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, ~~2021~~2022


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

For the transition period from to

Commission file number: 001-34249

FARMER BROS. CO.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

95-0725980

(State or Other Jurisdiction of Incorporation of Organization)

(I.R.S. Employer Identification No.)

1912 Farmer Brothers Drive,

Northlake,

Texas

76262

(Address of Principal Executive Offices; Zip Code)

~~888~~

~~301-0489~~682-549-6600

(Registrant’s Telephone Number, Including Area Code)

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

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, ~~$1.00~~ par value $1.00 per share

FARM

~~NASDAQ~~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 ~~26, 2021~~,28, 2022, the registrant had ~~17,822,656~~18,448,058 shares outstanding of its common stock, par value $1.00 per share, which is the registrant’s only class of common stock.

TABLE OF CONTENTS


			Page
PART I – FINANCIAL INFORMATION (UNAUDITED)

Item 1. Financial Statements			1

~~Condensed~~ Consolidated Balance Sheets at March 31, ~~202~~1 2022 and June 30, ~~2020~~2021			1

~~Condensed~~ Consolidated Statements of Operations for the Three and Nine Months Ended March 31, ~~202~~1 2022 and 20 202021			2

~~Condensed~~ Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended March 31, ~~202~~1 2022 and 20 212021			3

~~Condensed~~ Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended March 31, ~~202~~1 2022 and 20 202021			4

~~Condensed~~ Consolidated Statements of Cash Flows for the Nine ~~Nine~~Months Ended March 31, ~~202~~1 2022 and 20 202021			6

Notes to ~~Condensed~~ Consolidated Financial Statements			87

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3725

Item 3. Quantitative and Qualitative Disclosures About Market Risk			5336

Item 4. Controls and Procedures			5437

PART II – OTHER INFORMATION

Item 1. Legal Proceedings			5537

Item 1A. Risk Factors			5537

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5537

Item 3. Defaults Upon Senior Securities			5537

Item 4. Mine Safety Disclosures			5537

Item 5. Other Information			5537

Item 6. Exhibits			5638

SIGNATURES			5839

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, 2022		June 30, 2021

ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	8,474	$	60,013	Cash and cash equivalents	$	10,378	$	10,263
Accounts receivable, net		37,100		40,882
Restricted cash						Restricted cash	175		175
Accounts receivable, net of allowance for doubtful accounts of $369 and $325, respectively						Accounts receivable, net of allowance for doubtful accounts of $369 and $325, respectively	47,443		40,321
Inventories	Inventories	75,151		67,408		Inventories	100,645		76,791
Income tax receivable		0		831

Short-term derivative assets	Short-term derivative assets	1,062		165		Short-term derivative assets	6,088		4,351
Prepaid expenses	Prepaid expenses	8,711		7,414		Prepaid expenses	4,834		5,594
Assets held for sale	Assets held for sale	2,521		0		Assets held for sale	—		1,591
Total current assets	Total current assets	133,019		176,713		Total current assets	169,563		139,086
Property, plant and equipment, net	Property, plant and equipment, net	154,467		165,633		Property, plant and equipment, net	141,614		150,091

Intangible assets, net	Intangible assets, net	18,854		20,662		Intangible assets, net	16,456		18,252
Right-of-use operating lease assets	Right-of-use operating lease assets	25,800		21,117		Right-of-use operating lease assets	28,011		26,254
Long-term derivatives assets		0		10

Other assets	Other assets	8,121		8,564		Other assets	3,145		4,323
Total assets	Total assets	$	340,261	$	392,699	Total assets	$	358,789	$	338,006
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	44,610		36,987		Accounts payable	63,059		45,703
Accrued payroll expenses	Accrued payroll expenses	15,380		9,394		Accrued payroll expenses	13,662		15,345

Operating leases liabilities - current		6,036		5,854
Operating lease liabilities - current						Operating lease liabilities - current	7,311		6,262
Term loan - current						Term loan - current	3,800		950
Short-term derivative liabilities	Short-term derivative liabilities	1,990		5,255		Short-term derivative liabilities	1,691		1,555

Other current liabilities	Other current liabilities	6,384		6,802		Other current liabilities	7,834		6,425
Total current liabilities	Total current liabilities	74,400		64,292		Total current liabilities	97,357		76,240
Long-term borrowings under revolving credit facility	Long-term borrowings under revolving credit facility	88,000		122,000		Long-term borrowings under revolving credit facility	54,500		43,500
Term loan - noncurrent						Term loan - noncurrent	40,894		44,328
Accrued pension liabilities	Accrued pension liabilities	56,682		58,772		Accrued pension liabilities	37,947		39,229
Accrued postretirement benefits	Accrued postretirement benefits	10,381		9,993		Accrued postretirement benefits	1,007		960
Accrued workers’ compensation liabilities	Accrued workers’ compensation liabilities	3,687		4,569		Accrued workers’ compensation liabilities	3,381		3,649
Operating lease liabilities - noncurrent	Operating lease liabilities - noncurrent	19,770		15,628		Operating lease liabilities - noncurrent	21,175		20,049
Other long-term liabilities	Other long-term liabilities	5,352		5,532		Other long-term liabilities	1,822		5,092
Total liabilities	Total liabilities	$	258,272	$	280,786	Total liabilities	$	258,083	$	233,047
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0
Stockholders’ equity:	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, 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		17,771		17,348
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, 2022 and June 30, 2021; liquidation preference of $17,196 and $16,752 as of March 31, 2022 and June 30, 2021, 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, 2022 and June 30, 2021; liquidation preference of $17,196 and $16,752 as of March 31, 2022 and June 30, 2021, respectively	15		15
Common stock, $1.00 par value, 50,000,000 and 25,000,000 shares authorized as of March 31, 2022 and June 30, 2021, respectively; 18,300,855 and 17,852,793 shares issued and outstanding as of March 31, 2022 and June 30, 2021, respectively						Common stock, $1.00 par value, 50,000,000 and 25,000,000 shares authorized as of March 31, 2022 and June 30, 2021, respectively; 18,300,855 and 17,852,793 shares issued and outstanding as of March 31, 2022 and June 30, 2021, respectively	18,302		17,853
Additional paid-in capital	Additional paid-in capital	65,170		62,043		Additional paid-in capital	70,187		66,109
Retained earnings	Retained earnings	70,428		108,536		Retained earnings	53,983		66,311

Accumulated other comprehensive loss	Accumulated other comprehensive loss	(71,395)		(76,029)		Accumulated other comprehensive loss	(41,781)		(45,329)
Total stockholders’ equity	Total stockholders’ equity	$	81,989	$	111,913	Total stockholders’ equity	$	100,706	$	104,959
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	340,261	$	392,699	Total liabilities and stockholders’ equity	$	358,789	$	338,006

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,
		2021		2020		2021		2020			2022		2021		2022		2021
Net sales	Net sales	$	93,152	$	129,139	$	294,993	$	420,237	Net sales	$	119,398	$	93,152	$	346,205	$	294,993
Cost of goods sold	Cost of goods sold	69,274		91,190		222,447		297,662		Cost of goods sold	83,838		69,274		244,197		222,447
Gross profit	Gross profit	23,878		37,949		72,546		122,575		Gross profit	35,560		23,878		102,008		72,546
Selling expenses	Selling expenses	22,767		31,968		71,035		100,488		Selling expenses	27,477		22,767		81,505		71,035
General and administrative expenses	General and administrative expenses	11,018		8,833		32,334		32,839		General and administrative expenses	11,595		11,018		34,796		32,334

Net losses (gains) from sales of assets	Net losses (gains) from sales of assets	488		287		(62)		(23,375)		Net losses (gains) from sales of assets	426		488		(4,003)		(62)
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		Impairment of fixed assets	—		—		—		1,243
Operating expenses	Operating expenses	34,273		83,118		104,550		151,982		Operating expenses	39,498		34,273		112,298		104,550
Loss from operations	Loss from operations	(10,395)		(45,169)		(32,004)		(29,407)		Loss from operations	(3,938)		(10,395)		(10,290)		(32,004)
Other (expense) income:	Other (expense) income:									Other (expense) income:

Interest expense	Interest expense	(2,993)		(2,478)		(9,174)		(7,885)		Interest expense	(1,591)		(2,993)		(7,106)		(9,174)
Postretirement benefits curtailment and pension settlement charge		0		5,760		0		5,760
Other, net	Other, net	(356)		1,076		17,283		2,941		Other, net	1,579		(356)		5,790		17,283
Total other (expense) income	Total other (expense) income	(3,349)		4,358		8,109		816		Total other (expense) income	(12)		(3,349)		(1,316)		8,109
Loss before taxes	Loss before taxes	(13,744)		(40,811)		(23,895)		(28,591)		Loss before taxes	(3,950)		(13,744)		(11,606)		(23,895)
Income tax (benefit) expense		(60)		(1,034)		13,785		(1,222)
Income tax expense (benefit)										Income tax expense (benefit)	90		(60)		278		13,785
Net loss	Net loss	(13,684)		(39,777)		(37,680)		(27,369)		Net loss	$	(4,040)	$	(13,684)	$	(11,884)	$	(37,680)
Less: Cumulative preferred dividends, undeclared and unpaid	Less: Cumulative preferred dividends, undeclared and unpaid	144		139		428		414		Less: Cumulative preferred dividends, undeclared and unpaid	149		144		444		428
Net loss available to common stockholders	Net loss available to common stockholders	$	(13,828)	$	(39,916)	$	(38,108)	$	(27,783)	Net loss available to common stockholders	$	(4,189)	$	(13,828)	$	(12,328)	$	(38,108)
Net loss available to common stockholders per common share—basic	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—basic	$	(0.23)	$	(0.78)	$	(0.68)	$	(2.17)
Net loss available to common stockholders per common share—diluted	Net loss available to common stockholders per common share—diluted	$	(0.78)	$	(2.32)	$	(2.17)	$	(1.62)	Net loss available to common stockholders per common share—diluted	$	(0.23)	$	(0.78)	$	(0.68)	$	(2.17)
Weighted average common shares outstanding—basic	Weighted average common shares outstanding—basic	17,756,619		17,230,879		17,569,026		17,161,477		Weighted average common shares outstanding—basic	18,289,815		17,756,619		18,118,469		17,569,026
Weighted average common shares outstanding—diluted	Weighted average common shares outstanding—diluted	17,756,619		17,230,879		17,569,026		17,161,477		Weighted average common shares outstanding—diluted	18,289,815		17,756,619		18,118,469		17,569,026

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

FARMER BROS. CO.

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME (LOSS)~~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,
	2022		2021		2022		2021
Net loss	$	(4,040)	$	(13,684)	$	(11,884)	$	(37,680)
Other comprehensive income (loss):
Unrealized gains (losses) on derivatives designated as cash flow hedges	383		(1,315)		11,374		6,012
Gains on derivatives designated as cash flow hedges reclassified to cost of goods sold	(3,110)		(973)		(8,742)		(1,233)
Losses on derivative instruments undesignated as cash flow hedges reclassified to interest expense, net of tax	294		301		916		960
Change in pension and retiree benefit obligations	—		—		—		(1,105)

Total comprehensive loss, net of tax	$	(6,473)	$	(15,671)	$	(8,336)	$	(33,046)

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. 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, 2021	14,700	$	15	17,852,793	$	17,853	$	66,109	$	66,311	$	(45,329)	$	104,959
Net loss	—	—		—	—		—		(2,424)		—		(2,424)
Net reclassification of gain (loss) on cash flow hedges	—	—		—	—		—		—		4,253		4,253


ESOP compensation expense, including reclassifications	—	—		51,597	52		619		—		—		671
Share-based compensation	—	—		—	—		721		—		—		721
Issuance of common stock and Stock option exercises	—	—		94,407	94		(94)		—		—		—
Cumulative preferred dividends, undeclared and unpaid	—	—		—	—		—		(147)		—		(147)
Balance at September 30, 2021	14,700	15		17,998,797	17,999		67,355		63,740		(41,076)		108,033
Net loss	—	—		—	—		—		(5,420)		—		(5,420)
Net reclassification of gain (loss) on cash flow hedges	—	—		—	—		—		—		1,728		1,728


ESOP compensation expense, including reclassifications	—	—		82,437	84		664		—		—		748
Share-based compensation	—	—		—	—		858		—		—		858
Issuance of common stock and stock option exercises, net of shares withheld for taxes	—	—		129,292	129		(618)		—		—		(489)
Cumulative preferred dividends, undeclared and unpaid	—	—		—	—		—		(148)		—		(148)
Balance at December 31, 2021	14,700	15		18,210,526	18,212		68,259		58,172		(39,348)		105,310
Net loss	—	—		—	—		—		(4,040)		—		(4,040)
Net reclassification of (loss) gain on cash flow hedges	—	—		—	—		—		—		(2,433)		(2,433)


ESOP and 401 (k) compensation expense, including reclassifications	—	—		90,329	90		1,099		—		—		1,189
Share-based compensation	—	—		—	—		829		—		—		829
Issuance of common stock and stock option exercises	—	—		—	—		—		—		—		—
Cumulative preferred dividends, undeclared and unpaid	—	—		—	—		—		(149)		—		(149)
Balance at March 31, 2022	14,700	$	15	18,300,855	$	18,302	$	70,187	$	53,983	$	(41,781)	$	100,706

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. CONSOLIDATED 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, 2020	14,700	$	15	17,347,774	$	17,348	$	62,043	$	108,536	$	(76,029)	$	111,913
Net loss	—	—		—	—		—		(6,270)		—		(6,270)
Net reclassification of gain (loss) on cash flow hedges	—	—		—	—		—		—		4,271		4,271

Change in the funded status of retiree benefit obligations, net of taxes	—	—		—	—		—		—		(7,289)		(7,289)
ESOP compensation expense, including reclassifications	—	—		76,671	77		323		—		—		400
Share-based compensation	—	—		—	—		745		—		—		745
Issuance of common stock and Stock option exercises	—	—		7,370	7		(7)		—		—		—
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)
Net reclassification of gain (loss) on cash flow hedges	—	—		—	—		—		—		3,455		3,455

Change in the funded status of retiree benefit obligations, net of taxes	—	—		—	—		—		—		6,184		6,184
ESOP compensation expense, including reclassifications	—	—		108,426	108		287		—		—		395
Share-based compensation	—	—		—	—		399		—		—		399
Issuance of common stock and Stock option exercises	—	—		50,843	51		(51)		—		—		—
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)
Net reclassification of (loss) gain on cash flow hedges	—	—		—	—		—		—		(1,987)		(1,987)


ESOP compensation expense, including reclassifications	—	—		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

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


FARMER BROS. CO.	FARMER BROS. CO.					FARMER BROS. CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)						CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)	(In thousands)					(In thousands)
		Nine Months Ended March 31,					Nine Months Ended March 31,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(37,680)	$	(27,369)	Net loss	$	(11,884)	$	(37,680)
Adjustments to reconcile net loss to net cash used in operating activities:	Adjustments to reconcile net loss to net cash used in operating activities:					Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	21,231		22,544		Depreciation and amortization	18,119		21,231

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

Impairment of fixed assets						Impairment of fixed assets	—		1,243
Postretirement Medical benefits gains						Postretirement Medical benefits gains	—		(14,577)
Deferred income taxes	Deferred income taxes	13,472		0		Deferred income taxes	—		13,472
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	Net gains from sales of assets	(62)		(23,375)		Net gains from sales of assets	(4,003)		(62)

Net (gains) losses on derivative instruments		(2,875)		9,830
Net gains on derivatives instruments						Net gains on derivatives instruments	(12,798)		(2,875)
Other adjustments	Other adjustments	3,124		3,698		Other adjustments	4,963		3,124
Change in operating assets and liabilities:	Change in operating assets and liabilities:					Change in operating assets and liabilities:

Accounts receivable	Accounts receivable	4,210		3,745		Accounts receivable	(7,559)		4,210
Inventories	Inventories	(7,744)		1,004		Inventories	(25,610)		(7,744)

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

Derivative assets, net						Derivative assets, net	13,223		3,309
Other assets	Other assets	3,184		1,510		Other assets	1,989		3,184
Accounts payable	Accounts payable	6,496		(13,194)		Accounts payable	16,921		6,496
Accrued expenses and other	Accrued expenses and other	3,181		(4,126)		Accrued expenses and other	(2,988)		3,181

Net cash (used) provided by operating activities		$	(3,488)	$	8,065
Net cash used in operating activities						Net cash used in operating activities	(9,627)		(3,488)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:

Purchases of property, plant and equipment	Purchases of property, plant and equipment	(12,796)		(13,114)		Purchases of property, plant and equipment	(8,896)		(12,796)

Proceeds from sales of property, plant and equipment	Proceeds from sales of property, plant and equipment	2,009		36,733		Proceeds from sales of property, plant and equipment	9,062		2,009
Net cash (used) provided in investing activities		$	(10,787)	$	23,619
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	166		(10,787)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from revolving credit facility		$	27,150	$	48,000
Repayments on revolving credit facility		(61,150)		(60,000)

Proceeds from Credit Facilities						Proceeds from Credit Facilities	15,000		27,150
Repayments on Credit Facilities						Repayments on Credit Facilities	(4,950)		(61,150)
Payments of finance lease obligations	Payments of finance lease obligations	(57)		(40)		Payments of finance lease obligations	(144)		(57)
Payment of financing costs	Payment of financing costs	(3,207)		(367)		Payment of financing costs	(330)		(3,207)
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
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	9,576		(37,264)
Net increase (decrease) in cash and cash equivalents and restricted cash						Net increase (decrease) in cash and cash equivalents and restricted cash	115		(51,539)
Cash and cash equivalents and restricted cash at beginning of period						Cash and cash equivalents and restricted cash at beginning of period	10,438		60,013
Cash and cash equivalents and restricted cash at end of period						Cash and cash equivalents and restricted cash at end of period	$	10,553	$	8,474


Supplemental disclosure of non-cash investing and financing activities:
Non cash additions to property, plant and equipment	$	435	$	297
Non-cash issuance of 401-K common stock	224		347
Cumulative preferred dividends, undeclared and unpaid	444		428

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

statemen
ts.

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~~leading coffee roaster, wholesaler and distributor of coffee, tea, and ~~culinary products.~~other allied products manufactured under our owned brands, as well as under private labels on behalf of certain customers.

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, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, ~~2021.~~2022. Events occurring subsequent to March 31, ~~2021~~2022 have been evaluated for potential recognition or disclosure in the unaudited ~~condensed~~ consolidated financial statements for the three and nine months ended March 31, ~~2021.~~

2022.

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, ~~2020,~~2021, filed with the Securities and Exchange Commission (the “SEC”) on September ~~11, 2020~~10, 2021 (the ~~“2020~~“2021 Form 10-K”).

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 and, the parent company of Coffee Bean International, Inc., an Oregon corporation, ~~(“CBI”),~~ China Mist Brands, Inc., a Delaware corporation, and Boyd Assets Co., a Delaware ~~corporation, and Coffee Bean International LLC, a Delaware limited liability company.~~corporation. All ~~inter-company~~intercompany 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 ~~2020~~2021 Form 10-K.

During the three and nine months ended March 31, 2021, other than as set forth below and the adoption of Financial Accounting Standards Board Accounting (“FASB”) Standards Update (“ASU”) ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 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”),2022, there were no significant updates made to the Company’s significant accounting policies.

Concentration of Credit Risk

At March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, 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 asset positions. At March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, 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 27%~~Approximately 50% and ~~39%~~ 31% of the Company’s trade accounts receivable balance was with five customers at March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, 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 estimated credit losses have been appropriately considered in establishing the allowance for doubtful accounts.

Farmer Bros. Co.

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

the amount recorded on the balance sheet. The trade accounts receivables are generally short-term and all estimated credit losses have been appropriately considered in establishing the allowance for doubtful accounts.

Recent Accounting Pronouncements

The Company considers the applicability and impact of all ~~ASUs issued.~~Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (the “FASB”). ASUs not listed below were assessed and either determined to be not applicable or expected to have minimal impact on its ~~condensed~~ consolidated financial statements.

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

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 inbeing discontinued between December 2021 and June 2023. The Company has not entered into any new contracts ~~or continuation of~~after December 31, 2021. With the overnight, 1-month, 3-month, 6-month and 12-month USD LIBOR rates being published through June 30, 2023, we will continue to leverage these for the existing contracts.

ASU 2020-04 provides temporary optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the transition from LIBOR to alternative reference rate.

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

The Company ~~is currently evaluating the impact ASU 2020-04 will have~~does not anticipate any material impacts 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.~~

The Company adopted the new guidance effective July 1, 2020 on a prospective basis which did not require the Company to adjust comparative periods. Adoption of ASU 2018-15 did not have a material impact on the results of operations, financial 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 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.~~

The Company adopted the new guidance effective July 1, 2020 on a modified retrospective basis. Adoption of ASU 2016-13 did not have a material impact on the results of operations, financial position or cash flows of the Company.

~~Farmer Bros. Co.~~

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

Note 3. Leases

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,~~through September 30, 2028, some of which have options to extend the lease for up to 10 years. For purposes of calculating operating lease liabilities, lease terms are deemed not to include options to extend the lease renewal until it is reasonably certain that the Company will exercise that option. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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


(In thousands)	Classification	March 31, 2022		June 30, 2021
Operating lease assets	Right-of-use operating lease assets	$	28,011	$	26,254
Finance lease assets	Property, plant and equipment, net	615		739
Total lease assets		$	28,626	$	26,993

Operating lease liabilities - current	Operating lease liabilities - current	7,311		6,262
Finance lease liabilities - current	Other current liabilities	193		192
Operating lease liabilities - noncurrent	Operating lease liabilities - noncurrent	21,175		20,049
Finance lease liabilities -noncurrent	Other long-term liabilities	446		563
Total lease liabilities		$	29,125	$	27,066

The components of lease expense are as follows:


			Three Months Ended March 31,				Nine Months Ended March 31,
		Classification	2021		2020		2021		2020				Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	(In thousands)										(In thousands)	Classification	2022		2021		2022		2021

Operating lease expense	Operating lease expense	General and administrative expenses and cost of goods sold	$	1,838	$	1,497	$	5,415	$	3,858	Operating lease expense	General and administrative expenses and cost of goods sold	$	1,887	$	1,838	$	5,557	$	5,415
Finance lease expense:	Finance lease expense:										Finance lease expense:
Amortization of finance lease assets	Amortization of finance lease assets	General and administrative expenses	54		13		63		39		Amortization of finance lease assets	General and administrative expenses	41		54		123		63
Interest on finance lease liabilities	Interest on finance lease liabilities	Interest expense	13		0		13		1		Interest on finance lease liabilities	Interest expense	11		13		34		13
Total lease expense	Total lease expense		$	1,905	$	1,510	$	5,491	$	3,898	Total lease expense		$	1,939	$	1,905	$	5,714	$	5,491

118

Farmer Bros. Co.

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

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
Maturities of lease liabilities are as follows:


	March 31, 2022
(In thousands)	Operating Leases		Finance Leases
2022	$	1,839	$	47
2023	7,264		193
2024	6,985		193
2025	5,727		193
2026	4,525		96
Thereafter	6,707		—
Total lease payments	33,047		722
Less: interest	(4,561)		(83)
Total lease obligations	$	28,486	$	639

Lease term and discount rate:


		March 31, 2021		June 30, 2020			March 31, 2022		June 30, 2021
Weighted-average remaining lease terms (in years):	Weighted-average remaining lease terms (in years):					Weighted-average remaining lease terms (in years):
Operating lease	Operating lease	7.5		8.3		Operating lease	6.5		7.3
Finance lease	Finance lease	4.7		0.2		Finance lease	3.8		4.5

Weighted-average discount rate:	Weighted-average discount rate:					Weighted-average discount rate:
Operating lease	Operating lease	5.01	%	4.50	%	Operating lease	5.69	%	5.23	%
Finance lease	Finance lease	5.01	%	4.50	%	Finance lease	6.50	%	6.50	%

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,
(In thousands)	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,138	$	5,807
Operating cash flows from finance leases	34		13
Financing cash flows from finance leases	144		44

~~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, “Summary of Significant Accounting Policies,” in the Notes to the ~~consolidated financial statements~~Consolidated Financial Statements in the ~~2020~~2021 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, ~~2021~~2022 and June 30, ~~2020:~~2021:

(In thousands)

March 31, 2021

June 30, 2020

(In thousands)

March 31, 2022

June 30, 2021

Derivative instruments designated as cash flow hedges:

Long coffee pounds

20,681

36,413

Long coffee pounds

10,838

14,625

Derivative instruments not designated as cash flow hedges:

Long coffee pounds

8,112

8,348

Long coffee pounds

2,735

6,886

Total

28,793

44,761

Total

13,573

21,511

Farmer Bros. Co.

Notes to Unaudited Consolidated Financial Statements (continued)

Coffee-related derivative instruments designated as cash flow hedges outstanding as of March 31, ~~2021~~2022 will expire within 2112 months. At March 31, ~~2021~~2022 and June 30, ~~2020~~2021 approximately ~~72%~~80% and ~~81%~~68%, 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. (“ISDA”) 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~~subject to a 0% ~~floor,~~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 had designated the Rate Swap derivative instrument as a cash flow hedge; however, during the ~~quarter~~three months ended September 30, 2020, the Company de-designated the Rate Swap derivative ~~instruments.~~instrument. As a result, the balance in ~~AOCI~~accumulated other comprehensive income, or “AOCI” was frozen at the time of de-designation. The Company recognized ~~$0.3~~$0.3 million and ~~$1.0~~$0.9 million, respectively, inout of AOCI and into interest expense for the three and nine months ended March 31, ~~2021.~~2022. The remaining balance of ~~$2.9~~$1.7 million ~~froz~~enfrozen in AOCI will be amortized over the life of the Rate Swap through ~~November 6, 2023.~~October 11, 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 (the “Amended Rate Swap”) to transfer its interest swap to Wells ~~Fargo. See~~Fargo Bank, N.A. (“Wells Fargo”). 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 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.

The Company did not designate the Amended Rate Swap as a cash flow hedge. The Company’s obligations under the Amended Rate Swap are secured by the collateral which secures the loans under the new Revolver Credit Facility (see Note 11 for ~~summary description~~details) on a pari passu and pro rata basis with the principal of such loans.

Effect of Derivative Instruments on the ~~key items~~Financial Statements

Balance Sheets

Fair values of derivative instruments on the ~~ISDA agreement. The Company did not designate~~Company’s consolidated balance sheets:


	Derivative Instruments Designated as Cash Flow Hedges				Derivative Instruments Not Designated as Accounting Hedges
(In thousands)	March 31, 2022		June 30, 2021		March 31, 2022		June 30, 2021
Financial Statement Location:
Short-term derivative assets:
Coffee-related derivative instruments	$	5,561	$	3,823	$	526	$	528
Long-term derivative assets:
Coffee-related derivative instruments (1)	—		292		—		—
Interest rate swap derivative instruments (1)	—		—		162		—
Short-term derivative liabilities:
Coffee-related derivative instruments	24		20		1,123		3
Interest rate swap derivative instruments	—		—		544		1,532
Long-term derivative liabilities:
Coffee-related derivative instruments (2)	—		—		—		—
Interest rate swap derivative instruments (2)	—		—		—		1,653

________________

(1) Included in “Other assets” on the ~~amended rate swap as a cash flow hedge. The frozen AOCI~~Company's consolidated balance ~~described above from~~sheets.

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

1310

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, 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 “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)	2022		2021		2022		2021
Net losses recognized in AOCI - Interest rate swap	$	—	$	—	$	—	$	(304)	AOCI
Net (losses) gains recognized from AOCI to earnings - Interest rate swap	(1)		9		(6)		(354)		Interest Expense
Net losses reclassified from AOCI to earnings for de-designated Interest rate swap	(293)		(320)		(910)		(960)		Interest Expense
Net gains (losses) recognized in AOCI - Coffee-related	383		(1,315)		11,374		6,051		AOCI
Net gains recognized in earnings - Coffee - related	3,110		983		8,742		1,587		Cost of goods sold

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

~~(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, ~~2021~~2022 and ~~2020,~~2021, there were ~~0 gains~~no gains or losses recognized in earnings as a result of excluding amounts from the assessment of hedge effectiveness.

Net (gains) losses ~~(gains)~~ on derivative instruments in the Company’s ~~condensed~~ consolidated statements of cash flows also include net (gains) 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, ~~2021~~2022 and ~~2020.~~2021. Gains and losses on coffee-related derivative instruments not designated as accounting hedges are included in “Other, net” in the Company’s ~~condensed~~

~~Farmer Bros. Co.~~

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

consolidated statements of operations and in ~~“Net~~Net (gains) 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,					Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	(In thousands)	2021		2020		2021		2020		(In thousands)	2022		2021		2022		2021
Net (losses) gains on coffee-related derivative instruments(1)		$	(832)	$	(308)	$	1,002	$	(932)
Net gains (losses) on coffee-related derivative instruments (1)										Net gains (losses) on coffee-related derivative instruments (1)	$	665	$	(832)	$	3,087	$	1,002

Non-operating pension and other postretirement benefit (2)		455		1,248		15,943		3,744
Non-operating pension and other postretirement benefits										Non-operating pension and other postretirement benefits	896		455		2,685		15,943
Other gains (losses), net	Other gains (losses), net	21		136		338		129		Other gains (losses), net	18		21		18		338
Other, net	Other, net	$	(356)	$	1,076	$	17,283	$	2,941	Other, net	$	1,579	$	(356)	$	5,790	$	17,283

___________

(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, ~~2021~~2022 and ~~2020.~~

~~(2) Presented in accordance with ASU 2017-07.~~2021.

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, 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


(In thousands)		Gross Amount Reported on Balance Sheet		Netting Adjustments		Cash Collateral Posted		Net Exposure
March 31, 2022	Derivative Assets	$	6,250	$	(1,147)	$	—	$	5,103
	Derivative Liabilities	1,691		(1,147)		—		544
June 30, 2021	Derivative Assets	4,643		(23)		—		4,620
	Derivative Liabilities	3,208		(23)		—		3,185

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, ~~2021,~~ ~~$1.5~~2022, $9.4 million of net gains on ~~coffee-related~~coffee-

Farmer Bros. Co.

Notes to Unaudited Consolidated Financial Statements (continued)

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, ~~2021.~~2022.

~~Changes in~~The Company had designated the ~~fair value of the Company's interest rate swap~~Rate Swap derivative ~~instruments designated~~instrument as a cash flow ~~hedge are deferred in~~hedge; however, during the three months ended September 30, 2020, the Company de-designated the Rate Swap derivative instrument. The frozen AOCI ~~and~~is 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, ~~2021,~~ ~~$1.2~~2022, $1.1 million of net losses on ~~interest rate swap derivative instruments~~the Rate Swap 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.~~

months.

~~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		(In thousands)	Total		Level 1		Level 2		Level 3
March 31, 2021
March 31, 2022										March 31, 2022

Derivative instruments designated as cash flow hedges:	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 assets (1)	$	5,561	$	—	$	5,561	$	—
Coffee-related derivative liabilities (1)	Coffee-related derivative liabilities (1)	$	409	$	0	$	409	$	0	Coffee-related derivative liabilities (1)	24		—		24		—

Derivative instruments not designated as accounting hedges:	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 assets(1)	526		—		526		—
Interest rate swap derivative assets (1)										Interest rate swap derivative assets (1)	162		—		162		—
Coffee-related derivative liabilities(1)	Coffee-related derivative liabilities(1)	$	277	$	0	$	277	$	0	Coffee-related derivative liabilities(1)	1,123		—		1,123		—
Interest rate swap derivative liabilities (2)	Interest rate swap derivative liabilities (2)	$	3,011	0		$	3,011	0		Interest rate swap derivative liabilities (2)	544		—		544		—

											Total		Level 1		Level 2		Level 3

(In thousands)		Total		Level 1		Level 2		Level 3
June 30, 2020
June 30, 2021										June 30, 2021

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

Coffee-related derivative assets (1)										Coffee-related derivative assets (1)	$	4,115	$	—	$	4,115	$	—
Coffee-related derivative liabilities (1)										Coffee-related derivative liabilities (1)	20		—		20		—
Derivative instruments not designated as accounting hedges:										Derivative instruments not designated as accounting hedges:
Coffee-related derivative assets (1)	Coffee-related derivative assets (1)	$	45	$	0	$	45	$	0	Coffee-related derivative assets (1)	528		—		528		—
Coffee-related derivative liabilities (1)	Coffee-related derivative liabilities (1)	$	3,568	$	0	$	3,568	$	0	Coffee-related derivative liabilities (1)	3		—		3		—
Interest rate swap derivative liabilities (2)	Interest rate swap derivative liabilities (2)	$	3,841	$	0	$	3,841	$	0	Interest rate swap derivative liabilities (2)	3,185		—		3,185		—
Derivative instruments not designated as accounting hedges:

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

____________________

(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)	(In thousands)	March 31, 2021		June 30, 2020		(In thousands)	March 31, 2022		June 30, 2021
Trade receivables	Trade receivables	$	36,878	$	40,695	Trade receivables	$	45,943	$	37,208
Other receivables(1)	Other receivables(1)	1,254		1,983		Other receivables(1)	1,869		3,438
Allowance for doubtful accounts	Allowance for doubtful accounts	(1,032)		(1,796)		Allowance for doubtful accounts	(369)		(325)
Accounts receivable, net	Accounts receivable, net	$	37,100	$	40,882	Accounts receivable, net	$	47,443	$	40,321

__________

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

~~The~~ ~~$0.8 million decrease~~There was no material change in the allowance for doubtful accounts during the nine months ended March 31, ~~2021 was due to improvement of the Company’s aged accounts receivable balance.~~2022.

1612

Farmer Bros. Co.

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

Note 7. Inventories

(In thousands) March 31, 2021 June 30, 2020
Coffee
   Processed $ 21,011 $ 17,840
   Unprocessed 35,691 32,913
         Total $ 56,702 $ 50,753
Tea and culinary products
   Processed $ 12,437 $ 10,627
   Unprocessed 65 45
         Total $ 12,502 $ 10,672
Coffee brewing equipment parts $ 5,947 $ 5,983
              Total inventories $ 75,151 $ 67,408


(In thousands)	March 31, 2022		June 30, 2021
Coffee
Processed	$	27,058	$	20,917
Unprocessed	53,473		34,762
Total	$	80,531	$	55,679
Tea and culinary products
Processed	$	13,003	$	15,228
Unprocessed	72		60
Total	$	13,075	$	15,288
Coffee brewing equipment parts	$	7,039	$	5,824
Total inventories	$	100,645	$	76,791

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

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, 2021, the Company classified four branch properties with net book value of $2.5 million as “Asset Held for Sale”. See ~~Note 21~~ ~~for details.~~


(In thousands)	March 31, 2022		June 30, 2021
Buildings and facilities	$	95,049	$	94,846
Machinery, vehicles and equipment	219,893		223,579

Capitalized software	25,238		24,218
Office furniture and equipment	14,240		13,834
	$	354,420	$	356,477
Accumulated depreciation	(224,761)		(218,341)
Land	11,955		11,955
Property, plant and equipment, net	$	141,614	$	150,091

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

~~Farmer Bros. Co.~~

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


(In thousands)	March 31, 2022		June 30, 2021
Coffee Brewing Equipment	$	94,917	$	97,105
Accumulated depreciation	(70,039)		(70,705)
Coffee Brewing Equipment, net	$	24,878	$	26,400

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) 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


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	2022		2021		2022		2021
Depreciation expense in COGS	$	1,829	$	2,263	$	5,698	$	6,957
CBE Costs excl. depreciation exp	6,479		5,499		18,242		17,035

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 as of June 30, 2020.~~

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

March 31, 2021 June 30, 2020
(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:
Customer relationships 6.0 $ 33,003 $ (19,142) $ 13,861 $ 33,003 $ (17,492) $ — $ 15,511
Non-compete agreements 0.7 220 (192) 28 220 (161) — 59
Recipes 2.6 930 (586) 344 930 (487) — 443
Trade name/brand name 2.7 510 (411) 99 510 (383) — 127
Total amortized intangible assets $ 34,663 $ (20,331) $ 14,332 $ 34,663 $ (18,523) $ — $ 16,140
Unamortized intangible assets:
Trademarks, trade names and brand name with indefinite lives $ 4,522 $ — $ 4,522 $ 10,328 $ — $ (5,806) $ 4,522
Total unamortized intangible assets $ 4,522 $ — $ 4,522 $ 10,328 $ — $ (5,806) $ 4,522
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 was~~ ~~$0.6 million in each period.~~ ~~Aggregate amortization expense for the nine months ended March 31, 2021 and 2020 was~~ ~~$1.8 million in each period.~~

The Company 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 assesses the recoverability of certain finite-lived intangible assets. As a result of the Company’s annual test of impairment during for the ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~March 31, 2021, no impairment was recorded.~~

1813

Farmer Bros. Co.

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

Note 9. Intangible Assets

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


		March 31, 2022				June 30, 2021
(In thousands)	Weighted Average Amortization Period as of March 31, 2022	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Amortized intangible assets:
Customer relationships	5.0	$	33,003	$	(21,342)	$	11,661	$	33,003	$	(19,692)	$	13,311
Non-compete agreements	0.0	220		(220)		—		220		(202)		18
Recipes	1.6	930		(719)		211		930		(619)		311
Trade name/brand name	1.7	510		(448)		62		510		(420)		90
Total amortized intangible assets		$	34,663	$	(22,729)	$	11,934	$	34,663	$	(20,933)	$	13,730
Unamortized intangible assets:
Trademarks, trade names and brand name with indefinite lives		$	4,522	$	—	$	4,522	$	4,522	$	—	$	4,522
Total unamortized intangible assets		$	4,522	$	—	$	4,522	$	4,522	$	—	$	4,522
Total intangible assets		$	39,185	$	(22,729)	$	16,456	$	39,185	$	(20,933)	$	18,252

Aggregate amortization expense for the three months ended March 31, 2022 and 2021 was $0.6 million in each period. Aggregate amortization expense for the nine months ended March 31, 2022 and 2021 was $1.8 million in each period.

Note 10. Employee Benefit Plans

Single Employer Pension Plans

~~Effective June 30, 2011,~~As of March 31, 2022, the Company ~~amended its~~has two defined benefit pension plans ~~freezing~~for certain employees, the "Farmer Bros. Plan" and the “Hourly Employees' Plan”. The Company froze benefit ~~for all participants. As of~~accruals and participation in these plans effective June 30, 2011 and October 1, 2016, respectively. After the ~~effective date,~~plan freezes, participants do not accrue any benefits under the ~~plans,~~plan, and new hires are not eligible to participate in the ~~plans.~~plan.

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


		Three Months Ended March 31,				Nine Months Ended March 31,
		2021		2020		2021		2020			Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	(In thousands)									(In thousands)	2022		2021		2022		2021
Service cost	Service cost	$	0	$	0	$	0	$	0	Service cost	$	—	$	—	$	—	$	—
Interest cost	Interest cost	859		1,059		2,578		3,177		Interest cost	848		859		2,544		2,578
Expected return on plan assets	Expected return on plan assets	(1,038)		(1,102)		(3,113)		(3,305)		Expected return on plan assets	(1,237)		(1,038)		(3,711)		(3,113)
Amortization of net loss(1)	Amortization of net loss(1)	502		370		1,507		1,109		Amortization of net loss(1)	339		502		1,017		1,507

Net periodic benefit cost		$	323	$	327	$	972	$	981
Net periodic benefit (credit) cost										Net periodic benefit (credit) cost	$	(50)	$	323	$	(150)	$	972

___________

(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, 2021	June 30, 2020		March 31, 2022	June 30, 2021
Discount rate	Discount rate	2.55%	3.45%	Discount rate	2.60%	2.55%
Expected long-term return on plan assets	Expected long-term return on plan assets	6.25%	6.75%	Expected long-term return on plan assets	6.25%	6.25%

Multiemployer Pension Plans

The Company participates in ~~two~~one multiemployer defined benefit pension ~~plans~~plan that ~~are~~is union sponsored and collectively bargained for the benefit of certain employees subject to collective bargaining agreements, ~~of which~~called the Western Conference of Teamsters Pension Plan ("WCTPP") ~~is individually significant.~~. The Company makes contributions to ~~these plans~~this plan 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

~~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

1914

Farmer Bros. Co.

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

worked by the participants in accordance with the provisions of negotiated labor contracts. The company also contributes to two defined contribution pension plans (All Other Plans) that are union sponsored and collectively bargained for the benefit of certain employees subject to collective bargaining agreements.

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


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	2022		2021		2022		2021
Contributions to WCTPP	$	275	$	260	$	679	$	783
Contributions to All Other Plans	7		12		19		26

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 January 31, 2025.

401(k) Plan

~~The Company’s~~Farmer Bros. Co. 401(k) Plan (the “401(k) Plan”) is available to all eligible employees. The 401(k) Plan match portion is available to all eligible employees who have worked more than 1,000 hours during a calendar year and were employed at the end of the calendar year. Participants in the 401(k) Plan may choose to contribute a percentage of their annual pay subject to the maximum contribution allowed by the Internal Revenue Service. The Company's matching contribution is discretionary, based on approval by the Company's Board of Directors.

In March 2020, due to the impact the COVID-19 pandemic had on our business and financial results, the Company elected to suspend the 401(k) Plan matching contribution for non-union employees.

Beginning in July 2021, the Company re-instated a 401(k) Plan matching program (the “401(k) Match”) for non-union employees, by matching 50% of any non-union employee's annual contribution to the 401(k) Plan, up to 6% of such employee's eligible income, which is substantially similar to the program prior to its suspension in March 2020.

Beginning in January 2022, the Company amended the 401(k) Match, whereby the Company on a quarterly basis, will contribute, instead of cash, shares of the Company’s common stock., par value $1.00 per share (the “Common Stock”) with a value equal to 50% of any non-union employee's annual contribution to the 401(k) Plan, up to 6% of such employee's eligible income . The terms of the match are substantially the same as the safe-harbor non-elective contribution. The Company recorded matching contributions of $0.5 million and ~~$1.9~~$1.6 million ~~respectively,~~ in operating expenses in the three and nine months ended March 31, ~~2020. Effective March 31, 2020, the Company temporarily suspended its 401K matching program in response to the COVID-19 pandemic.~~

2022.

Additionally, the Company makes an annual safe harbor non-elective contribution of ~~shares of the Company’s common stock~~Common Stock equal to 4% of each eligible participant’s annual plan compensation. During the three ~~and nine~~ months ended March 31, 2022 and 2021, the Company contributed a total of ~~51,415~~90,329 and ~~322,100~~162,259 of shares ~~of the Company’s common stock~~Common Stock with a value of ~~$0.5~~$0.6 million and ~~$1.8~~$0.8 million, respectively, to eligible participants’ annual plan compensation.

During the ~~three and~~ nine months ended March 31, ~~2020,~~2022 and 2021, the Company contributed a ~~total~~total of ~~104,247~~224,363 and ~~213,896~~347,356 shares of ~~the Company’s common stock~~Common Stock with a value of ~~$0.9~~$1.8 million and ~~$2.3~~$1.4 million, respectively, to eligible ~~participants’~~participants’ annual plan compensation.

Effective January 1, 2022, the Company amended the 401(k) Plan to, among other things, increase the number of shares of Common Stock, available for issuance under the 401(k) Plan by 2,000,000 additional shares of Common Stock and permit participants in the 401(k) Plan to invest a portion of their 401(k) Plan accounts into Common Stock.

Effective January 1, 2022, the Company merged the Company’s Employee Stock Ownership Plan (“ESOP”) into the 401(k) Plan and transferred all of the assets and shares in the ESOP to the 401(k) Plan.

Farmer Bros. Co.

Notes to Unaudited Consolidated Financial Statements (continued)

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 December 31, 2020. The plan 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 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.~~January 1, 2021. As a result, the re-measurement generated a prior service credit. This credit, ~~of $13.4 million which~~along with actuarial gains, were amortized over the remaining 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 remaining months of the plan. Also, the Company recognized a one-time non-cash curtailment credit of $5.8 million for the fiscal year ended June 30, 2020. As of December 31, 2020, thethrough January 1, 2021. The Retiree Medical Plan ~~has~~is now terminated.

The Company ~~continues to provide~~provides a postretirement death benefit ~~(“Death~~(the “Death Benefit”) Plan) 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. In June 2021, the Company amended the Death Benefit Plan effective immediately, which triggered re-measurement of the plan. In conjunction with the amendment, the Company created a new Executive Death Benefit Plan (the “Executive Death Benefit Plan”) for a small group of participants in the Death Benefit Plan. Under the Executive Death Benefit Plan, the participants receive the same benefits they would have received under the Death Benefit Plan.

~~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 Plan for the three and nine months ended March 31, ~~2021~~2022 and ~~2020. Net periodic postretirement benefit cost was based on employee census information and asset information as of June 30, 2020.~~2021.

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,
(In thousands)	2022		2021		2022		2021
Components of Net Periodic Postretirement Benefit Cost (Credit):
Service cost	$	—	$	5	$	—	$	14
Interest cost	7		73		20		220

Amortization of net gain	2		80		8		(5,376)

Amortization of prior service credit	—		—		—		(8,961)
Net periodic postretirement benefit cost (credit)	$	9	$	158	$	28	$	(14,103)

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 year
	2022	2021
Retiree Medical Plan discount rate	N/A	0.06%
Death Benefit Plan discount rate	2.72%	2.87%

~~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, 2021				June 30, 2020								March 31, 2022				June 30, 2021
(In thousands)	(In thousands)	Debt Origination Date	Maturity	Original Borrowing Amount	Carrying Value		Weighted Average Interest Rate		Carrying Value		Weighted Average Interest Rate		(In thousands)	Debt Origination Date	Maturity	Principal Borrowing Amount	Carrying Value		Weighted Average Interest Rate (1)		Carrying Value		Weighted Average Interest Rate
Credit Facility		various	11/6/2023	N/A	$	88,000	6.41	%	$	122,000	4.91	%
Revolver													Revolver	Various	4/25/2025	N/A	$	54,500	2.75	%	$	43,500	6.21	%
Term Loan													Term Loan	4/26/2021	4/25/2025	$47,500	44,694		7.50	%	45,278		7.50	%
Total													Total				$	99,194			$	88,778

~~On July 23, 2020 (the "Effective Date"), pursuant to Amendment No. 3 to Amended and Restated Credit Agreement (the “Third Amendment”),~~__________

(1) The weighted average interest rate excludes the Company amended its existing senior secured revolving credit facility (such facility as amended to date, including pursuant to the Third Amendment, the “Amended Revolving Facility”) with certain financial institutions.

~~The Third Amendment, among other things:~~

1.~~retained the amount of revolving commitments under the 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 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~~fixed rate 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) 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~~de-designated Amended Rate ~~+ 4.50% to Adjusted LIBO Rate + 5.50% per annum and fixed the commitment fee at 0.50%;~~

~~10.~~provided for the revolving commitments to be reduced upon the occurrence of certain asset dispositions and incurrence of non-permitted indebtedness and imposed additional restrictions on the Company’s ability to utilize certain other negative covenant baskets; and

~~11.added a requirement to provide mortgages and related mortgage instruments with respect to certain specified real property owned by the Company.~~

The Amended Revolving Facility is subject to a variety of affirmative and negative covenants of types customary in a senior secured assets-based lending facility and it has no scheduled payback required on the principal prior to the maturity date on November 6, 2023.

~~As of March 31, 2021, the Company was in compliance with all of the covenants under the Amended Revolving 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 4~~ ~~for details.~~

~~Farmer Bros. Co.~~

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

Swap

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 underentered into 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.

Farmer Bros. Co.

Notes to Unaudited Consolidated Financial Statements (continued)

The following is a summary description of the Revolver Credit Facility Agreement and the Revolver Security Agreement key items. Please refer asto Exhibit 10.1 ~~and Exhibit 10.2 in this~~to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 for the full text of the agreements.

The Revolver Credit Facility Agreement, among other things ~~include:~~

includes:

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;~~2025, and has no scheduled payback required on the principal prior to the maturity date;

4.~~fully collateralized~~full collateralization 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,~~Eligible Inventory, minus (c) applicable reserve;

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

7.InFinancial covenants, in the event that ~~Borrowers’~~Borrowers' availability to borrow under the Revolver falls below $10.0 million requiring ~~, 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 is a summary description of the Term Credit Facility Agreement and the Term Security Agreement key items. Please refer to Exhibit 10.3 ~~in this~~to our Quarterly Report on Form 10-Q for quarter ended March 31, 2021 for the full text of the agreements.

The Term Credit Facility Agreement, among other things ~~include:~~

includes:

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~~full collateralization 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~~interest under the Term Loan is either (a) LIBOR + 6.5% per annum, with LIBOR Floor 1.0%, or (b) base rate + 5.50% per annum, with a 3% floor on base rate; and

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~~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.

During the quarter ended March 31, 2022, the Company commenced quarterly principal payments due on the Term Loan debt obligation in the amount of $950 thousand. At March 31, 2022, the Company had outstanding borrowings on the Revolver Credit Facility of $54.5 million and had utilized $4.1 million of the letters of credit sublimit. At March 31, 2022, we had $22.3 million available on our Revolver Credit Facility.

Farmer Bros. Co.

Notes to Unaudited Consolidated Financial Statements (continued)

~~In connection~~

As of March 31, 2022, the Company was in compliance with all of the ~~new~~financial covenants under the Revolver Credit Facility Agreement and the Term Credit Facility Agreement (collectively, the “Credit Facilities”),. Furthermore, the Company ~~also~~believes it will be in compliance with the related financial covenants under these agreements for the next twelve months.

In connection with the Credit Facilities, the Company executed ~~a new ISDA agreement to transfer its interest swap to Wells Fargo (“~~the 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.~~Swap. 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~~Employee Stock Ownership Plan (“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~~Effective January 1, 2022, the Company merged the ESOP plan ~~trustee for allocation among participants using a compensation-based formula. Subject to vesting requirements, allocated shares are owned by participants~~into the 401(k) Plan and transferred all of the assets and shares in the ESOP to the 401(k) Plan. As of March 31, 2022, there are ~~held by~~no shares left in 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

ESOP plan.

~~Farmer Bros. Co.~~

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

Note 13. Share-based Compensation

Farmer Bros. Co. Amended and Restated 2017 Long-Term Incentive Plan (the “2017 Plan”)

As of March 31, ~~2021,~~2022, there were 1,616,697 ~~666,665~~ shares available under the 2017 Plan including shares that were forfeited under the prior plans for future issuance.

On December 15, 2021, the Company’s stockholders approved an amendment (the “Plan Amendment”) to the 2017 Plan, which (i) increased the number of shares of Common Stock available for grant under the Plan by 1,500,000 additional shares of Common Stock and (ii) allows the Company to utilize awards to attract and incentivize non-employee consultants.

Farmer Bros. Co. 2020 Inducement Incentive Award Plan (the “2020 Inducement Plan”)

As of March 31, ~~2021,~~2022, there were ~~171,371~~138,520 shares available under the 2020 Inducement 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~~ There were no NQOs granted during the nine months ended March 31, ~~2021:~~


	~~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~~		%

2022.

The following table summarizes NQO activity for nine months ended March 31, ~~2021:~~2022:


Outstanding NQOs:	Outstanding NQOs:	Number of NQOs	Weighted Average Exercise Price ($)	Weighted Average Remaining Life (Years)	Aggregate Intrinsic Value ($ in thousands)	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
Outstanding at June 30, 2021						Outstanding at June 30, 2021	513,325	13.06	5.17	$	706
Granted	Granted	29,761	6.72	—	—	Granted	—	—	—	—
Exercised	Exercised	0	0	—	0	Exercised	—	—	—	—
Forfeited	Forfeited	(11,358)	16.62	—	—	Forfeited	(19,173)	16.24	—	—
Expired	Expired	(7,938)	28.51	—	—	Expired	(27,028)	20.67	—	—
Outstanding at March 31, 2021		539,423	13.25	5.55	440
Exercisable at March 31, 2021		153,230	16.13	5.24	0
Outstanding at March 31, 2022						Outstanding at March 31, 2022	467,124	12.52	4.50	$	35
Exercisable at March 31, 2022						Exercisable at March 31, 2022	277,762	13.60	4.33	$	12

~~The weighted-average grant-date fair value of options granted during nine months ended March 31, 2021 was~~ ~~$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 ~~$10.44~~Common Stock of $7.12 at March 31, ~~2021~~2022 and ~~$7.34~~$12.69 at June 30, ~~2020,~~2021, 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 nine months ended March 31, 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~~ ~~$129.3 thousand~~ ~~in proceeds from exercise of vested NQOs during the nine months ended March 31, 2020.~~

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

2618

Farmer Bros. Co.

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

There were no options exercised during nine months ended March 31, 2022 and 2020.

At March 31, 2022 and June 30, 2021, respectively, there was $0.4 million and $0.9 million of unrecognized NQO compensation cost. The unrecognized NQO compensation cost at March 31, 2022 is expected to be recognized over the weighted average period of eight months. Total compensation expense for NQOs was $95.3 thousand and $167.7 thousand for the three months ended March 31, 2022 and 2021, respectively and $432.9 thousand and $586.8 thousand for the nine months ended March 31, 2022 and 2021, respectively.

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, ~~2021:~~2022:

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, 2021	11,750	29.76	0.71	$	—
Granted	—	—	—	—
Exercised	—	—	—	—
Forfeited	—	—	—	—
Expired	(9,538)	29.51	—	—
Outstanding at March 31, 2022	2,212	30.91	1.07	$	—
Exercisable at March 31, 2022	2,211	30.91	1.07	$	—

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 $~~10.44~~7.12 at March 31, ~~2021~~2022 and ~~$7.34~~$12.69 at June 30, ~~2020,~~2021, 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, 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 nine months ended March 31, ~~2021~~2022 and ~~2020.~~2021.

At March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, there was no unrecognized PNQ compensation cost. There was no compensation expense related to PNQs in the three ~~months ended March 31, 2021~~ and ~~2020. Total compensation expense related to PNQs in the~~ nine months ended March 31, ~~2021~~2022 and ~~2020 was zero and $18.3 thousand, respectively.~~

2021.

Restricted Stock

The following table summarizes restricted stock activity for the nine months ended March 31, ~~2021:~~2022:

Outstanding and Nonvested Restricted Stock Awards: Shares
Awarded Weighted
Average
Grant Date
Fair Value
($)
Outstanding and nonvested at June 30, 2020 218,604 13.00
Granted 709,473 5.05
Vested/Released (81,254) 13.56
Cancelled/Forfeited (37,505) 3.81
Outstanding and nonvested at March 31, 2021 809,318 5.31


Outstanding and Nonvested Restricted Stock Awards:	Shares Awarded	Weighted Average Grant Date Fair Value ($)
Outstanding and nonvested at June 30, 2021	681,570	$	10.47
Granted	423,408	7.61
Vested/Released	(260,011)	5.02
Cancelled/Forfeited	(105,072)	7.00
Outstanding and nonvested at March 31, 2022	739,895	$	6.78

The total grant-date fair value of restricted stock granted during the nine months ended March 31, ~~2021~~2022 was $~~3.6~~3.5 million.

At March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, there was $~~3.6~~4.0 million and ~~$1.7~~$2.8 million, respectively, of unrecognized compensation cost related to restricted stock. The unrecognized compensation cost related to restricted stock at March 31, ~~2021~~2022 is expected to be recognized over the weighted average period of ~~1.5~~1.4 years. Total compensation expense for restricted stock was $~~0.4~~0.5 million and ~~$0.3~~$0.4 million, respectively, in the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021. Total compensation expense for restricted stock was ~~$1.5~~$1.5 million and ~~$0.7~~$1.5 million,, respectively, in the nine months ended March 31, ~~2021~~2022 and ~~2020.~~

2021.

2719

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, ~~2021:~~2022:


Outstanding and Nonvested PBRSUs:	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, 2020		81,337	15.78
Outstanding and nonvested at June 30, 2021				Outstanding and nonvested at June 30, 2021	354,466	$	6.06
Granted(1)	Granted(1)	306,095	4.10	Granted(1)	158,659	8.91
Vested/Released	Vested/Released	(805)	31.70	Vested/Released	(381)	25.04
Cancelled/Forfeited	Cancelled/Forfeited	(4,232)	18.50	Cancelled/Forfeited	(17,671)	3.11
Outstanding and nonvested at March 31, 2021		382,395	6.30
Outstanding and nonvested at March 31, 2022				Outstanding and nonvested at March 31, 2022	495,073	$	5.14

_____________

(1) The target number of PBRSUs is presented in the table. Under the terms of the awards, the recipient may earn between 0% and ~~150%~~200% of the target number of PBRSUs depending on the extent to which the Company meets or exceeds the achievement of the applicable financial performance goals.

The total grant-date fair value of PBRSUs granted during the nine months ended March 31, ~~2021~~2022 was $~~1.3~~1.4 million.

At March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, there was $~~1.2~~1.9 million and ~~$0.5~~$1.0 million, respectively, of unrecognized PBRSU compensation cost. The unrecognized PBRSU compensation cost at March 31, ~~2021~~2022 is expected to be recognized over the weighted average period of ~~2.7~~2.2 years. Total compensation expense for PBRSUs was ~~$91.1~~$173.3 thousand and $192.5 thousand, respectively, for the three months ended March 31, 2022 and 2021. Total compensation expense for PBRSUs was $0.5 million for the

~~As of~~nine months ended March 31, 2022. For the nine months ended 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 the three and 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 of Common Stock 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.~~price of Common Stock.

The following table summarizes CSRSU activity for the nine months ended March 31, ~~2021:~~2022:


Outstanding and Nonvested CSRSUs:	Outstanding and Nonvested CSRSUs:	CSRSUs Awarded	Weighted Average Grant Date Fair Value ($)	Outstanding and Nonvested CSRSUs:	CSRSUs Awarded	Weighted Average Grant Date Fair Value ($)
Outstanding and nonvested at June 30, 2020		0	0
Outstanding and nonvested at June 30, 2021				Outstanding and nonvested at June 30, 2021	185,602	$	4.31
Granted	Granted	232,002	4.31	Granted	85,851	8.91
Vested/Released	Vested/Released	0	0	Vested/Released	(52,583)	4.31
Cancelled/Forfeited	Cancelled/Forfeited	(15,660)	4.31	Cancelled/Forfeited	(59,211)	5.52
Outstanding and nonvested at March 31, 2021		216,342	4.31
Outstanding and nonvested at March 31, 2022				Outstanding and nonvested at March 31, 2022	159,659	$	6.34

The total grant-date fair value of CSRSUs granted during the nine months ended March 31, 2022 was $0.8 million.

At March 31, 2022 and June 30, 2021, there was $1.0 million.

~~Farmer Bros. Co.~~

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

~~At March 31, 2021, there was~~ ~~$2.0~~ and $2.0 million, respectively, of unrecognized compensation cost related to CSRSU. The unrecognized compensation cost related to CSRSU at March 31, ~~2021~~2022 is expected to be recognized over the weighted average period of ~~2.7~~2.0 years. Total compensation expense for CSRSUs was $25.0 thousand and $142.0 thousand, respectively for the three and nine months ended March 31, 2022. Total compensation expense for CSRSUs was $192.5 thousand and ~~$213.1~~$213.1 thousand in the three and nine months ended March 31, ~~2021, respectively.~~

2021.

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.

Farmer Bros. Co.

Notes to Unaudited Consolidated Financial Statements (continued)

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, 2022 and 2021, ~~the Company reversed the previously recognized nonvested accrued liabilities of~~ ~~$102.2 thousand~~there was no liability and no unrecognized PCA compensation cost since it was deemed not ~~probabl~~eprobable that the Company will achieve the target performance conditions.

~~At March 31, 2021, there was no unrecognized PCA compensation cost~~ ~~since it was deemed not probable that the Company will achieve the target performance conditions. Total compensation expense for PCAs was~~ ~~$29.7 thousand~~ ~~and~~ ~~$46.5 thousand, respectively, for the three and nine months ended March 31, 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)	(In thousands)	March 31, 2021		June 30, 2020		(In thousands)	March 31, 2022		June 30, 2021
Accrued postretirement benefits		$	500	$	744
Cumulative preferred dividends, undeclared and unpaid						Cumulative preferred dividends, undeclared and unpaid	$	2,496	$	2,051
Accrued workers’ compensation liabilities	Accrued workers’ compensation liabilities	1,413		1,466		Accrued workers’ compensation liabilities	989		1,016
Cumulative preferred dividends, undeclared and unpaid (1)		1,906		1,477
Finance lease liabilities	Finance lease liabilities	193		0		Finance lease liabilities	193		192

Other (2)		2,372		3,115
Other (1)						Other (1)	4,156		3,166
Other current liabilities	Other current liabilities	$	6,384	$	6,802	Other current liabilities	$	7,834	$	6,425

_________

(1) ~~Represents the cumulative preferred dividends, undeclared and unpaid. Previously accrued long-term portion has been reclassified to current liabilities.~~

~~(2)~~ Includes accrued property taxes, sales and use taxes and insurance ~~liabilities.~~

liabilities other than workers compensation.

Note 15. Other Long-Term Liabilities

Other long-term liabilities include the following:


(In thousands)	(In thousands)	March 31, 2021		June 30, 2020		(In thousands)	March 31, 2022		June 30, 2021

Derivative liabilities—noncurrent	Derivative liabilities—noncurrent	$	1,707	$	2,859	Derivative liabilities—noncurrent	$	—	$	1,653
Deferred compensation(1)		1,629		1,170

Deferred compensation (1)						Deferred compensation (1)	215		1,716
Finance lease liabilities						Finance lease liabilities	447		563
Deferred income taxes and other liabilities~~(2)~~	Deferred income taxes and other liabilities~~(2)~~	1,423		1,494		Deferred income taxes and other liabilities~~(2)~~	1,160		1,160
Finance lease liabilities		593		9
Other long-term liabilities	Other long-term liabilities	$	5,352	$	5,532	Other long-term liabilities	$	1,822	$	5,092

___________

(1) Includes payroll taxes and ~~performance cash awards~~cash-settled restricted stock units 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,							Three Months Ended March 31,						Nine Months Ended March 31,
		2021			2020			2021			2020				2022			2021			2022			2021
Income tax (benefit) expense		$	(60)		$	(1,034)		$	13,785		$	(1,222)
Income tax expense (benefit)														Income tax expense (benefit)	$	90		$	(60)		$	278		$	13,785
Effective tax rate	Effective tax rate	(0.4)		%	2.5		%	(57.7)		%	4.3		%	Effective tax rate	(2.3)		%	0.4		%	(2.4)		%	(57.7)		%

~~The 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 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. The difference between the Company’s effective tax rate and the federal statutory rate in each period presented primarily results from state tax expenses and changes in the Company’s valuation allowance. The effective tax rates for the nine month periods ended March 31, 2021 were also affected by tax expense of $13.5 million related to previously deferred non-cash tax expense in accumulated other comprehensive income associated with gains on the postretirement medical plan in prior years.

Tax expense in the three months ended March 31, 2022 was $89.5 thousand compared to income tax benefit of $60.0 thousand in the three months ended March 31, 2021. Tax expense in the nine months ended March 31, 2022 was $278.0 thousand compared to $13.8 million in the nine months ended March 31, 2021, which primarily relates to $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.

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, ~~2021 and June 30, 2020,~~2022, the Company is no longer subject to income tax audits by taxing authorities for any years prior to 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.

3121

Farmer Bros. Co.

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

prior to 2019. 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 consolidated financial statements.

Note 17. Net ~~Income (loss)~~Loss Per Common Share

Basic net ~~income~~ (loss) per common share is calculated by dividing net ~~income (loss)~~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)~~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 the Company’s Series A Convertible Participating Cumulative Perpetual Preferred Stock, par value $1.00 per share (“Series A Preferred ~~Stock,~~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 net earnings ~~(loss)~~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)	2022		2021		2022		2021
Undistributed net loss available to common stockholders	$	(3,993)	$	(13,234)	$	(11,854)	$	(36,601)
Undistributed net loss available to nonvested restricted stockholders and holders of convertible preferred stock	(196)		(594)		(474)		(1,507)
Net loss available to common stockholders - basic	$	(4,189)	$	(13,828)	$	(12,328)	$	(38,108)

Weighted average common shares outstanding - basic	18,289,815		17,756,619		18,118,469		17,569,026
Effect of dilutive securities:
Shares issuable under stock options	—		—		—		—
Shares issuable under PBSRUs	—		—		—		—
Shares issuable under convertible preferred stock	—		—		—		—
Weighted average common shares outstanding - diluted	18,289,815		17,756,619		18,118,469		17,569,026
Net loss available to common stockholders per common share—basic	$	(0.23)	$	(0.78)	$	(0.68)	$	(2.17)
Net loss available to common stockholders per common share—diluted	$	(0.23)	$	(0.78)	$	(0.68)	$	(2.17)

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


		Three Months Ended March 31,		Nine Months Ended March 31,			Three Months Ended March 31,		Nine Months Ended March 31,
		2021	2020	2021	2020		2022	2021	2022	2021
Shares issuable under stock options	Shares issuable under stock options	421,167	485,513	421,167	327,192	Shares issuable under stock options	467,124	421,167	471,380	421,167
Shares issuable under convertible preferred stock	Shares issuable under convertible preferred stock	433,373	418,531	433,373	418,531	Shares issuable under convertible preferred stock	448,741	433,373	448,741	433,373
Shares issuable under PBRSUs	Shares issuable under PBRSUs	185,236	98,946	104,271	75,926	Shares issuable under PBRSUs	495,073	185,236	454,110	104,271

~~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 acquisition of substantially all of the assets of the Boyd Coffee ~~acquisition.~~Company. At March 31, ~~2021,~~2022, 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	$	1,170	$	17,196	$	2,496	$	17,196

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

Farmer Bros. Co.

Notes to Unaudited Consolidated Financial Statements (continued)

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 through Direct-store-delivery (“DSD”) to the Company’s customers at their place of business and ~~direct~~Direct ship from the Company’s warehouse to the customer’s warehouse, facility or 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,								Nine Months Ended March 31,									Three Months Ended March 31,								Nine Months Ended March 31,
		2021				2020				2021				2020					2022				2021				2022				2021
(In thousands)	(In thousands)	$		% of total		$		% of total		$		% of total		$		% of total		(In thousands)	$		% of total		$		% of total		$		% of total		$		% of total
Net Sales by Product Category:	Net Sales by Product Category:																	Net Sales by Product Category:
Coffee (Roasted)	Coffee (Roasted)	$	60,771	65.2	%	$	84,300	65.3	%	$	196,353	66.6	%	$	267,847	63.7	%	Coffee (Roasted)	$	77,503	64.9	%	$	60,771	65.2	%	$	223,607	64.6	%	$	196,352	66.6	%
Coffee (Frozen Liquid)		3,890		4.2	%	7,044		5.5	%	10,510		3.6	%	23,528		5.6	%
Tea (Iced & Hot)		4,726		5.1	%	6,701		5.2	%	11,251		3.8	%	21,969		5.2	%
Tea & Other Beverages (1)																		Tea & Other Beverages (1)	21,033		17.6	%	17,146		18.4	%	62,961		18.2	%	51,790		17.5	%
Culinary	Culinary	10,551		11.3	%	12,954		9.9	%	32,471		11.0	%	42,315		10.1	%	Culinary	13,855		11.6	%	10,551		11.3	%	40,843		11.8	%	32,471		11.0	%
Spice		4,414		4.7	%	5,262		4.1	%	13,424		4.6	%	17,594		4.2	%
Other beverages(1)		8,530		9.2	%	12,290		9.5	%	30,028		10.1	%	42,322		10.1	%
Other revenues(2)		0		0	%	0		0	%	0		0	%	2,701		0.6	%
Spices																		Spices	5,747		4.8	%	4,414		4.8	%	16,005		4.6	%	13,424		4.6	%
Net sales by product category	Net sales by product category	92,882		99.7	%	128,551		99.5	%	294,037		99.7	%	418,276		99.5	%	Net sales by product category	118,138		98.9	%	92,882		99.7	%	343,416		99.2	%	294,037		99.7	%
Fuel surcharge		270		0.3	%	588		0.5	%	956		0.3	%	1,961		0.5	%
Delivery Surcharge																		Delivery Surcharge	1,260		1.1	%	270		0.3	%	2,789		0.8	%	956		0.3	%
Net sales	Net sales	$	93,152	100.0	%	$	129,139	100.0	%	$	294,993	100.0	%	$	420,237	100.0	%	Net sales	$	119,398	100.0	%	$	93,152	100.0	%	$	346,205	100.0	%	$	294,993	100.0	%

____________

(1)Includes all beverages other than roasted coffee, including 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, ~~2021.~~2022. Receivables from contracts with customers are included in “Accounts receivable, net” on the Company’s ~~condensed~~ consolidated balance sheets. At March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, “Accounts receivable, net” included, ~~$36.9~~$45.9 million and ~~$40.7~~$37.2 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~~20, “Commitments and ~~Contingencies~~”Contingencies” in the Notes to Consolidated Financial Statements in the ~~2020~~2021 Form 10-K. During the nine months ended March 31, ~~2021,~~2022, other than the following, or as otherwise disclosed ~~in these footnotes in the current Form 10-Q,~~herein, there were no material changes in the Company’s commitments and contingencies.

Purchase Commitments

As of March 31, ~~2021,~~2022, the Company had committed to purchase green coffee inventory totaling ~~$38.3~~$87.0 million under fixed-price contracts, ~~$7.9~~and $19.4 million in ~~other~~ inventory ~~under non-cancelable purchase orders~~ and~~$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 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 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.

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

Farmer Bros. Co.

Notes to Unaudited Consolidated Financial Statements (continued)

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 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. Due to COVID 19 restrictions, the Court continued the hearing on the nine motions until July 16, 2020. At the hearing, the Court denied three of CERT’s motions for summary adjudication that challenged the OEHHA rulemaking, and rescheduled the balance of the pending motions for August 10, 2020. Subsequent to the hearing on January 21, 2020, Plaintiff 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 has responded to the discovery requests but Plaintiff has filed a motion to compel further answers to discovery 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 filed its responsive brief on August 27, 2021. CERT’s response was filed on November 15, 2021. With respect to CERT’s second appeal, the ~~Company is unable to predict~~Company’s Respondent Brief was filed on November 18, 2021. CERT’s reply in the ~~timing of the final ruling. In addition, the~~second appeal was filed February 4, 2022. The Company believes that the likelihood that the Company will ultimately incur a material loss in connection with this 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.

Note 21. Sales of Assets

Sale of Branch Property

During the nine months ended March 31, ~~2021,~~2022, the Company completed the sale of the following branch ~~properties:~~properties, none of which were leased back:


(In thousands)	(In thousands)											(In thousands)
Name of Branch Property	Name of Branch Property	Date Sold	Sales Price		Net Proceeds		Gain (loss)		Long-Term Leaseback	Lease Term	Monthly Base Rent	Name of Branch Property	Date Sold	Sales Price		Net Proceeds		Gain on Sale
Austin, Texas		11/18/2020	$	1,360	$	1,239	$	1,045	No	N/A	N/A
Bishop, California		12/4/2020	$	220	$	204	$	204	No	N/A	N/A

Santa Ana, California												Santa Ana, California	7/2/2021	$	4,299	$	4,072	$	3,571
Santa Fe Springs, California												Santa Fe Springs, California	7/7/2021	2,650		2,507		1,509
San Antonio, Texas												San Antonio, Texas	11/2/2021	898		820		729

~~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 the aggregate assets held for sale are presented as a separate line items in the condensed consolidated condensed balance sheet. The branch properties did not meet the accounting guidance criteria to be classified as discontinued operations.

~~The following table presents net book value related to the major classes of assets that were classified as held for 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, 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:

~~On April 26, 2~~021, 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.~~

3624


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

~~Certain statements contained in this~~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, 2020 filedother documents we file with the Securities and Exchange Commission ~~(the “SEC”~~(“SEC”) contain forward-looking statements that are based on ~~September 11, 2020 (the “2020 Form 10-K”)~~current expectations, estimates, forecasts and ~~Part II, Item 1A~~projections about us, our future performance, our financial condition, our products, our business strategy, our beliefs and our management’s assumptions. In addition, we, or others on our behalf, may make forward-looking statements in press releases or written statements, or in our communications and discussions with investors and analysts in the normal course of ~~this report.~~business through meetings, webcasts, phone calls and conference calls. These forward-looking statements can be identified by the use of words like “anticipates,” “estimates,” “projects,” “expects,” “plans,” “believes,” “intends,” “will,” “could,” “may,” “assumes” and other words of similar meaning. ~~Owing~~These statements are based on management’s beliefs, assumptions, estimates and observations of future events based on information available to our management at the time the statements are made and include any statements that do not relate to any historical or current fact. These statements are not guarantees of future performance and they involve certain risks, uncertainties ~~inherent in forward-looking statements, actual~~and assumptions that are difficult to predict. Actual outcomes and results ~~could~~may differ materially from ~~those~~what is expressed, implied or forecast by our forward-looking statements due in part to the risks, uncertainties and assumptions set forth in ~~forward-looking statements. We intend these forward-looking statements to speak only at~~Part I, Item 1A of our Annual Report on Form 10-K for the ~~time~~fiscal year ended June 30, 2021 filed with the SEC on September 10, 2021 (the “2021 Form 10-K”) and Part II, Item 1A of this Quarterly Report on Form 10-Q, as well as those discussed elsewhere in this report and ~~do not undertake~~other factors described from time to ~~update or revise these statements as more information becomes available except as required under federal securities laws and~~time in our filings with 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, the duration and magnitude of the ~~COVID-19 pandemic’s~~ disruption to ~~the Company’s~~our business and customers from the COVID-19 pandemic (including the effects of emerging and novel variants of the virus and any virus containment measures such as stay-at-home orders or government mandates) and severe winter weather, levels of consumer confidence in national and local economic business conditions, the duration and magnitude of the pandemic’s impact on ~~unemployment rates,~~labor conditions, the success of ~~the Company’s~~our strategy to recover from the effects of the pandemic, the success of ~~the Company's~~our turnaround strategy, the execution of ~~the~~our five ~~key~~strategic initiatives, the impact of capital improvement projects, the adequacy and availability of capital resources to fund ~~the Company’s~~our existing and planned business operations and ~~the Company’s~~our capital expenditure requirements, the relative effectiveness of compensation-based employee incentives in causing improvements in ~~Company~~our performance, the capacity to meet the demands of our large national account customers, the extent of execution of plans for the growth of ~~Company~~our business and achievement of financial metrics related to those plans, ~~the~~our success ~~of the Company to retain~~in retaining and/or ~~attract~~attracting qualified employees, ~~the~~our success ~~of the Company’s adaptation~~in adapting to technology and new commerce channels, the effect of the capital markets as well as other external factors on stockholder value, fluctuations in availability and cost of green coffee, competition, organizational changes, the effectiveness of our hedging strategies in reducing price and interest rate risk, changes in consumer preferences, our ability to provide sustainability in ways that do not materially impair profitability, changes in the strength of the economy, including any effects from inflation, business conditions in the coffee industry and food industry in general, our continued success in attracting new customers, variances from budgeted sales mix and growth rates, weather and special or unusual events, as well as other risks described in this ~~report~~Quarterly Report on Form 10-Q and other factors described from time to time in our filings with the SEC. ~~The results~~

Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of ~~operations for the three and nine months ended March 31, 2021 are not necessarily indicative~~actual results. Any or all of the ~~results that~~forward-looking statements contained in this Quarterly Report on Form 10-Q and any other public statement made by us, including by our management, may turn out to be ~~expected~~incorrect. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future ~~period.~~

events, changes in assumptions or otherwise, except as required under federal securities laws and the rules and regulations of the SEC.

Our Business

We are a ~~national~~leading coffee roaster, wholesaler and distributor of coffee, tea and ~~culinary~~other allied 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. 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 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 ~~emphasize~~insist on 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., Fair Trade Certified™ ® and other sustainably-produced offerings; frozen liquid coffee; flavored and unflavored iced and hot ~~teas;~~teas, including organic and Rainforest Alliance Certified™; culinary products including ~~gelatins~~premium spices, pancake and ~~puddings, soup bases, dressings,~~biscuit mixes, gravy and sauce mixes, ~~pancake~~soup bases, dressings, syrups and ~~biscuit mixes, jellies and preserves,~~sauces, and coffee-related products such as coffee filters, cups, sugar and creamers; ~~spices;~~ and other beverages including cappuccino, cocoa, granitas, and other blender-based beverages 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; Portland, Oregon; and Hillsboro, Oregon. We ~~have stopped production in~~distribute our ~~Houston facility and plan to exit the facility in the fourth quarter of this fiscal year. Our distribution takes place out of the~~products from our Northlake, Texas, Portland, Oregon and Hillsboro, Oregon production facilities, as well as separate distribution centers in Portland, Oregon; Northlake, Illinois; Moonachie, New 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 (“DSD”)~~DSD network of ~~approximately~~ ~~205~~238 delivery routes and 9890 branch warehouses ~~some of which are located within the distribution facilities,~~ as of March 31, ~~2021,~~2022, or direct-shipped via common carriers or third-party distributors. DSD sales are primarily made “off-truck” to our customers at their places of business. We operate a large fleet of trucks and other vehicles to distribute and deliver our products through our DSD network, and we rely on ~~third-party logistics~~3PL service providers for our long-haul distribution.

Impact of the COVID-19 Pandemic on Our Business

The COVID-19 pandemic ~~continued~~has significantly impacted our financial position, results of operations, cash flows and liquidity as the effects of the pandemic and resulting governmental actions have decreased the demand for our products, most notably throughout our DSD network, which consist of small independent restaurants, foodservice operators, large institutional buyers, convenience store chains, hotels, casinos, healthcare facilities, and foodservice distributors. The COVID-19 pandemic continues to have a ~~significant~~material impact on our ~~DSD sales network.~~ revenues during the three and nine months ended March 31, 2022.

As local and state governments across the country have eased COVID-19 restrictions, and vaccines ~~are distributed and rolled out successfully,~~have become generally available, we ~~continue~~have continued to see improved ~~trends with~~ average weekly sales ~~during~~trends. During the ~~quarter~~three months ended March 31, ~~2021~~2022, our average weekly sales were down 36%16% compared to pre-COVID levels,~~. Currently, during~~ which represents continued improvement from the ~~month of April~~three months ended December 31, 2021 ~~our~~ ~~average weekly DSD~~and March 31, 2021 when sales ~~are~~were down ~~approximately 27% from pre-COVID levels. The largest DSD revenue declines were from restaurants, hotels~~17% and ~~casino channels.~~36%, respectively. Although we experienced improvement in several markets this quarter as COVID further recedes, the recovery is slower in certain regions caused by general COVID-19 restrictions across the country.

~~Compared to prior year third quarter, our Direct Ship revenues declined 23%.~~ Although our Direct Ship sales channel 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 moderate increases in demand that~~been impacted less by the pandemic. For the three months ended March 31, 2022, our Direct Ship revenues have ~~helped mitigate~~improved which is mainly driven by recently optimized customer base and recovery of several larger accounts.

Due to the impact of the COVID-19 ~~pandemic. Also, a portion~~pandemic on our revenues, we instituted several initiatives during fiscal 2020 and 2021 to reduce operating expenses and capital expenditures to help mitigate the significant negative impact of ~~the declines are attributable to accounts we decided to exit since they were lower or negative profit due to the impacts from COVID.~~

our revenue decline. In addition to the costs saving initiatives, ~~to reduce operating expenses and capital expenditures implemented during the~~in fiscal ~~year ended June 30, 2020,~~2021 we ~~have also~~ repaid our existing senior secured revolving credit facility, and ~~executed~~entered into a new ~~credit facilities, as described in~~senior secured facility composed of a Revolver Credit Facility Agreement and a Term Credit Facility Agreement (the “Credit Facilities”). We believe that the ~~Liquidity, Capital Resources and Financial Condition section. The new credit facilities provides~~Credit Facilities provide us with increased flexibility to proactively manage our working capital and execute our long term strategy, maintain compliance with our ~~debt~~ financial covenants, lower our 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~~our strategic initiatives. ~~Also, we took additional cost saving actions to mitigate the financial impact to our~~

~~operating results due to the surge in COVID-19 cases during the latter part of our fiscal second quarter and earlier in the current fiscal third quarter.~~

The duration and magnitude of the 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~~remains uncertain. The ultimate impacts of the ~~situation.~~COVID-19 pandemic on our business will depend on future developments, including the availability and cost of labor, global supply chain disruptions, variants of the virus, and the availability and use of vaccines, which are highly uncertain and cannot be predicted. While we anticipate that our revenue will continue to recover slowly as local, state and national governments ease COVID-19 related restrictions, and vaccines ~~are distributed throughout the country,~~become more widely accepted, there can be no assurance that we will be successful in returning to the ~~pre COVID-19~~pre-COVID-19 pandemic levels of revenue or ~~profitability. Accordingly, we expect that our results of operations will be adversely affected~~profitability for our fiscal year ending June 30, ~~2021.~~2022 (“fiscal 2022”).

For other impacts of the COVID-19 pandemic, please see “Item 1A. Risk Factors” in our 2021 Form 10‑K, which is accessible on the SEC’s website at www.sec.gov.

Summary Overview of Three Months Ended March 31, ~~2021~~2022 Results of Operations

During the three months ended March 31, ~~2021, we experienced sales declines in~~2022, revenues from both our DSD and ~~direct~~Direct ship sales channels ~~compared to the prior year same period.~~

~~Our DSD network~~ continued to be ~~negatively~~ impacted by the COVID-19 pandemic.

As a result of the COVID-19 pandemic, ~~and to a lesser extent, net customer attrition. Similar to~~ our ~~fiscal first and second quarters, the~~ largest DSD revenue declines were ~~from restaurants, hotels~~in our restaurant, healthcare, hotel and casino ~~channels. Our direct ship~~channels, while the C-store channel ~~sales were also~~was impacted ~~by lower coffee volumes~~less. However, due to ~~COVID-19 pandemic,~~the significant recovery in these channels throughout fiscal 2021 and ~~changes in coffee prices for~~fiscal 2022, our ~~cost plus customers~~

~~During~~average weekly DSD sales compared to pre COVID levels improved from down 36% during the three months ended March 31, 2021 ~~we experienced lower gross margin~~to down 16% during the three months ended March 31, 2022.

Our Direct ship channel sales improved 23.7% during the three months ended March 31, 2022 compared to the prior year ~~quarter primarily~~period. This was due to ~~lower volumes~~the recently optimized customer base and recovery from the impact of the COVID-19 pandemic by some of our larger Direct ship customers.

Gross margin improved 4.2% from 25.6% during the prior year period to 29.8% during the three months ended March 31, 2022. This improvement was mostly due to the effect of the continued recovery from the COVID-19 pandemic on our DSD ~~business. Gross margins decreased by 3.8% to 25.6% from 29.4% compared to the same prior period mostly due to unfavorable customer mix~~channel sales since our DSD channel has higher margins. The ~~gross margin~~increase was also attributable to a decline ~~was~~in our unfavorable production variances and inventory scrap write-downs due to the closure of our aged Houston, Texas plant during fiscal 2021. These improvements were partially offset by ~~lower~~higher freight costs ~~lower warehouse costs,~~due to global supply chain challenges. The price increases and ~~lower coffee brewing equipment (“CBE”) cost.~~delivery surcharges implemented across our DSD network beginning in the second quarter of fiscal 2022 helped mitigate the impact of higher supply chain and product costs.

Operating expenses ~~decreased~~increased $5.2 million during the three months ended March 31, 2022 compared to the prior year ~~quarter driven by $9.2~~period due to a $4.7 million ~~decrease~~increase in selling expenses and ~~the absence of~~ a ~~$42.0 million of goodwill and intangible assets impairment. This was partially offset by a $2.2~~$0.6 million increase in general and administrative ~~expenses and a $0.2 million increase in net losses realized from sales of assets.~~expenses. The increase in ~~general and administrative~~selling expenses was primarily due to variable costs, including payroll, associated with the ~~reversal of the previously accrued employee incentive bonus in prior year when the pandemic first impacted our~~higher sales volumes, as well as operating ~~results in March 2020, and one-time~~ costs associated with our ~~supply chain optimization~~new distribution center in Rialto, California.

Our capital expenditures for the three months ended March 31, 2022 were $3.0 million, a decrease of $0.1 million compared to the prior year period. This was due to lower investment spending of $1.1 million for several strategic initiatives completed ~~this quarter, that were incurred with the exiting~~during fiscal 2021, partially offset by higher maintenance capital spend 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, and other cost controls implemented over variable spending which have reduced payroll, freight, fleet and other variable costs due$0.9 million compared to the ~~lower sales volumes.~~

prior year period. Our capital expenditures for the nine months ended March 31, ~~2021~~2022 were ~~$12.8 million, representing lower maintenance capital spend of $5.8~~$8.9 million, a ~~45.6% reduction~~decline of $3.9 million compared to the prior year ~~period,~~period. This was due to lower investment capital of $6.0 million for several strategic initiatives completed during fiscal 2021, partially offset by higher maintenance capital spend of $2.1 million compared to the prior year period. The higher maintenance capital was mainly due to the purchase of coffee brewing equipment for our DSD customers as volumes have improved, as well as small Northlake, Texas plant and ~~various capital investment spending of $7.0 million. The spending reductions were driven by several~~IT projects. Several key initiatives ~~put~~ in ~~place,~~fiscal 2021, including a focus on refurbished ~~CBE~~coffee brewing equipment to drive cost savings, and reductions 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 athelped reduce our Northlake, Texas plant, 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.purchases as DSD sales volumes return.

As of March 31, ~~2021,~~2022, the outstanding ~~debt~~principal on our ~~revolver~~Revolver and Term Loan Credit Facilities was ~~$88.0~~$101.1 million, ~~a decrease~~an increase of ~~$34.0~~$10.1 million ~~since June 30, 2020.~~from December 31, 2021. Our cash balance ~~decreased~~increased by ~~$51.5~~$6.8 million, from ~~$60.0~~$3.6 million as of December 31, 2021, to $10.4 million as of March 31, 2022.

As of March 31, 2022, the outstanding principal on our Credit Facilities was $101.1 million, an increase of $10.1 million from June 30, 2021. Our cash balance increased by $0.1 million, from $10.3 million as of June 30, ~~2020,~~2021, to ~~$8.5~~$10.4 million as of March 31, ~~2021.~~2022. These changes ~~resulted~~were primarily due to higher inventory costs, and payment of our fiscal 2021 employee incentive program. These uses of cash were partially offset by cash proceeds from the ~~repayments on our revolver under~~sale of three branch properties during the ~~terms of the Amended Revolving Facility, now repaid. The net reduction in our liquidity was due to our investment in inventory, capital expenditures to fund certain key growth initiatives noted above,~~nine months ended March 31, 2022 and ~~pension funding requirements that were previously deferred under the Coronavirus Aid, Relief, and Economic Security Act.~~

realized hedging gains.

3927

~~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)
		2021			2020			Change			% Change		2021			2020			Change			% Change			2022			2021			Change		% Change		2022			2021			Change		% Change
Income Statement Data:	Income Statement Data:																							Income Statement Data:
Net sales	Net sales	$	93,152		$	129,139		$	(35,987)		(27.9)	%	$	294,993		$	420,237		$	(125,244)		(29.8)	%	Net sales	$	119,398		$	93,152		$26,246		28.2%		$	346,205		$	294,993		$51,212		17.4%
Gross margin	Gross margin	25.6		%	29.4		%	(3.8)		%	NM		24.6		%	29.2		%	(4.6)		%	NM		Gross margin	29.8		%	25.6		%	4.2%		NM		29.5		%	24.6		%	4.9%		NM
Operating expenses as a % of sales	Operating expenses as a % of sales	36.8		%	64.4		%	27.6		%	NM		35.4		%	36.2		%	0.8		%	NM		Operating expenses as a % of sales	33.1		%	36.8		%	3.7%		NM		32.4		%	35.4		%	3.0%		NM
Loss from operations	Loss from operations	$	(10,395)		$	(45,169)		$	34,774		NM		$	(32,004)		$	(29,407)		$	(2,597)		NM		Loss from operations	$	(3,938)		$	(10,395)		$6,457		62.1%		$	(10,290)		$	(32,004)		$21,714		67.8%
Net loss	Net loss	$	(13,684)		$	(39,777)		$	26,093		NM		$	(37,680)		$	(27,369)		$	(10,311)		NM		Net loss	$	(4,040)		$	(13,684)		$9,644		70.5%		$	(11,884)		$	(37,680)		$25,796		68.5%
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		$	(0.78)		$	(2.32)		$	1.54		NM		$	(2.17)		$	(1.62)		$	(0.55)		NM

Operating Data:	Operating Data:																							Operating Data:
Coffee pounds	Coffee pounds	18,026			25,678			(7,652)			(29.8)	%	60,366			80,995			(20,629)			(25.5)	%	Coffee pounds	18,797			18,026			771		4.3%		58,466			60,366			(1,900)		(3.1)%
EBITDA(1)	EBITDA(1)	$	(4,800)		$	(32,272)		$	27,472		(85.1)	%	$	3,391		$	(1,980)		$	5,371		(271.3)	%	EBITDA(1)	$	2,577		$	(4,800)		$7,377		153.7%		$	11,055		$	3,391		$7,664		226.0%
EBITDA Margin(1)	EBITDA Margin(1)	(5.2)		%	(25.0)		%	19.8		%	NM		1.1		%	(0.5)		%	1.6		%	NM		EBITDA Margin(1)	2.2		%	(5.2)		%	7.4%		NM		3.2		%	1.1		%	2.1%		NM
Adjusted EBITDA(1)	Adjusted EBITDA(1)	$	(759)		$	6,563		$	(7,322)		(111.6)	%	$	13,207		$	18,028		$	(4,821)		(26.7)	%	Adjusted EBITDA(1)	$	5,021		$	(759)		$5,780		761.5%		$	13,009		$	13,207		$(198)		(1.5)%
Adjusted EBITDA Margin(1)	Adjusted EBITDA Margin(1)	(0.8)		%	5.1		%	(5.9)		%	NM		4.5		%	4.3		%	0.2		%	NM		Adjusted EBITDA Margin(1)	4.2		%	(0.8)		%	5.0%		NM		3.8		%	4.5		%	(0.7)%		NM

Percentage of Total Net Sales By Product Category	Percentage of Total Net Sales By Product Category																							Percentage of Total Net Sales By Product Category
Coffee (Roasted)	Coffee (Roasted)	65.2		%	65.3		%	(0.1)		%	(0.2)	%	66.6		%	63.7		%	2.9		%	4.6	%	Coffee (Roasted)	64.9		%	65.2		%	(0.3)%		(0.5)%		64.6		%	66.6		%	(2.0)%		(3.0)%
Coffee (Frozen Liquid)		4.2		%	5.5		%	(1.3)		%	(23.6)	%	3.6		%	5.6		%	(2.0)		%	(35.7)	%
Tea (Iced & Hot)		5.1		%	5.2		%	(0.1)		%	(1.9)	%	3.8		%	5.2		%	(1.4)		%	(26.9)	%
Tea & Other Beverages (2)																								Tea & Other Beverages (2)	17.6		%	18.4		%	(0.8)%		(4.3)%		18.2		%	17.5		%	0.7%		4.0%
Culinary	Culinary	11.3		%	9.9		%	1.4		%	14.1	%	11.0		%	10.1		%	0.9		%	8.9	%	Culinary	11.6		%	11.3		%	0.3%		2.7%		11.8		%	11.0		%	0.8%		7.3%
Spice		4.7		%	4.1		%	0.6		%	14.6	%	4.6		%	4.2		%	0.4		%	9.5	%
Other beverages(2)		9.2		%	9.5		%	(0.3)		%	(3.2)	%	10.1		%	10.1		%	—		%	—	%
Other revenues(3)		—		%	—		%	—		%	NM		—		%	0.6		%	(0.6)		%	NM
Spices																								Spices	4.8		%	4.8		%	—%		—%		4.6		%	4.6		%	—%		—%
Net sales by product category	Net sales by product category	99.7		%	99.5		%	0.2		%	NM		99.7		%	99.5		%	0.8		%	NM		Net sales by product category	98.9		%	99.7		%	(0.8)%		NM		99.2		%	99.7		%	(0.5)%		NM
Fuel Surcharge		0.3		%	0.5		%	(0.2)		%	NM		0.3		%	0.5		%	(0.2)		%	NM
Total		100.0		%	100.0		%	—		%	—	%	100.0		%	100.0		%	—		%	—	%
Delivery Surcharge																								Delivery Surcharge	1.1		%	0.3		%	0.8%		NM		0.8		%	0.3		%	0.5%		NM
Net sales																								Net sales	100.0		%	100.0		%	—%		—%		100.0		%	100.0		%	—%		—%

Other data:	Other data:																							Other data:
Capital expenditures related to maintenance	Capital expenditures related to maintenance	$	2,042		$	3,163		$	(1,121)		(35.4)	%	$	5,783		$	10,622		$	(4,839)		(45.6)	%	Capital expenditures related to maintenance	$	2,985		$	2,042		$	(943)	(46.2)	%	$	7,893		$	5,783		$	(2,110)	(36.5)	%
Total capital expenditures	Total capital expenditures	$	3,133		$	4,107		$	(974)		(23.7)	%	$	12,769		$	13,114		$	(345)		(2.6)	%	Total capital expenditures	3,009			3,133			124		4.0	%	8,896			12,769			3,873		30.3	%
Depreciation and amortization expense	Depreciation and amortization expense	$	6,883		$	7,333		$	(450)		(6.1)	%	$	21,231		$	22,544		$	(1,313)		(5.8)	%	Depreciation and amortization expense	5,791			6,883			1,092		15.9	%	18,119			21,231			3,112		14.7	%

________________

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.~~

4028

Results of Operations

The following table sets forth information regarding our ~~condensed~~ consolidated results of operations for the three and nine months ended March 31, ~~2021~~2022 and ~~2020~~2021 (in thousands, except percentages):


	Three Months Ended March 31,				Favorable (Unfavorable)		Nine Months Ended March 31,				Favorable (Unfavorable)
	2022		2021		Change	% Change	2022		2021		Change	% Change
Net sales	$	119,398	$	93,152	$26,246	28.2%	$	346,205	$	294,993	$51,212	17.4%
Cost of goods sold	83,838		69,274		(14,564)	(21.0)%	244,197		222,447		(21,750)	(9.8)%
Gross profit	35,560		23,878		11,682	48.9%	102,008		72,546		29,462	40.6%
Selling expenses	27,477		22,767		(4,710)	(20.7)%	81,505		71,035		(10,470)	(14.7)%
General and administrative expenses	11,595		11,018		(577)	(5.2)%	34,796		32,334		(2,462)	(7.6)%
Net losses (gains) from sales of assets	426		488		62	NM	(4,003)		(62)		3,941	NM
Impairment of fixed assets	—		—		—	—%	—		1,243		1,243	100.0%
Operating expenses	39,498		34,273		(5,225)	(15.2)%	112,298		104,550		(7,748)	(7.4)%
Loss from operations	(3,938)		(10,395)		6,457	62.1%	(10,290)		(32,004)		21,714	67.8%
Other (expense) income:
Interest expense	(1,591)		(2,993)		1,402	46.8%	(7,106)		(9,174)		2,068	22.5%
Other, net	1,579		(356)		1,935	NM	5,790		17,283		(11,493)	NM
Total other (expense) income	(12)		(3,349)		3,337	NM	(1,316)		8,109		(9,425)	NM
Loss before taxes	(3,950)		(13,744)		9,794	71.3%	(11,606)		(23,895)		12,289	51.4%
Income tax expense (benefit)	90		(60)		(150)	NM	278		13,785		13,507	NM
Net loss	$	(4,040)	$	(13,684)	9,644	70.5%	$	(11,884)	$	(37,680)	25,796	68.5%
Less: Cumulative preferred dividends, undeclared and unpaid	149		144		(5)	(3.5)%	444		428		(16)	(3.7)%
Net loss available to common stockholders	$	(4,189)	$	(13,828)	9,639	69.7%	$	(12,328)	$	(38,108)	25,780	67.6%

Three Months Ended March 31, Favorable (Unfavorable) Nine Months Ended March 31, Favorable (Unfavorable)
2021 2020 Change % Change 2021 2020 Change % Change
Net sales $ 93,152 $ 129,139 $ (35,987) (27.9) % $ 294,993 $ 420,237 $ (125,244) (29.8) %
Cost of goods sold 69,274 91,190 21,916 24.0 % 222,447 297,662 75,215 25.3 %
Gross profit 23,878 37,949 (14,071) (37.1) % 72,546 122,575 (50,029) (40.8) %
Selling expenses 22,767 31,968 9,201 28.8 % 71,035 100,488 29,453 29.3 %
General and administrative expenses 11,018 8,833 (2,185) (24.7) % 32,334 32,839 505 1.5 %
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 42,030 100.0 % — 42,030 42,030 100.0 %
Impairment of fixed assets — — — — % 1,243 — (1,243) — %
Operating expenses 34,273 83,118 48,845 58.8 % 104,550 151,982 47,432 31.2 %
Loss from operations (10,395) (45,169) 34,774 77.0 % (32,004) (29,407) (2,597) (8.8) %
Other (expense) income:
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 (5,760) (100.0) %
Other, net (356) 1,076 (1,432) NM 17,283 2,941 14,342 NM
Total other (expense) income (3,349) 4,358 (7,707) NM 8,109 816 7,293 NM
Loss before taxes (13,744) (40,811) 27,067 66.3 % (23,895) (28,591) 4,696 16.4 %
Income tax (benefit) expense (60) (1,034) (974) NM 13,785 (1,222) (15,007) NM
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 144 139 (5) (3.6) % 428 414 (14) (3.4) %
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, ~~2021~~2022 Compared to Three and Nine Months Ended March 31, ~~2020~~

2021

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, 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)
2021 2020 Change % Change 2021 2020 Change % Change
Units sold
Coffee (Roasted) 14,421 20,542 (6,121) (29.8) % 48,293 64,796 (16,503) (25.5) %
Coffee (Frozen Liquid) 44 83 (39) (47.0) % 137 281 (144) (51.2) %
Tea (Iced & Hot) 395 650 (255) (39.2) % 1,257 1,998 (741) (37.1) %
Culinary 1,125 1,584 (459) (29.0) % 3,497 5,376 (1,879) (35.0) %
Spice 114 140 (26) (18.6) % 360 479 (119) (24.8) %
Other beverages(1) 663 828 (165) (19.9) % 2,181 3,225 (1,044) (32.4) %
Total 16,762 23,827 (7,065) (29.7) % 55,725 76,155 (20,430) (26.8) %
Unit Price
Coffee (Roasted) $ 4.21 $ 4.10 $ 0.11 2.7 % $ 4.07 $ 4.16 $ (0.09) (2.2) %
Coffee (Frozen Liquid) $ 88.41 $ 84.87 $ 3.54 4.2 % $ 76.72 $ 83.73 $ (7.01) (8.4) %
Tea (Iced & Hot) $ 11.96 $ 10.31 $ 1.65 16.0 % $ 8.95 $ 11.00 $ (2.05) (18.6) %
Culinary $ 9.38 $ 8.18 $ 1.20 14.7 % $ 9.29 $ 8.02 $ 1.27 15.8 %
Spice $ 38.72 $ 37.59 $ 1.13 3.0 % $ 37.29 $ 36.73 $ 0.56 1.5 %
Other beverages(1) $ 12.87 $ 14.84 $ (1.97) (13.3) % $ 13.77 $ 13.23 $ 0.54 4.1 %
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)
Coffee (Roasted) $ 60,771 $ 84,300 $ (23,529) (27.9) % $ 196,353 $ 269,367 $ (73,014) (27.1) %
Coffee (Frozen Liquid) 3,890 7,044 (3,154) (44.8) % 10,510 23,528 (13,018) (55.3) %
Tea (Iced & Hot) 4,726 6,701 (1,975) (29.5) % 11,251 21,969 (10,718) (48.8) %
Culinary 10,551 12,954 (2,403) (18.6) % 32,471 43,099 (10,628) (24.7) %
Spice 4,414 5,262 (848) (16.1) % 13,424 17,594 (4,170) (23.7) %
Other beverages(1) 8,530 12,290 (3,760) (30.6) % 30,028 42,681 (12,653) (29.6) %
Net sales by product category $ 92,882 $ 128,551 $ (35,669) (27.7) % $ 294,037 $ 418,238 $ (124,201) (29.7) %
Fuel Surcharge 270 588 (318) (54.1) % 956 1,999 (1,043) (52.2) %
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, ~~2021 decreased $36.0~~2022 increased $26.2 million, or ~~27.9%~~28.2%, to ~~$93.2~~$119.4 million from ~~$129.1~~$93.2 million in the three months ended March 31, ~~2020.~~2021. Net sales in the nine months ended March 31, 2022 increased $51.2 million, or 17.4%, to $346.2 million from $295.0 million in the nine months ended March 31, 2021. The ~~decline~~increase in net sales for the three and nine months ended March 31, 2022 was ~~primarily~~ due to ~~a decline in revenues~~the continued recovery from the impact of the COVID-19 pandemic on both our DSD and Direct Ship network, along with price increases and delivery surcharges.

On our DSD network, the increase was driven by improved volume of green coffee processed and sold, ~~and~~along with improved volume of other beverages, culinary, spice and tea products sold ~~through our DSD~~as we continue to experience higher weekly sales volumes compared to prior periods.

On the Direct ship network, ~~mostly impacted by COVID-19 pandemic,~~increase was due to higher volumes on Direct ship customers and price changes to customers utilizing commodity-based pricing arrangements where the changes in the green coffee commodity costs are passed on to the customer. This was also due to the recently optimized customer base and recovery from the impact of ~~changes~~the COVID-19 pandemic by some of our larger Direct ship customers.

Our Direct ship net sales in ~~coffee prices for our cost plus customers.~~the three months ended March 31, 2022 included $8.7 million in price increases to customers utilizing commodity-based pricing arrangements. 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.arrangements.

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 mostly impacted by COVID-19 pandemic and the impact of changes in coffee prices for our cost plus customers. Our ~~direct~~Direct ship net sales in the nine months ended March 31, ~~2021~~2022 included ~~$1.6~~$15.1 million in price ~~decreases~~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 ~~$7.6~~$1.6 million in price decreases to customers utilizing such arrangements in the nine months ended March 31, ~~2020.~~2021.

The following table presents the effect of changes in unit sales, and unit pricing and product mix in the three and nine months ended March 31, ~~2021~~2022 compared to the same ~~periods~~period in the prior fiscal year (in millions):

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) %


	Three Months Ended March 31, 2022 vs. 2021		% of Total Mix Change		Nine Months Ended March 31, 2022 vs. 2021		% of Total Mix Change
Effect of change in unit sales	$	5.8	22.1	%	$	(5.6)	(10.9)	%
Effect of pricing and product mix changes	20.4		77.9	%	56.8		110.9	%
Total increase in net sales	$	26.2	100.0	%	$	51.2	100.0	%

Unit sales ~~decreased 29.7%~~increased 5.1% and average unit price increased by ~~2.6%~~21.9% in the three months ended March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year, resulting in ~~a decrease~~an increase in our net sales of ~~27.9%~~28.2%. Unit sales decreased ~~26.8%~~1.6% and average unit price ~~declined~~increased by ~~3.8%~~19.3% in the nine months ended March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year, resulting in ~~a decrease~~an increase in our net sales of ~~29.8%~~17.4%. Average unit price ~~decreased~~increased during three and nine months ended March 31, ~~2021~~2022 due to a higher mix of product sold via ~~direct ship versus~~our DSD network versus Direct ship, as ~~direct~~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, ~~2021~~2022 or ~~2020.~~

2021.

Gross Profit

Gross profit in the three months ended March 31, ~~2021 decreased $14.1~~2022 increased $11.7 million, or ~~37.1%~~48.9%, to ~~$23.9~~$35.6 million from ~~$37.9~~$23.9 million in the three months ended March 31, ~~2020.~~2021. Gross margin ~~decreased~~increased to 29.8% in the three months ended March 31, 2022 from 25.6% in the three months ended March 31, ~~2021 from 29.4% in the three months ended March 31, 2020.~~ 2021.

Gross profit in the nine months ended March 31, ~~2021 decreased $50.0~~2022 increased $29.5 million, or ~~40.8%~~40.6%, to ~~$72.5~~$102.0 million from ~~$122.6~~$72.5 million in the nine months ended March 31, ~~2020.~~2021. Gross margin ~~decreased~~increased to 29.5% in the nine months ended March 31, 2022 from 24.6% in the nine months ended March 31, ~~2021 from 29.2% in the nine months ended March 31, 2020.~~2021.

The ~~decrease~~increase in gross profit in ~~three and nine months ended March 31, 2021,~~the current year was primarily driven by ~~lower~~higher net sales ~~of $36.0 million~~on both the DSD and ~~$125.2 million, respectively,~~Direct ship network, partially offset by ~~lower~~higher freight costs ~~of goods sold.~~due to global supply chain challenges. Gross margin ~~during~~improved due to the ~~three and nine months ended March 31, 2021, was negatively impacted by~~effect of the continued recovery from COVID-19 ~~pandemic~~ on our DSD ~~customers, higher production variances and unfavorable customer mix~~channel sales since our DSD channel has higher ~~margins, partially offset by lower freight costs, lower warehouse costs, lower CBE costs~~margins. The increase was also attributable to a decline in our unfavorable production variances and inventory scrap write-downs due to the closure of our aged Houston, Texas plant during fiscal 2021. The price increases and delivery surcharges implemented across our DSD network during the second quarter of fiscal 2022 helped mitigate the impact of ~~changes in coffee prices during the three~~higher supply chain and ~~nine months ended March 31, 2021.~~

product costs.

Operating Expenses

In the three months ended March 31, ~~2021,~~2022, operating expenses ~~decreased $48.8~~increased $5.2 million to $39.5 million, or ~~58.8% compared to prior year period at~~33.1% of net sales, from $34.3 million, or 36.8% of net sales ~~from $83.1 million, or 64.4% of net sales.~~in the prior year period. This increase was ~~primarily~~ due to a ~~$9.2~~$4.7 million ~~decrease~~increase in selling expenses and ~~the absence of a $42.0 million of goodwill and intangible assets impairment. This was partially offset by a $2.2~~$0.6 million increase in general and administrative ~~expenses and a $0.2 million increase in net losses realized from sales of asset.~~

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

The 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 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.

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.expenses.

In the nine months ended March 31, ~~2021,~~2022, operating expenses ~~decreased compared~~increased $7.7 million to ~~prior year period at~~$112.3 million, or 32.4% of net sales, from $104.6 million, or 35.4% of net sales ~~from $152.0 million, or 36.2% of net sales,~~in the prior year period. This increase was due to a ~~$29.5~~$10.5 million ~~decrease~~increase in selling expenses and a ~~$0.5~~$2.5 million ~~decrease~~increase in general and administrative expenses, ~~and the absence of a $42.0 million of goodwill and intangible assets impairment. The decrease was~~partially offset by a ~~$23.3~~$1.2 million ~~decrease~~lower fixed assets impairment and $3.9 million increase in net gains ~~realized~~ from the sales of assets ~~and a $1.2 million~~due to the sale of ~~fixed assets impairment.~~

three branch properties during the nine months ended March 31, 2022. The ~~decrease~~increase in selling expenses during the nine months ended March 31, 2022 was primarily ~~driven by reductions~~due to variable costs, including payroll, associated with the higher sales volumes, as well as operating costs associated with our new distribution center in ~~headcount, lower DSD sales commissions, lower travel expenses and lower fleet and freight costs.~~Rialto, California. The ~~decrease~~increase in general and administrative expenses during the nine months ended March 31, 2022 was ~~associated~~ primarily ~~with reductions in~~due to payroll and third party costs related to several supply chain optimization initiatives, partially offset by the absence of one-time severance costs in the prior year period. The increase in payroll in both and ~~reductions~~selling and general and administrative expenses are predominately due to the expiration of the temporary 15% reduction in ~~headcount~~base salaries and the expiration of the 401(k) cash match suspension under the Farmer Bros. Co. 401(k) Plan, which were both cost saving actions implemented in fiscal 2020 due to the COVID-19 ~~pandemic, partially offset by non recurring costs for severance and strategic initiatives.~~

The decrease in net gains from sales of assets were primarily 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 manufacturing facility, the office coffee assets and seven branch properties of $7.3 million, $7.2 million and $12.1 million, respectively.pandemic.

Total Other (Expense) Income ~~(Expense)~~

Total other ~~income~~ (expense) ~~in the three months ended March 31, 2021 was $3.3 million of expense compared to $4.4 million of~~ income in the three months ended March 31, ~~2020.~~ 2022 decreased $3.3 million or 99.6% to $12.0 thousand of expense compared to $3.3 million of expense in the three months ended March 31, 2021. This change was primarily a result of lower interest expense and higher gains on coffee-related derivative instruments in the current year period.

Total other (expense) income ~~(expense)~~ in the nine months ended March 31, ~~2021 was $8.1~~2022 increased $9.4 million or 116.2% to $1.3 million of ~~income~~expense compared to ~~$0.8~~$8.1 million of income in the nine months ended March 31, ~~2020. The~~2021. This change ~~in total other income (expense) in the three and nine months ended March 31, 2021~~ was

primarily a result ~~of:~~

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

•postretirement benefit curtailment in the prior year, partially offset by lower interest expense and higher ~~net losses~~gains on coffee-related derivative instruments in the current year.

Interest expense in the three months ended March 31, ~~2021;~~2022 decreased $1.4 million to $1.6 million from $3.0 million in the prior year period. The decrease in interest expense was primarily due to the lower interest rate on our Credit Facilities, and favorable interest rate swap activity.

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

•~~partially offset by higher interest expense.~~

~~Interest expense in the three and nine months ended March 31, 2021 increased $0.5 million and $1.3~~2022 decreased $2.1 million to ~~$3.0 million and $9.2~~$7.1 million from ~~$2.5~~$9.2 million ~~and $7.9 million, respectively,~~ in the prior year period. The ~~increase~~decrease in interest expense ~~in the three and nine months ended March 31, 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~~lower interest rate ~~swap costs, partially offset by~~on our Credit Facilities, and lower ~~pension~~losses on our interest ~~expense.~~rate swap.

Other, net in the three months ended March 31, ~~2021~~2022 increased by ~~$1.4~~$1.9 million to ~~an expense~~income of ~~$0.4~~$1.6 million compared to ~~income~~expense of ~~$1.1~~$0.3 million in the prior year period. Other, net in the nine months ended March 31, ~~2021 increased~~2022 decreased by ~~$14.3~~$11.5 million to income of ~~$17.3~~$5.8 million compared to income of ~~$2.9~~$17.3 million in the prior year period. The ~~increase in expenses, Other, net, in the three months ended March 31, 2021,~~decrease 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. The increase in income, Other, net, in the nine months ended March 31, 2021, was primarily a result of higher amortized gains on our terminated postretirement medical benefit plan andpartially offset by higher mark-to-market net gains on coffee-related derivative instruments not designated as accounting hedges.

Income Taxes

In the three months ended March 31, 2022 and March 31, 2021 , we recorded income tax expense of $0.1 million and income tax benefit of $0.1 million, respectively. In the nine months ended March 31, 2022 and March 31, 2021, we recorded income tax ~~benefit~~expense of ~~$0.1~~$0.3 million and ~~income tax expense~~ $13.8 million, ~~respectively, compared to income tax benefit of $1.0 million and $1.2 million, respectively, in the three and nine months ended March 31, 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 in the three months ended March 31, 2021, and the three and nine months ended March 31, 2020, respectively, were primarily driven by change in previously recorded valuation allowance and change in our estimated deferred tax liability.respectively. See Note 16, Income Taxes, of the Notes to Unaudited ~~Condensed~~ Consolidated Financial Statements included in Part I, Item 1 of this ~~report.~~Quarterly Report on Form 10-Q.

Non-GAAP Financial Measures

In addition to net ~~(loss) income~~loss 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~~loss excluding the impact of:

•income ~~taxes;~~tax expense;

•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;~~tax expense;

•interest ~~expense (benefit);~~

•~~(loss) income from short-term investments;~~expense;

•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;~~strategic initiatives;

•~~proxy contest-related expenses;~~impairment of fixed assets;

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

•net gains and losses from sales of assets;

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

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

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

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

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)~~loss to EBITDA (unaudited):


		Three Months Ended March 31,						Nine Months Ended March 31,							Three Months Ended March 31,						Nine Months Ended March 31,
(In thousands)	(In thousands)	2021			2020			2021			2020			(In thousands)	2022			2021			2022			2021
Net (loss) income, as reported		$	(13,684)		$	(39,777)		$	(37,680)		$	(27,369)
Income tax (benefit) expense		(60)			(1,034)			13,785			(1,222)
Net loss, as reported														Net loss, as reported	$	(4,040)		$	(13,684)		$	(11,884)		$	(37,680)
Income tax expense (benefit)														Income tax expense (benefit)	90			(60)			278			13,785
Interest expense (1)	Interest expense (1)	2,061			1,206			6,055			4,067			Interest expense (1)	736			2,061			4,542			6,055
Depreciation and amortization expense	Depreciation and amortization expense	6,883			7,333			21,231			22,544			Depreciation and amortization expense	5,791			6,883			18,119			21,231
EBITDA	EBITDA	$	(4,800)		$	(32,272)		$	3,391		$	(1,980)		EBITDA	$	2,577		$	(4,800)		$	11,055		$	3,391
EBITDA Margin	EBITDA Margin	(5.2)		%	(25.0)		%	1.1		%	(0.5)		%	EBITDA Margin	2.2		%	(5.2)		%	3.2		%	1.1		%

____________

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

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


		Three Months Ended March 31,						Nine Months Ended March 31,							Three Months Ended March 31,						Nine Months Ended March 31,
(In thousands)	(In thousands)	2021			2020			2021			2020			(In thousands)	2022			2021			2022			2021
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
Net loss, as reported														Net loss, as reported	$	(4,040)		$	(13,684)		$	(11,884)		$	(37,680)
Income tax expense (benefit)														Income tax expense (benefit)	90			(60)			278			13,785
Interest expense (1)														Interest expense (1)	736			2,061			4,542			6,055
Depreciation and amortization expense	Depreciation and amortization expense	6,883			7,333			21,231			22,544			Depreciation and amortization expense	5,791			6,883			18,119			21,231
ESOP and share-based compensation expense	ESOP and share-based compensation expense	1,611			1,418			3,561			3,197			ESOP and share-based compensation expense	2,018			1,611			5,015			3,561

Strategic initiatives (2)														Strategic initiatives (2)	—			1,593			—			3,268
Net losses (gains) from sale of assets														Net losses (gains) from sale of assets	426			488			(4,003)			(62)
Severance														Severance	—			200			942			1,397
Weather-related event - 2021 severe winter weather	Weather-related event - 2021 severe winter weather	109			—			109			—			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
Non-recurring costs associated with the COVID-19 pandemic														Non-recurring costs associated with the COVID-19 pandemic	—			40			—			300
Impairment of fixed assets	Impairment of fixed assets	—			—			1,243			—			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 (3)														Adjusted EBITDA (3)	$	5,021		$	(759)		$	13,009		$	13,207
Adjusted EBITDA Margin	Adjusted EBITDA Margin	(0.8)		%	5.1		%	4.5		%	4.3		%	Adjusted EBITDA Margin	4.2		%	(0.8)		%	3.8		%	4.5		%

____________

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

(2) 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, 2021 includes ~~$7.2~~$14.4 million ~~and~~ ~~$14.4 million, respectively,~~ of higher amortized gains resulting from the curtailment of the postretirement medical plan in March ~~2020. These higher gains continued until~~2020, which is further described in our consolidated financial statements in the ~~plan sunset on December 31, 2020. See~~ ~~Note 10~~ ~~for details.~~2021 Form 10-K.

Liquidity, Capital Resources and Financial Condition

The following table summarizes our debt obligations:


					March 31, 2021				June 30, 2020								March 31, 2022				June 30, 2021
(In thousands)	(In thousands)	Debt Origination Date	Maturity	Original Borrowing Amount	Carrying Value		Weighted Average Interest Rate		Carrying Value		Weighted Average Interest Rate		(In thousands)	Debt Origination Date	Maturity	Principal Borrowing Amount	Carrying Value		Weighted Average Interest Rate (1)		Carrying Value		Weighted Average Interest Rate
Credit Facility		various	11/6/2023	N/A	$	88,000	6.41	%	$	122,000	4.91	%
Revolver													Revolver	Various	4/25/2025	N/A	$	54,500	2.75	%	$	43,500	6.21	%
Term Loan													Term Loan	4/26/2021	4/25/2025	$47,500	44,694		7.50	%	45,278		7.50	%
Total													Total				$	99,194			$	88,778

__________

~~Credit Facility~~(1) The weighted average interest rate excludes the fixed rate on the de-designated Amended Rate Swap

On ~~July 23, 2020 (the "Effective Date"), pursuant to Amendment No. 3 to Amended and Restated Credit Agreement (the “Third Amendment”),~~April 26, 2021, the Company ~~amended its existing senior secured revolving credit facility (such facility~~entered into the Credit Facilities as ~~amended to date, including pursuant to the Third Amendment, the “Amended Revolving Facility”) with certain financial institutions. The Third Amendment, among other things (as~~ described in more detail in Note 11,, Debt

Obligations, of 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 of $125.0 million and the sublimit on letters of credit and swingline loans of $15.0 million each. The Amended Revolving Facility has no scheduled payback required on the principal prior to the maturity date on November 6, 2023.10‑Q.

~~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.~~

On April 26, 2021, we repaid in full all of the outstanding loans and other amounts payable under the Amended and Restated Credit Agreement, using proceeds of loans received pursuant to a 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,~~Eligible Inventory, minus (c) applicable reserve. The term loan under the Credit Facilities has a ~~total commitment~~principal amount 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 this type. Non-compliance with one or more of the covenants and restrictions could result in the full or partial principal balance of the Credit Facilities becoming immediately due and payable and termination of the commitments.

~~In connection~~ As of and through March 31, 2022, we were in compliance with all of the covenants under the Credit Facilities. Furthermore, the Company believes it will be in compliance with the ~~Credit Facilities, we also executed an ISDA agreement to transfer our interest swap to Wells Fargo~~related financial covenants under ~~substantially~~these agreements for the ~~same terms. See~~ ~~Note~~ 11 ~~for details.~~

next twelve months.

The Credit Facilities ~~provides~~provide us with increased flexibility to proactively manage our liquidity and working capital, while maintaining compliance with our debt financial covenants, and preserving financial liquidity to mitigate the impact of the uncertain business environment resulting from the COVID-19 pandemic and continue to execute on key strategic initiatives.

At ~~April 26, 2021, we~~March 31, 2022, the Company had outstanding borrowings on the Revolver Credit Facility of ~~$96.1 million~~ ~~and we had unrestricted cash of~~ ~~$8.2~~$54.5 million and ~~$23.2~~had utilized $4.1 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 ~~on the Credit Facilities.~~

sublimit.

Liquidity

We generally finance our operations through cash flows from operations and borrowings under our Credit Facilities described above. 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. We believe that the Credit Facilities, to the extent available, in addition to our cash flows from operations, collectively, will be sufficient to fund our working capital and capital expenditure requirements for the next 12 months.

~~As of March 31, 2021,~~ We expect to fund our long-term liquidity needs, including contractual obligations, anticipated capital expenditures, principal payments on our Term Loan Credit Facility, as ~~a result of~~well as working capital requirements, from our operating cash flows and our Credit facilities to 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, the date we filed our fiscal third quarter ended March 31, 2021 Form 10-Q, and~~ ~~through the Credit Facilities agreement~~ ~~effective date.~~extent available.

At March 31, ~~2021,~~2022, we had ~~$8.5~~$10.4 million inof unrestricted cash and cash equivalents and ~~none of the cash in~~$22.3 million available on our ~~coffee-related derivative margin accounts was restricted.~~

Revolver Credit Facility.

Impact of the COVID-19 Pandemic on ~~Our~~our Liquidity

The COVID-19 pandemic has significantly impacted our financial position, results of operations, cash flows and ~~related restrictive measures such~~liquidity as ~~travel bans, quarantines,~~the effects of the pandemic and ~~shutdowns as well as changes in consumer behavior,~~resulting governmental actions have ~~had an adverse~~decreased the demand for our products, most notably throughout our DSD network, which consists of small independent restaurants, foodservice operators, large institutional buyers, and convenience store chains, hotels, casinos, healthcare facilities, and foodservice distributors. The COVID-19 pandemic continues to have material impact on ~~certain of~~ our DSD customers, particularly restaurants, hotels, casinos and coffeehouses. 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 salesrevenues during the ~~quarter~~three and nine months ended March 31, ~~2021 down 36% compared~~2022.

In response to ~~pre-COVID levels. Currently, during~~ the ~~month of April 2021, our~~ average weekly DSD sales are now down approximately 27% from pre-COVID levels. However, we are unable to predict the rate at which our customers will resume purchases as the restrictive measures are lifted.

~~As previously disclosed, we have modified~~pandemic's impact on our business, ~~practices due~~we instituted several initiatives during fiscal 2020 and 2021 to reduce operating expenses and capital expenditures to help mitigate the significant negative impact of ~~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.

revenue decline. In addition to the costs saving initiatives, ~~to reduce operating expenses and capital expenditures,~~in fiscal 2021 we ~~have also~~ repaid our existing senior secured revolving credit facility, and ~~executed~~entered into our new ~~credit facilities. The~~ Credit Facilities. We believe that the Credit Facilities ~~agreement, as described above, provides~~ provide us with increased flexibility to proactively manage our working capital and execute our long term strategy, maintain compliance with our debt financial covenants, lower our 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~~our strategic initiatives.

These actions have improved our cost structure and helped in mitigating the impact of the COVID-19 pandemic on our operating results and liquidity; however we cannot make assurances that these actions will continue to be successful.

The duration and magnitude of the 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~~remains uncertain. The ultimate impacts of the ~~situation.~~COVID-19 pandemic on our business will depend on future developments, including the availability and cost of labor, global supply chain disruptions, variants of the virus, and the availability and use of vaccines, which is highly uncertain and cannot be predicted. While we anticipate that our revenue will continue to recover ~~slowly~~ as local, state and national governments continue to ease COVID-19 related restrictions, and vaccines ~~are distributed throughout the country,~~become more widely accepted, 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~~profitability for ~~our~~ fiscal ~~year ending June 30, 2021.~~

2022.

4933

Cash Flows

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

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


	Nine Months Ended March 31,
	2022		2021
Consolidated Statements of cash flows data (in thousands)
Net cash used in operating activities	$	(9,627)	$	(3,488)
Net cash provided by (used in) investing activities	166		(10,787)
Net cash provided by (used in) financing activities	9,576		(37,264)
Net increase (decrease) in cash and cash equivalents and restricted cash	$	115	$	(51,539)

Operating Activities

Net cash used in operating activities during the nine months ended March 31, ~~2021~~2022 was ~~$3.5~~$9.6 million as compared to net cash ~~provided~~used of ~~$8.1~~$3.5 million in the nine months ended March 31, ~~2020.~~2021. The ~~$11.6~~$6.1 million ~~increase~~change in net cash used in operating activities was primarily attributable to ~~declines~~changes in ~~revenues~~working capital primarily related to inventory and ~~related net income,~~accounts receivables, as well as bonus payments for our fiscal 2021 employee incentive program. We did not pay bonuses as part of the employee incentive program in fiscal 2020 due to the impact COVID-19 had on our business. These outflows were partially offset by ~~better working capital management.~~realized gains from our coffee-related derivative instruments for the nine months ended March 31, 2022.

Investing Activities

Net cash ~~used~~provided by investing activities during the nine months ended March 31, ~~2021~~2022 was ~~$10.8~~$0.2 million as compared to net cash ~~provided~~used of ~~$23.6~~$10.8 million in the nine months ended March 31, ~~2020.~~2021. The ~~decrease~~increase in cash provided ~~by investment activities~~ was ~~principally~~primarily due to net cash proceeds of $9.1 million from the sale of three branch assets during the nine months ended March 31, ~~2020 of $36.7 million as~~2022. Also, less cash was used for expansion capital expenditures compared to ~~$2.0 million in~~prior year period when we increased the current 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, offset by growth investment capital spend.

capacity of our Northlake, Texas plant.

Financing Activities

Net cash ~~used in~~provided by financing activities during the nine months ended March 31, ~~2021 increased $25.0~~2022 was $9.6 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~~of $37.3 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, ~~2021,~~2021. The change of $46.8 million was primarily due to ~~compliance with the anti-cash hoarding provision~~net repayments of $34.0 million under the Amended and Restated Credit Agreement dated as of July 23, 2020 (the "Amended Revolving ~~Facility, now~~Facility"), which was fully repaid ~~as well as financing costs associated with~~in prior year period. The Company also had net proceeds from revolver draw down of $11.0 million during the ~~Third Amendment.~~

nine months ended March 31, 2022.

Capital Expenditures

For the three and nine months ended March 31, ~~2021~~2022 and ~~2020,~~2021, 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)	2022		2021		2022		2021
Maintenance:
Coffee brewing equipment	$	2,002	$	1,578	$	5,625	$	4,430
Building and facilities	60		—		92		45
Vehicles, machinery and equipment	180		150		679		378
IT, software, office furniture and equipment	743		314		1,497		930

Capital expenditures related to maintenance	2,985		2,042		7,893		5,783

Expansion Project:
Machinery and equipment	24		481		992		5,251
IT equipment	—		50		—		755
Capital expenditures, Expansion Project	24		531		992		6,006

New Facility Costs
Building and facilities	—		560		11		980
Capital expenditures, New Facility	—		560		11		980

Total capital expenditures	$	3,009	$	3,133	$	8,896	$	12,769

In fiscal ~~year 2021,~~2022, we anticipate paying between ~~$8.0~~$11.0 million to ~~$11.0~~$14.0 million in maintenance capital expenditures. We expect to finance these expenditures through cash flows from operations and borrowings under our ~~credit facilities.~~Credit Facilities.

Depreciation and amortization expenses were ~~$6.9~~$5.8 million and ~~$7.3~~$6.9 million in the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively. Depreciation and amortization expenses were ~~$21.2~~$18.1 million and ~~$22.5~~$21.2 million in the nine months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively. We anticipate our depreciation and amortization expense will be approximately ~~$6.8~~$5.5 million to ~~$7.3~~$7.0 million per quarter in the remainder of fiscal ~~year 2021~~2022 based on our existing fixed asset commitments and the useful lives of our intangible assets.

Purchase Commitments

~~Commitments and Contingencies~~

As of March 31, ~~2021, we~~2022, the Company had committed to purchase green coffee inventory totaling ~~$38.3~~$87.0 million under fixed-price contracts, ~~$7.9~~and $19.4 million in ~~other~~ inventory ~~under non-cancelable purchase orders~~ and~~$4.4 million~~ in other purchases under non-cancelable purchase orders.

Contractual Obligations

As of March 31, 2022, the Company had operating and finance lease payment commitments totaling $29.1 million. Under our Term Loan Credit Agreement, the Company is required to make quarterly principal repayments of $950 thousand, beginning in fiscal quarter ending March 31, 2022 and has commenced these payments as of March 31, 2022.

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 ~~2020~~2021 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 ~~2020~~2021 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 ~~2020~~2021 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 2020 Form 10-K.

Off-Balance Sheet Arrangements

~~We have no off-balance sheet arrangements.~~ As of March 31, 2022, the Company had utilized $4.1 million of the letters of credit sublimit.

5235


Item 3.			Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

At March 31, ~~2021, under our Amended Revolving Facility,~~2022, we ~~were eligible to borrow up to a total of $125.0 million, subject to compliance with applicable financial covenants and~~ had outstanding borrowings on our Revolver Credit Facility of ~~$88.0~~$54.5 million and had utilized ~~$4.3~~$4.1 million of the letters of credit ~~sublimit. As a result~~sublimit, as well as $46.6 million of ~~the interest rate swap, only $23.0 million was subject to interest rate variability.~~debt outstanding under our Term Loan Credit Facility. The weighted average interest rate on our ~~outstanding borrowings subject to~~Revolver Credit Facility was 2.75% with a LIBOR Floor of 0.50%. The weighted average interest rate ~~variability under the Amended Revolving~~on our Term Loan Credit Facility ~~at March 31, 2021~~ was ~~6.41%~~7.50% with a LIBOR Floor of 1.0%.

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~~these Credit Facilities based on the weighted average interest rate on the outstanding borrowings as of March 31, ~~2021:~~2022:


(In thousands)	(In thousands)	Principal	Interest Rate		Annual Interest Expense		(In thousands)	Principal	Interest Rate		Annual Interest Expense
–150 basis points	–150 basis points	$23,000	4.91	%	$	1,129	–150 basis points	$101,050	4.94	%	$4,992
–100 basis points	–100 basis points	$23,000	5.41	%	$	1,244	–100 basis points	$101,050	4.94	%	$4,992
Unchanged	Unchanged	$23,000	6.41	%	$	1,474	Unchanged	$101,050	4.94	%	$4,992
+100 basis points	+100 basis points	$23,000	7.41	%	$	1,704	+100 basis points	$101,050	5.66	%	$5,719
+150 basis points	+150 basis points	$23,000	7.91	%	$	1,819	+150 basis points	$101,050	6.16	%	$6,225

In addition to the Credit Facilities above, the Company executed an ISDA agreement with Wells Fargo (“Amended Rate Swap”). 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%, 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. See Note 4, Derivative Instruments, of the Notes to Consolidated Financial Statements included in the fiscal 2021 Annual Report on Form 10‑K for further discussions of our derivative instruments.

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, ~~2021~~2022 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)									(In thousands)
Coffee-related derivative instruments(1)	Coffee-related derivative instruments(1)	$	1,002	$	(1,002)	$	2,650	$	(2,650)	Coffee-related derivative instruments(1)	$	568	$	(568)	$	1,883	$	(1,883)

__________

(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, ~~2021.~~2022. These contracts are not included in the sensitivity analysis above as the underlying price has been fixed.

5336


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, ~~2021,~~2022, 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, ~~2021~~2022 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~~2021 Form 10‑~~K for the year ended June 30, 2020, which is accessible on the SEC’s website at www.sec.gov.~~K. During the nine months ended March 31, ~~2021,~~2022, there have been no material changes to the risk factors disclosed in our ~~2020~~2021 Form 10‑K.

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

5537


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 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).

~~3.2~~						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).

~~3.3~~3.2						Certificate of Amendment ~~No. 1 to~~of Amended and Restated ~~Bylaws~~Certificate of Incorporation of Farmer Bros. Co. (filed as Exhibit ~~3.4~~3.2 to the Company’s ~~Annual~~Quarterly Report on Form ~~10-K~~10-Q for the quarter ended March 31, 2020 filed with the SEC on ~~September 11,~~May 8, 2020 and incorporated herein by reference).

3.3						Certificate of Amendment of Amended and Restated Certificate of Incorporation of Farmer Bros. Co. (filed as Exhibit 4.4 to the Company’s Registration Statement on Form S-8 filed with the SEC on December 28, 2021 and incorporated herein by reference).

3.4						Certificate of Designations of Series A Convertible Participating Cumulative Perpetual Preferred Stock of Farmer Bros. Co. (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 3, 2017 and incorporated herein by reference).

3.5						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, 2019 filed with the SEC on February 11, 2019 and incorporated herein by reference).

~~10.1~~3.6						~~Credit Agreement dated as~~Amendment No. 1 to Amended and Restated Bylaws of ~~dated as of April 26, 2021, by and among~~ Farmer Bros. Co.~~, a Delaware corporation, the other loan parties named therein, the lenders named therein and Wells Fargo Bank, N.A., as administrative agent and lender~~ (filed as Exhibit ~~10.1~~3.4 to the Company’s ~~Current~~Annual Report on Form ~~8-K~~10-K filed with the SEC on ~~April 26, 2021 and incorporated herein by reference).~~

~~10.2~~						Guaranty and Security Agreement dated as of April 26, 2021, by and among Farmer Bros. Co., 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 April 26, 2021 and incorporated herein by reference).

~~10.4~~						Guaranty and Security Agreement dated as of April 26, 2021, by and among Farmer Bros. Co., 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 April 26, 2021 and incorporated herein by reference).

~~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,~~September 11, 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**						Inline 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**104						~~Cover Page Interactive Data File - the~~The cover page ~~interactive data file does not appear~~from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in ~~the Interactive Data File because its XBRL tags are embedded within the~~ Inline XBRL ~~document.~~(included in Exhibit 101).

________________




*			Filed herewith

**			Furnished, not filed, herewith

5738

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 ~~6, 2021~~5, 2022

By:

/s/ Scott R. Drake

Scott R. Drake
Chief Financial Officer
(principal financial officer)

May ~~6, 2021~~5, 2022

5839


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


	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


	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)	%