| 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. | ☑ | |||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES ☐NO ☑
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference toof the registrant as of December 31, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, was $96.3 million based upon the closing price at whichreported for such date on the Farmer Bros. Co. common stock was sold on December 31, 2019 was $119.7 million.Nasdaq Global Select Market.
As of SeptemberOctober 1, 20202022, the registrant had 17,426,49719,279,970 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
| PART III | |||
| ITEM 10. | 1 | ||
| ITEM 11. | 9 | ||
| ITEM 12. | 33 | ||
| ITEM 13. | 36 | ||
| ITEM 14. | 38 | ||
| PART IV | |||
| ITEM 15. | 40 | ||
| 45 | |||
EXPLANATORY NOTE
Farmer Bros. Co. (“Farmer Bros.” or the “Company”) is filing this Amendment No. 1 on Form 10-K/A (this “Amendment”) to its Form 10-K for the fiscal year ended June 30, 2022, which was filed with the Securities and Exchange Commission (the “SEC”) on September 2, 2022 (the “Original Filing”).
This Amendment is being filed for the purpose of providing the information required by Items 10 through 14 of Part III of Form 10-K. This information was previously omitted from the Original Filing in reliance on General Instruction G(3) to Form 10-K, which permits the above-referenced Items to be incorporated in the Annual Report on Form 10-K by reference from a definitive proxy statement, if such definitive proxy statement is filed no later than 120 days after the last day of the Company’s fiscal year on June 30, 2022.
In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the cover page to the Original Filing and Items 10 through 14 of Part III of the Original Filing are hereby amended and restated in their entirety. In addition, pursuant to Rule 12b-15 under the Exchange Act, the Company is including Item 15 of Part IV, solely to file the certifications required under Section 302 of the Sarbanes-Oxley Act of 2002 with this Amendment.
Except as described above, no other changes have been made to the Original Filing. This Amendment does not affect any other section of the Original Filing not otherwise discussed herein and continues to speak as of the date of the Original Filing. The Company has not updated the disclosures contained in the Original Filing to reflect any events that occurred subsequent to the date of the Original Filing. Accordingly, this Amendment should be read in conjunction with the Company’s other filings made with the SEC subsequent to the filing of the Original Filing.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This reportAmendment and other documents we file with the SEC contain forward-looking statements“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act, that are based on current expectations, estimates, forecasts and projections about us, our future performance, our financial condition, our products, our business strategy, our beliefs and our management’s assumptions. In addition, we, or others on our behalf, may make forward-looking statements in press releases or written statements, or in our communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls and conference calls. These forward-looking statements can be identified by the use of words like “anticipates,” “estimates,” “projects,” “expects,” “plans,” “believes,” “intends,” “will,” “could,” “may,” “assumes” and other words of similar meaning. These statements are based on management’s beliefs, assumptions, estimates and observations of future events based on information available to our management at the time the statements are made and include any statements that do not relate to any historical or current fact. These statements are not guarantees of future performance and they involve certain risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed, implied or forecast by our forward-looking statements due in part to the risks, uncertainties and assumptions set forth below in Part I, Item 1.A., Risk Factors as well as Part II, Item 7, Management’s Discussion and Analysis of this report,Financial Condition and Results of Operations, of the Original Filing, as well as those discussed elsewhere in this reportthe Original Filing and other factors described from time to time in our filings with the SEC.
Factors that could cause actual results to differ materially from those in forward-looking statements include, but are not limited to, disruption to our business and customers from the COVID-19 pandemic (including the effects of emerging and novel variants of the virus and any virus containment measures such as stay-at-home orders or government mandates) and severe winter weather, levels of consumer confidence in national and local economic business conditions, the duration and magnitude of the pandemic’s impact on labor conditions, the success of our strategy to recover from the effects of the pandemic, the success of our turnaround strategy, the impact of capital improvement projects, the adequacy and availability of capital resources to fund our existing and planned business operations and our capital expenditure requirements, the relative effectiveness of compensation-based employee incentives in causing improvements in our performance, the capacity to meet the demands of our large national account customers, the extent of execution of plans for the growth of our business and achievement of financial metrics related to those plans, our success in retaining and/or attracting qualified employees, our success in adapting to technology and new commerce channels, the effect of the capital markets as well as other external factors on stockholder value, fluctuations in availability and cost of green coffee, competition, organizational changes, the effectiveness of our hedging strategies in reducing price and interest rate risk, changes in consumer preferences, our ability to achieve sustainability goals in ways that do not materially impair profitability, changes in the strength of the economy, including any effects from inflation, business conditions in the coffee industry and food industry in general, our continued success in attracting new customers, variances from budgeted sales mix and growth rates, weather and special or unusual events, as well as other risks described in Amendment and other factors described from time to time in our filings with the SEC.
Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results. Any or all of the forward-looking statements contained in this Annual Report on Form 10-KAmendment and any other public statement made by us, including by our management, may turn out to be incorrect. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise, except as required under federal securities laws and the rules and regulations of the SEC.
PART IIII
| Item | |
At the 2019 Annual Meeting of Stockholders, stockholders approved the proposal to amend and restate the Company’s Certificate of Incorporation to provide for the phased-in declassification of the Board of Directors. Prior to that time, the Board of Directors was 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. Each year only one class of directors was subject to a stockholder vote. Class I consisted of three directors whose term of office will expire at the 2022 Annual Meeting, Class II consisted of two directors whose term of office expired at the 2020 Annual Meeting, and Class III consisted of one director, whose term of office expired at the 2021 Annual Meeting of Stockholders. Beginning at the 2020 Annual Meeting, any director elected to the Board shall be for a one-year term.
The authorized number of directors is set forth in the Company’s Certificate of Incorporation and shall consist of not less than five nor more than nine members, the exact number of which shall be fixed from time to time by resolution of the Board of Directors. The authorized number of directors is currently eight. In no event shall a decrease in the number of directors remove or shorten the term of any incumbent director. Any vacancy on the Board of Directors that results from an increase in the number of directors may be filled by a majority of the directors then in office, provided that a quorum is present, and any other vacancy occurring on the Board of Directors may be filled by a majority of the directors then in office, even if less than a quorum, or by the sole remaining director. Any director elected to fill a vacancy not resulting from an increase in the number of directors will have the same remaining term as that of his or her predecessor.
All of the directors were elected to their current terms by the stockholders. There are no family relationships among any directors or executive officers of the Company. Except as disclosed below, none of the directors are a director of any other publicly held company.
Set forth below are the biographies of each Director, including their ages and positions and offices held with the Company.
Stacy Loretz-Congdon, age 63, has served on our Board since 2018. She retired at the end of 2016 after 26 years of service at Core-Mark, one of the largest marketers of fresh and foodservice operatorsbroad-line supply solutions to large institutional buyers like restaurant, departmentthe convenience retail industry in North America, where she served in various capacities, including as Senior Vice President, Chief Financial Officer and convenience store chains, hotels, casinos, healthcare facilities,Assistant Secretary from December 2006 to May 2016 and gourmet coffee houses,Executive Advisor from May 2016 through December 2016. From January 2003 to December 2006, Ms. Loretz-Congdon served as Core-Mark’s Vice President of Finance and Treasurer and from November 1999 to January 2003 served as Core-Mark’s Corporate Treasurer. Ms. Loretz-Congdon joined Core-Mark in 1990. Ms. Loretz-Congdon’s experience at Core-Mark included oversight of all finance functions, including all corporate finance disciplines, strategy execution, risk mitigation, investor relations, as well as grocery chainsinvolvement with private brandbenefits, executive compensation and consumer-branded coffeetechnology initiatives. During her tenure as Senior Vice President and tea products,Chief Financial Officer, Ms. Loretz-Congdon served on the Information Technology Steering Committee and foodservice distributors. With a robust product line, including organic, Direct Trade, Project D.I.R.E.C.T.® and other sustainably-produced coffees, iced and hot teas, cappuccino, spices, and baking/biscuit mixes, among others, we offer a comprehensive approach to our customers by providing not only a breadth of high-quality products, but also value added services such as market insight, beverage planning, and equipment placement and service. We were founded in 1912, incorporated in California in 1923, and reincorporated in Delaware in 2004. Our principal office and product development lab is located in Northlake, Texas ("Northlake facility"). We operate in one business segment.
D. Deverl Maserang II, age 59, is President and Chief Executive Officer of the Company, since September 2019. Prior to joining the Company, from 2017 to 2019, Mr. Maserang served as they arePresident and Chief Executive Officer of Earthbound Farm Organic, a global leader in use and/organic food and farming. From 2016 to 2017, Mr. Maserang served as Managing Partner of TADD Holdings, a business advisory firm. From 2013 to 2016, Mr. Maserang was Executive Vice President Global Supply Chain for Starbucks Corporation, a global coffee roaster and retailer, where he was responsible for end-to-end supply chain operations globally spanning manufacturing, engineering, procurement, distribution, planning, transportation, inventory management and worldwide sourcing. Prior to that, he held leadership roles at Chiquita Brands International, Peak Management Group, FreedomPay, Installation Included, Pepsi Bottling Group and United Parcel Service. Mr. Maserang received his Bachelor of Science degree from Texas Tech University.
Christopher P. Mottern, age 78, has served as Chairman of the Board of Directors since January 2020. He acted as interim President and Chief Executive Officer of Farmer Bros. Co. from May through October 2019. Prior to joining Farmer Bros. Co. in his interim role, Mr. Mottern was an independent business consultant. He served as President and Chief Executive Officer of Peet’s Coffee & Tea, Inc., a specialty coffee and tea company, from 1997 to 2002 and a director of Peet’s Coffee & Tea, Inc., from 1997 through 2004. From 1992 to 1996, Mr. Mottern served as President of The Heublein Wines Group, a manufacturer and marketer of wines, now part of Diageo plc, a multinational alcoholic beverage company. From 1986 through 1991, he served as President and Chief Executive Officer of Capri Sun, Inc., one of the largest single-service juice drink manufacturers in the United States. He has served as a director, including lead director, and member of the finance committee, of a number of private companies. Mr. Mottern received his undergraduate degree in Accounting from the University of Connecticut.
Alfred Poe, age 73, has served on our Board of Directors since 2020 and is currently the Chief Executive Officer of AJA Restaurant Corp., serving as such since 1999. From 1997 to 2002, he was the Chief Executive Officer of Superior Nutrition Corporation, a provider of nutrition products. He was Chairman of the Board and Chief Executive Officer of MenuDirect Corporation from 1997 to 1999. Mr. Poe was a Corporate Vice President of Campbell Soup Company from 1991 through 1996. From 1993 through 1996, he was the President of the Campbell’s Meal Enhancement Group. From 1982 to 1991, Mr. Poe held various positions, including Vice President, Brands Director and Commercial Director with Mars, Inc. Mr. Poe currently serves on the Board of Directors of B&G, Foods, Inc., a manufacturer and distributor of shelf-stable food and household products across the United States, Canada and Puerto Rico and a publicly traded company listed on the New York Stock Exchange, since 1997. Mr. Poe has previously served on the boards of directors of Centerplate, Inc. and State Street Bank.
John D. Robinson, age 63, has served on our Board since 2021 and is currently an operating partner focusing on food and beverage opportunities at Sequel Holdings, a private equity firm, serving in such role since 2017. Currently, Mr. Robinson serves as CEO of Chairmans Foods, a Sequel portfolio company. Prior to joining Sequel, from 2009 to 2015, Mr. Robinson was Managing Partner for Rutherford Wine Studios LLC, dba The Ranch Winery, a wine co-packing and processing facility in Napa Valley, CA, which was sold to E&J Gallo Winery in 2015. Prior to that, he held leadership roles at Morningstar Foods, Dean Foods Company and Robinson Dairy. Mr. Robinson received a Bachelor of Science in Business Administration from the University of Arizona.
Waheed Zaman, age 62, has served on our Board since September 2021 and is currently the Chief Executive Officer of W&A Consulting, a consulting and advisory firm, where he advises senior executives on transformational change and consults with leaders and teams on personal success and leadership practices to ensure organizational effectiveness and strategy execution, serving as such since April 2017. He also serves as Advisor to Thematiks, a business research company. From April 2013 to March 2017, he was the Senior Vice President, Chief Corporate Strategy & Administrative Officer at the Hershey Company, a food manufacturer. Prior to that, he held leadership roles at Chiquita Brands International and Procter & Gamble. Mr. Zaman holds a bachelor’s degree with a double major in Computer Science and Policy Studies from Dartmouth College.
Executive Officers
The following table sets forth the executive officers of the Company as of the date hereof. At each annual meeting of the Board of Directors, the Board of Directors formally re-appoints the executive officers, and all executive officers serve at the pleasure of the Board of Directors. No executive officer has any family relationship with any director or nominee, or any other executive officer.
| Name | Age | Title | Executive Officer Since | |||
D. Deverl Maserang II(1) | 59 | President and Chief Executive Officer | 2019 | |||
| Scott R. Drake | 53 | Chief Financial Officer | 2020 | |||
| Amber D. Jefferson | 51 | Chief Human Resources Officer | 2021 | |||
| Ruben E. Inofuentes | 55 | Chief Supply Chain Officer | 2019 | |||
| Maurice S.J. Moragne | 58 | Chief Sales Officer | 2020 | |||
| Jared Vitemb | 39 | Vice President, General Counsel, Chief Compliance Officer and Secretary | 2022 |
(1) For D. Deverl Maserang, II, please see his biography under “Directors” above.
Scott R. Drakejoined the Company as Chief Financial Officer in March 2020. As Chief Financial Officer, Mr. Drake’s current responsibilities include overseeing the Finance and Accounting functions. Prior to joining the Company, Mr. Drake served as Senior Vice President of Finance and Treasurer of GameStop Corp., an omnichannel video game retailer, from July 2015 to March 2020, where he was responsible for financial planning and analysis, treasury, risk management and events/travel functions. From 2001 through 2015, Mr. Drake held various senior management positions with 7-Eleven, Inc., an international convenience store chain, most recently as their registrations are properly maintainedVice President of Finance, Strategy and they have not been foundCommunications. Prior to have become generic. Registrations2001, he held finance and accounting positions with Arthur Andersen, La Madeleine French Bakery and Café, Coca-Cola Enterprises and Coopers & Lybrand. Mr. Drake received a B.B.A. in Finance and Accounting and an M.B.A. in Corporate Finance from Texas A&M University. He is a Certified Public Accountant.
Amber D. Jeffersonjoined the Company as Chief Human Resources Officer in October 2021. As Chief Human Resources Officer, Ms. Jefferson’s responsibilities include overseeing the Human Resources, Risk Management and Safety functions. Prior to joining the Company, Ms. Jefferson served as Head of trademarks can also generally be renewed indefinitelyHuman Resources KNA Sales & e-Commerce at the Kellogg Company, a global consumer packaged goods company specializing in cereal, cookies, crackers, natural organic and salty snacks production from October 2012 to October 2021, where she was responsible for leading all facets of talent strategies, organizational effectiveness, leadership & capability development, and day-to-day HR operations across the North America region. From 2012 through 2018, Ms. Jefferson held HR leadership roles across various divisions within Kellogg including their Away From Home and Walmart business. Prior to 2012, she held leadership roles with Brinker International, Sabre, Texas Health Resources, The American Lung Association and The American Red Cross. Ms. Jefferson received a Bachelor of Science degree from Texas A&M University and a Master of Science in Healthcare Administration and a Master of Business Administration from Texas Woman’s University.
Ruben E. Inofuentesjoined the Company as longChief Supply Chain Officer in November 2019. As Chief Supply Officer, Mr. Inofuentes’ current responsibilities include overseeing the operations, manufacturing, logistics, procurement, coffee brewing equipment, research and development, green coffee buying, sustainability, supply and demand planning and quality functions. Prior to joining the Company, Mr. Inofuentes served as the trademarks areChief Operations Officer of JR286, Inc. (“JR286”), a sports equipment and accessories company from 2005 to 2019, where he was responsible for developing platforms to enable aggressive growth plans and market strategies. Prior to joining JR286, from 2003 to 2005, Mr. Inofuentes was the Vice President of Supply Chain Services for Advocare International, LP, a dietary supplement company. He was responsible for procurement, inventory planning, manufacturing, transportation, logistics, and information technology. Mr. Inofuentes received his undergraduate degree in use. In addition, we own numerous copyrights, registered and unregistered, registered domain names, and proprietary trade secrets, technology, know-how, and other proprietary rights that are not registered.Industrial Engineering from Iowa State University.
3
Maurice S. J. Moragnejoined the warmer months when coffee consumption ordinarily decreases. Additionally, we usually experience an increaseCompany as Chief Sales Officer in sales during the summer and early fall months from seasonal businesses located in vacation areas and from grocery retailers ramping up inventory for the winter selling season. BecauseJune 2020. As Chief Sales Officer, Mr. Moragne’s current responsibilities include oversight of the seasonalitycompany’s sales and marketing organizations. Prior to joining the Company, Mr. Moragne served as Chief Executive Officer, Chief Sales Officer and Co-Founder of our business, resultsInternational Agriculture Group LLC, an ingredient technology company, from August 2015 to June 2020, where he was responsible for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.
Jared Vitembjoined the Company as Vice President, General Counsel, Chief Compliance Officer and Secretary in March 2022. Mr. Vitemb’s current responsibilities include overseeing the Company’s Legal and Compliance functions. Prior to joining the Company, Mr. Vitemb held various positions with FTS International Services, Inc., an oilfield services company, from September 2017 to March 2022, where he last served as Senior Vice President, General Counsel, Chief Compliance Officer and Secretary. From March 2014 to September 2017, Mr. Vitemb worked as an in-house attorney for Dean Foods Company, a dairy processing and distribution centerscompany. Prior to 2014, he was in Northlake, Illinois;private practice, primarily with the law firm of Gardere Wynne Sewell LLP in Dallas, Texas. Mr. Vitemb received a B.A. in History and Moonachie, New Jersey. Our products reach our customers primarily ina J.D. from The University of Texas.
Corporate Governance
Board Meeting and Attendance
The Board of Directors held seven meetings during the following ways: through our nationwide DSD network of 186 delivery routes and 97 branch warehouses as of June 30, 2020, or direct-shipped via common carriers or third-party distributors. DSD sales are primarily made “off-truck” to our customers at their places of business. We operate a large fleet of trucks and other vehicles to distribute and deliver our products through our DSD network, and we rely on 3PL service providers for our long-haul distribution. We maintain inventory levels at each branch warehouse to promote minimal interruption in supply. We also sell coffee and tea products directly to consumers through our websites and sell certain products at retail and through foodservice distributors.
Charters; Code of Conduct and accelerated our roastery directEthics; Corporate Governance Guidelines
The Board of Directors maintains charters for its committees, including the Audit Committee, Compensation Committee, Nominating and e-commerce initiatives. SomeCorporate Governance Committee, and the ad hoc Technology Committee. In addition, the Board of Directors has adopted a written Code of Conduct and Ethics for all employees, officers and directors. The Board of Directors maintains Corporate Governance Guidelines as a framework to promote the functioning of the Board and its committees and to set forth a common set of expectations as to how the Board should perform its functions. Current standing committee charters, the Code of Conduct and Ethics and the Corporate Governance Guidelines are available on the Company’s website at www.farmerbros.com. Information contained on the website is not incorporated by reference in, or considered part of, this Amendment.
Board Committees
The Board of Directors has three standing committees: the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee. Summary information about each of these new concepts willcommittees is set forth below.
Additionally, from time to time, the Board of Directors has established ad hoc or other committees, on an interim basis, to assist the Board with its consideration of specific matters, and it expects to continue to do so as it may determine to be a focusprudent and advisable in the future as we execute our 5E strategy.
The coffee industryAudit Committee is highly competitive, includinga standing committee of the Board of Directors established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee’s principal purposes are to oversee, on behalf of the Board, the accounting and financial reporting processes of the Company and the audit of the Company’s financial statements. As described in its charter, available on the Company’s website under Corporate Governance - Committee Charters, the Audit Committee’s responsibilities include assisting the Board of Directors in overseeing: (i) the integrity of the Company’s financial statements; (ii) the independent auditor’s qualifications and independence; (iii) the performance of the Company’s independent auditor and internal audit function; (iv) the Company’s compliance with legal and regulatory requirements relating to accounting and financial reporting matters; (v) the Company’s system of disclosure controls and procedures, internal control over financial reporting that management has established, and compliance with ethical standards adopted by the Company; and (vi) the Company’s framework and guidelines with respect to price, product quality, service, convenience, technologyrisk assessment and innovation,risk management. The Audit Committee is directly and competition could become increasingly more intense duesolely responsible for the appointment, dismissal, compensation, retention and oversight of the work of any independent auditor engaged by the Company for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company. The independent auditor reports directly to the relatively low barriers to entry. We face competition from many sources,Audit Committee.
During fiscal 2022, the Audit Committee held four regular meetings and three special meetings. Allison M. Boersma currently serves as Chair, and Stacy Loretz-Congdon, John D. Robinson and Waheed Zaman currently serve as members of the Audit Committee. All directors who currently serve on the Audit Committee meet the Nasdaq composition requirements, including the institutional foodservice divisionsrequirements regarding financial literacy and financial sophistication, and the Board of multi-national manufacturersDirectors has determined that all such directors are independent under the Nasdaq Listing Rules and the rules of retail products manythe SEC regarding audit committee membership. The Board of which have greaterDirectors has determined that Ms. Boersma and Ms. Loretz-Congdon are “audit committee financial experts” as defined in Item 407(d) of Regulation S-K under the Exchange Act.
Compensation Committee
The Compensation Committee is a standing committee of the Board of Directors. As described in its charter, available on the Company’s website under Corporate Governance - Committee Charters, the Compensation Committee’s principal purposes are to discharge the Board’s responsibilities related to compensation of the Company’s executive officers and other resources than we do, such asadminister the Company’s incentive and equity compensation plans. The J.M. Smucker Company (Folgers Coffee)Compensation Committee’s objectives and The Kraft Heinz Company (Maxwell House Coffee), wholesale foodservice distributors such as Sysco Corporationphilosophy with respect to the fiscal 2022 executive compensation program, and US Foods, regional and national coffee roasters such as S&D Coffee & Tea (WestRock Corporation), Massimo Zanetti Beverage USA, Trilliant Food and Nutrition LLC, Gaviña & Sons, Inc., Royal Cup, Inc., Ronnoco Coffee, LLC, and Community Coffee Company, L.L.C., specialty coffee suppliers such as Rogers Family Company, Distant Lands Coffee, Mother Parkers Tea & Coffee Inc., Starbucks Corporation and Peet’s Coffee & Tea (JAB Holding Company), and retail brand beverage manufacturers such as Keurig Dr. Pepper Inc. As manythe actions taken by the Compensation Committee in fiscal 2022 with respect to the compensation of our customersNamed Executive Officers, are small foodservice operators, we also compete with cash and carry and club stores (physical and on-line) such as Costco, Sam’s Club and Restaurant Depot and on-line retailers such as Amazon. We also face competition from growth in the single-serve, ready-to-drink coffee beverage and cold-brewed coffee channels, as well as competition from other beverages, such as soft drinks (including highly caffeinated energy drinks), juices, bottled water, teas and other beverages.
The Compensation Committee also is responsible for evaluating and making recommendations to the SEC.Board of Directors regarding director compensation. In addition, thesethe Compensation Committee is responsible for conducting an annual risk evaluation of the Company’s compensation practices, policies and programs.
During fiscal 2022, the Compensation Committee held four regular meetings and three special meetings. Charles F. Marcy currently serves as Chair and Alfred Poe and John D. Robinson currently serve as members of the Compensation Committee. The Board of Directors has determined that all current Compensation Committee members are independent under the Nasdaq Listing Rules.
Compensation Committee Interlocks and Insider Participation
Messrs. Robinson, Marcy, and Poe were members of the Compensation Committee during fiscal 2022. None of the members of the Compensation Committee is or has been an executive officer of the Company, nor did any of them have any relationships requiring disclosure by the Company under Item 404 of Regulation S-K. None of the Company’s executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity, an executive officer of which served as a director of the Company or member of the Compensation Committee during fiscal 2022.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is a standing committee of the Board of Directors. As described in its charter, available on the Company’s website under Corporate Governance - Committee Charters, the Nominating and Corporate Governance Committee’s principal purposes are (i) monitoring the Company’s corporate governance structure; (ii) assisting the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with corporate governance; (iii) ensuring that the Board is appropriately constituted in order to meet its fiduciary obligations, including by identifying individuals qualified to become Board members and members of Board committees, recommending to the Board director nominees for the next annual meeting of stockholders or for appointment to vacancies on the Board, and recommending to the Board membership on Board committees (including committee chairs); (iv) leading the Board in its annual review of the Board’s performance; (v) conducting the annual performance review of the Chief Executive Officer and communicating the results to the Board; and (vi) overseeing succession planning for senior management.
During fiscal 2022, the Nominating and Corporate Governance Committee held four regular meetings. Ms. Loretz-Congdon currently serves as Chair, and Charles F. Marcy, John D. Robinson and Alfred Poe currently serve as members of the Nominating and Corporate Governance Committee. The Board of Directors has determined that all current Nominating and Corporate Governance Committee members are independent under the Nasdaq Listing Rules.
Other Committees
In July 2020, the Board of Directors created an ad hoc Search Committee to assist the Nominating and Corporate Governance Committee in identifying and evaluating potential candidates for future director positions. The Search Committee no longer exists.
In December 2021, the Board of Directors established the Technology Committee for the purpose of assisting with the review of the technological and cybersecurity needs of the Company. As described in its charter, available on the Company’s website under Corporate Governance - Committee Charters, the Technology Committee’s principal purposes include: (i) overseeing the quality and effectiveness of the Company’s cybersecurity strategy; and (ii) overseeing the Company’s technology strategy. Waheed Zaman currently serves as Chair, and Allison M. Boersma and Alfred Poe currently serve as members of the Technology Committee. The Technology Committee met four times in fiscal 2022.
Board Diversity
The below Board Diversity Matrix reports self-identified diversity statistics for the Board of Directors.
| Board Diversity Matrix (As of September 1, 2022) | ||||
| Total Number of Directors | 8 | |||
| Female | Male | Non-Binary | ||
| Part I: Gender Identity | 2 | 6 | 0 | |
| Part II: Demographic Background | ||||
| African American or Black | 0 | 1 | 0 | |
| Alaskan or Native American | 0 | 0 | 0 | |
| Asian or South Asian | 0 | 1 | 0 | |
| Hispanic | 0 | 0 | 0 | |
| Pacific Islander | 0 | 0 | 0 | |
| White | 2 | 4 | 0 | |
| Two or More Races or Ethnicities | 0 | 0 | 0 | |
| LGBTQ+ | 0 | 0 | 0 | |
| Military Veterans | 0 | 1 | 0 | |
| Directors with Disabilities | 0 | 0 | 0 | |
Board Leadership Structure
Under our By-Laws, the Board of Directors, in its discretion, may choose a Chairman of the Board of Directors. If there is a Chairman of the Board of Directors, such person may exercise such powers as provided in the By-Laws or assigned by the Board of Directors. Christopher P. Mottern was appointed as Chairman of the Board in January 2020. Mr. Mottern has served on our Board of Directors since 2013.
Notwithstanding the current separation of Chairman of the Board and Chief Executive Officer, our Chairman of the Board of Directors is generally responsible for soliciting and collecting agenda items from other members of the Board and the other documents we file withChief Executive Officer, and the SEC are available atChief Executive Officer is generally responsible for leading discussions during Board meetings. This structure allows for effective and efficient Board meetings and information flow on important matters affecting the Company. As required under the Nasdaq Listing Rules, a website maintainedmajority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the SEC at http://www.sec.gov. Copiesboard of our Corporate Governance Guidelines,directors. The Board of Directors has determined that, other than Mr. Maserang, all members of the ChartersBoard of Directors are independent and each of the Audit, Compensation, and Nominating and Corporate Governance Committees of the Board are composed solely of independent directors. Due principally to the size of the Board of Directors, the Board has not formally designated a lead independent director and believes that as a result thereof, non-employee director and executive sessions of the Board of Directors, which are attended solely by non-employee directors or independent directors, as applicable, result in an open and free flow of discussion of any and all matters that any director may believe relevant to the Company and/or its management.
Although the roles of Chairman and Chief Executive Officer are currently filled by different individuals, no single leadership model is right for all companies at all times, and the Company has no bylaw or policy in place that mandates this leadership structure. The Nominating and Corporate Governance Committee will evaluate and recommend to the Board of Directors any changes in the Board’s leadership structure.
Board’s Role in Risk Oversight
The Board of Directors recognizes that although management is responsible for identifying risk and risk controls related to business activities and developing programs and recommendations to determine the sufficiency of risk identification and the appropriate manner in which to control risk, the Board plays a critical role in the oversight of risk. The Board of Directors implements its risk oversight responsibilities by having management provide periodic briefing and informational sessions on the significant risks that the Company faces and how the Company is seeking to control risk if and when appropriate. In some cases, a Board committee is responsible for oversight of specific risk topics. For example, the Audit Committee has oversight responsibility of risks associated with financial accounting and audits, internal control over financial reporting, and the Company’s major financial risk exposures, including commodity risk and risks relating to hedging programs. Regarding cybersecurity, the Board of Directors temporarily assigned primary oversight responsibility to the Technology Committee, but placed the Chairwoman of the Audit Committee on the Technology Committee and made a second member of the Audit Committee the Chairman of the Technology Committee to ensure that the Audit Committee remained well informed of the Company’s cybersecurity risks. The Compensation Committee has oversight responsibility of risks relating to the Company’s compensation policies and practices. At each regular meeting, or more frequently as needed, the Board of Directors considers reports from the Audit Committee and Compensation Committee which provide detail on risk management issues and management’s response. The Board of Directors, as a whole, examines specific business risks in its periodic reviews of the individual business units, and also of the Company as a whole as part of its regular reviews, including as part of the strategic planning process, annual budget review and approval, and data and cyber security review. Beyond formal meetings, the Board of Directors and our Codeits committees have regular access to senior executives, including the Company’s Chief Executive Officer and Chief Financial Officer. The Company believes that its leadership structure promotes effective Board oversight of Conduct and Ethics can also be found on our website.
Compensation-Related Risk
As part of its customers duringrisk oversight role, our Compensation Committee annually considers whether our compensation policies and after the COVID-19 pandemic. The Company continues to leverage relief available through the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and other government programs,practices for all employees, including through industry associations, as well as any other efforts to support the food industry as a pillar of critical infrastructure.
A good balance of fixed and at-risk compensation, as well as an appropriate balance of cash and equity-based compensation.
Management incentive programs are based on multiple metrics, including strategic, individual and operational measures.
The Compensation Committee is directly involved in setting short- and long-term incentive performance targets and payout intervals, assessing performance against targets, and reviewing/approving the performance goals for the CEO and other executives.
Executive annual short-term incentive awards are generally capped at 200% of the target opportunity and the performance-based restricted stock units in the long-term incentive plan are capped at 180% of target opportunity.
Long-term equity awards are generally made on an annual basis which creates overlapping vesting periods and ensures that management remains exposed to the risks of their decision-making through their unvested equity-based awards for the period during which the business risks are likely to materialize.
Long-term compensation for senior executives is comprised of restricted stock units that vest ratably over three years and performance-based restricted stock units that are earned based on three-year performance goals. Company shares are inherently subject to the risks of the business, and the combination of options and performance-based restricted stock units ensure that management participates in these risks.
The number of performance-based restricted stock units ultimately earned by the Company’s executives and employees are determined at the end of a three-year performance period based on adjusted EBITDA performance and total shareholder return (“TSR”) metrics that are tracked during the performance period.
The Company has significant share ownership requirements for executives and non-employee directors. Executive officers are required to hold share-based compensation awards until meeting their ownership requirements. Company shares held by management are inherently subject to the risks of the business.
Executive compensation is benchmarked annually relative to pay levels and practices at peer companies.
The Company has a clawback policy in place that allows for recovery of incentive compensation if there is a material restatement of financial results caused by the fraud or misconduct of an individual which resulted in an over payment of incentives.
The Company prohibits employees and directors from hedging or pledging its securities.
The Compensation Committee is composed solely of independent directors and retains an independent compensation consultant to provide a balanced perspective on compensation programs and practices. The Compensation Committee approves all pay decisions for executive officers.
Stockholder Engagement
The Company has a history of actively engaging with our stockholders. We believe that strong corporate governance should include regular engagement with our stockholders. We have a long-standing, robust stockholder outreach program through which we solicit feedback on our corporate governance, executive compensation program, disclosure practices, and environmental and social impact programs and goals. Investor feedback is shared with our Board of Directors as received.
Corporate Governance Cycle and 2022 Outreach
Engagement
As part of our stockholder outreach program, and in response to the results of operations. During fiscal 2020,the say-on-pay advisory vote at our top five customers accounted for approximately 19.8%2021 Annual Meeting, we reached out to 16 of our net sales. We generally do not have long-term contracts29 largest stockholders in 2022, representing approximately 47% of our total shares outstanding as of our 2021 Annual Meeting, to solicit and gain a better understanding of stockholder feedback regarding our executive compensation program. Six of the 16 holders elected to participate in this compensation-specific outreach program. The feedback we received from our stockholders about our executive compensation program was collected directly by members of our Compensation Committee. The Compensation Committee made changes to our plan design in light of the feedback we received during this process.
Additionally, our CEO and CFO engage in meaningful dialogue with our stockholders through our quarterly earnings calls and investor-related outreach events.
Topics
Key areas of discussion included:
Corporate Governance
Executive Compensation
Inclusion and Diversity
Human Capital Management
Sustainability Programs
Supply Chain
Company Policy
Brand/Public Affairs
Risk Management
Long-term Growth Strategy
Financial Performance
For additional information, please see “2022 Stockholder Outreach” in Item 11 of this Amendment.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors, certain of our officers, and persons who beneficially own more than 10% of the Company’s common stock to file reports of stock ownership and changes in ownership (Forms 3, 4 and 5) in shares with the majoritySEC. To our knowledge, based solely on our records and certain written representations received from our executive officers and directors, during the fiscal year ended June 30, 2022, all persons related to the Company that are required to file these insider trading reports have filed them in a timely manner, except for a Form 4 filed on May 11, 2022 for Scott R. Drake to correct the amount of securities granted to him in a transaction that occurred on September 13, 2021; a Form 4 filed on July 19, 2022 for Maurice S. J. Moragne to correct the amount of securities granted to him in a transaction that occurred on September 13, 2021; a Form 4 filed on July 19, 2022 for Ruben Inofuentes to correct the amount of securities granted to him in a transaction that occurred on September 13, 2021 and to correct the amount of securities beneficially owned by him in subsequent transactions through July 18, 2022; a Form 4 filed on July 19, 2022 for D. Deverl Maserang II to disclose reportable transactions that occurred on July 16, 2021, September 13, 2021, December 2, 2021, and July 18, 2022; and a Form 4/A filed on August 2, 2022 for Christopher P. Mottern to correct the amount of securities beneficially owned by him. Copies of the insider trading reports can be found on the Company’s website at www.farmerbros.com.
| Item 11. | Executive Compensation |
Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes our executive compensation philosophy, objectives, and programs, the decisions made under those programs and factors considered by our Compensation Committee in fiscal 2022 with respect to the compensation of our customers. Accordingly, the majority of our customers can stop purchasing our products at any time without penalty and are free to purchase products from our competitors. There can be no assurance that our customers will continue to purchase our products in the same mix or quantities or on the same terms as they have in the past. In addition, because of the competitive environment facing many of our customers and industry consolidation which has produced large customers with increased buying power and negotiating strength, our customers have increasingly sought to improve their profitability through pricing concessions and more favorable trade terms. To the extent we provide pricing concessions or favorable trade terms, our margins would be reduced. If we are unable to continue to offer terms that are acceptable to our customers, they may reduce purchases of our products which would adversely affect our financial performance. Requirements that may be imposed on us by our customers, such as sustainability, inventory management or product specification requirements, may have an adverse effect on our results of operations. Additionally, our customers may face financial difficulties, bankruptcy or other business disruptions that may impact their operations and their purchases from us and may affect their ability to pay us for products which could adversely affect our sales and profitability.Named Executive Officers.
Fiscal 2022 Named Executive Officers
| Name | Title (as of June 30, 2022) | |
| D. Deverl Maserang II | President and Chief Executive Officer | |
| Scott R. Drake | Chief Financial Officer | |
| Ruben E. Inofuentes | Chief Supply Chain Officer | |
| Maurice S. J. Moragne | Chief Supply Chain Officer | |
| Amber D. Jefferson | Chief Human Resources Officer |
Executive Summary
Our accounts receivable represents a significant portion of our current assetsexecutive compensation programs are designed to:
attract, retain, and a substantial portion of our trade accounts receivables relate principally to a limited number of customers, increasing our exposure to bad debtsmotivate talented executives with competitive pay and counter-party risk which could potentially have a material adverse effect on ourincentives;
reward positive results of operations.
motivate and develop management and other employees sufficiently to maintain our current business and support our projected growth and strategic initiatives. This may require significant investments in training, coaching and other career development and retention activities. Activities related to identifying, recruiting, hiring and integrating qualified individuals require significant time and attention. We may also need to invest significant amounts of cash and equity to attract talented new employees, and we may never realize returns on these investments. Competition for talent is intense, and we might
maintain total compensation and relative amounts of operations. Further, any unplanned turnover or failurebase salary, annual, and long-term incentive compensation competitive with those amounts paid by peer companies to develop or implement an adequate succession planremain competitive in the market for our senior management and other key employees, could deplete our institutional knowledge base, erode our competitive advantage, and negatively affect our business, financial condition and results of operations. talent.
We do not maintain key person life insurance policies on any ofbelieve that this design appropriately focuses our executive officers.
Impact of and Response to COVID-19
Below we summarize key actions the Company undertook to protect our employees, stockholders, business, and customers particularly restaurants, hotels, casinosthroughout COVID-19 pandemic. Management quickly responded to the revised business landscape, purposefully managed liquidity and coffeehouses.remained focused on our strategic projects to deliver long-term stockholder value.
In fiscal 2022, although both our operating performance deteriorate further orDSD and Direct Ship sales channels continued to be impacted by the COVID-19 pandemic, persists or recursthere was significant recovery in the near term, we will have less cash inflows from operations available to meet our financial obligations or to fund our other liquidity needs. In addition, if such deterioration were to lead to the closure of leased facilities, we would need to fund the costs of terminating those leases. If we are unable to generate sufficient cash flows from operations in the future to satisfy these financial obligations, we may be required to, among other things:
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||
| Farmer Bros. Co. | $ | 100.00 | $ | 136.43 | $ | 128.72 | $ | 130.00 | $ | 69.66 | $ | 31.32 | ||||||||||||
| Russell 2000 Index | $ | 100.00 | $ | 93.83 | $ | 119.01 | $ | 139.84 | $ | 135.21 | $ | 126.25 | ||||||||||||
| Value Line Food Processing Index | $ | 100.00 | $ | 118.48 | $ | 126.26 | $ | 125.48 | $ | 135.42 | $ | 138.97 | ||||||||||||
| Peer Group Index | $ | 100.00 | $ | 150.78 | $ | 144.48 | $ | 137.15 | $ | 104.43 | $ | 114.54 | ||||||||||||
| For the Years Ended June 30, | |||||||||||||||||||
| (In thousands, except per share data) | 2020 | 2019 | 2018(1) | 2017(1) | 2016(1) | ||||||||||||||
| Consolidated Statement of Operations Data: | |||||||||||||||||||
| Net sales | $ | 501,320 | $ | 595,942 | $ | 606,544 | $ | 541,500 | $ | 544,382 | |||||||||
| Cost of goods sold | $ | 363,198 | $ | 416,840 | $ | 399,155 | $ | 354,649 | $ | 373,165 | |||||||||
| Restructuring and other transition expenses | $ | — | $ | 4,733 | $ | 662 | $ | 11,016 | $ | 16,533 | |||||||||
| Net gain from sale of Torrance Facility | $ | — | $ | — | $ | — | $ | (37,449 | ) | $ | — | ||||||||
| Net (gains) losses from sales of assets | $ | (25,237 | ) | $ | 465 | $ | (966 | ) | $ | (2,129 | ) | $ | (8,405 | ) | |||||
| Impairment losses on intangible assets | $ | 42,030 | $ | — | $ | 3,820 | $ | — | $ | — | |||||||||
| (Loss) income from operations | $ | (43,002 | ) | $ | (14,702 | ) | $ | 1,053 | $ | 38,934 | $ | (1,736 | ) | ||||||
| Postretirement benefits curtailment gains and pension settlement (charge) | $ | 5,760 | $ | (10,948 | ) | $ | — | $ | — | $ | — | ||||||||
| Income tax (benefit) expense(2) | $ | (195 | ) | $ | 40,111 | $ | 17,312 | $ | 14,815 | $ | (72,239 | ) | |||||||
| Net (loss) income available to common stockholders | $ | (37,641 | ) | $ | (74,130 | ) | $ | (18,669 | ) | $ | 22,551 | $ | 71,791 | ||||||
| Net (loss) income available to common stockholders per common share—basic | $ | (2.19 | ) | $ | (4.36 | ) | $ | (1.11 | ) | $ | 1.35 | $ | 4.35 | ||||||
| Net (loss) income available to common stockholders per common share—diluted | $ | (2.19 | ) | $ | (4.36 | ) | $ | (1.11 | ) | $ | 1.34 | $ | 4.32 | ||||||
| As of June 30, | |||||||||||||||||||
| (In thousands) | 2020 | 2019 | 2018(1) | 2017(1) | 2016(1) | ||||||||||||||
| Consolidated Balance Sheet Data: | |||||||||||||||||||
| Total current assets | $ | 176,713 | $ | 159,908 | $ | 173,514 | $ | 140,703 | $ | 177,366 | |||||||||
| Property, plant and equipment, net | $ | 165,633 | $ | 189,458 | $ | 186,589 | $ | 176,066 | $ | 118,416 | |||||||||
| Goodwill | $ | — | $ | 36,224 | $ | 36,224 | $ | 10,996 | $ | 272 | |||||||||
| Intangible assets, net | $ | 20,662 | $ | 28,878 | $ | 31,515 | $ | 18,618 | $ | 6,219 | |||||||||
| Operating lease assets | $ | 21,117 | $ | — | $ | — | $ | — | $ | — | |||||||||
| Deferred income taxes | $ | — | $ | — | $ | 39,308 | $ | 53,933 | $ | 71,508 | |||||||||
| Total assets | $ | 392,699 | $ | 424,610 | $ | 475,531 | $ | 407,153 | $ | 383,714 | |||||||||
| Short-term borrowings under revolving credit facility | $ | — | $ | — | $ | 89,787 | $ | 27,621 | $ | 109 | |||||||||
| Long-term borrowings under revolving credit facility | $ | 122,000 | $ | 92,000 | $ | — | $ | — | $ | — | |||||||||
| Operating lease liabilities | $ | 21,483 | $ | — | $ | — | $ | — | $ | — | |||||||||
| Finance lease obligations | $ | 9 | $ | 32 | $ | 248 | $ | 1,195 | $ | 2,359 | |||||||||
| Earnout payable | $ | — | $ | 400 | $ | 600 | $ | 1,100 | $ | 100 | |||||||||
| Long-term derivative liabilities | $ | 2,859 | $ | 1,612 | $ | 386 | $ | 380 | $ | — | |||||||||
| Total liabilities | $ | 280,786 | $ | 267,116 | $ | 246,476 | $ | 177,601 | $ | 186,397 | |||||||||
During fiscal 2022, we delivered higher gross margins compared to the prior year periods.
Our capital expenditures for the fiscal year ended June 30, 20202022 were $17.6$15.2 million, as compared to $34.8$15.1 million in the fiscal year ended June 30, 2019, representing2021, an increase of $0.1 million. This was driven by lower expansionary capital spend of $5.8 million in fiscal 2022 compared to fiscal 2021, offset by a $5.8 million increase in maintenance capital spend in fiscal 2022. Also included in the $15.2 million of $11.8capital expenditures in fiscal 2022 was $1.6 million a 49.5% reduction comparedfor expansion projects and $10.1 million of coffee brewing equipment spend to the prior year period. Theseexecute several key strategic initiatives pertaining to fiscal 2022. The expansionary capital spending reductions were driven by several key initiatives put in place, including a focus on refurbished CBEcoffee brewing equipment to drive cost savings, and reductions across some capital categories due to additional cost controls put in place during the COVID-19 pandemic.
What we did for our employees
We implemented the outstanding debtfollowing measures to assist our employees:
Implemented Company health guidelines that included social distancing, shift spacing, protective equipment, temperature monitoring and a remote work option for employees able to do so;
Provided up to 10 additional days of sick time at no cost for certain employees in locations with a confirmed COVID-19 case or who were quarantined due to COVID-19 related symptoms/exposure;
Provided COVID-19 testing for team members on our revolver was $122.0 million, an increase of $30.0 million since June 30, 2019. However, our cash increased by $53.0 million to $60.0 million as of June 30, 2020, compared to $7.0 million as of June 30, 2019. These improvementshealth plan at no charge;
Extended company-paid medical benefits for employees enrolled in our liquidity provide additional financial and operational flexibility during the COVID–19 pandemic.
Reinforced access for team members to telehealth options available through our health plans; and
| For The Years Ended June 30, | 2020 vs 2019 | 2019 vs 2018 | |||||||||||||||||||||||
| 2020 | 2019 | 2018 | Favorable (Unfavorable) | Favorable (Unfavorable) | |||||||||||||||||||||
| Change | % Change | Change | % Change | ||||||||||||||||||||||
| Income Statement Data: | |||||||||||||||||||||||||
| Net sales | $ | 501,320 | $ | 595,942 | $ | 606,544 | $ | (94,622 | ) | (15.9 | )% | $ | (10,602 | ) | (1.7 | )% | |||||||||
| Gross margin | 27.6 | % | 30.1 | % | 34.2 | % | (2.5 | )% | NM | (4.1 | )% | NM | |||||||||||||
| Operating expenses as a % of sales | 36.1 | % | 32.5 | % | 34.0 | % | 3.6 | % | NM | (1.5 | )% | NM | |||||||||||||
| (Loss) income from operations | $ | (43,002 | ) | $ | (14,702 | ) | $ | 1,053 | $ | (28,300 | ) | 192.5 | % | $ | (15,755 | ) | NM | ||||||||
| Net loss | $ | (37,087 | ) | $ | (73,595 | ) | $ | (18,280 | ) | $ | 36,508 | 49.6 | % | $ | (55,315 | ) | NM | ||||||||
| Net loss available to common stockholders per common share—basic | $ | (2.19 | ) | $ | (4.36 | ) | $ | (1.11 | ) | $ | 2.17 | NM | $ | (3.25 | ) | NM | |||||||||
| Net loss available to common stockholders per common share—diluted | $ | (2.19 | ) | $ | (4.36 | ) | $ | (1.11 | ) | $ | 2.17 | NM | $ | (3.25 | ) | NM | |||||||||
| Operating Data: | |||||||||||||||||||||||||
| Coffee pounds | 100,700 | 108,098 | 107,429 | (7,398 | ) | (6.8 | )% | 669 | 0.6 | % | |||||||||||||||
| EBITDA(1) | $ | (1,796 | ) | $ | 3,617 | $ | 32,673 | $ | (5,413 | ) | (149.7 | )% | (29,056 | ) | (88.9 | )% | |||||||||
| EBITDA Margin(1) | (0.4 | )% | 0.6 | % | 5.4 | % | (1.0 | )% | NM | (4.8 | )% | NM | |||||||||||||
| Adjusted EBITDA(1) | $ | 18,742 | $ | 31,882 | $ | 47,562 | $ | (13,140 | ) | (41.2 | )% | $ | (15,680 | ) | (33.0 | )% | |||||||||
| Adjusted EBITDA Margin(1) | 3.7 | % | 5.3 | % | 7.8 | % | (1.6 | )% | NM | (2.5 | )% | NM | |||||||||||||
| Percentage of Total Net Sales By Product Category | |||||||||||||||||||||||||
| Coffee (Roasted) | 64.9 | % | 63.5 | % | 62.6 | % | 1.4 | % | 2.2 | % | 0.9 | % | 1.4 | % | |||||||||||
| Coffee (Frozen Liquid) | 5.7 | % | 5.8 | % | 5.7 | % | (0.1 | )% | (1.7 | )% | 0.1 | % | 1.8 | % | |||||||||||
| Tea (Iced & Hot) | 5.1 | % | 5.6 | % | 5.4 | % | (0.5 | )% | (8.9 | )% | 0.2 | % | 3.7 | % | |||||||||||
| Culinary | 10.0 | % | 10.8 | % | 10.6 | % | (0.8 | )% | (7.4 | )% | 0.2 | % | 1.9 | % | |||||||||||
| Spice | 4.3 | % | 4.0 | % | 4.2 | % | 0.3 | % | 7.5 | % | (0.2 | )% | (4.8 | )% | |||||||||||
| Other beverages(2) | 9.0 | % | 9.8 | % | 11.0 | % | (0.8 | )% | (8.2 | )% | (1.2 | )% | (10.9 | )% | |||||||||||
| Other revenues(3) | 0.5 | % | — | % | — | % | |||||||||||||||||||
| Net sales by product category | 99.5 | % | 99.5 | % | 99.5 | % | (0.5 | )% | (16.5 | )% | — | % | (6.9 | )% | |||||||||||
| Fuel Surcharge | 0.5 | % | 0.5 | % | 0.5 | % | — | % | — | % | — | % | — | % | |||||||||||
| Total | 100.0 | % | 100.0 | % | 100.0 | % | (0.5 | )% | (16.5 | )% | — | % | — | % | |||||||||||
| Other data: | |||||||||||||||||||||||||
| Capital expenditures related to maintenance | $ | 11,845 | $ | 21,088 | $ | 21,782 | $ | (9,243 | ) | (43.8 | )% | $ | (694 | ) | (3.2 | )% | |||||||||
| Total capital expenditures | $ | 17,560 | $ | 34,759 | $ | 37,020 | $ | (17,199 | ) | (49.5 | )% | $ | (2,261 | ) | (6.1 | )% | |||||||||
| Depreciation and amortization expense | $ | 29,896 | $ | 31,065 | $ | 30,464 | $ | (1,169 | ) | (3.8 | )% | $ | 601 | 2.0 | % | ||||||||||
Invested in and reallocated capital in a focused approach, allowing team members to continue to deliver on projects to optimize our manufacturing and distribution network during challenging times.
Recognizing that affectmaintaining ample liquidity is key to withstanding the pandemic and emerging in a position of strength, we prudently managed cash, including:
Amended our industryprior credit facility in April 2021 and business which we expect will play an important rolesubsequently entered into a new $127.5 million, four-year financing arrangement, providing a lower overall cost of borrowing and reducing or eliminating several negative covenants in our future growth and profitability. Some of these factors include:its prior credit facility;
| • |
| For the Years Ended June 30, | 2020 vs 2019 | 2019 vs 2018 | |||||||||||||||||||||||
| 2020 | 2019 | 2018 | Favorable (Unfavorable) | Favorable (Unfavorable) | |||||||||||||||||||||
| Change | % Change | Change | % Change | ||||||||||||||||||||||
| Net sales | $ | 501,320 | $ | 595,942 | $ | 606,544 | $ | (94,622 | ) | (15.9 | )% | $ | (10,602 | ) | (1.7 | )% | |||||||||
| Cost of goods sold | 363,198 | 416,840 | 399,155 | 53,642 | 12.9 | % | (17,685 | ) | (4.4 | )% | |||||||||||||||
| Gross profit | 138,122 | 179,102 | 207,389 | (40,980 | ) | (22.9 | )% | (28,287 | ) | (13.6 | )% | ||||||||||||||
| Selling expenses | 121,762 | 139,647 | 153,391 | 17,885 | 12.8 | % | 13,744 | 9.0 | % | ||||||||||||||||
| General and administrative expenses | 42,569 | 48,959 | 49,429 | 6,390 | 13.1 | % | 470 | 1.0 | % | ||||||||||||||||
| Restructuring and other transition expenses | — | 4,733 | 662 | 4,733 | 100.0 | % | (4,071 | ) | NM | ||||||||||||||||
| Net (gains) losses from sales of assets | (25,237 | ) | 465 | (966 | ) | 25,702 | NM | (1,431 | ) | 148.1 | % | ||||||||||||||
| Impairment of goodwill and intangible assets | 42,030 | — | 3,820 | (42,030 | ) | NM | 3,820 | 100.0 | % | ||||||||||||||||
| Operating expenses | 181,124 | 193,804 | 206,336 | 12,680 | 6.5 | % | 12,532 | 6.1 | % | ||||||||||||||||
| (Loss) income from operations | (43,002 | ) | (14,702 | ) | 1,053 | (28,300 | ) | 192.5 | % | (15,755 | ) | NM | |||||||||||||
| Other (expense) income: | |||||||||||||||||||||||||
| Dividend income | — | — | 12 | — | — | % | (12 | ) | (100.0 | )% | |||||||||||||||
| Interest income | — | — | 2 | — | — | % | (2 | ) | (100.0 | )% | |||||||||||||||
| Interest expense | (10,483 | ) | (12,000 | ) | (9,757 | ) | 1,517 | (12.6 | )% | (2,243 | ) | 23.0 | % | ||||||||||||
| Postretirement benefits curtailment gains and pension settlement (charge) | 5,760 | (10,948 | ) | — | 16,708 | NM | (10,948 | ) | NM | ||||||||||||||||
| Other, net | 10,443 | 4,166 | 7,722 | 6,277 | 150.7 | % | (3,556 | ) | (46.1 | )% | |||||||||||||||
| Total other income (expense) | 5,720 | (18,782 | ) | (2,021 | ) | 24,502 | (130.5 | )% | (16,761 | ) | NM | ||||||||||||||
| Loss before taxes | (37,282 | ) | (33,484 | ) | (968 | ) | (3,798 | ) | 11.3 | % | (32,516 | ) | NM | ||||||||||||
| Income tax (benefit) expense | (195 | ) | 40,111 | 17,312 | (40,306 | ) | (100.5 | )% | 22,799 | 131.7 | % | ||||||||||||||
| Net loss | $ | (37,087 | ) | $ | (73,595 | ) | $ | (18,280 | ) | $ | 36,508 | (49.6 | )% | $ | (55,315 | ) | 302.6 | % | |||||||
| Less: Cumulative preferred dividends, undeclared and unpaid | 554 | 535 | 389 | 19 | 3.6 | % | 146 | 37.5 | % | ||||||||||||||||
| Net loss available to common stockholders | $ | (37,641 | ) | $ | (74,130 | ) | $ | (18,669 | ) | $ | 36,489 | (49.2 | )% | $ | (55,461 | ) | 297.1 | % | |||||||
| For the Years Ended June 30, | 2020 vs 2019 | 2019 vs 2018 | |||||||||||||||||||||||
| 2020 | 2019 | 2018 | Favorable (Unfavorable) | Favorable (Unfavorable) | |||||||||||||||||||||
| Change | % Change | Change | % Change | ||||||||||||||||||||||
| Units sold | |||||||||||||||||||||||||
| Coffee (Roasted) | 80,560 | 86,478 | 85,943 | (5,918 | ) | (6.84 | )% | 535 | 0.62 | % | |||||||||||||||
| Coffee (Frozen Liquid) | 310 | 427 | 407 | (117 | ) | (27.40 | )% | 20 | 4.91 | % | |||||||||||||||
| Tea (Iced & Hot) | 2,381 | 2,755 | 2,706 | (374 | ) | (13.58 | )% | 49 | 1.81 | % | |||||||||||||||
| Culinary | 6,237 | 7,932 | 9,227 | (1,695 | ) | (21.37 | )% | (1,295 | ) | (14.03 | )% | ||||||||||||||
| Spice | 589 | 792 | 933 | (203 | ) | (25.63 | )% | (141 | ) | (15.11 | )% | ||||||||||||||
| Other beverages(1) | 3,566 | 4,631 | 5,932 | (1,065 | ) | (23.00 | )% | (1,301 | ) | (21.93 | )% | ||||||||||||||
| Total | 93,643 | 103,015 | 105,148 | (9,372 | ) | (9.10 | )% | (2,133 | ) | (2.03 | )% | ||||||||||||||
| Unit Price | |||||||||||||||||||||||||
| Coffee (Roasted) | $ | 4.06 | $ | 4.38 | $ | 4.42 | $ | (0.32 | ) | (7.31 | )% | $ | (0.04 | ) | (0.90 | )% | |||||||||
| Coffee (Frozen Liquid) | $ | 92.32 | $ | 80.89 | $ | 85.49 | $ | 11.43 | 14.13 | % | $ | (4.60 | ) | (5.38 | )% | ||||||||||
| Tea (Iced & Hot) | $ | 10.65 | $ | 12.02 | $ | 12.00 | $ | (1.37 | ) | (11.40 | )% | $ | 0.02 | .17 | % | ||||||||||
| Culinary | $ | 8.16 | $ | 8.08 | $ | 6.98 | $ | 0.08 | .99 | % | $ | 1.10 | 15.76 | % | |||||||||||
| Spice | $ | 36.46 | $ | 30.43 | $ | 26.96 | $ | 6.03 | 19.82 | % | $ | 3.47 | 12.87 | % | |||||||||||
| Other beverages(1) | $ | 12.72 | $ | 12.60 | $ | 11.24 | $ | 0.12 | .95 | % | $ | 1.36 | 12.10 | % | |||||||||||
| Average unit price | $ | 5.35 | $ | 5.79 | $ | 5.77 | $ | (0.44 | ) | (7.60 | )% | $ | 0.02 | 0.35 | % | ||||||||||
| Total Net Sales By Product Category | |||||||||||||||||||||||||
| Coffee (Roasted) | $ | 327,283 | $ | 378,583 | $ | 379,951 | $ | (51,300 | ) | (13.55 | )% | $ | (1,368 | ) | (0.36 | )% | |||||||||
| Coffee (Frozen Liquid) | 28,619 | 34,541 | 34,794 | (5,922 | ) | (17.14 | )% | (253 | ) | (.73 | )% | ||||||||||||||
| Tea (Iced & Hot) | 25,369 | 33,109 | 32,477 | (7,740 | ) | (23.38 | )% | 632 | 1.95 | % | |||||||||||||||
| Culinary | 50,917 | 64,100 | 64,432 | (13,183 | ) | (20.57 | )% | (332 | ) | (.52 | )% | ||||||||||||||
| Spice | 21,473 | 24,101 | 25,150 | (2,628 | ) | (10.90 | )% | (1,049 | ) | (4.17 | )% | ||||||||||||||
| Other beverages(1) | 45,342 | 58,367 | 66,699 | (13,025 | ) | (22.32 | )% | (8,332 | ) | (12.49 | )% | ||||||||||||||
| Net sales by product category | $ | 499,003 | $ | 592,801 | $ | 603,503 | $ | (93,798 | ) | (15.82 | )% | $ | (10,702 | ) | (1.77 | )% | |||||||||
| Fuel Surcharge | 2,317 | 3,141 | 3,041 | (824 | ) | (26.23 | )% | 100 | 3.29 | % | |||||||||||||||
| Total | $ | 501,320 | $ | 595,942 | $ | 606,544 | $ | (94,622 | ) | (15.88 | )% | $ | (10,602 | ) | (1.75 | )% | |||||||||
Remained disciplined in coffee pricescapital allocation priorities, including deferring capital expenditures, as appropriate;
Focused on key initiatives that would drive our business transformation; and
Renegotiated unprofitable contracts to meet evolving business needs.
Compensation Policies and Practices—Good Governance
Consistent with our commitment to strong corporate governance, in fiscal 2022, our Board followed the compensation policies and practices described below to drive performance and serve our stockholders’ long-term interests:
What We Do
Our Compensation Committee is composed solely of independent directors, and regularly meets in executive session without members of management present. Our Compensation Committee retains an independent compensation consultant to provide it with advice on matters related to executive compensation. Our Compensation Committee regularly reviews and assesses the potential risks of our compensation policies and practices. The structure of our executive compensation program includes a mix of cash and equity-based compensation, with an emphasis on performance-based compensation. The competitiveness of our executive compensation program is assessed by comparison to the compensation programs of peer group companies that are similar to us in terms of industry, annual revenue, and/or other business characteristics. Our claw-back policy requires the recoupment of certain incentive compensation from our executive officers in the event of a material restatement of the Company’s financial results due to fraud or misconduct. We maintain meaningful stock ownership guidelines for directors and executive officers that promote a long-term stockholder perspective.What We Do Not Do
We do not provide for excise tax gross-ups in connection with severance or other payments or benefits arising in connection with a change in control. We do not provide for “single trigger” change in control payments or benefits. We do not provide guaranteed base salary increases or guaranteed bonuses. We do not provide supplemental pension benefits to our We do not provide excessive perquisites. We do not permit (absent stockholder approval in the case of repricing/exchanging), and have not engaged in, the practice of backdating or re-pricing/exchanging stock options. We do not allow directors or executive officers to hedge or short sell Company stock. We do not allow directors or executive officers to pledge shares as collateral for a loan or in a margin account.2022 Stockholder Outreach
Every year, the Company provides stockholders with the opportunity for an annual vote to approve its executive compensation program on an advisory basis. At our 2021 Annual Meeting, approximately 47% of our stockholders supported our advisory vote on executive compensation. Following this vote, we conducted an extensive engagement campaign with our stockholders. For additional information, see “Corporate Governance Cycle and 2022 Outreach” in Item 10 of this Amendment.
We reached out to investors representing approximately 47% of our common shares outstanding, as of our 2021 Annual Meeting, with invitations to discuss our officer compensation program and provide direct feedback to members of our Compensation Committee. We held discussions with investors representing approximately 15% of our common shares outstanding as of our 2021 Annual Meeting. Below are key learnings from these direct discussions with investors. The Compensation Committee will continue to engage directly with stockholders on a periodic basis on officer compensation matters.
Key Themes from Stockholder Engagement
Stockholders that accepted invitations to discuss compensation matters with members of our Compensation Committee were generally supportive of the heightFarmer Bros. officer compensation programs. Discussions tended to focus on the following categories:
Compensation Amounts: Stockholders did not express concern about the amount of COVID-19 pandemic in April 2020, DSD sales declined 65%compensation paid to 70% from the pre–COVID weekly average run rates, but improved to approximatelyofficers, nor did they express concern about any misalignment between pay and performance.
Mix of Compensation: Stockholders generally expressed a 45% decline from pre-COVID-19 levels by June 30, 2020. Also, our DSD net salespreference that the officer team have a uniform mix of long-term incentives.
Benchmarking Peer Group: Stockholders were impactedsupportive of the set of companies selected by the saleCompensation Committee to benchmark officer compensation. Certain stockholders expressed a view that peer companies should be similar in size and industry to Farmer Bros.
Incentives Plan Metrics: Stockholders were generally supportive of our office coffee business in July 2019,using EBITDA as the featured annual incentive plan metric, and net customer attrition. Our direct ship net sales inunderstood the fiscal year ended June 30, 2020 included $9.5 million in price decreasesunique approach to customers utilizing commodity-based pricing arrangements, wheregoal-setting given the changes inCompany’s challenging situation. Several suggested that the green coffee commodity costs are passedCompensation Committee consider return on capital, revenue growth, cash flow, working capital and measuring performance on a per-share basis going forward. Several stockholders expressed a desire for TSR to have a greater weighting for future PBRSU awards.
Incentive Plan Design: Shareholders generally understood and supported the unique annual and long-term incentive design adopted by the Committee as a response to the customer, as compared to $6.9 million in price decreases to customers utilizing such arrangements in the fiscal ended June 30, 2019.
For Year Ended June 30, 2020 vs. 2019 | % of Total Mix Change | |||||
| Effect of change in unit sales | $ | (50.1 | ) | (53.0 | )% | |
| Effect of pricing and product mix changes | (44.5 | ) | (47.0 | )% | ||
| Total decrease in net sales | $ | (94.6 | ) | (100.0 | )% | |
Compensation Committee Response to Stockholder Feedback
The Compensation Committee is thankful to the stockholders that accepted invitations to engage and provide feedback on DSD customers, unfavorable customerthe Company’s officer compensation programs. The Compensation Committee has, and will continue, to discuss the specific feedback and perspective provided by stockholders and intends to consider such feedback for future compensation decisions. The Compensation Committee took immediate action for certain features for fiscal 2023 officer compensation as a direct response to stockholder feedback:
The Compensation Committee removed several companies from the compensation peer group that were relatively larger than the Company in terms of revenue, and added several that are closer in revenues to the Company. These changes are described in greater detail the section below titled “Benchmarking and Peer Group Companies.”
For fiscal 2023 PBRSU awards, the TSR modifier has been changed to have greater influence on the award outcome. For fiscal 2023 awards, TSR goals have been set based on the Company’s absolute cumulative TSR over a full three-year period (fiscal 2023 through 2025). The Company’s absolute TSR over this three year period can modify amounts earned by adjusted EBITDA performance by a factor of 0.80x to 1.5x (an increase from the 1.2x factor from prior awards). Adjusted EBITDA will be measured over three one-year measurement periods and generate a payout factor at the end of the three years based on the average achievement over the three years. This payout factor will then be subject to modification based on the Company’s absolute cumulative three-year as follows:
| Absolute 3-year Cumulative TSR | Modification Factor | ||
| ≤ 25.0% | 0.8x | ||
| -25.0% to +24.9% | 1.0x | ||
| +25.0% to +49.9% | 1.20x | ||
| +50.0% to +99.9% | 1.33x | ||
| ≥ 100% | 1.50x |
The purpose of the absolute TSR modifier above is to incentivize achievement of superior shareholder returns over a three-year period.
In addition to placing greater weighting on TSR, shareholders generally expressed a preference that all officers have the same mix of long-term incentive award vehicles with at least 50% of the awards granted in PBRSUs. As such, 50% of LTI granted to officers for the fiscal 2023 was granted in PBRSUs (an increase from 40% from prior year for NEOs other than our CEO which has been awarded 50% of LTI in PBRSUs in prior years).
Additional details about the fiscal 2023 long-term incentive awards will be reported in the Company’s proxy statement for fiscal 2023.
Oversight of the Executive Compensation Program
Compensation Committee
Under its charter, the Compensation Committee has the duty, among other things, to assess the overall executive compensation structure of the Company, including the compensation for our President and higher reservesChief Executive Officer and each of our other Named Executive Officers. In exercising this authority, the Compensation Committee determines the forms and amount of executive compensation appropriate to achieve the Compensation Committee’s strategic objectives, including base salary, bonus, incentive or performance-based compensation, equity awards and other benefits.
Compensation Consultant
The Compensation Committee has the authority to retain the services of outside consultants to assist it in performing its responsibilities. In fiscal 2022, the Compensation Committee engaged Meridian Compensation Partners, LLC, an independent compensation consultant (“Meridian”) to provide advisory and consulting services relating to the Company’s executive officer and director compensation programs, consultation regarding short-term and long-term incentive plan design, consultation regarding CEO pay ratio disclosure, and consultation regarding corporate governance practices and general Compensation Committee matters and processes. In fiscal 2022, the Compensation Committee also engaged Meridian to help determine the compensation of our President and Chief Executive Officer, as well as our other Named Executive Officers.
Meridian provided no other services to the Company or its affiliates during fiscal 2022 other than as described above. The Compensation Committee has determined that Meridian is “independent” according to the criteria required by the SEC in Rule 10C-1 of the Exchange Act.
Management’s Role in Establishing Compensation
The compensation of the Named Executive Officers is determined by the Compensation Committee, taking into account the input and recommendations of our President and Chief Executive Officer regarding compensation for slow moving inventories, partially offsetthose executive officers, and taking into account the input of the Nominating and Corporate Governance Committee and Chairman regarding performance of our President and Chief Executive Officer. The Compensation Committee has sole authority for all final compensation determinations regarding our President and Chief Executive Officer. In fiscal 2022, our President and Chief Executive Officer, Chief Human Resources Officer and General Counsel routinely attended the meetings of the Compensation Committee to provide input, as requested by lower freight costs, lower CBE costs, improved production variancesthe Compensation Committee and, in the impactcase of changesthe General Counsel, to act as secretary for the meeting; however, no executive officer has any role in coffee pricesapproving his or her own compensation, and neither our President and Chief Executive Officer nor any other Named Executive Officer is present during the fiscal year June 30, 2020. Inportion of the our fiscal year ending June 30, 2021, we expect continued declinemeeting at which the Compensation Committee considers their compensation. The Compensation Committee regularly meets in our margin dueexecutive session, without members of the management team present, when discussing and approving executive compensation.
Benchmarking and Peer Group Companies
The Compensation Committee compares the pay levels and programs for the Company’s executive officers to customer mix,compensation information from a relevant peer group as well as information from published survey sources. The Compensation Committee uses this comparative data as a reference point in its review and determination of executive compensation but also considers competitive compensation practices and other relevant factors based on the continuedmembers’ collective experience in setting pay. Accordingly, the Compensation Committee does not generally establish compensation at specific benchmark percentiles.
When setting compensation, the Compensation Committee considers other factors in addition to market data, including:
individual performance;
impact on long-term stockholder value creation;
impact on development and execution of Company strategy;
experience and tenure in role;
retention;
trends and competitive factors impacting the labor market;
internal alignment;
the impact of the COVID-19 pandemic on DSD customers.the business and management’s actions to respond to the uncertain market in fiscal 2022; and
scope of responsibility.
The Compensation Committee, with the assistance of Meridian, developed and approved the following peer group for purposes of benchmarking the compensation levels of our Named Executive Officers relative to our peers and informing fiscal 2022 pay levels for our Named Executive Officers:
| B&G Food, Inc. | The Boston Beer Company, Inc. |
| Seneca Food Corporation | Cal-Maine Foods, Inc. |
| Lancaster Colony Corporation | Medifast, Inc. |
| Hostess Brands, Inc. | The Chef’s Warehouse, Inc. |
| Calavo Growers, Inc. | Utz Brands, Inc. |
| J & J Snack Foods Corp. | The Simply Good Foods Company |
| John B. Sanfilippo & Son, Inc. | SunOpta, Inc. |
| Beyond Meat, Inc. | MGP Ingredients, Inc. |
| Freshpet, Inc. | New Age Beverage Corporation |
| Bridgford Foods Corporation |
The Compensation Committee evaluates our peer group annually and makes adjustments to this peer group when appropriate to reflect changes in relative size or operations of the Company or its peers, or to address changes resulting from mergers, acquisitions or other structural changes. The Compensation Committee found this peer group to be appropriate because it represented a meaningful sample of comparable companies in terms of, as applicable, industry, annual revenue, and other business characteristics. In 2022, for fiscal 2023 compensation, the Compensation Committee has decided to remove B&G Foods, Inc., The Chefs’ Warehouse, Inc., The Boston Beer Company, Inc., Lancaster Colony Corporation, Medifast, Inc., Cal-Maine Foods, Inc., and Seneca Foods Corporation from the peer group, and to add Whole Earth Brands, Inc., The Duckhorn Portfolio, Inc., and Vital Farms, Inc. The changes to the peer group were made to include companies with similar business lines and revenues more comparable to those of the Company.
Fiscal 2022 Named Executive Officer Compensation Mix
In fiscal 2020, operating expenses decreased $12.7 million, or 6.5%,2022, the Compensation Committee’s compensation decisions with respect to $181.1 million, or 36.1% of net sales from $193.8 million, or 32.5%, of net sales inour Named Executive Officers once again reflected strong alignment between pay and performance. We believe that our fiscal 2019, primarily due to a $25.7 million increase in net gains from sales of assets, a $17.9 million decrease in selling expenses, a $6.4 million decrease in general and administrative expenses and the absence of $4.7 million in restructuring and other transition expenses, partially offset by impairments of goodwill and intangible assets of $42.0 million.
Key Elements of Fiscal 2022 Executive Compensation Program
Below are the key elements of the Company’s fiscal 2022 executive compensation program applicable to our Named Executive Officers.
| What We Pay | Why and How We Pay It | |||
| Base Salary | • Base salary comprises fixed cash compensation that is designed to provide a reasonable level of Company-wide and individual performance. • Base salaries are reviewed annually and adjusted when appropriate (increases are neither fixed nor guaranteed). • Competitive base salaries are a key component of attracting and retaining executive talent. | |||
| Short-Term Cash Incentives | • Annual cash incentives constitute variable “at risk” compensation, payable in cash based on Company-wide and individual performance. These awards are designed to reward achievement of annual financial objectives as well as near-term strategic objectives that create momentum that is expected to foster the long-term success of the Company’s business. • Company-wide metrics and targets are derived from, and intended to promote, our near-term business strategy. • Individual targets are consistent with our focus on both quantitative and qualitative priorities and thereby reward both attainment of objective metrics and individual contributions. | |||
| Long-Term Incentives | • Stock options, Restricted Stock Units (“RSUs”) and Performance-based Restricted Stock Units (“PBRSUs”) subject to both performance- and time-based vesting conditions are designed to create direct alignment with stockholder objectives, provide a focus on long-term value creation, retain critical talent over extended timeframes and enable key employees to share in value creation. • Performance-based award metrics and targets align with long-term business strategy as well as stock price appreciation creating shareholder value. | |||
| Severance Benefits | • Severance benefits provide income and health insurance protection to our Named Executive Officers in connection with certain involuntary terminations of employment. These severance benefits are designed to enable the Named Executive Officers to focus on the best interests of the Company and its stockholders, including in circumstances that may jeopardize the individual’s job security. • Enhanced severance benefits are available if the termination of employment occurs in connection with a change in control to ensure continued focus on the best alternatives for the Company and its stockholders, free from distractions caused by personal uncertainties associated with the heightened risk to job security that arises for senior executives in the transactional context. • Severance benefits are also key to attracting and retaining key talent. | |||
| Retirement and Welfare Benefits | • A standard complement of retirement, health, welfare and insurance benefits, offered to our Named Executive Officers on terms generally similar to those available to other employees, provides important protections and stability for our Named Executive Officers and their families that help enable our Named Executive Officers to remain focused on their work responsibilities. • These are generally low-cost benefits with a higher perceived value that are intended to help keep our overall compensation package competitive. | |||
| Perquisites | • We provide limited perquisites as well as relocation assistance, each intended to facilitate the operation of the Company’s business and to assist the Company in recruiting and retaining key executives. • These are also low-cost benefits with a higher perceived value that are intended to help keep our overall compensation package competitive. |
Base Salary
Consistent with the established executive compensation philosophy and objectives described above, and utilizing the peer comparisons provided by Meridian, the Compensation Committee approved fiscal 2022 annual base salaries for the Named Executive Officers as shown in the table below.
Named Executive Officers: | Fiscal 2022 Annual Base Salary(1) | Fiscal 2021 Annual Base Salary(1) | Annual Base Salary Percentage Change | |||||||||
| D. Deverl Maserang II | $ | 680,000 | $ | 660,000 | 3.0 | % | ||||||
| Scott R. Drake | $ | 450,000 | $ | 375,000 | 20.0 | % | ||||||
| Ruben E. Inofuentes | $ | 350,000 | $ | 340,000 | 3.0 | % | ||||||
| Maurice S. J. Moragne | $ | 355,000 | $ | 340,000 | 4.4 | % | ||||||
| Amber D. Jefferson | $ | 320,000 | N/A | N/A | ||||||||
| (1) | Annual base salary as of the end of the applicable fiscal year. |
Short-Term Cash Incentives for Fiscal 2022
Fiscal Years Ended June 30, 20192022 awards were designed to place a significant portion of each Named Executive Officer’s annual cash compensation “at risk” and 2018
For the fiscal 2022 Short-Term Cash Incentive Program, the Compensation Committee used adjusted EBITDA as the relevant performance metric and set a minimum threshold for achievement (described below) which, if achieved, the Compensation Committee believed would reflect a meaningful level of Company profitability and would be aligned with our cost plus customers. The decreasestrategic plan to deliver long-term value to our stockholders. Generating EBITDA is critically important during this unprecedented time in net sales was partially offset by an increase in sales from the addition of the Boyd Businesscompany’s history which is fully reflected inwhy adjusted EBITDA was the year ended June 30, 2019, compared to only nine months of Boyd Business operations in the year ended June 30, 2018. The impact of price decreases to customers utilizing commodity-based pricing arrangements was $6.9 million during the year ended June 30, 2019 as compared to $3.0 million in price decreases to customers utilizing such arrangements in the year ended June 30, 2018.
For Year Ended June 30, 2019 vs. 2018 | % of Total Mix Change | |||||
| Effect of change in unit sales | $ | (12.4 | ) | (117.0 | )% | |
| Effect of pricing and product mix changes | 1.8 | 17.0 | % | |||
| Total decrease in net sales | $ | (10.6 | ) | (100.0 | )% | |
(i) income taxes;
(ii) interest expense; and
(iv) depreciation and amortization expense;
(v) ESOP and share-based compensation expense;
(vi) non-cash impairment losses;
non-cash pension withdrawal expense;
(viii) other similar non-cash expenses; (ix) restructuring and other transition expenses; (x) non-recurring stockholder-related expenses; (xi) acquisition costs (and related revenues only during the same fiscal year); (xii) capital issuance expenses; (xiii) out of period external legal expenses; (xiv) business segment disposition expenses (and exclusion of related gain on sales); (xv) net gain or loss on sale of assets other than M&A or business segment disposition; and (xvi) non-recurring and/or extraordinary expenses.
As a result of achieving above the threshold level on adjusted EBITDA, the Compensation Committee determined that the plan should pay out at 80% of each executive’s target annual bonus, subject to adjustment for individual performance. In determining to pay the bonus at this level, the Compensation Committee considered management’s leadership of key initiatives within the company’s optimization strategy that were completed during the fiscal year, including the continued improvement in the Company’s financial performance despite unforeseen lingering impacts of the COVID-19 pandemic;pandemic, supply chain bottlenecks and the significant increase in the cost of raw coffee. The Compensation Committee also considered the continued uncertainty presented by the COVID-19 pandemic, the inflationary environment, and the need for liquidity to execute the Company’s strategic initiatives in evaluating whether to payout in excess of target given the adjusted EBITDA performance. The Compensation Committee believes that it was important to reward executives for the completion of these key initiatives and to keep those executives motivated because the achievement of these milestones is essential to the Company’s plans to deliver long-term value to stockholders.
The following table shows such achievement compared to Company-wide performance threshold for fiscal 2022.
| Metric | AEBITDA Target | Threshold Goal (80% of Target Performance) | Actual Achievement | Actual Achievement Compared to Target Performance | Payout for Fiscal 2022 Company-wide Performance | |||||||||||||||
| Adjusted EBITDA | $ | 20.3 | M | $ | 17.9 | M | $ | 19.1 | M | 93.9 | % | 85.0 | % | |||||||
The following table shows such target achievement compared to actual earned short-term cash incentive for fiscal 2022.
Named Executive Officers: | Fiscal 2022 Target Short Term Cash Incentive | Fiscal 2022 Target Short Term Earned Cash Incentive | ||||||
| D. Deverl Maserang II | $ | 680,000 | $ | 598,400 | ||||
| Scott R. Drake | $ | 337,500 | $ | 297,000 | ||||
| Ruben E. Inofuentes | $ | 210,000 | $ | 159,600 | ||||
| Maurice S. J. Moragne | $ | 213,000 | $ | 170,400 | ||||
| Amber D. Jefferson | $ | 192,000 | $ | 168,960 | ||||
Long-Term Incentive Compensation
Awards
The fiscal 2022 long-term incentives were designed to be competitive with market and losses from sales of assets;
Our practice historically has been to grant annual normal-cycle long-term incentive awards generally in the second quarter of net sales.the fiscal year, with interim grants for new hires and promotions after the annual grant date being made on the first day of the calendar month following the hire or promotion, as applicable. Our grants have historically taken the form of 50% PBRSUs vesting over a three-year performance period and 50% in stock options. However, in an attempt to conserve our authorized shares under our equity plan, the Compensation Committee started utilizing RSUs instead of stock options.
Fiscal 2022 Awards
Restricted Stock Units
In fiscal 2022, the RSUs granted to (i) employee retention and separation benefits, pension withdrawal expense, facility-related costs and other related costs such as travel, legal, consulting and other professional services; and (ii) severance, prorated bonuses for bonus eligible employees, contractual termination payments and outplacement services, and other related costs, including legal, recruiting, consulting, other professional services, and travel.
Performance-Based Restricted Stock Units
In fiscal 2022, the PBRSUs granted to our Named Executive Officers under the 2017 Plan cliff vest at the end of the three-year performance period based upon achievement of adjusted EBITDA (as defined above for purposes of fiscal 2022 cash incentive) performance goals for the performance period July 1, 2021 through June 30, 2024. During this unprecedented period of uncertainty and challenging operating results, a meaningful comparison with historical results and with the results of other companies, and insight into the Company’s ongoing operating performance. Further, management utilizes these measures, in additionenvironment for Farmer Bros., generating EBITDA is critically important to GAAP measures, when evaluating and comparing the Company’s operating performance against internal financial forecasts and budgets.
Performance against adjusted EBITDA targets for each year will determine a payout factor for that year which can range from 0% to 130% of target. At the end of the 3-year performance period, the average payout factor for each of the three one-year adjusted EBITDA Margin, Adjustedmeasurement periods will be calculated. This three-year average payout factor for adjusted EBITDA and Adjusted EBITDA Margin, as defined by us, may not be comparableperformance is then subject to similarly titled measures reported by other companies. We do not intend for non-GAAP financial measures to be considered in isolation or as a substitute for other measures prepared in accordance with GAAP.
| For the Year Ended June 30, | ||||||||||||
| (In thousands) | 2020 | 2019 | 2018 | |||||||||
| Net loss, as reported | $ | (37,087 | ) | $ | (73,595 | ) | $ | (18,280 | ) | |||
| Income tax (benefit) expense | (195 | ) | 40,111 | 17,312 | ||||||||
| Interest expense(1) | 5,590 | 6,036 | 3,177 | |||||||||
| Depreciation and amortization expense | 29,896 | 31,065 | 30,464 | |||||||||
| EBITDA | $ | (1,796 | ) | $ | 3,617 | $ | 32,673 | |||||
| EBITDA Margin | (0.4 | )% | 0.6 | % | 5.4 | % | ||||||
| Year Ended June 30, | |||||||||||||
| (In thousands) | 2020 | 2019 | 2018 | ||||||||||
| Net loss, as reported | $ | (37,087 | ) | $ | (73,595 | ) | $ | (18,280 | ) | ||||
| Income tax (benefit) expense | (195 | ) | 40,111 | 17,312 | |||||||||
| Interest expense(1) | 5,590 | 6,036 | 3,177 | ||||||||||
| Income from short-term investments | — | — | (19 | ) | |||||||||
| Depreciation and amortization expense | 29,896 | 31,065 | 30,464 | ||||||||||
| ESOP and share-based compensation expense | 4,329 | 3,723 | 3,822 | ||||||||||
| Restructuring and other transition expenses(2) | — | 4,733 | 662 | ||||||||||
| Strategic initiatives | 341,000 | 523 | — | — | |||||||||
| Net (gains) losses from sales of assets | (25,237 | ) | 465 | (966 | ) | ||||||||
| Impairment of goodwill and intangible assets | 42,030 | — | 3,820 | ||||||||||
| Non-recurring costs associated with the COVID-19 pandemic | 362 | — | — | ||||||||||
| Postretirement benefits gains curtailment and pension settlement charge | (5,760 | ) | 10,948 | — | |||||||||
| Proxy contest-related expenses | 463 | — | — | ||||||||||
| Acquisition and integration costs | — | 6,123 | 7,570 | ||||||||||
| Severance | 2,273,000 | 3,828 | 2,273 | — | |||||||||
| Adjusted EBITDA(3) | $ | 18,742 | $ | 31,882 | $ | 47,562 | |||||||
| Adjusted EBITDA Margin | 3.7 | % | 5.3 | % | 7.8 | % | |||||||
| June 30, 2020 | June 30, 2019 | |||||||||||||||||||
| (In thousands) | Debt Origination Date | Maturity | Original Borrowing Amount | Carrying Value | Weighted Average Interest Rate | Carrying Value | Weighted Average Interest Rate | |||||||||||||
| Credit Facility | Revolver | 11/6/2023 | N/A | $ | 122,000 | 4.91 | % | $ | 92,000 | 3.98 | % | |||||||||
Our performance goals for adjusted EBITDA are based on business forecasts, our ability to Consolidated Financial Statements included in this Annual Report on Form 10‑K, for details.
For additional information regarding changes to our PBRSU grant practices for fiscal 2023, please see “Compensation Committee Response to Shareholder Feedback” above.
Employment and Change in Control Severance Agreements
The Company has entered into an employment agreement with our President and Chief Executive Officer, Deverl Maserang (“Employment Agreement”), as well as a Change in Control Severance Agreement with each of the Named Executive Officers. A detailed description of the severance benefits each Named Executive Officer is due to receive based on their Employment Agreement and/or Change in Control Severance Agreement is set forth below under the heading “Named Executive Officer Compensation-Potential Payments Upon Termination or Change in Control.”
These agreements were entered into, and continue in effect, to achieve the following objectives: (a) assure the Named Executive Officers’ full attention and dedication to the Company, free from distractions caused by personal uncertainties and risks related to a pending or threatened change in control; (b) assure the Named Executive Officers’ objectivity with respect to stockholders’ interests in a change in control scenario; (c) assure the fair treatment of the Named Executive Officer in case of involuntary termination following a change in control or in connection with a threatened change in control; and (d) attract and retain key talent during uncertain times. The agreements are structured so that payments and benefits are provided only if there is both a change in control or threatened change in control and a qualifying termination of employment (“double trigger”), either by us (other than for “Cause,” “Disability” or death), or by the Named Executive Officer in connection with a “Resignation for Good Reason” (as each is defined in the change in control severance agreements).
Retirement and Welfare Benefits
The Named Executive Officers receive the same welfare benefits as those received by our employees generally, including medical, dental, life, disability and accident insurance.
The Named Executive Officers are eligible on the same basis as our employees generally to participate in the Company’s 401(k). plan. The value of the Named Executive Officers’ 401(k) plan balances depends solely on the performance of investment alternatives selected by the applicable Named Executive Officer from among the alternatives offered to all participants. All investment options in the 401(k) plan are market-based, meaning there are no “above-market” or. guaranteed rates of return. In the beginning of the year ended June 30, 2020,2021 (“fiscal 2020”), the proceeds from the sale of assets helped financed our operations. In fiscal 2018, we filedCompany offered a shelf registration statement with the SEC which allows us to issue unspecified amounts of common stock, preferred stock, depository shares, warrants for the purchase of shares of common stock or preferred stock, purchase contracts for the purchase of equity securities, currencies or commodities, and units consisting of any combination of anydiscretionary match of the foregoing securities, in one or more series, from timeemployees’ annual contributions under the 401(k) plan equal to time and in one or more offerings50% of an employee’s annual contribution, up to a total dollar amount of $250.0 million. In light of our financial position, operating performance and current economic conditions, including the state6% of the global capital markets, there can be no assurance as to whether or when we will be able to raise capital by issuing securities pursuant to our effective shelf registration statement or otherwise. We believe our Amended Revolving Facility, to the extent available, in addition to our cash flows from operations, collectively, will be sufficient to fund our working capital and capital expenditure requirements for the next 12 months.
Today, the Company offers two different types of contributions: (1) a “non-elective” contribution that does not require the team member to contribute and is equal to 4% of eligible earnings; and (2) a company match of 100% of the first 3% of eligible earnings that eligible employees contribute. The Company match is currently made in Company stock to help the Company manage its cash position as it emerges from the impacts of COVID-19. Through our shareholder outreach program, we learned that many of our shareholders are concerned about dilution. So, effective January 1, 2023, we will eliminate the 4% non-elective contribution and change the Company match to 100% of the first 3% each eligible employee contributes plus 50% on the next 2% they contribute. This model will allow the Company to take advantage of the “safe harbor” provisions of the regulations applicable to its 401(k) and remain competitive in a challenging labor market, while reducing the dilutive effects of the match.
Perquisites
We have modifiedbelieve that offering certain limited perquisites facilitates the operation of our business, allows our Named Executive Officers to better focus their time, attention and capabilities on our business, and assists the Company in recruiting and retaining key executives. We also believe that the perquisites offered to our Named Executive Officers are generally consistent with practices dueamong companies in our peer group.
It is the Company’s and the Compensation Committee’s intention to continually assess business needs and evolving practices to ensure that perquisite offerings are competitive and reasonable.
Compensation Policies and Practices
Stock Ownership Guidelines
The Board has adopted Stock Ownership Guidelines to further align the interests of the Company’s executive officers with the interests of the Company’s stockholders. Under the stock ownership guidelines, an executive officer is not permitted to sell any shares of Common Stock received as a result of grants under the Company’s long-term incentive plans unless the executive officer achieves and maintains the applicable threshold share ownership level set forth in the table below. Further, under the stock ownership guidelines, a non-employee director is expected to own and hold during his or her service as a Board member a number of shares of Common Stock with a value of at least four times his or her annual cash retainer for service on the Board, and is not permitted to sell any shares of Common Stock received as grants under the Company’s long-term incentive plans unless and until the non-employee director achieves and maintains this threshold share ownership level.
Shares of Common Stock that count toward satisfaction of these guidelines include: (i) shares of Common Stock owned outright by the executive officer or non-employee director and his or her immediate family members who share the same household, whether held individually or jointly; (ii) restricted stock or restricted stock units (whether or not the restrictions have lapsed); (iii) shares of Common Stock held in trust for the benefit of the executive officer or non-employee director or his or her family; and (iv) shares of Common Stock issuable under vested options held by the executive officer or non-employee director.
| Position | Value of Shares Owned | |
| Chief Executive Officer | 3x base salary | |
| Other Executive Officers | 1x base salary | |
| Non-Employee Directors | 4x Annual Cash Retainer |
Insider Trading Policy (Including Anti-Hedging and Anti-Pledging Policies)
Our insider trading policy prohibits all employees, officers, directors, consultants and other associates of the Company and certain of their family members from, among other things, purchasing or selling any type of security, whether the issuer of that security is the Company or any other company, while aware of material, non-public information relating to the impactissuer of COVID-19 pandemicthe security or from providing such material, non-public information to any person who may trade while aware of such information. The insider trading policy also prohibits employees from engaging in short sales with respect to our securities, purchasing or pledging Company stock on margin and entering into derivative or similar transactions (i.e., puts, calls, options, forward contracts, collars, swaps or exchange agreements) with respect to our operating results. To navigate through this periodsecurities. We also have procedures that require trades by certain insiders, including our directors and executive officers, to be pre-cleared by appropriate Company personnel. Additionally, such insiders are generally prohibited from conducting transactions involving the purchase or sale of uncertainty, we have reduced discretionary expenses, aggressively reduced capital expenditures, closely and proactively managed our inventory purchases, while prioritizing investments in e-commerce initiatives and serving current Direct Ship customers’ needs. Additionally, we also continue to focusedthe Company’s securities from 12:01 a.m. New York City time on the rebalancingfourteenth calendar day before the end of volume acrosseach of the Company’s four fiscal quarters (including fiscal year end) through 11:59 p.m. New York City time on the business day following the date of the public release containing the Company’s quarterly (including annual) results of operations.
Clawback Policy on Executive Compensation in Restatement Situations
In the event of a material restatement of the financial results of the Company, the Board, or the appropriate committee thereof, will review all bonuses and other incentive and equity compensation awarded to the Company’s executive officers on the basis of having met or exceeded performance targets for performance periods that occurred during the restatement period. If such bonuses and other incentive and equity compensation would have been lower had they been calculated based on such restated results, the Board, or the appropriate committee thereof, may, to the extent permitted by governing law and as appropriate under the circumstances, seek to recover for the benefit of the Company all or a portion of such bonuses and incentive and equity compensation awarded to executive officers whose fraud or misconduct caused or partially caused such restatement, as determined by the Board, or the appropriate committee thereof.
Accounting Standards
Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718 requires us to recognize an expense for the fair value of share-based compensation awards. Grants of stock options, restricted stock and PBRSUs under the Company’s long-term incentive plans are accounted for under FASB ASC Topic 718. The Compensation Committee considers the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our manufacturing network, bringing additional production intolong-term incentive program. As accounting standards change, the Company may revise certain programs to appropriately align accounting expenses of our Northlake, Texas facilityshare-based compensation awards with our overall executive compensation philosophy and objectives.
Summary Compensation Table
The following table sets forth summary information concerning compensation awarded to, generate additional savings. Among others things, we have already takenearned by, or paid to each of our Named Executive Officers for all services rendered in all capacities to the following actions:Company and its subsidiaries in the last three fiscal years. For a complete understanding of the table, please read the footnotes and narrative disclosures that follow the table.
| A | B | C | D | E | F | G | H | I | ||||||||||||||||
Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||
| D. Deverl Maserang II (1) | 2022 | 676,154 | — | 2,006,755 | — | 598,400 | 20,900 | 3,292,209 | ||||||||||||||||
| President and Chief Executive Officer | 2021 | 615,574 | — | 1,899,995 | — | 660,000 | 11,114 | 3,186,683 | ||||||||||||||||
| 2020 | 487,385 | — | 499,990 | 999,997 | — | 13,200 | 2,000,572 | |||||||||||||||||
| Scott R. Drake (2) | 2022 | 397,500 | — | 712,160 | — | 297,000 | 19,119 | 1,425,779 | ||||||||||||||||
| Chief Financial Officer | 2021 | 349,758 | — | 344,989 | — | 281,250 | 14,226 | 990,223 | ||||||||||||||||
| 2020 | 80,769 | — | — | 199,999 | — | — | 280,768 | |||||||||||||||||
| Ruben E. Inofuentes (3) | 2022 | 348,077 | — | 245,266 | — | 159,600 | 20,675 | 773,618 | ||||||||||||||||
| Chief Supply Chain Officer | 2021 | 317,114 | — | 359,992 | — | 204,000 | 11,248 | 892,354 | ||||||||||||||||
| 2020 | 192,231 | — | 125,000 | 124,999 | — | 96,368 | 538,598 | |||||||||||||||||
| Maurice S. J. Moragne (4) | 2022 | 352,115 | — | 267,567 | — | 170,400 | 20,606 | 810,688 | ||||||||||||||||
| Chief Sales Officer | 2021 | 340,000 | — | 289,986 | 74,998 | 204,000 | 10,994 | 844,980 | ||||||||||||||||
| Amber D. Jefferson (5) | 2022 | 221,538 | — | 249,996 | — | 168,960 | 10,359 | 650,853 | ||||||||||||||||
| Chief Human Resources Officer | — | — | — | — | — | — | — | — |
(2) Mr. Drake joined as our Board of Directors;Chief Financial Officer effective March 23, 2020.
(3) Mr. Inofuentes joined as our Chief Supply Chain Officer effective November 15, 2019.
(4) Mr. Moragne joined as our Chief Sales Officer effective June 8, 2020.
(5) Ms. Jefferson joined as our Chief Human Resources Officer effective October 11, 2021.
Salary (Column C)
The amounts reported in column C represent base salaries earned by 15%;
Bonus (Column D)
This column reflects that these actions will continue to be successful.no cash-based bonus payments outside of an incentive plan were made during the fiscal years set forth. All non-equity incentive plan compensation for services performed during the fiscal year by the Named Executive Officers under the 2017 Plan is shown in column G.
The significant captionsamounts in column E for fiscal 2020 represent the aggregate grant date fair value of the PBRSU award received by each of Mr. Maserang and amounts from our condensed consolidated statementsMr. Inofuentes in connection with the commencement of cash flows are summarized below:
| For the Years Ended June 30, | |||||||||||
| 2020 | 2019 | 2018 | |||||||||
| Condensed Consolidated Statements of cash flows data (in thousands) | |||||||||||
| Net cash provided by operating activities | $ | 1,455 | $ | 35,450 | $ | 8,855 | |||||
| Net cash used in investing activities | 21,917 | (32,361 | ) | (74,640 | ) | ||||||
| Net cash provided by financing activities | 29,658 | 1,456 | 61,982 | ||||||||
| Net increase (decrease) in cash and cash equivalents | $ | 53,030 | $ | 4,545 | $ | (3,803 | ) | ||||
For annual PBRSU awards in each of fiscal 2022, fiscal 2021 and fiscal 2020, we have reported the fair value of the award based upon the probable satisfaction of the performance conditions as of the grant date. The maximum aggregate grant date fair value that would have been received if the highest level of performance was impacted by, among other items, declines in revenues and related net income and a reduction in outstanding accounts payable balances driven by significant reductions in past due balances. This was partially offset by lower inventory and trade accounts receivable balances resulting from lower revenues.
Option Awards (Column F)
The amounts reported in column F represent the aggregate grant date fair value of stock option awards computed in accordance with FASB ASC Topic 718. The stock option awards granted in fiscal 2020 reflects an award received by Messrs. Maserang, Inofuentes and Drake in connection with commencement of their respective employment. The stock option awards granted in fiscal 2021 reflects awards received by Mr. Moragne in connection with commencement of his employment. A discussion of the assumptions used in calculating the amounts in this column may be found in Note 13 to fiscal 2018 primarily due to, among other items, improved collections on many large national accounts and distributors, improved vendor terms, and reduced cash purchases to fund inventory levels. These were partially offset by a decline in revenues and higher manufacturing and supply chain costs, higher labor and service costs associated with increased installations of coffee brewing equipment, and higher restructuring and other transition expenses.
Non-Equity Incentive Plan Compensation (Column G)
The amounts reported in column G represent the aggregate dollar value of the annual incentives earned by the Named Executive Officers under the 2017 Plan for fiscal 2022 and 2021 under the short-term incentive plan for the relevant fiscal year. In accordance with SEC rules, the actual annual incentive amounts earned by the Named Executive Officers are reflected in the Summary Compensation Table in the fiscal year earned, even though these annual incentive amounts are paid in the subsequent fiscal year.
As a result of the Company’s failure to achieve threshold levels of performance in fiscal 2021, no payouts are reported for any of the Named Executive Officers during that period.
All Other Compensation (Column H)
The amounts reported in column H include the following:
All Other Compensation (1)
Company Contributions to 401(k) Plan (2)($) | Relocation Expense ($) | Relocation Tax Gross-Up ($) | ||||||||
| D. Deverl Maserang II | 2022 | 20,900 | — | — | ||||||
| 2021 | 11,114 | — | — | |||||||
| 2020 | 13,200 | — | — | |||||||
| Scott R. Drake | 2022 | 19,119 | — | — | ||||||
| 2021 | 14,226 | — | — | |||||||
| 2020 | — | — | — | |||||||
| Ruben E. Inofuentes | 2022 | 20,675 | — | — | ||||||
| 2021 | 11,248 | — | — | |||||||
| 2020 | 7,637 | 70,550 | 18,181 | |||||||
| Maurice S.J. Moragne | 2022 | 20,606 | — | — | ||||||
| 2021 | 10,994 | — | — | |||||||
| Amber D. Jefferson | 2022 | 10,359 | — | — |
(1) Except as set forth in the table, the total value of all perquisites and other personal benefits received by each of our Named Executive Officers did not exceed $10,000 in fiscal 2022 and has been excluded from the table.
(2) Represents the Company’s contribution under the 401(k) plan including the company matching contribution and the Qualified Non-elective Contribution (QNEC). Company contributions (and any earnings thereon) are 100% vested. The QNEC contributions are given in Company Common Stock.
Total Compensation (Column I)
The amounts reported in column I are the sum of columns C through H for each of the Named Executive Officers.
Fiscal 2022 Grants of Plan-Based Awards
The following table sets forth, for each of our Named Executive Officers, the plan-based awards granted to each of our Named Executive Officers during fiscal 2022.
Estimated Future Payouts Under Non- Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards(1) | ||||||||||||||||||||||||||||||
| Name | Grant Date | Threshold ($)(3) | Target ($)(3) | Maximum ($)(3) | Threshold (#) | Target (#) | Maximum (#) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(2) | ||||||||||||||||||||
| D. Deverl Maserang II | 9/13/2021 | − | − | − | − | − | − | 112,612 | − | − | 1,003,373 | ||||||||||||||||||||
9/13/2021 | − | − | − | 0 | 112,613 | 202,703 | − | − | − | 1,003,382 | |||||||||||||||||||||
| Scott R. Drake | 9/13/2021 | − | − | − | − | − | − | 21,021 | − | − | 187,297 | ||||||||||||||||||||
9/13/2021 | − | − | − | 0 | 14,014 | 25,255 | − | − | − | 124,865 | |||||||||||||||||||||
5/09/2022 | − | − | − | − | − | − | 73,529 | − | − | 399,998 | |||||||||||||||||||||
| Ruben E. Inofuentes | 9/13/2021 | − | − | − | − | − | − | 16,516 | − | − | 147,158 | ||||||||||||||||||||
9/13/2021 | − | − | − | 0 | 11,011 | 19,820 | − | − | − | 98,108 | |||||||||||||||||||||
Maurice S.J. Moragne | 9/13/2021 | − | − | − | − | − | − | 18,018 | − | − | 160,540 | ||||||||||||||||||||
9/13/2021 | − | − | − | 0 | 12,012 | 21,622 | − | − | 107,027 | ||||||||||||||||||||||
| Amber D. Jefferson | 11/1/21 | − | − | − | − | − | − | 32,851 | − | − | |||||||||||||||||||||
(1) Represents PBRSU awards granted to our Named Executive Officers in fiscal 2022 which cliff vest based upon achievement of adjusted EBITDA performance goals and TSR for the performance period of July 1, 2021 through June 30, 2024. Each year, performance targets for adjusted EBITDA will be established, performance in each of those years will create a bank of shares between 0% to 130% of the target amount, depending on the extent to which the Company meets or exceeds the achievement of the performance goals. At the end of the three-year performance period a TSR modifier is applied which can increase or decrease the cumulative number of shares earned based on adjusted EBITDA by as much as 15%. All shares, including banked shares will be forfeited if the executive voluntarily leaves the Company prior to the end of the performance period.
(2) Reflects the grant date fair value of restricted stock and PBRSU awards computed in accordance with FASB ASC Topic 718. A discussion of the assumptions used of $32.4 million duringin calculating the amounts in this column may be found in Note 14 to our audited consolidated financial statements for the fiscal year ended June 30, 2019.2022, included in our 2022 Form 10-K, except that, as required by applicable SEC rules, we did not reduce the amounts in this column for any risk of forfeiture relating to service-based (time-based) vesting conditions. The $54.3 million increaseamount reported for PBRSU awards is based upon the probable satisfaction of the performance conditions as of the grant date.
(3) Represents annual cash incentive opportunities under the Short-Term Cash Incentive Program based on the Company’s achievement of certain metrics, as determined by the Compensation Committee. Our Named Executive Officers received a cash payout at Target under the Short-Term Cash Incentive Program in fiscal 2022, based on the Compensation Committee’s discretion once threshold performance was achieved. Annual cash providedincentive awards earned by our Named Executive Officers for performance in respect of a fiscal year are paid during the subsequent fiscal year. Such earned awards are included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth summary information regarding the outstanding equity awards at June 30, 2022 granted to each of our Named Executive Officers.
| Option Awards | Stock Awards | |||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable (#)(1) | Number of Securities Underlying Unexercised Options Unexercisable (#)(1) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) (2) | Market Value of Shares or Units of Stock That Have Not Vested ($) (3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value Of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | |||||||||||||||||||
| D. Deverl Maserang II | 147,650 | 76,063 | − | 13.13 | 9/13/2026 | − | − | − | − | |||||||||||||||||||
− | − | − | − | − | − | − | 231,707 | 1,086,706 | ||||||||||||||||||||
− | − | − | − | − | − | − | 112,613 | 528,155 | ||||||||||||||||||||
− | − | − | − | − | 105,030 | 492,591 | − | − | ||||||||||||||||||||
− | − | − | − | − | 112,612 | 528,150 | − | − | ||||||||||||||||||||
| Scott R. Drake | 58,406 | 30,089 | 6.72 | 4/01/2027 | − | − | − | − | ||||||||||||||||||||
− | − | − | − | − | − | − | 21,036 | 98,659 | ||||||||||||||||||||
− | − | − | − | − | − | − | 14,014 | 65,726 | ||||||||||||||||||||
− | − | − | − | − | 19,071 | 89,443 | ||||||||||||||||||||||
− | − | − | − | − | 13,341 | 62,569 | − | − | ||||||||||||||||||||
− | − | − | − | − | 21,021 | 98,589 | − | − | ||||||||||||||||||||
− | − | − | − | − | 73,529 | 344,851 | − | − | ||||||||||||||||||||
| Ruben E. Inofuentes | 17,973 | 9,260 | 14.92 | 11/15/2026 | − | − | − | − | ||||||||||||||||||||
− | − | − | − | − | − | − | 8,378 | 39,293 | ||||||||||||||||||||
− | − | − | − | − | − | − | 21,951 | 102,950 | ||||||||||||||||||||
− | − | − | − | − | − | − | 11,011 | 51,642 | ||||||||||||||||||||
− | − | − | − | − | 19,900 | 93,331 | − | − | ||||||||||||||||||||
− | − | − | − | − | 13,921 | 65,289 | − | − | ||||||||||||||||||||
− | − | − | − | − | 16,516 | 77,460 | − | − | ||||||||||||||||||||
| Maurice S.J. Moragne | 9,821 | 19,940 | 7.23 | 7/01/2027 | − | − | − | − | ||||||||||||||||||||
− | − | − | − | − | − | − | 13,109 | 61,481 | ||||||||||||||||||||
− | − | − | − | − | − | − | 12,012 | 56,336 | ||||||||||||||||||||
− | − | − | − | − | 10,373 | 48,649 | − | − | ||||||||||||||||||||
− | − | − | − | − | 11,855 | 55,741 | − | − | ||||||||||||||||||||
− | − | − | − | − | 8,314 | 38,993 | − | − | ||||||||||||||||||||
− | − | − | − | − | 18,018 | 84,504 | − | − | ||||||||||||||||||||
| Amber D. Jefferson | − | − | − | − | − | 32,851 | 154,071 | − | − | |||||||||||||||||||
(1) Stock options vest in equal ratable installments on each of the first three anniversaries of the date of grant, contingent on continued employment through the applicable vesting date, and subject to accelerated vesting in certain circumstances.
(2) Restricted stock units vest in equal ratable installments on each of the first three anniversaries of the date of grant, contingent on continued employment through the applicable vesting date, and subject to accelerated vesting in certain circumstances.
(3) The market value was calculated by multiplying the closing price of our Common Stock on June 30, 2022 ($4.69) by the number of shares of Common Stock underlying the unvested restricted stock or PBRSUs.
(4) PBRSU awards cliff vest following the expiration of the three-year performance period upon the certification by the Compensation Committee of the Company’s achievement of performance goals for the three-year performance, subject to certain continued employment conditions and subject to the acceleration provisions of the 2017 Plan and restricted stock unit award agreement. At the end of the three-year performance period, the number of PBRSUs that actually vest will be 0% to 200% of the target amount, depending on the extent to which the Company meets or exceeds the achievement of those performance goals measured over the full three-year performance period, with payouts for performance between threshold and target, and between target and maximum determined by reference to a matrix established by the Compensation Committee. The target number of PBRSUs is presented in the table.
Option Exercises and Stock Vested
None of our Named Executive Officers exercised options nor did any of their stock awards vest during fiscal year ended June 30, 2022.
Pension Benefits
None of our Named Executive Officers are entitled to payments or other benefits at, following, or in connection with retirement.
Change in Control and Termination Arrangements
Change in Control Agreements
The Company has entered into change in control severance agreement (“Severance Agreement”) with each of the Named Executive Officers. The Severance Agreements provide certain severance benefits in the event of a termination of employment in connection with a Change in Control (as defined below).
Under each of the Severance Agreements, a “Change in Control” generally will be deemed to have occurred at any of the following times: (i) upon the acquisition by any person, entity or group of beneficial ownership of 50% or more of either the then outstanding Common Stock or the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors; (ii) at the time individuals who were members of the Board at the effective time of the Severance Agreement (or whose election, or nomination for election, was approved by a vote of at least a majority of the members of the Board at the effective time of the Severance Agreement, but excluding any such individual whose initial election or assumption of office occurs as a result of either an actual or threatened election contest) (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; or (iii) the approval of the stockholders of the Company of a reorganization, merger, consolidation, complete liquidation, or dissolution of the Company, the sale or disposition of all or substantially all of the assets of the Company or any similar corporate transaction (other than any transaction with respect to which persons who were the stockholders of the Company immediately prior to such transaction continue to hold shares of Common Stock representing at least 50% of the outstanding Common Stock of the Company or such surviving entity or parent or affiliate thereof immediately after such transaction). Further, a “Threatened Change in Control” generally will be deemed to have occurred upon the first day that any bona fide pending tender offer for any class of the Company’s outstanding shares of Common Stock, any pending bona fide offer to acquire the Company by merger or consolidation, or any other pending action or plan to effect, or which would lead to, a Change in Control, as determined by the Incumbent Board, becomes manifest, and will continue in effect when such action is abandoned or a Change in Control occurs.
In the event of a Named Executive Officer’s termination of employment other than for “Cause” or due to death or “Disability”, or in the event of a Named Executive Officer’s “Resignation for Good Reason” (each, as defined in the Severance Agreements), in each case, in connection with a Change in Control or Threatened Change in Control, each of the Named Executive Officers will be entitled to the payments and benefits shown in the tables below.
Each Severance Agreement provides that while the relevant Named Executive Officer is receiving compensation and benefits thereunder, that Named Executive Officer will not in any manner attempt to induce or assist others to attempt to induce any officer, employee, customer or client of the Company to terminate its association with the Company, nor do anything directly or indirectly to interfere with the relationship between the Company and any such persons or concerns. In the event such Named Executive Officer breaches this provision, all compensation and benefits under the Severance Agreement will immediately cease.
Employment Agreements
Under Mr. Maserang’s Employment Agreement, he is eligible for severance payments in the event of termination without Cause or for resignation with Good Reason (each, as defined in Mr. Maserang’s Employment Agreement) that are not in conjunction with a Change in Control. In the aforementioned events, he would receive the following severance payments:
the sum of his base salary and target annual bonus payable over twelve months,
partially Company-paid COBRA coverage under the Company’s health plan for a period of 12 months
a pro rata bonus, if earned for the year of termination and
if such termination occurs after the end of the fiscal year but before any bonus for the fiscal year is paid, then the payment of any such earned bonus.
The potential amount of these payments are reflected in the table below.
Potential Payments Upon Termination or Change in Control
The following tables describe potential payments and benefits upon termination (including resignation, severance, retirement or a constructive termination) or a change in control to which the Named Executive Officers would be entitled. The actual amount of payments and benefits can only be determined at the time of such a termination or change in control and therefore the actual amounts may vary from investment activities was principallythe estimated amounts in the tables below. Descriptions of how such payments and benefits are determined under the circumstances, material conditions and obligations applicable to the receipt of payments or benefits and other material factors regarding such agreements, as well as other material assumptions that we have made in calculating the estimated compensation, follow these tables.
The estimated amount of compensation payable to each Named Executive Officer in each situation is listed in the tables below and, with respect to each Named Executive Officer, assumes that the termination and/or change in control of the Company occurred on June 30, 2022.
| D. Deverl Maserang II | Change in Control and Involuntarily Terminated or Resignation for Good Reason Within 24 Months of Change in Control | Threatened Change in Control and Involuntarily Terminated or Resignation for Good Reason | Termination Without Cause or Resignation With Good Reason |
| Base Salary Continuation | 1,360,000 | 1,360,000 | 680,000 |
| Annual Incentive Payments | 680,000 | 680,000 | 680,000 |
| Value of Accelerated Stock Options | 0 | 0 | |
| Value of Accelerated Restricted Stock | 1,020,741 | 1,020,741 | 1,020,741 |
| Value of Accelerated PBRSUs | 1,614,861 | 1,614,861 | 1,614,861 |
| Health and Dental Insurance | 34,014 | 34,014 | 17,007 |
| Outplacement Services | 25,000 | 25,000 | 25,000 |
| Total Pre-Tax Benefit | 2,099,014 | 2,099,014 | 4,037,609 |
Scott R. Drake
| Base Salary Continuation | 900,000 | 900,000 | 0 |
| Annual Incentive Payments | 337,500 | 337,500 | 0 |
| Value of Accelerated Stock Options | 0 | 0 | 0 |
| Value of Accelerated Restricted Stock | 595,452 | 595,452 | 0 |
| Value of Accelerated PBRSUs | 164,385 | 164,385 | 0 |
| Health and Dental Insurance | 34,014 | 34,014 | 0 |
| Outplacement Services | 25,000 | 25,000 | 0 |
| Total Pre-Tax Benefit | 1,312,966 | 1,312,966 | 0 |
Ruben E. Inofuentes
| Base Salary Continuation | 700,000 | 700,000 | 0 |
| Annual Incentive Payments | 210,000 | 210,000 | 0 |
| Value of Accelerated Stock Options | 0 | 0 | 0 |
| Value of Accelerated Restricted Stock | 236,080 | 236,080 | 0 |
| Value of Accelerated PBRSUs | 193,885 | 193,885 | 0 |
| Health and Dental Insurance | 49,972 | 49,972 | 0 |
| Outplacement Services | 25,000 | 25,000 | 0 |
| Total Pre-Tax Benefit | 984,972 | 984,972 | 0 |
Maurice S.J. Moragne
| Base Salary Continuation | 710,000 | 710,000 | 0 |
| Annual Incentive Payments | 213,000 | 213,000 | 0 |
| Value of Accelerated Stock Options | 0 | 0 | 0 |
| Value of Accelerated Restricted Stock | 227,887 | 227,887 | 0 |
| Value of Accelerated PBRSUs | 117,817 | 117,817 | 0 |
| Health and Dental Insurance | 34,486 | 34,486 | 0 |
| Outplacement Services | 25,000 | 25,000 | 0 |
| Total Pre-Tax Benefit | 984,486 | 984,486 | 0 |
Amber D. Jefferson
| Base Salary Continuation | 640,000 | 640,000 | 0 |
| Annual Incentive Payments | 192,000 | 192,000 | 0 |
| Value of Accelerated Stock Options | 0 | 0 | 0 |
| Value of Accelerated Restricted Stock | 154,071 | 154,071 | 0 |
| Value of Accelerated PBRSUs | 0 | 0 | 0 |
| Health and Dental Insurance | 17,332 | 17,332 | 0 |
| Outplacement Services | 25,000 | 25,000 | 0 |
| Total Pre-Tax Benefit | 874,332 | 874,332 | 0 |
Base Salary Continuation
Severance Agreements
Under each Severance Agreement, if (i) a Change in Control occurs and a Named Executive Officer’s employment is terminated within the two years following the occurrence of the Change in Control by the Company other than for Cause, Disability or death, or is terminated due to the sales of assetsNamed Executive Officer’s Resignation for Good Reason, or (ii) a Threatened Change in Control occurs and the executive officer’s employment is terminated during the current period resulting“Threatened Change in net cash proceeds of $39.1 million. In addition, cash usedControl Period” (as defined in the Severance Agreement) by the Company other than for purchases of property, plant and equipment decreased $17.2 million primarilyCause, Disability or death, or is terminated due to lower maintenance capital expenditures,the Named Executive Officer’s Resignation for Good Reason (each, a “Change in Control Qualifying Termination”), such Named Executive Officer will be entitled to base salary continuation for a period of 12-month or 24-months depending upon the terms of their individual agreement, with such payment to be made in installments in accordance with the Company’s standard payroll practices over such period.
Bonus and lower coffee brewing equipment purchasesAnnual Incentive Payments
Severance Agreements
Under each Severance Agreement, if a Change in Control Qualifying Termination occurs, the Named Executive Officer will receive a lump sum payment equal to 100% of the executive officer’s target annual cash bonus for the fiscal year in which the date of termination occurs (or, if no target annual cash bonus has been assigned as of the date of termination, the average annual cash bonus paid to such Named Executive Officer for the last three completed fiscal years or for the number of completed fiscal years such person has been in the current yearemploy of the Company if fewer than three).
Value of Accelerated Vesting of Stock Options and Restricted Stock
Under the terms of the Named Executive Officers’ outstanding awards, in the event of death or “Disability” (as defined in the applicable plan):
100% of any unvested stock options will vest;
a pro rata portion of any unvested restricted stock will vest; and
outstanding PBRSU awards will remain outstanding and the participant will be eligible to earn a pro-rata portion of the number of PBRSU awards that would have been earned based on actual performance through the end of the performance period (amounts shown in the tables above assume 100% of the target PBRSU awards were earned at the end of the performance period).
Under the applicable award agreement, if a Change in Control (as defined in the applicable plan) occurs and a participant’s awards are not continued, converted, assumed or replaced by the Company or a parent or subsidiary of the Company, or a Successor Entity (as defined in the applicable plan), such awards will become fully exercisable and/or payable, and all forfeiture, repurchase and other restrictions on such awards will lapse immediately prior to such Change in Control. In the case of PBRSU awards, the vested shares will be a prorated number of the target PBRSU awards. The amounts in the tables above assume all awards were continued, converted, assumed, or replaced in connection with a Change in Control.
If there is a Change in Control and the Named Executive Officer’s employment is terminated by the Company without Cause or by the participant for Good Reason, in either case, within twenty-four months following the Change in Control:
100% of any unvested stock options will vest;
100% of any unvested restricted stock or restricted stock units will vest; and
the target number of PBRSU awards will be deemed to have immediately vested as we focusedof the date of termination of service.
The value of accelerated awards shown in the tables above was calculated using the closing price of our Common Stock on refurbished CBE equipment to drive cost savings. Investment capitalJune 30, 2022 ($4.69). The value of accelerated stock options is based on the difference between the exercise price and such closing price for all accelerated stock options that were in-the-money as of such date.
Under the applicable plan, the Plan Administrator also declined due to lower purchaseshas discretionary authority regarding accelerated vesting of machineryawards in certain circumstances. The amounts in the tables above assume such discretionary authority was not exercised.
Health and equipment forDental Insurance
Severance Agreements
Under each Severance Agreement, if a Change in Control Qualifying Termination occurs, the Northlake, Texas plant comparedhealth, dental, and life insurance benefits coverage provided to the Named Executive Officer at his or her date of termination will be continued by the Company during the 12-month or 24-month period following the Named Executive Officer’s date of termination, based on the terms of their individual agreement unless he or she commences employment prior year period.to the end of the relevant period and qualifies for substantially equivalent insurance benefits with his or her new employer, in which case such insurance coverage will end on the date of qualification. The Company will generally provide for such insurance coverage at its expense at the same level and in the same manner as in effect at the applicable date of termination. Any additional coverage the Named Executive Officer had at the time of termination, including dependent coverage, will also be continued for such period on the same terms, to the extent permitted by the applicable policies or contracts. If the terms of any benefit plan do not permit such continued coverage, the Company will arrange for other coverage at its expense providing substantially similar benefits. Estimated payments shown in the tables above represent the current net annual cost to the Company of the Named Executive Officer’s participation in the Company’s health and/or dental insurance program offered to all non-union employees.
The tables and discussion above do not reflect the value of accrued and unused paid days off, disability benefits under the Company’s group health plan, the value of retiree medical, vision and dental insurance benefits, and group life insurance, if any, that would be paid and/or provided to each Named Executive Officer following termination of employment, because, in investing activities duringeach case, these benefits are generally available to all regular Company employees similarly situated in age, years of service and date of hire and do not discriminate in favor of the Named Executive Officers.
Outplacement Services
Under each of the 12-month or 24-month Severance Agreements, if a Change in Control Qualifying Termination occurs, the Company will provide the Named Executive Officer with outplacement services at the expense of the Company, in an amount of $15,000 or $25,000, respectively.
CEO to Median Employee Pay Ratio
In accordance with applicable SEC rules, we are providing the ratio of the annual total compensation of our CEO to the median of the annual total compensation of our other employees, excluding our CEO. For fiscal 2022, as calculated in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, the annual total compensation of our CEO was $3,292,209 as disclosed in the “Summary Compensation Table”, the median of the annual total compensation of our employees other than the CEO was $44,452, and the ratio of our CEO’s annual total compensation to the median of the annual total compensation of our other employees was 74 to 1.
We believe the ratio presented above is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. We determined our median employee based on total direct compensation paid to all of our employees (consisting of approximately 1,068 individuals active as of June 30, 2022) for the fiscal year ended June 30, 2019 decreased $42.3 million as compared2022. Total direct compensation was calculated using internal human resources records and included base salary (wages earned based on our payroll records), cash incentive awards earned for the period, and the annual grant date fair value of long-term incentive awards during fiscal 2022.
Because the SEC rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to fiscal year ended June 30, 2018. Investment activities were elevated inadopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices, the prior year period principally duepay ratio reported by other companies may not be comparable to the acquisitionpay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Director Compensation
Non-Employee Director Compensation
The compensation program for our non-employee directors is intended to fairly compensate our non-employee directors for the time and effort required of a director given the size and complexity of the Boyd BusinessCompany’s operations. Portions of the compensation program utilize our stock in order to further align the interests of the directors with all other stockholders of the Company and to motivate the directors to focus on the long-term financial interest of the Company. Directors who are Company employees are not paid any additional fees for $39.6 millionserving on the Board or for attending Board meetings.
The Company’s non-employee director compensation program is as follows:
Form of Non-Employee Director Compensation | Director Compensation Program |
| Annual Board Cash Retainer | $60,000 |
| Committee Chair Cash Retainer | $10,000 for Nominating and Corporate Governance Committee and Technology Committee $15,000 for Compensation Committee $20,000 for Audit Committee |
| Non-Chair Committee Cash Retainer | $7,500 for Compensation Committee and Nominating and Corporate Governance Committee $10,000 for Audit Committee |
| Chairman of the Board Cash Retainer | $50,000, with no additional fees for committee service |
| Meeting Fees | $2,000, only paid for Board or committee meetings in excess of seven in a fiscal year |
| Annual Equity Award Value | $95,000 |
| Expense Reimbursement | Payment or reimbursement of reasonable travel expenses from outside the greater Dallas-Fort Worth area, in accordance with Company policy, incurred in connection with attendance at Board and committee meetings, as well as payment or reimbursement of amounts incurred in connection with director continuing education |
| Other | Ad hoc committee fees are determined from time to time by the Board, as needed. |
The annual grant of restricted stock is generally made on the date on which the Company holds its annual meeting of stockholders or such other date as the Board may determine, in cash. Foreach case, subject to any blackout period under the Company’s insider trading policy. In fiscal 2022, the annual grant of restricted stock was made on December 15, 2021. Each non-employee director received a grant of 14,683 shares of restricted stock based on the $6.47 closing price per share of our Common Stock on December 15, 2021 (for an aggregate amount of $94,999.01), with the exception of Mr. Zaman. Mr. Zaman received a grant of 17,613 shares of restricted stock based on the $6.47 closing price per share of our Common Stock on December 15, 2021 (for an aggregate amount of $113,956.11). Mr. Zaman received a larger grant because he joined the Board on September 1, 2021 but did not receive an equity grant for his approximately 3.5 months of service prior to December 15, 2021. Such grants cliff vest on the one-year anniversary of the grant date, subject to continued service to the Company through the vesting date and the acceleration provisions of the 2017 Plan and the restricted stock award agreement.
Stock Ownership Guidelines
Under the Company’s stock ownership guidelines, a non-employee director is expected to own and hold during his or her service as a Board member a number of shares of Common Stock with a value of at least four times their annual retainer, and is not permitted to sell any shares of Common Stock received as grants under the Company’s long-term incentive plans unless and until the non-employee director achieves and maintains this threshold share ownership level.
Shares of Common Stock that count toward satisfaction of these guidelines include (to the extent applicable): (i) shares of Common Stock owned outright by the non-employee director and his or her immediate family members who share the same household, whether held individually or jointly; restricted stock or restricted stock units (whether or not the restrictions have lapsed); (iii) shares of Common Stock held in trust for the benefit of the non-employee director or his or her family; and (iv) shares of Common Stock issuable under vested options held by the non-employee director.
Director Compensation Table
The following table sets forth non-employee director compensation for fiscal 2022:
| Director | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | ||||||
| Allison M. Boersma | 85,000 | 95,000 | 180,000 | ||||||
| Stacy Loretz-Congdon | 80,000 | 95,000 | 175,000 | ||||||
| Charles F. Marcy | 80,000 | 95,000 | 175,000 | ||||||
| Christopher P. Mottern | 110,000 | 95,000 | 205,000 | ||||||
| Alfred Poe | 83,750 | 95,000 | 178,750 | ||||||
| John D. Robinson | 46,042 | 95,000 | 141,042 | ||||||
| Waheed Zaman | 63,333 | 113,956 | 177,289 |
(1) Represents the full grant date fair value of restricted stock granted to each non-employee director in fiscal 2022, computed in accordance with FASB ASC Topic 718. A discussion of the assumptions used in calculating the amounts in this column may be found in Note 16 to our audited consolidated financial statements for the fiscal year ended June 30, 2019 we had purchases of property, plant and equipment of $34.8 million, which2022, included $13.7 millionin our Annual Report on Form 10-K for machinery and equipment relating to the Northlake, Texas facility, and $21.1 million in maintenance capital expenditures. Maintenance capital expenditures included higher coffee brewing equipment purchases compared to the prior year period due to an increased level of installations for new customers during fiscal 2019.
Director Indemnification
Under the Company’s Certificate of Incorporation and By-Laws, the current and former directors are entitled to indemnification and advancement of expenses from the Company to the fullest extent permitted by Delaware corporate law. The $30.0 millionBoard of Directors has approved a form of Indemnification Agreement (“Indemnification Agreement”) to be entered into between the Company and its directors and officers. The Company’s Board of Directors may from time to time authorize the Company to enter into additional indemnification agreements with future directors and officers of the Company.
The Indemnification Agreements provide, among other things, that the Company will, to the extent permitted by applicable law, indemnify and hold harmless each indemnitee if, by reason of his or her corporate status as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent of the Company or of any other enterprise which such person is or was serving at the request of the Company, such indemnitee was, is or is threatened to be made, a party to or a participant (as a witness or otherwise) in net borrowingsany threatened, pending or completed proceeding, whether formal or informal, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, against all expenses, judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by him or her or on his or her behalf in connection with such proceeding. In addition, the Indemnification Agreements provide for the payment, advancement or reimbursement of expenses incurred by the indemnitee in connection with any such proceeding to the fullest extent permitted by applicable law. The Indemnification Agreements also provide that, in the event of a Potential Change in Control (as defined in the Indemnification Agreements), the Company will, upon request by the indemnitee, create a trust for the benefit of the indemnitee and fund such trust in an amount sufficient to satisfy expenses reasonably anticipated to be incurred in connection with investigating, preparing for, participating in or defending any proceedings, and any judgments, fines, penalties and amounts paid in settlement in connection with any proceedings. The Indemnification Agreements do not exclude any other rights to indemnification or advancement of expenses to which the indemnitee may be entitled, including any rights arising under the Certificate of Incorporation or By-Laws of the Company, or the General Corporation Law of the State of Delaware. The Company is also obligated to maintain directors’ and officers’ liability insurance coverage, including tail coverage under certain circumstances.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on the review and discussions, recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Amendment and incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020, was the result of increased borrowings as a proactive measure to increase our cash position and preserve financial flexibility due to the COVID-19 pandemic business uncertainty.
| Payment due by period | ||||||||||||||||||||
| (In thousands) | Total | Less Than One Year | 1-3 Years | 3-5 Years | More Than 5 Years | |||||||||||||||
| Contractual obligations: | ||||||||||||||||||||
| Operating lease obligations(1) | $ | 21,482 | $ | 5,854 | $ | 8,348 | $ | 6,157 | $ | 1,123 | ||||||||||
| Finance lease obligations(1) | 9 | 9 | — | — | — | |||||||||||||||
| Pension plan obligations(2) | 72,790 | 7,260 | 14,170 | 14,700 | 36,660 | |||||||||||||||
Postretirement benefits other than pension plans(2) | 5,166 | 750 | 915 | 963 | 2,538 | |||||||||||||||
| Revolving credit facility | 122,000 | — | — | 122,000 | — | |||||||||||||||
| Purchase commitments(3) | 65,702 | 65,702 | — | — | — | |||||||||||||||
| Derivative liabilities—noncurrent | 2,859 | — | 2,859 | — | — | |||||||||||||||
| Cumulative Preferred dividends, undeclared and unpaid-non-current | 1,478 | — | 1,478 | — | — | |||||||||||||||
| Total contractual obligations | $ | 291,486 | $ | 79,575 | $ | 27,770 | $ | 143,820 | $ | 40,321 | ||||||||||
| June 30, | ||||||||||||
| (In thousands) | 2020 | 2019 | 2018 | |||||||||
| Maintenance: | ||||||||||||
| Coffee brewing equipment | $ | 6,479 | $ | 14,925 | $ | 12,067 | ||||||
| Building and facilities | 154 | 106 | 542 | |||||||||
| Vehicles, machinery and equipment | 1,772 | 2,787 | 5,513 | |||||||||
| Software, office furniture and equipment | 3,440 | 3,270 | 3,660 | |||||||||
| Capital expenditures, maintenance | $ | 11,845 | $ | 21,088 | $ | 21,782 | ||||||
| Expansion Project: | ||||||||||||
| Machinery and equipment | $ | 5,417 | $ | 13,671 | $ | 10,746 | ||||||
| IT equipment | $ | 298 | $ | — | $ | — | ||||||
| Capital expenditures, Expansion Project | $ | 5,715 | $ | 13,671 | $ | 10,746 | ||||||
| New Facility Costs: | ||||||||||||
| Building and facilities, including land | $ | — | $ | — | $ | 1,577 | ||||||
| Machinery and equipment | — | — | 2,489 | |||||||||
| Software, office furniture and equipment | — | — | 426 | |||||||||
| Capital expenditures, New Facility | $ | — | $ | — | $ | 4,492 | ||||||
| Total capital expenditures | $ | 17,560 | $ | 34,759 | $ | 37,020 | ||||||
| Compensation Committee |
| of the Board of Directors |
| Charles F. Marcy, Chair |
| Alfred Poe |
| John D. Robinson |
| ($ in thousands) | Principal | Interest Rate | Annual Interest Expense | ||||||
| –150 basis points | $57,000 | 3.41 | % | $ | 1,944 | ||||
| –100 basis points | $57,000 | 3.91 | % | $ | 2,229 | ||||
| Unchanged | $57,000 | 4.91 | % | $ | 2,799 | ||||
| +100 basis points | $57,000 | 5.91 | % | $ | 3,369 | ||||
| +150 basis points | $57,000 | 6.41 | % | $ | 3,654 | ||||
| Increase (Decrease) to Net Income | Increase (Decrease) to AOCI | |||||||||||||||
| 10% Increase in Underlying Rate | 10% Decrease in Underlying Rate | 10% Increase in Underlying Rate | 10% Decrease in Underlying Rate | |||||||||||||
| (In thousands) | ||||||||||||||||
| Coffee-related derivative instruments(1) | $ | 861 | $ | (861 | ) | $ | 3,813 | $ | (3,813 | ) | ||||||
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth information required by this item willas of June 30, 2022 with respect to the shares of Common Stock that may be set forth inissued upon the Proxy Statementexercise of options and is incorporated in this report by reference.
| Plan Category | Number of Shares to be Issued Upon Exercise / Vesting of Outstanding Options or Rights(2) | Weighted Average Exercise Price of Outstanding Options(3) | Number of Shares Remaining Available for Future Issuance(4) | |||
| Equity compensation plans approved by stockholders(1) | 535,430 | $13.56 | 458,947 | |||
| Equity compensation plans not approved by stockholders (5) | 88,495 | $6.72 | 211,505 | |||
| Total | 623,925 | 670,452 | ||||
| Plan Category | Number of Shares to be Issued Upon Exercise / Vesting of Outstanding Options or Rights(2) | Weighted Average Exercise Price of Outstanding Options(3) | Number of Shares Remaining Available for Future Issuance(4) | |||||||||
| Equity compensation plans approved by stockholders(1) | 641,205 | $ | 14.36 | 1,581,299 | ||||||||
| Equity compensation plans not approved by stockholders (5) | 118.256 | $ | 6.85 | 99,537 | ||||||||
| Total | 759,461 | 1,680,836 | ||||||||||
(1) Includes shares issued under the Prior PlansAmended and Restated 2007 Long-Term Incentive Plan, and its predecessor plan, the Farmer Bros. Co. 2007 Omnibus Incentive Plan (together, the “Prior Plans”) and the 2017 Plan. The 2017 Plan succeeded the Prior Plans. On the Effective Date of the 2017 Plan, the Company ceased granting awards under the Prior Plans; however, awards outstanding under the Prior Plans will remain subject to the terms of the applicable Prior Plan.
(2) Includes shares that may be issued upon the achievement of certain financial and other performance criteria as a condition to vesting in addition to time-based vesting pursuant to PBRSUs granted under the 2017 Plan. The PBRSUs included in the table include the maximum number of shares that may be issued under the awards. Under the terms of the awards, the recipient may earn between 0% and 150%200% of the target number of PBRSUs depending on the extent to which the Company meets or exceeds the achievement of the applicable financial performance goals.
(3) Does not include outstanding PBRSUs.
(4) The 2017 Plan authorizes the issuance of (i) 900,0003,550,000 shares of common stockCommon Stock plus (ii) the number of shares of common stockCommon Stock subject to awards under the Company’s Prior Plans that are outstanding as of the Effective Date and that expire or are forfeited, cancelled or similarly lapse following the Effective Date. Subject to certain limitations, shares of common stockCommon Stock covered by awards granted under the 2017 Plan that are forfeited, expire or lapse, or are repurchased for or paid in cash, may be used again for new grants under the 2017 Plan. Shares of common stockCommon Stock granted under the 2017 Plan may be authorized but unissued shares, shares purchased on the open market or treasury shares. In no event will more than 900,0003,550,000 shares of common stockCommon Stock be issuable pursuant to the exercise of incentive stock options under the 2017 Plan. The 2017 Plan provides for the grant of stock options (including incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, performance shares and other stock- or cash-based awards to eligible participants. Non-employee directors of the Company and employees of the Company or any of its subsidiaries are eligible to receive awards under the 2017 Plan. If the Plan Amendment is adopted, the Company’s consultants would also be eligible to receive awards under the 2017 Plan.
(5) Consists of grants made under the Farmer Bros. Co. 2020 Inducement Incentive Award Plan (the “Inducement Award Plan”), which in accordance with Rule 5635(c)(4) of the Nasdaq Stock Market LLC listing rulesListing Rules (“Rule 5635(c)(4)”) permits grants of up to 300,000 shares of common stockCommon Stock to newly hired employees who have not previously been a member of the Board, or to an employee who is being rehired following a bona fide period of non-employment by the Company or a subsidiary, as a material inducement to the employee'semployee’s entering into employment with the Company or its subsidiary. Subject to certain limitations, shares of common stockCommon Stock covered by awards granted under the Inducement Award Plan that are forfeited, expire or lapse, or are repurchased for or paid in cash, may be used again for new grants under the Amended and Restated 2017 Plan. The Inducement Award Plan allows for the grant of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, and dividend equivalentsequivalents.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial ownership of the Company’s voting securities as of October 1, 2022 by (i) each of our current directors, (ii) each of our executive officers required to be listed pursuant to Item 402 of Regulation S-K, (iii) all of our current directors and executive officers as a group, and (iv) each person, or group of affiliated persons, known to us to be the beneficial owner of more than five percent (5%) of our outstanding Common Stock, based on 19,279,970 shares of Common Stock outstanding as of October 1, 2022.
The amounts and percentages of shares beneficially owned are reported on the basis of SEC regulations governing the determination of beneficial ownership of securities. Under SEC rules, a person is deemed to be a “beneficial” owner of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Securities that can be so acquired are not deemed to be outstanding for purposes of computing any other person’s percentage. Under these rules, more than one person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.
Except as otherwise indicated in these footnotes, each of the individuals or entities listed below has, to our knowledge, sole voting and investment power with respect to the shares of Common Stock. Unless otherwise indicated below, the address for each natural person listed below is c/o Farmer Bros. Co., 1912 Farmer Brothers Drive, Northlake, Texas 76262.
| Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class(1) |
| Non-Employee Directors: | ||
Allison M. Boersma(2) | 45,913 | * |
Stacy Loretz-Congdon(2) | 45,641 | * |
Charles F. Marcy(3) | 58,283 | * |
Christopher P. Mottern(4) | 103,379 | * |
Alfred Poe(2) | 33,764 | * |
John Robinson(2) | 14,683 | * |
Waheed Zaman(5) | 17,613 | * |
| Named Executive Officers: | ||
D. Deverl Maserang II(6) | 282,715 | 1.5% |
Scott R. Drake(7) | 156,210 | * |
Ruben E. Inofuentes(8) | 88,225 | * |
Maurice S.J. Moragne(9) | 58,544 | * |
Amber D. Jefferson(10) | 2,345 | * |
All directors and executive officers as a group (13 individuals)(11) | 939,401 | 4.9% |
| Greater than 5% Stockholders: | ||
Mario J. Gabelli, GAMCO Investors, Inc. and Affiliated Parties(12) | 1,523,457 | 7.9% |
Kennedy Capital Management, Inc.(13) | 1,030,211 | 5.3% |
James C. Pappas, Aron R. English, Bradley L. Radoff and Affiliated Parties(14) | 3,285,073 | 17.0% |
Farmer Bros. Co. 401(k) Plan(15) | 1,921,751 | 10.0% |
* Less than 1%
(1) Percent of class is calculated based on 19,279,970 outstanding shares of Common Stock, plus securities deemed outstanding pursuant to Rule 13d-3(d)(1) under the Exchange Act, as of October 1, 2022 and may differ from the percent of class reported in statements of beneficial ownership filed with the SEC.
(2) Includes 14,683 unvested shares of restricted stock which will vest in December 2022.
(3) Includes 14,683 unvested shares of restricted stock which will vest in December 2022, 2,000 shares held in a SEP IRA and 5,000 shares held in a revocable trust.
(4) Includes 14,683 unvested shares of restricted stock which will vest in December 2022 and 20,000 shares held by the Mottern Family Trust.
(5) Includes 17,613 unvested shares of restricted stock which will vest in December 2022
(6) Includes 223,713 shares of Common Stock issuable upon exercise of options which are currently exercisable or will become exercisable within 60 days and 6,099 shares of Common Stock beneficially owned by Mr. Maserang through the Company’s 401(k) Plan, rounded to the nearest whole share.
(7) Includes 58,406 shares of Common Stock issuable upon exercise of options which are currently exercisable or will become exercisable within 60 days and 5,870 shares of Common Stock beneficially owned by Mr. Drake through the Company’s 401(k) Plan, rounded to the nearest whole share.
(8) Includes 9,260 shares of Common Stock issuable upon exercise of options which are currently exercisable or will become exercisable within 60 days and 4,416 shares of Common Stock beneficially owned by Mr. Inofuentes through the 401(k) Plan, rounded to the nearest whole share.
(9) Includes 19,642 shares of Common Stock issuable upon exercise of options which are currently exercisable or will become exercisable within 60 days and 5,110 shares of Common Stock beneficially owned by Mr. Moragne through the 401(k) Plan, rounded to the nearest whole share.
(10) Includes 2,345 shares of Common Stock beneficially owned by Ms. Jefferson through the 401(k) Plan, rounded to the nearest whole share.
(11) Includes 328,994 shares of Common Stock issuable upon exercise of options which will become exercisable within 60 days and 23,840 shares of Common Stock beneficially owned through the 401(k) Plan, rounded to the nearest whole share.
(12) Based solely on an amendment to Schedule 13D filed March 31, 2022, according to which (i) Mario J. Gabelli may be deemed to beneficially own 1,523,457 of these shares, (ii) Gabelli Funds, LLC may be deemed to beneficially own 297,167 of these shares, (iii) GAMCO Asset Management, Inc. may be deemed to beneficially own 767,000 of these shares, (iv) Teton Advisors, Inc. may be deemed to beneficially own 459,000 of these shares, (v) and GAMCO Investors, Inc. may be deemed to beneficially own 290 of these shares. The principal address of each of the aforementioned parties is One Corporate Center, Rye, New York 10580.
(13) Based solely on a Schedule 13G filed on February 14, 2022. The principal address of Kennedy Capital Management, Inc. is 10829 Olive Blvd., St. Louis, Missouri 63141.
(14) Based solely on (1) a Schedule 13D filed October 7, 2022, according to which (i) Aron R. English may be deemed to beneficially own 1,964,536 of these shares, (ii) 22NW Fund, LP, 22NW, LP, 22NW Fund GP, LLC, and 22NW GP, Inc. may each be deemed to beneficially own 1,955,526 of these shares, (iii) Cory J. Mitchell may be deemed to beneficially own 1,300 of these shares, (iv) Bryson O. Hirai-Hadley may be deemed to beneficially own 1,261 of these shares, and (v) Ryan W. Broderick may be deemed to beneficially own 150 of these shares, and (2) an amendment to Schedule 13D filed on October 3, 2022, according to which (i) James C. Pappas and JCP Investment Management, LLC may each be deemed to beneficially own 992,826 of these shares, (ii) JCP Investment Partnership, LP, JCP Investment Partners, LP and JCP Investment Holdings, LLC may each be deemed to beneficially own 671,955 of these shares, (iii) Bradley L. Radoff may be deemed to beneficially own 275,000 of these shares, and (iv) The Radoff Family Foundation may be deemed to beneficially own 75,000 of these shares. The principal address of each of Aron R. English, 22NW Fund, LP, 22NW, LP, 22NW Fund GP, LLC, 22NW GP, Inc., Cory J. Mitchell, Bryson O. Hirai-Hadley, and Ryan W. Broderick is 1455 NW Leary Way, Suite 400, Seattle, Washington 98107. The principal address of James C. Pappas, JCP Investment Management, LLC, JCP Investment Partnership, LP, JCP Investment Partners, LP, and JCP Investment Holdings, LLC is 1177 West Loop South, Suite 1320, Houston, Texas 77027. The principal address of Bradley L. Radoff and The Radoff Family Foundation is 2727 Kirby Drive, Unit 29L, Houston, Texas 77098.
(15) This information is based on the Company’s records and includes 1,921,751 shares of Common Stock that are held in the 401(k) Plan and allocated to a participant’s account (“allocated shares”) as of October 1, 2022, and includes the 23,840 shares of Common Stock beneficially owned by the executive officers described above. The 401(k) Trustee votes allocated shares as directed by such participant or beneficiary of the 401(k). The present member of the Administrative Committee of the Farmer Bros. Co. Qualified Employee Retirement Plans (the “Management Administrative Committee”), which administers the 401(k) Plan, is Ms. Jefferson. Each member of the Management Administrative Committee disclaims beneficial ownership of the securities held by the 401(k) Plan except for those, if any, that have been allocated to the member as a participant in the 401(k) Plan. The principal address of the 401(k) Plan is c/o Farmer Bros. Co., 1912 Farmer Brothers Drive, Northlake, Texas 76262.
| Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Under the Company’s written Policies and Procedures for the Review, Approval or Ratification of Related Person Transactions, a related person transaction may be consummated or may continue only if the Audit Committee approves or ratifies the transaction in accordance with the guidelines set forth in the Proxy Statementpolicy. The policy applies to: (i) any person who is, or at any time since the beginning of the Company’s last fiscal year was, a director, nominee for director or executive officer of the Company; (ii) any person who is known to be the beneficial owner of more than 5% of any class of the Company’s voting securities; and (iii) any immediate family member, as defined in the policy, of, or sharing a household with, any of the foregoing persons. For purposes of the policy, a related person transaction includes, but is incorporatednot limited to, any financial transaction, arrangement or relationship or any series of similar transactions, arrangements or relationships, specifically including indebtedness and guarantees of indebtedness and transactions involving employment, consulting or similar arrangements, between the Company and any of the foregoing persons since the beginning of the Company’s last fiscal year, or any currently proposed transaction in this report by reference.which the Company was or is to be a participant or a party, in which the amount involved exceeds $120,000, and in which any of the foregoing persons had or will have a direct or indirect material interest.
The Company will maintain a related person master list to assist in identifying related person transactions, which will be distributed by the Company’s General Counsel to the Company’s executive officers; the function or department managers responsible for purchasing goods or services for the Company and its subsidiaries; the director of accounts payable and the director of accounts receivable for the Company and its subsidiaries; and any other persons whom the Audit Committee, the Chief Compliance Officer or the General Counsel may designate.
Upon referral by the Chief Compliance Officer, General Counsel or Secretary of the Company, any proposed related person transaction will be reviewed by the Audit Committee for approval or disapproval based on the following:
The materiality of the related person’s interest, including the relationship of the related person to the Company, the nature and importance of the interest to the related person, the amount involved in the transaction, whether the transaction has the potential to present a conflict of interest, whether there are business reasons for the Company to enter the transaction, and whether the transaction would impair the independence of any independent director;
Whether the terms of the transaction, in the aggregate, are comparable to those that would have been reached by unrelated parties in an arm’s length transaction;
The availability of alternative transactions, including whether there is another person or entity that could accomplish the same purposes as the transaction and, if alternative transactions are available, there must be a clear and articulable reason for the transaction with the related person;
Whether the transaction is proposed to be undertaken in the ordinary course of the Company’s business, on the same terms that the Company offers generally in transactions with persons who are not related persons; and
Such additional factors as the Audit Committee determines relevant.
Following review, the Audit Committee will approve or ratify in writing any related person transaction determined by the Audit Committee to be in, or not inconsistent with, the best interests of the Company and its stockholders.
The Audit Committee may impose conditions or guidelines on any related person transaction, including, but not limited to: (i) conditions relating to on-going reporting to the Audit Committee and other internal reporting; (ii) limitations on the amount involved in the transaction; (iii) limitations on the duration of the transaction or the Audit Committee’s approval of the transaction; and (iv) other conditions for the protection of the Company and to avoid conferring an improper benefit, or creating the appearance of a conflict of interest. Any member of the Audit Committee who has or whose immediate family member has an interest in the transaction under discussion will abstain from voting on the approval of the related person transaction, but may, if so requested by the Chair of the Audit Committee, participate in some or all of the Audit Committee’s discussions of the related person transaction.
The Audit Committee will direct the Company’s executive officers to disclose all related person transactions approved by the Audit Committee to the extent required under applicable accounting rules, Federal securities laws, SEC rules and regulations, and Nasdaq rules.
Related Person Transactions
The Company did not have any related person transactions in fiscal 2022.
Director Independence
At least annually and in connection with any individuals being nominated to serve on the Board, the Board reviews the independence of each director or nominee, including pursuant to Rule 5605 of the Nasdaq Stock Market, Inc. Marketplace Rules (“Nasdaq Listing Rules”), and affirmatively determines whether each director or nominee qualifies as independent.
The Board believes that stockholder interests are best served by having a number of objective, independent representatives on the Board. For this purpose, a director or nominee will be considered to be “independent” only if the Board affirmatively determines that the director or nominee has no relationship with respect to the Company that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Additionally, pursuant to Rule 5605 of the Nasdaq Listing Rules, our Board must determine that an independent director has no material relationship with us other than as a director. The standards specify the criteria by which the independence of our directors will be determined, including strict guidelines for directors and their immediate families with respect to past employment or affiliation with us or our independent registered public accounting firm. The standards also prohibit Audit Committee members from having any direct or indirect financial relationship with us and restrict both commercial and not-for-profit relationships between us and each director. We may not give personal loans or extensions of credit to our directors, and all directors are required to deal at arm’s length with us and our subsidiaries, and to disclose any circumstance that might be perceived as a conflict of interest.
In making its independence determinations, the Board reviewed transactions, relationships, behavior and arrangements between each director and nominee, or any member of his or her immediate family, and us or our subsidiaries based on information provided by the director or nominee, our records and publicly available information. The Board made the following independence determinations (the transactions, relationships and arrangements reviewed by the Board in making such determinations are set forth in the footnotes below):
| Director | Status | |
| Allison M. Boersma | Independent | |
| Stacy Loretz-Congdon | Independent (1) | |
| Charles F. Marcy | Independent | |
| D. Deverl Maserang | Not Independent (2) | |
| Christopher P. Mottern | Independent | |
| Alfred Poe | Independent | |
| John D. Robinson | Independent | |
| Waheed Zaman | Independent |
(1) CoreMark HoldingCompany, Inc. (“Core-Mark”) was a customer of the Company in fiscal 2022 and continues to be a customer of the Company in fiscal 2023. Ms. Loretz-Congdon retired from Core-Mark at the end of 2016 after 26 years of service, including as Senior Vice President, Chief Financial Officer and Assistant Secretary from December 2006 to May 2016 and Executive Advisor from May 2016 to December 2016. Ms. Loretz-Congdon also serves as a Board Director and Treasurer of the Core-Mark Families Foundation, an independent non-profit foundation that provides scholarships to children of Core-Mark employees, since 2015. Ms. Loretz-Congdon owns less than 1% of the outstanding publicly traded stock of Performance Food Group Company which Core-Mark merged with in September 2021. The Board has determined that these relationships do not create a conflict of interest under the Company’s Code of Conduct and Ethics, do not require disclosure under Item 404(a) of Regulation S-K, and do not interfere with Ms. Loretz-Congdon’s exercise of independent judgment in carrying out the responsibilities of a director of the Company.
(2) Mr. Maserang is the Company’s President and Chief Executive Officer.
| Item 14. | Principal Accountant Fees and Services |
Audit Committee Report
The informationAudit Committee has reviewed and discussed with management the Company’s audited consolidated financial statements as of and for the fiscal year ended June 30, 2022.
The Audit Committee has discussed with the Company’s independent registered public accounting firm, Grant Thornton LLP (“Grant Thornton”) (Dallas, Texas, PCAOB ID Number 248), the matters required to be discussed by the Statement on Auditing Standards No. 16, “Communications with Audit Committees,” as adopted by the Public Company Accounting Oversight Board.
The Audit Committee has received the written disclosures and the letter from Grant Thornton required by this itemapplicable requirements of the Public Company Accounting Oversight Board regarding Grant Thornton’s communications with the Audit Committee concerning independence, and has discussed with Grant Thornton that firm’s independence.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements referred to above be included in the Company’s 2022 Form 10-K for filing with the SEC.
| Audit Committee of the Board of Directors |
| Allison M. Boersma, Chair |
| Stacy Loretz-Congdon |
| John D. Robinson |
| Waheed Zaman |
Change of Independent Public Accounting Firm
As previously reported on the Company’s Current Report on Form 8-K, filed with the SEC on December 22, 2021, on December 16, 2021, the Company, upon the approval of the Audit Committee, dismissed Deloitte & Touche LLP (“Deloitte”) as its independent registered public accounting firm effective as of December 16, 2021, and engaged Grant Thornton as of such date. Deloitte served as the Company’s independent registered public accounting firm since fiscal 2014.
The reports of Deloitte on the audited consolidated financial statements of the Company for fiscal 2021 and fiscal 2020 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles. During the fiscal 2021 and fiscal 2020, and in the subsequent interim period through December 16, 2021, there were (a) no disagreements (as that term is described in Item 304(a)(1)(iv) of Regulation S-K) with Deloitte on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Deloitte, would have caused Deloitte to make reference to the subject matter of the disagreements in its reports on the consolidated financial statements for such years, and (b) no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K).
Pursuant to Item 304(a)(3) of Regulation S-K, the Company provided Deloitte with a copy of the foregoing disclosures and requested that Deloitte furnish the Company with a letter addressed to the SEC stating whether or not it agrees with the statements made herein. A copy of Deloitte’s letter to the SEC, dated December 22, 2021, is filed as Exhibit 16.1 to the Current Report on Form 8-K filed by the Company regarding the foregoing.
Independent Registered Public Accounting Firm Fees
The following table sets forth the aggregate fees billed by Deloitte and Grant Thornton for fiscal 2021 and 2022, respectively, for audit and non-audit services (as well as all “out-of-pocket” costs incurred in connection with these services) and are categorized as Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees. The nature of the services provided in each such category is described following the table. The Audit Committee approved all audit and permissible non-audit services provided by Deloitte and Grant Thornton in accordance with the pre-approval policies and procedures described below.
| Fiscal 2022 | Fiscal 2021 | ||||||||
| Grant Thornton | Deloitte | ||||||||
| Audit fees(1) | $ | 626,031 | $ | 1,098,523 | |||||
| Audit-related fees(2) | $ | 0 | $ | 0 | |||||
| Tax fees(3) | $ | 0 | $ | 0 | |||||
| All other fees(4) | $ | 0 | $ | 0 | |||||
| Total fees | $ | 626,031 | $ | 1,098,523 | |||||
(1) “Audit Fees” are fees paid for the audit of the Company’s annual consolidated financial statements included in its Form 10-K and review of financial statements included in the Form 10-Q’s, for the audit of the Company’s internal control over financial reporting, and for services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements. Audit fees for fiscal 2021 and fiscal 2022 consisted of fees associated with the audit of the Company’s annual financial statements, the audit of internal control over financial reporting, the review of the Company’s quarterly reports on Form 10-Q, services associated with SEC registration statements, and accounting advisory services in connection with the impact of new accounting standards.
(2) “Audit-Related Fees” represent fees for assurance and related services that are traditionally performed by Deloitte or Grant Thornton. No audit-related fees were paid to Deloitte or Grant Thornton for fiscal 2021 or fiscal 2022.
(3) “Tax Fees” are fees for tax compliance, planning, advice and consultation services, including state tax representation and miscellaneous consulting on federal and state taxation matters. No tax fees were paid to Deloitte or Grant Thornton for fiscal 2021 or fiscal 2022.
(4) No other fees were paid to Deloitte or Grant Thornton for fiscal 2021 or fiscal 2022.
Pre-Approval of Audit and Non-Audit Services
Under the Farmer Bros. Co. Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee must pre-approve all audit and non-audit services provided by the independent auditor. The policy, as described below, sets forth the procedures and conditions for such pre-approval of services to be performed by the independent auditor. The policy utilizes both a framework of general pre-approval for certain specified services and specific pre-approval for all other services. Unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee if it is to be provided by the independent auditor. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval by the Audit Committee.
In the first quarter of each year, the Audit Committee is asked to pre-approve the engagement of the independent auditor and the projected fees for audit services for the current fiscal year. The Audit Committee is also asked to provide general pre-approval for certain audit-related services (assurance and related services that are reasonably related to the performance of the auditor’s review of the financial statements or that are traditionally performed by the independent auditor) and tax services (such as tax compliance, tax planning and tax advice) for the current fiscal year consistent with the SEC’s rules on auditor independence. If the Company wishes to engage the independent auditor for additional services that have not been generally pre-approved as described above, then such engagement will be set forth inpresented to the Proxy Statement andAudit Committee for pre-approval at its next regularly scheduled meeting. Pre-approval of any engagement by the Audit Committee is incorporated in this report by reference.required before the independent auditor may commence any engagement.
In fiscal 2022, there were no fees paid to Deloitte or Grant Thornton under a de minimis exception to the rules that waive pre-approval for certain non-audit services.
PART IV
| Item 15. | Exhibits and Financial Statement Schedules |
| (a) | List of Financial Statements and Financial Statement Schedules: |
| (b) | Exhibits: |
Exhibit No. | Description | |
| 3.1 | ||
| 3.2 | ||
| 3.3 | ||
| 3.4 | ||
| 3.5 | ||
| 3.6 | ||
| 3.7 | ||
| 4.1 | ||
| 4.2 | ||
| 4.3 | ||
Exhibit No. | Description | |
Exhibit No. | Description | |
| 10.26 | ||
| 10.38 | ||
| 10.39 | ||
| 10.40 |
Exhibit No. | Description | |
| 10.41 | ||
| 10.42 | ||
| 10.43 | ||
| 10.44 | ||
| 10.45 | ||
| 10.46 | ||
| 10.47 | ||
| 10.48 | ||
| 10.49 | ||
| 14.1 | ||
| 16.1 | ||
| 21.1 | ||
| 23.1 | ||
| 23.2 | ||
| 31.1 | ||
| 31.2 | ||
| 32.1 | ||
| 32.2 | ||
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (furnished herewith). | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document (furnished herewith). | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document (furnished herewith). | |
Exhibit No. | Description | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document (furnished herewith). | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document (furnished herewith). | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document (furnished herewith). | |
| 104 | Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (furnished herewith). |
| ** | Management contract or compensatory plan or arrangement. |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FARMER BROS. CO.
| By: | /s/ Deverl Maserang | ||||
| Deverl Maserang | |||||
| President and Chief Executive Officer (principal executive officer) | |||||
Chief Financial Officer (principal financial officer) | |||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| /s/ Deverl Maserang | President, Chief Executive Officer and Director (principal executive officer) | October 27, 2022 | ||
| Deverl Maserang | ||||
| /s/ Scott R. Drake | Chief Financial Officer (principal financial officer) | October 27, 2022 | ||
| Scott R. Drake | ||||
| /s/ Matthew Coffman | Vice President and Controller (principal accounting officer) | October 27, 2022 | ||
| Matthew Coffman | ||||
| /s/ Christopher P. Mottern | Chairman of the Board and Director | |||
| Christopher P. Mottern | ||||
| /s/ Allison M. Boersma | Director | |||
| Allison M. Boersma | ||||
| /s/ Stacy Loretz-Congdon | Director | |||
| Stacy Loretz-Congdon | ||||
| /s/ Charles F. Marcy | Director | |||
| Charles F. Marcy | ||||
| /s/ | Director | |||
| As of June 30, | |||||||
| 2020 | 2019 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 60,013 | $ | 6,983 | |||
| Accounts receivable, net of allowance for doubtful accounts of $1,796 and $1,324, respectively | 40,882 | 55,155 | |||||
| Inventories | 67,408 | 87,910 | |||||
| Income tax receivable | 831 | 1,191 | |||||
| Short-term derivative assets | 165 | 1,865 | |||||
| Prepaid expenses | 7,414 | 6,804 | |||||
| Total current assets | 176,713 | 159,908 | |||||
| Property, plant and equipment, net | 165,633 | 189,458 | |||||
| Goodwill | 0 | 36,224 | |||||
| Intangible assets, net | 20,662 | 28,878 | |||||
| Other assets | 8,564 | 9,468 | |||||
| Long-term derivative assets | 10 | 674 | |||||
| Right-of-use operating lease assets | 21,117 | — | |||||
| Total assets | $ | 392,699 | $ | 424,610 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable | 36,987 | 72,771 | |||||
| Accrued payroll expenses | 9,394 | 14,518 | |||||
| Operating leases liabilities - current | 5,854 | — | |||||
| Short-term derivative liabilities | 5,255 | 1,474 | |||||
| Other current liabilities | 6,802 | 7,309 | |||||
| Total current liabilities | 64,292 | 96,072 | |||||
| Long-term borrowings under revolving credit facility | 122,000 | 92,000 | |||||
| Accrued pension liabilities | 58,772 | 47,216 | |||||
| Accrued postretirement benefits | 9,993 | 23,024 | |||||
| Accrued workers’ compensation liabilities | 4,569 | 4,747 | |||||
| Operating lease liabilities - noncurrent | 15,628 | — | |||||
| Other long-term liabilities | 5,532 | 4,057 | |||||
| Total liabilities | 280,786 | 267,116 | |||||
| Commitments and contingencies | |||||||
| Stockholders’ equity: | |||||||
| Preferred stock, $1.00 par value, 500,000 shares authorized; Series A Convertible Participating Cumulative Perpetual Preferred Stock, 21,000 shares authorized; 14,700 shares issued and outstanding as of June 30, 2020 and 2019, respectively; liquidation preference of $16,178 and $15,624 as of June 30, 2020 and 2019, respectively | 15 | 15 | |||||
| Common stock, $1.00 par value, 25,000,000 shares authorized; 17,347,774 and 17,042,132 shares issued and outstanding at June 30, 2020 and 2019, respectively | 17,348 | 17,042 | |||||
| Additional paid-in capital | 62,043 | 57,912 | |||||
| Retained earnings | 108,536 | 146,177 | |||||
| Accumulated other comprehensive loss | (76,029 | ) | (63,652 | ) | |||
| Total stockholders’ equity | $ | 111,913 | $ | 157,494 | |||
| Total liabilities and stockholders’ equity | $ | 392,699 | $ | 424,610 | |||
| For the Years Ended June 30, | |||||||||||
| 2020 | 2019 | 2018 | |||||||||
| Net sales | $ | 501,320 | $ | 595,942 | $ | 606,544 | |||||
| Cost of goods sold | 363,198 | 416,840 | 399,155 | ||||||||
| Gross profit | 138,122 | 179,102 | 207,389 | ||||||||
| Selling expenses | 121,762 | 139,647 | 153,391 | ||||||||
| General and administrative expenses | 42,569 | 48,959 | 49,429 | ||||||||
| Restructuring and other transition expenses | 0 | 4,733 | 662 | ||||||||
| Net (gains) losses from sales of assets | (25,237 | ) | 465 | (966 | ) | ||||||
| Impairment of goodwill and intangible assets | 42,030 | 0 | 3,820 | ||||||||
| Operating expenses | 181,124 | 193,804 | 206,336 | ||||||||
| (Loss) income from operations | (43,002 | ) | (14,702 | ) | 1,053 | ||||||
| Other (expense) income: | |||||||||||
| Dividend income | 0 | 0 | 12 | ||||||||
| Interest income | 0 | 0 | 2 | ||||||||
| Interest expense | (10,483 | ) | (12,000 | ) | (9,757 | ) | |||||
| Postretirement benefits curtailment gains and pension settlement (charge) | 5,760 | (10,948 | ) | 0 | |||||||
| Other, net | 10,443 | 4,166 | 7,722 | ||||||||
| Total other income (expense) | 5,720 | (18,782 | ) | (2,021 | ) | ||||||
| Loss before taxes | (37,282 | ) | (33,484 | ) | (968 | ) | |||||
| Income tax (benefit) expense | (195 | ) | 40,111 | 17,312 | |||||||
| Net loss | $ | (37,087 | ) | $ | (73,595 | ) | $ | (18,280 | ) | ||
| Less: Cumulative preferred dividends, undeclared and unpaid | 554 | 535 | 389 | ||||||||
| Net loss available to common stockholders | $ | (37,641 | ) | $ | (74,130 | ) | $ | (18,669 | ) | ||
| Net loss available to common stockholders per common share—basic | $ | (2.19 | ) | $ | (4.36 | ) | $ | (1.11 | ) | ||
| Net loss available to common stockholders per common share—diluted | $ | (2.19 | ) | $ | (4.36 | ) | $ | (1.11 | ) | ||
| Weighted average common shares outstanding—basic | 17,205,849 | 16,996,354 | 16,815,020 | ||||||||
| Weighted average common shares outstanding—diluted | 17,205,849 | 16,996,354 | 16,815,020 | ||||||||
| For the Years Ended June 30, | |||||||||||
| 2020 | 2019 | 2018 | |||||||||
| Net loss | $ | (37,087 | ) | $ | (73,595 | ) | $ | (18,280 | ) | ||
| Other comprehensive (loss) income, net of tax: | |||||||||||
| Unrealized losses on derivative instruments designated as cash flow hedges, net of tax | (7,518 | ) | (9,198 | ) | (5,922 | ) | |||||
| Losses on derivative instruments designated as cash flow hedges reclassified to cost of goods sold, net of tax | 8,863 | 9,197 | 800 | ||||||||
| Change in pension and retiree benefit obligations, net of tax | (13,722 | ) | (1,612 | ) | 4,576 | ||||||
| Total comprehensive loss, net of tax | $ | (49,464 | ) | $ | (75,208 | ) | $ | (18,826 | ) | ||
FARMER BROS. CO. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands, except share and per share data) | |||||||||||||||||||||||||||||||||
| Preferred Shares | Preferred Stock Amount | Common Shares | Common Stock Amount | Additional Paid-in Capital | Retained Earnings | Unearned ESOP Shares | Accumulated Other Comprehensive Income (Loss) | Total | |||||||||||||||||||||||||
| Balance at June 30, 2017 | 0 | 0 | 16,846,002 | 16,846 | 41,495 | 236,993 | (4,289 | ) | (61,493 | ) | 229,552 | ||||||||||||||||||||||
| Net loss | — | — | — | — | — | (18,280 | ) | — | — | (18,280 | ) | ||||||||||||||||||||||
| Adjustment due to the adoption of ASU 2017-12 | — | — | — | — | — | 342 | — | (209 | ) | 133 | |||||||||||||||||||||||
| Adjustment due to the adoption of ASU 2016-09 | — | — | — | — | — | 1,641 | — | — | 1,641 | ||||||||||||||||||||||||
| Unrealized losses on derivative instruments designated as cash flow hedges, net of reclassifications to cost of goods sold, net of tax | — | — | — | — | — | — | — | (4,913 | ) | (4,913 | ) | ||||||||||||||||||||||
| Change in the funded status of retiree benefit obligations, net of tax | — | — | — | — | — | — | — | 4,576 | 4,576 | ||||||||||||||||||||||||
| ESOP compensation expense, including reclassifications | — | — | — | — | 150 | — | 2,144 | — | 2,294 | ||||||||||||||||||||||||
| Share-based compensation | — | — | 9,155 | 9 | 1,518 | — | — | — | 1,527 | ||||||||||||||||||||||||
| Stock option exercises | — | — | 96,502 | 97 | 1,245 | — | — | — | 1,342 | ||||||||||||||||||||||||
| Consideration for Boyd Coffee acquisition | 14,700 | 15 | — | — | 11,557 | — | — | — | 11,572 | ||||||||||||||||||||||||
| Cumulative preferred dividends, undeclared and unpaid | — | — | — | — | — | (389 | ) | — | — | (389 | ) | ||||||||||||||||||||||
| Balance at June 30, 2018 | 14,700 | 15 | 16,951,659 | 16,952 | 55,965 | 220,307 | (2,145 | ) | (62,039 | ) | 229,055 | ||||||||||||||||||||||
| Net loss | — | — | — | — | — | (73,595 | ) | — | — | (73,595 | ) | ||||||||||||||||||||||
| Net reclassification of unrealized losses on cash flow hedges, net of tax | — | — | — | — | — | — | — | (1 | ) | (1 | ) | ||||||||||||||||||||||
| Change in pension and retiree benefit obligations, net of tax | — | — | — | — | — | — | — | (1,612 | ) | (1,612 | ) | ||||||||||||||||||||||
| ESOP compensation expense, including reclassifications | — | — | 37,571 | 37 | 364 | — | 2,145 | — | 2,546 | ||||||||||||||||||||||||
| Share-based compensation | — | — | 18,298 | 18 | 1,111 | — | — | — | 1,129 | ||||||||||||||||||||||||
| Stock option exercises | — | — | 34,604 | 35 | 472 | — | — | — | 507 | ||||||||||||||||||||||||
| Cumulative preferred dividends, undeclared and unpaid | — | — | — | — | — | (535 | ) | — | — | (535 | ) | ||||||||||||||||||||||
| Balance at June 30, 2019 | 14,700 | $ | 15 | 17,042,132 | $ | 17,042 | $ | 57,912 | $ | 146,177 | $ | 0 | $ | (63,652 | ) | $ | 157,494 | ||||||||||||||||
| Net loss | — | — | — | — | — | (37,087 | ) | — | — | (37,087 | ) | ||||||||||||||||||||||
| Net reclassification of unrealized gains on cash flow hedges, net of taxes | — | — | — | — | — | — | — | 1,345 | 1,345 | ||||||||||||||||||||||||
| Change in retiree benefit obligations, net of taxes | — | — | — | — | — | — | — | (13,722 | ) | (13,722 | ) | ||||||||||||||||||||||
| ESOP compensation expense, including reclassifications | — | — | 266,429 | 266 | 2,719 | — | — | — | 2,985 | ||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | 1,323 | — | — | — | 1,323 | ||||||||||||||||||||||||
| Issuance of common stock and stock option exercises | — | — | 39,213 | 40 | 89 | — | — | — | 129 | ||||||||||||||||||||||||
| Cumulative preferred dividends, undeclared and unpaid | — | — | — | — | — | (554 | ) | — | — | (554 | ) | ||||||||||||||||||||||
| Balance at June 30, 2020 | 14,700 | $ | 15 | 17,347,774 | $ | 17,348 | $ | 62,043 | $ | 108,536 | $ | 0 | $ | (76,029 | ) | $ | 111,913 | ||||||||||||||||
| FARMER BROS. CO. | |||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
| (In thousands) | |||||||||||
| For the Years Ended June 30, | |||||||||||
| 2020 | 2019 | 2018 | |||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | (37,087 | ) | $ | (73,595 | ) | $ | (18,280 | ) | ||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 29,896 | 31,065 | 30,464 | ||||||||
| Provision for doubtful accounts | 1,379 | 1,363 | 137 | ||||||||
| Impairment of goodwill and intangible assets | 42,030 | 0 | 3,820 | ||||||||
| Change in estimated fair value of contingent earnout consideration | 0 | 0 | (500 | ) | |||||||
| Restructuring and other transition expenses, net of payments | 0 | 1,172 | (1,185 | ) | |||||||
| Deferred income taxes | (300 | ) | 41,654 | 17,155 | |||||||
| Postretirement benefits and pension settlement cost | (5,760 | ) | 10,948 | 0 | |||||||
| Net (gains) losses from sales of assets | (25,237 | ) | 466 | (995 | ) | ||||||
| ESOP and share-based compensation expense | 4,309 | 3,674 | 3,822 | ||||||||
| Net losses on derivative instruments and investments | 9,818 | 9,196 | 1,982 | ||||||||
| Change in operating assets and liabilities: | |||||||||||
| Accounts receivable | 12,893 | 2,757 | (4,628 | ) | |||||||
| Inventories | 19,530 | 16,192 | (15,513 | ) | |||||||
| Derivative (liabilities) assets, net | (1,082 | ) | (18,901 | ) | (7,782 | ) | |||||
| Other assets | 990 | 114 | 1,073 | ||||||||
| Accounts payable | (35,784 | ) | 16,546 | 3,864 | |||||||
| Accrued expenses and other | (14,140 | ) | (7,201 | ) | (4,579 | ) | |||||
| Net cash provided by operating activities | $ | 1,455 | $ | 35,450 | $ | 8,855 | |||||
| Cash flows from investing activities: | |||||||||||
| Acquisitions of businesses, net of cash acquired | $ | 0 | $ | 0 | $ | (39,608 | ) | ||||
| Purchases of property, plant and equipment | (17,560 | ) | (34,760 | ) | (35,443 | ) | |||||
| Purchases of assets for construction of New Facility | 0 | 0 | (1,577 | ) | |||||||
| Proceeds from sales of property, plant and equipment | 39,477 | 2,399 | 1,988 | ||||||||
| Net cash provided (used) in investing activities | $ | 21,917 | $ | (32,361 | ) | $ | (74,640 | ) | |||
| Cash flows from financing activities: | |||||||||||
| Proceeds from revolving credit facility | $ | 90,000 | $ | 50,642 | $ | 85,315 | |||||
| Repayments on revolving credit facility | (60,000 | ) | (48,429 | ) | (23,149 | ) | |||||
| Payments of finance lease obligations | (53 | ) | (215 | ) | (947 | ) | |||||
| Payment of financing costs | (418 | ) | (1,049 | ) | (579 | ) | |||||
| Proceeds from stock option exercises | 129 | 507 | 1,342 | ||||||||
| Net cash provided by financing activities | $ | 29,658 | $ | 1,456 | $ | 61,982 | |||||
| Net increase (decrease) in cash and cash equivalents | $ | 53,030 | $ | 4,545 | $ | (3,803 | ) | ||||
| Cash and cash equivalents at beginning of year | 6,983 | 2,438 | 6,241 | ||||||||
| Cash and cash equivalents at end of year | $ | 60,013 | $ | 6,983 | $ | 2,438 | |||||
| FARMER BROS. CO. | |||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) | |||||||||||
| (In thousands) | |||||||||||
| For the Years Ended June 30, | |||||||||||
| 2020 | 2019 | 2018 | |||||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Cash paid for interest | $ | 4,426 | $ | 5,512 | $ | 3,177 | |||||
| Cash paid for income taxes | $ | 21 | $ | 107 | $ | 144 | |||||
| Supplemental disclosure of non-cash investing and financing activities: | |||||||||||
| Non-cash additions to property, plant and equipment | $ | 446 | $ | 2,619 | $ | 2,814 | |||||
| Non-cash portion of earnout receivable recognized—Spice Assets sale | $ | 0 | $ | 0 | $ | 298 | |||||
| Non-cash portion of earnout payable recognized—West Coast Coffee acquisition | $ | 0 | $ | 400 | $ | 0 | |||||
| Non-cash receivable from West Coast Coffee—post-closing final working capital adjustment | $ | 0 | $ | 0 | $ | 218 | |||||
| Non-cash post-closing working capital adjustment—Boyd Coffee acquisition | $ | 0 | $ | 2,277 | $ | 1,056 | |||||
| Non-cash Issuance of 401-K shares of Common Stock | $ | 266 | $ | 37 | $ | 0 | |||||
| Non-cash consideration given-Issuance of Series A Preferred Stock | $ | 0 | $ | 0 | $ | 11,756 | |||||
| Cumulative preferred dividends, undeclared and unpaid | $ | 554 | $ | 535 | $ | 389 | |||||
| (In thousands) | Fair Value | Estimated Useful Life (years) | |||
| Cash paid | $ | 38,871 | |||
| Holdback Cash Amount | 3,150 | ||||
| Multiemployer Plan Holdback | 1,056 | ||||
| Fair value of Series A Preferred Stock (14,700 shares)(1) | 11,756 | ||||
| Fair value of Holdback Stock (6,300 shares)(1) | 4,825 | ||||
| Estimated post-closing net working capital adjustment | (8,059 | ) | |||
| Total consideration | $ | 51,599 | |||
| Accounts receivable | $ | 7,503 | |||
| Inventory | 9,415 | ||||
| Prepaid expense and other assets | 1,951 | ||||
| Property, plant and equipment | 4,936 | ||||
| Goodwill | 25,395 | ||||
| Intangible assets: | |||||
| Customer relationships | 16,000 | 10 | |||
| Trade name/trademark—indefinite-lived | 3,100 | ||||
| Accounts payable | (15,080 | ) | |||
| Other liabilities | (1,621 | ) | |||
| Total consideration | $ | 51,599 | |||
| (In thousands) | For the Year Ended June 30, | |||
| 2018 | ||||
| Net sales | $ | 67,385 | ||
| Income before taxes | $ | 1,572 | ||
| For the Year Ended June 30, | |||||
| (In thousands) | 2018 | ||||
| Net sales | $ | 628,526 | |||
| (Loss) income before taxes | $ | (642 | ) | ||
| (In thousands) | Balances as of June 30, 2017 | Additions | Payments | Non-Cash Settled | Adjustments | Balances as of June 30, 2020 | |||||||||||||||||
| Employee-related costs | $ | 0 | $ | 2,634 | $ | 2,634 | $ | 0 | $ | 0 | $ | 0 | |||||||||||
| Other | 0 | 1,949 | 1,949 | 0 | 0 | 0 | |||||||||||||||||
| Total | $ | 0 | $ | 4,583 | $ | 4,583 | $ | 0 | $ | 0 | $ | 0 | |||||||||||
| Year Ended June 30, | |||||||||||
| (In thousands) | 2020 | 2019 | 2018 | ||||||||
| Employee-related costs | $ | 30 | $ | 1,487 | $ | 612 | |||||
| Other | 0 | 284 | 429 | ||||||||
| Total | $ | 30 | $ | 1,771 | $ | 1,041 | |||||
| (In thousands) | ||||||||||||||||||||||
| Name of Branch Property | Date Sold | Sales Price | Net Proceed | Gain (loss) | Long-Term Leaseback | Lease Term | Monthly Base Rent | |||||||||||||||
| Seattle, Washington | 8/28/2019 | $ | 7,900 | $ | 7,300 | $ | 6,800 | No | N/A | N/A | ||||||||||||
| Indianapolis, Indiana | 11/19/2019 | $ | 250 | $ | 186 | $ | (173 | ) | No | N/A | N/A | |||||||||||
| Hayward, California(1) | 12/23/2019 | $ | 7,050 | $ | 6,569 | $ | 2,016 | Yes | 5 years | $ | 28 | |||||||||||
| Denver, Colorado(1) | 12/31/2019 | $ | 2,300 | $ | 2,075 | $ | 1,989 | Yes | 7 years | $ | 17 | |||||||||||
| Casper, Wyoming | 12/31/2019 | $ | 385 | $ | 355 | $ | 304 | No | N/A | N/A | ||||||||||||
| Tempe, Arizona | 1/28/2020 | $ | 1,150 | $ | 1,077 | $ | 841 | No | N/A | N/A | ||||||||||||
| Great Falls, Montana | 2/28/2020 | $ | 385 | $ | 356 | $ | 283 | No | N/A | N/A | ||||||||||||
| Fort Collins, Colorado | 6/24/2020 | $ | 1,275 | $ | 1,179 | $ | 1,112 | No | N/A | N/A | ||||||||||||
| Oxnard, California | 6/25/2020 | $ | 1,650 | $ | 1,545 | $ | 1,390 | No | N/A | N/A | ||||||||||||
| As of June 30, | ||||||
| (In thousands) | 2020 | 2019 | ||||
| Derivative instruments designated as cash flow hedges: | ||||||
| Long coffee pounds | 36,413 | 42,113 | ||||
| Derivative instruments not designated as cash flow hedges: | ||||||
| Long coffee pounds | 8,348 | 6,070 | ||||
| Total | 44,761 | 48,183 | ||||
Derivative Instruments Designated as Cash Flow Hedges | Derivative Instruments Not Designated as Accounting Hedges | |||||||||||||||
| As of June 30, | As of June 30, | |||||||||||||||
| (In thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Financial Statement Location: | ||||||||||||||||
| Short-term derivative assets: | ||||||||||||||||
| Coffee-related derivative instruments(1) | $ | 35 | $ | 1,254 | $ | 130 | $ | 611 | ||||||||
| Long-term derivative assets: | ||||||||||||||||
| Coffee-related derivative instruments(2) | $ | 10 | $ | 671 | $ | 0 | $ | 3 | ||||||||
| Short-term derivative liabilities: | ||||||||||||||||
| Coffee-related derivative instruments(3) | $ | 3,322 | $ | 1,114 | $ | 706 | $ | 114 | ||||||||
| Interest rate swap derivative instruments(3) | $ | 1,228 | $ | 246 | $ | 0 | $ | 0 | ||||||||
| Long-term derivative liabilities: | ||||||||||||||||
| Coffee-related derivative instruments(4) | $ | 246 | $ | 13 | $ | 0 | $ | 0 | ||||||||
| Interest rate swap derivative instruments(4) | $ | 2,613 | $ | 1,599 | $ | 0 | $ | 0 | ||||||||
| Year Ended June 30, | Financial Statement Classification | ||||||||||||||
| (In thousands) | 2020 | 2019 | 2018 | ||||||||||||
| Net losses recognized in AOCI - Interest rate swap | $ | (2,863 | ) | $ | (1,791 | ) | $ | 0 | AOCI | ||||||
| Net (losses) gains recognized from AOCI to earnings - Interest rate swap | $ | (383 | ) | $ | 45 | $ | 0 | Interest Expense | |||||||
| Net losses reclassified from AOCI to earnings for partial unwind of interest swap - Interest rate swap (1) | $ | (407 | ) | $ | 0 | $ | 0 | Interest Expense | |||||||
| Net losses recognized in AOCI - Coffee-related | $ | (4,655 | ) | $ | (7,407 | ) | $ | (8,420 | ) | AOCI | |||||
| Net losses recognized in earnings - Coffee-related | $ | (8,073 | ) | $ | (9,242 | ) | $ | (1,179 | ) | Costs of goods sold | |||||
| Net gains (losses) recognized in earnings (ineffective portion) | $ | 0 | $ | 0 | $ | 48 | Other, net | ||||||||
| Year Ended June 30, | ||||||||||||
| (In thousands) | 2020 | 2019 | 2018 | |||||||||
| Net losses on coffee-related derivative instruments | $ | (1,362 | ) | $ | (2,252 | ) | $ | (469 | ) | |||
| Net gains on investments | 0 | 0 | 7 | |||||||||
| Net losses on derivative instruments and investments(1) | (1,362 | ) | (2,252 | ) | (462 | ) | ||||||
| Non-operating pension and other postretirement benefit plans cost(2) | 11,651 | 6,315 | 6,651 | |||||||||
| Other gains, net | 154 | 103 | 1,533 | |||||||||
| Other, net | $ | 10,443 | $ | 4,166 | $ | 7,722 | ||||||
| (In thousands) | Gross Amount Reported on Balance Sheet | Netting Adjustments | Cash Collateral Posted | Net Exposure | ||||||||||||||
| As of June 30, 2020 | Derivative Assets | $ | 175 | $ | (175 | ) | $ | 0 | $ | 0 | ||||||||
| Derivative Liabilities | $ | 8,115 | $ | (176 | ) | $ | 0 | $ | 7,939 | |||||||||
| As of June 30, 2019 | Derivative Assets | $ | 2,539 | $ | (698 | ) | $ | 0 | $ | 1,841 | ||||||||
| Derivative Liabilities | $ | 3,086 | $ | (698 | ) | $ | 0 | $ | 2,388 | |||||||||
| Classification | As of June 30, 2020 | |||||
| (In thousands) | ||||||
| Operating lease assets | Right-of-use operating lease assets | $ | 21,117 | |||
| Finance lease assets | Property, plant and equipment, net | 9 | ||||
| Total lease assets | $ | 21,126 | ||||
| Operating lease liabilities - current | Operating lease liabilities - current | $ | 5,854 | |||
| Operating lease liabilities - noncurrent | Operating lease liabilities - noncurrent | 15,628 | ||||
| Finance lease liabilities | Other long-term liabilities | 9 | ||||
| Total lease liabilities | $ | 21,491 | ||||
| Classification | For the Year Ended June 30, 2020 | ||||||
| (In thousands) | |||||||
| Operating lease expense | General and administrative expenses and cost of goods sold | $ | 5,354 | ||||
| Finance lease expense: | |||||||
| Amortization of finance lease assets | General and administrative expenses | 52 | |||||
| Interest on finance lease liabilities | Interest expense | 2 | |||||
| Total lease expense | $ | 5,408 | |||||
| For the Years Ended June 30, | ||||||||
| (In thousands) | Operating Leases | Finance Leases | ||||||
| Maturities of lease liabilities are as follows: | ||||||||
| 2021 | $ | 5,854 | $ | 9 | ||||
| 2022 | 4,454 | 0 | ||||||
| 2023 | 3,894 | 0 | ||||||
| 2024 | 3,654 | 0 | ||||||
| 2025 | 2,503 | 0 | ||||||
| Thereafter | 3,954 | 0 | ||||||
| Total lease payments | 24,313 | 9 | ||||||
| Less: interest | (2,831 | ) | 0 | |||||
| Total lease obligations | $ | 21,482 | $ | 9 | ||||
| Waheed Zaman | ||||
| For the Year Ended June 30, 2020 | ||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||
| Operating cash flows from operating leases | $ | 5,000 | ||
| Operating cash flows from finance leases | $ | 2 | ||
| Financing cash flows from finance leases | $ | 51 | ||
| Leased assets obtained in exchange for new finance lease liabilities | $ | 0 | ||
| Leased assets obtained in exchange for new operating lease liabilities | $ | 0 | ||
| (In thousands) | Operating Lease Obligations | Capital Lease Obligations | ||||||
| Year Ended June 30, | ||||||||
| 2020 | $ | 4,434 | $ | 36 | ||||
| 2021 | 3,238 | 1 | ||||||
| 2022 | 2,472 | 0 | ||||||
| 2023 | 2,131 | 0 | ||||||
| 2024 | 2,025 | 0 | ||||||
| Thereafter | 4,389 | 0 | ||||||
| Total minimum lease payments | $ | 18,689 | 37 | |||||
| Less: imputed interest (0.82% to 10.66%) | (2 | ) | ||||||
| Present value of future minimum lease payments | 35 | |||||||
| Less: current portion | (34 | ) | ||||||
| Long-term capital lease obligations | $ | 1 | ||||||
| (In thousands) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| As of June 30, 2020 | ||||||||||||||||
| Derivative instruments designated as cash flow hedges: | ||||||||||||||||
| Coffee-related derivative assets(1) | $ | 45 | $ | 0 | $ | 45 | $ | 0 | ||||||||
| Coffee-related derivative liabilities(1) | $ | 3,568 | $ | 0 | $ | 3,568 | $ | 0 | ||||||||
| Interest rate swap derivative liabilities(2) | $ | 3,841 | $ | 0 | $ | 3,841 | $ | 0 | ||||||||
| Derivative instruments not designated as accounting hedges: | ||||||||||||||||
| Coffee-related derivative assets(1) | $ | 130 | $ | 0 | $ | 130 | $ | 0 | ||||||||
| Coffee-related derivative liabilities(1) | $ | 706 | $ | 0 | $ | 706 | $ | 0 | ||||||||
| (In thousands) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| As of June 30, 2019 | ||||||||||||||||
| Derivative instruments designated as cash flow hedges: | ||||||||||||||||
| Coffee-related derivative assets(1) | $ | 1,925 | $ | 0 | $ | 1,925 | $ | 0 | ||||||||
| Coffee-related derivative liabilities(1) | $ | 1,127 | $ | 0 | $ | 1,127 | $ | 0 | ||||||||
| Interest rate swap derivative liabilities(2) | $ | 1,845 | $ | 0 | $ | 1,845 | $ | 0 | ||||||||
| Derivative instruments not designated as accounting hedges: | ||||||||||||||||
| Coffee-related derivative assets(1) | $ | 614 | $ | 0 | $ | 614 | $ | 0 | ||||||||
| Coffee-related derivative liabilities(1) | $ | 114 | $ | 0 | 114 | $ | 0 | |||||||||
| As of June 30, | ||||||||
| (In thousands) | 2020 | 2019 | ||||||
| Trade receivables | $ | 40,695 | $ | 53,593 | ||||
| Other receivables(1) | 1,983 | 2,886 | ||||||
| Allowance for doubtful accounts | (1,796 | ) | (1,324 | ) | ||||
| Accounts receivable, net | $ | 40,882 | $ | 55,155 | ||||
| (In thousands) | |||
| Balance at June 30, 2017 | $ | (721 | ) |
| Provision | (909 | ) | |
| Write-off | 1,530 | ||
| Recoveries | (395 | ) | |
| Balance at June 30, 2018 | $ | (495 | ) |
| Provision | (1,761 | ) | |
| Write-off | 533 | ||
| Recoveries | 399 | ||
| Balance at June 30, 2019 | $ | (1,324 | ) |
| Provision | (1,872 | ) | |
| Write-off | 1,196 | ||
| Recoveries | 204 | ||
| Balance at June 30, 2020 | $ | (1,796 | ) |
| As of June 30, | ||||||||
| (In thousands) | 2020 | 2019 | ||||||
| Coffee | ||||||||
| Processed | $ | 17,840 | $ | 25,769 | ||||
| Unprocessed | 32,913 | 33,259 | ||||||
| Total | $ | 50,753 | $ | 59,028 | ||||
| Tea and culinary products | ||||||||
| Processed | $ | 10,627 | $ | 21,767 | ||||
| Unprocessed | 45 | 74 | ||||||
| Total | $ | 10,672 | $ | 21,841 | ||||
| Coffee brewing equipment parts | $ | 5,983 | $ | 7,041 | ||||
| Total inventories | $ | 67,408 | $ | 87,910 | ||||
| As of June 30, | ||||||||
| (In thousands) | 2020 | 2019 | ||||||
| Buildings and facilities (1) | $ | 98,293 | $ | 107,915 | ||||
| Machinery and equipment (2) | 240,431 | 249,477 | ||||||
| Capitalized software | 29,765 | 27,666 | ||||||
| Office furniture and equipment | 14,042 | 14,035 | ||||||
| $ | 382,531 | $ | 399,093 | |||||
| Accumulated depreciation | (229,829 | ) | (225,826 | ) | ||||
| Land (1) | 12,931 | 16,191 | ||||||
| Property, plant and equipment, net | $ | 165,633 | $ | 189,458 | ||||
| As of June 30, | ||||||||
| (In thousands) | 2020 | 2019 | ||||||
| Coffee Brewing Equipment (1) | $ | 98,734 | $ | 106,593 | ||||
| Accumulated depreciation (1) | (67,800 | ) | (70,202 | ) | ||||
| Coffee Brewing Equipment, net | $ | 30,934 | $ | 36,391 | ||||
| For the Years Ended June 30, | ||||||||||||
| (In thousands) | 2020 | 2019 | 2018 | |||||||||
| Depreciation expense | $ | 9,572 | $ | 9,109 | $ | 8,629 | ||||||
| Other CBE expenses | $ | 27,906 | $ | 33,855 | $ | 30,172 | ||||||
| Balance at June 30, 2017 | $ | 10,996 | ||
| Final Purchase Price Allocation Adjustment (West Coast Coffee) | (167 | ) | ||
| Additions (Boyd Coffee) | 25,395 | |||
| Balance at June 30, 2018 | $ | 36,224 | ||
| Additions | — | |||
| Balance at June 30, 2019 | 36,224 | |||
| Additions | — | |||
| Impairment | (36,224 | ) | ||
| Balance at June 30, 2020 | $ | 0 | ||
| As of June 30, | ||||||||||||||||||||||||||||||
Weighted Average Amortization Period as of June 30, 2020 | 2020 | 2019 | ||||||||||||||||||||||||||||
| (In thousands) | Gross Carrying Amount | Accumulated Amortization | Impairment | Net | Gross Carrying Amount | Accumulated Amortization | Net | |||||||||||||||||||||||
| Amortized intangible assets: | ||||||||||||||||||||||||||||||
| Customer relationships | 6.7 | $ | 33,003 | $ | (17,492 | ) | $ | — | $ | 15,511 | $ | 33,003 | $ | (15,291 | ) | $ | 17,712 | |||||||||||||
| Non-compete agreements | 1.5 | 220 | (161 | ) | — | 59 | 220 | (122 | ) | 98 | ||||||||||||||||||||
| Recipes | 3.3 | 930 | (487 | ) | — | 443 | 930 | (354 | ) | 576 | ||||||||||||||||||||
| Trade name/brand name | 3.4 | 510 | (383 | ) | — | 127 | 510 | (346 | ) | 164 | ||||||||||||||||||||
| Total amortized intangible assets | $ | 34,663 | $ | (18,523 | ) | $ | — | $ | 16,140 | $ | 34,663 | $ | (16,113 | ) | $ | 18,550 | ||||||||||||||
| Unamortized intangible assets: | ||||||||||||||||||||||||||||||
| Trademarks, trade names and brand name with indefinite lives | $ | 10,328 | $ | — | $ | (5,806 | ) | $ | 4,522 | $ | 10,328 | $ | — | $ | 10,328 | |||||||||||||||
| Total unamortized intangible assets | $ | 10,328 | $ | — | $ | (5,806 | ) | $ | 4,522 | $ | 10,328 | $ | — | $ | 10,328 | |||||||||||||||
| Total intangible assets | $ | 44,991 | $ | (18,523 | ) | $ | (5,806 | ) | $ | 20,662 | $ | 44,991 | $ | (16,113 | ) | $ | 28,878 | |||||||||||||
| For the fiscal year ending: | ||||
| June 30, 2021 | $ | 2,412 | ||
| June 30, 2022 | 2,388 | |||
| June 30, 2023 | 2,370 | |||
| June 30, 2024 | 2,260 | |||
| June 30, 2025 | 2,200 | |||
| Thereafter | 4,510 | |||
| Total | $ | 16,140 | ||
Brewmatic Plan As of June 30, | Hourly Employees’ Plan As of June 30, | Farmer Bros. Plan As of June 30, | Total | |||||||||||||||||||||||||
| ($ in thousands) | 2020 | 2019 | 2020 | 2019 | 2019 | 2020 | 2019 | |||||||||||||||||||||
| Change in projected benefit obligation | ||||||||||||||||||||||||||||
| Benefit obligation at the beginning of the year | $ | 121,752 | $ | 3,724 | $ | 4,475 | $ | 4,040 | $ | 137,175 | $ | 126,227 | $ | 144,939 | ||||||||||||||
| Interest cost | 4,084 | 2,339 | 152 | 161 | 2,722 | 4,236 | 5,222 | |||||||||||||||||||||
| Actuarial (gain) loss | 13,433 | 8,482 | 561 | 349 | (1,571 | ) | 13,994 | 7,260 | ||||||||||||||||||||
| Benefits paid | (5,943 | ) | (3,097 | ) | (102 | ) | (75 | ) | (3,574 | ) | (6,045 | ) | (6,746 | ) | ||||||||||||||
| Pension settlement | 0 | (21,286 | ) | 0 | 0 | (3,162 | ) | 0 | (24,448 | ) | ||||||||||||||||||
| Other - Plan merger | 0 | 131,590 | 0 | 0 | (131,590 | ) | 0 | 0 | ||||||||||||||||||||
| Projected benefit obligation at the end of the year | $ | 133,326 | $ | 121,752 | $ | 5,086 | $ | 4,475 | $ | 0 | $ | 138,412 | $ | 126,227 | ||||||||||||||
| Change in plan assets | ||||||||||||||||||||||||||||
| Fair value of plan assets at the beginning of the year | $ | 75,411 | $ | 3,719 | $ | 3,778 | $ | 3,629 | $ | 97,211 | $ | 79,189 | $ | 104,559 | ||||||||||||||
| Actual return on plan assets | 3,382 | 9,325 | 239 | 224 | (6,236 | ) | 3,621 | 3,313 | ||||||||||||||||||||
| Employer contributions | 3,054 | 1,800 | 0 | 0 | 1,525 | 3,054 | 3,325 | |||||||||||||||||||||
| Benefits paid | (5,943 | ) | (3,097 | ) | (102 | ) | (75 | ) | (3,574 | ) | (6,045 | ) | (6,746 | ) | ||||||||||||||
| Pension settlement | 0 | (22,100 | ) | 0 | 0 | $ | (3,162 | ) | 0 | (25,262 | ) | |||||||||||||||||
| Other - Plan merger | 0 | 85,764 | 0 | 0 | $ | (85,764 | ) | 0 | 0 | |||||||||||||||||||
| Fair value of plan assets at the end of the year | $ | 75,904 | $ | 75,411 | $ | 3,915 | $ | 3,778 | $ | 0 | $ | 79,819 | $ | 79,189 | ||||||||||||||
| Funded status at end of year (underfunded) overfunded | $ | (57,422 | ) | $ | (46,341 | ) | $ | (1,171 | ) | $ | (697 | ) | $ | 0 | $ | (58,593 | ) | $ | (47,038 | ) | ||||||||
| Amounts recognized in consolidated balance sheets | ||||||||||||||||||||||||||||
| Non-current liabilities | (57,422 | ) | (46,341 | ) | (1,171 | ) | (697 | ) | 0 | (58,593 | ) | (47,038 | ) | |||||||||||||||
| Total | $ | (57,422 | ) | $ | (46,341 | ) | $ | (1,171 | ) | $ | (697 | ) | $ | 0 | $ | (58,593 | ) | $ | (47,038 | ) | ||||||||
| Amounts recognized in AOCI | ||||||||||||||||||||||||||||
| Net loss | 62,830 | 50,080 | 1,115 | 565 | 0 | 63,945 | 50,645 | |||||||||||||||||||||
| Total AOCI (not adjusted for applicable tax) | $ | 62,830 | $ | 50,080 | $ | 1,115 | $ | 565 | $ | 0 | $ | 63,945 | $ | 50,645 | ||||||||||||||
| Weighted average assumptions used to determine benefit obligations | ||||||||||||||||||||||||||||
| Discount rate | 2.55 | % | 3.45 | % | 2.55 | % | 3.45 | % | 4.10 | % | 2.55 | % | 4.05 | % | ||||||||||||||
| Rate of compensation increase | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||||||
Brewmatic Plan June 30, | Hourly Employees’ Plan June 30, | Farmer Bros. Plan June 30, | Total | |||||||||||||||||||||||||
| ($ in thousands) | 2020 | 2019 | 2020 | 2019 | 2019 | 2020 | 2019 | |||||||||||||||||||||
| Components of net periodic benefit cost | ||||||||||||||||||||||||||||
| Interest cost | 4,084 | 2,339 | 152 | 161 | 2,722 | 4,236 | 5,222 | |||||||||||||||||||||
| Expected return on plan assets | (4,174 | ) | (2,257 | ) | (232 | ) | (222 | ) | (2,767 | ) | (4,406 | ) | (5,246 | ) | ||||||||||||||
| Amortization of net loss | 1,475 | 796 | 4 | 0 | 710 | 1,479 | 1,506 | |||||||||||||||||||||
| Pension settlement charge | 0 | 9,586 | 0 | 0 | 1,356 | 0 | 10,942 | |||||||||||||||||||||
| Net periodic benefit cost | $ | 1,385 | $ | 10,464 | $ | (76 | ) | $ | (61 | ) | $ | 2,021 | $ | 1,309 | $ | 12,424 | ||||||||||||
| Other changes recognized in OCI | ||||||||||||||||||||||||||||
| Net loss (1) | $ | 14,225 | $ | 1,413 | $ | 554 | $ | 347 | $ | 7,433 | $ | 14,779 | $ | 9,193 | ||||||||||||||
| Prior service cost (credit) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| Amortization of net loss | (1,475 | ) | (796 | ) | (4 | ) | 0 | (710 | ) | (1,479 | ) | (1,506 | ) | |||||||||||||||
| Pension settlement charge | 0 | (9,586 | ) | 0 | 0 | (1,356 | ) | 0 | (10,942 | ) | ||||||||||||||||||
| Allocation of net Loss - Plan merger | 0 | 56,446 | 0 | 0 | (56,446 | ) | 0 | 0 | ||||||||||||||||||||
| Net loss due to annuity purchase | 0 | 814 | 0 | 0 | 0 | 0 | 814 | |||||||||||||||||||||
| Total recognized in OCI | $ | 12,750 | $ | 48,291 | $ | 550 | $ | 347 | $ | (51,079 | ) | $ | 13,300 | $ | (2,441 | ) | ||||||||||||
| Total recognized in net periodic benefit cost and OCI | $ | 14,135 | $ | 58,755 | $ | 474 | $ | 286 | $ | (49,058 | ) | $ | 14,609 | $ | 9,983 | |||||||||||||
| Weighted-average assumptions used to determine net periodic benefit cost | ||||||||||||||||||||||||||||
| Discount rate | 3.45 | % | 4.10 | % | 3.45 | % | 4.05 | % | 4.05 | % | 3.45 | % | 4.05 | % | ||||||||||||||
| Expected long-term return on plan assets | 6.75 | % | 6.75 | % | 6.75 | % | 6.75 | % | 0 | % | 6.75 | % | 6.75 | % | ||||||||||||||
| Rate of compensation increase | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||||||
Brewmatic Plan June 30, | Hourly Employees’ Plan June 30, | Total | |||||||||||||||||||||
| ($ in thousands) | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||
| Comparison of obligations to plan assets | |||||||||||||||||||||||
| Projected benefit obligation | $ | 133,326 | $ | 121,752 | $ | 5,086 | $ | 4,475 | $ | 138,412 | $ | 126,227 | |||||||||||
| Accumulated benefit obligation | $ | 133,326 | $ | 121,752 | $ | 5,086 | $ | 4,475 | $ | 138,412 | $ | 126,227 | |||||||||||
| Fair value of plan assets at measurement date | $ | 75,904 | $ | 75,411 | $ | 3,915 | $ | 3,778 | $ | 79,819 | $ | 79,189 | |||||||||||
| Plan assets by category | |||||||||||||||||||||||
| Equity securities | $ | 49,744 | $ | 48,464 | $ | 2,572 | $ | 2,440 | $ | 52,316 | $ | 50,904 | |||||||||||
| Debt securities | 21,439 | 22,461 | 1,111 | 1,100 | 22,550 | 23,561 | |||||||||||||||||
| Real estate | 4,721 | 4,486 | 232 | 238 | 4,953 | 4,724 | |||||||||||||||||
| Total | $ | 75,904 | $ | 75,411 | $ | 3,915 | $ | 3,778 | $ | 79,819 | $ | 79,189 | |||||||||||
| Plan assets by category | |||||||||||||||||||||||
| Equity securities | 66 | % | 64 | % | 66 | % | 65 | % | 66 | % | 64 | % | |||||||||||
| Debt securities | 28 | % | 30 | % | 28 | % | 29 | % | 28 | % | 30 | % | |||||||||||
| Real estate | 6 | % | 6 | % | 6 | % | 6 | % | 6 | % | 6 | % | |||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||
| As of June 30, 2020 | ||||||||||||||||||||
| (In thousands) | Total | Level 1 | Level 2 | Level 3 | Investments measured at NAV | |||||||||||||||
| Brewmatic Plan | $ | 75,904 | $ | 0 | $ | 0 | $ | 0 | $ | 75,904 | ||||||||||
| Hourly Employees’ Plan | $ | 3,915 | $ | 0 | $ | 0 | $ | 0 | $ | 3,915 | ||||||||||
| As of June 30, 2019 | ||||||||||||||||||||
| (In thousands) | Total | Level 1 | Level 2 | Level 3 | Investments measured at NAV | |||||||||||||||
| Brewmatic Plan | $ | 75,411 | $ | 0 | $ | 0 | $ | 0 | $ | 75,411 | ||||||||||
| Hourly Employees’ Plan | $ | 3,778 | $ | 0 | $ | 0 | $ | 0 | $ | 3,778 | ||||||||||
| (In thousands) | Brewmatic Plan | Hourly Employees’ Plan | |||||||
| Year Ending: | |||||||||
| June 30, 2021 | $ | 7,100 | $ | 160 | |||||
| June 30, 2022 | $ | 6,820 | $ | 160 | |||||
| June 30, 2023 | $ | 7,010 | $ | 180 | |||||
| June 30, 2024 | $ | 7,110 | $ | 190 | |||||
| June 30, 2025 | $ | 7,200 | $ | 200 | |||||
| June 30, 2026 to June 30, 2030 | $ | 35,510 | $ | 1,150 | |||||
| (In thousands) | WCTPP(1)(2)(3)(5) | All Other Plans(4) | ||||||
| Year Ended: | ||||||||
| June 30, 2020 | $ | 1,685 | $ | 34 | ||||
| June 30, 2019 | $ | 3,634 | $ | 39 | ||||
| June 30, 2018 | $ | 1,605 | $ | 35 | ||||
| (In thousands) | June 30, 2020 | June 30, 2019 | ||||||
| WCT Pension Trust (1) | 0 | $ | 1,487 | |||||
| Local 807 Pension Fund (2) | $ | 182 | $ | 182 | ||||
| Year Ended June 30, | ||||||||||||
| (In thousands) | 2020 | 2019 | 2018 | |||||||||
| Components of Net Periodic Postretirement Benefit Cost (Credit): | ||||||||||||
| Service cost | $ | 446 | $ | 530 | $ | 609 | ||||||
| Interest cost | 725 | 887 | 835 | |||||||||
| Amortization of net gain | (3,067 | ) | (834 | ) | (841 | ) | ||||||
| Curtailment credit - Retiree Medical | (5,750 | ) | 0 | 0 | ||||||||
| Amortization of prior service credit | (5,666 | ) | (1,757 | ) | (1,757 | ) | ||||||
| Net periodic postretirement benefit (credit) cost | $ | (13,312 | ) | $ | (1,174 | ) | $ | (1,154 | ) | |||
| Retiree Medical Plan | Death Benefit | |||||||||||||||
| Year Ended June 30, | Year Ended June 30, | |||||||||||||||
| ($ in thousands) | 2020(1) | 2019 | 2020 | 2019 | ||||||||||||
| Amortization of Net (Gain) Loss: | ||||||||||||||||
| Net (gain) loss as of July 1 | $ | 0 | $ | (7,039 | ) | $ | 2,903 | $ | 1,878 | |||||||
| Net (gain) loss subject to amortization | 0 | (7,039 | ) | 2,903 | 1,878 | |||||||||||
| Corridor (10% of greater of APBO or assets) | 0 | 1,490 | 1,043 | 919 | ||||||||||||
| Net (gain) loss in excess of corridor | $ | 0 | $ | (5,549 | ) | $ | 1,860 | $ | 959 | |||||||
| Amortization years | — | 8.6 | 5.8 | 6.5 | ||||||||||||
| As of June 30, | ||||||||
| (In thousands) | 2020 | 2019 | ||||||
| Change in Benefit Obligation: | ||||||||
| Projected postretirement benefit obligation at beginning of year | $ | 24,092 | $ | 21,283 | ||||
| Service cost | 446 | 530 | ||||||
| Interest cost | 725 | 887 | ||||||
| Participant contributions | 593 | 605 | ||||||
| Amendments | (13,441 | ) | 0 | |||||
| Actuarial gains (losses) | (621 | ) | 2,010 | |||||
| Benefits paid | (1,055 | ) | (1,223 | ) | ||||
| Projected postretirement benefit obligation at end of year | $ | 10,739 | $ | 24,092 | ||||
| Year Ended June 30, | ||||||||
| (In thousands) | 2020 | 2019 | ||||||
| Change in Plan Assets: | ||||||||
| Fair value of plan assets at beginning of year | $ | 0 | $ | 0 | ||||
| Employer contributions | 462 | 618 | ||||||
| Participant contributions | 593 | 605 | ||||||
| Benefits paid | (1,055 | ) | (1,223 | ) | ||||
| Fair value of plan assets at end of year | $ | 0 | $ | 0 | ||||
| Projected postretirement benefit obligation at end of year | 10,739 | 24,092 | ||||||
| Funded status of plan | $ | (10,739 | ) | $ | (24,092 | ) | ||
| June 30, | ||||||||
| (In thousands) | 2020 | 2019 | ||||||
| Amounts Recognized in the Consolidated Balance Sheets Consist of: | ||||||||
| Current liabilities | $ | (744 | ) | $ | (1,068 | ) | ||
| Non-current liabilities | (9,995 | ) | (23,024 | ) | ||||
| Total | $ | (10,739 | ) | $ | (24,092 | ) | ||
| Year Ended June 30, | ||||||||
| (In thousands) | 2020 | 2019 | ||||||
| Amounts Recognized in AOCI Consist of: | ||||||||
| Net gain | $ | (2,714 | ) | $ | (5,160 | ) | ||
| Prior service credit | (8,961 | ) | (6,936 | ) | ||||
| Total AOCI | $ | (11,675 | ) | $ | (12,096 | ) | ||
| Year Ended June 30, | ||||||||
| (In thousands) | 2020 | 2019 | ||||||
| Other Changes in Plan Assets and Benefit Obligations Recognized in OCI: | ||||||||
| Unrecognized actuarial gains (loss) | $ | (621 | ) | $ | 2,010 | |||
| Prior service (credit) cost | (13,441 | ) | 0 | |||||
| Unrecognized prior service cost | — | — | ||||||
| Amortization of net loss | 3,068 | 835 | ||||||
| Amortization of prior service cost | 11,416 | 1,757 | ||||||
| Total recognized in OCI | 422 | 4,602 | ||||||
| Net periodic benefit cost | (13,312 | ) | (1,174 | ) | ||||
| Total recognized in net periodic benefit credit and OCI | $ | (12,890 | ) | $ | 3,428 | |||
| (In thousands) | |||
| Estimated Future Benefit Payments: | |||
| Year Ending: | |||
| June 30, 2021 | $ | 750 | |
| June 30, 2022 | $ | 451 | |
| June 30, 2023 | $ | 464 | |
| June 30, 2024 | $ | 476 | |
| June 30, 2025 | $ | 487 | |
| June 30, 2026 to June 30, 2030 | $ | 2,538 | |
| Expected Contributions: | |||
| June 30, 2021 | $ | 750 | |
| 1-Percentage Point | ||||||||
| (In thousands) | Increase | Decrease | ||||||
| Effect on total of service and interest cost components | $ | 50 | $ | (43 | ) | |||
| Effect on accumulated postretirement benefit obligation | $ | 0 | $ | 0 | ||||
| June 30, 2020 | June 30, 2019 | |||||||||||||||||||
| (In thousands) | Debt Origination Date | Maturity | Original Borrowing Amount | Carrying Value | Weighted Average Interest Rate | Carrying Value | Weighted Average Interest Rate | |||||||||||||
| Credit Facility | Revolver | 11/6/2023 | N/A | $ | 122,000 | 4.91 | % | $ | 92,000 | 3.98 | % | |||||||||
| As of June 30, | ||||||||
| 2020 | 2019 | |||||||
| Allocated shares | 1,170,015 | 1,393,530 | ||||||
| Committed to be released shares | 0 | 0 | ||||||
| Unallocated shares | 0 | 0 | ||||||
| Total ESOP shares | 1,170,015 | 1,393,530 | ||||||
| (In thousands) | ||||||||
| Fair value of ESOP shares | $ | 8,588 | $ | 22,812 | ||||
| Year Ended June 30, | ||||||||||||
| 2020 | 2019 | 2018 | ||||||||||
| Weighted average fair value of NQOs | $ | 4.24 | $ | 7.78 | $ | 10.41 | ||||||
| Risk-free interest rate | 1.5 | % | 3.0 | % | 2.0 | % | ||||||
| Dividend yield | 0 | % | 0 | % | 0 | % | ||||||
| Average expected term | 4.6 years | 4.6 years | 4.6 years | |||||||||
| Expected stock price volatility | 35.4 | % | 29.6 | % | 35.4 | % | ||||||
| Outstanding NQOs: | Number of NQOs | Weighted Average Exercise Price ($) | Weighted Average Remaining Life (Years) | Aggregate Intrinsic Value ($ in thousands) | ||||||
| Outstanding at June 30, 2019 | 198,049 | 27.35 | 5.25 | 40 | ||||||
| Granted | 536,468 | 13.16 | — | — | ||||||
| Exercised | (10,360 | ) | 12.48 | — | 28 | |||||
| Forfeited | (157,172 | ) | 24.14 | — | — | |||||
| Expired | (38,027 | ) | 31.31 | — | — | |||||
| Outstanding at June 30, 2020 | 528,958 | 13.92 | 6.21 | 55 | ||||||
| Exercisable at June 30, 2020 | 20,017 | 28.27 | 3.23 | 0 | ||||||
| Outstanding PNQs: | Number of PNQs | Weighted Average Exercise Price ($) | Weighted Average Remaining Life (Years) | Aggregate Intrinsic Value ($ in thousands) | ||||||
| Outstanding at June 30, 2019 | 229,961 | 26.21 | 1.23 | 0 | ||||||
| Granted | — | — | — | — | ||||||
| Exercised | 0 | 0 | — | — | ||||||
| Forfeited | (6,212 | ) | 32.85 | — | — | |||||
| Expired | (210,119 | ) | 25.86 | — | — | |||||
| Outstanding at June 30, 2020 | 13,630 | 28.60 | 2.36 | 0 | ||||||
| Exercisable at June 30, 2020 | 8,822 | 26.89 | 1.98 | 0 | ||||||
| Outstanding and Nonvested Restricted Stock Awards: | Shares Awarded | Weighted Average Grant Date Fair Value ($) | |||
| Outstanding at June 30, 2019 | 32,056 | 21.10 | |||
| Granted | 229,573 | 13.0 | |||
| Exercised/Released | (30,352 | ) | 20.8 | ||
| Cancelled/Forfeited | (12,673 | ) | 17.7 | ||
| Outstanding and nonvested at June 30, 2020 | 218,604 | 13.0 | |||
| Outstanding and Nonvested PBRSUs: | PBRSUs Awarded | Weighted Average Grant Date Fair Value ($) | |||
| Outstanding and nonvested at June 30, 2019 | 51,237 | 27.69 | |||
| Granted | 81,236 | 14.46 | |||
| Vested/Released | 0 | 0 | |||
| Cancelled/Forfeited | (51,136 | ) | 25.63 | ||
| Outstanding and nonvested at June 30, 2020 | 81,337 | 15.78 | |||
| As of June 30, | ||||||||
| (In thousands) | 2020 | 2019 | ||||||
| Accrued postretirement benefits | $ | 744 | $ | 1,068 | ||||
| Accrued workers’ compensation liabilities | 1,466 | 1,495 | ||||||
| Cumulative preferred dividends, undeclared and unpaid (1) | 1,477 | 305 | ||||||
| Earnout payable(2) | 0 | 1,000 | ||||||
| Working capital dispute payable(3) | 551 | 354 | ||||||
| Other(4) | 2,564 | 3,087 | ||||||
| Other current liabilities | $ | 6,802 | $ | 7,309 | ||||
| As of June 30, | ||||||||
| (In thousands) | 2020 | 2019 | ||||||
| Finance leases liabilities | $ | 9 | $ | 32 | ||||
| Derivative liabilities—noncurrent | 2,859 | 1,612 | ||||||
| Deferred compensation (1) | 1,170 | 0 | ||||||
| Cumulative preferred dividends, undeclared and unpaid—noncurrent | 0 | 618 | ||||||
| Deferred income taxes (2) | 1,494 | 1,795 | ||||||
| Other long-term liabilities | $ | 5,532 | $ | 4,057 | ||||
| For the Years Ended June 30, | ||||||||||||
| (In thousands) | 2020 | 2019 | 2018 | |||||||||
| Current: | ||||||||||||
| Federal | $ | 0 | $ | (1,774 | ) | $ | 101 | |||||
| State | 105 | 231 | 56 | |||||||||
| Total current income tax (benefit) expense | 105 | (1,543 | ) | 157 | ||||||||
| Deferred: | ||||||||||||
| Federal | (458 | ) | 30,618 | 17,090 | ||||||||
| State | 158 | 11,036 | 65 | |||||||||
| Total deferred income tax expense | (300 | ) | 41,654 | 17,155 | ||||||||
| Income tax expense | $ | (195 | ) | $ | 40,111 | $ | 17,312 | |||||
| For the Years Ended June 30, | ||||||||||||
| (In thousands) | 2020 | 2019 | 2018 | |||||||||
| Statutory tax rate | 21 | % | 21 | % | 28 | % | ||||||
| Income tax (benefit) expense at statutory rate | $ | (7,829 | ) | $ | (7,032 | ) | $ | (272 | ) | |||
| State income tax (benefit) expense, net of federal tax benefit | (1,523 | ) | (1,295 | ) | 12 | |||||||
| Valuation allowance | 9,153 | 50,123 | 283 | |||||||||
| Change in tax rate | 233 | 124 | 18,022 | |||||||||
| Retiree life insurance | 0 | 0 | 19 | |||||||||
| Other (net) | (229 | ) | (1,809 | ) | (752 | ) | ||||||
| Income tax expense | $ | (195 | ) | $ | 40,111 | $ | 17,312 | |||||
| As of June 30, | |||||||||
| (In thousands) | 2020 | 2019 | |||||||
| Deferred tax assets: | |||||||||
| Postretirement benefits | $ | 20,232 | $ | 20,775 | |||||
| Accrued liabilities | 3,970 | 5,042 | |||||||
| Net operating loss carryforwards | 38,754 | 37,768 | |||||||
| Intangible assets | 9,482 | 0 | |||||||
| Operating lease liabilities | 5,419 | — | |||||||
| Other | 6,893 | 5,950 | |||||||
| Total deferred tax assets | 84,750 | 69,535 | |||||||
| Deferred tax liabilities: | |||||||||
| Fixed assets | (13,427 | ) | (15,562 | ) | |||||
| Right-of-use operating lease assets | (5,513 | ) | — | ||||||
| Other | (2,950 | ) | (3,749 | ) | |||||
| Total deferred tax liabilities | (21,890 | ) | (19,311 | ) | |||||
| Valuation allowance | (64,354 | ) | (52,019 | ) | |||||
| Net deferred tax liabilities | $ | (1,494 | ) | $ | (1,795 | ) | |||
| For the Years Ended June 30, | ||||||||||||
| (In thousands, except share and per share amounts) | 2020 | 2019 | 2018 | |||||||||
| Undistributed net (loss) income available to common stockholders | $ | (37,462 | ) | $ | (74,054 | ) | $ | (18,652 | ) | |||
| Undistributed net (loss) income available to nonvested restricted stockholders and holders of convertible preferred stock | (179 | ) | (76 | ) | (17 | ) | ||||||
| Net (loss) income available to common stockholders—basic | $ | (37,641 | ) | $ | (74,130 | ) | $ | (18,669 | ) | |||
| Weighted average common shares outstanding—basic | 17,205,849 | 16,996,354 | 16,815,020 | |||||||||
| Effect of dilutive securities: | ||||||||||||
| Shares issuable under stock options | 0 | 0 | 0 | |||||||||
| Weighted average common shares outstanding—diluted | 17,205,849 | 16,996,354 | 16,815,020 | |||||||||
| Net (loss) income per common share available to common stockholders—basic | $ | (2.19 | ) | $ | (4.36 | ) | $ | (1.11 | ) | |||
| Net (loss) income per common share available to common stockholders—diluted | $ | (2.19 | ) | $ | (4.36 | ) | $ | (1.11 | ) | |||
| For the Years Ended June 30, | |||||||||
| 2020 | 2019 | 2018 | |||||||
| Shares issuable under stock options | 330,627 | 157,850 | 462,032 | ||||||
| Shares issuable under convertible preferred stock | 422,193 | 407,734 | 393,769 | ||||||
| Shares issuable under PBRSUs | 73,012 | 65,971 | 35,732 | ||||||
| (In thousands, except share and per share amounts) | ||||||||||||||||||||
| Shares Authorized | Shares Issued and Outstanding | Stated Value per Share | Carrying Value | Cumulative Preferred Dividends, Undeclared and Unpaid | Liquidation Preference | |||||||||||||||
| 21,000 | 14,700 | $ | 1,101 | $ | 16,178 | $ | 1,478 | $ | 16,178 | |||||||||||
| For the Years Ended June 30, | |||||||||||||||||||||
| 2020 | 2019 | 2018 | |||||||||||||||||||
| (In thousands) | $ | % of total | $ | % of total | $ | % of total | |||||||||||||||
| Net Sales by Product Category: | |||||||||||||||||||||
| Coffee (Roasted) | $ | 325,764 | 64.9 | % | $ | 378,583 | 63.5 | % | $ | 379,951 | 62.6 | % | |||||||||
| Coffee (Frozen Liquid) | 28,619 | 5.7 | % | 34,541 | 5.8 | % | 34,794 | 5.7 | % | ||||||||||||
| Tea (Iced & Hot) | 25,369 | 5.1 | % | 33,109 | 5.6 | % | 32,477 | 5.4 | % | ||||||||||||
| Culinary | 50,135 | 10.0 | % | 64,100 | 10.8 | % | 64,432 | 10.6 | % | ||||||||||||
| Spice | 21,473 | 4.3 | % | 24,101 | 4.0 | % | 25,150 | 4.2 | % | ||||||||||||
| Other beverages(1) | 44,983 | 9.0 | % | 58,367 | 9.8 | % | 66,699 | 11.0 | % | ||||||||||||
| Other revenues(2) | 2,701 | 0.5 | % | 0 | 0 | % | 0 | 0 | % | ||||||||||||
| Net sales by product category | 499,044 | 99.5 | % | 592,801 | 99.5 | % | 603,503 | 99.5 | % | ||||||||||||
| Fuel surcharge | 2,276 | 0.5 | % | 3,141 | 0.5 | % | 3,041 | 0.5 | % | ||||||||||||
| Net sales | $ | 501,320 | 100.0 | % | $ | 595,942 | 100.0 | % | $ | 606,544 | 100.0 | % | |||||||||
| For The Three Months Ended | ||||||||||||||||
| September 30, 2019 | December 31, 2019 | March 31, 2020 | June 30, 2020 | |||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
| Net sales | $ | 138,600 | $ | 152,498 | $ | 129,139 | $ | 81,083 | ||||||||
| Cost of goods sold | $ | 97,959 | $ | 108,513 | $ | 91,190 | $ | 65,536 | ||||||||
| Gross profit | $ | 40,641 | $ | 43,985 | $ | 37,949 | $ | 15,547 | ||||||||
| Selling expenses | $ | 33,614 | $ | 34,906 | $ | 31,968 | $ | 21,274 | ||||||||
| Income (loss) from operations | $ | 6,892 | $ | 8,870 | $ | (45,169 | ) | $ | (13,595 | ) | ||||||
| Net income (loss) | $ | 4,654 | $ | 7,754 | $ | (39,777 | ) | $ | (9,718 | ) | ||||||
| Net income (loss) available to common stockholders per common share—basic | $ | 0.26 | $ | 0.44 | $ | (2.32 | ) | $ | (0.57 | ) | ||||||
| Net income (loss) available to common stockholders per common share—diluted | $ | 0.26 | $ | 0.43 | $ | (2.32 | ) | $ | (0.57 | ) | ||||||
| For The Three Months Ended | ||||||||||||||||
| September 30, 2018 | December 31, 2018 | March 31, 2019 | June 30, 2019 | |||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
| Net sales | $ | 147,440 | $ | 159,773 | $ | 146,679 | $ | 142,050 | ||||||||
| Cost of goods sold | $ | 99,205 | $ | 106,529 | $ | 106,779 | $ | 104,327 | ||||||||
| Gross profit | $ | 48,235 | $ | 53,244 | $ | 39,900 | $ | 37,723 | ||||||||
| Selling expenses | $ | 37,310 | $ | 39,591 | $ | 34,422 | $ | 28,324 | ||||||||
| (Loss) income from operations | $ | (2,078 | ) | $ | 502 | $ | (6,102 | ) | $ | (7,024 | ) | |||||
| Net loss | $ | (2,986 | ) | $ | (10,100 | ) | $ | (51,749 | ) | $ | (8,760 | ) | ||||
| Net loss available to common stockholders per common share—basic | $ | (0.18 | ) | $ | (0.60 | ) | $ | (3.05 | ) | $ | (0.52 | ) | ||||
| Net loss available to common stockholders per common share—diluted | $ | (0.18 | ) | $ | (0.60 | ) | $ | (3.05 | ) | $ | (0.52 | ) | ||||