony Brenner

Analyst

Okay. So is it reasonable to expect that on balance that G&A expenses up but is a lower basis-point number as a percent of revenues?

Isaac Johnston

Analyst

In the prior - in 2015, the SG&A was kind of lower the normal as didn't hit the performance targets so it came down and then this year set the performance targets and exceeded the performance targets and the difference between the two was the - within the quarter was in the [14.5%] [ph]. If you look at it for the full year that change was almost $0.45 per share; it was a fairly significant number. If you look at it and you say look, take your year-end whole year-end results, we had about a $1.6 per share, the way I would think about it is normalized bonus, so add $0.04. So just from normalizing the bonuses so that gets you from a $1.06 to roughly $1.10. And then this [indiscernible] loan, is a reserve against a legacy loan that is a one-time nature of which we'll be doing absolutely everything possible to collect the full amount in the future, but it's about $0.04 also. So add $0.08 on to the $1.06 and we are really - I'd think we are in the $1.14 per share range.

Tony Brenner

Analyst

Okay. And all of that really is fourth quarter, that $0.08 essentially is a fourth-quarter phenomenon.

Isaac Johnston

Analyst

Yes, it's a fourth quarter and the full year number also.

Tony Brenner

Analyst

Right, okay.

Isaac Johnston

Analyst

On the same-store basis.

Tony Brenner

Analyst

Mike, I think you mentioned that SST becomes your largest customer. Is that right?

Mike Keown

Analyst

It's SSP and this is the largest DSD roast and ground sales that we got data back to about 2011 and we are very positive. It's very good work by our DSD group.

Tony Brenner

Analyst

How long will it take you to transition and penetrate all 24 of those locations?

Mike Keown

Analyst

We've already started with a few, I'd probably say by the end of January or February to be conservative, or potentially faster than that. It's just a matter to logistically getting to each place, getting things set up and so forth, but we're excited about this partnership.

Tony Brenner

Analyst

Okay. Last question from me. Regarding China Mist, you mentioned that they've got a very attractive distribution system of their own. How will that be blended in or how would that work?

Mike Keown

Analyst

Well, I think there is a couple of ways that we can see it. First, we'll be working with the existing distributor group, we are very excited to work with them. It gives us in essence another club to swing in the bag Tony. In some cases it could be an opportunity to drive China Mist. It could be an opportunity to sell other products through that network and in some cases where we don’t have a distributor in a particular region it's an opportunity to put it on the truck. So we see this being very malleable to work into our system. Again we just announced this today, we still are working through the close, but it's a terrific organization and we are excited to have them part of our family.

Isaac Johnston

Analyst

And if you look at their customers versus our current customers, they are pretty much incremental customers. So it opens up an opportunity for us through another avenue to work with the distributors, make them successful and then make our business successful also.

Tony Brenner

Analyst

And what are their sales?

Isaac Johnston

Analyst

When we go through the final closing which is scheduled in the early part of the second quarter timeframe, we will disclose at that time, at this point in time we haven’t disclosed the sales range.

Tony Brenner

Analyst

Okay. Thank you very much.

Operator

Operator

[Operator Instructions] Our next question comes from Kara Anderson with B. Riley and Company. Your questions, please.

Kara Anderson

Analyst · B. Riley and Company. Your questions, please.

Hi, good afternoon, guys. I was wondering if you could update us on the expectation for the timing for - $18 million to $20 million in annual savings.

Isaac Johnston

Analyst · B. Riley and Company. Your questions, please.

Okay. That's a good question. As we bring our facility up and running here in Texas in Northlake, it starts opening up the opportunity for the next link of the chain for us. So if that comes we said it will be end of the second quarter, beginning of the third quarter, and then we would expect to start seeing some of the savings after the second quarter into more of the third quarter and then ramp up over the next kind of year time frame is what we are working against.

Kara Anderson

Analyst · B. Riley and Company. Your questions, please.

Okay. And then, could you provide a little bit more color as to the breakout of the coffee volume growth by DSD and direct ship?

Mike Keown

Analyst · B. Riley and Company. Your questions, please.

As you know, we don’t break that out as a going basis. But I think you could probably gather from my comments as I name some of the customers that more came from the direct-ship business than from the DSD group. And that’s certainly where some of the newer volume has come on over the last year. But we don’t break that out publicly.

Isaac Johnston

Analyst · B. Riley and Company. Your questions, please.

But some of the more recent wins that Mike walked through were - are DSD wins, the ones that SSP and the customers that he'd specifically walked through.

Kara Anderson

Analyst · B. Riley and Company. Your questions, please.

Okay. That's helpful. And then what were the assets sold in the quarter? I don't know if I missed that.

Isaac Johnston

Analyst · B. Riley and Company. Your questions, please.

The assets sold in the quarter include - we had a facility sell that occurred within the quarter in Northern California. And if you notice in our capital spending, we also spent some additional dollars on the acquisition - so it was a repositioning, a closing of one and opening of another. So there was an in and out flow, it was primarily on the facility side for the capital spending or the real estate sell occurred.

Kara Anderson

Analyst · B. Riley and Company. Your questions, please.

Okay. That is it from me. Thank you.

Operator

Operator

Thank you. Our next question comes from the line of Carter Dunlap with Dunlap Equity Management. Your questions, please.

Carter Dunlap

Analyst · Dunlap Equity Management. Your questions, please.

Hi, guys. One quick follow-up to Tony's question and then another one. If I go back to the SG&A year-over-year and talk about it in dollar amounts, which is what you speak to in the press release, just want to make sure I understand one thing. So the difference between the incentive accrual plus the credit last year was $2.5 million swing, and then the charge against the legacy loan was $700,000. So that's $3.2 million. And you mentioned that the total went up $4.8 million. So will the rest of that drift down in the next two quarters before these other cost savings kick in, or is that a new level, after you take those two non-recurrings out?

Isaac Johnston

Analyst · Dunlap Equity Management. Your questions, please.

And there was also a retiree medical there where we had a $1.1 million credit in the prior year and then $300,000 charge within the current year. The…

Carter Dunlap

Analyst · Dunlap Equity Management. Your questions, please.

So that was a $1.4 million swing, is that what you said?

Isaac Johnston

Analyst · Dunlap Equity Management. Your questions, please.

Yes. That was the $1.4 million swing. So those are the three components that are in the difference.

Carter Dunlap

Analyst · Dunlap Equity Management. Your questions, please.

Okay.

Isaac Johnston

Analyst · Dunlap Equity Management. Your questions, please.

And that gets you kind of the full amount versus a - if you think of kind of versus a normalized – let's say we perform on plan, on target, grow volume, hit all the productivity targets, it would be roughly $600,000 different as far as raw dollars are concern, so $600,000 more within the quarter. For the full year it would be roughly $2.2 million lower, okay.

Carter Dunlap

Analyst · Dunlap Equity Management. Your questions, please.

Okay.

Isaac Johnston

Analyst · Dunlap Equity Management. Your questions, please.

Then the next item you think of this legacy loan that we took within the quarter that's roughly $700,000 and within the quarter and then that one is $700,000 impact for the full year also. So the $2.2 million plus the - $2.2 million plus the $700,000 that $2.9 million you should think of as going away in the run rate. Now the legacy - the legacy workmen's - I am sorry, the legacy retiree medical cost, they do an actuarial assessment each year. This year it was - last year it was down, this year it was up. That was about 300 grand. So I would - if the actuarial assessments remain constant then it would be 300 grand that would basically fall out also.

Carter Dunlap

Analyst · Dunlap Equity Management. Your questions, please.

Okay.

Isaac Johnston

Analyst · Dunlap Equity Management. Your questions, please.

So 2.2, plus 700, plus the retiree medical number.

Carter Dunlap

Analyst · Dunlap Equity Management. Your questions, please.

Okay. Just to shift to a totally different question. Back in prior conversations in thinking about the transition to Texas, if my memory serves me, the December quarter, your first fiscal '17, was your peak shipment volume quarter. And given the success you've had in these unit growth volumes in this quarter and what it sounds like laying in, is there something incremental you have to do to clear the mountain here in the December quarter? I'm sorry, the September - yes, the December quarter.

Isaac Johnston

Analyst · Dunlap Equity Management. Your questions, please.

In the second quarter in fiscal year?

Carter Dunlap

Analyst · Dunlap Equity Management. Your questions, please.

Yes, right. I’m sorry Q2.

Isaac Johnston

Analyst · Dunlap Equity Management. Your questions, please.

One thing we know a lot better now than we were nine months, 12 months ago, is we actually know what we can produce within our two current manufacturing sites. And we don’t see that we will have any capacity constraints in going through the year-end time frame. We now know what we can handle. We know we’ve got surge capacity. We know what we can get from sixth and seventh day production. And we don’t see an issue in handling similar level growth number in the future.

Carter Dunlap

Analyst · Dunlap Equity Management. Your questions, please.

Wonderful thanks.

Mike Keown

Analyst · Dunlap Equity Management. Your questions, please.

And I'd add on to that, Carter. We do have some contingency plans as well that we’ve established over the course of the last year. So I would say the Houston and Portland facilities are just doing a terrific job. But if there was an issue, even with the progress Isaac’s was discussing in terms of how we’re thinking about capacity, we do have some failsafe strategies in place as well.

Carter Dunlap

Analyst · Dunlap Equity Management. Your questions, please.

Thank you.

Isaac Johnston

Analyst · Dunlap Equity Management. Your questions, please.

The new lines come up and running, just if you got your notes, it’s between £24 million to £28 million of incremental capacity will be coming on stream.

Carter Dunlap

Analyst · Dunlap Equity Management. Your questions, please.

Got it. Thank you.

Operator

Operator

Thank you. Our next question comes from the line of Adam France with 1492 Capital. Your questions, please.

Adam France

Analyst · 1492 Capital. Your questions, please.

Good afternoon, guys. Thanks for squeezing me in. Mike, could you speak to - I'm sure price was part of it, but with this Jacks business or the airport locations, you're obviously replacing somebody. How come you won, in terms of simplest question? Why did they choose you?

Mike Keown

Analyst · 1492 Capital. Your questions, please.

Sure. I think one of the things that we’re doing better is demonstrating our total capability. So as examples, we’ve got a terrific green coffee team in terms of buying, roasting, ensuring that we meet almost any customers spec. We’ve got terrific plans. We’ve got hedging programs for those customers who want that. And for those who want more innovation, we got a very small but talented marketing group. When we show up all together for customers who are truly interested in driving our business, we feel much better. Conversely, if it’s just going to be a bid, while we may participate if they’re not interested in really driving coffee with the segment, we may not be the best partner. And we’re trying to find ways to make sure that we're engaging the - it's really the people and the channels are going to win in long haul. It may sound obvious, but it’s something I think we’re doing better and better and the markets demonstrating that.

Adam France

Analyst · 1492 Capital. Your questions, please.

Very good. Thank you, guys.

Operator

Operator

Thank you. Our next question comes from the line of Francesco Pellegrino with Sidoti & Company. Your questions, please.

Francesco Pellegrino

Analyst · Sidoti & Company. Your questions, please.

Good afternoon guys. Just wanted to start off with a quick question. Mike actually, Isaac, I heard you going over some of the actuarial assumptions. Could you maybe just explain a little bit what happened with the $20 million jump sequentially from Q3 to Q4 on the balance sheet for the accrued pension liabilities?

Isaac Johnston

Analyst · Sidoti & Company. Your questions, please.

Yes. Interest rates in the last quarter dropped almost a full - a half percentage point. And the - as interest rates moved down, then the estimated liability then goes up. So it moved up by somewhere in the $18 million to $20 million range. I don’t remember the exact number, but I think it’s right around $20 million. As interest rates go the other direction, then it could potentially go back to a normalized. If you look at the last two quarters in a row, it dropped -it was almost 0.5% this quarter, it dropped almost 0.5% the prior quarter. So we’ve seen a pretty significant jump driven primarily by the reduction of interest rates over the last two quarters.

Francesco Pellegrino

Analyst · Sidoti & Company. Your questions, please.

So this is just a reduction in the discount rate, nothing with like changing around like mortality assumptions or anything like that, it's just the discounting.

Isaac Johnston

Analyst · Sidoti & Company. Your questions, please.

The mortality or actuarial rates were a little bit, but the majority within the quarter, but the majority of it was interest rate moves. If I remember correctly, I think it’s just below 0.5%...

Francesco Pellegrino

Analyst · Sidoti & Company. Your questions, please.

Okay, so 50 basis points. I just want to make sure I'm on the same page as you guys. Because I see the China Mist business that you did, and it seems as if that's going to be something really nice to roll into the business, especially since when I look at what the tea line has been doing over the past four quarters, although it's off of a pretty small base, it looks as if it's been down about an average of, just like 15% per quarter. So that will be something nice to just strengthen up that part of the business. I just want to make sure, like you guys were not interested in acquiring S&D coffee, right? Just because they're more of a competitor. You're doing a lot with your own manufacturing capabilities to become a low-cost producer. Acquiring S&D did not even cross your mind; right?

Mike Keown

Analyst · Sidoti & Company. Your questions, please.

We're not going to have a comment on that. Regarding tea, the one area that you may have noticed is we had some industrial tea production over that time that was going out. So our core Farmer Brothers Tea actually has been growing kind of 2% to 4% a year and in a scenario that we feel pretty good about. As that industrial tea product rolled out, that’s where you see the declines. I actually think we’ve done a very nice job on our core tea products, and you wouldn’t see that in the data, so it’s a very fair conclusion. But our core Farmer Brothers tea is not meeting all of our expectations and they’re pretty high, but it has turned around and the work that our marketing department has done to reinvigorate that business is beginning to show up in the market.

Isaac Johnston

Analyst · Sidoti & Company. Your questions, please.

The quality of the product that we have currently is a very good product. China Mist really introduced the super premium category of teas. They’ve been around for 34 years. They have very high consumer brand awareness and we believe it’s a very good match. It allows us to get into more of the super premium end of teas, similar to what CBI allowed Farmer Brothers to get into the premium end of the coffee segment when the acquisition occurred. So we’re very excited both of the way they built the business and the distributor network that’s in place and what it could mean to us in the future.

Francesco Pellegrino

Analyst · Sidoti & Company. Your questions, please.

Okay. Couldn't squeeze out an answer about S&D, so let me ask you a different question then. Back in 2014, you did a $2 million deal. Today you did a $10 million deal. What would really be the maximum threshold for the size of a deal that you'd probably look to roll into your current operations? Are we talking $50 million, $60 million, $70 million? Or is it just what type of leverage can you get from the business that you'd even consider something substantially a lot bigger.

Isaac Johnston

Analyst · Sidoti & Company. Your questions, please.

Well, we have a very rigorous process that we look at for any inorganic growth or M&A activities, and we’ll work with our Board in deciding which ones we think will deliver the greatest shareholder value over the time frame. But we have no stated objectives or any stated specific targets on what we’re trying to deliver. Just to communicate, we do have an active program in place that we are - that we continue to look.

Francesco Pellegrino

Analyst · Sidoti & Company. Your questions, please.

Okay. And my last question for you is after the acquisition today, for a premium brand in the tea category, up here in northwest - in the northeast, I'm sorry, cold brew has become pretty hot. I know you have an iced coffee business. I know you - I don't know if you have a cold brew coffee business. I know when it gets into cold brew, then you need bottling capabilities. I'm not sure necessarily that might be something that you guys would want to venture into, but I just wanted to hear your thoughts maybe about it as we see this becoming a category with some really incredible growth.

Mike Keown

Analyst · Sidoti & Company. Your questions, please.

Sure. First I think that when you look at coffee, you see these micro categories, if you will, are niches. But often, they become large businesses. Ice coffee, it might be considered that cold brew is a different version of it. We’re working to become much more aggressive to be at the forefront of these moves. We have work that's going on both with existing customers who make it themselves and some work that we will have to help customers get into that business. We’ll share more on that now, but I think you’ll see us broadly be more innovative in some of these high-growth premium areas than we have been in the past.

Francesco Pellegrino

Analyst · Sidoti & Company. Your questions, please.

Well, let me ask you this, only because I know it could be expensive, and you might actually have one. Would you look to add a bottling line to Northlake?

Mike Keown

Analyst · Sidoti & Company. Your questions, please.

I'm going to have to pull the - I don’t - I'm not going to comment on that. I'm sorry.

Francesco Pellegrino

Analyst · Sidoti & Company. Your questions, please.

Okay.

Mike Keown

Analyst · Sidoti & Company. Your questions, please.

We always assessed it and there is a lot of ways to get in some of these businesses. Sometimes you can start a little smaller before you put the CapEx in. There is different model, - in this category it's fragmenting and growing in a very broad way, and I don’t think I can share anymore on how we may choose to enter it more aggressively and what the capital might be behind it.

Francesco Pellegrino

Analyst · Sidoti & Company. Your questions, please.

Okay.

Isaac Johnston

Analyst · Sidoti & Company. Your questions, please.

Just as a general industry standpoint, there is a lot of bottling capacity that's out there.

Francesco Pellegrino

Analyst · Sidoti & Company. Your questions, please.

Okay, interesting. That's it for me. Thank you, guys.

Mike Keown

Analyst · Sidoti & Company. Your questions, please.

Do we have time for one more question.

Operator

Operator

Yes. Our last question comes from Adam France of 1492 Capital. Your questions, please.

Adam France

Analyst

Thanks for squeezing me in again, guys. Mike, any issues in terms of green coffee supply out there? How do the harvests look, any comments you can make there?

Mike Keown

Analyst

Sure. At this point and you know that industry can change dramatically, but we feel very comfortable that we got access to the green coffee that we need and work very closely particularly with our larger customers to ensure we do. You could read a lot about the size of the coffee and all of that. I'm probably not expert enough to comment, but I'm very confident that we've got access to the green coffee we need and the quality of the green coffee that we need for all of our customer needs.

Adam France

Analyst

Very good. Thank you, guys.

Mike Keown

Analyst

Thank you. Well, thank you very much. We really appreciate your interest in Farmer Brothers and your comments and your time. And we look forward to talking with you very shortly. Thank you.