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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission file number: 001-34249
FARMER BROS. CO.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 95-0725980
(State or Other Jurisdiction of Incorporation of Organization) (I.R.S. Employer Identification No.)
1912 Farmer Brothers Drive, Northlake, Texas 76262
(Address of Principal Executive Offices; Zip Code)
682-549-6600
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, par value $1.00 per share
FARM
Nasdaq Global Select Market
None
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      NO  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      NO  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer

  Accelerated filer 
Non-accelerated filer

  Smaller reporting company 
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
YES  NO  
As of May 6, 2024, the registrant had 21,264,327 shares outstanding of its common stock, par value $1.00 per share, which is the registrant’s only class of common stock.



TABLE OF CONTENTS
 
 Page




PART I - FINANCIAL INFORMATION (UNAUDITED)
Item 1. Financial Statements
FARMER BROS. CO.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per share data)
March 31, 2024June 30, 2023
ASSETS
Current assets:
Cash and cash equivalents$5,524 $5,244 
Restricted cash175 175 
Accounts receivable, net of allowance for credit losses of $710 and $416, respectively
32,785 45,129 
Inventories54,394 49,276 
Short-term derivative assets13 68 
Prepaid expenses4,482 5,334 
Assets held for sale3,284 7,770 
Total current assets100,657 112,996 
Property, plant and equipment, net33,973 33,782 
Intangible assets, net11,783 13,493 
Right-of-use operating lease assets30,884 24,593 
Other assets1,804 2,917 
Total assets$179,101 $187,781 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable42,867 60,088 
Accrued payroll expenses10,895 10,082 
Right-of-use operating lease liabilities - current13,591 8,040 
Short-term derivative liability306 2,636 
Other current liabilities3,064 4,519 
Total current liabilities70,723 85,365 
Long-term borrowings under revolving credit facility23,300 23,021 
Accrued pension liabilities19,123 19,761 
Accrued postretirement benefits795 763 
Accrued workers’ compensation liabilities2,504 3,065 
Right-of-use operating lease liabilities - noncurrent17,850 17,157 
Other long-term liabilities1,661 537 
Total liabilities$135,956 $149,669 
Commitments and contingencies
Stockholders’ equity:
Common stock, $1.00 par value, 50,000,000 shares authorized; 21,264,327 and 20,142,973 shares issued and outstanding as of March 31, 2024 and June 30, 2023, respectively
21,266 20,144 
Additional paid-in capital79,525 77,278 
Accumulated deficit(25,764)(26,479)
Accumulated other comprehensive loss(31,882)(32,831)
Total stockholders’ equity$43,145 $38,112 
Total liabilities and stockholders’ equity$179,101 $187,781 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
1


FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except share and per share data)
 
 Three Months Ended March 31,Nine Months Ended March 31,
 2024202320242023
Net sales$85,358 $85,723 $256,698 $254,468 
Cost of goods sold51,127 56,968 155,571 167,671 
Gross profit34,231 28,755 101,127 86,797 
Selling expenses28,001 26,693 82,970 78,081 
General and administrative expenses9,581 9,424 32,066 27,239 
Net gains from sale of assets(2,883)(557)(15,806)(7,685)
Operating expenses34,699 35,560 99,230 97,635 
(Loss) income from operations(468)(6,805)1,897 (10,838)
Other (expense) income:
Interest expense(1,849)(2,227)(5,978)(6,155)
Other, net1,635 2,135 4,830 (82)
Total other expense(214)(92)(1,148)(6,237)
(Loss) income from continuing operations before taxes(682)(6,897)749 (17,075)
Income tax expense 30 32 113 
(Loss) income from continuing operations$(682)$(6,927)$717 $(17,188)
Loss from discontinued operations, net of income taxes$ $(4,496)$ $(15,216)
Net (loss) income$(682)$(11,423)$717 $(32,404)
(Loss) income from continuing operations available to common stockholders per common share, basic and diluted$(0.03)$(0.34)$0.03 $(0.88)
Loss from discontinued operations available to common stockholders per common share, basic and diluted$ $(0.23)$ $(0.78)
Net (loss) income available to common stockholders per common share, basic and diluted$(0.03)$(0.57)$0.03 $(1.66)
Weighted average common shares outstanding—basic21,104,728 19,923,577 20,743,861 19,467,022 
Weighted average common shares outstanding—diluted21,104,728 19,923,577 20,948,329 19,467,022 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

2


FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(In thousands)
Three Months Ended March 31,Nine Months Ended March 31,
2024202320242023
Net (loss) income$(682)$(11,423)$717 $(32,404)
Other comprehensive income (loss), net of taxes:
Unrealized gains (losses) on derivatives designated as cash flow hedges142 819 293 (1,993)
Losses (gains) on derivatives designated as cash flow hedges reclassified to cost of goods sold26 (331)656 (2,213)
Losses on derivative instruments undesignated as cash flow hedges reclassified to interest expense 267  833 
Total comprehensive (loss) income$(514)$(10,668)$1,666 $(35,777)

The accompanying notes are an integral part of these unaudited consolidated financial statements.



3




FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(In thousands, except share and per share data) 
Common
Shares
Common Stock
Amount
Additional
Paid-in
Capital
Accumulated DeficitAccumulated
Other
Comprehensive
Loss
Total
Balance at June 30, 202320,142,973 $20,144 $77,278 $(26,479)$(32,831)$38,112 
Net loss— — — (1,307)— (1,307)
Cash flow hedges, net of taxes— — — — (628)(628)
401(k) compensation expense, including reclassifications154,046 154 653 — — 807 
Share-based compensation— — 814 — — 814 
Issuance of common stock and stock option exercises279,464 280 (280)— —  
Balance at September 30, 202320,576,483 $20,578 $78,465 $(27,786)$(33,459)$37,798 
Net income— — — 2,704 — 2,704 
Cash flow hedges, net of taxes— — — — 1,409 1,409 
401(k) compensation expense, including reclassifications171,786 172 740 — — 912 
Share-based compensation— — 438 — — 438 
Issuance of common stock and stock option exercises45,687 45 (45)— —  
Balance at December 31, 202320,793,956 $20,795 $79,598 $(25,082)$(32,050)$43,261 
Net loss— — — (682)— (682)
Cash flow hedges, net of taxes— — — — 168 168 
401(k) compensation expense, including reclassifications269,199 270 (294)— — (24)
Share-based compensation— — 422 — — 422 
Issuance of common stock and stock option exercises201,172 201 (201)— —  
Balance at March 31, 202421,264,327 $21,266 $79,525 $(25,764)$(31,882)$43,145 


FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(In thousands, except share and per share data) 
Preferred SharesPreferred Stock AmountCommon
Shares
Common Stock
Amount
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Balance at June 30, 202214,700 $15 18,464,966 $18,466 $71,997 $52,701 $(38,431)$104,748 
Net loss— — — — — (7,374)— (7,374)
Cash flow hedges, net of taxes— — — — — — (1,521)(1,521)
401(k) compensation expense, including reclassifications— — 257,052 257 940 — — 1,197 
Share-based compensation— — — — 1,165 — — 1,165 
Issuance of common stock and stock option exercises— — 158,744 159 (159)— —  
Conversion and cancellation of preferred shares(14,700)(15)399,208 399 (1,750)— — (1,366)
Balance at September 30, 2022  19,279,970 $19,281 $72,193 $45,327 $(39,952)$96,849 
Net loss— — — — — (13,608)— (13,608)
Cash flow hedges, net of taxes— — — — — — (2,606)(2,606)
401(k) compensation expense, including reclassifications— — 264,712 265 1,059 — — 1,324 
Share-based compensation— — — — 979 — — 979 
Issuance of common stock and stock option exercises— — 137,261 137 (137)— —  
Balance at December 31, 2022  19,681,943 $19,683 $74,094 $31,719 $(42,558)$82,938 
Net loss— — — — — (11,423)— (11,423)
Cash flow hedges, net of taxes— — — — — — 755 755 
401(k) compensation expense, including reclassifications— — 271,838 272 773 — — 1,045 
Share-based compensation— — — — 528 — — 528 
Balance at March 31, 2023 $ 19,953,781 $19,955 $75,395 $20,296 $(41,803)$73,843 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
4


 
FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
 Nine Months Ended March 31,
20242023
Cash flows from operating activities:
Net income (loss)$717 $(32,404)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities
Depreciation and amortization8,675 16,725 
Gain on settlement related to Boyd's acquisition (1,917)
Net gains from sale of assets(17,019)(7,685)
Net losses on derivative instruments363 1,189 
401(k) and share-based compensation expense3,368 6,237 
Provision for credit losses551 535 
Change in operating assets and liabilities:
Accounts receivable, net13,007 (7,698)
Inventories(5,119)17,363 
Derivative (liabilities) assets, net(594)(3,751)
Other assets2,035 (510)
Accounts payable(17,203)12,101 
Accrued expenses and other (1,933)(6,468)
Net cash used in operating activities(13,152)(6,283)
Cash flows from investing activities:
Sale of business(1,214) 
Purchases of property, plant and equipment(10,267)(11,113)
Proceeds from sales of property, plant and equipment24,847 11,507 
Net cash provided by investing activities13,366 394 
Cash flows from financing activities:
Proceeds from Credit Facilities6,279 54,000 
Repayments on Credit Facilities(6,000)(50,167)
Payments of finance lease obligations(144)(144)
Payment of financing costs(69)(363)
Net cash provided by financing activities66 3,326 
Net increase in cash and cash equivalents and restricted cash280 (2,563)
Cash and cash equivalents and restricted cash at beginning of period5,419 9,994 
Cash and cash equivalents and restricted cash at end of period$5,699 $7,431 
Supplemental disclosure of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities$11,039 $3,487 
Non-cash issuance of ESOP and 401(K) common stock595 793 
Non cash additions to property, plant and equipment19 167 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

5



FARMER BROS. CO.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Introduction and Basis of Presentation
Farmer Bros. Co., a Delaware corporation (including its consolidated subsidiaries unless the context otherwise requires, the “Company,” or “Farmer Bros.”), is a leading coffee roaster, wholesaler, equipment servicer and distributor of coffee, tea and other allied products. The Company serves a wide variety of customers, from small independent restaurants and foodservice operators to large institutional buyers like restaurants, department and convenience store retailers, hotels, casinos, healthcare facilities, and gourmet coffee houses, as well as grocery chains with private brand and consumer-branded coffee and tea products, and foodservice distributors.
On June 30, 2023, the Company completed its sale of certain assets of the Company related to its direct ship and private label business, including the Company’s production facility and corporate office building in Northlake, Texas (the "Sale"). The Sale and the related direct ship and private label operations are reported in loss from discontinued operations, net of income taxes on the consolidated statements of operations. See Note 3, Discontinued Operations for more information related to the Sale and the discontinued operations. All other footnotes present results of the continuing operations.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the interim financial data have been included. Operating results for the three and nine months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2024.
The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023, filed with the Securities and Exchange Commission (the “SEC”) on September 12, 2023, as amended by the Form 10-K/A filed on October 27, 2023 (as amended, the “2023 Form 10-K”).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its direct and indirect wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. Certain amounts disclosed in fiscal 2023 have been reclassified to conform with the discontinued operations.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company reviews its estimates on an ongoing basis using currently available information. Changes in facts and circumstances may result in revised estimates and actual results may differ from those estimates.
Note 2. Summary of Significant Accounting Policies
For a detailed discussion about the Company’s significant accounting policies, see Note 2, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements in the 2023 Form 10-K.
During the three and nine months ended March 31, 2024, there were no significant updates made to the Company’s significant accounting policies.
Concentration of Credit Risk
At March 31, 2024 and June 30, 2023, the financial instruments which potentially expose the Company to concentration of credit risk consist of cash in financial institutions (in excess of federally insured limits), derivative instruments and trade receivables.
The Company does not have any credit-risk related contingent features that would require it to post additional collateral in support of its net derivative liability positions.
6

Farmer Bros. Co.
Notes to Unaudited Consolidated Financial Statements (continued)








The Company estimates its credit risk for accounts receivable at the amount recorded on the balance sheet. The accounts receivable are generally short-term and all estimated credit losses have been appropriately considered in establishing the allowance for credit losses. There were no individual customers with balances over 10% of the Company’s accounts receivable balance.
Recent Accounting Pronouncements
The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (the “FASB”). ASUs not listed below were assessed and either determined to be not applicable or expected to have minimal impact on its consolidated financial statements.
The following table provides a brief description of the recent ASUs applicable to the Company:
StandardDescriptionEffective DateEffect on the Financial Statements or Other Significant Matters
In March 2020, the FASB issued ASU No. 2020-04, “Facilitation of the Effect of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”)
The London Interbank Offered Rate (LIBOR) is being discontinued between December 2021 and June 2023. The Company has not entered into any new contracts after December 31, 2021 subject to LIBOR. With the overnight, 1-month, 3-month, 6-month and 12-month USD LIBOR rates being published through June 30, 2023, we will continue to leverage these for the existing contracts.
ASU 2020-04 provides temporary optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the transition from LIBOR to alternative reference rate.
 Issuance date of March 12, 2020 through December 31, 2024.The Company does not anticipate any material impacts on its consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740)”, Improvements to Income Tax Disclosures
The amendments in this Update address investor requests for more
transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.
Effective for
annual periods beginning after December 15, 2024.
The Company is still evaluating the impact of this standard.
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280)”, Improvements to Reportable Segment Disclosures.
The amendments in this Update are to improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses.Effective for
annual periods beginning after December 15, 2024.
The Company is still evaluating the impact of this standard.
Note 3. Discontinued Operations
On June 30, 2023, the Company completed the sale of certain assets of the Company related to its direct ship and private label business, including the Company’s production facility and corporate office building in Northlake, Texas, pursuant to that certain Asset Purchase Agreement dated as of June 6, 2023, by and between the Company and TreeHouse Foods, Inc. (the "Buyer"), as amended by that certain Amendment to the Asset Purchase Agreement, dated June 30, 2023.
The accounting requirements for reporting the Sale as a discontinued operation were met when the Sale was completed as of June 30, 2023. Accordingly, the consolidated financial statements reflect the results of the Sale as a discontinued operation. During Q2 2024, the Company recorded a net loss of $1.2 million related to a working capital adjustment in continuing operations.
The Company also entered into (i) a Transition Services Agreement with the Buyer pursuant to which the Company will provide the Buyer certain specified services on a temporary basis, (ii) a Co-Manufacturing Agreement with the Buyer pursuant to which the Company and Buyer will manufacture certain products for each other on a temporary basis and (iii) a Lease Agreement with the Buyer pursuant to which the Company will lease office and warehouse space from the Buyer on a temporary basis. The Transition Services Agreement expired on March 31, 2024.
7

Farmer Bros. Co.
Notes to Unaudited Consolidated Financial Statements (continued)








There was no activity related to the discontinued operations for the three and nine months ended March 31, 2024. The operating results of the divested operations have been reclassified as discontinued operations in the Consolidated Statements of Operations for the three and nine months ended March 31, 2023, as detailed in the table below:
(In thousands)Three Months Ended March 31, 2023Nine Months Ended March 31, 2023
Net sales$38,511 $123,838 
Cost of goods sold38,595 124,977 
Gross loss(84)(1,139)
Selling expenses1,632 5,055 
General and administrative expenses1,115 3,619 
Operating expense2,747 8,674 
Loss from discontinued operations(2,831)(9,813)
Other (expense) income:
Interest expense(1,983)(6,276)
Other, net318 873 
Total other expense(1,665)(5,403)
Loss from discontinued operations before taxes(4,496)(15,216)
Income tax benefit  
Loss from discontinued operations, net of income taxes$(4,496)$(15,216)
Interest expense for the Revolver (as defined below) was allocated on a ratio of net assets discontinued to the sum of consolidated net assets plus consolidated debt and the Term Loan (as defined below) was fully allocated to discontinued operations as it was required to be repaid in full.
Applicable Consolidated Statements of Cash Flow information related to the divested operations for the nine month period ended March 31, 2023 is detailed in the table below:
(In thousands)March 31, 2023
Cash Flows from Discontinued Operations
Net cash used in operating activities$(20,339)
Net cash used in investing activities(1,787)
Note 4. Leases
The Company has entered into leases for building facilities, vehicles and other equipment. The Company’s leases have remaining contractual terms through April 30, 2030, some of which have options to extend the lease for up to 10 years. For purposes of calculating operating lease liabilities, lease terms are deemed not to include options to extend the lease renewal until it is reasonably certain that the Company will exercise that option. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The components of lease expense are as follows:
Three Months Ended March 31,Nine Months Ended March 31,
(In thousands)2024202320242023
Operating lease expense$3,595 $1,964 $9,164 $5,910 
Finance lease expense:
Amortization of finance lease assets
41 41 123 123 
Interest on finance lease liabilities
6 8 19 27 
Total lease expense$3,642 $2,013 $9,306 $6,060 
8

Farmer Bros. Co.
Notes to Unaudited Consolidated Financial Statements (continued)








Maturities of lease liabilities are as follows:
March 31, 2024
(In thousands)Operating LeasesFinance Leases
2024$3,587 $48 
202512,237 193 
20267,796 96 
20275,524  
20284,495  
Thereafter1,740  
Total lease payments35,379 337 
Less: interest (3,938)(19)
Total lease obligations$31,441 $318 
Lease term and discount rate:
March 31, 2024June 30, 2023
Weighted-average remaining lease terms (in years):
Operating lease5.35.9
Finance lease1.82.5
Weighted-average discount rate:
Operating lease6.48 %6.20 %
Finance lease6.50 %6.50 %
Other Information:
Nine Months Ended March 31,
(In thousands)20242023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$9,289 $5,830 
Operating cash flows from finance leases19 27 
Financing cash flows from finance leases123 144 
Note 5. Derivative Instruments
Derivative Instruments Held
Coffee-Related Derivative Instruments
The Company is exposed to commodity price risk associated with its price to be fixed green coffee purchase contracts, which are described further in Note 2, “Summary of Significant Accounting Policies,” in the Notes to the Consolidated Financial Statements in the 2023 Form 10-K. The Company utilizes forward and option contracts to manage exposure to the variability in expected future cash flows from forecasted purchases of green coffee attributable to commodity price risk. Certain of these coffee-related derivative instruments utilized for risk management purposes have been designated as cash flow hedges, while other coffee-related derivative instruments have not been designated as cash flow hedges or do not qualify for hedge accounting despite hedging the Company’s future cash flows on an economic basis.
The following table summarizes the notional volumes for the coffee-related derivative instruments held by the Company at March 31, 2024 and June 30, 2023:
(In thousands)March 31, 2024June 30, 2023
Derivative instruments designated as cash flow hedges:
  Long coffee pounds 1,538 
Derivative instruments not designated as cash flow hedges:
  Long coffee pounds35 6,713 
  Short coffee pounds (4,388)
      Total35 3,863 
At March 31, 2024 and June 30, 2023 approximately 0% and 40%, respectively, of the Company's outstanding coffee-related derivative instruments were designated as cash flow hedges.
9

Farmer Bros. Co.
Notes to Unaudited Consolidated Financial Statements (continued)








Interest Rate Swap Derivative Instruments
Pursuant to an International Swap Dealers Association, Inc. (“ISDA”) Master Agreement, which was effective March 20, 2019, the Company on March 27, 2019, entered into an interest rate swap transaction utilizing a notional amount of $80.0 million, with an effective date of April 11, 2019 and a maturity date of October 11, 2023 (the “Original Rate Swap”). In December 2019, the Company amended the notional amount to $65.0 million. The Original Rate Swap was intended to manage the Company’s interest rate risk on its floating-rate indebtedness under the Company’s revolving credit facility.
The Company had designated the Original Rate Swap derivative instrument as a cash flow hedge; however, during the quarter ended September 30, 2020, the Company de-designated the Original Rate Swap derivative instruments. On May 16, 2023, the Company settled the Original Rate Swap. The net settlement of the Original Rate Swap was a $13 thousand loss.
Effect of Derivative Instruments on the Financial Statements
Balance Sheets
Fair values of derivative instruments on the Company’s consolidated balance sheets:
Derivative Instruments
Designated as Cash Flow Hedges
Derivative Instruments Not Designated as Accounting Hedges
(In thousands)March 31, 2024June 30, 2023March 31, 2024June 30, 2023
Financial Statement Location:
Short-term derivative assets:
Coffee-related derivative instruments (1)$ $4 $13 $64 
Long-term derivative assets:
    Coffee-related derivative instruments (2)  23  
Short-term derivative liabilities:
Coffee-related derivative instruments (3) 158 306 2,478 
Long-term derivative liabilities:
Coffee-related derivative instruments (4)  1,095  
________________
(1) Included in “Short-term derivative assets” on the Company's consolidated balance sheets.
(2) Included in “Other Assets” on the Company's consolidated balance sheets.
(3) Included in “Short-term derivative liabilities” on the Company's consolidated balance sheets.
(4) Included in “Other long-term liabilities” on the Company's consolidated balance sheets.
Statements of Operations
The following table presents pretax net gains and losses for the Company's derivative instruments designated as cash flow hedges, as recognized in “AOCI,” “Cost of goods sold” and “Interest expense”.
Three Months Ended March 31,Nine Months Ended March 31,Financial Statement Classification
(In thousands)2024202320242023
Net (losses) gains recognized from AOCI to earnings - Interest rate swap (1) 385 Interest Expense
Net losses reclassified from AOCI to earnings for de-designated Interest rate swap (266) (1,218)Interest Expense
Net gain (losses) recognized in AOCI - Coffee-related142 819 293 (1,993)AOCI
Net (losses) gains recognized in earnings - Coffee - related(26)331 (656)2,213 Cost of goods sold
For the three and nine months ended March 31, 2024 and 2023, there were no gains or losses recognized in earnings as a result of excluding amounts from the assessment of hedge effectiveness.
Net losses (gains) on derivative instruments in the Company’s consolidated statements of cash flows also include net (gains) losses on coffee-related derivative instruments designated as cash flow hedges reclassified to cost of goods sold from AOCI in the three and nine months ended March 31, 2024 and 2023. Gains and losses on coffee-related derivative instruments not designated as accounting hedges are included in “Other, net” in the Company’s consolidated statements of operations and in Net losses (gains) on derivative instruments in the Company’s consolidated statements of cash flows.
10

Farmer Bros. Co.
Notes to Unaudited Consolidated Financial Statements (continued)








Net gains and losses recorded in “Other, net” are as follows:
 Three Months Ended March 31,Nine Months Ended March 31,
(In thousands)2024202320242023
Net gains (losses) on coffee-related derivative instruments (1)$93 $1,424 $294 $(2,181)
Non-operating pension and other postretirement benefits915 727 2,746 2,182 
Other gains (losses), net627 (16)1,790 (83)
             Other, net $1,635 $2,135 $4,830 $(82)
___________
(1) Excludes net gains and losses on coffee-related derivative instruments designated as cash flow hedges recorded in cost of goods sold in the three and nine months ended March 31, 2024 and 2023.
Statement of Comprehensive Income (Loss)
The following table provides the balances and changes in accumulated other comprehensive income (loss) related to derivative instruments for the indicated periods:
Three Months Ended March 31,Nine Months Ended March 31,
(In thousands)2024202320242023
Accumulated other comprehensive loss (income) beginning balance$395 $2,436 $1,176 $(1,692)
Net (losses) gains recognized from AOCI to earnings - Interest rate swap (1) 385 
Net losses reclassified from AOCI to earnings for partial unwind of interest swap - Interest rate swap (266) (1,218)
Net (gains) losses recognized in AOCI - Coffee-related(142)(819)(293)1,993 
Net (losses) gains recognized in earnings - Coffee - related(26)331 (656)2,213 
Accumulated other comprehensive loss ending balance$227 $1,681 $227 $1,681 
Offsetting of Derivative Assets and Liabilities
The Company has agreements in place that allow for the financial right of offset for derivative assets and liabilities at settlement or in the event of default under the agreements. Additionally, under certain coffee derivative agreements, the Company maintains accounts with its counterparties to facilitate financial derivative transactions in support of its risk management activities.
The following table presents the Company’s net exposure from its offsetting derivative asset and liability positions, as well as cash collateral on deposit with its counterparties as of the reporting dates indicated:
(In thousands)Gross Amount Reported on Balance SheetNetting AdjustmentsCash Collateral PostedNet Exposure
March 31, 2024Derivative Assets$36 $(36)$ $ 
Derivative Liabilities1,401 (36) 1,365 
June 30, 2023Derivative Assets68 (68)  
Derivative Liabilities2,636 (68) 2,568 
Cash Flow Hedges
Changes in the fair value of the Company’s coffee-related derivative instruments designated as cash flow hedges are deferred in AOCI and subsequently reclassified into cost of goods sold in the same period or periods in which the hedged forecasted purchases affect earnings, or when it is probable that the hedged forecasted transaction will not occur by the end of the originally specified time period. Based on recorded values at March 31, 2024, $0.2 million of net gains on coffee-related derivative instruments designated as a cash flow hedge are expected to be reclassified into cost of goods sold within the next 12 months. These recorded values are based on market prices of the commodities as of March 31, 2024.
11

Farmer Bros. Co.
Notes to Unaudited Consolidated Financial Statements (continued)








Note 6. Fair Value Measurements
Assets and liabilities measured and recorded at fair value on a recurring basis were as follows: 
(In thousands)TotalLevel 1Level 2Level 3
March 31, 2024
Derivative instruments not designated as accounting hedges:
Coffee-related derivative assets (1)36  36  
Coffee-related derivative liabilities (1)1,401  1,401  
TotalLevel 1Level 2Level 3
June 30, 2023
Derivative instruments designated as cash flow hedges:
Coffee-related derivative assets (1)$4 $ $4 $ 
Coffee-related derivative liabilities (1)158  158  
Derivative instruments not designated as accounting hedges:
Coffee-related derivative assets (1)64  64  
Coffee-related derivative liabilities (1)2,478  2,478  
____________________ 
(1)The Company's coffee-related derivative instruments are traded over-the-counter and, therefore, classified as Level 2.
Note 7. Accounts Receivable, Net
(In thousands)March 31, 2024June 30, 2023
Trade receivables$30,587 $42,914 
Other receivables (1)2,908 2,631 
Allowance for credit losses(710)(416)
    Accounts receivable, net$32,785 $45,129 
__________
(1) Includes vendor rebates, transition services receivables and other non-trade receivables.
There was no material change in the allowance for credit losses during the nine months ended March 31, 2024.
Note 8. Inventories
(In thousands)March 31, 2024June 30, 2023
Coffee
   Processed$19,228 $15,860 
   Unprocessed7,146 7,409 
         Total$26,374 $23,269 
Tea and culinary products
   Processed24,018 21,418 
   Unprocessed77 63 
         Total$24,095 $21,481 
Coffee brewing equipment parts3,925 4,526 
              Total inventories$54,394 $49,276 
In addition to product cost, inventory costs include expenditures such as direct labor and certain supply, freight, warehousing, overhead variances, purchase price variance and other expenses incurred in bringing the inventory to its existing condition and location. The “Unprocessed” inventory values as stated in the above table represent the value of raw materials and the “Processed” inventory values represent all other products consisting primarily of finished goods.
12

Farmer Bros. Co.
Notes to Unaudited Consolidated Financial Statements (continued)








Note 9. Property, Plant and Equipment
(In thousands)March 31, 2024June 30, 2023
Buildings and facilities $20,548 $20,146 
Machinery, vehicles and equipment 135,387 144,473 
Capitalized software8,726 7,934 
Office furniture and equipment8,475 8,231 
$173,136 $180,784 
Accumulated depreciation(140,081)(147,920)
Land 918 918 
Property, plant and equipment, net$33,973 $33,782 
Coffee Brewing Equipment (“CBE”) and Service
Capitalized CBE included in machinery, vehicles and equipment above are:
(In thousands)March 31, 2024June 30, 2023
Coffee Brewing Equipment$92,062 $93,159 
Accumulated depreciation(65,598)(66,953)
  Coffee Brewing Equipment, net$26,464 $26,206 
Depreciation expense related to capitalized CBE and other CBE related expenses provided to customers and reported in cost of goods sold were as follows:
Three Months Ended March 31,Nine Months Ended March 31,
(In thousands)2024202320242023
Depreciation expense in COGS$1,866 $1,785 $5,450 $5,403 
CBE Costs excl. depreciation exp9,174 8,950 27,865 23,370 
Other expenses related to CBE provided to customers, such as the cost of servicing that equipment (including service employees’ salaries, cost of transportation and the cost of supplies and parts), are considered directly attributable to the generation of revenues from the customers. Therefore, these costs are included in cost of goods sold.
Note 10. Intangible Assets
The following is a summary of the Company’s amortized and unamortized intangible assets: 
March 31, 2024June 30, 2023
(In thousands)
Weighted Average Amortization Period as of March 31, 2024
Gross Carrying
Amount
Accumulated
Amortization
NetGross Carrying
Amount
Accumulated
Amortization
Net
Amortized intangible assets:
Customer relationships3.0$33,003 $(25,742)$7,261 $33,003 $(24,092)$8,911 
Recipes0.0930 (930) 930 (885)45 
Trade name/brand name0.0510 (510) 510 (495)15 
Total amortized intangible assets$34,443 $(27,182)$7,261 $34,443 $(25,472)$8,971 
Unamortized intangible assets:
Trademarks, trade names and brand name with indefinite lives$4,522 $— $4,522 $4,522 $— $4,522 
Total unamortized intangible assets$4,522 $— $4,522 $4,522 $— $4,522 
 Total intangible assets$38,965 $(27,182)$11,783 $38,965 $(25,472)$13,493 
Aggregate amortization expense for the three months ended March 31, 2024 and 2023 was $0.5 million and $0.6 million, respectively. Aggregate amortization expense for the nine months ended March 31, 2024 and 2023 was $1.7 million and $1.8 million, respectively.
13

Farmer Bros. Co.
Notes to Unaudited Consolidated Financial Statements (continued)








Note 11. Employee Benefit Plans
Single Employer Pension Plans
As of March 31, 2024, the Company has two defined benefit pension plans for certain employees, the "Farmer Bros. Plan" and the “Hourly Employees' Plan.” The Company froze benefit accruals and participation in these plans effective June 30, 2011 and October 1, 2016, respectively. After the plan freezes, participants do not accrue any benefits under the plan, and new hires are not eligible to participate in the plan.
The net periodic benefit cost for the defined benefit pension plans is as follows:
 Three Months Ended March 31,Nine Months Ended March 31,
(In thousands)2024202320242023
Interest cost$1,204 $1,156 $3,612 $3,468 
Expected return on plan assets(1,122)(1,009)(3,366)(3,027)
Amortization of net loss (1)
207 281 620 844 
Net periodic benefit cost$289 $428 $866 $1,285 
___________
(1) These amounts represent the estimated portion of the net loss in AOCI that is expected to be recognized as a component of net periodic benefit cost over the current fiscal year. 
Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost
 March 31, 2024June 30, 2023
Discount rate5.05%4.50%
Expected long-term return on plan assets7.00%6.50%
 Multiemployer Pension Plans
The Company participates in one multiemployer defined benefit pension plan that is union sponsored and collectively bargained for the benefit of certain employees subject to collective bargaining agreements, called the Western Conference of Teamsters Pension Plan ("WCTPP"). The Company makes contributions to this plan generally based on the number of hours worked by the participants in accordance with the provisions of negotiated labor contracts. The company also contributes to two defined contribution pension plans (All Other Plans) that are union sponsored and collectively bargained for the benefit of certain employees subject to collective bargaining agreements.
Contributions made by the Company to the multiemployer pension plans were as follows:
 Three Months Ended March 31,Nine Months Ended March 31,
(In thousands)2024202320242023
Contributions to WCTPP $272 $313 $944 $978 
Contributions to All Other Plans9 6 27 22 
Multiemployer Plans Other Than Pension Plans
The Company participates in nine multiemployer defined contribution plans other than pension plans that provide medical, vision, dental and disability benefits for active, union-represented employees subject to collective bargaining agreements. The plans are subject to the provisions of the Employee Retirement Income Security Act of 1974, and provide that participating employers make monthly contributions to the plans in an amount as specified in the collective bargaining agreements. Also, the plans provide that participants make self-payments to the plans, the amounts of which are negotiated through the collective bargaining process. The Company’s participation in these plans is governed by collective bargaining agreements which expire on or before March 31, 2027.
401(k) Plan
Farmer Bros. Co. 401(k) Plan (the “401(k) Plan”) is available to all eligible employees. The Company has a matching program that is available to all eligible employees who have worked more than 1,000 hours during a calendar year and were employed at the end of the calendar year. Participants in the 401(k) Plan may choose to contribute a percentage of their annual pay subject to the maximum contribution allowed by the Internal Revenue Service. The Company's matching contribution is discretionary, based on approval by the Company's Board of Directors.
Beginning in January 2022, the Company amended the 401(k) matching program, whereby the Company on a quarterly basis, will contribute, instead of cash, shares of the Company’s common stock, par value $1.00 per share (the “Common Stock”) with a value equal to 50% of any non-union employee's annual contribution to the 401(k) Plan, up to 6% of such employee's eligible income. The terms of the match are substantially the same as the safe-harbor non-elective contribution. On January 1, 2023, the Company changed its match to 100% of the first 3% each eligible employee contributes plus 50%
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Farmer Bros. Co.
Notes to Unaudited Consolidated Financial Statements (continued)








on the next 2% they contribute. Effective January 1, 2024, the Company amended the 401(k) matching program, whereby the Company on an annual basis will contribute cash for 100% of the first 3% each eligible employee contributes plus 50% on the next 2% they contribute.
The Company recorded matching contributions of $0.4 million and $0.4 million in operating expenses in the three months ended March 31, 2024 and 2023, respectively. The Company recorded matching contributions of $0.9 million and $1.5 million in operating expenses in the nine months ended March 31, 2024 and 2023, respectively.
Note 12. Debt Obligations
The following table summarizes the Company’s debt obligations: