Disclosures

Farmer Brothers Co.

I, Kara Anderson , certify that this report reflects my personal beliefs about this company and that no portion of my compensation was, is or will be directly or indirectly related to the specific recommendations or views discussed in this report.

Disclosure

  • B. Riley & Co., LLC, or any of its affiliates, does and seeks to do business with companies covered in its research reports.
  • A portion of this analyst’s compensation is based on the sales, trading and investment banking activities of B. Riley & Co., LLC.
  • B. Riley & Co., LLC makes a market in the securities of the company covered in this report.
  • This report may be distributed by FBR Capital Markets & Co., an affiliate of B. Riley & Co., LLC and as such constitutes third party research. For additional information, please visit http://www.fbr.com/disclosures.
Disclosure Chart

Initiated Coverage on 09/24/14 with a Buy Rating and Price Target of $31.00

Ratings Distribution as of August 21, 2017
Rating Number of Companies Percent of Total
Buy 145 74.4%
Neutral 49 25.1%
Sell 1 0.5%
Total 195 100%
% with Investment Banking Relationships
Rating Number of Companies Percent of Total
Buy 23 88.5%
Neutral 3 11.5%
Sell 0 0.0%
Total 26 100%

Explanation of B. Riley & Co. LLC's Rating System

  • Buy: We generally expect “Buy” rated stocks to have an above-average risk-adjusted total return over the next 12 months. We recommend that investors buy the securities at the current valuation.
  • Neutral: We generally believe “Neutral” rated stocks will have an average risk-adjusted total return over the next 12 months.
  • Sell: We generally expect “Sell” rated stocks to have a below-average risk-adjusted total return over the next 12 months. We recommend that investors reduce their positions until the valuation or fundamentals become more compelling.

Risks and Considerations

  • Commodity Costs - Should commodity prices for the Company's resources increase, the Company's operating margins could be harmed.
  • Competition - The industry is highly competitive and many of the Company's competitors have greater resources.
  • Economy - Macro-economic issues such as increasing oil and gas prices and a possible drop in consumer spending could have a negative impact on the Company's business.
  • Financial Results - The Company has a history of operating losses. Although the Company is focused on achieving profitability, there are no assurances that the Company will meet its goals or be able to sustain profitability in future periods.
  • Freight costs - Increases in freight costs caused by high gasoline prices or other factors could cause margin erosion or lost market share if the Company raises prices.
  • Insider Ownership - Directors and executive officers collectively own a significant percentage of the Company. While this may align interest with other shareholders, investors might view a future sale by any director or officer negatively.
  • Inventory risk - Depending on market conditions, the Company's gross margins could come under pressure if market prices quickly fall within a three to five week time frame.
  • Labor - The Company has a large number of full-time employees and is party to several collective bargaining agreements that cover some of these employees. Additionally, the Company is facing rising labor costs.
  • Pension Fund Liability - The Company's pension is currently under funded due to lower than expected investment returns over the last three years. The amount the pension is under funded by will fluctuate from period to period depending on the rate of the Company's investment return.
  • Pricing Pressure - The Company's business could be affected by pricing pressure within the market.
  • Product Concentration - A large percentage of the Company's revenues are from one line of products. Any weakness in those sales would have a significant negative impact on the Company's results.
  • General Industry - The Company could miss our estimates and/or their financial guidance.
  • Further Potential Risks - See the Company's SEC filings, particularly its 10-K filing, for a discussion of further potential risks.