TORRANCE, Calif., Sept. 11, 2013 (GLOBE NEWSWIRE) -- Farmer Bros. Co. (Nasdaq:FARM) (the "Company"), a manufacturer, wholesaler and distributor of coffee, tea and culinary products, announced today that the Audit Committee of its Board of Directors, based on the recommendation of management, and after discussion with the Company's independent registered public accounting firm, Ernst & Young LLP ("Ernst & Young"), determined that the Company's consolidated financial statements for the fiscal years ended June 30, 2012, 2011 and 2010 and the quarters therein, as well as the quarters ended March 31, 2013, December 31, 2012 and September 30, 2012 (the "Relevant Periods"), should no longer be relied upon because of certain errors in the calculation of the Company's postretirement benefit obligations. Similarly, related press releases, Ernst & Young's reports on the consolidated financial statements, including the effectiveness of internal control over financial reporting, and stockholder communications describing the Company's consolidated financial statements for the Relevant Periods, should no longer be relied upon.
In connection with the preparation, review and audit of the Company's consolidated financial statements required to be included in its Annual Report on Form 10-K for the fiscal year ended June 30, 2013 (the "2013 Form 10-K"), the Company identified the following errors. The amounts provided below are preliminary estimates and are subject to adjustment based on further review by the Company and Ernst & Young.
- Postretirement Benefit Obligations Related to Retiree Medical Plan
In fiscal 2011, the Company amended its retiree medical plan to increase the minimum annual premium contribution required by participants. The increased participant contributions and a resulting reduction in the number of participants electing to maintain this benefit coverage were not appropriately considered in the Company's actuarial estimate of its postretirement benefit liability recorded in its consolidated financial statements for the fiscal years ended June 30, 2012 and 2011. This resulted in the Company overstating the amount of accrued postretirement benefits in its consolidated financial statements as of June 30, 2012 and 2011 by approximately $21 million and $11 million, respectively.
- Postretirement Benefit Obligations Related to Death Benefit
The Company did not timely adopt certain accounting guidance applicable to a death benefit provided to certain of its employees and retirees. As a result, the Company failed to record a liability equal to the present value of the death benefit, which resulted in an understatement of the amount of the Company's accrued postretirement benefits in its consolidated financial statements as of June 30, 2012, 2011 and 2010 by approximately $8 million, $6 million and $6 million, respectively.
- Cash Surrender Value ("CSV")
In addition, the Company failed to properly record the cash surrender value of the life insurance policies that it purchased to fund the death benefit, resulting in the Company understating the amount of its total assets in its consolidated financial statements as of June 30, 2012, 2011 and 2010 by approximately $2 million, $2 million and $3 million, respectively.The Company has also identified certain immaterial adjustments primarily relating to inventory and the reclassification of certain pension liabilities from current to long-term in each of the fiscal years ended June 30, 2012, 2011 and 2010, which are expected to be reflected in the restated consolidated financial statements for the Relevant Periods.