UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant _X_
Filed by a Party other than the Registrant __
Check the appropriate box:
__ Preliminary Proxy Statement
X_ Definitive Proxy Statement
__ Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
__ Definitive Additional Materials
__ Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
FARMER BROS. CO.
(Name of Registrant as Specified In Its Charter)
NA
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No Fee required.
__ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
__ Fee paid previously with preliminary materials.
__ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
FARMER BROS. CO.
20333 South Normandie Avenue
Torrance, California 90502
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON TUESDAY,
DECEMBER 14, 2004
TO THE STOCKHOLDERS OF FARMER BROS. CO.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Farmers
Bros. Co., a Delaware corporation (the "Company"), will be held at the
Principal office of the Company located at 20333 South Normandie Avenue,
Torrance, California 90502 on Tuesday, December 14, 2004, at 10:00 a.m.,
Pacific Standard Time, for the following purposes:
1. To elect three directors to a three year term of office expiring at the
2007 Annual Meeting of Stockholders;
2. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for the fiscal year ending June 30, 2005; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on November 15,
2004, as the record date for the determination of stockholders entitled to
notice of and to vote at this Annual Meeting and at any continuation,
postponement or adjournment thereof.
By Order of the Board of Directors
John M. Anglin
Torrance, California Secretary
November 18, 2004
PLEASE SUBMIT A PROXY AS SOON AS POSSIBLE SO THAT YOUR SHARES CAN BE VOTED
AT THE ANNUAL MEETING IN ACCORDANCE WITH YOUR INSTRUCTIONS. FOR SPECIFIC
INSTRUCTIONS ON VOTING, PLEASE REFER TO THE INSTRUCTIONS ON THE PROXY CARD OR
THE INFORMATION FORWARDED BY YOUR BROKER, BANK OR OTHER HOLDER OF RECORD. EVEN
IF YOU HAVE VOTED YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE
MEETING. HOWEVER, IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE IN PERSON AT THE MEETING, YOU MUST OBTAIN A PROXY
ISSUED IN YOUR NAME FROM SUCH BROKER, BANK OR OTHER NOMINEE.
TABLE OF CONTENTS
PROXY STATEMENT ....................................................... 1
General .............................................................. 1
Solicitation of Proxies ............................................. 1
Voting of Shares ..................................................... 1
Counting of Votes ................................................... 2
Shares Outstanding and Quorum ........................................ 2
Proxy Card and Revocation of Proxy ................................... 2
ITEM 1 ELECTION OF DIRECTORS ......................................... 3
ITEM 2 RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS ............. 6
SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN BENEFICIAL OWNERS ......................................... 7
Principal Stockholders .............................................. 7
Directors and Executive Officers .................................... 8
BOARD AND COMMITTEE MATTERS ........................................... 9
Board Meetings ....................................................... 9
Corporate Governance ................................................ 9
Committees .......................................................... 9
Audit Committee .................................................... 9
Nominating Committee .............................................. 10
Compensation Committee............................................. 10
Compensation of Directors .......................................... 11
EXECUTIVE COMPENSATION .............................................. 12
Compensation of Executive Officers ................................. 12
Retirement Plan .................................................... 13
Compensation Committee Report ...................................... 14
Philosophy and Objectives ......................................... 14
Executive Officer Compensation .................................... 14
Incentive Compensation Plan........................................ 14
Compensation Committee Interlocks and Insider Participation ......... 15
Performance Graph ................................................... 16
AUDIT MATTERS ........................................................ 17
Audit Committee Report ............................................. 17
Independent Auditors ................................................ 17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ...................... 19
Purchase of Common Stock ........................................... 19
Sale of Common Stock to the ESOP .................................... 19
OTHER ............................................................... 20
Section 16(a) Beneficial Ownership Reporting Compliance ............ 20
Stockholder Proposals and Nominations ............................... 20
Communication with the Board ....................................... 21
Householding of Proxy Materials ..................................... 22
Annual Report to Stockholders ...................................... 22
ANNEX A - Code of Conduct for Employees, Officers and Directors
ANNEX B - Code of Ethics for Chief Executive Officer and Chief Financial
Officer
ANNEX C - Charter of the Compensation Committee of the Board of Directors
FARMER BROS. CO. 20333 South Normandie Avenue Torrance, California 90502
PROXY STATEMENT
INFORMATION CONCERNING VOTING AND SOLICITATION
General
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board of Directors" or the "Board") of Farmer Bros. Co., a Delaware
corporation (the "Company" or "Farmer Bros."), for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held on Tuesday, December 14, 2004,
at 10:00 a.m., Pacific Standard Time, or at any continuation, postponement or
adjournment thereof, for the purposes discussed in this Proxy Statement and in
the accompanying Notice of Annual Meeting, and any business properly brought
before the Annual Meeting. Proxies are solicited to give all stockholders of
record an opportunity to vote on matters properly presented at the Annual
Meeting. The Company intends to mail this Proxy Statement and accompanying
proxy card on or about November 18, 2004 to all stockholders entitled to vote
at the Annual Meeting. The Annual Meeting will be held at the principal office
of the Company located at 20333 South Normandie Avenue, Torrance, California
90502.
Solicitation of Proxies
The mailing of proxy materials will commence on or about November 18,
2004. The Company will bear the entire cost of solicitation of proxies,
including preparation, assembly and mailing of this Proxy Statement, the proxy
and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding shares of Farmers Bros. common stock (the
"Common Stock") in their names that are beneficially owned by others to forward
to these beneficial owners. The Company may reimburse persons representing
beneficial owners for their costs of forwarding the solicitation material to
the beneficial owners. Original solicitation of proxies by mail may be
supplemented by telephone, facsimile, electronic mail or personal solicitation
by directors, officers or employees of the Company. No additional compensation
will be paid to directors, officers or employees for such services.
Voting of Shares
You are entitled to vote if you were a stockholder of record of Common
Stock as of the close of business on November 15, 2004. You may vote by
attending the Annual Meeting and voting in person. You may also vote by
completing and mailing the enclosed proxy card. Each such holder present or
represented at the meeting will be entitled to one vote for each share of
Common Stock held on all matters to be voted upon at the meeting. All shares
entitled to vote and represented by properly executed proxies received before
the polls are closed at the Annual Meeting, and not revoked or superseded, will
be voted at the Annual Meeting in accordance with the instructions indicated on
those proxies. YOUR VOTE IS IMPORTANT.
Counting of Votes
All votes will be tabulated by the inspector of election appointed for the
Annual Meeting who will separately tabulate affirmative and negative votes and
abstentions. Shares held by persons attending the Annual Meeting but not
voting, shares represented by proxies that reflect abstentions as to a
particular proposal and broker "nonvotes" will be counted as present for
purposes of determining a quorum. A broker "nonvote" occurs when a nominee
holding shares for a beneficial owner has not received instructions from the
beneficial owner and does not have discretionary authority to vote the shares.
Directors are elected by a plurality of votes cast, so abstentions and
broker nonvotes will not be counted in determining which nominees received the
largest number of votes cast. The ratification of the selection of Ernst &
Young LLP requires the affirmative vote of a majority of the shares present or
represented by proxy at the Annual Meeting and entitled to vote on the matter.
Abstentions will have the same effect as votes against such proposal and broker
nonvotes will have no effect on the result of the votes on such proposal.
Shares Outstanding and Quorum
At the close of business on November 15, 2004, 16,075,080 shares of Common
Stock were outstanding and entitled to vote. The Company has no other class of
securities outstanding. A majority of the outstanding shares of Common Stock,
represented in person or by proxy, will constitute a quorum at the Annual
Meeting.
Proxy Card and Revocation of Proxy
If you sign the proxy card but do not specify how you want your shares to
be voted, your shares will be voted by the proxy holders named in the enclosed
proxy in favor of the election of all of the director nominees and in favor of
ratification of the selection of Ernst & Young LLP as the independent auditors
for the fiscal year ending June 30, 2005. In their discretion, the proxy
holders named in the enclosed proxy are authorized to vote on any other matters
that may properly come before the Annual Meeting and at any continuation,
postponement or adjournment thereof. The Board of Directors knows of no items
of business that will be presented for consideration at the Annual Meeting
other than those described in this Proxy Statement. In addition, no
stockholder proposal or nomination was received on a timely basis in accordance
with the requirements of the Company's Bylaws, so no such matters may be
brought to a vote at the Annual Meeting.
If you vote by proxy, you may revoke that proxy at any time before it is
voted at the Annual Meeting. You may revoke your proxy by sending to the
Company's Secretary at the Company's principal office at 20333 South Normandie
Avenue, Torrance, California 90502, a written notice of revocation or a duly
executed proxy bearing a later date or by attending the Annual Meeting in
person and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
ITEM 1
ELECTION OF DIRECTORS
Under the Company's Certificate of Incorporation and Bylaws, the Board of
Directors is divided into three classes, each class consisting, as nearly as
possible, of one third of the total number of directors, with members of each
class serving for a three year term. Class I consists of three directors,
continuing in office until the Annual Meeting, and each of Class II and Class
III consists of two directors, continuing in office until the 2005 Annual
Meeting and the 2006 Annual Meeting, respectively.
Directors are elected by a plurality of the votes. As a result, the three
Class I nominees who receive the largest number of properly cast votes will be
elected as directors. Each share of Common Stock is entitled to one vote for
each of the three director nominees. Cumulative voting is not permitted. It is
the intention of the proxy holders named in the enclosed proxy to vote the
proxies received by them for the election of the nominees named below unless
authorization to do so is withheld. If any nominee should become unavailable
for election prior to the Annual Meeting, an event that currently is not
anticipated by the Board, the proxies will be voted for the election of a
substitute nominee or nominees proposed by the Nominating Committee of the
Board of Directors. Each person nominated for election has consented to be
named and has agreed to serve if elected and management has no reason to
believe that any nominee will be unable to serve.
Lewis A. Coffman, Kenneth R. Carson and John Samore, Jr. are nominees for
election to the Board. All such nominees are presently directors of the
Company. Each of the nominees would serve until his successor is elected and
qualified, or until such director's earlier death, resignation, retirement,
disqualification or removal. If elected at the Annual Meeting, Messrs. Coffman,
Carson and Samore would each be elected to a three year term expiring at the
2007 Annual Meeting.
All of the present directors were elected to their current terms by the
stockholders, with the exception of Mr. Carson who was appointed by the Board
on August 17, 2004, filling a vacancy created by the death of Roy F. Farmer
this past spring. The Board has determined that all nominees for election to
the Board at the 2004 Annual Meeting and all continuing directors are
independent under the revised listing standards of The Nasdaq Stock Market,
Inc. ("NASDAQ"), except for Messrs. Carson, Berger and Farmer.
Set forth below is biographical information for each nominee and for each
person whose term of office as a director will continue after the Annual
Meeting. Other than as disclosed in the footnotes below, none of the directors
is a director of any other publicly held company.
Nominees for Election to a Three Year Term Expiring at the 2007 Annual Meeting
Served as a Director Principal Occupation
Name Age Continuously Since For the Last Five Years
Lewis A. Coffman 85 1983 Retired (former Vice President,
(1)(2) Sales from 1981 to 1986)
Kenneth R. Carson 64 2004 Retired (former Vice President,
Sales from 1990 to August 17,
2004)
John Samore, Jr. 58 2003 Independent Consultant and CPA,
(1)(2)(3)(4) Los Angeles, California since
2002; Tax Partner with the
Accounting Firm Arthur Andersen
LLP, Los Angeles, California,
from 1971 to 2002
THE BOARD RECOMMENDS A VOTE "FOR" EACH NAMED NOMINEE.
(1) Member of the Compensation Committee
(2) Member of the Nominating Committee
(3) Member of the ESOP Administrative Committee
(4) Member of the Audit Committee
Directors Continuing in Office Until the 2005 Annual Meeting
Served as a Director Principal Occupation
Name Age Continuously Since For the Last Five Years
Guenter W. Berger 67 1980 Vice President, Production
(1)
Thomas A. Maloof 52 2003 Chief Financial Officer of
(2)(3)(4)(5) Hospitality Marketing Concepts,
LLC, Irvine, California, a
provider of loyalty membership
programs for the hospitality
and leisure industries, since
2001; President of Perinatal
Practice Management - Alfigen
The Genetics Institute, Pasadena,
California, a national genetic
testing provider, previously
Directors Continuing in Office Until the 2006 Annual Meeting
Served as a Director Principal Occupation
Name Age Continuously Since For the Last Five Years
Roy E. Farmer 52 1993 Chairman of the Board since
June 16, 2004; President, Chief
Executive Officer since 2003;
Chief Operating Officer
previously
John H. Merrell 60 2001 Partner in Accounting Firm of
(1)(2)(3)(4) Hutchinson and Bloodgood LLP,
Glendale, California
(1) Member of the ESOP Administrative Committee
(2) Member of the Compensation Committee
(3) Member of the Nominating Committee
(4) Member of the Audit Committee
(5) Mr. Maloof is also a director of eCOST.COM, INC. and PC Mall, Inc.,
publicly traded companies listed on NASDAQ.
ITEM 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee of the Board has selected Ernst & Young LLP ("EY") as
the Company's independent auditors for the fiscal year ending June 30, 2005,
and has further directed that management submit the selection of independent
auditors for ratification by the stockholders at the Annual Meeting. EY has
audited the Company's financial statements since 1997. EY has no direct
financial interest or any material indirect financial interest in the Company
or its subsidiaries. During the past three years, EY has had no connection with
the Company or its subsidiaries in the capacity of promoter, underwriter,
voting trustee, director, officer or employee. Representatives of EY are
expected to be present at the Annual Meeting. They will have the opportunity
to make a statement if they desire to do so and are expected to be available to
respond to appropriate questions.
Stockholder ratification of the selection of EY as the Company's
independent auditors is not required by the Bylaws or otherwise. However, the
Board is submitting the selection of EY to the stockholders for ratification as
a matter of corporate practice. If the stockholders fail to ratify the
selection, the Audit Committee will reconsider whether or not to retain that
firm. Even if the selection is ratified, the Audit Committee in its discretion
may direct the appointment of a different independent accounting firm at any
time during the year if the Audit Committee determines that such a change would
be in the best interests of the Company and its stockholders.
The following resolution will be presented at the Annual Meeting:
"RESOLVED, that the appointment by the Audit Committee of Ernst & Young LLP as
the Company's independent auditors for the fiscal year ending June 30, 2005 is
hereby ratified, confirmed and approved."
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy at the Annual Meeting and entitled to vote is
required to ratify the selection of EY as the Company's independent auditors.
THE BOARD RECOMMENDS A VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF ERNST &
YOUNG LLP.
SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL
OWNERS
Principal Stockholders
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of November 10, 2004 (except as
otherwise stated in the footnotes), by all persons known to management who own
beneficially more than five percent (5%) of the Common Stock as of such date:
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership(1) Class
Roy E. Farmer 6,311,282 shares(2) 39.30%
c/o Farmer Bros. Co.
20333 South Normandie Ave.
Torrance, California 90502
Farmer Bros. Co. Employee Stock 3,000,500 shares(3) 18.70%
Ownership Plan
c/o Farmer Bros. Co.
20333 South Normandie Ave.
Torrance, California 90502
Franklin Mutual Advisers, LLC 2,093,533 shares(4) 13.00%
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Attn: Bradley Takahashi
Royce & Associates, LLC 922,750 shares(5) 5.70%
1414 Avenue of the Americas
New York, New York 10019
Attn: Daniel A. O'Byrne
. (1) Information in this table regarding beneficial owners of more than five
percent (5%) of the Common Stock is based on information provided by them or
obtained from filings under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Unless otherwise indicated in the footnotes and subject
to community property laws where applicable, each of the beneficial owners of
more than five percent (5%) of the Common Stock has sole voting and/or
investment power with respect to such shares.
. (2) Includes 6,269,580 shares held by various trusts of which Mr. Farmer is
the sole trustee for the benefit of family members (including himself), 40,000
shares owned outright by Mr. Farmer and 1,702 shares beneficially owned by Mr.
Farmer through the Company's Employee Stock Ownership Plan ("ESOP"), rounded to
the nearest whole share.
. (3) There are 400,110 allocated shares and 2,600,390 shares as yet
unallocated to plan participants. Under the terms of the ESOP, unallocated
shares and allocated shares which ESOP participants have failed to vote will be
voted proportionately to the vote of allocated shares by ESOP participants.
. (4) According to a Form 4 filed with the Securities and Exchange Commission
(the "SEC") dated September 20, 2004 by Franklin Mutual Advisers, LLC
("Franklin"), Franklin on that date beneficially owned 2,093,533 shares
(13.0%). Franklin is reported to have sole voting and investment power over
these shares pursuant to certain investment advisory contracts with one or more
of Franklin's clients, which advisory clients are the record owners of the
2,093,533 shares.
. (5) According to a Form 13F filed with the SEC on November 10, 2004 by Royce
& Associates, LLC ("Royce"), Royce on that date beneficially owned 922,750
shares (5.7%). Royce is reported to have sole voting and investment power over
these shares.
Directors and Executive Officers
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of November 10, 2004 by: (i) each
director and nominee; (ii) the Company's Chief Executive Officer, and each of
its other four most highly compensated executive officers (collectively, the
"Named Executive Officers") for fiscal 2004; and (iii) all directors and
nominees, Named Executive Officers and executive officers of the Company as a
group:
Amount and Nature of Percent of
Name Beneficial Ownership Class
Guenter W. Berger 6,762(2) *
Kenneth R. Carson 4,202(3) *
Lewis A. Coffman 150 *
Roy E. Farmer 6,311,282(4) 39.3%
Michael J. King 1,432(5) *
Thomas A. Maloof - -
John H. Merrell 500(6) *
John Samore, Jr. 500(7) *
John E. Simmons 5,350(8) *
All directors and
executive officers as
a group (10 persons) 6,330,178 39.4%
* Less than 1%
. (1) Information in this table regarding directors and nominees, Named
Executive Officers and executive officers is based on information provided by
them. Unless otherwise indicated in the footnotes and subject to community
property laws where applicable, each of the directors and nominees, Named
Executive Officers and executive officers has sole voting and/or investment
power with respect to such shares.
. (2) Held in trust with voting and investment power shared by Mr. Berger and
his wife. Includes 1,702 shares beneficially owned by Mr. Berger through the
ESOP, rounded to the nearest whole share.
. (3) Includes 1,702 shares beneficially owned by Mr. Carson through the ESOP,
rounded to the nearest whole share, and 1,000 shares voted as custodian for
minor children.
. (4) Includes 6,269,580 shares held by various trusts of which Mr. Farmer is
the sole trustee for the benefit of family members (including himself), 40,000
shares owned outright by Mr. Farmer and 1,702 shares beneficially owned by Mr.
Farmer through the Company's ESOP, rounded to the nearest whole share.
. (5) Beneficially owned by Mr. King through the ESOP, rounded to the nearest
whole share.
. (6) Held in a revocable living trust with voting and investment power shared
by Mr. Merrell and his wife.
. (7) Held in a revocable living trust with voting and investment power shared
by Mr. Samore and his wife.
. (8) Includes 1,702 shares beneficially owned by Mr. Simmons through the ESOP,
rounded to the nearest whole share.
BOARD AND COMMITTEE MATTERS
Board Meetings
The Board held eleven meetings during fiscal 2004. All of the directors
attended at least 75% of the total number of meetings of the Board of Directors
and committees on which they served during fiscal 2004. Although it is
customary for all Board members to attend, the Company has no formal policy in
place with regard to Board members' attendance at its annual meetings of
stockholders. All members of the Board, with the exception of the late Roy F.
Farmer, were present at the 2003 Annual Meeting of Stockholders held on
February 23, 2004.
Corporate Governance
The Board maintains charters for select committees. In addition, the Board
has adopted a written Code of Conduct for all employees, officers and
directors, and a Code of Ethics for the Chief Executive Officer and Chief
Financial Officer that generally formalize practices already in place at the
Company. The Board has approved the Code of Conduct and Code of Ethics that
are included in this Proxy Statement as Annex A and Annex B, respectively. The
committee charters, Code of Conduct and Code of Ethics are not yet available on
the Company's website; however, the Company is in the process of updating its
website at www.farmerbroscousa.com(1) to include such information and other
corporate and financial information.
Committees
Audit Committee
The Company has a standing Audit Committee established in accordance with
applicable provisions of the Exchange Act. The Audit Committee's principal
purposes are to oversee the accounting and financial reporting processes of the
Company, the audits of the financial statements of the Company, and the
qualifications and independence of the independent accountants. The Board has
approved an amended and restated charter of the Audit Committee that was
included as Annex D to the Company's Proxy Statement for the 2003 Annual
Meeting of Stockholders. The Audit Committee carries out its responsibilities
in accordance with the terms of its charter. During fiscal 2004, the Audit
Committee met six times. John H. Merrell serves as Chairman, and Thomas A.
Maloof and John Samore, Jr. serve as members of the Audit Committee. The Board
has determined that at least one member of the Audit Committee is an "audit
committee financial expert" as defined in item 401(h)(2) of Regulation SK under
the Exchange Act. That person is John H. Merrell, the Audit Committee
Chairman. Mr. Merrell is "independent" as that term is used in Item
7(d)(3)(iv) of Schedule 14A under the Exchange Act. The Board has determined
that all Audit Committee members are independent under the revised listing
standards of NASDAQ. The Audit Committee meets the NASDAQ composition
requirements, including the requirements regarding financial literacy and
financial sophistication.
(1) This website address is not intended to function as a hyperlink, and the
information contained in the Company's website is not intended to be a part of
this Proxy Statement.
Nominating Committee
The Nominating Committee is a standing committee of the Board and is
comprised of Lewis A. Coffman, Thomas A. Maloof, John H. Merrell and John
Samore, Jr. The principal purposes of the Nominating Committee are to identify
persons qualified to become Board members and to recommend to the Board
individuals to be selected as director nominees for the next annual meeting of
stockholders or for appointment to vacancies on the Board. The Board has
determined that all Nominating Committee members are independent under the
revised listing standards of NASDAQ.
The Nominating Committee believes that its slate of nominees should
include: the Chief Executive Officer of the Company; one or more nominees with
upper management experience with the Company or in the coffee industry; three
nominees who are independent and have the requisite accounting or financial
qualifications to serve on the Audit Committee; and at least three nominees who
are independent and have executive compensation experience to serve on the
Compensation Committee. All nominees should contribute substantially to the
Board's oversight responsibilities. The Nominating Committee met once in fiscal
2004 to nominate directors for election at the 2004 Annual Meeting. The Board
has approved a charter of the Nominating Committee that was included as Annex E
to the Company's Proxy Statement for the 2003 Annual Meeting of Stockholders.
The Nominating Committee will consider recommendations for director
nominees from Company stockholders. Biographical information and contact
information for proposed candidates should be sent to Farmer Bros. Co., 20333
South Normandie Avenue, Torrance, California 90502, Attn: Secretary, subject to
the notice provisions described below under the caption "Other Stockholder
Proposals and Nominations." The Nominating Committee will evaluate candidates
proposed by stockholders using the following criteria: Board needs (see
discussion of slate of nominees above); relevant business experience; time
availability; absence of conflicts of interest; and perceived ability to
contribute to the Company's success.
Compensation Committee
The Compensation Committee is a standing committee of the Board and is
comprised of Lewis A. Coffman, John H. Merrell, Thomas A. Maloof and John
Samore, Jr. The Compensation Committee is responsible for assessing the overall
compensation structure of the Company and for administering and reviewing all
executive compensation programs, incentive compensation plans and equitybased
plans, and all other compensation and benefit programs currently in place at
the Company. Additionally, the Compensation Committee is responsible for
reviewing and evaluating the performance of the Company's executive officers
(including the Chief Executive Officer) and setting compensation for executive
officers based on such evaluations. The Board has approved a charter of the
Compensation Committee that is included in this Proxy Statement as Annex C. The
Compensation Committee met once in fiscal 2004. The Board has determined that
all Compensation Committee members are independent under the revised listing
standards of NASDAQ.
Compensation of Directors
For fiscal 2004, each nonemployee director was paid an annual retainer of
$20,000 and meeting fees of $1,500 for each Board meeting and committee meeting
(if not held in conjunction with a Board meeting) attended. For fiscal 2005,
each nonemployee director will receive an annual retainer of $25,000 and
meeting fees of $1,500 for each Board meeting and committee meeting (if not
held in conjunction with a Board meeting) attended, and the Audit Committee
Chairman will receive an additional annual retainer of $2,500. The members of
the Board are also entitled to reimbursement of travel expenses from outside
the greater Los Angeles area, in accordance with Company policy, incurred in
connection with attendance at Board and committee meetings. There are no family
relationships among any directors of the Company.
EXECUTIVE COMPENSATION
Compensation of Executive Officers
The following table sets forth summary information concerning certain
compensation awarded to, paid to, or earned by the Named Executive Officers for
all services rendered in all capacities to the Company and its subsidiaries for
the fiscal years 2002 through 2004.
SUMMARY COMPENSATION TABLE
Annual Compensation
--------------------------------------
Name and Fiscal Other Annual
All Other
Principal Position Year Salary ($)Bonus($) Compensation ($)(2)
Compensation ($)
ROY F. FARMER 2004 300,000 59,002(3)
16,349(4)
Deceased - Former Chairman 2003 850,000
181,278(4)
of the Board and CEO 2002 1,000,000 450,000
151,773(4)
ROY E. FARMER 2004 498,411 400,000
16,678(5)
President, CEO and 2003 335,585 400,000
17,082(5)
Chairman of the Board 2002 325,730 300,000
13,383(5)
GUENTER W. BERGER 2004 250,788 100,000
17,040(6)
Vice President, Production 2003 244,477 100,000
17,317(6)
2002 238,113 100,000
13,588(6)
KENNETH R. CARSON 2004 250,788 75,000
16,890(7)
Retired - Former Vice 2003 214,889 100,000
17,031(7)
President, Sales 2002 208,544 75,000
13,342(7)
MICHAEL J. KING 2004 168,967
13,850(8)
Vice President, Sales 2003 162,919
13,567(8)
2002 156,781
11,930(8)
JOHN E. SIMMONS 2004 228,555 100,000
16,598(9)
Treasurer and CFO 2003 203,472 100,000
16,833(9)
2002 188,584 75,000
13,106(9)
. (1) Awarded under the Company's Incentive Compensation Plan for the years
indicated, paid during the following year, consistent with past practice. The
awards for fiscal 2004 were based primarily upon the Company's earnings
achieved that year. (See "Compensation Committee Report" below.)
. (2) None of the Named Executive Officers, other than Roy F. Farmer, received
perquisites or other personal benefits in an amount large enough to require
reporting in this column, nor did any of them receive any other compensation
required to be reported in this column.
. (3) Legal fees paid for tax and estate planning.
. (4) Includes: (i) allocations under the ESOP (based on the closing price of
the Company's Common Stock on June 30 of each year) of $12,958, $16,595 and
$16,349 for fiscal 2002, 2003 and 2004, respectively (including mandatory
distributions of cash in lieu of shares of $1,482 and $1,909 for fiscal 2003
and 2004, respectively); and (ii) P.S. 58 costs of the two split dollar life
insurance policies purchased under Mr. Farmer's prior employment agreement
which expired in 1998 plus the dollar value of the benefit to him under the
Company's executive life insurance plan, in the amount of $138,815 and $164,683
for fiscal 2002 and 2003, respectively. No premiums were paid by the Company in
fiscal 2002 through 2004 on the split dollar policies.
. (5) Includes: (i) the dollar value of benefits under the Company's
executive life insurance plan of $282, $465 and $425; and
. (ii) allocations under the ESOP of $12,958, $16,595 and $16,349, for fiscal
2002, 2003 and 2004, respectively.
. (6) Includes: (i) the dollar value of benefits under the Company's executive
life insurance plan of $644, $700 and $630; and
. (ii) allocations under the ESOP of $12,958, $16,595 and $16,349, for fiscal
2002, 2003 and 2004, respectively.
. (7) Includes: (i) the dollar value of benefits under the Company's executive
life insurance plan of $494, $414 and $384; and
. (ii) allocations under the ESOP of $12,958, $16,595 and $16,349, for fiscal
2002, 2003 and 2004, respectively.
. (8) Includes: (i) the dollar value of benefits under the Company's executive
life insurance plan of $215, $251 and $226; and
. (ii) allocations under the ESOP of $11,715, $13,316 and $13,624, for fiscal
2002, 2003 and 2004, respectively.
. (9) Includes: (i) the dollar value of benefits under the Company's executive
life insurance plan of $202, $216 and $148; and (ii) allocations under the ESOP
of $12,958, $16,595 and $16,349, for fiscal 2002, 2003 and 2004, respectively.
Retirement Plan
The following table shows estimated annual benefits payable for the 2004
plan year under the Company's retirement plan ("Retirement Plan") upon
retirement at age 62 to persons at various average compensation levels and
years of credited service based on a straight-life annuity. The Retirement
Plan is a contributory defined benefit plan covering all nonunion Company
employees. The following figures assume that employee contributions (2% of
annual gross earnings) are made throughout the employees' first five years of
service and are not withdrawn. After five years of participation in the
Retirement Plan, employees make no further contributions. Benefits under a
predecessor plan are included in the following figures. Maximum annual combined
benefits under both plans generally cannot exceed the lesser of $205,000 or the
average of the employee's highest three years of compensation.
Credited Years of Service
Annualized Pension Compensation
for Highest 60 Consecutive Months
in Last Ten Years of Employment 20 25 30 35
$100,000 $30,000 $37,500 $45,000 $52,500
$125,000 $37,500 $46,875 $56,250 $65,625
$150,000 $45,000 $56,250 $67,500 $78,750
$170,000 $52,500 $65,625 $78,750 $91,875
$200,000 $60,000 $75,000 $90,000 $105,000
$250,000 $61,500 $76,875 $92,250 $107,625
The earnings of executive officers by which benefits in part are measured
consist of the amounts reportable under "Annual Compensation" in the Summary
Compensation Table less certain allowance items (none in 2004).
The five year average compensation for purposes of the Retirement Plan of
each of the Named Executive Officers and the number of years of service rounded
to the nearest year (as of December 31, 2003) and credited to each of them
under the Retirement Plan were as follows: Roy E. Farmer - $637,894 (27 years);
Guenter W. Berger - $332,742 (39 years); Kenneth R. Carson $286,882 (38 years);
Michael J. King $151,094 (30 years); and John E. Simmons $269,651 (22 years).
After 37 years of credited service, Roy F. Farmer began receiving maximum
benefits during fiscal 1988, which benefits ceased upon his death in 2004.
The above straight life annuity amounts are not subject to deductions for
Social Security or other offsets. Other payment options, one of which is
integrated with Social Security benefits, are available.
Compensation Committee Report(1)
The Compensation Committee Report for fiscal 2004 is as follows:
Philosophy and Objectives
The Compensation Committee believes that once base salaries of executive
officers are established at competitive levels, increases should generally
reflect cost of living changes and adjustments for market competitiveness, and
that individual performance should be rewarded by bonuses or other incentive
compensation awards. The Compensation Committee believes that most of the
executive officers will be incentivized to a greater degree by such a program.
Executive Officer Compensation
In 2003 the Compensation Committee obtained a compensation study prepared
by Valuemetrics Advisors, Inc. relating to officer and director compensation.
The report concluded that the current executive officers employed by the
Company were underpaid when compared to their counterparts at sizeadjusted peer
group companies. Consistent with the Compensation Committee's expressed
compensation policy of paying a competitive base salary, the Compensation
Committee has increased base salaries to Messrs. Berger and Simmons by three
percent (3%) for fiscal 2005. In recognition of Mr. Farmer's increased
responsibilities as Chairman and Chief Executive Officer, the Compensation
Committee has raised his base salary for fiscal 2005 to $595,000 from $498,411
for fiscal 2004. Mr. Farmer's base salary is not directly related to Company
performance. Mr. Farmer also received an award for fiscal 2004 under the
Company's Incentive Compensation Plan (see below).
Incentive Compensation Plan
The Company made awards under its Incentive Compensation Plan (the "Plan")
for fiscal 2004 to all employee executive officers. The Compensation Committee
felt that awards were justified in light of the Company's performance in fiscal
2004, although financial results were below those achieved in the prior two
years. Total awards for fiscal 2004 were $675,000, as compared to $700,000 for
fiscal 2003 and $1,000,000 for fiscal 2002.
Under the provisions of the Plan, a percentage of the Company's annual
pretax income is made available for discretionary cash or deferred awards. The
percentage varies from three percent of pretax income over $14.0 million to six
percent of pretax income of $24.0 million or more. Amounts available for awards
but not awarded are carried forward. The pool available for awards for fiscal
2004 under the Incentive Compensation Plan was in excess of $14.0 million. Of
the available pool, the Compensation Committee awarded a total of $675,000 of
which $400,000 was awarded to Roy E. Farmer, the Company's Chairman, President
and Chief Executive Officer, and a total of $275,000 was awarded to the other
executive officers. The award to Mr. Farmer was based on the Compensation
Committee's evaluation of Mr. Farmer's performance. Specific performance areas
that the Compensation Committee evaluated in fiscal 2004 included relative
financial performance and accomplishment of other strategic and operational
priorities.
(1) The material in this report is not soliciting material, is not deemed
filed with the SEC, and is not incorporated by reference in any filing of the
Company under the Securities Act of 1933, as amended (the "Securities Act"), or
the Exchange Act, whether made before or after the date of this Proxy Statement
and irrespective of any general incorporation language in such filing.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Lewis A. Coffman
Thomas A. Maloof
John H. Merrell
John Samore, Jr.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is comprised of Lewis A. Coffman, an outside
director and retired executive officer of the Company, John H. Merrell, an
outside director, Thomas A. Maloof, an outside director, and John Samore, Jr.,
an outside director.
The chart set forth below shows the value of an investment of $100 on June
30, 1999 in each of Farmer Bros. Common Stock, the Russell 2000 Index and Value
Line Food Processing Index. All values assume reinvestment of the pretax value
of dividends paid by companies included in these indices and are calculated as
of June 30 of each year. The historical stock price performance of the
Company's Common Stock shown in the performance graph below is not necessarily
indicative of future stock performance.
Comparison of Five-Year Cumulative Total Return
Farmer Bros. Co., Russell 2000 Index and Value Line Food Processing Index
(Performance Results Through 6/30/04)
Performance Graph
1999 2000 2001 2002 2003 2004
Farmer Brothers Co. 100.00 87.92 115.04 181.41 171.45 137.07
Russell 2000 Index 100.00 113.01 110.55 99.77 96.69 127.56
Food Processing 100.00 103.82 126.43 155.48 147.87 185.68
Source: Value Line, Inc. Factual material is obtained from sources believed
to be reliable, but the publisher is not responsible for any errors or
omissions contained herein.
(1) The material in this performance graph is not soliciting material, is not
deemed filed with the SEC, and is not incorporated by reference in any filing
of the Company under the Securities Act or the Exchange Act, whether made
before or after the date of this Proxy Statement and irrespective of any
general incorporation language in such filing.
AUDIT MATTERS
Audit Committee Report(1)
The Audit Committee Report for fiscal 2004 is as follows:
1. The Audit Committee has reviewed and discussed with management the Company's
audited financial statements as of and for the year ended June 30, 2004.
2. The Audit Committee has discussed with Ernst & Young LLP, the Company's
independent auditors, the matters required to be discussed by Statement of
Auditing Standards No. 61, Communication with Audit Committees, as amended, by
the Auditing Standards Board of the American Institute of Certified Public
Accountants.
3. The Audit Committee has received written disclosures and the letter from
Ernst & Young LLP required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, as amended, and has discussed
with Ernst & Young LLP their independence.
4. Based on the review and discussion referred to in paragraphs (1) through (3)
above, the Audit Committee has recommended to the Board, that the audited
financial statements referred to above be included in the Company's Annual
Report on Form 10K for the fiscal year ended June 30, 2004 filed with the SEC
on September 13, 2004.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
John H. Merrell, Chairman
Thomas A. Maloof
John Samore, Jr.
Independent Auditors
The following summarizes the fees paid to EY for the fiscal years ended
June 30, 2003 and 2004:
2004 2003
Audit Fees $244,000 $154,000
Audit Related Fees 0 0
Tax Fees 210,000 126,000
All Other Fees 0 0
Total Fees $454,000 $280,000
Audit fees include aggregate fees billed by EY for the audit of the
Company's annual financial statements and review of financial statements
included in the Company's quarterly reports on Form 10Q. The fiscal 2004 audit
fees include $28,500 to examine Company documentation related to management
reporting under Section 404 of the Sarbanes-Oxley Act of 2002. Tax fees include
aggregate fees billed by EY for tax compliance, tax advice and tax planning
services, including state tax representation and miscellaneous consulting on
federal taxation matters. For fiscal 2003 and 2004, EY provided no services
other than audit and tax services. The Audit Committee has considered the
effect of EY's providing tax services and other non-audit services on the
firm's independence.
From and after the effective date of the SEC rule requiring Audit
Committee pre-approval of all audit and permissible non-audit services provided
by independent auditors, the Audit Committee has pre-approved all audit and
permissible non-audit services provided by EY.
(1) The material in this report is not soliciting material, is not deemed
filed with the SEC, and is not incorporated by reference in any filing of the
Company under the Securities Act or the Exchange Act, whether made before or
after the date of this Proxy Statement and irrespective of any general
incorporation language in such filing.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Purchase of Common Stock(1)
On December 24, 2003, the Company purchased 4,438,450 shares of Common
Stock from Catherine Crowe (2,133,300 shares), sister of former Company
Chairman Roy F. Farmer, and trusts created for the benefit of her children
(2,305,150 shares) for the sum of approximately $110,960,000 or approximately
$25.00 per share. The closing price per share of the Common Stock on NASDAQ on
December 24, 2003 was $31.60. In connection with this purchase, litigation
filed by the Crowe family to remove Roy F. Farmer as trustee of various family
trusts was settled.
Sale of Common Stock to the ESOP(1)
On January 9, 2004, the Company sold 1,249,390 shares of Common Stock to
the Company's ESOP for $25.00 per share. The closing price per share of the
Common Stock on NASDAQ on January 9, 2004 was $30.36. The Company loaned the
ESOP $31,234,750 for such purpose. The loan bears interest at a variable rate
equal to 1.5% per annum over a 90 day commercial paper rate adjusted quarterly
and is repayable in annual installments through December 15, 2018. The Company
has agreed to make contributions to the ESOP sufficient to enable it to repay
the loan.
(1) Share numbers and per share prices have been retroactively adjusted to
reflect a ten for one stock split declared on March 4, 2004.
OTHER
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities ("Reporting Persons"), to file reports of
ownership and changes in ownership with the SEC and with NASDAQ. Reporting
Persons are required by SEC regulations to furnish the Company with copies of
all forms they file pursuant to Section 16(a). Based solely on its review of
the copies of such reports received by it, and written representations from
certain Reporting Persons that no other reports were required for those
persons, the Company believes that, during the fiscal year ended June 30, 2004,
the Reporting Persons met all applicable Section 16(a) filing requirements,
except: the ESOP and Mr. Samore each had one purchase transaction for which the
filing was late; and Franklin Mutual Advisers, LLC reported 12 purchase
transactions, for which all of the filings were late.
Stockholder Proposals and Nominations
Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present
proper proposals for inclusion in the Company's proxy statement and for
consideration at the Company's next annual meeting of stockholders. To be
eligible for inclusion in the Company's 2005 proxy statement, stockholder
proposals must be received by the Company by July 21, 2005 if the 2005 Annual
Meeting is held between November 14, 2005 and January 13, 2006, or if not,
within a reasonable time before the Company begins to print and mail its proxy
material, and must otherwise comply with Rule 14a8. While the Board will
consider stockholder proposals, the Company reserves the right to omit from the
Company's proxy statement stockholder proposals that it is not required to
include under the Exchange Act, including Rule 14a8.
In addition, the Company's Bylaws contain an advance notice provision with
respect to matters to be brought at an annual meeting of stockholders,
including nominations, and not included in the Company's proxy statement. A
stockholder who desires to nominate a director or bring any other business
before the stockholders at the 2005 Annual Meeting must notify the Company in
writing, must cause such notice to be delivered to or received by the Secretary
not less than ninety (90) days nor more than one hundred twenty (120) days
prior to the anniversary of the 2004 Annual Meeting of Stockholders, and must
comply with the other Bylaw provisions summarized below; provided, however,
that in the event that the 2005 Annual Meeting is called for a date that is not
within thirty (30) days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the tenth (10th) day following the day on which such notice of
the date of the 2005 Annual Meeting was mailed or such public disclosure of the
date of the 2005 Annual Meeting was made, whichever first occurs.
The Bylaws provide that nominations may be made by the Board, by a
committee appointed by the Board or any stockholder entitled to vote in the
election of directors generally. Stockholders must provide actual written
notice of their intent to make nomination(s) to the Secretary of the Company
within the timeframes described above. Each such notice must set forth (a) as
to each person whom the stockholder proposes to nominate for election as a
director (i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person, (iii) the
class or series and number of shares of capital stock of the Company which are
owned beneficially or of record by the person and (iv) any other information
relating to the person that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with solicitations
of proxies for election of directors pursuant to Section 14 of the Exchange
Act; and (b) as to the stockholder giving notice. (i) the name and record
address of such stockholder, (ii) the class or series and number of shares of
capital stock of the Company which are owned beneficially or of record by such
stockholder, (iii) a description of all arrangements or understandings between
such stockholder and each proposed nominee and any other person or persons
(including their names) pursuant to which the nomination(s) are to be made by
such stockholder, (iv) a representation that such stockholder intends to appear
in person or by proxy at the meeting to nominate the persons named in its
notice and (v) any other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with the solicitation of proxies for election of directors
pursuant to Section 14 of the Exchange Act. Such notice must be accompanied by
a written consent of each proposed nominee to being named as a nominee and to
serve as a director if elected.
The notice given by a stockholder regarding other business to be brought
before an annual meeting of the stockholders must set forth (a) a brief
description of the business desired to be brought before the annual meeting and
the reason for conducting such business at the annual meeting, (b) the name and
record address of such stockholder, (c) the class and number of shares of stock
of the Company which are owned beneficially or of record by such stockholder,
(d) a description of all arrangements or understandings between such
stockholder and any other persons (including their names) in connection with
the proposal and any material interest of such stockholder in such business and
(e) a representation that such stockholder intends to appear in person or by
proxy at the annual meeting to bring such business before the meeting.
You may write to the Secretary of the Company at the Company's principal
executive office, 20333 South Normandie Avenue, Torrance, California 90502, to
deliver the notices discussed above and for a copy of the relevant Bylaw
provisions regarding the requirements for making stockholder proposals and
nominating director candidates.
Communication with the Board
The Company's annual meeting of stockholders provides an opportunity each
year for stockholders to ask questions of or otherwise communicate directly
with members of the Board on appropriate matters. In addition, stockholders may
communicate in writing with any particular director, or the directors as a
group, by sending such written communication to the Secretary of the Company at
the Company's principal executive office, 20333 South Normandie Avenue,
Torrance, California 90502. Copies of written communications received at such
address will be provided to the Board or the relevant director unless such
communications are considered, in the reasonable judgment of the Secretary, to
be inappropriate for submission to the intended recipient(s). Examples of
stockholder communications that would be considered inappropriate for
submission to the Board include, without limitation, customer complaints,
solicitations, communications that do not relate directly or indirectly to the
Company's business or communications that relate to improper or irrelevant
topics.
Householding of Proxy Materials
The SEC has adopted rules that permit companies and intermediaries (such
as banks and brokers) to satisfy the delivery requirements for proxy statements
and annual reports with respect to two or more stockholders sharing the same
address by delivering a single proxy statement addressed to those stockholders.
This process, which is commonly referred to as "householding," potentially
means extra convenience for stockholders and cost savings for companies.
This year, a number of brokers with account holders who are Company
stockholders will be "householding" the Company's proxy materials. A single
proxy statement will be delivered to multiple stockholders sharing an address
unless contrary instructions have been received from the affected stockholders.
Once you have received notice from your broker that they will be "householding"
communications to your address, "householding" will continue until you are
notified otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in "householding" and would prefer to receive a
separate proxy statement and annual report, please notify your broker, direct
your written request to Mr. John E. Simmons, Chief Financial Officer, Farmer
Bros. Co., 20333 South Normandie Avenue, Torrance, California 90502, or contact
Mr. John E. Simmons by telephone at (310) 7875200. Stockholders who currently
receive multiple copies of the proxy statement at their address and would like
to request "householding" of their communications should contact their broker.
Annual Report to Stockholders
The 2004 Annual Report to Stockholders is being mailed to stockholders
with this Proxy Statement. The Annual Report is neither incorporated by
reference in this Proxy Statement nor part of the proxy soliciting material. A
copy of the Company's Form 10K, as filed with the SEC for the year ended June
30, 2004, may be obtained by persons entitled thereto, without charge, by
writing to Farmer Bros. Co., 20333 South Normandie Avenue, Torrance, California
90502, attention Chief Financial Officer.
By Order of the Board of Directors
John M. Anglin
Secretary
November 18, 2004
ANNEX A
FARMER BROS. CO. CODE OF CONDUCT
PURPOSE AND SCOPE
Farmer Bros. Co. (referred to herein as "Farmer Bros." or the "Company")
has established this Code of Conduct (this "Code") to codify the personal and
professional ethical and legal standards of conduct required of Company
employees, officers and directors, the procedures by which complaints of
violations of those standards will be investigated and the disciplinary actions
which may be taken to enforce this Code. This Code applies to all Farmer Bros.
employees, officers and directors.
POLICY
Farmer Bros.' business must be conducted in accordance with applicable
laws of the United States and other jurisdictions in which Farmer Bros.
operates and in accordance with the highest ethical standards of business
conduct. All employees, officers and directors shall adhere strictly to this
policy, without exception.
Throughout Farmer Bros. long history it has been our policy to comply with
all relevant federal, state and local laws. However, in these uncertain times,
we must also strive to demonstrate that our commitment to ethical conduct in
the affairs of our business goes far beyond the prohibitions of any particular
law. Farmer Bros.' minimum requirements for the conduct of all employees,
officers and directors follow.
This Code cannot describe every practice or convey every standard which
relates to Farmer Bros.' commitment to personal and professional, business,
ethical and legal standards. It is the responsibility of each employee,
officer and director to use his or her common sense where there is no written
guideline in this Code.
We encourage you to voice your concerns and raise any questions which you
may have related to this policy free from any fear of retaliation.
SPECIFIC OBLIGATIONS
General Business Ethics
Farmer Bros. employees, officers and directors are required and expected
to deal honestly, truthfully and fairly with others in business. False or
intentionally misleading statements or omissions of any kind should never be
made. Confidential information, either of Farmer Bros. or of any other company,
must never be misused. Farmer Bros. will not tolerate any types of deceitful
practices.
Maintenance of Company Books, Records, Documents and Accounts
Farmer Bros. corporate and business records must be maintained completely,
accurately and honestly at all times. The making of false or intentionally
misleading entries, whether related to financial results or test results, is
strictly prohibited. Farmer Bros. records serve as a basis for managing our
business and are vital in serving the needs of our customers, suppliers,
employees and others with whom we do business.
Financial Integrity and Public Reporting
Farmer Bros. records are relied upon to produce reports for our
management, stockholders, governmental agencies and the general public. In
particular, our accounting and other business and corporate records are relied
upon for preparing periodic and current reports required by the United States
Securities and Exchange Commission and The Nasdaq Stock Market, Inc. where our
common stock is traded. These reports must provide full, fair, accurate, timely
and understandable disclosures related to the results of our operations and our
financial condition.
Employees charged with collecting, analyzing and providing reports related
to this information must always strive to ensure that our financial disclosures
are accurate and transparent and that our reports contain all of the
information required by stockholders and potential investors to assess the
soundness and risks of our business and financial position.
Relationships With Vendors/Customers
Farmer Bros. vendors and customers are to be treated honestly and fairly
at all times, without exception. No payments, gifts of more than nominal value,
or any form of preferential treatment may be made to obtain or retain business,
or to realize a certain price for our products. No payments, direct or
indirect, including gifts of more than nominal value, or any form of
preferential treatment, may be solicited or accepted from any vendor, customer
or competitor of Farmer Bros. Money, gifts, repetitive or extensive
entertainment and other favors which would imply or incur an obligation must
not be accepted or given by employees, officers, directors or members of their
immediate families in connection with transactions involving Farmer Bros. For
example, acceptance of an inappropriate gift by a member of your family from
one of our suppliers could create a conflict of interest and result in a
violation of this Code attributable to you.
Acceptance of a meal, refreshments or entertainment in the normal course
of business relations is permitted and, to the extent practical, should be
reciprocated.
Farmer Bros. will promptly terminate any employee who offers or receives a
bribe or a kickback. Such conduct is illegal and strictly forbidden.
Conflicts of Interest
Farmer Bros. employees, officers and directors must avoid conflicts of
interest and avoid the mere appearance of a potential conflict of interest.
Each employee, officer and director should carefully review his or her own
situation to make sure they are free from conflicts of interest.
All decisions involving the business or non-business activities of Farmer Bros.
must be made solely in the best interests of Farmer Bros. Employees, officers
and directors must not make decisions based on personal considerations which
might affect or appear to affect their judgment. Accordingly, they must not
have, or appear to have, any direct or indirect personal interest, financial or
otherwise, in any of Farmer Bros.' competitors, suppliers or customers. They
may not buy or sell, directly or indirectly, any property, goods or services
from or to Farmer Bros. for their own benefit or for the benefit of their
families or associates. Employees, officers and directors must not accept from
others, directly or indirectly, any form of compensation for work or services
relating to their responsibilities as Farmer Bros. employees. The ownership, as
an investor, of the securities of publicly held corporations may normally be
disregarded, provided that such ownership does not trigger reporting in
accordance with federal securities laws (typically five percent (5%)).
Any employee with a question about whether a particular situation
constitutes a conflict of interest should discuss it with his or her
supervisor.
The following are examples of situations which, depending on the facts
and circumstances, might involve conflicts of interest:
. Employment by (including consulting for) or service on the board of a
competitor, customer, supplier or other service provider. Activity that
enhances or supports the position of a competitor to the detriment of Farmer
Bros. is prohibited, including employment by or service on the board of a
competitor. Employment by or service on the board of a customer or supplier or
other service provider is generally discouraged and you must seek authorization
in advance if you plan to take such action.
. Owning, directly or indirectly, a significant financial interest in any
entity that does business, seeks to do business or competes with us. In
addition to the factors described above, persons evaluating ownership for
conflicts of interest will consider the size and nature of the investment; the
nature of the relationship between the other entity and Farmer Bros.; the
employee's access to confidential information and the employee's ability to
influence Farmer Bros.' decisions. If you would like to acquire a financial
interest of that kind, you must seek approval in advance.
. Soliciting or accepting gifts, favors, loans or preferential treatment
from any person or entity that does business or seeks to do business with us.
. Soliciting contributions to any charity or for any political candidate
from any person or entity that does business or seeks to do business with us.
. Taking personal advantage of corporate opportunities or confidential
Company business information.
. Conducting our business transactions with your family member, significant
other or person who shares your household or a business in which you have a
significant financial interest. Material related-party transactions approved by
the Audit Committee and involving any executive officer or director will be
publicly disclosed as required by applicable laws and regulations.
. Exercising supervisory or other authority on behalf of Farmer Bros. over
a coworker who is also a family member. The employee's supervisor and/or a
compliance officer will consult with the human resources department to assess
the advisability of reassignment.
. Loans to, or guarantees of obligations of, employees or their family
members by Farmer Bros. could constitute an improper personal benefit to the
recipients of those loans or guarantees, depending on the facts and
circumstances. Some loans are expressly prohibited by law and others may
require approval by the Board of Directors or one of its committees.
Inside Information
Farmer Bros. employees, officers and directors who have access to "inside
information" that has not yet become publicly available about either Farmer
Bros. or publicly traded companies with which Farmer Bros. has business
dealings, may not profit financially by buying, selling or in any other way
dealing in Farmer Bros. stock or the stock of another publicly traded company
about which the person has obtained inside information.
In furtherance of this policy, Farmer Bros. employees, officers and
directors may not benefit financially or in any other way by passing on inside
information to any other person or entity. The use of inside information in
order to gain personal benefit is illegal regardless of how small the user's
profit from the transaction may be.
An easy way to determine whether information not yet publicly available is
inside information is to ask whether the dissemination of the information would
be likely to affect the market price of the stock of the company in question or
whether it would be likely to be considered as important information by
investors who are considering purchasing or selling that company's stock. If
the information makes you want to buy or sell, it is likely to have the same
effect on others.
If you possess inside information, you must refrain from trading the stock
of the company concerned, from advising anyone else to do so or from
communicating the inside information to anyone else until you know that it has
been disseminated to the public. The mere appearance of an improper transaction
should be avoided, without exception.
Company Trade Secrets
Proprietary information includes data developed or assembled on Company
time or at Company expense, that is unique in the sense that the end result is
not readily available generally without a like expenditure of time and money,
even though the basic data is known or observable. Trade secrets include all
data unique to Farmer Bros. and discoverable only by employees in certain
positions in Farmer Bros. Information in these categories is the property of
Farmer Bros., and any misapplication or misappropriation of that property may
prompt legal action by Farmer Bros.
No one should share proprietary information or trade secrets of Farmer
Bros. with anyone outside Farmer Bros., or anyone within Farmer Bros. not
authorized to receive that information. Nor should anyone solicit or accept
from anyone outside Farmer Bros. any proprietary information or trade secrets
of another company. Farmer Bros. has no interest either in receiving or using
any proprietary information or trade secrets of other companies, because to do
so would be unethical and improper.
Further, no one should make any use of materials protected by copyrights,
trademarks or patents without first bringing the matter to the attention of the
CFO's office.
Antitrust
Farmer Bros. has always been, and remains, an ardent supporter of free and
fair competition. Farmer Bros. forbids any conduct that would unfairly and
unlawfully diminish competition in the marketplace. The antitrust laws protect
and promote free and fair competition among businesses. Examples of the types
of conduct which are prohibited under the antitrust laws, and are therefore
particularly unacceptable to Farmer Bros., include but are not limited to:
Any agreements among competitors about price, or allocation of markets,
territories or customers.
Any agreements with customers not to deal with a competitor.
Restrictions on resale.
Sales conditioned on agreements to purchase other products.
Environmental, Health and Safety Laws and Regulations
Environmental, health and safety laws and regulations are very complex and
extremely important. Farmer Bros. has its own written operating procedures that
govern our commitment to comply with all applicable environmental, health and
safety laws and regulations. Compliance with these regulations is essential. In
addition, it is essential that any reports or representations made by or on
behalf of Farmer Bros. to any environmental, health or safety regulatory body
is completely accurate and correct, containing no false statements or material
omissions.
International Business
Farmer Bros. will observe the highest ethical standards in all business
transactions, including those involving foreign countries. Farmer Bros. should
not conduct business in any foreign country in a way that would be illegal or
improper in the United States.
Both the Foreign Corrupt Practices Act and the Organization for Economic
Cooperation and Development anti-bribery convention prohibit the bribing of any
foreign government official. Payments made to any foreign agent must be lawful
and required under the laws of the foreign country. Payments by or on behalf of
Farmer Bros. to foreign agents should always be strictly for services rendered
and should be reasonable in amount given the nature of those services.
Farmer Bros. will be accurate and truthful in representing international
business transactions to government agencies. All information furnished to any
customs official or to any agent which Farmer Bros. may have hired to
facilitate imports and exports must be accurate and truthful. If you conduct
business internationally on behalf of Farmer Bros., please make sure you have a
thorough understanding of these laws.
Media and Public Discussions
Farmer Bros. is a publicly traded company and is therefore required to
make certain disclosures of material information concerning our business and
financial operations. We make these disclosures through very specific and
limited channels in order to avoid inappropriate publicity and to ensure that
all persons with an interest in our Company have equal access to such
information.
All inquiries or calls from the press, financial analysts or other
individuals or entities requesting information about Farmer Bros. should be
referred to the CFO, John Simmons, or the person who in the future may be
designated to be in charge of investor relations for our Company. Farmer Bros.
has designated the CFO as our official spokesperson. Unless a specific
exception has been made by the CEO or the CFO, the CFO is the only person who
may communicate freely with the press on behalf of Farmer Bros.
Sexual Harassment
Farmer Bros. prohibits the sexual harassment of individuals in the
workplace. Sexually harassing behavior which occurs off Farmer Bros. premises
is also prohibited. Furthermore, Farmer Bros. will not tolerate retaliation
against anyone who rejects sexual advances, makes a report of harassment or
provides information or assistance in the investigation of such a report.
Interference with an Audit
It is unlawful to attempt improperly to persuade an outside auditor to
approve false financial statements. Farmer Bros. prohibits its employees,
officers and directors, and anyone acting under their direction, from coercing,
manipulating, misleading or fraudulently influencing Farmer Bros.' outside
auditor to approve materially misleading financial statements.
Reporting Procedures
Farmer Bros. employees, officers and directors who become aware of any
illegal activities or any violation of the policies contained in this Code are
required to immediately report such conduct. Farmer Bros. does not only
encourage this reporting, it is required. Farmer Bros. pledges that it will not
retaliate against person who make such reports and shall not tolerate
retaliation by any other person against any person who makes such a report.
Employees may report a violation of this Code to their supervisors,
directly to the CFO or to the following Farmer Bros. Employee Compliance
Hotline which has been established for such use:
Voice Mail Number: (818) 5026521
Voice mail messages can be sent anonymously to the Farmer Bros. Employee
Compliance Hotline; however, if you wish to preserve your anonymity, you should
not send voice mail messages using a phone located within the Company's
offices.
Employees may report questionable accounting or auditing matters directly
to the Chairperson of the Audit Committee of the Company's Board of Directors
or to the following Audit Committee Hotline which has been established for such
use:
Voice Mail Number: (866) 821-6436
Voice mail messages can be sent anonymously to the Audit Committee
Hotline; however, if you wish to preserve your anonymity, you should not send
voice mail messages using a phone located within the Company's offices.
A full and accurate report made to the CFO constitutes compliance with the
reporting requirement.
Complaint Investigation Procedures
Complaints which do not relate to accounting, internal accounting controls
or auditing will be handled by the CFO and the Company's legal counsel as
appropriate. Complaints alleging questionable accounting, internal accounting
controls and auditing matters will be submitted to the Audit Committee of the
Board of Directors. The Audit Committee may request the Company's legal counsel
to conduct an investigation, or may, in its discretion, retain its own advisors
to evaluate and/or to investigate the complaint. Complaints alleging serious
misconduct by Senior Management will be referred to the full Board of Directors
for evaluation and investigation as appropriate. All other complaints will be
investigated by the Company's legal counsel, as appropriate, and a summary of
the complaints and management follow up will be reported to the Audit Committee
periodically.
Disciplinary Sanctions
Employees who violate the policies set forth in this Code will be subject
to discipline. Disciplinary measures will vary, depending on the seriousness of
the violation and the individual circumstances of the employee. Available
disciplinary sanctions include suspension, termination and referral to public
law enforcement authorities for possible prosecution.
Administration
Managers are responsible for ensuring that their exempt employees have
read and understand this Code. Human Resources is responsible for providing
copies of the this Code and other Farmer Bros. policies in the new employee
package for all salaried exempt new hires.
SPECIAL RESPONSIBILITIES OF THE CEO AND SENIOR FINANCIAL OFFICERS
The Chief Executive Officer, the Chief Financial Officer and all other
senior financial officers are bound by the provisions set forth above relating
to ethical conduct, conflicts of interest and compliance with law. In
addition, the Chief Executive Officer, the Chief Financial Officer and all
other senior financial officers are subject to the following specific policies:
. The Chief Executive Officer and all senior financial officers are
responsible for full, fair, accurate, timely and understandable disclosure in
the periodic reports required to be filed by Farmer Bros. with the Securities
and Exchange Commission, and in all other public communications made by Farmer
Bros. Accordingly, it is the responsibility of the Chief Executive Officer and
each senior financial officer promptly to bring or cause to be brought to the
attention of the Audit Committee any material information of which he or she
may become aware that affects the disclosures made by Farmer Bros. in its
public filings and other public communications or otherwise assist the Audit
Committee in fulfilling its responsibilities as specified in the Audit
Committee's charter.
. The Chief Executive Officer and each senior financial officer shall
promptly bring or cause to be brought to the attention of the outside general
counsel and to the Audit Committee any information he or she may have
concerning any violation of this Code, including any actual or apparent
conflicts of interest between personal and professional relationships,
involving any management or other employees who have a significant role in
Farmer Bros.' financial reporting, disclosures or internal controls.
. The Chief Executive Officer and each senior financial officer shall
promptly bring or cause to be brought to the attention of the outside general
counsel and to the Audit Committee any information he or she may have
concerning evidence of a material violation of the securities or other laws,
rules or regulations applicable to Farmer Bros. and the operation if its
business, by Farmer Bros. or any agent thereof.
. The Board of Directors shall determine, or designate appropriate persons
to determine, appropriate actions to be taken in the event of violations of
this Code by the Chief Executive Officer and Farmer Bros.' senior financial
officers. Such actions shall be reasonably designed to deter wrongdoing and to
promote accountability for adherence to this Code and may include written
notices to the individual involved that the Board has determined that there has
been a violation, censure by the Board, demotion or re-assignment of the
individual involved, suspension with or without pay or benefits (as determined
by the Board), termination of the individual's employment and referral to
public law enforcement authorities for possible prosecution. In determining
what action is appropriate in a particular case, the Board of Directors or such
designee shall take into account all relevant information, including the nature
and severity of the violation, whether the violation was a single occurrence or
repeated occurrences, whether the violation appears to have been intentional or
inadvertent, whether the individual in question had been advised prior to the
violation as to the proper course of action and whether or not the individual
in question had committed other violations in the past.
Adopted: August 16, 2004
ANNEX B
CODE OF ETHICS
As the Chief Executive Officer, Chief Financial Officer or the holder of
such other position to which Farmer Bros. Co. (the "Company") has applied this
Code, I recognize that financial managers hold an important and elevated role
in corporate governance. I certify that I will adhere to the following
principles and responsibilities:
. Act with honesty and integrity, avoiding actual or apparent conflicts of
interest between personal and professional relationships;
. Provide in the Company's reports to the Securities and Exchange
Commission and other public communications information that is accurate,
objective, relevant, timely and understandable;
. Comply with applicable rules and regulations of federal, state and local
governments, and other private and public regulatory agencies, including
exchanges where the Company's securities might be listed;
. Act in good faith, responsibly, with due care, competence and diligence,
and without misrepresenting material facts or allowing my independent judgment
to be subordinated;
. Maintain the confidentiality of information acquired in the course of my
work except when authorized or otherwise legally obligated to disclose.
Confidential information acquired in the course of my work will not be used for
personal advantage;
. Share my knowledge and maintain skills important and relevant to my
constituents' needs;
. Promote ethical behavior as a responsible partner among peers in my work
environment;
. Achieve responsible use of and control over all assets and resources
employed or entrusted to me;
. Report known or suspected violations of this Code to the Audit Committee
and in accordance with all applicable rules;
. Report to the Audit Committee any actual or apparent conflicts of
interest between me and the Company and between any Company officer or director
and the Company of which I become aware; and
. I understand that I will be accountable for adhering to this Code of
Ethics and that violations will not be tolerated by the Company and will result
in consequences which may include reprimand, suspension, dismissal or legal
action.
Dated: September 26, 2003
/s/ Roy E. Farmer
Roy E. Farmer, President and Chief Executive Officer
Dated: September 26, 2003
/s/ John E. Simmons
John E. Simmons, Treasurer and Chief Financial Officer
ANNEX C
CHARTER OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Purpose
The Compensation Committee (the "Committee") of the Board of Directors
(the "Board") of Farmer Bros. Co. (the "Company") is established for the
principal purposes of discharging the Board's responsibilities related to
compensation of the Company's employees and executive officers, including
approval of chief executive officer compensation and to prepare the report on
executive compensation required to be included in the Company's annual proxy
statement. This charter specifies the scope of authority and responsibility of
the Committee.
Organization, Membership and Meetings
1. The Committee shall be comprised of at least three (3) directors, at least
two (2) of whom must meet the independence, expertise and other qualification
standards required by the federal securities laws and as may be required by the
listing standards of The Nasdaq Stock Market, Inc. or other securities exchange
upon which the Company's securities are traded.
2. Members of the Committee shall be appointed by the Board. Members may be
replaced by the Board at any time, but shall otherwise serve until a successor
has been named.
3. The Committee shall meet at least once each year, with the authority to
convene additional meetings, as circumstances require. The Committee may invite
members of management, legal counsel or others to attend meetings and to
provide relevant information.
4. The Committee may form and delegate authority to subcommittees when
appropriate, or to one or more members of the Committee.
5. The Committee may elect a Chairman of the Committee who, if elected, shall
preside at all meetings. At all meetings of the Committee, a majority of the
members of the Committee shall constitute a quorum for the transaction of
business, and the act of a majority of the members of the Committee present at
a meeting at which a quorum is in attendance shall be the act of the Committee.
Members of the Committee may participate in any meeting by means of a
conference telephone or similar communications equipment by means of which
persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting. The
Committee shall maintain written minutes of its meetings, which minutes will be
filed in the corporate minute book. Any person present at a meeting may be
appointed by the Committee as Secretary to record the minutes. The Committee
may adopt additional rules of procedure, but when a matter of procedure is not
addressed by Committee rules, the procedure specified by the Company's Bylaws
shall be followed.
Committee Authority, Responsibilities and Duties
The Committee shall have the following authority, responsibilities and
duties:
1. To review and approve on an annual basis the procedures and substances of
the Company's copmpensation policy for executive officers.
2. Evaluate at least annually the executive officers' performance in light of
established goals and objectives and, based on such evaluation, have sole
authority to determine the executive officers' annual compensation.
3. Review and make recommendations to the Board with respect to compensation
for other executive officers, incentive compensation plans and equitybased
compensation plans.
4. Review and make recommendations to the Board with respect to the
compensation of directors.
5. Administer, interpret and determine awards pursuant to the Company's
Incentive Compensation Plan, as it may be amended.
6. Conduct a performance evaluation of the Committee and review and assess
this charter's adequacy at least annually.
7. The authority to engage, and pay the fees and expenses of search firms,
consulting firms, independent counsel, advisors and experts deemed necessary,
as determined by the Committee, to permit the Committee to perform its duties
under this charter. The fees and expenses of these search firms, consulting
firms, independent counsel, advisors and experts shall be paid by the Company,
and the Company shall provide all other funding necessary for the Committee to
perform its functions and responsibilities.
8. Perform such other activities consistent with this charter, the Company's
Bylaws and governing law, as the Committee or the Board deems necessary or
appropriate.
9. Report to stockholders in the Company's annual proxy statement about
officer compensation as required by Securities and Exchange Commission rules.
10. Perform other functions as requested by the Board of Directors.
Reporting Responsibilities
The Committee shall report to the Board periodically or as required by the
nature of its duties on its activities and shall make recommendations to the
Board as the Committee decides are appropriate.
Adopted: August 16, 2004
Farmer Bros. Co.
20333 S. Normandie Ave.
Torrance, CA 90502
(310) 7875240
[LOGO]
FARMER BROS. CO.
ANNUAL MEETING OF STOCKHOLDERS
Tuesday, December 14, 2004
Time: 10:00 a.m.
FARMER BROS. CO.
CORPORATE OFFICE
20333 South Normandie Avenue
Torrance, CA 90520
Farmer Bros. Co.
20333 South Normandie Avenue
Torrance, CA 90502 Proxy
This proxy is solicited by the Board of Directors for use at the Annual Meeting
on December 14, 2004.
The shares of stock you hold in your account or in a dividend reinvestment
account will be voted as you specify below.
If no choice is specified, the proxy will be voted FOR Proposals One and Two
and AGAINST Proposal Three.
By signing the proxy, you revoke all prior proxies and appoint Roy E. Farmer,
Guenter W. Berger and Lewis A. Coffman, and each of them, with full power of
substitution, to vote your shares on the matters shown on the reverse side and
any other matters which may come before the Annual Meeting and all
adjournments.
See reverse for voting instructions.
Please detach here
The Board of Directors Recommends a Vote FOR Item One.
1. To elect three directors for a three year term expiring at the Annual
Meeting of Stockholders in 2007.
Nominees:
01 Lewis A. Coffman 02 Kenneth R. Carson 03 John
Samore, Jr.
____Vote FOR all nominees ____Vote WITHHELD for all nominees
(except as marked)
(Instructions: To withhold authority to vote for any indicated nominee, write
the number(s) of the nominee(s) in the box provided to the right.)
The Board of Directors Recommends a Vote FOR Item Two.
2. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for the fiscal year ending June 30, 2005.
____ For ___ Against ____ Abstain
In their discretion, the Proxy Holders are authorized to vote upon such other
matters as may properly come before the Annual Meeting of Stockholders and at
any continuation, postponement or adjournment thereof. The Board of Directors
at present knows of no other business to be presented at the Annual Meeting of
Stockholders.
This Proxy Card will be voted as specified or, if no choice is specified, will
be voted FOR the election of the named nominees and FOR ratification of the
selection of Ernst & Young LLP.
As of the date hereof, the undersigned hereby acknowledges receipt of the
accompanying Notice of Annual Meeting of Stockholders to be held December 14,
2004, the Proxy Statement and the Company's Annual Report to Stockholders for
the fiscal year ended June 30, 2004.
Address Change? Mark Box __
Indicate changes below:
Date:
Signature(s) in Box
Please sign exactly as your name(s) appears on Proxy. If held in joint
tenancy, all persons must sign. Trustees, administrators, etc., should include
title and authority. Corporations should provide full name of corporation and
title of authorized officer signing the proxy.