UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2020~~2021



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-34249

FARMER BROS. CO.

(Exact Name of Registrant as Specified in Its Charter)



Delaware			95-0725980
(State or Other Jurisdiction of ~~Incorporation)~~Incorporation of Organization)			(I.R.S. Employer Identification No.)
1912 Farmer Brothers Drive,	Northlake,	Texas	76262
(Address of Principal Executive Offices; Zip Code)

	888		~~998-2468~~301-0489
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)		Name of Each Exchange on Which Registered
Common Stock, $1.00 par value	FARM		NASDAQ Global Select Market

None
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the

Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ☐ NO ☒

As of April ~~30, 2020,~~26, 2021, the registrant had ~~17,335,720~~17,822,656 shares outstanding of its common stock, par value $1.00 per share, which is the registrant’s only class of common stock.

TABLE OF CONTENTS


		Page
PART I – FINANCIAL INFORMATION (UNAUDITED)

		~~Page~~
~~PART I – FINANCIAL INFORMATION (UNAUDITED)~~

Item 1. Financial Statements	1

Condensed Consolidated Balance Sheets at March 31, ~~2020~~202 1 and June 30, ~~2019~~2020		1

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31, ~~2020~~202 1 and ~~2019~~20 20		2

Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended March 31, ~~2020~~202 1 and ~~2019~~20 21		3

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended March 31, ~~2020~~202 1 and ~~2019~~20 20		4

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, ~~2020~~202 1 and ~~2019~~20 20		6

Notes to Condensed Consolidated Financial Statements		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		37

Item 3. Quantitative and Qualitative Disclosures About Market Risk		53

Item 4. Controls and Procedures		54

PART II – OTHER INFORMATION

Item 1. Legal Proceedings		55

Item 1A. Risk Factors		55

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		5855

Item 3. Defaults Upon Senior Securities		5855

Item 4. Mine Safety Disclosures		5855

Item 5. Other Information		5855

Item 6. Exhibits		5956

SIGNATURES		6058

PART I - FINANCIAL INFORMATION (UNAUDITED)

Item 1. Financial Statements

FARMER BROS. CO.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share and per share data)


								March 31, 2021		June 30, 2020
	March 31, 2020			June 30, 2019
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	26,389		$	6,983		Cash and cash equivalents	$	8,474	$	60,013
Accounts receivable, net	50,889			55,155			Accounts receivable, net	37,100		40,882
Inventories	85,934			87,910			Inventories	75,151		67,408
Income tax receivable	1,020			1,191			Income tax receivable	0		831

Short-term derivative assets	2,833			1,865			Short-term derivative assets	1,062		165
Prepaid expenses	6,230			6,804			Prepaid expenses	8,711		7,414
Assets held for sale							Assets held for sale	2,521		0
Total current assets	173,295			159,908			Total current assets	133,019		176,713
Property, plant and equipment, net	169,361			189,458			Property, plant and equipment, net	154,467		165,633
Goodwill	—			36,224

Intangible assets, net	21,264			28,878			Intangible assets, net	18,854		20,662
Right-of-use operating lease assets							Right-of-use operating lease assets	25,800		21,117
Long-term derivatives assets							Long-term derivatives assets	0		10

Other assets	9,144			9,468			Other assets	8,121		8,564
Long-term derivatives assets	470			674
Right-of-use operating lease assets	21,789			—
Total assets	$	395,323		$	424,610		Total assets	$	340,261	$	392,699
LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:							Current liabilities:
Accounts payable	59,577			72,771			Accounts payable	44,610		36,987
Accrued payroll expenses	14,329			14,518			Accrued payroll expenses	15,380		9,394

Operating leases liabilities - current	6,031			—			Operating leases liabilities - current	6,036		5,854
Short-term derivative liabilities	1,401			1,474			Short-term derivative liabilities	1,990		5,255

Other current liabilities	6,476			7,309			Other current liabilities	6,384		6,802
Total current liabilities	87,814			96,072			Total current liabilities	74,400		64,292
Long-term borrowings under revolving credit facility	80,000			92,000			Long-term borrowings under revolving credit facility	88,000		122,000
Accrued pension liabilities	45,145			47,216			Accrued pension liabilities	56,682		58,772
Accrued postretirement benefits	9,065			23,024			Accrued postretirement benefits	10,381		9,993
Accrued workers’ compensation liabilities	5,000			4,747			Accrued workers’ compensation liabilities	3,687		4,569
Operating lease liabilities - noncurrent	16,010			—			Operating lease liabilities - noncurrent	19,770		15,628
Other long-term liabilities	4,553			4,057			Other long-term liabilities	5,352		5,532
Total liabilities	$	247,587		$	267,116		Total liabilities	$	258,272	$	280,786
Commitments and contingencies							Commitments and contingencies	0		0
Stockholders’ equity:							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 March 31, 2020 and June 30, 2019; liquidation preference of $16,038 and $15,624 as of March 31, 2020 and June 30, 2019, respectively	15			15
Common stock, $1.00 par value, 25,000,000 shares authorized; 17,231,473 and 17,042,132 shares issued and outstanding as of March 31, 2020 and June 30, 2019, respectively	17,234			17,042
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 March 31, 2021 and June 30, 2020; liquidation preference of $16,607 and $16,178 as of March 31, 2021 and June 30, 2020, respectively							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 March 31, 2021 and June 30, 2020; liquidation preference of $16,607 and $16,178 as of March 31, 2021 and June 30, 2020, respectively	15		15
Common stock, $1.00 par value, 25,000,000 shares authorized; 17,771,241 and 17,347,774 shares issued and outstanding as of March 31, 2021 and June 30, 2020, respectively							Common stock, $1.00 par value, 25,000,000 shares authorized; 17,771,241 and 17,347,774 shares issued and outstanding as of March 31, 2021 and June 30, 2020, respectively	17,771		17,348
Additional paid-in capital	61,027			57,912			Additional paid-in capital	65,170		62,043
Retained earnings	118,394			146,177			Retained earnings	70,428		108,536

Accumulated other comprehensive loss	(48,934		)	(63,652		)	Accumulated other comprehensive loss	(71,395)		(76,029)
Total stockholders’ equity	$	147,736		$	157,494		Total stockholders’ equity	$	81,989	$	111,913
Total liabilities and stockholders’ equity	$	395,323		$	424,610		Total liabilities and stockholders’ equity	$	340,261	$	392,699

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

FARMER BROS. CO.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except share and per share data)


	Three Months Ended March 31,						Nine Months Ended March 31,							Three Months Ended March 31,				Nine Months Ended March 31,
	2020			2019			2020			2019				2021		2020		2021		2020
Net sales	$	129,139		$	146,679		$	420,237		$	453,892		Net sales	$	93,152	$	129,139	$	294,993	$	420,237
Cost of goods sold	91,190			106,779			297,662			312,513			Cost of goods sold	69,274		91,190		222,447		297,662
Gross profit	37,949			39,900			122,575			141,379			Gross profit	23,878		37,949		72,546		122,575
Selling expenses	31,968			34,422			100,488			111,323			Selling expenses	22,767		31,968		71,035		100,488
General and administrative expenses	8,833			11,306			32,839			32,063			General and administrative expenses	11,018		8,833		32,334		32,839
Restructuring and other transition expenses	—			26			—			4,700

Net losses (gains) from sales of assets	287			248			(23,375		)	971			Net losses (gains) from sales of assets	488		287		(62)		(23,375)
Impairment of goodwill and intangible assets	42,030			—			42,030			—			Impairment of goodwill and intangible assets	0		42,030		0		42,030
Impairment of fixed assets													Impairment of fixed assets	0		0		1,243		0
Operating expenses	83,118			46,002			151,982			149,057			Operating expenses	34,273		83,118		104,550		151,982
Loss from operations	(45,169		)	(6,102		)	(29,407		)	(7,678		)	Loss from operations	(10,395)		(45,169)		(32,004)		(29,407)
Other (expense) income:													Other (expense) income:

Interest expense	(2,478		)	(2,981		)	(7,885		)	(9,165		)	Interest expense	(2,993)		(2,478)		(9,174)		(7,885)
Postretirement benefits curtailment and pension settlement charge	5,760			—			5,760			(10,948		)	Postretirement benefits curtailment and pension settlement charge	0		5,760		0		5,760
Other, net	1,076			495			2,941			2,105			Other, net	(356)		1,076		17,283		2,941
Total other income (expense)	4,358			(2,486		)	816			(18,008		)
Total other (expense) income													Total other (expense) income	(3,349)		4,358		8,109		816
Loss before taxes	(40,811		)	(8,588		)	(28,591		)	(25,686		)	Loss before taxes	(13,744)		(40,811)		(23,895)		(28,591)
Income tax (benefit) expense	(1,034		)	43,161			(1,222		)	39,149			Income tax (benefit) expense	(60)		(1,034)		13,785		(1,222)
Net loss	(39,777		)	(51,749		)	(27,369		)	(64,835		)	Net loss	(13,684)		(39,777)		(37,680)		(27,369)
Less: Cumulative preferred dividends, undeclared and unpaid	139			134			414			400			Less: Cumulative preferred dividends, undeclared and unpaid	144		139		428		414
Net loss available to common stockholders	$	(39,916	)	$	(51,883	)	$	(27,783	)	$	(65,235	)	Net loss available to common stockholders	$	(13,828)	$	(39,916)	$	(38,108)	$	(27,783)
Net loss available to common stockholders per common share—basic	$	(2.32	)	$	(3.05	)	$	(1.62	)	$	(3.84	)	Net loss available to common stockholders per common share—basic	$	(0.78)	$	(2.32)	$	(2.17)	$	(1.62)
Net loss available to common stockholders per common share—diluted	$	(2.32	)	$	(3.05	)	$	(1.62	)	$	(3.84	)	Net loss available to common stockholders per common share—diluted	$	(0.78)	$	(2.32)	$	(2.17)	$	(1.62)
Weighted average common shares outstanding—basic	17,230,879			17,003,206			17,161,477			16,982,247			Weighted average common shares outstanding—basic	17,756,619		17,230,879		17,569,026		17,161,477
Weighted average common shares outstanding—diluted	17,230,879			17,003,206			17,161,477			16,982,247			Weighted average common shares outstanding—diluted	17,756,619		17,230,879		17,569,026		17,161,477

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

FARMER BROS. CO.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~LOSS~~INCOME (LOSS) (UNAUDITED)

(In thousands)


	Three Months Ended March 31,				Nine Months Ended March 31,
	2021		2020		2021		2020
Net loss	$	(13,684)	$	(39,777)	$	(37,680)	$	(27,369)
Other comprehensive (loss) income, net of tax:
Unrealized (losses) gains on derivative instruments designated as cash flow hedges, net of tax	(1,315)		(7,680)		6,012		(285)
Gains (losses) on derivative instruments designated as cash flow hedges reclassified to cost of goods sold, net of tax	(973)		2,042		(1,233)		9,290
Losses on derivative instruments de-designated as cash flow hedges reclassified to interest expense, net of tax	301		0		960		0
Change in pension and retiree benefit obligations, net of tax	0		5,712		(1,105)		5,712

Total comprehensive (loss) income, net of tax	$	(15,671)	$	(39,703)	$	(33,046)	$	(12,652)

Three Months Ended March 31, Nine Months Ended March 31,
2020 2019 2020 2019
Net loss $ (39,777 ) $ (51,749 ) $ (27,369 ) $ (64,835 )
Other comprehensive (loss) income, net of tax:
Unrealized losses on derivative instruments designated as cash flow hedges, net of tax (7,680 ) (5,905 ) (285 ) (11,254 )
Losses on derivative instruments designated as cash flow hedges reclassified to cost of goods sold and interest expense, net of tax 2,042
3,201
9,290
6,311
Change in retiree benefit obligations, net of tax 1,416
(1,943 ) 1,416
(7,594 )
Postretirement benefits curtailment and pension settlement charge, net of taxes 4,296
2,801
4,296
10,948
Total comprehensive loss, net of tax $ (39,703 ) $ (53,595 ) $ (12,652 ) $ (66,424 )

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

FARMER BROS. CO.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(In thousands, except share and per share data)

Preferred Shares Preferred Stock Amount Common
Shares Common Stock
Amount Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Total
Balance at June 30, 2019 14,700
$ 15
17,042,132
$ 17,042
$ 57,912
$ 146,177
$ (63,652 ) $ 157,494
Net income —
—
—
—
—
4,654
—
4,654
Net reclassification of unrealized losses on cash flow hedges, net of taxes —
—
—
—
—
—
(1,301 ) (1,301 )
ESOP compensation expense, including reclassifications —
—
52,534
53
807
—
—
860
Share-based compensation —
—
—
—
(1 ) —
—
(1 )
Issuance of common stock and stock option exercises —
—
532
—
—
—
—
—
Cumulative preferred dividends, undeclared and unpaid —
—
—
—
—
(137 ) —
(137 )
Balance at September 30, 2019 14,700
$ 15
17,095,198
$ 17,095
$ 58,718
$ 150,694
$ (64,953 ) $ 161,569
Net income —
—
—
—
—
7,754
—
7,754
Net reclassification of unrealized losses on cash flow hedges, net of taxes —
—
—
—
—
—
15,945
15,945
ESOP compensation expense, including reclassifications —
—
55,623
56
525
—
—
581
Share-based compensation —
—
—
—
319
—
—
319
Issuance of common stock and stock option exercises —
—
26,627
29
101
—
—
130
Cumulative preferred dividends, undeclared and unpaid —
—
—
—
—
(138 ) —
(138 )
Balance at December 31, 2019 14,700
$ 15
17,177,448
$ 17,180
$ 59,663
$ 158,310
$ (49,008 ) $ 186,160
Net loss —
—
—
—
—
(39,777 ) —
(39,777 )
Net reclassification of unrealized gains on cash flow hedges, net of taxes —
—
—
—
—
—
(5,638 ) (5,638 )
Postretirement benefits curtailment, net of taxes —
—
—
—
—
—
4,296
4,296
Change in retiree benefit obligations, net of taxes —
—
—
—
—
—
1,416
1,416
ESOP compensation expense, including reclassifications —
—
54,025
54
854
—
—
908
Share-based compensation —
—
—
—
510
—
—
510
Cumulative preferred dividends, undeclared and unpaid —
—
—
—
—
(139 ) —
(139 )
Balance at March 31, 2020 14,700
15
17,231,473
17,234
61,027
118,394
(48,934 ) 147,736

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

FARMER BROS. CO.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) (Continued)
(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, 2018 14,700
$ 15
16,951,659
$ 16,952
$ 55,965
$ 220,307
$ (2,145 ) $ (62,039 ) $ 229,055
Net loss —
—
—
—
—
(2,986 ) —
—
(2,986 )
Net reclassification of unrealized losses on cash flow hedges, net of taxes —
—
—
—
—
—
—
(4,637 ) (4,637 )
ESOP compensation expense, including reclassifications —
—
—
—
529
—
—
—
529
Share-based compensation —
—
—
—
433
—
—
—
433
Issuance of common stock and stock option exercises —
—
26,042
26
300
—
—
—
326
Cumulative preferred dividends, undeclared and unpaid —
—
—
—
—
(132 ) —
—
(132 )
Balance at September 30, 2018 14,700
15
16,977,701
16,978
57,227
217,189
(2,145 ) (66,676 ) 222,588
Net loss —
—
—
—
—
(10,100 ) —
—
(10,100 )
Net reclassification of unrealized gains on cash flow hedges, net of taxes —
—
—
—
—
�� —
—
2,398
2,398
Pension settlement charge, net of taxes —
—
—
—
—
—
—
8,147
8,147
Change in retiree benefit obligations, net of taxes —
—
—
—
—
—
—
(5,651 ) (5,651 )
ESOP compensation expense, including reclassifications —
—
—
—
(1,740 ) —
2,145
—
405
Share-based compensation —
—
16,266
16
474
—
—
—
490
Issuance of common stock and stock option exercises —
—
8,562
9
173
—
—
—
182
Cumulative preferred dividends, undeclared and unpaid —
—
—
—
—
(134 ) —
—
(134 )
Balance at December 31, 2018 14,700
$ 15
17,002,529
$ 17,003
$ 56,134
$ 206,955
$ —
$ (61,782 ) $ 218,325
Net loss —
—
—
—
—
(51,749 ) —
—
(51,749 )
Net reclassification of unrealized losses on cash flow hedges, net of taxes —
—
—
—
—
—
—
(2,705 ) (2,705 )
Pension settlement charge, net of taxes —
—
—
—
—
—
—
2,801
2,801
Change in retiree benefit obligations, net of taxes —
—
—
—
—
—
—
(1,943 ) (1,943 )
ESOP compensation expense, including reclassifications —
—
—
—
700
—
—
—
700
Share-based compensation —
—
2,032
2
487
—
—
—
489
Cumulative preferred dividends, undeclared and unpaid —
—
—
—
—
$ (134 ) —
—
$ (134 )
Balance at March 31, 2019 14,700
$ 15
17,004,561
$ 17,005
$ 57,321
$ 155,072
$ —
$ (63,629 ) $ 165,784

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


FARMER BROS. CO. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) (In thousands, except share and per share data)

	Preferred Shares	Preferred Stock Amount		Common Shares	Common Stock Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance at June 30, 2020	14,700	15		17,347,774	17,348		62,043		108,536		(76,029)		$	111,913
Net loss	—	—		—	—		—		(6,270)		—		(6,270)
Cash flow hedges, net of taxes	—	—		—	—		—		—		4,271		4,271

Change in the funded status of retiree benefit obligations, net of taxes	—	—		—	—		—		—		(7,289)		(7,289)
Non-cash issuance of 401-k common stock	—	—		76,671	77		323		—		—		400
Share-based compensation	—	—		—	—		745		—		—		745
Issuance of common stock and stock option exercises	—	—		7,370	7		(7)		—		—		0
Cumulative preferred dividends, undeclared and unpaid	—	—		—	—		—		(142)		—		(142)
Balance at September 30, 2020	14,700	15		17,431,815	17,432		63,104		102,124		(79,047)		103,628
Net loss	—	—		—	—		—		(17,725)		—		(17,725)
Cash flow hedges, net of taxes	—	—		—	—		—		—		3,455		3,455

Change in the funded status of retiree benefit obligations, net of taxes	—	—		—	—		—		—		6,184		6,184
Non-cash issuance of 401-k common stock	—	—		108,426	108		287		—		—		395
Share-based compensation	—	—		—	—		399		—		—		399
Issuance of common stock and stock option exercises	—	—		50,843	51		(51)		—		—		0
Cumulative preferred dividends, undeclared and unpaid	—	—		—	—		—		(143)		—		(143)
Balance at December 31, 2020	14,700	15		17,591,084	17,591		63,739		84,256		(69,408)		96,193
Net loss	—	—		—	—		—		(13,684)		—		(13,684)
Cash flow hedges, net of taxes	—	—		—	—		—		—		(1,987)		(1,987)


Non-cash issuance of 401-k common stock	—	—		162,259	162		769		—		—		931
Share-based compensation	—	—		—	—		680		—		—		680
Issuance of common stock and stock option exercises	—	—		17,898	18		(18)		—		—		—
Cumulative preferred dividends, undeclared and unpaid	—	—		—	—		—		(144)		—		(144)
Balance at March 31, 2021	14,700	$	15	17,771,241	$	17,771	$	65,170	$	70,428	$	(71,395)	$	81,989

FARMER BROS. CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Nine Months Ended March 31,
2020 2019
Cash flows from operating activities:
Net loss $ (27,369 ) $ (64,835 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 22,544
23,230
Restructuring and other transition expenses, net of payments —
1,886
Deferred income taxes —
40,078
Impairment of goodwill and intangible assets 42,030
—
Postretirement benefits curtailment and pension settlement charge (5,760 ) 10,948
Net (gains) losses from sales of assets (23,375 ) 971
Net losses on derivative instruments 9,830
9,228
Other adjustments 3,698
4,981
Change in operating assets and liabilities:
Accounts receivable 3,745
(7,651 )
Inventories 1,004
3,937
Derivative assets/liabilities, net (2,472 ) (13,229 )
Other assets 1,510
180
Accounts payable (13,194 ) 8,466
Accrued expenses and other liabilities (4,126 ) (10,690 )
Net cash provided by operating activities $ 8,065
$ 7,500
Cash flows from investing activities:
Purchases of property, plant and equipment (13,114 ) (30,393 )
Proceeds from sales of property, plant and equipment 36,733
143
Net cash provided (used) in investing activities $ 23,619
$ (30,250 )
Cash flows from financing activities:
Proceeds from revolving credit facility $ 48,000
$ 50,642
Repayments on revolving credit facility (60,000 ) (17,417 )
Payments of finance lease obligations (40 ) (185 )
Payment of financing costs (367 ) (1,041 )
Proceeds from stock option exercises 129
507
Net cash (used) provided by financing activities $ (12,278 ) $ 32,506
Net increase in cash and cash equivalents $ 19,406
$ 9,756
Cash and cash equivalents at beginning of period 6,983
2,438
Cash and cash equivalents at end of period $ 26,389
$ 12,194

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


FARMER BROS. CO. CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) (Continued) (In thousands, except share and per share data)

	Preferred Shares	Preferred Stock Amount		Common Shares	Common Stock Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance at June 30, 2019	14,700	$	15	17,042,132	$	17,042	$	57,912	$	146,177	$	(63,652)	157,494
Net income	—	—		—	—		—		4,654		—		4,654
Cash flow hedges, net of taxes	—	—		—	—		—		—		(1,301)		(1,301)


Non-cash issuance of 401-k common stock	—	—		52,534	53		807		—		—		860
Share-based compensation	—	—		—	—		(1)		—		—		(1)
Issuance of common stock and stock option exercises	—	—		532	—		—		—		—		0
Cumulative preferred dividends, undeclared and unpaid	—	—		—	—		—		(137)		—		(137)
Balance at September 30, 2019	14,700	15		17,095,198	17,095		58,718		150,694		(64,953)		161,569
Net income	—	—		—	—		—		7,754		—		7,754
Cash flow hedges, net of taxes	—	—		—	—		—		—		15,945		15,945


Non-cash issuance of 401-k common stock	—	—		55,623	56		525		—		—		581
Share-based compensation	—	—		—	—		319		—		—		319
Issuance of common stock and stock option exercises	—	—		26,627	29		101		—		—		130
Cumulative preferred dividends, undeclared and unpaid	—	—		—	—		—		(138)		—		(138)
Balance at December 31, 2019	14,700	15		17,177,448	17,180		59,663		158,310		(49,008)		186,160
Net loss	—	—		—	—		—		(39,777)		—		(39,777)
Cash flow hedges, net of taxes	—	—		—	—		—		—		(5,638)		(5,638)

Change in retiree benefit obligations, net of taxes	—	—		—	—		—		—		5,712		5,712
Non-cash issuance of 401-k common stock	—	—		54,025	54		854		—		—		908
Share-based compensation	—	—		0	0		510		—		—		510

Cumulative preferred dividends, undeclared and unpaid	—	—		—	—		—		(139)		—		(139)
Balance at March 31, 2020	14,700	$	15	17,231,473	$	17,234	$	61,027	$	118,394	$	(48,934)	$	147,736

FARMER BROS. CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - (continued)
(In thousands)
Nine Months Ended March 31,
2020 2019
Supplemental disclosure of non-cash investing and financing activities:
    Non-cash additions to property, plant and equipment $ 1,130
$ 739
    Non-cash portion of earnout receivable recognized—spice assets sale $ —
$ 592
    Non-cash portion of earnout payable recognized—West Coast Coffee acquisition $ —
$ 1,000
    Non-cash issuance of 401-K common stock $ 163
$ —
     Non-cash - Boyd Coffee post-closing working capital adjustment $ —
$ 2,277
    Cumulative preferred dividends, undeclared and unpaid $ 414
$ 400

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


FARMER BROS. CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
	Nine Months Ended March 31,
	2021		2020
Cash flows from operating activities:
Net loss	$	(37,680)	$	(27,369)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	21,231		22,544



Postretirement and Pension benefits gains	(14,577)		(5,760)

Deferred income taxes	13,472		0
Release of deferred tax asset valuation allowance	—		—
Impairment of goodwill and intangible assets	0		42,030
Impairment of fixed assets	1,243		0


Net gains from sales of assets	(62)		(23,375)

Net (gains) losses on derivative instruments	(2,875)		9,830
Other adjustments	3,124		3,698
Change in operating assets and liabilities:



Accounts receivable	4,210		3,745
Inventories	(7,744)		1,004

Derivative assets/liabilities, net	3,309		(2,472)

Other assets	3,184		1,510
Accounts payable	6,496		(13,194)
Accrued expenses and other	3,181		(4,126)


Net cash (used) provided by operating activities	$	(3,488)	$	8,065
Cash flows from investing activities:

Purchases of property, plant and equipment	(12,796)		(13,114)

Proceeds from sales of property, plant and equipment	2,009		36,733
Net cash (used) provided in investing activities	$	(10,787)	$	23,619
Cash flows from financing activities:
Proceeds from revolving credit facility	$	27,150	$	48,000
Repayments on revolving credit facility	(61,150)		(60,000)



Payments of finance lease obligations	(57)		(40)
Payment of financing costs	(3,207)		(367)
Proceeds from stock option exercises	0		129



Net cash used by financing activities	$	(37,264)	$	(12,278)
Net (decrease) increase in cash and cash equivalents	$	(51,539)	$	19,406
Cash and cash equivalents at beginning of period	60,013		6,983
Cash and cash equivalents at end of period	$	8,474	$	26,389

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


FARMER BROS. CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - (continued)
(In thousands)
	Nine Months Ended March 31,
	2021		2020
Supplemental disclosure of non-cash investing and financing activities:


Non-cash additions to property, plant and equipment	$	297	$	1,130






Non-cash issuance of 401-K common stock	$	347	$	163



Cumulative preferred dividends, undeclared and unpaid	$	428	$	414

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

FARMER BROS. CO.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Introduction and Basis of Presentation

Farmer Bros. Co., a Delaware corporation (including its consolidated subsidiaries unless the context otherwise requires, the “Company”), is a national coffee roaster, wholesaler and distributor of coffee, tea, and culinary products.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the interim financial data have been included. Operating results for the three and nine months ended March 31, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, ~~2020.~~2021. Events occurring subsequent to March 31, ~~2020~~2021 have been evaluated for potential recognition or disclosure in the unaudited condensed consolidated financial statements for the three and nine months ended March 31, ~~2020.~~2021.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2019,~~2020, filed with the Securities and Exchange Commission (the “SEC”) on September 11, ~~2019~~2020 (the ~~“2019~~“2020 Form 10-K”).

~~Going Concern -~~ The accompanying unaudited condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

As of March 31, 2020, the Company had $26.4 million of cash on hand and was in compliance with financial covenants under its Amended Revolving Facility. In April 2020, the Company borrowed an additional $42.0 million under its Amended Revolving Facility as a proactive measure to increase its cash position and preserve financial flexibility in light of the current uncertainty in the global markets resulting from the COVID-19 pandemic.

The COVID-19 pandemic and the related restrictive measures such as travel bans, quarantines, shelter-in-place orders, and shutdowns as well as changes in recent consumer behavior, have had an adverse impact on certain of the Company’s Direct-store- delivery (“DSD”) customers, particularly restaurants, hotels, casinos and coffeehouses. Many of these customers have been forced to close or curtail operations, and are purchasing at reduced volumes, if at all. As a result, sales from the Company’s DSD customers have declined between 65% to 70% from pre COVID-19 average sales and there is uncertainty regarding the rate at which these customers will resume operations and purchases as the restrictive measures are lifted. As a result, the Company is projecting potential violations of its financial covenants under the Amended Revolving Facility beginning June 30, 2020, which would place it in an event of default. The occurrence of a default would permit the Company’s lenders to declare as due all amounts outstanding under its Amended Credit Facility which total $122.0 million as of May 7, 2020, and currently mature on November 6, 2023. The Company does not have sufficient cash on hand or available liquidity that can be utilized to repay the total outstanding debt in the event of default. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.

In response to these conditions and to maintain operating results and liquidity, the Company has reduced discretionary expenses, aggressively reduced capital expenditures, and closely and proactively managed its inventory purchases, while prioritizing investments in e-commerce initiatives and serving current Direct Ship customers’ needs. Additionally, the Company has continued to focus on the rebalancing of volume across its manufacturing network, bringing additional production into its Northlake, Texas facility to generate additional savings. The Company has already taken the following actions, among others:

~~reduced headcount and furloughed a significant percentage of the remaining employees;~~

~~eliminated fiscal third quarter 2020 cash compensation for its Board of Directors;~~

~~temporarily decreased executive leadership, corporate team members’ and all exempt employees’ (except route sales representatives) base salaries by 15%;~~

~~reduced discretionary spending, including a moratorium on all travel;~~

~~reduced fiscal year ending 2020 management incentive bonus program;~~

~~Farmer Bros. Co.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (continued)~~

~~reduced plant production costs in two of its plants;~~

~~suspended 401(k) cash matching for all eligible employees;~~

~~reduced capital expenditures while also closely managing inventory and other spending;~~

~~implemented cost controls throughout its coffee brewing equipment (“CBE”) program service network;~~

~~instituted cost savings to reduce its selling, general and administrative expenses;~~

~~reduced its DSD supply chain network costs by reducing freight, and fleet, and consolidating routes; and~~

~~commenced negotiations with certain landlords on rent, operating expenses and leases.~~

The Company expects these actions will improve its cost structure to mitigate the impact of the COVID-19 pandemic on its operating results and liquidity. In addition, the Company is currently pursuing with its lenders a waiver agreement or forbearance arrangement related to projected covenant violations under its Amended Revolving Facility. The Company obtained an amendment from its lenders in March 2020, and based on the current debt market environment and other factors, management believes that a waiver or forbearance will be approved to avoid acceleration of its debt. As a result, the Company has concluded that management’s plans are probable of being achieved to alleviate substantial doubt about the Company’s ability to continue as a going concern.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its direct and indirect wholly owned subsidiaries FBC Finance Company, a California corporation, Coffee Bean Holding Co., Inc., a Delaware corporation, the parent company of Coffee Bean International, Inc., an Oregon corporation (“CBI”), China Mist Brands, Inc., a Delaware corporation, Boyd Assets Co., a Delaware corporation, and Coffee Bean International LLC, a Delaware limited liability company. All inter-company balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company reviews its estimates on an ongoing basis using currently available information. Changes in facts and circumstances may result in revised estimates and actual results may differ from those estimates.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Note 2. Summary of Significant Accounting Policies

For a detailed discussion about the Company’s significant accounting policies, see Note 2, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements in the ~~2019~~2020 Form 10-K.

During the three and nine months ended March 31, ~~2020,~~2021, other than as set forth below and the adoption of Financial Accounting Standards Board Accounting (“FASB”) Standards Update (“ASU”) ASU No. ~~2016-02, “Leases (Topic 842)”~~2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU ~~2016-02”~~2016-13”) and ASU 2018-15, “Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service” (“ASU 2018-15”), there were no significant updates made to the Company’s significant accounting policies.

Concentration of Credit Risk

At March 31, ~~2020~~2021 and June 30, ~~2019,~~2020, the financial instruments which potentially expose the Company to concentration of credit risk consist of cash in financial institutions (in excess of federally insured limits), derivative instruments and trade receivables.

The Company does not have any credit-risk related contingent features that would require it to post additional collateral in support of its net derivative ~~liability~~asset positions. At March 31, ~~2020~~2021 and June 30, ~~2019,~~2020, none of the cash in the Company’s coffee-related derivative margin accounts was restricted. Further changes in commodity prices and the number of coffee-related derivative instruments held, could have a significant impact on cash deposit requirements under certain of the Company's broker and counterparty agreements.

~~Approximately 40%~~Approximately 27% and ~~28%~~ 39% of the Company’s trade accounts receivable balance was with five customers at March 31, ~~2020~~2021 and June 30, ~~2019,~~2020, respectively. The Company estimates its maximum credit risk for accounts receivable at the amount recorded on the balance sheet. The trade accounts receivables are generally short-term and all ~~probable bad debt~~estimated credit losses have been appropriately considered in establishing the allowance for doubtful accounts.

~~Adoption of ASC 842 - Leases~~

~~Effective July 1, 2019, the Company adopted the FASB Topic 842 (“ASC 842”),~~ ~~Leases~~. The Company adopted ASC 842 under the modified retrospective approach using the practical expedient; therefore, the presentation of prior year periods has not been adjusted. No cumulative effect of initially adopting ASC 842 as an adjustment to the opening balance of components of equity as of July 1, 2019 was necessary. The adoption of ASC 842 resulted in the recording of Operating lease right-of-use assets and Operating lease liabilities of $16.3 million, as of July 1, 2019. The adoption of ASC 842 had no impact on retained earnings. See ~~Note 3~~ ~~for detail discussions on the adoption of ASC 842.~~

Right-of-use lease assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the company will exercise that option. Lease expense is primarily recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are combined for certain assets classes.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Recent Accounting Pronouncements

The Company considers the applicability and impact of all ASUs issued. ASUs not listed below were assessed and either determined to be not applicable or expected to have minimal impact on its condensed consolidated financial statements.

The following table provides a brief description of the applicable recent ASUs issued by the FASB:

Standard

Description

Effective Date

Effect on the Financial Statements or Other Significant Matters

In March 2020, the FASB issued ASU No. 2020-04, “Facilitation of the Effect of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”)

The London Interbank Offered Rate (LIBOR) is set to expire at the end of 2021. Contracts affected by the rate change would be required to be modified. Under current U.S. GAAP, those modifications would have to be evaluated to determine whether they result in new contracts or continuation of the existing contracts. ASU 2020-04 provides temporary optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the transition from LIBOR to alternative reference rate.

Issuance date of March 12, 2020 through December 31, 2022.

The Company is currently evaluating the impact ASU 2020-04 will have on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes" ("ASU 2019-12").

ASU 2019-12 guidance simplifies the accounting for income taxes by removing the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (for example, discontinued operations or other comprehensive income). With the removal of this exception, entities will determine the tax effect of pre-tax income or loss from continuing operations without consideration of the tax effects of other items that are not included in continuing operations.

Annual periods beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period.

The Company is currently evaluating the impact ASU 2019-12 will have on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” (“ASU 2018-15”).

ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

Annual periods beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period.

~~Effective for~~The Company adopted the new guidance effective July 1, 2020 on a prospective basis which did not require the Company ~~beginning July 1, 2020. The Company is currently evaluating the impact~~to adjust comparative periods. Adoption of ASU 2018-15 ~~will~~did not have a material impact on ~~its consolidated~~the results of operations, financial ~~statements.~~position or cash flows of the Company.

In August 2018, the FASB issued ASU No. 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans” (“ASU 2018-14”).

ASU 2018-14 modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing disclosures that no longer are considered cost beneficial, clarifying the specific requirements of disclosures and adding disclosure requirements identified as relevant.

Annual periods beginning after December 15, 2020. Early adoption is permitted.

Effective for the Company beginning July 1, 2021. The Company is currently evaluating the impact ASU 2018-14 will have on its consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”).

~~ASU 2018-02 provides entities an option to reclassify certain stranded tax effects resulting from the tax reform from accumulated other comprehensive income to retained earnings.~~

The guidance in ASU 2018-02 is effective for annual periods beginning after December 15, 2018, and interim periods within those fiscal years, and should be applied either in the period of adoption or retrospectively.

~~The Company did not elect the option to reclassify certain stranded tax effects resulting from the tax reform from accumulated other comprehensive income to retained earnings.~~

~~In January 2017, the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”).~~

The amendments in ASU 2017-04 address concerns regarding the cost and complexity of the two-step goodwill impairment test, and remove the second step of the test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. ASU 2017-04 does not amend the optional qualitative assessment of goodwill impairment.

~~Annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019.~~

The Company adopted the new guidance effective January 1, 2020, on a prospective basis, which did not require the Company to adjust comparative periods. Adoption of ASU 2017-04 did not have a material impact on the results of operations, financial position or cash flows of the Company.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Since that date, the FASB has issued additional ASUs clarifying certain aspects of ASU 2016-13.

The objective of the guidance in ASU 2016-13 is to allow entities to recognize estimated credit losses in the period that the change in valuation occurs. The amendments in ASU 2016-13 requires an entity to present financial assets measured on an amortized cost basis on the balance sheet net of an allowance for credit losses. The model requires an estimate of the credit losses expected over the life of an exposure or pool of exposures. The income statement will reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period.

Annual reporting periods beginning after December 15, 2019 and interim periods within those reporting periods.

~~Effective for~~The Company adopted the ~~Company beginning~~new guidance effective July 1, ~~2020. The Company is currently evaluating the impact~~2020 on a modified retrospective basis. Adoption of ~~adoption on its financial statements and related disclosures, but does~~ASU 2016-13 did not ~~anticipate~~have a material impact toon the ~~consolidated~~results of operations, financial ~~statements.~~position or cash flows of the Company.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)



~~Standard~~		~~Description~~	~~Effective Date~~	~~Effect on the Financial Statements or Other Significant Matters~~
~~In February 2016, the FASB issued ASU 2016-02, Leases. Since that date, the FASB has issued additional ASUs clarifying certain aspects of ASU 2016-02.~~	ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases. Subsequent guidance issued after February 2016 did not change the core principle of ASU 2016-02.	~~Annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early application is permitted.~~	~~The Company adopted the new guidance effective July 1, 2019, using the modified retrospective transition method, which did not require the Company to adjust comparative periods. See~~ ~~Note 3~~ ~~for the applicable disclosure of ASU 2016-02 adoption. .~~

~~Farmer Bros. Co.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (continued)~~

Note 3. Leases

The Company makes a determination if an arrangement constitutes a lease at inception, and categorizes the lease as either an operating or finance lease. Operating leases are included in right-of-use operating lease assets and operating lease liabilities in the Company's Condensed Consolidated Balance Sheets. Finance leases are included in property, plant and equipment, net and other long-term liabilities in the Condensed Consolidated Balance Sheets. Leases with an initial term of 12 months or less are not recorded on the Condensed Consolidated Balance Sheets.

The Company has entered into leases for building facilities, vehicles and other equipment. The Company’s leases have remaining contractual terms of up to 10 years, some of which have options to extend the lease for up to 10 years. For purposes of calculating operating lease liabilities, lease terms are deemed not to include options to extend the lease ~~termination~~renewal until it is reasonably certain that the Company will exercise that option. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

In September 2020, the Company entered a new 89 month lease for its western U.S. distribution center. The lease terminates on March 31, 2028, with a one 5 year renewal option. The lease has been classified as an operating lease and included in the lease tables and the related disclosures below.

In January 2021, the Company entered into a 60 month lease for various office copier equipment terminating on December 31, 2025. The lease term is for a major part of the remaining economic life of the lease assets. Therefore, the lease has been classified as a finance lease and included in the lease tables and the related disclosures below.

Supplemental unaudited consolidated balance sheet information related to leases is as follows:


	Classification	March 31, 2021		June 30, 2020
(In thousands)
Operating lease assets	Right-of-use operating lease assets	$	25,800	21,117
Finance lease assets	Property, plant and equipment, net	779		9
Total lease assets		$	26,579	$	21,126

Operating lease liabilities - current	Operating lease liabilities - current	6,036		5,854
Finance lease liabilities - current	Other current liabilities	193		0
Operating lease liabilities - noncurrent	Operating lease liabilities - noncurrent	19,770		15,628
Finance lease liabilities	Other long-term liabilities	593		9
Total lease liabilities		$	26,592	$	21,491

Classification March 31, 2020
(In thousands)
Operating lease assets Right-of-use operating lease assets $ 21,789
Finance lease assets Property, plant and equipment, net 22
Total lease assets $ 21,811

Operating lease liabilities - current Operating lease liabilities - current $ 6,031
Operating lease liabilities - noncurrent Operating lease liabilities - noncurrent 16,010
Finance lease liabilities Other long-term liabilities 22
Total lease liabilities $ 22,063

The components of lease expense are as follows:


		Three Months Ended March 31,				Nine Months Ended March 31,
	Classification	2021		2020		2021		2020
(In thousands)
Operating lease expense	General and administrative expenses and cost of goods sold	$	1,838	$	1,497	$	5,415	$	3,858
Finance lease expense:
Amortization of finance lease assets	General and administrative expenses	54		13		63		39
Interest on finance lease liabilities	Interest expense	13		0		13		1
Total lease expense		$	1,905	$	1,510	$	5,491	$	3,898

Three Months Ended March 31, Nine Months Ended March 31,
Classification 2020 2020
(In thousands)
Operating lease expense General and administrative expenses and cost of goods sold $ 1,497
$ 3,858
Finance lease expense:
Amortization of finance lease assets General and administrative expenses 13
39
Interest on finance lease liabilities Interest expense —
1
Total lease expense $ 1,510
$ 3,898

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

March 31, 2020
(In thousands) Operating Leases Finance Leases
Maturities of lease liabilities are as follows:
2020 $ 1,532
$ 13
2021 5,764
9
2022 4,357
—
2023 3,711
—
2024 3,375
—
Thereafter 6,272
—
Total lease payments 25,011
22
Less: interest (2,970 ) —
Total lease obligations $ 22,041
$ 22


	March 31, 2021
(In thousands)	Operating Leases		Finance Leases
Maturities of lease liabilities are as follows:
2021	$	1,546	$	48
2022	5,899		193
2023	5,476		193
2024	5,184		193
2025	4,019		193
Thereafter	7,877		96
Total lease payments	30,001		916
Less: interest	(4,195)		(130)
Total lease obligations	$	25,806	$	786

Lease term and discount rate:


	March 31, 2021		June 30, 2020
Weighted-average remaining lease terms (in years):
Operating lease	7.5		8.3
Finance lease	4.7		0.2

Weighted-average discount rate:
Operating lease	5.01	%	4.50	%
Finance lease	5.01	%	4.50	%



	~~March 31, 2020~~
~~Weighted-average remaining lease terms (in years):~~
~~Operating lease~~	~~8.5~~
~~Finance lease~~	~~0.4~~

~~Weighted-average discount rate:~~
~~Operating lease~~	~~4.50~~	%
~~Finance lease~~	~~4.50~~	%

Other Information:


	Nine Months Ended March 31,
(In thousands)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,807	$	3,585
Operating cash flows from finance leases	$	13	$	1
Financing cash flows from finance leases	$	44	$	38

Leased assets obtained in exchange for new finance lease liabilities	$	0	$	0
Leased assets obtained in exchange for new operating lease liabilities	$	0	$	0

Nine Months Ended
March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 3,585
Operating cash flows from finance leases $ 1
Financing cash flows from finance leases $ 38

Leased assets obtained in exchange for new finance lease liabilities $ —
Leased assets obtained in exchange for new operating lease liabilities $ —

~~Disclosures related to periods prior to adoption of ASU 2016-02~~

~~Rent expense paid for the fiscal year ended June 30, 2019 was $6.4 million.~~

~~The minimum annual payments under operating and capital leases as of June 30, 2019 are as follows:~~

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

(In thousands) Operating
Lease
Obligations Capital��
Lease
Obligations
Year Ended June 30,
2020 $ 4,434
$ 36
2021 3,238
1
2022 2,472
—
2023 2,131
—
2024 2,025
—
Thereafter 4,389
—
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

~~Farmer Bros. Co.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (continued)~~

Note 4. Derivative Instruments

Derivative Instruments Held

Coffee-Related Derivative Instruments

The Company is exposed to commodity price risk associated with its price to be fixed green coffee purchase contracts, which are described further in Note 2 to the consolidated financial statements in the ~~2019~~2020 Form 10-K. The Company utilizes forward and option contracts to manage exposure to the variability in expected future cash flows from forecasted purchases of green coffee attributable to commodity price risk. Certain of these coffee-related derivative instruments utilized for risk management purposes have been designated as cash flow hedges, while other coffee-related derivative instruments have not been designated as cash flow hedges or do not qualify for hedge accounting despite hedging the Company’s future cash flows on an economic basis.

The following table summarizes the notional volumes for the coffee-related derivative instruments held by the Company at March 31, ~~2020~~2021 and June 30, ~~2019:~~2020:


(In thousands)	March 31, 2021	June 30, 2020
Derivative instruments designated as cash flow hedges:
Long coffee pounds	20,681	36,413
Derivative instruments not designated as cash flow hedges:
Long coffee pounds	8,112	8,348
Total	28,793	44,761

(In thousands) March 31, 2020 June 30, 2019
Derivative instruments designated as cash flow hedges:
  Long coffee pounds 33,900
42,113
Derivative instruments not designated as cash flow hedges:
  Long coffee pounds 4,911
6,070
      Total 38,811
48,183

Coffee-related derivative instruments designated as cash flow hedges outstanding as of March 31, ~~2020~~2021 will expire within 21 months. At March 31, ~~2020~~2021 and June 30, ~~2019~~2020 approximately ~~87%~~72% and 81%, respectively, of the Company's outstanding coffee-related derivative instruments were designated as cash flow hedges.

Interest Rate Swap Derivative Instruments

Pursuant to an International Swap Dealers Association, Inc. Master Agreement (“ISDA”) which was effective March 20, 2019, the Company on March 27, 2019, entered into an interest rate swap transaction utilizing a notional amount of $80.0 million, with an effective date of April 11, 2019 and a maturity date of October 11, 2023 (the “Rate Swap”). In December 2019, the Company amended the notional amount to $65.0 million. The Rate Swap is intended to manage the Company’s interest rate risk on its floating-rate indebtedness under the Company’s revolving credit facility. Under the terms of the Rate Swap, the Company receives 1-month LIBOR, subject to a 0% floor, and makes payments based on a fixed rate of 2.1975%. The Company’s obligations under the ISDA are secured by the collateral which secures the loans under the revolving credit facility on a pari passu and pro rata basis with the principal of such loans.

The Company ~~has~~had designated the Rate Swap derivative ~~instruments~~instrument as a cash flow ~~hedge.~~hedge; however, during the quarter ended September 30, 2020, the Company de-designated the Rate Swap derivative instruments. As a result, the balance in AOCI was frozen at the time of de-designation. The Company recognized $0.3 million and $1.0 million, respectively, in interest expense for the three and nine months ended March 31, 2021. The remaining balance of $2.9 million frozen in AOCI will be amortized over the life of the Rate Swap through November 6, 2023.

In connection with a new revolver credit facility agreement in April 2021 (see Note 11 for details), the Company also executed a new ISDA agreement to transfer its interest swap to Wells Fargo. See Note 11 for summary description of the key items of the ISDA agreement. The Company did not designate the amended rate swap as a cash flow hedge. The frozen AOCI balance described above from the original interest rate swap that was de-designated during the quarter ended September 30, 2020 will continue to be recognized in interest expense through November 6, 2023.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Effect of Derivative Instruments on the Financial Statements

Balance Sheets

Fair values of derivative instruments on the Company’s condensed consolidated balance sheets:

Derivative Instruments
Designated as Cash Flow Hedges
Derivative Instruments Not Designated as Accounting Hedges
March 31, 2020 June 30, 2019 March 31, 2020 June 30, 2019
(In thousands)
Financial Statement Location:
Short-term derivative assets:
Coffee-related derivative instruments(1) $ 2,208
$ 1,254
$ 625
$ 611
Long-term derivative assets:
Coffee-related derivative instruments (2) $ 470
$ 671
$ —
$ 3
Short-term derivative liabilities:
Coffee-related derivative instruments (3) $ 257
$ 1,114
$ 38
$ 114
Interest rate swap derivative instruments (3) $ 1,106
$ 246
$ —
$ —
Long-term derivative liabilities:
Coffee-related derivative instruments (4) $ 3
$ 13
$ —
$ —
Interest rate swap derivative instruments (4) $ 2,745
$ 1,599
$ —
$ —


	Derivative Instruments Designated as Cash Flow Hedges				Derivative Instruments Not Designated as Accounting Hedges
	March 31, 2021		June 30, 2020		March 31, 2021		June 30, 2020
(In thousands)
Financial Statement Location:
Short-term derivative assets:
Coffee-related derivative instruments(1)	$	1,014	$	35	$	48	$	130
Long-term derivative assets:



Coffee-related derivative instruments (2)	$	0	$	10	$	0	$	0
Short-term derivative liabilities:
Coffee-related derivative instruments	$	382	$	3,322	$	277	$	706

Interest rate swap derivative instruments	$	0	$	1,228	$	1,331	$	0
Long-term derivative liabilities:
Coffee-related derivative instruments (3)	$	27	$	246	$	0	$	0
Interest rate swap derivative instruments (3)	$	0	$	2,613	$	1,680	$	0

________________

(1) Included in “Short-term derivative assets” on the Company’s condensed consolidated balance sheets.

(2) Included in “Long-term derivative assets” on the Company's condensed consolidated balance sheets.

(3) ~~Included in “Short-term liabilities” on the Company's condensed consolidated balance sheets.~~

~~(4)~~ Included in “Other long-term liabilities” on the Company's condensed consolidated balance sheets.

Statements of Operations

The following table presents pretax net gains and losses for the Company's derivative instruments designated as cash flow hedges, as recognized in “AOCI,” “Cost of goods sold” and “Other, net”.


	Three Months Ended March 31,				Nine Months Ended March 31,				Financial Statement Classification
(In thousands)	2021		2020		2021		2020
Net losses recognized in AOCI - Interest rate swap	$	0	$	(2,542)	$	(304)	$	(2,590)	AOCI
Net (losses) recognized from AOCI to earnings - Interest rate swap	$	9	$	(83)	$	(354)	$	(115)	Interest Expense
Net losses reclassified from AOCI to earnings for de-designated Interest rate swap (1)	$	(320)	$	—	$	(960)	$	—	Interest Expense
Net losses reclassified from AOCI to earnings for partial unwind of interest swap - Interest rate swap(2)	$	—	$	0	$	—	$	(407)	Interest Expense
Net gains (losses) recognized in AOCI - Coffee-related	$	(1,315)	$	(5,681)	$	6,051	$	1,750	AOCI
Net gains (losses) recognized in earnings - Coffee - related	$	983	$	(1,976)	$	1,587	$	(8,898)	Cost of goods sold

Three Months Ended March 31, Nine Months Ended March 31, Financial Statement Classification
(In thousands) 2020 2019 2020 2019
Net losses recognized in AOCI - Interest rate swap $ (2,542 ) $ (78 ) $ (2,590 ) $ (78 ) AOCI
Net losses recognized from AOCI to earnings - Interest rate swap $ (83 ) $ —
$ (115 ) $ —
Interest Expense
Net losses reclassified from AOCI to earnings for partial unwind of interest swap - Interest rate swap (1) $ —
$ —
$ (407 ) $ —
Interest Expense
Net (losses) gains recognized in AOCI - Coffee-related $ (5,681 ) $ (3,988 ) $ 1,750
$ (11,176 ) AOCI
Net losses recognized in earnings - Coffee - related $ (1,976 ) $ (2,131 ) $ (8,898 ) $ (6,310 ) Cost of goods sold
________________

~~________________~~(1)The $320 thousand of realized loss was due to the amortization of de-designated interest rate swap.


~~(1)~~	~~The $407 thousand of realized loss was due to partial unwinding of interest rate swap resulting from the amendment of the notional amount from $80 million to $65 million.~~

(2)The $407 thousand of realized loss was due to partial unwinding of interest rate swap resulting from the amendment of the notional amount from $80.0 million to $65.0 million.

For the three and nine months ended March 31, ~~2020~~2021 and ~~2019,~~2020, there were 0 gains or losses recognized in earnings as a result of excluding amounts from the assessment of hedge effectiveness.

Net losses (gains) on derivative instruments in the Company’s condensed consolidated statements of cash flows also include net losses (gains) on coffee-related derivative instruments designated as cash flow hedges reclassified to cost of goods sold from AOCI in the three and nine months ended March 31, ~~2020~~2021 and ~~2019.~~2020. Gains and losses on coffee-related derivative instruments not designated as accounting hedges are included in “Other, net” in the Company’s condensed ~~consolidated statements of operations~~

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

consolidated statements of operations and in “Net losses (gains) on derivative instruments and investments” in the Company’s condensed consolidated statements of cash flows.

Net gains and losses recorded in “Other, net” are as follows:

Three Months Ended March 31, Nine Months Ended March 31,
(In thousands) 2020 2019 2020 2019
Net losses on coffee-related derivative instruments(1) $ (308 ) $ (893 ) $ (932 ) $ (2,918 )
Non-operating pension and other postretirement benefit (2) 1,248
1,394
3,744
4,921
Other gains (losses), net 136
(6 ) 129
102
Other, net $ 1,076
$ 495
$ 2,941
$ 2,105


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	2021		2020		2021		2020
Net (losses) gains on coffee-related derivative instruments(1)	$	(832)	$	(308)	$	1,002	$	(932)


Non-operating pension and other postretirement benefit (2)	455		1,248		15,943		3,744
Other gains (losses), net	21		136		338		129
Other, net	$	(356)	$	1,076	$	17,283	$	2,941

___________

(1) Excludes net gains and losses on coffee-related derivative instruments designated as cash flow hedges recorded in cost of goods sold in the three and nine months ended March 31, ~~2020~~2021 and ~~2019.~~2020.

(2) Presented in accordance with ASU 2017-07.

Offsetting of Derivative Assets and Liabilities

The Company has agreements in place that allow for the financial right of offset for derivative assets and liabilities at settlement or in the event of default under the agreements. Additionally, under certain coffee derivative agreements, the Company maintains accounts with its counterparties to facilitate financial derivative transactions in support of its risk management activities.

The following table presents the Company’s net exposure from its offsetting derivative asset and liability positions, as well as cash collateral on deposit with its counterparties as of the reporting dates indicated:

(In thousands) Gross Amount Reported on Balance Sheet Netting Adjustments Cash Collateral Posted Net Exposure
March 31, 2020 Derivative Assets $ 3,303
$ (298 ) $ —
$ 3,005
Derivative Liabilities $ 4,149
$ (298 ) $ —
$ 3,851
June 30, 2019 Derivative Assets $ 2,539
$ (698 ) $ —
$ 1,841
Derivative Liabilities $ 3,086
$ (698 ) $ —
$ 2,388


(In thousands)		Gross Amount Reported on Balance Sheet		Netting Adjustments		Cash Collateral Posted		Net Exposure
March 31, 2021	Derivative Assets	$	1,062	$	(650)	$	0	$	412
	Derivative Liabilities	$	3,697	$	(650)	$	0	$	3,047
June 30, 2020	Derivative Assets	$	175	$	(175)	$	0	$	0
	Derivative Liabilities	$	8,115	$	(176)	$	0	$	7,939

Cash Flow Hedges

Changes in the fair value of the Company’s coffee-related derivative instruments designated as cash flow hedges are deferred in AOCI and subsequently reclassified into cost of goods sold in the same period or periods in which the hedged forecasted purchases affect earnings, or when it is probable that the hedged forecasted transaction will not occur by the end of the originally specified time period. Based on recorded values at March 31, ~~2020, $3.6~~2021, $1.5 million of net gains on coffee-related derivative instruments designated as a cash flow hedge are expected to be reclassified into cost of goods sold within the next twelve months. These recorded values are based on market prices of the commodities as of March 31, ~~2020.~~2021.

Changes in the fair value of the Company's interest rate swap derivative instruments designated as a cash flow hedge are deferred in AOCI and subsequently reclassified into interest expense in the period or periods when the hedged transaction affects earnings or when it is probable that the hedged forecasted transaction will not occur by the end of the originally specified time period. As of March 31, ~~2020, $1.1~~2021, $1.2 million of net losses on interest rate swap derivative instruments ~~designated~~de-designated as a cash flow hedge are expected to be reclassified into interest expense within the next twelve months assuming no significant changes in the LIBOR rates. Due to LIBOR volatility, actual gains or losses realized within the next twelve months will likely differ from these values.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Note 5. Fair Value Measurements

Assets and liabilities measured and recorded at fair value on a recurring basis were as follows:


(In thousands)									(In thousands)	Total		Level 1		Level 2		Level 3
March 31, 2021									March 31, 2021

Derivative instruments designated as cash flow hedges:									Derivative instruments designated as cash flow hedges:

Coffee-related derivative assets (1)									Coffee-related derivative assets (1)	$	1,014	$	0	$	1,014	$	0
Coffee-related derivative liabilities (1)									Coffee-related derivative liabilities (1)	$	409	$	0	$	409	$	0

Derivative instruments not designated as accounting hedges:									Derivative instruments not designated as accounting hedges:
Coffee-related derivative assets(1)									Coffee-related derivative assets(1)	$	48	$	0	$	48	$	0
Coffee-related derivative liabilities(1)									Coffee-related derivative liabilities(1)	$	277	$	0	$	277	$	0
Interest rate swap derivative liabilities (2)									Interest rate swap derivative liabilities (2)	$	3,011	0		$	3,011	0

(In thousands)	Total		Level 1		Level 2		Level 3		(In thousands)	Total		Level 1		Level 2		Level 3
March 31, 2020
June 30, 2020									June 30, 2020

Derivative instruments designated as cash flow hedges:									Derivative instruments designated as cash flow hedges:

Coffee-related derivative assets (1)	$	2,678	$	—	$	2,678	$	—	Coffee-related derivative assets (1)	$	45	$	0	$	45	$	0
Coffee-related derivative liabilities (1)	$	260	$	—	$	260	$	—	Coffee-related derivative liabilities (1)	$	3,568	$	0	$	3,568	$	0
Interest rate swap derivative liabilities (2)	$	3,851	$	—	$	3,851	$	—	Interest rate swap derivative liabilities (2)	$	3,841	$	0	$	3,841	$	0
Derivative instruments not designated as accounting hedges:									Derivative instruments not designated as accounting hedges:
Coffee-related derivative assets(1)	$	625	$	—	$	625	$	—
Coffee-related derivative liabilities(1)	$	38	$	—	$	38	$	—

Coffee-related derivative assets (1)									Coffee-related derivative assets (1)	$	130	$	0	$	130	$	0
Coffee-related derivative liabilities (1)									Coffee-related derivative liabilities (1)	$	706	$	0	$	706	$	0



(In thousands)	Total		Level 1		Level 2		Level 3
June 30, 2019
Derivative instruments designated as cash flow hedges:
Coffee-related derivative assets (1)	$	1,925	$	—	$	1,925	$	—
Coffee-related derivative liabilities (1)	$	1,127	$	—	$	1,127	$	—
Interest rate swap derivative liabilities (2)	$	1,845	$	—	$	1,845	$	—
Derivative instruments not designated as accounting hedges:
Coffee-related derivative assets (1)	$	614	$	—	$	614	$	—
Coffee-related derivative liabilities (1)	$	114	$	—	$	114	$	—

____________________


~~(1)~~	~~The Company's coffee-related derivative instruments are traded over-the-counter and, therefore, classified as Level 2.~~


~~(2)~~	The Company's interest rate swap derivative instrument are model-derived valuations with directly or indirectly observable significant inputs such as interest rate and, therefore, classified as Level 2.

(1)The Company's coffee-related derivative instruments are traded over-the-counter and, therefore, classified as Level 2.

(2)The Company's interest rate swap derivative instrument are model-derived valuations with directly or indirectly observable significant inputs such as interest rate and, therefore, classified as Level 2.

Note 6. Accounts Receivable, Net

(In thousands) March 31, 2020 June 30, 2019
Trade receivables $ 49,328
$ 53,593
Other receivables(1) 2,266
2,886
Allowance for doubtful accounts (705 ) (1,324 )
Accounts receivable, net $ 50,889
$ 55,155


(In thousands)	March 31, 2021		June 30, 2020
Trade receivables	$	36,878	$	40,695
Other receivables(1)	1,254		1,983
Allowance for doubtful accounts	(1,032)		(1,796)
Accounts receivable, net	$	37,100	$	40,882

__________

(1) Includes vendor rebates and other non-trade receivables.

The ~~$0.6~~$0.8 million decrease in the allowance for doubtful accounts during the nine months ended March 31, ~~2020~~2021 was due to improvement of the Company’s aged accounts receivable ~~aging~~ balance.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Note 7. Inventories


(In thousands)	March 31, 2020		June 30, 2019		(In thousands)	March 31, 2021		June 30, 2020
Coffee					Coffee
Processed	$	24,568	$	25,769	Processed	$	21,011	$	17,840
Unprocessed	36,905		33,259		Unprocessed	35,691		32,913
Total	$	61,473	$	59,028	Total	$	56,702	$	50,753
Tea and culinary products					Tea and culinary products
Processed	$	17,737	$	21,767	Processed	$	12,437	$	10,627
Unprocessed	68		74		Unprocessed	65		45
Total	$	17,805	$	21,841	Total	$	12,502	$	10,672
Coffee brewing equipment parts	$	6,656	$	7,041	Coffee brewing equipment parts	$	5,947	$	5,983
Total inventories	$	85,934	$	87,910	Total inventories	$	75,151	$	67,408

In addition to product cost, inventory costs include expenditures such as direct labor and certain supply, freight, warehousing, overhead variances, purchase price variance and other expenses incurred in bringing the inventory to its existing condition and location. The “Unprocessed” inventory values as stated in the above table represent the value of raw materials and the “Processed” inventory values represent all other products consisting primarily of finished goods.

Note 8. Property, Plant and Equipment


(In thousands)	March 31, 2021		June 30, 2020
Buildings and facilities	$	94,970	$	98,293
Machinery, vehicles and equipment	228,466		240,431

Capitalized software	23,987		29,765
Office furniture and equipment	13,833		14,042
	$	361,256	$	382,531
Accumulated depreciation	(218,744)		(229,829)
Land	11,955		12,931
Property, plant and equipment, net	$	154,467	$	165,633

(In thousands) March 31, 2020 June 30, 2019
Buildings and facilities (1) $ 99,225
$ 107,915
Machinery, vehicles and equipment (1) 243,141
249,477
Capitalized software 29,227
27,666
Office furniture and equipment 14,121
14,035
$ 385,714
$ 399,093
Accumulated depreciation (229,493 ) (225,826 )
Land (1) 13,140
16,191
Property, plant and equipment, net $ 169,361
$ 189,458

~~__________~~

~~(1) Decrease as~~During the second quarter ended December 31, 2020, the Company completed the implementation of a new route handheld equipment, and wrote-off $0.9 million of the remaining net book value of the previous route handheld equipment and $0.3 million of other assets. Also, during the third quarter ended March 31, ~~2020 is due to~~2021, the ~~sale~~Company classified four branch properties with net book value of ~~assets.~~$2.5 million as “Asset Held for Sale”. See Note 21 for details.

Coffee Brewing Equipment (“CBE”) and Service

Capitalized CBE included in machinery and equipment above are:


(In thousands)	March 31, 2021		June 30, 2020
Coffee Brewing Equipment	$	98,214	$	98,734
Accumulated depreciation	(70,672)		$	(67,800)
Coffee Brewing Equipment, net	$	27,542	$	30,934

(In thousands) March 31, 2020 June 30, 2019
Coffee Brewing Equipment $ 102,423
$ 106,593
Accumulated depreciation (69,094 ) $ (70,202 )
Coffee Brewing Equipment, net $ 33,329
$ 36,391

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Depreciation expense related to capitalized CBE and other CBE related expenses (excluding CBE depreciation) provided to customers and reported in cost of goods sold were as follows:

Three Months Ended March 31, Nine Months Ended March 31,
(In thousands) 2020 2019 2020 2019
Depreciation expense $ 2,359
$ 2,269
$ 7,239
$ 6,665

Other CBE expenses $ 7,821
$ 10,458
$ 23,778
$ 27,375


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	2021		2020		2021		2020
Depreciation expense	$	2,263	$	2,359	$	6,957	$	7,239

Other CBE expenses	$	5,499	$	7,821	$	17,035	$	23,778

Other expenses related to CBE provided to customers, such as the cost of servicing that equipment (including service employees’ salaries, cost of transportation and the cost of supplies and parts), are considered directly attributable to the generation of revenues from the customers. Therefore, these costs are included in cost of goods sold.

Note 9. Goodwill and Intangible Assets

The carrying value of goodwill was fully impaired and written down to 0 ~~at March 31, 2020. See below. The carrying value~~as of ~~goodwill at~~ June 30, ~~2019 was $36.2 million.~~2020.

The following is a summary of the Company’s amortized and unamortized intangible assets other than goodwill:


		March 31, 2020										June 30, 2019									March 31, 2021				June 30, 2020
(In thousands)	Weighted Average Amortization Period as of March 31, 2020	Gross Carrying Amount		Accumulated Amortization			Impairment			Net		Gross Carrying Amount		Accumulated Amortization			Net		(In thousands)	Weighted Average Amortization Period as of December 31, 2020	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Impairment		Net
Amortized intangible assets:																			Amortized intangible assets:
Customer relationships	7.2	$	33,003	$	(16,943	)	$	—		$	16,060	$	33,003	$	(15,291	)	$	17,712	Customer relationships	6.0	$	33,003	$	(19,142)	$	13,861	$	33,003	$	(17,492)	$	—	$	15,511
Non-compete agreements	2.0	220		(151		)	—			69		220		(122		)	98		Non-compete agreements	0.7	220		(192)		28		220		(161)		—		59
Recipes	3.7	930		(453		)	—			477		930		(354		)	576		Recipes	2.6	930		(586)		344		930		(487)		—		443
Trade name/brand name	4.3	510		(374		)	—			136		510		(346		)	164		Trade name/brand name	2.7	510		(411)		99		510		(383)		—		127
Total amortized intangible assets		$	34,663	$	(17,921	)	$	—		$	16,742	$	34,663	$	(16,113	)	$	18,550	Total amortized intangible assets		$	34,663	$	(20,331)	$	14,332	$	34,663	$	(18,523)	$	—	$	16,140
Unamortized intangible assets:																			Unamortized intangible assets:
Trademarks, trade names and brand name with indefinite lives		$	10,328	$	—		$	(5,806	)	$	4,522	$	10,328	$	—		$	10,328	Trademarks, trade names and brand name with indefinite lives		$	4,522	$	—	$	4,522	$	10,328	$	—	$	(5,806)	$	4,522
Total unamortized intangible assets		$	10,328	$	—		$	(5,806	)	$	4,522	$	10,328	$	—		$	10,328	Total unamortized intangible assets		$	4,522	$	—	$	4,522	$	10,328	$	—	$	(5,806)	$	4,522
Total intangible assets		$	44,991	$	(17,921	)	$	(5,806	)	$	21,264	$	44,991	$	(16,113	)	$	28,878	Total intangible assets		$	39,185	$	(20,331)	$	18,854	$	44,991	$	(18,523)	$	(5,806)	$	20,662

Aggregate amortization expense for the three months ended March 31, 2021 and 2020 ~~and 2019~~ was ~~$0.6~~$0.6 million ~~and $0.7 million, respectively.~~ in each period. Aggregate amortization expense for the nine months ended March 31, 2021 and 2020 ~~and 2019~~ was ~~$1.8~~$1.8 million ~~and $2.0 million, respectively.~~in each period.

The Company ~~tests goodwill and~~test indefinite-lived intangible assets for impairment annually, as of January 31, or when events or changes in circumstances would indicate that more likely than not the fair values may be below the carrying amounts of the assets. The Company also ~~assessed~~assesses the recoverability of certain finite-lived intangible assets. ~~Additionally, for the nine months ended March 31, 2020, the changes in the business environment and the general economic outlook as~~As a result of the ~~COVID-19 pandemic have negatively impacted the fair value~~Company’s annual test of ~~these assets.~~

~~As a result of these tests for~~ impairment ~~the Company recorded $36.2 million and $5.8 million, respectively, of impairments to goodwill and indefinite-lived intangibles~~during for the three and nine months ended March 31, ~~2020. No~~2021, no impairment was ~~recorded for the finite-lived intangibles for the three and nine months ended March 31, 2020.~~recorded.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Note 10. Employee Benefit Plans

Single Employer Pension Plans

Effective June 30, 2011, the Company amended its defined benefit pension plans, freezing the benefit for all participants. As of the effective date, participants do not accrue any benefits under the plans, and new hires are not eligible to participate in the plans.

The net periodic benefit cost for the defined benefit pension plans is as follows:


	Three Months Ended March 31,						Nine Months Ended March 31,							Three Months Ended March 31,				Nine Months Ended March 31,
	2020			2019			2020			2019				2021		2020		2021		2020
(In thousands)													(In thousands)
Service cost	$	—		$	—		$	—		$	—		Service cost	$	0	$	0	$	0	$	0
Interest cost	1,059			1,173			3,177			4,025			Interest cost	859		1,059		2,578		3,177
Expected return on plan assets	(1,102		)	(1,126		)	(3,305		)	(4,096		)	Expected return on plan assets	(1,038)		(1,102)		(3,113)		(3,305)
Amortization of net loss(1)	370			380			1,109			1,120			Amortization of net loss(1)	502		370		1,507		1,109
Pension settlement charge	—			—			—			10,948

Net periodic benefit cost	$	327		$	427		$	981		$	11,997		Net periodic benefit cost	$	323	$	327	$	972	$	981

___________

(1) These amounts represent the estimated portion of the net loss in AOCI that is expected to be recognized as a component of net periodic benefit cost over the current fiscal year.

Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost

March 31, 2020 June 30, 2019
Discount rate 3.45% 4.05%
Expected long-term return on plan assets 6.75% 6.75%


	March 31, 2021	June 30, 2020
Discount rate	2.55%	3.45%
Expected long-term return on plan assets	6.25%	6.75%

Multiemployer Pension Plans

The Company participates in two multiemployer defined benefit pension plans that are union sponsored and collectively bargained for the benefit of certain employees subject to collective bargaining agreements, of which the Western Conference of Teamsters Pension Plan ("WCTPP") is individually significant. The Company makes contributions to these plans generally based on the number of hours worked by the participants in accordance with the provisions of negotiated labor contracts.

Contributions made by the Company to the multiemployer pension plans were as follows:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2021		2020		2021		2020
(In thousands)
Contributions	$	272	$	240	$	809	$	1,120

Three Months Ended March 31, Nine Months Ended March 31,
2020 2019 2020 2019
(In thousands)
Contributions $ 240
$ 585
$ 1,120
$ 1,364

Outstanding balance of settlement obligations of the Company to certain multiemployer pension plans are as follows:


(In thousands)	March 31, 2021		June 30, 2020

Local 807 Pension Fund	$	182	$	182

(In thousands) March 31, 2020 June 30, 2019
WCT Pension Trust (1) $ —
$ 1,487
Local 807 Pension Fund (2) $ 182
$ 182

~~__________~~

(1) Initial liability amount of $3.4 million, including interest, commencing in September 10, 2018, payable in 17 monthly installments of $190,507 followed by a final monthly installment of $153,822 in February 2020.

(2) Lump sum cash settlement payment of $3.0 million plus two remaining installment payments of $91,000 due on or before October 1, 2034 and on or before January 1, 2035. As of March 31, 2020, the Company has paid the Local 807 Pension Fund $3.0 million and has accrued $0.2 million within “Accrued pension liabilities” on the Company’s condensed consolidated balance sheet.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Multiemployer Plans Other Than Pension Plans

The Company participates in 9 multiemployer defined contribution plans other than pension plans that provide medical, vision, dental and disability benefits for active, union-represented employees subject to collective bargaining agreements. The plans are subject to the provisions of the Employee Retirement Income Security Act of 1974, and provide that participating employers make monthly contributions to the plans in an amount as specified in the collective bargaining agreements. Also, the plans provide that participants make self-payments to the plans, the amounts of which are negotiated through the collective bargaining process. The Company’s participation in these plans is governed by collective bargaining agreements which expire on or before ~~June 30, 2022.~~January 31, 2025.

401(k) Plan

The Company’s 401(k) Plan is available to all eligible employees. Participants in the 401(k) Plan may choose to contribute a percentage of their annual pay subject to the maximum contribution allowed by the Internal Revenue Service. The Company recorded matching contributions of ~~$0.5~~$0.5 million and ~~$0.7~~$1.9 million, respectively, in operating expenses in the three ~~months ended March 31, 2020~~ and ~~2019, respectively. The Company recorded matching contributions of $1.9 million and $1.6 million in operating expenses in the~~ nine months ended March 31, ~~2020 and 2019, respectively.~~2020. Effective March 31, 2020, the Company temporarily suspended its 401K matching program in response to the COVID-19 pandemic.

Additionally, the Company makes an annual safe harbor non-elective contribution of shares of the Company’s common stock equal to 4% of each eligible participant’s annual plan compensation. During the three and nine months ended March 31, 2021, the Company contributed a total of 51,415 and 322,100 shares of the Company’s common stock with a value of $0.5 million and $1.8 million, respectively, to eligible participants’ annual plan compensation. During the three and nine months ended March 31, 2020, the Company contributed a total of 104,247 and 213,896 shares of the Company’s common stock with a value of $0.9 million and $2.3 million, respectively, to eligible participants’ annual plan compensation. During the three and nine months ended March 31, 2019, the Company contributed a total of 37,571 shares of the Company’s common stock with a value of $0.7 million to eligible participants’ annual plan compensation.

Postretirement Benefits

Retiree Medical Plan and Death Benefit

On March 23, 2020, the Company announced a plan to amend and terminate the postretirement medical benefit plan that covers qualified non-union retirees and certain qualified union retirees (“Retiree Medical Plan”) effective ~~January 1, 2021.~~December 31, 2020. The plan ~~provides~~provided medical, dental and vision coverage for retirees under age 65 and medical coverage only for retirees age 65 and above. Under this postretirement plan, the Company’s contributions toward premiums for retiree medical, dental and vision coverage for participants and dependents ~~are~~were scaled based on length of service, with greater Company contributions for retirees with greater length of service, subject to a maximum monthly Company contribution. The Company's retiree medical, dental and vision plan was unfunded and its liability was calculated using an assumed discount rate.

The Company’s communication of its intention to amend and terminate the Retiree Medical Plan triggered re-measurement and curtailment of the plan. As a result, the re-measurement generated a prior service credit of $13.4 million ~~to be~~which were amortized over the remaining ~~nine~~ months of the plan, and a revised net periodic postretirement benefit credit for fiscal 2021 of $14.6 million which were also amortized over the ~~fourth quarter~~remaining months of ~~fiscal 2020 of $7.2 million.~~the plan. Also, the Company recognized a one-time non-cash curtailment credit of $5.8 million for the ~~three and nine months~~fiscal year ended ~~March~~June 30, 2020. As of December 31, ~~2020.~~2020, the Retiree Medical Plan has terminated.

The Company continues to provide a postretirement death benefit (“Death Benefit”) to certain of its employees and retirees, subject, in the case of current employees, to continued employment with the Company until retirement and certain other conditions related to the manner of employment termination and manner of death.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

The following table shows the components of net periodic postretirement benefit cost (credit) for the Retiree Medical Plan and Death Benefit for the three and nine months ended March 31, ~~2020~~2021 and ~~2019.~~2020. Net periodic postretirement benefit cost was based on employee census information and asset information as of June 30, ~~2019.~~2020.


	Three Months Ended March 31,				Nine Months Ended March 31,
	2021		2020		2021		2020
(In thousands)
Components of Net Periodic Postretirement Benefit Cost (Credit):
Service cost	$	5	$	147	$	14	$	441
Interest cost	73		214		220		641

Amortization of net gain	80		(125)		(5,376)		(374)
Curtailment credit - Retiree Medical	0		(5,750)		0		(5,750)
Amortization of prior service credit	0		(395)		(8,961)		(1,186)
Net periodic postretirement benefit credit	$	158	$	(5,909)	$	(14,103)	$	(6,228)

Three Months Ended March 31, Nine Months Ended March 31,
2020 2019 2020 2019
(In thousands)
Components of Net Periodic Postretirement Benefit Cost (Credit):
Service cost $ 147
$ 133
$ 441
$ 399
Interest cost 214
222
641
666
Amortization of net gain (125 ) (209 ) (374 ) (627 )
Curtailment credit - Retiree Medical (5,750 ) —
(5,750 ) —
Amortization of prior service credit (395 ) (439 ) (1,186 ) (1,317 )
Net periodic postretirement benefit credit $ (5,909 ) $ (293 ) $ (6,228 ) $ (879 )

Weighted-Average Assumptions Used to Determine Net Periodic Postretirement Benefit Cost


	Fiscal
	2021	2020
Retiree Medical Plan discount rate	0.06%	3.62%
Death Benefit discount rate	2.87%	3.64%

Fiscal
2020 2019
Retiree Medical Plan discount rate 3.44% 4.25%
Death Benefit discount rate 3.64% 4.25%

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Note 11. Debt Obligations

The following table summarizes the Company’s debt obligations:

March 31, 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 $ 80,000
4.45 % $ 92,000
3.98 %

March 31, 2021

June 30, 2020

(In thousands)

Debt Origination Date

Maturity

Original Borrowing Amount

Carrying Value

Weighted Average Interest Rate

Carrying Value

Weighted Average Interest Rate

Credit Facility

various

11/6/2023

N/A

88,000

6.41

122,000

4.91

~~In March~~On July 23, 2020 (the "Effective Date"), pursuant to Amendment No. 23 to Amended and Restated Credit Agreement (the ~~“Second~~“Third Amendment”), the Company amended its existing senior secured revolving credit facility (such facility as amended to date, including pursuant to the ~~Second~~Third Amendment, the “Amended Revolving Facility”) with ~~Bank of America, N.A, Citibank, N.A., JPMorgan Chase Bank, N.A., PNC Bank, National Association, Regions Bank, and SunTrust Bank.~~ certain financial institutions.

The ~~Second~~Third Amendment, among other things: ~~(i) decreased~~

1.retained the ~~size~~amount of revolving commitments under the ~~revolving credit facility to~~Amended Revolving Facility of $125.0 million and the sublimit on letters of credit and swingline loans of $15.0 million each;

2.added a $5.0 million quarterly commitment reduction beginning September 30, 2021;

3.adjusted from ~~$150.0 million;~~ cash flow-based to an asset-based lending structure with borrowing a base equal to 85% of eligible accounts receivable plus 50% of eligible inventory with certain permitted maximum over advance amounts, minus certain reserves;

4.removed all previous financial covenants of net leverage ratio, interest coverage ratio and minimum EBITDA;

5.added a covenant relief period (commencing on the effective date and ending upon delivery of a compliance certificate on or after fiscal month ending September 30, 2021), during which the Company must comply with the following:

(i) a minimum cumulative EBITDA covenant, tested on a monthly basis until the last day of June 2021;

(ii) ~~made certain adjustments~~a standalone minimum monthly EBITDA covenant tested on the last day of July 2021 and August 2021; and

(iii) a restriction on capital expenditures such that the amount of capital expenditures shall not exceed $25.0 million in the aggregate.

6.added covenant requiring the Company to comply with a minimum liquidity covenant, tested on a weekly basis;

7.added an anti-cash hoarding provision;

8.added a minimum fixed charge coverage ratio of 1.05:1.00 commencing with fiscal quarter ending September 30, 2021, and tested on a quarterly basis thereafter;

9.modified the applicable margin for base rate loans to range from PRIME + 3.50% to PRIME + 4.50% per annum and the applicable margin for Eurodollar loans to range from Adjusted LIBO Rate + 4.50% to Adjusted LIBO Rate + 5.50% per annum and fixed the commitment fee rates and interest rates; (iii) increased the maximum total net leverage ratio financial covenant until the quarter ending December 31, 2021; (iv) added a minimum EBITDA financial covenant until the quarter ending December 31, 2021; (v) amended the definitions of “EBITDA” and “Permitted Acquisition”at 0.50%; ~~(vi) removed the accordion feature; (vii) removed the Company’s option to request and agree to an extension of the maturity date with individual lenders; (viii)~~

10.provided ~~for a mortgage on certain of the Company’s real property; (ix) provides~~ for the revolving commitments to be reduced upon the occurrence of certain asset dispositions and ~~incurrences~~incurrence of non-permitted indebtedness and imposed additional restrictions on the Company’s ability to utilize certain other ~~indebtedness; (x)~~ negative covenant baskets; and

11.added a ~~monthly reporting requirement;~~requirement to provide mortgages and ~~(xi) modified~~related mortgage instruments with respect to certain ofspecified real property owned by the ~~Company’s covenant-related baskets.~~Company.

The Amended Revolving Facility otherwise retained many of its previous terms, including the sublimit on letters of credit and swingline loans of $15.0 million each. The commitment fee is based on a leverage grid and ranges from 0.20% to 0.50%. Borrowings under the Amended Revolving Facility bear interest on base rate loans based on a leverage grid with a range of PRIME + 0.50% to 2.50%, and on Eurodollar loans based on a leverage grid with a range of Adjusted LIBO Rate + 1.50% to 3.50%. Effective March 27, 2019, the Company entered into a rate swap agreement and in December 2019 amended the agreement to reduce the notional amount. The impact of the amendment for the nine months ended March 31, 2020, was $0.4 million of realized loss due to the partial unwinding of interest rate swap resulting from the amendment of the notional amount from $80.0 million to $65.0 million. See ~~Note 4~~ ~~for details.~~

~~Under the Amended Revolving Facility, the Company~~ is subject to a variety of affirmative and negative covenants of types customary in a senior secured assets-based lending facility ~~including financial covenants relating to leverage, interest expense coverage~~ and (until the quarter ending December 31, 2021) minimum adjusted EBITDA. The Company is allowed to pay dividends, provided, among other things, a total net leverage ratio is met, and no default exists or has occurred and is continuing as of the date of any such payment and after giving effect thereto. The Amended Revolving Facilityit has no scheduled payback required on the principal prior to the maturity date on November 6, 2023.

AtAs of March 31, ~~2020,~~2021, the Company was in compliance with all of the covenants under the Amended Revolving ~~Facility.~~Facility and had utilized $4.3 million of the letters of credit sublimit.

Effective March 27, 2019, the Company entered into an interest rate swap to manage the interest rate risk on its floating-rate indebtedness. See Note 14,~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity, Capital Resources and Financial Condition”~~ ~~on consideration of future debt covenants compliance.~~for details.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

On April 26, 2021, the Company repaid in full all of the outstanding loans and other amounts payable under the Amended and Restated Credit Agreement dated as of November 6, 2018, using proceeds of loans received pursuant to a refinancing under a new senior secured facility composed of (a) a Credit Agreement, dated as of April 26, 2021 (the “Revolver Credit Facility Agreement”) by and among the Company, Boyd Assets Co., FBC Finance Company, Coffee Bean Holding Co., Inc., Coffee Bean International, Inc. and China Mist Brands, Inc., as borrowers (collectively, the “Borrowers”), Wells Fargo Bank, N.A. (“Wells Fargo”), as administrative agent and lender, and the other lenders party thereto, and various loan documents relating thereto including the Guaranty and Security Agreement, dated as of April 26, 2021 (the “Revolver Security Agreement”), by and among the Borrowers, as grantors, and Wells Fargo, as administrative agent, and (b) a Credit Agreement, dated as of April 26, 2021 (the “Term Credit Facility Agreement”) by and among the Borrowers, MGG Investment Group LP. (“MGG”), as administrative agent, and the lenders party thereto, and various loan documents relating thereto including the Guaranty and Security Agreement, dated as of April 26, 2021 (the “Term Security Agreement”), by and among the Borrowers, as grantors, and MGG, as administrative agent.

The following summary description of the Revolver Credit Facility Agreement and the Revolver Security Agreement key items. Please refer as Exhibit 10.1 and Exhibit 10.2 in this Quarterly Report on Form 10-Q for the full text of the agreements.

The Revolver Credit Facility Agreement, among other things include:

1.A commitment of up to $80.0 million (“Revolver”);

2.sublimit on letters of credit of $10.0 million;

3.maturity date of April 25, 2025;

4.fully collateralized by all existing and future capital stock of the Borrowers (other than the Company) and all of the Borrowers' personal and real property;

5.Revolver calculated as the lesser of (a) $80.0 million and (b) the amount derived from pursuant to a borrowing base composed of the sum of (i) 85%of eligible accounts receivable (less a dilution reserve), plus (ii) the lesser of: (a) 80% of eligible raw material inventory, eligible in-transit inventory and eligible finished goods inventory (collectively, “Eligible Inventory”), and (b) 85% of the net orderly liquidation value (“NOLV”) of eligible inventory, minus (c) applicable reserve;

6.Interest under the Revolver is either LIBOR + 2.25% per annum, with LIBOR floor 0.50%, or base rate + 1.25% per annum; and

7.In the event that Borrowers’ availability to borrow under the Revolver falls below $10.0 million, financial covenant requires the Company to have a fixed charge coverage ratio of at least 1.00:1.00 at all such times.

The Revolver Credit Facility Agreement and the Revolver Security Agreement contain customary affirmative and negative covenants and restrictions typical for a financing of this type that, among other things, require the Company to satisfy certain financial covenants and restrict the Company's and its subsidiaries' ability to incur additional debt, pay dividends and make distributions, make certain investments and acquisitions, repurchase its stock and prepay certain indebtedness, create liens, enter into agreements with affiliates, modify the nature of its business, transfer and sell material assets and merge or consolidate. Non-compliance with one or more of the covenants and restrictions could result in the full or partial principal balance of the Revolver Credit Facility Agreement becoming immediately due and payable and termination of the commitments.

The following summary description of the Term Credit Facility Agreement and the Term Security Agreement key items. Please refer to Exhibit 10.3 in this Quarterly Report on Form 10-Q for the full text of the agreements.

The Term Credit Facility Agreement, among other things include:

1.total commitment of $47.5 million in the form of a term loan (“Term Loan”);

2.maturity date of April 25, 2025;

3.fully collateralized by all existing and future capital stock of the Borrowers (other than the Company) and all of the Borrowers' personal and real property;

4.Interest under the Term Loan is either (a) LIBOR + 6.5% per annum, or (b) base rate + 5.50% per annum, with a 3% floor on base rate;

5.financial covenants include;

(i) maintain qualified cash and Borrower’s availability to borrow under the Revolver of at least $15.0 million

through September 30, 2021; and

(ii) Commencing on the fiscal quarter ending on March 31, 2022, quarterly minimum EBITDA and fixed charge

coverage ratio requirements specified therein.

The Term Credit Facility Agreement and the Term Security Agreement contain customary affirmative and negative covenants and restrictions typical for a financing of this type that, among other things, require the Company to satisfy certain financial covenants and restrict the Company's and its subsidiaries' ability to incur additional debt, pay dividends and

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

make distributions, make certain investments and acquisitions, repurchase its stock and prepay certain indebtedness, create liens, enter into agreements with affiliates, modify the nature of its business, transfer and sell material assets and merge or consolidate. Non-compliance with one or more of the covenants and restrictions could result in the full or partial principal balance of the Term Credit Facility Agreement becoming immediately due and payable and termination of the commitments.

In connection with the new Revolver Credit Facility Agreement and Term Credit Facility Agreement (collectively, the “Credit Facilities”), the Company also executed a new ISDA agreement to transfer its interest swap to Wells Fargo (“Amended Rate Swap”). Please refer to Exhibit 10.5, Exhibit 10.6 and Exhibit 10.7 in this Quarterly Report on Form 10-Q for the full text of the agreements. Under the terms of the Amended Rate Swap, the Company receives 1-month LIBOR, subject to a 0% floor, and makes payments based on a fixed rate of 2.4725%, an increase of 0.275% from its original interest rate swap fixed rate of 2.1975%. The Amended Rate Swap utilizes the same notional amount of $65.0 million and maturity date of October 11, 2023 as the original interest rate swap. By transferring the interest swap, the fair value of the liability will be impacted by future changes in interest rates and the Company will avoid settling the $3.7 million liability at close.

The Company’s obligations under the ISDA are secured by the collateral which secures the loans under the new Revolver Credit Facility on a pari passu and pro rata basis with the principal of such loans. The Company did not designate the Amended Rate Swap as a cash flow hedge. The frozen AOCI balance from the original interest rate swap that was de-designated during the quarter ended September 30, 2020 will continue to be recognized in interest expense through October 11, 2023.”

Upon executing the foregoing Credit Facilities agreements, the Company was in compliance with all of the financial covenants under the senior credit facility, and no event of default has occurred or existed through the Credit Facilities agreements effective date. Furthermore, the Company believes it will be in compliance with the related financial covenants under the Credit Facilities agreements for the next twelve months.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Note 12. Employee Stock Ownership Plan

The Company’s ESOP was established in 2000. As of December 31, 2018, the Company froze the ESOP such that (i) no employees of the Company may commence participation in the ESOP on or after December 31, 2018; (ii) no Company contributions will be made to the ESOP with respect to services performed or compensation received after December 31, 2018; and (iii) the ESOP accounts of all individuals who are actively employed by the Company and participating in the ESOP on December 31, 2018 will be fully vested as of such date. Additionally, the Administrative Committee, with the consent of the Board of Directors, designated certain employees who were terminated in connection with certain reductions-in-force in 2018 to be fully vested in their ESOP accounts as of their severance dates.

Shares are held by the plan trustee for allocation among participants using a compensation-based formula. Subject to vesting requirements, allocated shares are owned by participants and shares are held by the plan trustee until the participant retires.


	March 31, 2021		June 30, 2020
Allocated shares	1,100,058		1,170,015
Committed to be released shares	0		0
Unallocated shares	0		0
Total ESOP shares	1,100,058		1,170,015



(In thousands)
Fair value of ESOP shares	$	11,485	$	8,588

March 31, 2020 June 30, 2019
Allocated shares 1,191,754
1,393,530
Committed to be released shares —
—
Unallocated shares —
—
Total ESOP shares 1,191,754
1,393,530

(In thousands)
Fair value of ESOP shares $ 8,295
$ 22,812

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Note 13. Share-based Compensation

Farmer Bros. Co. Long-Term Incentive Plan

As of March 31, ~~2020,~~2021, there were ~~544,857~~ 666,665 shares available under the 2017 Plan including shares that were forfeited under the ~~Prior Plans~~prior plans for future issuance. As of March 31, ~~2020,~~2021, there were ~~300,000~~171,371 shares available under the 2020 Inducement ~~Plan of which 88,495 were issued on April 1, 2020.~~Plan.

Non-qualified stock options with time-based vesting (“NQOs”)

One-third of the total number of shares subject to each stock option vest ratably on each of the first three anniversaries of the grant date, contingent on continued employment, and subject to accelerated vesting in certain circumstances.

Following are the assumptions used in the Black-Scholes valuation model for NQOs granted during the nine months ended March 31, ~~2020:~~2021:

Nine Months Ended March 31, 2020
Weighted average fair value of NQOs $ 4.68
Risk-free interest rate 1.7 %
Dividend yield — %
Average expected term 4.6 years
Expected stock price volatility 35.4 %


	Nine Months Ended March 31, 2021
Weighted average fair value of NQOs	$	4.60
Risk-free interest rate	0.29		%
Dividend yield	0		%
Average expected term	4.6 years
Expected stock price volatility	35.4		%

The following table summarizes NQO activity for ~~the~~ nine months ended March 31, ~~2020:~~

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 447,973
14.44 — —
Exercised (10,360 ) 12.48 — 28
Forfeited (112,624 ) 26.55 — —
Expired (37,342 ) 31.43 — —
Outstanding at March 31, 2020 485,696
15.63 6.42 —
Exercisable at March 31, 2020 20,702
28.16 4.97 —

2021:


Outstanding NQOs:	Number of NQOs	Weighted Average Exercise Price ($)	Weighted Average Remaining Life (Years)	Aggregate Intrinsic Value ($ in thousands)
Outstanding at June 30, 2020	528,958	13.92	6.21	55
Granted	29,761	6.72	—	—
Exercised	0	0	—	0
Forfeited	(11,358)	16.62	—	—
Expired	(7,938)	28.51	—	—
Outstanding at March 31, 2021	539,423	13.25	5.55	440
Exercisable at March 31, 2021	153,230	16.13	5.24	0

The weighted-average grant-date fair value of options granted during ~~the~~ nine months ended March 31, ~~2020~~2021 was ~~$4.68.~~$2.36. The aggregate intrinsic values outstanding at the end of period in the table above represent the total pretax intrinsic values, based on the Company’s closing stock price of ~~$6.96~~ $10.44 at March 31, ~~2020~~2021 and ~~$16.37~~$7.34 at June ~~28, 2019,~~30, 2020, representing the last trading day of the respective periods, which would have been received by NQO holders had all award holders exercised their NQOs that were in-the-money as of those dates. The aggregate intrinsic value of NQO exercises in ~~the~~ nine months ended March 31, ~~2020~~2021 represents the difference between the exercise price and the value of the Company’s common stock at the time of exercise. NQOs outstanding that are expected to vest are net of estimated forfeitures.

The were no options exercised during nine months ended March 31, 2021. The Company received ~~$0.1 million and $0.3 million~~$129.3 thousand in proceeds from ~~exercises~~exercise of vested NQOs during the nine months ended March 31, ~~2020 and 2019, respectively.~~2020.

At March 31, ~~2020~~2021 and June 30, ~~2019,~~2020, respectively, there ~~were $1.9~~was $1.2 million and ~~$1.1~~$1.7 million of unrecognized NQO compensation cost. The unrecognized NQO compensation cost at March 31, ~~2020~~2021 is expected to be recognized over the weighted average period of ~~2.5 years.~~1.6 years. Total compensation expense for NQOs was ~~$167.3~~$167.7 thousand and ~~$185.8~~$167.3 thousand for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Total compensation expense for NQOs was ~~$444.9~~$586.8 thousand and ~~$454.8~~$444.9 thousand for the nine months ended March 31, 2021 and 2020, ~~and 2019,~~ respectively.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Non-qualified stock options with performance-based and time-based vesting (“PNQs”)

The following table summarizes PNQ activity for the nine months ended March 31, ~~2020:~~2021:


Outstanding PNQs:	Number of PNQs	Weighted Average Exercise Price ($)	Weighted Average Remaining Life (Years)	Aggregate Intrinsic Value ($ in thousands)
Outstanding at June 30, 2020	13,630	28.60	2.36	0
Granted	0	0	—	—
Exercised	0	0	—	0
Forfeited	0	0	—	—
Expired	(1,880)	21.33	—	—
Outstanding at March 31, 2021	11,750	29.76	2.16	—
Exercisable at March 31, 2021	6,942	28.40	1.89	—

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 —
Granted —
— — —
Exercised —
— — —
Forfeited (6,212 ) 32.85 — —
Expired (210,119 ) 25.86 — —
Outstanding at March 31, 2020 13,630
28.60 2.61 —
Exercisable at March 31, 2020 8,822
26.89 2.23 —

The aggregate intrinsic values outstanding at the end of each fiscal period in the table above represent the total pretax intrinsic values, based on the Company’s closing stock price of ~~$6.96~~$10.44 at March 31, ~~2020~~2021 and ~~$16.37~~$7.34 at June ~~28, 2019,~~30, 2020, representing the last trading day of the respective fiscal periods, which would have been received by PNQ holders had all award holders exercised their PNQs that were in-the-money as of those dates. The aggregate intrinsic value of PNQ exercises in the nine months ended March 31, ~~2020~~2021 represents the difference between the exercise price and the value of the Company’s common stock at the time of exercise. PNQs outstanding that are expected to vest are net of estimated forfeitures.

There were no options exercised during ~~the~~ nine months ended March 31, 2021 and 2020. ~~The Company received $0.1 million in proceeds from exercises of vested PNQs during the nine months ended March 31, 2019.~~

At March 31, ~~2020~~2021 and June 30, ~~2019,~~2020, there ~~were zero and $39.7 thousand, respectively, of~~was no unrecognized PNQ compensation cost. ~~Total~~There was no compensation expense related to PNQs in the three months ended March 31, ~~2020~~2021 and ~~2019 were zero and $56.1 thousand, respectively.~~2020. Total compensation expense related to PNQs in the nine months ended March 31, 2021 and 2020 was zero and ~~2019 were~~ $18.3 thousand, ~~and $324.5 thousand,~~ respectively.

Restricted Stock

The following table summarizes restricted stock activity for the nine months ended March 31, ~~2020:~~

2021:


Outstanding and Nonvested Restricted Stock Awards:	Shares Awarded		Weighted Average Grant Date Fair Value ($)	Outstanding and Nonvested Restricted Stock Awards:	Shares Awarded	Weighted Average Grant Date Fair Value ($)
Outstanding and nonvested at June 30, 2019	32,056		21.10
Outstanding and nonvested at June 30, 2020				Outstanding and nonvested at June 30, 2020	218,604	13.00
Granted	83,692		15.26	Granted	709,473	5.05
Vested/Released	(18,298	)	23.98	Vested/Released	(81,254)	13.56
Cancelled/Forfeited	(10,809	)	20.37	Cancelled/Forfeited	(37,505)	3.81
Outstanding and nonvested at March 31, 2020	86,641		15.53
Outstanding and nonvested at March 31, 2021				Outstanding and nonvested at March 31, 2021	809,318	5.31

The total grant-date fair value of restricted stock granted during the nine months ended March 31, ~~2020~~2021 was ~~$1.3 million.~~$3.6 million.

At March 31, ~~2020~~2021 and June 30, ~~2019,~~2020, there ~~were $0.8~~was $3.6 million and ~~$0.4~~$1.7 million, respectively, of unrecognized compensation cost related to restricted stock. The unrecognized compensation cost related to restricted stock at March 31, ~~2020~~2021 is expected to be recognized over the weighted average period of ~~0.7 years.~~ 1.5 years. Total compensation expense for restricted stock ~~were~~was $0.4 million and $0.3 ~~million and $0.1~~ million, respectively, in the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020. Total compensation expense for restricted stock was $1.5 million and $0.7 million, respectively, in the nine months ended March 31, ~~2020~~2021 and ~~2019 were $0.7 million and $0.3 million, respectively.~~2020.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Performance-Based Restricted Stock Units (“PBRSUs”)

The following table summarizes PBRSU activity for the nine months ended March 31, ~~2020:~~2021:


Outstanding and Nonvested PBRSUs:	PBRSUs Awarded(1)		Weighted Average Grant Date Fair Value ($)	Outstanding and Nonvested PBRSUs:	PBRSUs Awarded(1)	Weighted Average Grant Date Fair Value ($)
Outstanding and nonvested at June 30, 2019	51,237		27.69
Outstanding and nonvested at June 30, 2020				Outstanding and nonvested at June 30, 2020	81,337	15.78
Granted(1)	81,236		14.46	Granted(1)	306,095	4.10
Vested/Released	—		—	Vested/Released	(805)	31.70
Cancelled/Forfeited	(38,262	)	27.38	Cancelled/Forfeited	(4,232)	18.50
Outstanding and nonvested at March 31, 2020	94,211		16.41
Outstanding and nonvested at March 31, 2021				Outstanding and nonvested at March 31, 2021	382,395	6.30

_____________

(1) The target number of PBRSUs is presented in the table. Under the terms of the awards, the recipient may earn between 0% and ~~200%~~150% 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.

The total grant-date fair value of PBRSUs granted during the nine months ended March 31, ~~2020~~2021 was ~~$1.2 million.~~$1.3 million.

At March 31, ~~2020~~2021 and June 30, ~~2019,~~2020, there ~~were $0.6~~was $1.2 million and ~~$0.3~~$0.5 million, respectively, of unrecognized PBRSU compensation cost. The unrecognized PBRSU compensation cost at March 31, ~~2020~~2021 is expected to be recognized over the weighted average period of ~~2.4~~2.7 years. Total compensation expense for PBRSUs ~~were $17.9~~was $91.1 thousand ~~and $149.0 thousand, respectively,~~ for the three months ended March 31, ~~2020 and 2019.~~2021.

As of March 31, 2021, the Company reversed the previously recognized nonvested compensation expense of $295.8 thousand for awards granted prior to fiscal 2021 since it was deemed not probable that the Company will achieve the target performance conditions. Total PBRSUs compensation expense for ~~PBRSUs were $0.1 million~~the three and ~~$0.3 million,~~nine months ended March 31, 2020 was $17.9 thousand and $128.0 thousand, respectively.

Cash-Settled Restricted Stock Units (“CSRSUs”)

In December 2020, the Company granted CSRSUs under the 2017 Plan to certain employees. CSRSUs vest in equal installments over a three-year period from the grant date, and are cash-settled upon vesting based on the Company’s common stock closing share price on the vesting date.

The CSRSUs are accounted for as liability awards, and compensation expense is measured at fair value on the date of grant and recognized on a straight-line basis over the vesting period net of forfeitures. Compensation expense is remeasured at each reporting date with a cumulative adjustment to compensation cost during the period based on changes in the Company’s common stock closing share price.

The following table summarizes CSRSU activity for the nine months ended March 31, ~~2020~~2021:


Outstanding and Nonvested CSRSUs:	CSRSUs Awarded	Weighted Average Grant Date Fair Value ($)
Outstanding and nonvested at June 30, 2020	0	0
Granted	232,002	4.31
Vested/Released	0	0
Cancelled/Forfeited	(15,660)	4.31
Outstanding and nonvested at March 31, 2021	216,342	4.31

The total grant-date fair value of CSRSUs granted during the nine months ended March 31, 2021 was $1.0 million.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

At March 31, 2021, there was $2.0 million of unrecognized compensation cost related to CSRSU. The unrecognized compensation cost related to CSRSU at March 31, 2021 is expected to be recognized over the weighted average period of 2.7 years. Total compensation expense for CSRSUs was $192.5 thousand and ~~2019.~~$213.1 thousand in the three and nine months ended March 31, 2021, respectively.

Performance Cash Awards (“PCAs”)

In November 2019, the Company granted PCAs under the 2017 Plan to certain employees. The PCAs cliff vest on the third anniversary of the date of grant based on the Company’s achievement of certain financial performance goals for the performance period July 1, 2019 through June 30, 2022, subject to certain continued employment conditions and subject to acceleration provisions of the 2017 Plan. At the end of the three-year performance period, the amount of PCAs 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 financial performance goals measured over the full three-year performance period.

The PCAs are measured initially based on a fixed amount of the awards at the date of grant and are required to be re-measured based on the probability of achieving the performance conditions at each reporting date until settlement. Compensation expense for PCAs is recognized over the applicable performance periods. The Company records a liability equal to the cost of PCAs for which achievement of the performance condition is deemed probable. As of March 31, ~~2020,~~2021, the Company ~~had~~reversed the previously recognized nonvested accrued liabilities of ~~$46.5 thousand.~~$102.2 thousand since it was deemed not probable that the Company will achieve the target performance conditions.

At March 31, ~~2020,~~2021, there was ~~$0.4 million of unrecognized PCA compensation cost. The~~no unrecognized PCA compensation cost ~~at March 31, 2020 is expected to be recognized over~~since it was deemed not probable that the ~~weighted average period of 2.6 years.~~Company will achieve the target performance conditions. Total compensation expense for PCAs was ~~$29.7~~$29.7 thousand and ~~$46.5~~$46.5 thousand, respectively, for the three and nine months ended March 31, ~~2020, respectively.~~2020.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Note 14. Other Current Liabilities

Other current liabilities consist of the following:


(In thousands)	March 31, 2021		June 30, 2020
Accrued postretirement benefits	$	500	$	744
Accrued workers’ compensation liabilities	1,413		1,466
Cumulative preferred dividends, undeclared and unpaid (1)	1,906		1,477
Finance lease liabilities	193		0

Other (2)	2,372		3,115
Other current liabilities	$	6,384	$	6,802

(In thousands) March 31, 2020 June 30, 2019
Accrued postretirement benefits $ 890
$ 1,068
Accrued workers’ compensation liabilities 1,702
1,495
Cumulative preferred dividends, undeclared and unpaid (4) 1,337
305
Earnout payable (1) —
1,000
Working capital dispute payable(2) 354
354
Other (3) 2,193
3,087
Other current liabilities $ 6,476
$ 7,309

___________

(1) Represents ~~estimated fair value of earnout payable in connection with~~ the ~~Company’s acquisition of substantially all of the assets of West Coast Coffee completed on February 7, 2017.~~cumulative preferred dividends, undeclared and unpaid. Previously accrued long-term portion has been reclassified to current liabilities.

(2) ~~Represents accrued expenses related to working capital disputes in connection with the Company's acquisition of Boyd Coffee on October 2, 2017.~~

~~(3)~~ Includes accrued property taxes, sales and use taxes and insurance liabilities.

~~(4) Per the agreement, all the cumulative preferred dividends, undeclared and unpaid are now payable. Therefore, the previously accrued long-term portion has been reclassified to current liabilities.~~

Note 15. Other Long-Term Liabilities

Other long-term liabilities include the following:

(In thousands) March 31, 2020 June 30, 2019
Finance lease liabilities $ 22
$ 32
Derivative liabilities—noncurrent 2,747
1,612
Performance Cash Awards Liability 46
—
Cumulative preferred dividends, undeclared and unpaid—noncurrent —
618
Deferred income taxes and other liabilities(1) 1,738
1,795
Other long-term liabilities $ 4,553
$ 4,057


(In thousands)	March 31, 2021		June 30, 2020

Derivative liabilities—noncurrent	$	1,707	$	2,859
Deferred compensation(1)	1,629		1,170

Deferred income taxes and other liabilities(2)	1,423		1,494
Finance lease liabilities	593		9
Other long-term liabilities	$	5,352	$	5,532

___________

(1) Includes payroll taxes and performance cash awards liabilities.

(2) Includes deferred tax liabilities that have an indefinite reversal pattern.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Note 16. Income Taxes

The income tax expense (benefit) and the related effective tax rates are as follows (in thousands, except effective tax rate):


	Three Months Ended March 31,						Nine Months Ended March 31,
	2021			2020			2021			2020
Income tax (benefit) expense	$	(60)		$	(1,034)		$	13,785		$	(1,222)
Effective tax rate	(0.4)		%	2.5		%	(57.7)		%	4.3		%

Three Months Ended March 31, Nine Months Ended March 31,
2020 2019 2020 2019
Income tax (benefit) expense $ (1,034 ) $ 43,161
$ (1,222 ) $ 39,149
Effective tax rate 2.5 % (502.7 )% 4.3 % (152.4 )%

The ~~higher~~ effective tax rate in nine months ended March 31, 2021 is negative primarily due to the $13.5 million of previously deferred non-cash tax expense in accumulated other comprehensive income associated with gains on the postretirement medical plan in prior years. Upon termination of this plan on December 31, 2020, the deferred non-cash tax expense was recognized in net income in the second quarter of fiscal 2021. The negative effective tax rate in the three months ended March 31, 2021, and the positive effective tax rates in the three and nine months ended March 31, 2020, are due to change in previously recorded valuation allowance and change in ~~the Company’s~~our estimated deferred tax liability. The Company’s interim tax provision is determined using an estimated annual effective tax rate and adjusted for discrete taxable events that may occur during the quarter. The Company recognizes the effects of tax legislation in the period in which the law is enacted. Deferred tax assets and liabilities are remeasured using enacted tax rates expected to apply to taxable income in the years the Company estimates the related temporary differences to reverse. The Company evaluates its deferred tax assets quarterly to determine if a valuation allowance is required. In making such assessment, significant weight is given to evidence that can be objectively verified, such as recent operating results, and less consideration is given to less objective indicators such as future income projections.

~~Farmer Bros. Co.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (continued)~~

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by U.S. federal, state and local tax authorities. With limited exceptions, as of March 31, ~~2020~~2021 and June 30, ~~2019,~~2020, the Company is no longer subject to income tax audits by taxing authorities for any years prior to ~~2016.~~2018. Although the outcome of tax audits is always uncertain, the Company does not believe the outcome of any future audit will have a material adverse effect on the Company’s condensed consolidated financial statements.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Note 17. Net Income (loss) Per Common Share

Basic net income (loss) per common share is calculated by dividing net income (loss) attributable to the Company by the weighted average number of common shares outstanding during the periods presented. Diluted net income (loss) per common share is calculated by dividing diluted net income (loss) attributable to the Company by the weighted average number of common shares outstanding adjusted to include the effect, if dilutive, of the exercise of in-the-money stock options, unvested performance-based restricted stock units, and shares of Series A Preferred Stock, as converted, during the periods presented. The calculation of dilutive shares outstanding excludes out-of-the-money stock options (i.e., such option’s exercise prices were greater than the average market price of our common shares for the period) and unvested performance-based restricted stock units because their inclusion would be have been anti-dilutive.

The following table presents the computation of basic and diluted earnings (loss) per common share:


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands, except share and per share amounts)	2021		2020		2021		2020
Undistributed net (loss) income available to common stockholders	$	(13,234)	$	(39,790)	$	(36,601)	$	(27,692)
Undistributed net (loss) income available to nonvested restricted stockholders and holders of convertible preferred stock	(594)		(126)		(1,507)		(91)
Net (loss) earnings available to common stockholders—basic	$	(13,828)	$	(39,916)	$	(38,108)	$	(27,783)

Weighted average common shares outstanding—basic	17,756,619		17,230,879		17,569,026		17,161,477
Effect of dilutive securities:
Shares issuable under stock options	0		0		0		0
Shares issuable under PBRSUs	0		0		0		0
Shares issuable under convertible preferred stock	0		0		0		0
Weighted average common shares outstanding—diluted	17,756,619		17,230,879		17,569,026		17,161,477
Net loss available to common stockholders per common share—basic	$	(0.78)	$	(2.32)	$	(2.17)	$	(1.62)
Net loss available to common stockholders per common share—diluted	$	(0.78)	$	(2.32)	$	(2.17)	$	(1.62)

Three Months Ended March 31, Nine Months Ended March 31,
(In thousands, except share and per share amounts) 2020 2019 2020 2019
Undistributed net loss available to common stockholders $ (39,790 ) $ (51,828 )
$ (27,692 )
$ (65,177 )
Undistributed net loss available to nonvested restricted stockholders and holders of convertible preferred stock (126 ) (55 ) (91 ) (58 )
Net loss available to common stockholders—basic $ (39,916 ) $ (51,883 ) $ (27,783 ) $ (65,235 )

Weighted average common shares outstanding—basic 17,230,879
17,003,206
17,161,477
16,982,247
Effect of dilutive securities:
Shares issuable under stock options —
—
—
—
Shares issuable under PBRSUs —
—
—
—
Weighted average common shares outstanding—diluted 17,230,879
17,003,206
17,161,477
16,982,247
Net loss per common share available to common stockholders—basic $ (2.32 ) $ (3.05 ) $ (1.62 ) $ (3.84 )
Net loss per common share available to common stockholders—diluted $ (2.32 ) $ (3.05 ) $ (1.62 ) $ (3.84 )

The following table summarizes anti-dilutive securities excluded from the computation of diluted net income (loss) per common share for the periods indicated:


	Three Months Ended March 31,		Nine Months Ended March 31,
	2021	2020	2021	2020
Shares issuable under stock options	421,167	485,513	421,167	327,192
Shares issuable under convertible preferred stock	433,373	418,531	433,373	418,531
Shares issuable under PBRSUs	185,236	98,946	104,271	75,926

Three Months Ended March 31, Nine Months Ended March 31,
2020 2019 2020 2019
Shares issuable under stock options 485,513
269,872
327,192
211,594
Shares issuable under convertible preferred stock 418,531
404,197
418,531
404,197
Shares issuable under PBRSUs 98,946
91,697
75,926
65,971

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Note 18. Preferred Stock

The Company is authorized to issue 500,000 shares of preferred stock at a par value of $1.00, including 21,000 authorized shares of Series A Preferred Stock.

On October 2, 2017, the Company issued 14,700 shares of Series A Preferred Stock in connection with the Boyd Coffee acquisition. At March 31, ~~2020,~~2021, Series A Preferred Stock consisted of the following:


(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	$	1,130	$	16,607	$	1,907	$	16,607

(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
$ 1,091
$ 16,038
$ 1,338
$ 16,038

Note 19. Revenue Recognition

The Company’s primary sources of revenue are sales of coffee, tea and culinary products. The Company recognizes revenue when control of the promised good or service is transferred to the customer and in amounts that the Company expects to collect. The timing of revenue recognition takes into consideration the various shipping terms applicable to the Company’s sales.

The Company delivers products to customers ~~primarily~~ through ~~two methods,~~ Direct-store-delivery (“DSD”) to the Company’s customers at their place of business and direct ship from the Company’s warehouse to the customer’s warehouse, facility or ~~facility.~~address. Each delivery or shipment made to a third party customer is to satisfy a performance obligation. Performance obligations generally occur at a point in time and are satisfied when control of the goods passes to the customer. The Company is entitled to collection of the sales price under normal credit terms in the regions in which it operates.

The Company disaggregates net sales from contracts with customers based on the characteristics of the products sold:


	Three Months Ended March 31,									Three Months Ended March 31,								Nine Months Ended March 31,
	2020				2019					2021				2020				2021				2020
(In thousands)	$		% of total		$		% of total		(In thousands)	$		% of total		$		% of total		$		% of total		$		% of total
Net Sales by Product Category:									Net Sales by Product Category:
Coffee (Roasted)	$	84,300	65.3	%	$	93,211	63.5	%	Coffee (Roasted)	$	60,771	65.2	%	$	84,300	65.3	%	$	196,353	66.6	%	$	267,847	63.7	%
Coffee (Frozen Liquid)	7,044		5.5	%	8,267		5.6	%	Coffee (Frozen Liquid)	3,890		4.2	%	7,044		5.5	%	10,510		3.6	%	23,528		5.6	%
Tea (Iced & Hot)	6,701		5.2	%	8,320		5.7	%	Tea (Iced & Hot)	4,726		5.1	%	6,701		5.2	%	11,251		3.8	%	21,969		5.2	%
Culinary	12,954		9.9	%	15,990		11.0	%	Culinary	10,551		11.3	%	12,954		9.9	%	32,471		11.0	%	42,315		10.1	%
Spice	5,262		4.1	%	5,736		3.9	%	Spice	4,414		4.7	%	5,262		4.1	%	13,424		4.6	%	17,594		4.2	%
Other beverages(1)	12,290		9.5	%	14,405		9.8	%	Other beverages(1)	8,530		9.2	%	12,290		9.5	%	30,028		10.1	%	42,322		10.1	%
Other revenues(2)									Other revenues(2)	0		0	%	0		0	%	0		0	%	2,701		0.6	%
Net sales by product category	128,551		99.5	%	145,929		99.5	%	Net sales by product category	92,882		99.7	%	128,551		99.5	%	294,037		99.7	%	418,276		99.5	%
Fuel surcharge	588		0.5	%	750		0.5	%	Fuel surcharge	270		0.3	%	588		0.5	%	956		0.3	%	1,961		0.5	%
Net sales	$	129,139	100.0	%	$	146,679	100	%	Net sales	$	93,152	100.0	%	$	129,139	100.0	%	$	294,993	100.0	%	$	420,237	100.0	%

____________


~~(1)~~	~~Includes all beverages other than roasted coffee, frozen liquid coffee, and iced and hot tea, including cappuccino, cocoa, granitas, and concentrated and ready-to drink cold brew and iced coffee.~~

(1)Includes all beverages other than roasted coffee, frozen liquid coffee, and iced and hot tea, including cappuccino, cocoa, granitas, and concentrated and ready-to drink cold brew and iced coffee.

(2)Represents revenues for certain transition services related to the sale of the Company’s office coffee assets.

~~Farmer Bros. Co.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (continued)~~

Nine Months Ended March 31,
2020 2019
(In thousands) $ % of total $ % of total
Net Sales by Product Category:
Coffee (Roasted) $ 267,847
63.7 % $ 287,851
63.4 %
Coffee (Frozen Liquid) 23,528
5.6 % 26,141
5.8 %
Tea (Iced & Hot) 21,969
5.2 % 25,876
5.7 %
Culinary 42,315
10.1 % 48,779
10.8 %
Spice 17,594
4.2 % 17,895
3.9 %
Other beverages(1) 42,322
10.1 % 44,946
9.9 %
Other revenues(2) 2,701
0.6 % —
— %
Net sales by product category 418,276
99.5 % 451,488
99.5 %
Fuel surcharge 1,961
0.5 % 2,404
0.5 %
Net sales $ 420,237
100.0 % $ 453,892
100.0 %

~~___________~~


~~(1)~~	~~Includes all beverages other than roasted coffee, frozen liquid coffee, and iced and hot tea, including cappuccino, cocoa, granitas, and concentrated and ready-to drink cold brew and iced coffee.~~


~~(2)~~	~~Represents revenues for certain transition services related to the sale of the Company’s office coffee assets.~~

The Company does not have any material contract assets and liabilities as of March 31, ~~2020.~~2021. Receivables from contracts with customers are included in “Accounts receivable, net” on the Company’s condensed consolidated balance sheets. At March 31, ~~2020~~2021 and June 30, ~~2019,~~2020, “Accounts receivable, net” included, ~~$49.3~~$36.9 million and ~~$53.6~~$40.7 million, respectively, in receivables from contracts with customers.

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Note 20. Commitments and Contingencies

For a detailed discussion about the Company’s commitments and contingencies, see Note 22, “Commitments and Contingencies” in the Notes to Consolidated Financial Statements in the ~~2019~~2020 Form 10-K. During the nine months ended March 31, ~~2020,~~2021, other than the following, or as otherwise disclosed in these footnotes in the current Form 10-Q, there were no material changes in the Company’s commitments and contingencies.

Purchase Commitments

As of March 31, ~~2020,~~2021, the Company had committed to purchase green coffee inventory totaling ~~$61.2~~$38.3 million under fixed-price contracts, ~~$4.5~~$7.9 million in other inventory under non-cancelable purchase orders and ~~$7.2~~$4.4 million in other purchases under non-cancelable purchase orders.

Legal Proceedings

Council for Education and Research on Toxics (“CERT”) v. Brad Berry Company Ltd., et al., Superior Court of the State of California, County of Los Angeles

On August 31, 2012, CERT filed an amendment to a private enforcement action adding a number of companies as defendants, including the Company’s subsidiary, Coffee Bean International, Inc., which ~~sell~~sells coffee in California under the State of California's Safe Drinking Water and Toxic Enforcement Act of 1986 (“Prop 65”). The suit alleges that the defendants have failed to issue clear and reasonable warnings in accordance with Prop 65 that the coffee they produce, distribute, and sell contains acrylamide. This lawsuit was filed in Los Angeles Superior Court (the “Court”). CERT alleges that the Company and the other defendants failed to provide warnings for their coffee products of exposure to the chemical acrylamide as required under Prop 65. Plaintiff seeks equitable relief, including providing warnings to consumers of coffee products, as well as civil penalties in the amount of the statutory maximum of ~~$2,500.00~~$2,500 per day per violation of Prop 65. The Plaintiff asserts that every consumed cup of coffee, absent a compliant warning, is equivalent to a violation under Prop 65.

~~Farmer Bros. Co.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (continued)~~

The Company, as part of a joint defense group (“JDG”) organized to defend against the lawsuit, disputes the claims of CERT. Acrylamide is not added to coffee but is present in all coffee in small amounts (parts per billion) as a byproduct of the coffee bean roasting process. Acrylamide is produced naturally in connection with the heating of many foods, especially starchy foods, and is believed to be caused by the Maillard reaction, though it has also been found in unheated foods such as olives. With respect to coffee, acrylamide is produced when coffee beans are heated during the roasting process-it is the roasting itself that produces the acrylamide. While there has been a significant amount of research concerning proposals for treatments and other processes aimed at reducing acrylamide content of different types of foods, to our knowledge there is currently no known strategy for reducing acrylamide in coffee without negatively impacting the sensorial properties of the product.

The Company has asserted multiple affirmative defenses. Trial of the first phase of the case commenced on September 8, 2014, and was limited to three affirmative defenses shared by all defendants. On September 1, 2015, the trial court issued a final ruling adverse to defendants on all Phase 1 defenses. Trial of the second phase of the case commenced in the fall of 2017. On May 7, 2018, the trial court issued a ruling adverse to defendants on the Phase 2 defense, the Company's last remaining defense to liability. On June 22, 2018, the California Office of Environmental Health Hazard Assessment (OEHHA) proposed a new regulation clarifying that cancer warnings are not required for coffee under Proposition 65. The case was set to proceed to a third phase trial on damages, remedies and attorneys' fees on October 15, 2018. However, on October 12, 2018, the California Court of Appeal granted the “defendants” request for a stay of the Phase 3 trial.

On June 3, 2019, the Office of Administrative Law (OAL) approved the coffee exemption regulation. The regulation became effective on October 1, 2019. On June 24, 2019, the Court of Appeal lifted the stay of the litigation. A status conference was held on July 11, 2019. The Court granted the JDG’s motion for leave to amend its answers to add the coffee exemption regulation as a defense. Concurrently, the Court denied CERT’s motion to add OEHHA as a party but granted CERT’s motions to complete the administrative record with respect to the exemption and to undertake certain third party discovery. A status conference was held November 12, 2019 to discuss discovery issues and dispositive motions. Plaintiff’s motion to compel OEHHA to add documents to the rulemaking file for the new coffee exemption regulation was denied. CERT ~~continues~~continued to pursue third-party discovery with plans to file motions to compel appearances of proposed deponents. These motions, along with CERT’s eight summary judgment motions, were heard at a January 21, 2020 hearing where the Court denied several of CERT’s discovery requests. The JDG’s reply in support of its motion for summary judgment was due to the Court on the March 16, 2020 however, on March 17, 2020, notice was given that the Court was rescheduling the

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

hearings set for March 23, 2020. ~~The~~Due to COVID 19 restrictions, the Court ~~delayed~~continued the ~~March~~ hearing on the nine motions until ~~May 11, 2020 due to~~July 16, 2020. At the ~~COVID 19 pandemic’s impact~~hearing, the Court denied three of CERT’s motions for summary adjudication that challenged the OEHHA rulemaking, and ~~closure~~rescheduled the balance of ~~courts. The parties’ reply papers are now due May 6.~~

the pending motions for August 10, 2020. Subsequent to the hearing on January 21, 2020, Plaintiff ~~issued~~made broad discovery requests against each of the defendants in hopes of opening up a third round of discovery. The discovery focuses on “additives to” and “flavorings” in coffee. The JDG ~~is currently working~~has responded to ~~respond~~the discovery requests but Plaintiff has filed a motion to ~~those~~compel further answers to discovery ~~requests.~~and production of documents.

At the August 10, 2020 hearing, the Court denied multiple motions by the Plaintiffs for summary adjudication. The hearing on the remaining motions was scheduled for August 25, 2020 and at that hearing, the Court denied CERT’s motion for summary judgment and granted the JDG’s motion for summary judgment, noting that the discovery and claims regarding additives were outside the scope of this case. Notice of Judgment in favor of defendants was entered on October 6, 2020.

On November 20, 2020, CERT filed an appeal with the Superior Court of California.On January 29, 2021, CERT filed another appeal with the Superior Court of California. On April 9, 2021, CERT filed it’s opening brief on the first appeal. At this time, the Company is ~~not able~~unable to predict the ~~probability~~timing of the ~~outcome or estimate of~~final ruling. In addition, the Company believes that the likelihood that the Company will ultimately incur a loss ~~if any, related to~~in connection with this ~~matter.~~ litigation is less than reasonably possible.

The Company is a party to various other pending legal and administrative proceedings. It is management’s opinion that the outcome of such proceedings will not have a material impact on the Company’s financial position, results of operations, or cash flows.

~~Farmer Bros. Co.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (continued)~~

Note 21. Sales of Assets

Sale of ~~Office Coffee Assets~~

In order to focus on its core product offerings, in July 2019, the Company completed the sale of certain assets associated with its office coffee customers for $9.3 million in cash paid at the time of closing plus an earnout of up to an additional $2.3 million if revenue expectations were achieved during test periods scheduled to occur at various branches at various times and concluded by early third quarter of fiscal year 2020. The earnout of up to an additional $2.3 million was not paid to the Company because the revenue expectations were not achieved. The Company recognized a net gain on the asset sales of $7.2 million during the nine months ended March 31, 2020. The sale of office coffee assets did not represent a strategic shift for the Company and did not have a material impact on the Company's results of operations because the Company has signed a supply agreement to provide certain coffee products to the assets purchaser.

~~Sale of~~ Branch ~~Properties~~Property

During the nine months ended March 31, ~~2020,~~2021, the Company completed the sale of ~~seven~~the following branch properties:

(In thousands)

Name of Branch Property

Date Sold

Sales Price

Net Proceeds

Gain (loss)

Long-Term Leaseback

Lease Term

Monthly Base Rent

Austin, Texas

11/18/2020

1,360

1,239

1,045

N/A

Bishop, California

12/4/2020

220

204

N/A

Assets Held for Sale

As of March 31, 2021, certain branch properties met the accounting guidance criteria to be classified as held for sale. As such, the Company evaluated the assets to determine whether the carrying value exceeded the fair value less any costs to sell. No loss was recorded as of March 31, 2021 and ~~entered into two operating lease agreements with~~ the ~~purchasers of two of~~aggregate assets held for sale are presented as a separate line items in the condensed consolidated condensed balance sheet. The branch properties ~~as detailed in the following table:~~

(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

~~___________~~

~~(1) Has an option to renew the lease for additional five years.~~

~~Sale leaseback of Houston Facility~~

In November 2019, the Company completed the sale of its Houston, Texas manufacturing facility and warehouse (the “Property”) for an aggregate purchase price, exclusive of closing costs, of $10.0 million. Cash proceeds from the sale of the Property were $9.0 million. The Company recognized a net gain on the Property sale of $7.3 million during the nine months ended March 31, 2020. The Property did not meet the accounting guidance criteria to be classified as discontinued operations.

~~Following the close of the sale of the Property, the Company and the purchaser of the Property entered into a three-year leaseback agreement with respect~~

The following table presents net book value related to the ~~Property~~major classes of assets that were classified as held for a base rent of $50,000 per month. The Company may terminate the leaseback no earlier than the first day of the eighteenth full calendar month of the term providing at least nine months’ notice. The purchaser of the Property does not have any material relationship with the Company or its subsidiaries.sale:


(In thousands)	March 31, 2021
Building and facilities	$	1,632
Land	889
Assets held for sale	$	2,521

Farmer Bros. Co.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Note 22. Subsequent Events

The Company evaluated all events or transactions that occurred after March 31, ~~2020~~2021 through the date the condensed consolidated financial statements were issued. During this period the Company had the following material subsequent events that require disclosure:

~~None.~~On April 26, 2021, the Company, repaid in full all of the outstanding loans and other amounts payable under the Amended and Restated Credit Agreement dated as of November 6, 2018, using proceeds of loans received pursuant to a refinancing under a new senior secured facility composed of (a) a Credit Agreement, dated as of April 26, 2021 (the “Revolver Credit Facility Agreement”) by and among the Company, Boyd Assets Co., FBC Finance Company, Coffee Bean Holding Co., Inc., Coffee Bean International, Inc. and China Mist Brands, Inc., as borrowers (collectively, the “Borrowers”), Wells Fargo Bank, N.A. (“Wells Fargo”), as administrative agent and lender, and the other lenders party thereto, and various loan documents relating thereto including the Guaranty and Security Agreement, dated as of April 26, 2021 (the “Revolver Security Agreement”), by and among the Borrowers, as grantors, and Wells Fargo, as administrative agent, and (b) a Credit Agreement, dated as of April 26, 2021 (the “Term Credit Facility Agreement”) by and among the Borrowers, MGG Investment Group LP. (“MGG”), as administrative agent, and the lenders party thereto, and various loan documents relating thereto including the Guaranty and Security Agreement, dated as of April 26, 2021 (the “Term Security Agreement”), by and among the Borrowers, as grantors, and MGG, as administrative agent.

See Note 1 1 for summary description of the key items of the Revolver and Term loan Credit Facility Agreements (collectively, the “Credit Facilities”). Please refer to Exhibit 10.1, Exhibit 10.2, Exhibit 10.3 and Exhibit 10.4 in this Quarterly Report on Form 10-Q for the full text of the agreements.

In connection with the Credit Facilities agreements, the Company also executed an ISDA agreement to transfer its interest swap to Wells Fargo. See Note 11 for summary description of the key items of the ISDA agreement. Please refer to Exhibit 10.5, Exhibit 10.6 and Exhibit 10.7 in this Quarterly Report on Form 10-Q for the full text of the agreements.



Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements contained in this Quarterly Report on Form 10-Q are not based on historical fact and are forward-looking statements within the meaning of federal securities laws and regulations. These statements are based on management’s current expectations, assumptions, estimates and observations of future events and include any statements that do not directly relate to any historical or current fact; actual results may differ materially due in part to the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2019~~2020 filed with the Securities and Exchange Commission (the “SEC”) on September 11, ~~2019~~2020 (the ~~“2019~~“2020 Form 10-K”) and Part II, Item 1A of this report. These forward-looking statements can be identified by the use of words like “anticipates,” “estimates,” “projects,” “expects,” “plans,” “believes,” “intends,” “will,” “could,” “assumes” and other words of similar meaning. Owing to the uncertainties inherent in forward-looking statements, actual results could differ materially from those set forth in forward-looking statements. We intend these forward-looking statements to speak only at the time of this report and do not undertake to update or revise these statements as more information becomes available except as required under federal securities laws and the rules and regulations of the SEC. Factors that could cause actual results to differ materially from those in forward-looking statements include, but are not limited to, duration of the COVID-19 pandemic’s disruption to the Company’s business and customers, levels of consumer confidence in national and local economic business conditions, the duration and magnitude of the pandemic’s impact on unemployment rates, the success of the Company’s strategy to recover from the effects of the pandemic, the success of the Company's turnaround strategy, the execution of the five key initiatives, the impact of capital improvement projects, the adequacy and availability of capital resources to fund the Company’s existing and planned business operations and the Company’s capital expenditure requirements, the relative effectiveness of compensation-based employee incentives in causing improvements in Company performance, the capacity to meet the demands of our large national account customers, the extent of execution of plans for the growth of Company business and achievement of financial metrics related to those plans, the success of the Company to retain and/or attract qualified employees, the success of the Company’s adaptation 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 provide sustainability in ways that do not materially impair profitability, changes in the strength of the economy, 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 this report and other factors described from time to time in our filings with the SEC. The results of operations for the three and nine months ended March 31, ~~2020~~2021 are not necessarily indicative of the results that may be expected for any future period.

Our Business

We are a national coffee roaster, wholesaler and distributor of coffee, tea and culinary products manufactured under supply agreements, under our owned brands, as well as under private labels on behalf of certain customers. We were founded in 1912, incorporated in California in 1923, and reincorporated in Delaware in 2004. ~~In fiscal 2017, we completed the relocation of our corporate headquarters from Torrance, California to~~Our principal office is located in Northlake, Texas. We operate in one business segment.

We serve a wide variety of customers, from small independent restaurants and foodservice operators to large institutional buyers like restaurants, department and convenience store ~~chains,~~retailers, hotels, casinos, healthcare facilities, and gourmet coffee houses, as well as grocery chains with private brand and consumer-branded coffee and tea products, and foodservice distributors. Through our sustainability, stewardship, environmental efforts, and leadership we are not only committed to serving the finest products available, considering the cost needs of the customer, but also ~~insist on~~emphasize their sustainable cultivation, manufacture and distribution whenever possible.

Our product categories consist of a robust line of roast and ground coffee, including organic, Direct Trade, Project D.I.R.E.C.T.® and other sustainably-produced offerings; frozen liquid coffee; flavored and unflavored iced and hot teas; culinary products including gelatins and puddings, soup bases, dressings, gravy and sauce mixes, pancake and biscuit mixes, jellies and preserves, and coffee-related products such as coffee filters, sugar and creamers; spices; and other beverages including cappuccino, cocoa, granitas, and concentrated and ready-to-drink cold brew and iced coffee. 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 operate production facilities in Northlake, Texas; ~~Houston, Texas;~~ Portland, Oregon; and Hillsboro, Oregon. ~~Distribution~~We have stopped production in our Houston facility and plan to exit the facility in the fourth quarter of this fiscal year. Our distribution takes place out of the Northlake, ~~facility,~~ Texas, ~~the~~ Portland, Oregon and Hillsboro, Oregon production facilities, as well as separate distribution centers in Northlake, ~~Illinois and~~Illinois; Moonachie, New ~~Jersey.~~Jersey; and Rialto, California. We opened and started operating the distribution center in Rialto, California in the third quarter of the current fiscal year. Our products reach our customers primarily in the following ways:

through our nationwide ~~Direct-store-delivery~~direct-store-delivery (“DSD”) network of approximately ~~260~~205 delivery routes and ~~100~~98 branch warehouses, some of which are located within the distribution facilities, as of March 31, ~~2020,~~2021, or direct-shipped via common carriers or third-party distributors. DSD sales are 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, and we rely on third-party logistics service providers for our long-haul distribution.

Impact of the COVID-19 Pandemic on Our Business

The COVID-19 pandemic ~~has significantly impacted our~~ ~~financial position, results of operations, cash flows and liquidity as the spread of the pandemic and resulting governmental actions~~continued to have ~~decreased the demand for our products, most notably throughout our DSD network, which has had~~ a ~~material~~significant impact on our ~~revenues~~DSD sales network. As local governments across the country eased COVID-19 restrictions, and vaccines are distributed and rolled out successfully, we continue to see improved trends with average weekly sales during the quarter ended March 31, ~~2020, and will have a material impact on~~2021 down 36% compared to pre-COVID levels. Currently, during the month of April 2021, our revenues in future periods. Our DSD customers consist of small independent restaurants, foodservice operators, large institutional buyers, and convenience store chains, hotels, casinos, healthcare facilities, and foodservice distributors. Some customers have either limited operations, or have closed their doors in compliance with the restrictive measures enacted by federal, states and local governments restrictions on social distancing. Thus, our average weekly DSD sales ~~channel weekly revenue~~are down approximately 27% from these customers during this pandemic period have declined by 65% to 70% from the pre COVID-19 pandemic weeks. Even though we have proactively responded with new concepts such as, warehouse and pop-up sales, and accelerated our roastery direct and e-commerce initiatives, we do not expect these efforts to be able to offset the material decline in DSD revenue.

~~Therefore, we have instituted certain initiatives to reduce operating expenses and capital expenditures to help mitigate the significant negative impact of our~~pre-COVID levels. The largest DSD revenue ~~decline. Specifically, we have, among other things;~~declines were from restaurants, hotels and casino channels.

~~reduced headcount and furloughed significant percentage of the remaining employees;~~

~~eliminated fiscal~~Compared to prior year third quarter, ~~2020 cash compensation for~~ our ~~Board of Directors;~~

~~temporarily decreased executive leadership, corporate team member’s and all exempt employees (except route sales representatives) base salaries by instituting a 15% reduction;~~

~~reduced discretionary spending, including a moratorium on all travel;~~

~~reduced fiscal year ending 2020 management incentive bonus program;~~

~~reduced plant production costs in two of our plants;~~

~~suspended 401k cash matching for all eligible employees;~~

~~reduced capital expenditures while also closely managing inventory and other spending;~~


•	~~implemented cost controls throughout our coffee brewing equipment~~ (“~~CBE”) program service network;~~

~~instituted cost savings to reduce our general and administrative expenses;~~

~~reduced our DSD supply chain network costs by reducing freight and fleet, and consolidating routes; and~~

~~commenced negotiations with landlords on rent, operating expenses and leases.~~

We expect the above initiatives to result in significant monthly costs savings during the duration of the initiatives. The duration of the initiatives will depend on the length of the COVID-19 pandemic related impacts on our business and the method of ramp up of DSD after the COVID-19 pandemic.

~~On the other hand,~~Direct Ship revenues declined 23%. Although our Direct Ship sales channel ~~which includes~~was also affected by the COVID-19 pandemic, the impact was significantly less due to the types of customers we serve through this channel. These customers include our retail business and products sold by key grocery stores under their private labels, as well as third party e-commerce platforms, which have seen ~~significant~~moderate increases in demand that have helped mitigate the impact of COVID-19 pandemic. Also, a portion of the declines are attributable to accounts we decided to exit since they were lower or negative profit due to the impacts from COVID.

In addition to the costs saving initiatives to reduce operating expenses and capital expenditures implemented during the fiscal year ended June 30, 2020, we have also repaid our existing senior secured revolving credit facility, and executed new credit facilities, as described in the Liquidity, Capital Resources and Financial Condition section. The new credit facilities provides us with increased flexibility to proactively manage our working capital and execute our long term strategy, maintain compliance with our debt financial covenants, lower cost of borrowing, and preserve financial liquidity to mitigate the impact of the uncertain business environment resulting from the COVID-19 pandemic, aswhile continuing to execute on key strategic initiatives. Also, we took additional cost saving actions to mitigate the ~~general public has self-quarantined~~financial impact to our

operating results due to the surge in ~~their residences~~COVID-19 cases during the latter part of our fiscal second quarter and ~~purchased more of their food and beverage items from retail and grocery outlets.~~earlier in the current fiscal third quarter.

The magnitude of the COVID-19 pandemic, including the extent of the ~~uncertain economic conditions resulting in~~ weaker demand for our products, our financial position, results of operations and liquidity, which could be material, ~~cannot be reasonably estimated at this time~~is still uncertain due to the rapid development and fluidity of the situation. It will be determined by the duration of the pandemic, its geographic spread, business disruptions and the overall impact on the global economy. Nevertheless, despite the uncertainty of the COVID-19 pandemic situation,While we expect our results of operations to be adversely affected for the remaining part of our fiscal year ending June 30, 2020, and at least the first half of our fiscal year ending June 30, 2021. However, we expectanticipate that ~~most of~~ our revenue will continue to recover slowly as ~~the~~ local and national governments ~~eases social distancing restrictions; but~~ease COVID-19 related restrictions, and vaccines are distributed throughout the country, there can be no assurance that we will be successful in returning to the pre COVID-19 pandemic levels of revenue or profitability. Accordingly, we expect that our results of operations will be adversely affected for our fiscal year ending June 30, 2021.

~~For other impacts of the COVID-19 pandemic, please see~~
~~Liquidity section and Risk Factors described in Part II, Item IA of this report.~~

Summary Overview of Three Months Ended March 31, ~~2020~~2021 Results of Operations

During the three months ended March 31, ~~2020,~~2021, we experienced sales declines in our DSD and direct ship sales channels compared to the prior year same period.

~~Similar to what we experienced in the past few quarters, our~~Our DSD network continued to be negatively impacted by higher customer attrition, partially offset by sales to new customers. In addition, our DSD sales network was negatively impacted by the sale of our office coffee business in July 2019 and the COVID-19 pandemic. The impact of the COVID-19 pandemic, ~~on DSD revenues in~~and to a lesser extent, net customer attrition. Similar to our fiscal first and second quarters, the last two weeks of March 2020 was approximately 65% to 70% decline from the pre–COVID pandemic sales run rates as the customer base had either limited operations, or had closed their doors in compliance with the federal, states and local governments restrictions on social distancing. The largest DSD revenue declines were from restaurants, hotels and casino ~~channels, while demand from healthcare and C-stores channels were impacted less.~~channels. Our direct ship channel sales were also impacted by lower coffee volumes due to COVID-19 pandemic, and changes in coffee prices for our cost plus customers ~~offset by slightly favorable customer mix shift.~~

During the three months ended March 31, ~~2020, despite~~2021, we experienced lower gross margin compared to the ~~decline in~~prior year quarter primarily due to lower volumes and the impact of COVID-19 on our DSD ~~volumes~~business. Gross margins decreased by 3.8% to 25.6% from ~~the COVID–19 pandemic, gross margins increased by 2.2% to~~ 29.4% ~~from 27.2%~~ compared to the same prior period mostly due to unfavorable customer mix since our DSD channel has higher margins. The gross margin decline was partially offset by lower freight costs, lower ~~CBE~~warehouse costs, ~~improved production variances~~ and lower ~~reserves for slow moving inventories.~~coffee brewing equipment (“CBE”) cost.

Operating expenses ~~increased by $37.1 million over~~decreased compared to the prior year quarter driven by ~~impairment of goodwill and intangible assets of $42.0 million, partially offset by a $2.5~~$9.2 million decrease in selling expenses, and the absence of a ~~$2.5~~$42.0 million ~~decrease in general and administrative expenses. Impairment~~ of goodwill and intangible assets impairment. This was partially offset by a $2.2 million increase in general and administrative expenses and a $0.2 million increase in net losses realized from sales of ~~$42.0 million~~assets. The increase in ~~the three months ended March 31, 2020,~~general and administrative expenses was primarily associated with the results of our annual impairment test as of January 31, 2020, adjusted further by the impact of the COVID-19 pandemic that had a negative impact on the fair value of our assets. Operating expenses benefited from a COVID-19 pandemic related one-time credit for employee incentive cost due to the reversal of ~~management~~the previously accrued employee incentive bonus ~~accrual, partially offset by~~in prior year when the pandemic first impacted our operating results in March 2020, and one-time costs associated with our supply chain optimization initiatives completed this quarter, that were incurred with the exiting of our Houston, Texas facility, and the opening and full ramp-up of our new west coast distribution facility in Rialto, California. Excluding this impact, general and administrative expenses have declined due to reductions in third party costs and reductions in headcount due to COVID-19. Overall, operating expenses benefited from cost savings actions taken due to COVID-19 pandemic, ~~related severance~~and other cost controls implemented over variable spending which have reduced payroll, freight, fleet and other variable costs ~~during~~due to the ~~three months ended March 31, 2020.~~

~~During the three months ended March 31, 2020, we completed the sale of two branch properties for an aggregate sale price of $1.6 million. Net cash proceeds from these assets~~lower sales ~~were $1.5 million. We recognized a net gain on these asset sales of $1.1 million during three months ended March 31, 2020. The proceeds from the sales gave us increased liquidity and flexibility.~~volumes.

Our capital expenditures for the nine months ended March 31, ~~2020~~2021 were ~~$13.1~~$12.8 million, representing lower maintenance capital spend of ~~$10.6~~$5.8 million, a ~~56.9%~~45.6% reduction compared to the prior year ~~period. These~~period, and various capital investment spending of $7.0 million. The spending reductions were driven by several key initiatives put in place, including a focus on refurbished CBE equipment to drive cost savings, and reductions ~~in purchase of machinery and equipment for~~across some capital categories due to additional cost controls implemented during the COVID-19 pandemic. The investment capital was primarily due to the key strategic optimization initiatives to increase the capacity at our Northlake, Texas plant, ~~expansion.~~to close the Houston, Texas plant, and open a new distribution center in Rialto, California. Each of these projects were completed in the current fiscal third quarter ended March 31, 2021.

As of March 31, ~~2020,~~2021, the outstanding debt on our revolver was ~~$80.0~~$88.0 million, ~~an increase of $10.0 million since December 31, 2019 and~~ a decrease of ~~$12.0~~$34.0 million since June 30, ~~2019. Additionally, our~~2020. Our cash ~~increased~~balance decreased by $51.5 million, from $60.0 million as of June 30, 2020, to ~~$26.4~~$8.5 million as of March 31, ~~2020, compared to $7.0 million as~~2021. These changes resulted from the repayments on our revolver under the terms of ~~June 30, 2019. These improvements~~the Amended Revolving Facility, now repaid. The net reduction in our liquidity ~~provide additional financial~~was due to our investment in inventory, capital expenditures to fund certain key growth initiatives noted above, and ~~operational flexibility during~~pension funding requirements that were previously deferred under the ~~COVID–19 pandemic.~~Coronavirus Aid, Relief, and Economic Security Act.

Results of Operations

Financial Data Highlights (in thousands, except per share data and percentages)


	Three Months Ended March 31,						Favorable (Unfavorable)					Nine Months Ended March 31,						Favorable (Unfavorable)						Three Months Ended March 31,						Favorable (Unfavorable)					Nine Months Ended March 31,						Favorable (Unfavorable)
	2020			2019			Change			% Change		2020			2019			Change			% Change			2021			2020			Change			% Change		2021			2020			Change			% Change
Income Statement Data:																							Income Statement Data:
Net sales	$	129,139		$	146,679		$	(17,540	)	(12.0	)%	$	420,237		$	453,892		$	(33,655	)	(7.4	)%	Net sales	$	93,152		$	129,139		$	(35,987)		(27.9)	%	$	294,993		$	420,237		$	(125,244)		(29.8)	%
Gross margin	29.4		%	27.2		%	2.2		%	NM		29.2		%	31.1		%	(1.9		)%	NM		Gross margin	25.6		%	29.4		%	(3.8)		%	NM		24.6		%	29.2		%	(4.6)		%	NM
Operating expenses as a % of sales	64.4		%	31.4		%	(33.0		)%	NM		36.2		%	32.8		%	(3.4		)%	NM		Operating expenses as a % of sales	36.8		%	64.4		%	27.6		%	NM		35.4		%	36.2		%	0.8		%	NM
Loss from operations	$	(45,169	)	$	(6,102	)	$	(39,067	)	NM		$	(29,407	)	$	(7,678	)	$	(21,729	)	NM		Loss from operations	$	(10,395)		$	(45,169)		$	34,774		NM		$	(32,004)		$	(29,407)		$	(2,597)		NM
Net loss	$	(39,777	)	$	(51,749	)	$	11,972		NM		$	(27,369	)	$	(64,835	)	$	37,466		57.8	%	Net loss	$	(13,684)		$	(39,777)		$	26,093		NM		$	(37,680)		$	(27,369)		$	(10,311)		NM
Net loss available to common stockholders per common share—basic	$	(2.32	)	$	(3.05	)	$	0.73		NM		$	(1.62	)	$	(3.84	)	$	2.22		NM		Net loss available to common stockholders per common share—basic	$	(0.78)		$	(2.32)		$	1.54		NM		$	(2.17)		$	(1.62)		$	(0.55)		NM
Net loss available to common stockholders per common share—diluted	$	(2.32	)	$	(3.05	)	$	0.73		NM		$	(1.62	)	$	(3.84	)	$	2.22		NM		Net loss available to common stockholders per common share—diluted	$	(0.78)		$	(2.32)		$	1.54		NM		$	(2.17)		$	(1.62)		$	(0.55)		NM

Operating Data:																							Operating Data:
Coffee pounds	25,678			27,873			(2,195		)	(7.9	)%	80,995			80,719			276			0.3	%	Coffee pounds	18,026			25,678			(7,652)			(29.8)	%	60,366			80,995			(20,629)			(25.5)	%
EBITDA(1)	$	(32,272	)	$	639		$	(32,911	)	NM		$	(1,980	)	$	2,109		$	(4,089	)	NM		EBITDA(1)	$	(4,800)		$	(32,272)		$	27,472		(85.1)	%	$	3,391		$	(1,980)		$	5,371		(271.3)	%
EBITDA Margin(1)	(25.0		)%	0.4		%	(25.4		)%	NM		(0.5		)%	0.5		%	(1.0		)%	NM		EBITDA Margin(1)	(5.2)		%	(25.0)		%	19.8		%	NM		1.1		%	(0.5)		%	1.6		%	NM
Adjusted EBITDA(1)	$	6,563		$	4,535		$	2,028		44.7	%	$	18,028		$	27,945		$	(9,917	)	(35.5	)%	Adjusted EBITDA(1)	$	(759)		$	6,563		$	(7,322)		(111.6)	%	$	13,207		$	18,028		$	(4,821)		(26.7)	%
Adjusted EBITDA Margin(1)	5.1		%	3.1		%	2.0		%	NM		4.3		%	6.2		%	(1.9		)%	NM		Adjusted EBITDA Margin(1)	(0.8)		%	5.1		%	(5.9)		%	NM		4.5		%	4.3		%	0.2		%	NM


Percentage of Total Net Sales By Product Category																							Percentage of Total Net Sales By Product Category
Coffee (Roasted)	65.3		%	63.5		%	1.8		%	2.8	%	63.7		%	63.4		%	0.3		%	0.5	%	Coffee (Roasted)	65.2		%	65.3		%	(0.1)		%	(0.2)	%	66.6		%	63.7		%	2.9		%	4.6	%
Coffee (Frozen Liquid)	5.5		%	5.6		%	(0.1		)%	(1.8	)%	5.6		%	5.8		%	(0.2		)%	(3.4	)%	Coffee (Frozen Liquid)	4.2		%	5.5		%	(1.3)		%	(23.6)	%	3.6		%	5.6		%	(2.0)		%	(35.7)	%
Tea (Iced & Hot)	5.2		%	5.7		%	(0.5		)%	(8.8	)%	5.2		%	5.7		%	(0.5		)%	(8.8	)%	Tea (Iced & Hot)	5.1		%	5.2		%	(0.1)		%	(1.9)	%	3.8		%	5.2		%	(1.4)		%	(26.9)	%
Culinary	9.9		%	11.0		%	(1.1		)%	(10.0	)%	10.1		%	10.8		%	(0.7		)%	(6.5	)%	Culinary	11.3		%	9.9		%	1.4		%	14.1	%	11.0		%	10.1		%	0.9		%	8.9	%
Spice	4.1		%	3.9		%	0.2		%	5.1	%	4.2		%	3.9		%	0.3		%	7.7	%	Spice	4.7		%	4.1		%	0.6		%	14.6	%	4.6		%	4.2		%	0.4		%	9.5	%
Other beverages(2)	9.5		%	9.8		%	(0.3		)%	(3.1	)%	10.1		%	9.9		%	0.2		%	2.0	%	Other beverages(2)	9.2		%	9.5		%	(0.3)		%	(3.2)	%	10.1		%	10.1		%	—		%	—	%
Other revenues(3)	—		%	—		%	—		%	NM		0.6		%	—		%	0.6		%	NM		Other revenues(3)	—		%	—		%	—		%	NM		—		%	0.6		%	(0.6)		%	NM
Net sales by product category	99.5		%	99.5		%	—		%	NM		99.5		%	99.5		%	(0.6		)%	NM		Net sales by product category	99.7		%	99.5		%	0.2		%	NM		99.7		%	99.5		%	0.8		%	NM
Fuel Surcharge	0.5		%	0.5		%	—		%	NM		0.5		%	0.5		%	—		%	NM		Fuel Surcharge	0.3		%	0.5		%	(0.2)		%	NM		0.3		%	0.5		%	(0.2)		%	NM
Total	100.0		%	100.0		%	—		%	NM		100.0		%	100.0		%	(0.6		)%	—	%	Total	100.0		%	100.0		%	—		%	—	%	100.0		%	100.0		%	—		%	—	%

Other data:																							Other data:
Capital expenditures related to maintenance	$	3,163		$	4,434		$	(1,271	)	(28.7	)%	$	10,622		$	17,001		$	(6,379	)	(37.5	)%	Capital expenditures related to maintenance	$	2,042		$	3,163		$	(1,121)		(35.4)	%	$	5,783		$	10,622		$	(4,839)		(45.6)	%
Total capital expenditures	$	4,107		$	7,273		$	(3,166	)	(43.5	)%	$	13,114		$	30,393		$	(17,279	)	(56.9	)%	Total capital expenditures	$	3,133		$	4,107		$	(974)		(23.7)	%	$	12,769		$	13,114		$	(345)		(2.6)	%
Depreciation and amortization expense	$	7,333		$	7,600		$	(267	)	(3.5	)%	$	22,544		$	23,230		$	(686	)	(3.0	)%	Depreciation and amortization expense	$	6,883		$	7,333		$	(450)		(6.1)	%	$	21,231		$	22,544		$	(1,313)		(5.8)	%

________________

NM - Not Meaningful

(1) EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. See “Non-GAAP Financial Measures” below for a reconciliation of these non-GAAP measures to their corresponding GAAP measures.

(2) Includes all beverages other than roasted coffee, frozen liquid coffee, and iced and hot tea, including cappuccino, cocoa, granitas, and concentrated and ready-to-drink cold brew and iced coffee.

(3) Represents revenues for certain transition services related to the sale of our office coffee assets.

The following table sets forth information regarding our condensed consolidated results of operations for the three and nine months ended March 31, ~~2020~~2021 and ~~2019~~2020 (in thousands, except percentages):


	Three Months Ended March 31,						Favorable (Unfavorable)					Nine Months Ended March 31,						Favorable (Unfavorable)						Three Months Ended March 31,				Favorable (Unfavorable)				Nine Months Ended March 31,				Favorable (Unfavorable)
	2020			2019			Change			% Change		2020			2019			Change			% Change			2021		2020		Change		% Change		2021		2020		Change		% Change
Net sales	$	129,139		$	146,679		$	(17,540	)	(12.0	)%	$	420,237		$	453,892		$	(33,655	)	(7.4	)%	Net sales	$	93,152	$	129,139	$	(35,987)	(27.9)	%	$	294,993	$	420,237	$	(125,244)	(29.8)	%
Cost of goods sold	91,190			106,779			15,589			14.6	%	297,662			312,513			14,851			4.8	%	Cost of goods sold	69,274		91,190		21,916		24.0	%	222,447		297,662		75,215		25.3	%
Gross profit	37,949			39,900			(1,951		)	(4.9	)%	122,575			141,379			(18,804		)	(13.3	)%	Gross profit	23,878		37,949		(14,071)		(37.1)	%	72,546		122,575		(50,029)		(40.8)	%

Selling expenses	31,968			34,422			2,454			7.1	%	100,488			111,323			10,835			9.7	%	Selling expenses	22,767		31,968		9,201		28.8	%	71,035		100,488		29,453		29.3	%
General and administrative expenses	8,833			11,306			2,473			21.9	%	32,839			32,063			(776		)	(2.4	)%	General and administrative expenses	11,018		8,833		(2,185)		(24.7)	%	32,334		32,839		505		1.5	%
Restructuring and other transition expenses	—			26			26			100.0	%	—			4,700			4,700			100.0	%

Net losses (gains) from sales of assets	287			248			(39		)	15.7	%	(23,375		)	971			24,346			NM		Net losses (gains) from sales of assets	488		287		(201)		70.0	%	(62)		(23,375)		(23,313)		NM
Impairment of goodwill and intangible assets	42,030			—			(42,030		)	—	%	42,030			—			(42,030		)	—	%	Impairment of goodwill and intangible assets	—		42,030		42,030		100.0	%	—		42,030		42,030		100.0	%
Impairment of fixed assets																							Impairment of fixed assets	—		—		—		—	%	1,243		—		(1,243)		—	%

Operating expenses	83,118			46,002			(37,116		)	(80.7	)%	151,982			149,057			(2,925		)	(2.0	)%	Operating expenses	34,273		83,118		48,845		58.8	%	104,550		151,982		47,432		31.2	%

Loss from operations	(45,169		)	(6,102		)	(39,067		)	NM		(29,407		)	(7,678		)	(21,729		)	(283.0	)%	Loss from operations	(10,395)		(45,169)		34,774		77.0	%	(32,004)		(29,407)		(2,597)		(8.8)	%
Other (expense) income:																							Other (expense) income:

Interest expense	(2,478		)	(2,981		)	503			16.9	%	(7,885		)	(9,165		)	1,280			14.0	%	Interest expense	(2,993)		(2,478)		(515)		(20.8)	%	(9,174)		(7,885)		(1,289)		(16.3)	%
Postretirement benefits curtailment and pension settlement charge	5,760			—			5,760			NM		5,760			(10,948		)	16,708			(152.6	)%	Postretirement benefits curtailment and pension settlement charge	—		5,760		(5,760)		NM		—		5,760		(5,760)		(100.0)	%
Other, net	1,076			495			581			117.4	%	2,941			2,105			836			39.7	%	Other, net	(356)		1,076		(1,432)		NM		17,283		2,941		14,342		NM
Total other income (expense)	4,358			(2,486		)	6,844			275.3	%	816			(18,008		)	18,824			(104.5	)%
Total other (expense) income																							Total other (expense) income	(3,349)		4,358		(7,707)		NM		8,109		816		7,293		NM
Loss before taxes	(40,811		)	(8,588		)	(32,223		)	(375.2	)%	(28,591		)	(25,686		)	(2,905		)	(11.3	)%	Loss before taxes	(13,744)		(40,811)		27,067		66.3	%	(23,895)		(28,591)		4,696		16.4	%
Income tax (benefit) expense	(1,034		)	43,161			44,195			(102.4	)%	(1,222		)	39,149			40,371			103.1	%	Income tax (benefit) expense	(60)		(1,034)		(974)		NM		13,785		(1,222)		(15,007)		NM
Net loss	$	(39,777	)	$	(51,749	)	11,972			23.1	%	$	(27,369	)	$	(64,835	)	37,466			57.8	%	Net loss	$	(13,684)	$	(39,777)	26,093		65.6	%	$	(37,680)	$	(27,369)	(10,311)		(37.7)	%
Less: Cumulative preferred dividends, undeclared and unpaid	139			134			(5		)	(3.7	)%	414			400			(14		)	(3.5	)%	Less: Cumulative preferred dividends, undeclared and unpaid	144		139		(5)		(3.6)	%	428		414		(14)		(3.4)	%
Net loss available to common stockholders	$	(39,916	)	$	(51,883	)	11,967			23.1	%	$	(27,783	)	$	(65,235	)	37,452			57.4	%	Net loss available to common stockholders	$	(13,828)	$	(39,916)	26,088		65.4	%	$	(38,108)	$	(27,783)	(10,325)		(37.2)	%

_____________

NM - Not Meaningful

Three and Nine Months Ended March 31, ~~2020~~2021 Compared to Three and Nine Months Ended March 31, ~~2019~~2020

Net Sales

The following table presents changes in units sold, unit price and net sales by product category in the three and nine months ended March 31, ~~2020~~2021 compared to the same periods in the prior fiscal year (in thousands, except unit price and percentages):


	Three Months Ended March 31,				Favorable (Unfavorable)					Nine Months Ended March 31,				Favorable (Unfavorable)						Three Months Ended March 31,				Favorable (Unfavorable)				Nine Months Ended March 31,				Favorable (Unfavorable)
	2020		2019		Change			% Change		2020		2019		Change			% Change			2021		2020		Change		% Change		2021		2020		Change		% Change
Units sold																			Units sold
Coffee (Roasted)	20,542		22,298		(1,756		)	(7.9	)%	64,796		64,575		221			0.3	%	Coffee (Roasted)	14,421		20,542		(6,121)		(29.8)	%	48,293		64,796		(16,503)		(25.5)	%
Coffee (Frozen Liquid)	83		101		(18		)	(17.8	)%	281		336		(55		)	(16.4	)%	Coffee (Frozen Liquid)	44		83		(39)		(47.0)	%	137		281		(144)		(51.2)	%
Tea (Iced & Hot)	650		740		(90		)	(12.2	)%	1,998		2,097		(99		)	(4.7	)%	Tea (Iced & Hot)	395		650		(255)		(39.2)	%	1,257		1,998		(741)		(37.1)	%
Culinary	1,584		1,986		(402		)	(20.2	)%	5,376		6,186		(810		)	(13.1	)%	Culinary	1,125		1,584		(459)		(29.0)	%	3,497		5,376		(1,879)		(35.0)	%
Spice	140		162		(22		)	(13.6	)%	479		552		(73		)	(13.2	)%	Spice	114		140		(26)		(18.6)	%	360		479		(119)		(24.8)	%
Other beverages(1)	828		1,100		(272		)	(24.7	)%	3,225		4,009		(784		)	(19.6	)%	Other beverages(1)	663		828		(165)		(19.9)	%	2,181		3,225		(1,044)		(32.4)	%
Total	23,827		26,387		(2,560		)	(9.7	)%	76,155		77,755		(1,600		)	(2.1	)%	Total	16,762		23,827		(7,065)		(29.7)	%	55,725		76,155		(20,430)		(26.8)	%

Unit Price																			Unit Price
Coffee (Roasted)	$	4.10	$	4.18	$	(0.08	)	(1.9	)%	$	4.16	$	4.46	$	(0.30	)	(6.7	)%	Coffee (Roasted)	$	4.21	$	4.10	$	0.11	2.7	%	$	4.07	$	4.16	$	(0.09)	(2.2)	%
Coffee (Frozen Liquid)	$	84.87	$	81.85	$	3.02		3.7	%	$	83.73	$	77.80	$	5.93		7.6	%	Coffee (Frozen Liquid)	$	88.41	$	84.87	$	3.54	4.2	%	$	76.72	$	83.73	$	(7.01)	(8.4)	%
Tea (Iced & Hot)	$	10.31	$	11.24	$	(0.93	)	(8.3	)%	$	11.00	$	12.34	$	(1.34	)	(10.9	)%	Tea (Iced & Hot)	$	11.96	$	10.31	$	1.65	16.0	%	$	8.95	$	11.00	$	(2.05)	(18.6)	%
Culinary	$	8.18	$	8.05	$	0.13		1.6	%	$	8.02	$	7.89	$	0.13		1.6	%	Culinary	$	9.38	$	8.18	$	1.20	14.7	%	$	9.29	$	8.02	$	1.27	15.8	%
Spice	$	37.59	$	35.39	$	2.20		6.2	%	$	36.73	$	32.42	$	4.31		13.3	%	Spice	$	38.72	$	37.59	$	1.13	3.0	%	$	37.29	$	36.73	$	0.56	1.5	%
Other beverages(1)	$	14.84	$	13.10	$	1.74		13.3	%	$	13.23	$	11.21	$	2.02		18.0	%	Other beverages(1)	$	12.87	$	14.84	$	(1.97)	(13.3)	%	$	13.77	$	13.23	$	0.54	4.1	%
Average unit price	$	5.40	$	5.53	$	(0.13	)	(2.4	)%	$	5.49	$	5.81	$	(0.32	)	(5.5	)%	Average unit price	$	5.54	$	5.40	$	0.14	2.6	%	$	5.28	$	5.49	$	(0.21)	(3.8)	%

Total Net Sales By Product Category(2)																			Total Net Sales By Product Category(2)
Coffee (Roasted)	$	84,300	$	93,211	$	(8,911	)	(9.6	)%	$	269,367	$	287,851	$	(18,484	)	(6.4	)%	Coffee (Roasted)	$	60,771	$	84,300	$	(23,529)	(27.9)	%	$	196,353	$	269,367	$	(73,014)	(27.1)	%
Coffee (Frozen Liquid)	7,044		8,267		(1,223		)	(14.8	)%	23,528		26,141		(2,613		)	(10.0	)%	Coffee (Frozen Liquid)	3,890		7,044		(3,154)		(44.8)	%	10,510		23,528		(13,018)		(55.3)	%
Tea (Iced & Hot)	6,701		8,320		(1,619		)	(19.5	)%	21,969		25,876		(3,907		)	(15.1	)%	Tea (Iced & Hot)	4,726		6,701		(1,975)		(29.5)	%	11,251		21,969		(10,718)		(48.8)	%
Culinary	12,954		15,990		(3,036		)	(19.0	)%	43,099		48,779		(5,680		)	(11.6	)%	Culinary	10,551		12,954		(2,403)		(18.6)	%	32,471		43,099		(10,628)		(24.7)	%
Spice	5,262		5,736		(474		)	(8.3	)%	17,594		17,895		(301		)	(1.7	)%	Spice	4,414		5,262		(848)		(16.1)	%	13,424		17,594		(4,170)		(23.7)	%
Other beverages(1)	12,290		14,405		(2,115		)	(14.7	)%	42,681		44,946		(2,265		)	(5.0	)%	Other beverages(1)	8,530		12,290		(3,760)		(30.6)	%	30,028		42,681		(12,653)		(29.6)	%

Net sales by product category	$	128,551	$	145,929	$	(17,378	)	(11.9	)%	$	418,238	$	451,488	$	(33,250	)	(7.4	)%	Net sales by product category	$	92,882	$	128,551	$	(35,669)	(27.7)	%	$	294,037	$	418,238	$	(124,201)	(29.7)	%
Fuel Surcharge	588		750		(162		)	(21.6	)%	1,999		2,404		(405		)	(16.8	)%	Fuel Surcharge	270		588		(318)		(54.1)	%	956		1,999		(1,043)		(52.2)	%
Total	$	129,139	$	146,679	$	(17,540	)	(12.0	)%	$	420,237	$	453,892	$	(33,655	)	(7.4	)%	Total	$	93,152	$	129,139	$	(35,987)	(27.9)	%	$	294,993	$	420,237	$	(125,244)	(29.8)	%

____________

(1) Includes all beverages other than roasted coffee, frozen liquid coffee, and iced and hot tea, including cappuccino, cocoa, granitas, and concentrated and ready-to-drink cold brew and iced coffee.

(2) Certain transition service revenues related to the sale of our office coffee assets are not separately presented. The amounts are included in each of the product categories.

Net sales in the three months ended March 31, ~~2020~~2021 decreased ~~$17.5~~$36.0 million, or ~~12.0%~~27.9%, to ~~$129.1~~$93.2 million from ~~$146.7~~$129.1 million in the three months ended March 31, ~~2019.~~2020. The decline in net sales was primarily due to a decline in revenues and volume of green coffee processed and sold, and other beverages, culinary, spice and tea products sold through our DSD network ~~a decrease in net sales from tea and culinary products,~~mostly impacted by COVID-19 pandemic, and the impact of changes in coffee prices for our cost plus customers. ~~Sales~~Our direct ship net sales in the three months ended March 31, 2021 included no material price increases to customers utilizing commodity-based pricing arrangements, where the changes in the green coffee commodity costs are passed on to the customer, as compared to $2.6 million in price decreases to customers utilizing such arrangements in the three months ended March 31, 2020.

Net sales in the nine months ended March 31, 2021 decreased $125.2 million, or 29.8%, to $295.0 million from $420.2 million in the nine months ended March 31, 2020. The decline in net sales was primarily due to a decline in revenues and volume of green coffee processed and sold, other beverages, culinary, spice and tea products all sold through our DSD network ~~were~~mostly impacted by ~~the sale of our office coffee business in July of 2019, net customer attrition~~COVID-19 pandemic and the impact of ~~the COVID-19 pandemic in the latter part of the quarter. Our direct ship sales declined slightly compared to the prior year period driven by lower coffee volumes and~~ changes in coffee prices for our cost plus ~~customers offset by slightly favorable customer mix shift. Net~~customers. Our direct ship net sales in the ~~three~~nine months ended March 31, ~~2020~~2021 included ~~$2.6~~$1.6 million in price decreases to customers utilizing commodity-based pricing arrangements, where the changes in the green coffee commodity costs are passed on to the customer, as compared to ~~$2.1~~$7.6 million in price decreases to customers utilizing such arrangements in the three months ended March 31, 2019. In the next quarter ending June 30, 2020, we expect a material decline in revenue due to the impact of the COVID-19 pandemic on our DSD customers.

Net sales in the nine months ended March 31, 2020 decreased $33.7 million, or 7.4%, to $420.2 million from $453.9 million in the nine months ended March 31, 2019. The decline in net sales was primarily due to a decline in revenues and volume of green coffee processed and sold through our DSD network, a decrease in net sales from tea and culinary products, unfavorable customer mix within our direct ship sales, non-recurring sales of industrial soup based products associated with the Boyd’s acquisition which we stopped selling last year, and the impact of changes in coffee prices for our cost plus customers. Sales through our DSD network were impacted by the sale of our office coffee business in July of 2019, higher customer attrition, impact of the COVID-19 pandemic in the latter part of March 2020 and lower inventory fill rates associated with downtime at our Houston plant during the earlier part of the current period. Net sales in the nine months ended March 31, 2020 included $7.6 million in price decreases to customers utilizing commodity-based pricing arrangements, where the changes in the green coffee commodity costs are passed on to the customer, as compared to $5.1 million in price decreases to customers utilizing such arrangements in the nine months ended March 31, ~~2019.~~

2020.

The following table presents the effect of changes in unit sales, unit pricing and product mix in the three and nine months ended March 31, ~~2020~~2021 compared to the same periods in the prior fiscal year (in millions):

Three Months Ended
March 31, 2020 vs. 2019 % of Total Mix Change Nine Months Ended
March 31,
2020 vs. 2019 % of Total Mix Change
Effect of change in unit sales $ (13.8 ) (78.9 )% $ (8.8 ) (26.1 )%
Effect of pricing and product mix changes (3.7 ) (21.1 )% (24.9 ) (73.9 )%
Total decrease in net sales $ (17.5 ) (100.0 )% $ (33.7 ) (100.0 )%


	Three Months Ended March 31, 2021 vs. 2020		% of Total Mix Change		Nine Months Ended March 31, 2021 vs. 2020		% of Total Mix Change
Effect of change in unit sales	$	(39.1)	(108.6)	%	$	(107.9)	(86.2)	%
Effect of pricing and product mix changes	3.2		8.6	%	(17.4)		(13.8)	%
Total decrease in net sales	$	(36.0)	(100.0)	%	$	(125.2)	(100.0)	%

Unit sales decreased ~~9.7%~~29.7% and average unit price ~~declined~~increased by ~~2.4%~~2.6% in the three months ended March 31, ~~2020~~2021 as compared to the same period in the prior fiscal year, resulting in a decrease in our net sales of ~~12.0%~~27.9%. Unit sales decreased ~~2.1%~~26.8% and average unit price ~~decreased~~declined by ~~5.5%~~3.8% in the nine months ended March 31, ~~2020~~2021 as compared to the same period in the prior fiscal year, resulting in a decrease in our net sales of ~~7.4%~~29.8%. Average unit price decreased during three and nine months ended March 31, ~~2020~~2021 due to a higher mix of product sold via direct ship versus DSD network, as direct ship has a lower average unit price. There were no new product category introductions which had a material impact on our net sales in the three and nine months ended March 31, ~~2020~~2021 or ~~2019, which had a material impact on our net sales.~~2020.

Gross Profit

Gross profit in the three months ended March 31, ~~2020~~2021 decreased ~~$2.0~~$14.1 million, or ~~4.9%~~37.1%, to ~~$37.9~~$23.9 million from ~~$39.9~~$37.9 million in the three months ended March 31, ~~2019.~~2020. Gross margin ~~increased~~decreased to 25.6% in the three months ended March 31, 2021 from 29.4% in the three months ended March 31, ~~2020 from 27.2% in the three months ended March 31, 2019.~~2020. Gross profit in the nine months ended March 31, ~~2020~~2021 decreased ~~$18.8~~$50.0 million, or ~~13.3%~~40.8%, to ~~$122.6~~$72.5 million from ~~$141.4~~$122.6 million in the nine months ended March 31, ~~2019.~~2020. Gross margin decreased to 24.6% in the nine months ended March 31, 2021 from 29.2% in the nine months ended March 31, ~~2020 from 31.1% in the nine ended March 31, 2019.~~2020.

The decrease in gross profit in ~~the~~ three and nine months ended March 31, ~~2020~~2021, was primarily driven by lower net sales of ~~$17.5~~$36.0 million and ~~$33.7~~$125.2 million, respectively, partially offset by lower costs of goods sold. Gross margin ~~for~~during the three ~~months~~

~~ended March 31, 2020 was positively impacted by lower freight costs, lower CBE costs, improved production variances~~ and ~~lower reserves for slow moving inventories. Gross margin during the~~ nine months ended March 31, ~~2020~~2021, was negatively impacted by the COVID-19 pandemic on DSD customers, higher production variances and unfavorable customer mix ~~and~~since our DSD channel has higher ~~reserves for slow moving inventories,~~margins, partially offset by lower freight costs, lower warehouse costs, lower CBE costs ~~improved production variances~~ and the impact of changes in coffee prices during the three and nine months ended March 31, ~~2020. In the next quarter ending June 30, 2020, we expect a material decline in our margin due to customer mix and the impact of the COVID-19 pandemic on DSD customers.~~2021.

Operating Expenses

In the three months ended March 31, ~~2020,~~2021, operating expenses ~~increased $37.1~~decreased $48.8 million or ~~80.7%,~~58.8% compared to prior year period at $34.3 million, or 36.8% of net sales, from $83.1 million, or 64.4% of net ~~sales, from $46.0 million, or 31.4% of net sales, in the three months ended March 31, 2019,~~sales. This was primarily due to ~~impairments of goodwill and intangible assets of $42.0 million, partially offset by~~ a ~~$2.5~~$9.2 million decrease in selling expenses and the absence of a ~~$2.5~~$42.0 million ~~decrease~~of goodwill and intangible assets impairment. This was partially offset by a $2.2 million increase in general and administrative ~~expenses.~~expenses and a $0.2 million increase in net losses realized from sales of asset.

The decrease in selling expenses was primarily driven by ~~efficiencies realized from DSD route optimization,~~reductions in headcount, lower DSD sales commissions, lower travel expenses and lower ~~travel expenses.~~ fleet and freight costs.

The ~~decrease~~increase in general and administrative expenses was due to the reversal of the previously accrued employee incentive bonus in prior year when the pandemic first impacted our operating results in March 2020, and one-time costs associated ~~primarily~~ with our supply chain optimization initiatives completed this quarter, that were incurred with the exiting of our Houston, Texas facility, and the opening and full ramp-up of our new west coast distribution facility in Rialto, California. Excluding this impact, general and administrative expenses have declined due to reductions in third party costs ~~the absence of Boyd Coffee integration costs~~ and ~~one-time credit for employee incentive cost~~reductions in headcount due to ~~the reversal of management incentive bonus accrual, partially offset by the COVID-19 pandemic related severance costs during the three months ended March 31, 2020.~~COVID-19.

Impairment of goodwill and intangible assets of $42.0 million in the three and nine months ended March 31, 2020, was primarily associated with our annual impairment test as of January 31, 2020, adjusted further by the impact of the COVID-19 pandemic that had a negative impact on the fair value of the assets. ~~See~~ ~~Note 9~~, ~~Goodwill and Intangible Assets, of the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.~~

In the nine months ended March 31, ~~2020,~~2021, operating expenses ~~increased $2.9~~decreased compared to prior year period at $104.6 million, or ~~2.0%, to~~35.4% of net sales, from $152.0 million, or 36.2% of net sales, ~~from $149.1 million, or 32.8% of net sales, in the nine months ended March 31, 2019, primarily~~ due to ~~impairment write-down~~a $29.5 million decrease in selling expenses, a $0.5 million decrease in general and administrative expenses and the absence of a $42.0 million of goodwill and intangible assets ~~of $42.0 million and a $0.8 million increase in general and administrative expenses, partially~~impairment. The decrease was offset by a ~~$24.3~~$23.3 million ~~increase~~decrease in net gains realized from sales of assets and a ~~$10.8~~$1.2 million ~~decrease in selling expenses and the absence~~ of ~~$4.7 million in restructuring and other transition expenses.~~fixed assets impairment.

The decrease in selling expenses was primarily ~~due to~~driven by reductions in headcount, ~~reductions, the conclusion of Boyd Coffee integration at the beginning of October 2018~~lower DSD sales commissions, lower travel expenses and ~~other efficiencies realized from DSD route optimization.~~lower fleet and freight costs. The ~~increase~~decrease in general and administrative expenses was associated primarily with ~~severance costs, employee incentive and benefit~~reductions in third party costs and ~~proxy contest expenses incurred during~~reductions in headcount due to the ~~nine months ended March 31, 2020.~~COVID-19 pandemic, partially offset by non recurring costs for severance and strategic initiatives.

~~Net~~The decrease in net gains from sales of assets ~~in the nine months ended March 31, 2020~~ were primarily ~~associated with~~due to the sales of two branch properties at a net gain of $1.2 million compared to the prior year sales of the Houston ~~Property,~~manufacturing facility, the office coffee assets and seven branch properties of $7.3 million, $7.2 million and ~~$12.3~~$12.1 million, respectively.

Total Other Income (Expense)

Total other income (expense) in the three months ended March 31, ~~2020~~2021 was $3.3 million of expense compared to $4.4 million of income ~~compared to $2.5 million of expense~~ in the three months ended March 31, ~~2019.~~2020. Total other ~~expense~~income (expense) in the nine months ended March 31, ~~2020~~2021 was ~~$0.8~~$8.1 million of income compared to ~~$18.0~~$0.8 million of ~~expense~~income in the nine months ended March 31, ~~2019.~~2020. The change in total other income (expense) in the three and nine months ended March 31, ~~2020~~2021 was primarily a result ~~of;~~of:

~~postretirement medical curtailment gains in the current period;~~

~~pension settlement charge in prior period;~~

~~reduced~~•higher employee postretirement benefit ~~gains;~~gains due to the plan curtailment;

~~lower interest expense; and~~

~~lower~~•higher net losses on coffee-related derivative instruments in the three ~~and~~months ended March 31, 2021;

•higher net gains on coffee-related derivative instruments in the nine months ended March 31, ~~2020.~~2021;

•partially offset by higher interest expense.

In March 2020, we announced the termination of our postretirement medical benefit plan effective January 1, 2021. The announcement triggered a re-measurement, and resulted in curtailment gains of $5.8 million

Interest expense in the three and nine months ended March 31, 2020. The pension settlement charge incurred in the nine months ended March 31, 2019 of $10.9 million was due to the termination of the Farmer Bros. Co. Pension Plan for Salaried Employees effective December 1, 2018.

~~Interest expense in the three months ended March 31, 2020 decreased~~2021 increased $0.5 million ~~to $2.5 million from $3.0 million in the prior year period. Interest expense in the nine months ended March 31, 2020 decreased~~and $1.3 million to $3.0 million and $9.2 million from $2.5 million and $7.9 million, ~~from $9.2 million~~respectively, in the prior year period. The ~~decrease~~increase in interest expense in the three and nine months ended March 31, ~~2020~~2021 was principally due to the write-off of deferred finance costs related to our debt amendment in July 2020 and the amortization of de-designated interest rate swap costs, partially offset by lower pension interest ~~expense and lower borrowings on our credit facility. This was partially offset in the nine months ended March 31, 2020 by a$0.4 million of realized loss from the partial unwinding of our interest rate swap notional amount from $80.0 million to $65.0 million.~~expense.

Other, net in the three months ended March 31, ~~2020~~2021 increased by ~~$0.6~~$1.4 million to ~~$1.1~~an expense of $0.4 million compared to ~~$0.5~~income of $1.1 million in the prior year period. Other, net in the nine months ended March 31, ~~2020~~2021 increased by ~~$0.8~~$14.3 million to ~~$2.9~~income of $17.3 million compared to ~~$2.1~~income of $2.9 million in the prior year period. The increase in expenses, Other, net, in the three months ended March 31, 2021, was primarily a result of lower amortized gains on our

terminated postretirement medical benefit plan, and higher mark-to-market net losses on coffee-related derivative instruments not designated as accounting ~~hedges~~hedges. The increase in income, Other, net, in the ~~three and~~ nine months ended March 31, ~~2020 compared same prior year period.~~

2021, was primarily a result of higher amortized gains on our terminated postretirement medical benefit plan and higher mark-to-market net gains on coffee-related derivative instruments not designated as accounting hedges.

Income Taxes

In the three and nine months ended March 31, ~~2020,~~2021, we recorded income tax benefit of $0.1 million and income tax expense $13.8 million, respectively, compared to income tax benefit of $1.0 million and $1.2 million, respectively, ~~compared to income expense of $43.2 million and $39.1 million~~ in the three and nine months ended March 31, ~~2019, respectively.~~2020. The income tax expense in the nine months ended March 31, 2021 included $13.5 million of previously deferred non-cash tax expense in accumulated other comprehensive income associated with gains on the postretirement medical plan in prior years. Upon termination of this plan on December 31, 2020, the deferred non-cash tax expense was recognized in net income in the second quarter of fiscal 2021. The income tax benefit isin the three months ended March 31, 2021, and the three and nine months ended March 31, 2020, respectively, were primarily ~~due to the~~driven by change in previously recorded valuation allowance and change in our estimated deferred tax ~~liability during the three and nine months ended March 31, 2020 as compared to the prior year period.~~liability. See Note 16, Income Taxes, of the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

Non-GAAP Financial Measures

In addition to net (loss) income determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we use the following non-GAAP financial measures in assessing our operating performance:

“EBITDA” is defined as net (loss) income excluding the impact of:

•income taxes;

•interest expense; and

•depreciation and amortization expense.

“EBITDA Margin” is defined as EBITDA expressed as a percentage of net sales.

“Adjusted EBITDA” is defined as net (loss) income excluding the impact of:

•income taxes;

•interest ~~expense;~~expense (benefit);

•(loss) income from short-term investments;

•depreciation and amortization expense;

•ESOP and share-based compensation expense;

•non-cash impairment losses;

•non-cash pension withdrawal expense;

•restructuring and other transition expenses;

•severance costs;

•proxy ~~related~~contest-related expenses;

•non-recurring costs associated with the COVID-19 ~~pandemic;~~pandemic and 2021 severe winter weather;

•net gains and losses from sales of assets;

•non-cash pension settlements and postretirement ~~benefits;~~benefits curtailment; and

•acquisition, integration and ~~integration~~strategic initiative costs.

“Adjusted EBITDA Margin” is defined as Adjusted EBITDA expressed as a percentage of net sales.

Restructuring and other transition expenses are expenses that are directly attributable 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.

For purposes of calculating EBITDA and EBITDA Margin and Adjusted EBITDA and Adjusted EBITDA Margin, we have excluded the impact of interest expense resulting from the adoption of ASU 2017-07, non-cash pretax pension and postretirement benefits resulting from the amendment and termination of ~~the~~certain Farmer Bros. pension and postretirement benefits plans and severance because these items are not reflective of our ongoing operating results.

We believe these non-GAAP financial measures provide a useful measure of the Company’s 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 addition to GAAP measures, when evaluating and comparing the Company’s operating performance against internal financial forecasts and budgets.

We believe that EBITDA facilitates operating performance comparisons from period to period by isolating the effects of certain items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. These potential differences may be caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense). We also present EBITDA and EBITDA Margin because (i) we believe that these measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry, (ii) we believe that investors will find these measures useful in assessing

our ability to service or incur indebtedness, and (iii) we use these measures internally as benchmarks to compare our performance to that of our competitors.

EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin, as defined by us, may not be comparable 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.

Set forth below is a reconciliation of reported net income (loss) to EBITDA (unaudited):


	Three Months Ended March 31,						Nine Months Ended March 31,
(In thousands)	2021			2020			2021			2020
Net (loss) income, as reported	$	(13,684)		$	(39,777)		$	(37,680)		$	(27,369)
Income tax (benefit) expense	(60)			(1,034)			13,785			(1,222)
Interest expense (1)	2,061			1,206			6,055			4,067
Depreciation and amortization expense	6,883			7,333			21,231			22,544
EBITDA	$	(4,800)		$	(32,272)		$	3,391		$	(1,980)
EBITDA Margin	(5.2)		%	(25.0)		%	1.1		%	(0.5)		%

____________

(1) Excludes interest expense related to pension plans and postretirement benefits.

Set forth below is a reconciliation of reported net income (loss) to Adjusted EBITDA (unaudited):


	Three Months Ended March 31,						Nine Months Ended March 31,
(In thousands)	2021			2020			2021			2020
Net (loss) income, as reported	$	(13,684)		$	(39,777)		$	(37,680)		$	(27,369)
Income tax (benefit) expense	(60)			(1,034)			13,785			(1,222)
Interest expense(1)	2,061			1,206			6,055			4,067
Depreciation and amortization expense	6,883			7,333			21,231			22,544
ESOP and share-based compensation expense	1,611			1,418			3,561			3,197

Weather-related event - 2021 severe winter weather	109			—			109			—
Strategic initiatives (2)	1,593			—			3,268			—
Net losses (gains) from sales of other assets	488			287			(62)			(23,375)
Impairment of goodwill and intangible assets	—			42,030			—			42,030
Impairment of fixed assets	—			—			1,243			—
Non-recurring costs associated with the COVID-19 pandemic	40			129			300			129
Proxy contest-related expenses	—			204			—			463

Postretirement benefits curtailment and pension settlement charge	—			(5,760)			—			(5,760)
Severance	200			527			1,397			3,324
Adjusted EBITDA(3)	$	(759)		$	6,563		$	13,207		$	18,028
Adjusted EBITDA Margin	(0.8)		%	5.1		%	4.5		%	4.3		%

Three Months Ended March 31, Nine Months Ended March 31,
(In thousands) 2020 2019 2020 2019
Net loss, as reported $ (39,777 ) $ (51,749 ) $ (27,369 ) $ (64,835 )
Income tax (benefit) expense (1,034 ) 43,161
(1,222 ) 39,149
Interest expense(1) 1,206
1,627
4,067
4,565
Depreciation and amortization expense 7,333
7,600
22,544
23,230
ESOP and share-based compensation expense 1,418
1,238
3,197
3,095
Restructuring and other transition expenses(2) —
26
—
4,700
Net losses (gains) from sales of other assets 287
248
(23,375 ) 971
Impairment of goodwill and intangible assets 42,030
—
42,030
—
Non-recurring costs associated with the COVID-19 pandemic 129
—
129
—
Proxy contest-related expenses 204
—
463
—
Acquisition and integration costs —
2,384
—
6,122
Postretirement benefits curtailment and pension settlement charge (5,760 ) —
(5,760 ) 10,948
Severance 527
—
3,324
—
Adjusted EBITDA $ 6,563
$ 4,535
$ 18,028
$ 27,945
Adjusted EBITDA Margin 5.1 % 3.1 % 4.3 % 6.2 %

____________

(1) Excludes interest expense related to pension plans and postretirement benefits.

(2) ~~The~~Includes initiatives related to the Houston facility exit and opening of the Rialto distribution center.

(3) Adjusted EBITDA for the three and nine months ended March 31, ~~2019,~~2021 includes ~~$3.4~~$7.2 million ~~including interest, assessed by~~and $14.4 million, respectively, of higher amortized gains resulting from the ~~WC Pension Trust representing the Company’s share~~curtailment of the ~~Western Conference of Teamsters Pension Plan ("WCTPP") unfunded benefits due to~~postretirement medical plan in March 2020. These higher gains continued until the ~~Company’s partial withdrawal from the WCTPP as a result of employment actions taken by the Company in 2016 in connection with the Corporate Relocation Plan.~~plan sunset on December 31, 2020. See Note 10 for details.

Liquidity, Capital Resources and Financial Condition

The following table summarizes our debt obligations:

March 31, 2021

June 30, 2020

(In thousands)

Debt Origination Date

Maturity

Original Borrowing Amount

Carrying Value

Weighted Average Interest Rate

Carrying Value

Weighted Average Interest Rate

Credit Facility

various

11/6/2023

N/A

88,000

6.41

122,000

4.91

~~Revolving~~ Credit Facility

~~In March~~On July 23, 2020 (the "Effective Date"), pursuant to Amendment No. 23 to Amended and Restated Credit Agreement (the ~~“Second~~“Third Amendment”) we, the Company amended ~~our~~its existing senior secured revolving credit facility (such facility as amended to date, including pursuant to the ~~Second~~Third Amendment, the “Amended Revolving Facility”) with ~~Bank~~certain financial institutions. The Third Amendment, among other things (as described in more detail in Note 11, Debt Obligations, of ~~America, N.A, Citibank, N.A., JPMorgan Chase Bank, N.A., PNC Bank, National Association, Regions Bank, and SunTrust Bank. The~~the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q) retained the amount of revolving commitments under the Amended Revolving Facility ~~amongst other things (described in more detail above) decreased the size~~ of ~~the revolving credit facility to~~ $125.0 million ~~from $150.0 million but retained most of its previous terms including~~and the sublimit on letters of credit and swingline loans of $15.0 million each. The ~~commitment fee is based on a leverage grid and ranges from 0.20% to 0.50%. Borrowings under the~~ Amended Revolving Facility ~~bear interest~~has no scheduled payback required on ~~base rate loans based~~the principal prior to the maturity date on ~~a leverage grid with a range of PRIME + 0.50% to 2.50%, and on Eurodollar loans based on a leverage grid with a range of Adjusted LIBO Rate + 1.50% to 3.50%.~~ November 6, 2023.

Effective March 27, 2019, we entered into an interest rate swap to manage our interest rate risk on our floating-rate indebtedness. See Note 4 for details.

~~Under~~On April 26, 2021, we repaid in full all of the outstanding loans and other amounts payable under the Amended ~~Revolving Facility, we are subject~~and Restated Credit Agreement, using proceeds of loans received pursuant to a ~~variety~~refinancing under a new senior secured facility composed of a Revolver Credit Facility Agreement and a Term Credit Facility Agreement (collectively, the “Credit Facilities”), as described in more detail in Note 1 1, Debt Obligations, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

The revolver under the Credit Facilities has a commitment of up to $80.0 million and a maturity date of April 25, 2025. Availability under the revolver is calculated as the lesser of (a) $80.0 million and (b) the amount derived from pursuant to a borrowing base composed of the sum of (i) 85%of eligible accounts receivable (less a dilution reserve), plus (ii) the lesser of: (a) 80% of eligible raw material inventory, eligible in-transit inventory and eligible finished goods inventory (collectively, “Eligible Inventory”), and (b) 85% of the net orderly liquidation value (“NOLV”) of eligible inventory, minus (c) applicable reserve. The term loan under the Credit Facilities has a total commitment of $47.5 million and a maturity date of April 25, 2025.

The Credit Facilities contain customary affirmative and negative covenants and restrictions (see Note 11 for details) typical for a financing of ~~types customary~~this type. Non-compliance with one or more of the covenants and restrictions could result in ~~a senior secured lending facility, including~~the full or partial principal balance of the Credit Facilities becoming immediately due and payable and termination of the commitments.

In connection with the Credit Facilities, we also executed an ISDA agreement to transfer our interest swap to Wells Fargo under substantially the same terms. See Note 11 for details.

The Credit Facilities provides us with increased flexibility to proactively manage our liquidity and working capital, while maintaining compliance with our debt financial covenants, ~~relating~~and preserving financial liquidity to ~~leverage, interest expense coverage and (until~~mitigate the quarter ending December 31, 2021) minimum adjusted EBITDA. We are allowed to pay dividends, provided, among other things, a total net leverage ratio is met, and no default exists or has occurred and is continuing asimpact of the ~~date of any such payment~~uncertain business environment resulting from the COVID-19 pandemic and ~~after giving effect thereto. The Amended Revolving Facility has no scheduled payback required~~continue to execute on ~~the principal prior to the maturity date on November 6, 2023.~~key strategic initiatives.

At April ~~30, 2020,~~26, 2021, we had outstanding borrowings of ~~$122.0~~$96.1 million and we had unrestricted cash of $8.2 million and ~~utilized $2.3~~$23.2 million of availability under our Credit Facilities. We also had restricted cash on hand of an additional $4.5 million used to collateralize our letters of credit on the Amended Revolving Facility until we issue the letters of credit ~~sublimit under~~on the Amended Revolving Facility. The amount available to borrow is subject to compliance with the applicable financial covenants set out under the Amended Revolving Facility (described in more detail below).Credit Facilities.

Liquidity

We generally finance our operations through cash flows from operations and borrowings under our ~~Amended Revolving facility~~Credit Facilities described above. In fiscal 2018, we filed 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 any of the foregoing securities, in one or more series, from time to time and in one or more offerings up to a total dollar amount of $250.0 million. In light of our financial position, operating performance and current economic conditions, including the state 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~~securities. We believe that the Credit Facilities, to the extent available, in addition to our ~~effective shelf registration statement or otherwise~~cash flows from operations, collectively, will be sufficient to fund our working capital and capital expenditure requirements for the next 12 months.

~~The Amended Revolving Facility includes financial covenants with respect to leverage and interest expense that are tested each fiscal quarter. The ratio~~As of consolidated total indebtedness (net of unrestricted cash up to $7.5 million) to adjusted EBITDA (as defined in the Amended Revolving Facility) must not exceed 4.0 to 1.0 at June 30, 2020, 4.75 to 1.0 at September 30, 2020, 5.25 to 1.0 at December 31, 2020, 5.75 to 1.0 at March 31, 2021, ~~5.25 to 1.0 at June 30,~~as a result of the foregoing Credit Facilities described above, we were in compliance with all of the covenants under our credit facility agreement. No event of default has occurred or existed through May 6, 2021, ~~4.75 to 1.0 at September 30, 2021, 4.25 to 1.0 at December~~the date we filed our fiscal third quarter ended March 31, 2021 Form 10-Q, and ~~3.5 to 1.0 thereafter. Additionally,~~through the Amended Revolving Facility requires that, as at each fiscal quarter end commencing June 30, 2020 and ending December 31, 2021, adjusted EBITDA (as defined in the Amended Revolving Facility) must not be less than the applicable amount set out in the Amended Revolving Facility. The ratio of adjusted EBITDA (as defined in the Amended Revolving Facility) to consolidated interest expense must not be less than 3.0 to 1.0.

Credit Facilities agreement effective date.

At March 31, ~~2020,~~2021, we had ~~$26.4~~$8.5 million in cash and cash equivalents and none of the cash in our coffee-related derivative margin accounts was restricted.

Impact of COVID-19 on Our Liquidity

As of March 31, 2020, were in compliance with our covenants under the Amended Revolving Facility. In April 2020, we borrowed an additional $42.0 million under our Amended Revolving Facility. We increased our borrowings as a proactive measure to increase our cash position and preserve financial flexibility in light of the current uncertainty in the global markets resulting from the COVID-19 pandemic. However, our liquidity position continues to deteriorate as our revenues from operating activities decline due to the impacts from the COVID-19 pandemic.

~~This~~The COVID-19 pandemic and related restrictive measures such as travel bans, quarantines, ~~shelter-in-place orders,~~ and shutdowns as well as changes in ~~recent~~ consumer behavior, have had an adverse impact on certain of our DSD customers, particularly restaurants, hotels, casinos and coffeehouses. ~~Many~~As local governments across the country ease COVID-19 restrictions, and vaccines are distributed and rolled out successfully, we continue to see improved trends with average weekly sales during the quarter ended March 31, 2021 down 36% compared to pre-COVID levels. Currently, during the month of ~~these customers have been forced to close or curtail operations, and~~April 2021, our average weekly DSD sales are ~~purchasing at reduced volumes, if at all. We~~now down approximately 27% from pre-COVID levels. However, we are unable to predict the rate at which ~~these~~our customers will resume ~~operations and~~ purchases as the restrictive measures are lifted.

As a result, sales from our DSD customers have declined between 65% to 70% from pre COVID-19 average sales. We do not expect to see a meaningful improvement in our operating results until federal, state and local government authorities ease the restrictive measures.

Due to these factors, the degree to which the COVID-19 pandemic impacts our results will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the pandemic or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume, as well as our effectiveness on serving our customer base and acquiring new customers. Therefore, with the uncertainty around the duration and breadth of the COVID-19 pandemic, the ultimate impact on our business, financial condition or operating results cannot be reasonably estimated at this time.

Absent a significant recovery and our ability to successfully scale operations and production accordingly, we are projecting potential violations of our financial covenants under the Amended Revolving Facility as of June 30, 2020, which would place us in an event of default. The occurrence of a default would permit our lenders to declare as due all amounts outstanding under our Amended Credit Facility which total $122.0 million as of May 7, 2020. We do not have sufficient cash on hand or available liquidity that can be utilized to repay the total outstanding debt in the event of a default. In addition, the occurrence of a default could cause cross defaults and accelerations under our other indebtedness.

~~Due to these factors,~~previously disclosed, we have modified our business ~~practices. To navigate through this period~~practices due to the impact of ~~uncertainty, we have~~COVID-19 pandemic on our operating results. These included, reduced discretionary expenses, aggressively reduced certain 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 be focused on the rebalancing of volume across our manufacturing network, bringing additional production into our Northlake, Texas facility to generate additional savings. ~~Among others things, we have already taken~~

In addition to the ~~following actions:~~

~~reduced headcount and furloughed a significant percentage of the remaining employees;~~

~~eliminated fiscal third quarter 2020 cash compensation for our Board of Directors;~~

~~temporarily decreased executive leadership, corporate team members’ and all exempt employees’ (except route sales representatives) base salaries by 15%;~~

~~reduced discretionary spending, including a moratorium on all travel;~~

~~reduced fiscal year ending 2020 management incentive bonus program;~~

~~reduced plant production~~ costs ~~in two of our plants;~~

~~suspended 401(k) cash matching for all eligible employees;~~

~~reduced capital expenditures while also closely managing inventory and other spending;~~

~~implemented cost controls throughout our coffee brewing equipment (“CBE”) program service network;~~

~~instituted cost savings~~saving initiatives to reduce ~~our selling, general and administrative expenses;~~

~~reduced our DSD supply chain network costs by reducing freight, and fleet, and consolidating routes; and~~

~~commenced negotiations with certain landlords on rent,~~ operating expenses and ~~leases.~~capital expenditures, we have also repaid our existing senior secured revolving credit facility, and executed new credit facilities. The Credit Facilities agreement, as described above, provides us with increased flexibility to proactively manage our working capital and execute our long term strategy, maintain compliance with our debt financial covenants, lower cost of borrowing, and preserve financial liquidity to mitigate the impact of the uncertain business environment resulting from the COVID-19 pandemic, while continuing to execute on key strategic initiatives.

~~We expect these~~These actions ~~will improve~~have improved our cost structure ~~to mitigate~~and helped in mitigating the impact of the COVID-19 pandemic on our operating results and ~~liquidity,~~liquidity; however we cannot make assurances that these actions will continue to be successful. ~~Absent other actions, we would likely default under our Amended Revolving Facility as discussed above. As a result, we are exploring several different~~

~~opportunities and access to various capital markets to provide additional near-term liquidity. These options, among others, include:~~

~~apply for the Main Street Lending program~~The magnitude of the ~~CARES Act;~~

~~unlock~~COVID-19 pandemic, including the extent of the weaker demand for our products, our financial position, results of operations and liquidity, which could be material, is still uncertain due to the rapid development and fluidity of ~~certain of~~the situation. While we anticipate that our ~~real estate assets through sale leaseback or sale of excess real estate;~~

~~seek additional financing in the debt or equity markets; or~~

~~refinance or restructure all or a portion of our indebtedness.~~

We are currently pursuing with our lenders a waiver agreement or forbearance arrangement related to projected covenant violations under our Amended Revolving Facility. We obtained an amendment from our lenders in March 2020, and based on the current debt market environment and other factors, management believes that a waiver or forbearancerevenue will be approved to avoid acceleration of our debt. We believe one or more of these options, along with the actions already taken to modify our business practices and reduce costs, will provide us the liquidity and flexibility we need to continue to ~~operate~~recover slowly as local and ~~meet our obligations as they come due for~~national governments ease COVID-19 related restrictions, and vaccines are distributed throughout the ~~next 12 months. However,~~country, there can be no assurance that we will be ~~able~~successful in returning to ~~execute on one~~the pre-COVID-19 pandemic levels of revenue or ~~more of the above options,~~profitability. Accordingly, we expect that our ~~cost saving measures~~results of operations will be ~~effective or that we will be able to avoid a breach of the covenants in~~adversely affected for our ~~Amended Revolving Facility and related event of default and acceleration of our debt.~~fiscal year ending June 30, 2021.

Cash Flows

The significant captions and amounts from our condensed consolidated statements of cash flows are summarized below:

Nine Months Ended March 31,
2020 2019
Condensed Consolidated Statements of cash flows data (in thousands)
Net cash provided by operating activities $ 8,065
$ 7,500
Net cash provided (used) in investing activities 23,619
(30,250 )
Net cash (used) provided by financing activities (12,278 ) 32,506
Net increase in cash and cash equivalents $ 19,406
$ 9,756


	Nine Months Ended March 31,
	2021		2020
Condensed Consolidated Statements of cash flows data (in thousands)
Net cash (used) provided by operating activities	$	(3,488)	$	8,065
Net cash (used) provided in investing activities	(10,787)		23,619
Net cash used by financing activities	(37,264)		(12,278)
Net (decrease) increase in cash and cash equivalents	$	(51,539)	$	19,406

Operating Activities

Net cash ~~provided by~~used in operating activities ~~were~~during the nine months ended March 31, 2021 was $3.5 million as compared to net cash provided of $8.1 million ~~and $7.5 million, respectively,~~ in the nine months ended March 31, ~~2020 and 2019.~~2020. The ~~$0.6~~$11.6 million increase in net cash ~~provided~~used in operating activities was primarily attributable to ~~a lower use of cash for working capital during the current fiscal period. Working capital during the nine months ended March 31, 2020 was impacted by, among other items, lower inventory levels~~declines in revenues and ~~improvement in trade accounts receivable collections,~~related net income, partially offset by ~~a decline in outstanding accounts payable balance.~~better working capital management.

Investing Activities

Net cash ~~provided~~used by investing activities during the nine months ended March 31, ~~2020~~2021 was ~~$23.6~~$10.8 million as compared to net cash ~~used~~provided of ~~$30.3~~$23.6 million in the nine months ended March 31, ~~2019.~~2020. The ~~$53.9 million increase~~decrease in cash provided ~~from~~by investment activities was principally due to net cash proceeds from the ~~sales~~sale of assets during the ~~current period resulting in net cash proceeds~~nine months ended March 31, 2020 of $36.7 ~~million. In addition, cash used for purchases of property, plant and equipment decreased $17.3~~ million ~~primarily due purchase of machinery and equipment for the Northlake, Texas plant expansion in fiscal 2019, and lower coffee brewing equipment purchases~~as compared to $2.0 million in the current ~~year period~~period. Our capital expenditures for the nine months ended March 31, 2021 represented lower maintenance capital spend as we focus on refurbished CBE equipment to drive cost ~~savings.~~savings, offset by growth investment capital spend.

Financing Activities

Net cash used in financing activities during the nine months ended March 31, 2021 increased $25.0 million as compared to the nine months ended March 31, 2020. The increase in net cash used in financing activities in the current period, is primarily due to $34.0 million in net payments under the Amended Revolving Facility, compared to $12.0 million in net payments in the prior period. The $34.0 million in net payments in the nine months ended March 31, ~~2020~~2021, was ~~$12.3 million as compared~~due to ~~net cash provided of $32.5 million in~~compliance with the ~~nine months ended March 31, 2019, a change of $44.8 million. Net cash used in financing activities in~~anti-cash hoarding provision under the ~~nine months ended March 31, 2020 included $12.0 million in net payments under our~~Amended Revolving Facility, ~~compared to $33.2 million in net borrowings in~~now repaid, as well as financing costs associated with the ~~nine months ended March 31, 2019.~~Third Amendment.

Capital Expenditures

For the three ~~and nine~~ months ended March 31, ~~2020~~2021 and ~~2019,~~2020, our capital expenditures paid were as follows:


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	2021		2020		2021		2020
Maintenance:
Coffee brewing equipment	$	1,578	$	2,159	$	4,430	$	6,294
Building and facilities	—		—		45		133
Vehicles, machinery and equipment	150		408		378		1,444
IT, software, office furniture and equipment	314		596		930		2,751

Capital expenditures, maintenance	$	2,042	$	3,163	$	5,783	$	10,622

Expansion Project:
Machinery and equipment	$	481	$	828	$	5,251	$	2,376
IT equipment	$	50	$	116	$	755	$	116
Capital expenditures, Expansion Project	$	531	$	944	$	6,006	$	2,492

New Facility Costs
Building and facilities, including land	560		—		980		—


Capital expenditures, New Facility	$	560	$	—	$	980	$	—

Total capital expenditures	$	3,133	$	4,107	$	12,769	$	13,114

Three Months Ended March 31, Nine Months Ended March 31,
(In thousands) 2020 2019 2020 2019
Maintenance:
Coffee brewing equipment $ 2,159
$ 3,538
$ 6,294
$ 12,460
Building and facilities —
35
133
50
Vehicles, machinery and equipment 408
464
1,444
2,187
IT, software, office furniture and equipment 596
397
2,751
2,304
Capital expenditures, maintenance $ 3,163
$ 4,434
$ 10,622
$ 17,001

Expansion Project:
Machinery and equipment $ 828
$ 2,839
$ 2,376
$ 13,392
IT equipment $ 116
$ —
$ 116
$ —
Capital expenditures, Expansion Project $ 944
$ 2,839
$ 2,492
$ 13,392

Total capital expenditures $ 4,107
$ 7,273
$ 13,114
$ 30,393

In fiscal year ~~2020,~~2021, we anticipate paying between ~~$11.0~~$8.0 million to ~~$14.0~~$11.0 million in maintenance capital expenditures. We expect to finance these expenditures through cash flows from operations and borrowings under our ~~Revolving Facility.~~credit facilities.

Depreciation and amortization expenses were ~~$7.3~~$6.9 million and ~~$7.6~~$7.3 million in the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Depreciation and amortization ~~expense~~expenses were ~~$22.5~~$21.2 million and ~~$23.2~~$22.5 million in the nine months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. We anticipate our depreciation and amortization expense will be approximately ~~$7.2~~$6.8 million to ~~$7.5~~$7.3 million per quarter in the remainder of fiscal year ~~2020~~2021 based on our existing fixed asset commitments and the useful lives of our intangible assets.

Commitments and Contingencies

As of March 31, ~~2020,~~2021, we had committed to purchase green coffee inventory totaling ~~$61.2~~$38.3 million under fixed-price contracts, ~~$4.5~~$7.9 million in other inventory under non-cancelable purchase orders and ~~$7.2~~$4.4 million in other purchases under non-cancelable purchase orders.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with GAAP. In applying many of these accounting principles, we need to make assumptions, estimates or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates or judgments, however, are both subjective and subject to change, and actual results may differ from our assumptions and estimates. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. For a summary of our significant accounting policies, see Note 2, Summary of Significant Accounting Policies, of the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this report and in our ~~2019~~2020 Form 10-K. For a summary of our critical accounting estimates, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates" in our ~~2019~~2020 Form 10-K.

Recent Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, of the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this report and in our ~~2019~~2020 Form 10-K. For a summary of our critical accounting estimates, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates" in our ~~2019~~2020 Form 10-K.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.



Item 3.			Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

At March 31, ~~2020,~~2021, under our ~~amended credit facility,~~Amended Revolving Facility, we were eligible to borrow up to a total of $125.0 million, subject to compliance with applicable financial covenants ~~under the Amended Revolving Facility as described above~~ and had outstanding borrowings of ~~$80.0~~$88.0 million and utilized ~~$2.3~~$4.3 million of the letters of credit sublimit. As a result of the interest rate swap, only ~~$15.0~~$23.0 million was subject to interest rate variability. The weighted average interest rate on our outstanding borrowings subject to interest rate variability under the Amended Revolving Facility at March 31, ~~2020~~2021 was ~~4.45%~~6.41%.

The following table demonstrates the impact of interest rate changes on our annual interest expense on outstanding borrowings subject to interest rate variability under the Amended Revolving Facility based on the weighted average interest rate on the outstanding borrowings as of March 31, ~~2020:~~2021:


(In thousands)	Principal	Interest Rate		Annual Interest Expense
–150 basis points	$23,000	4.91	%	$	1,129
–100 basis points	$23,000	5.41	%	$	1,244
Unchanged	$23,000	6.41	%	$	1,474
+100 basis points	$23,000	7.41	%	$	1,704
+150 basis points	$23,000	7.91	%	$	1,819

(In thousands) Principal Interest Rate Annual Interest Expense
–150 basis points $15,000 2.95 % $ 443
–100 basis points $15,000 3.45 % $ 518
Unchanged $15,000 4.45 % $ 668
+100 basis points $15,000 5.45 % $ 818
+150 basis points $15,000 5.95 % $ 893

Commodity Price Risk

We are exposed to commodity price risk arising from changes in the market price of green coffee. We value green coffee inventory on the FIFO basis. In the normal course of business we hold a large green coffee inventory and enter into forward commodity purchase agreements with suppliers. We are subject to price risk resulting from the volatility of green coffee prices. Due to competition and market conditions, volatile price increases cannot always be passed on to our customers. See Note 4, Derivative Instruments, of the Notes to the Unaudited Condensed Consolidated Financial Statements for further discussions of our derivative instruments.

The following table summarizes the potential impact as of March 31, ~~2020~~2021 to net loss and AOCI from a hypothetical 10% change in coffee commodity prices. The information provided below relates only to the coffee-related derivative instruments and does not include, when applicable, the corresponding changes in the underlying hedged items:


	Increase (Decrease) to Net Loss					Increase (Decrease) to AOCI						Increase (Decrease) to Net Loss				Increase (Decrease) to AOCI
	10% Increase in Underlying Rate		10% Decrease in Underlying Rate			10% Increase in Underlying Rate		10% Decrease in Underlying Rate				10% Increase in Underlying Rate		10% Decrease in Underlying Rate		10% Increase in Underlying Rate		10% Decrease in Underlying Rate
(In thousands)											(In thousands)
Coffee-related derivative instruments(1)	$	596	$	(596	)	$	4,155	$	(4,155	)	Coffee-related derivative instruments(1)	$	1,002	$	(1,002)	$	2,650	$	(2,650)

__________

(1) The Company’s purchase contracts that qualify as normal purchases include green coffee purchase commitments for which the price has been locked in as of March 31, ~~2020.~~2021. These contracts are not included in the sensitivity analysis above as the underlying price has been fixed.



Item 4.			Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

As of March 31, ~~2020,~~2021, our management, with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial and accounting officer), carried out an evaluation of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(e) promulgated under the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

Management has determined that there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act) during our fiscal quarter ended March 31, ~~2020~~2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



PART II - OTHER INFORMATION



Item 1.			Legal Proceedings

The information set forth in Note 20, Commitments and Contingencies, of the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q is incorporated herein by reference.



Item 1A.			Risk Factors

For a discussion of our other potential risks and uncertainties, see the information under “Item 1A. Risk Factors” in our Annual Report on Form 10‑K for the year ended June 30, ~~2019,~~2020, which is accessible on the SEC’s website at www.sec.gov. During the nine months ended March 31, ~~2020, other than the following,~~2021, there have been no material changes to the risk factors disclosed in our ~~2019~~2020 Form 10‑K.

~~The recent novel coronavirus (“COVID-19”) pandemic could materially adversely affect our financial condition and results of operations.~~

In late 2019, a novel strain of coronavirus (“COVID-19” or the “virus”) emerged in China and has spread worldwide. The measure to contain the spread of the virus is adversely affecting our business and those of our customers. The outbreak has resulted in federal, state and local government authorities implementing numerous restrictive measures to attempt to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and shutdowns. These measures have impacted our workforce and operations, the operations of our customers, and those of our respective vendors and suppliers. There is considerable uncertainty regarding how such measures and potential future measures will affect our manufacturing, sales and distribution operations, and how similar limitations will affect our customers, vendors and suppliers. Restrictions or disruptions of transportation could limit our capacity to meet customer demand and have a material adverse effect on our financial condition and results of operations.

The COVID-19 pandemic has significantly increased economic uncertainty. It is likely that the current pandemic, or a future recurrence of COVID-19, will cause continued economic slowdown, and it is likely to cause a global recession. The spread of COVID-19 has caused us to modify our business practices (including practices related to employee travel, work locations, and physical participation in meetings, events and conferences), and we may take further actions as may be required by government authorities, or that we determine are in the best interests of our employees, customers, vendors and suppliers. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and our ability to perform critical functions could be harmed.

The COVID-19 pandemic and the related restrictive measures and changes in recent consumer behavior have had an adverse impact on certain of our DSD customers, particularly restaurants, hotels, casinos and coffeehouses. Many of these customers have been forced to close or curtail operations and are purchasing at reduced volumes if at all. We are unable to predict the rate at which these customers will resume operations and purchases as restrictive measures are lifted. Certain of these customers may be unable to resume operations or satisfy their outstanding obligations, which may adversely impact our receivables. The ability of our customers to resume operations will largely depend on the behavior of end consumers and the ability of our customers to respond to those habits. Our success will depend on our ability to scale operations and production in line with purchases by our customers, acquire additional customers as operators resume operations, delivery flexibly through various methods and manage accounts receivable. We have adjusted our operations to address current demand. Our success will depend on our ability and effectiveness in identifying and addressing our customers’ future needs in light of the COVID-19 pandemic. At this time, it is difficult to predict the full extent and timing of the impact that the COVID-19 pandemic will have on our customer base.

While most participants in our supply chain are considered an “essential businesses” and permitted to continue operations, the COVID-19 pandemic has created uncertainty within certain supply chains due to restrictions in movement and shortages in shipping containers, including potential delays in transportation and labor shortages for upcoming harvests in Central and South America. Globally, roasters and coffee importers have stocked up on green coffee and, those increased purchases, may increase green coffee prices in the near term.

Our success largely depends on the efforts and abilities of our team members. In response to the pandemic and resulting decrease in sales, we have eliminated and furloughed positions, implemented temporary reductions in base salary of exempt

team members, and suspended 401(k) matching cash contributions. The Company’s executive leadership has taken a voluntary 15% reduction in base salary and Farmer Brothers’ Board of Directors will forego its cash compensation for the third quarter 2020. We are unable to predict the duration of these actions at this time. If we are unable to regain sales to bring back team members before others, we may lose talent to other employers, including competitors. If we are not able to effectively retain our talent, our ability to achieve certain strategic objectives may be adversely affected, which may impact our financial condition and results of operations. Further, any unplanned turnover or failure to develop or implement an adequate succession plan 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.

We continue to assess the impact of the COVID-19 pandemic and will continue to take appropriate actions to support the business and address the needs of its customers during and after the COVID-19 pandemic. The Company is working to evaluate any relief available through the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and other government programs, including through industry associations, as well as any other efforts to support the food industry as a pillar of critical infrastructure.

The degree to which the COVID-19 pandemic impacts our results will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume and our effectiveness on serving our customer base and acquiring new customers. With the uncertainty around the duration and breadth of the COVID-19 pandemic, the ultimate impact on our business, financial condition or operating results cannot be reasonably estimated at this time.

Our liquidity has been adversely affected as a result of our operating performance in recent periods, as well as the COVID-19 pandemic, and may be further materially adversely affected by constraints in the capital and credit markets and limitations under our financing arrangements.

We need sufficient sources of liquidity to fund our working capital requirements, service our outstanding indebtedness and finance business opportunities. Without sufficient liquidity, we could be forced to curtail our operations, or we may not be able to pursue business opportunities. The principal sources of our liquidity are funds generated from operating activities, available cash, and our credit facility. In recent periods, significant acquisition costs, large capital investments along with the underperformance of our business has resulted in a decrease in funds from operating activities, which has weakened our liquidity position. Since March 2020, the impact of the COVID-19 pandemic and related federal, state, and local restrictive measures have had an adverse impact on certain of our DSD customers, particularly restaurants, hotels, casinos and coffeehouses.

Should our operating performance continue to deteriorate or COVID-19 pandemic persist or recur 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:

~~seek additional financing in the debt or equity markets;~~

~~refinance or restructure all or a portion of our indebtedness;~~

~~sell assets; and/or~~

~~reduce or delay planned capital or operating expenditures, strategic acquisitions or investments.~~

Given the recent impact from the COVID-19 pandemic, we intend to apply for the Main Street Lending program of the recently passed CARES Act. At this time, we are awaiting further information around the structure of the program and are unable to predict the timing of receipt or amount of funds available to us under such programs.

Such measures might not be sufficient to enable us to satisfy our financial obligations or to fund our other liquidity needs, and could impede the implementation of our business strategy, prevent us from entering into transactions that would otherwise benefit our business and/or have a material adverse effect on our financial condition and results of operations. In addition, any such financing, refinancing or sale of assets might not be available on economically favorable terms or at all. Our ability to obtain additional financing or refinance our indebtedness would depend upon, among other things, our financial condition at the time, and the liquidity of the overall capital markets and the state of the economy. Furthermore, any refinancing of our existing debt could be at higher interest rates and may require compliance with more onerous covenants, which could further restrict our business operations. In addition, if our lenders experience difficulties that render them unable to fund future draws on the credit facility, we may not be able to access all or a portion of these funds, which could adversely affect our ability to

operate our business and pursue our business strategies. In addition, covenants in our debt agreements could restrict or delay our ability to respond to business opportunities, or in the event of a failure to comply with such covenants, could result in an event of default, which if not cured or waived, could have a material adverse effect on us.

~~An increase in our debt leverage could adversely affect our liquidity and results of operations.~~

As of March 31, 2020 and June 30, 2019, we had outstanding borrowings under our credit facility of $80.0 million and $92.0 million, respectively, with excess availability of $45.0 million and $55.7 million, respectively subject to covenant compliance. We may incur significant indebtedness in the future, including through additional borrowings under the credit facility, through the issuance of debt securities, or otherwise.

~~Our present indebtedness and any future borrowings could have adverse consequences, including:~~

~~requiring a substantial portion of our cash flow from operations to make payments on our indebtedness;~~

~~reducing the cash flow available or limiting our ability to borrow additional funds, to pay dividends, to fund capital expenditures and other corporate purposes and to pursue our business strategies;~~

~~limiting our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate;~~

~~increasing our vulnerability to general adverse economic and industry conditions; and~~

~~placing us at a competitive disadvantage compared to our competitors that have less debt.~~

~~To the extent we become more leveraged, we face an increased likelihood that one or more of the risks described above would materialize.~~

Our credit facility also contains financial covenants relating to the maintenance of a maximum total net leverage ratio, a minimum interest expense coverage ratio and, until December 31, 2021, minimum adjusted EBITDA levels. Our ability to meet those covenants may be affected by events beyond our control, such as COVID-19, and there can be no assurance that we will meet those covenants. The breach of any of these covenants could result in a default under the credit facility.

In addition, if we are unable to make payments as they come due or comply with the restrictions and covenants under the credit facility or any other agreements governing our indebtedness, there could be a default under the terms of such agreements. In such event, or if we are otherwise in default under the credit facility or any such other agreements, the lenders could terminate their commitments to lend and/or accelerate the loans and declare all amounts borrowed due and payable. Furthermore, our lenders under the credit facility could foreclose on their security interests in our assets. If any of those events occur, our assets might not be sufficient to repay in full all of our outstanding indebtedness and we may be unable to find alternative financing on acceptable terms or at all. Failure to maintain existing or secure new financing could have a material adverse effect on our liquidity and financial position.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None



Item 6.			Exhibits


Exhibit No.		Description

3.1		Certificate of Amendment of Amended and Restated Certificate of Incorporation of Farmer Bros. Co. filed March 20, 2020. (filed as Exhibit ~~No.~~	~~Description~~3.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed with the SEC on May 8, 2020 and incorporated herein by reference).

~~3.1~~3.2		Amended and Restated Certificate of Incorporation of Farmer Bros. Co. (filed as Exhibit 3.1 to the Company’s Annual Report on Form 10-K filed with the SEC on September 11, 2019 and incorporated herein by reference).

3.2*3.3		~~Certificate of~~ Amendment ~~of Amended and Restated Certificate of Incorporation of Farmer Bros. Co.~~

~~3.3~~	No. 1 to Amended and Restated Bylaws ~~adopted~~of Farmer Bros. Co. (filed as ~~of October 14, 2018~~Exhibit 3.4 to the Company’s Annual Report on Form 10-K filed with the SEC on September 11, 2020 and incorporated herein by reference).

3.4		Amended and Restated Bylaws (filed as Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, ~~2018,~~2019 filed with the SEC on February 11, 2019 and incorporated herein by reference).

10.59*10.1		~~Form of Indemnification Agreement for Directors and Officers of the Company, as adopted on December 8, 2017 (with updated schedule of indemnitees attached).~~

10.60*	~~Form of Change in Control Severance Agreement for Executive Officers of the Company (with updated schedule of executive officers attached).~~

~~10.63~~	~~Amendment No. 2 to Amended and Restated~~ Credit Agreement dated as of ~~March 5, 2020,~~dated as of April 26, 2021, by and among Farmer Bros. Co., a Delaware corporation, the ~~financial institutions party thereto,~~other loan parties named therein, the lenders named therein and ~~JPMorgan Chase~~Wells Fargo Bank, N.A., as ~~Administrative Agent~~administrative agent and lender (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on ~~March 11, 2020~~April 26, 2021 and incorporated herein by reference).

~~10.64#~~10.2		Guaranty and Security Agreement dated as of April 26, 2021, by and among Farmer Bros. Co. ~~2020 Inducement Incentive Plan~~, a Delaware corporation, the other grantors named therein, and Wells Fargo Bank, N.A., as administrative agent (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 26, 2021 and incorporated herein by reference).

10.3		Credit Agreement dated as of dated as of April 26, 2026, by and among Farmer Bros. Co., a Delaware corporation, the other loan parties named therein, the lenders named therein and MGG Investment Group LP, as administrative agent (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on ~~March 16, 2020~~April 26, 2021 and incorporated herein by reference).

~~10.65#~~10.4		~~Form~~Guaranty and Security Agreement dated as of April 26, 2021, by and among Farmer Bros. Co. ~~2020 Inducement Incentive Plan Stock Option Award Agreement~~, a Delaware corporation, the other grantors named therein, and MGG Investment Group LP, as administrative agent (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on ~~March 16, 2020~~April 26, 2021 and incorporated herein by reference).

31.1*10.5		ISDA Master Agreement, dated as of April 26, 2021, by and between Farmer Bros. Co. and Wells Fargo Bank, N.A.(filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on April 26, 2021 and incorporated herein by reference).

10.6		Schedule of the ISDA Master Agreement, dated as of April 26, 2021, by and between Farmer Bros. Co. and Wells Fargo Bank, N.A. (filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the SEC on April 26, 2021 and incorporated herein by reference).

10.7		Replacement interest rate swap with Wells Fargo Bank, N.A. pursuant to a new interest rate swap confirmation. (filed as Exhibit 10.7 to the Company’s Current Report on Form 8-K filed with the SEC on April 26, 2021 and incorporated herein by reference).

10.8		Farmer Bros. Co. Amended and Restated 2017 Long-Term Incentive Plan (filed as Exhibit 10.73 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 21, 2020 filed with the SEC on February 5, 2021 and incorporated herein by reference).

31.1*		Principal Executive Officer Certification Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Principal Financial and Accounting Officer Certification Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Principal Financial and Accounting Officer Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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.

101.SCH**		Inline XBRL Taxonomy Extension Schema Document.

101.CAL**		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF**		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB**		Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE**		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

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.

________________



#		~~Management contract or compensatory plan or arrangement~~
*		Filed herewith
*		~~Filed herewith~~
**
**	Furnished, not filed, herewith

SIGNATURES

Pursuant to the requirements 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)

May ~~7, 2020~~6, 2021

By:

/s/ Scott R. Drake

Scott R. Drake

Chief Financial Officer

(principal financial officer)

May ~~7, 2020~~6, 2021



	Nine Months Ended March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,585
Operating cash flows from finance leases	$	1
Financing cash flows from finance leases	$	38

Leased assets obtained in exchange for new finance lease liabilities	$	—
Leased assets obtained in exchange for new operating lease liabilities	$	—



(In thousands)	Operating Lease Obligations		Capital�� Lease Obligations
Year Ended June 30,
2020	$	4,434	$	36
2021	3,238		1
2022	2,472		—
2023	2,131		—
2024	2,025		—
Thereafter	4,389		—
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



	Nine Months Ended March 31, 2020
Weighted average fair value of NQOs	$	4.68
Risk-free interest rate	1.7		%
Dividend yield	—		%
Average expected term	4.6 years
Expected stock price volatility	35.4		%



	Three Months Ended March 31, 2020 vs. 2019			% of Total Mix Change		Nine Months Ended March 31, 2020 vs. 2019			% of Total Mix Change
Effect of change in unit sales	$	(13.8	)	(78.9	)%	$	(8.8	)	(26.1	)%
Effect of pricing and product mix changes	(3.7		)	(21.1	)%	(24.9		)	(73.9	)%
Total decrease in net sales	$	(17.5	)	(100.0	)%	$	(33.7	)	(100.0	)%