Farmer Brothers Company

09/11/2025 | Press release | Distributed by Public on 09/11/2025 15:05

Annual Report for Fiscal Year Ending June 30, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors. The results of operations for fiscal 2025 and fiscal 2024 are not necessarily indicative of the results that may be expected for any future period. This discussion, which presents our results for fiscal 2025 and fiscal 2024, should be read in conjunction with our Consolidated Financial Statements and the accompanying notes and Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K, filed with the SEC on September 12, 2024, as amended by that certain Amendment No. 1 to Form 10-K, filed with the SEC on October 25, 2024, which provides additional information on our results for fiscal 2024.
Our Business
We are a leading coffee roaster, wholesaler, equipment servicer and distributor of coffee, tea and other allied products manufactured 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 Fort Worth, 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 focus 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; including organic and Rainforest Alliance Certified™; culinary products including premium spices, pancake and biscuit mixes, gravy and sauce mixes, soup bases, dressings, syrups and sauces, and coffee-related products such as coffee filters, cups, sugar and creamers; 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 a production and distribution facility in Portland, Oregon. We distribute our products from our Portland, Oregon production facility, as well as separate distribution centers in Northlake, Illinois; Moonachie, New Jersey; and Rialto, California. Our products reach our customers primarily through our nationwide DSD network of over 200 delivery routes and over 90 storage locations as of June 30, 2025. DSD sales are primarily made "off-truck" to our customers at their places of business. We operate a large fleet of trucks and other vehicles to distribute and deliver our products through our DSD network, and we rely on 3PL service providers for our long-haul distribution.
Summary Overview of Fiscal 2025 Results
Net sales in fiscal 2025 increased $1.2 million, or 0.3%, to $342.3 million from $341.1 million in fiscal 2024. The increase in net sales was primarily due to higher pricing compared to prior periods, partially offset by a decline in sales volume.
During fiscal 2025, we experienced higher gross margins compared to fiscal 2024. Overall, gross margins increased by 4.2% to 43.5% in fiscal 2025 from 39.3% in fiscal 2024. The improvement in gross margins was a result of price increases implemented across our network.
Operating expenses increased by $14.2 million in fiscal 2025 over the prior year period due to a $20.2 million decrease in gain on sale of assets from the sale of branch properties and other assets compared to prior year offset by a $3.6 million decrease in selling expenses and a $2.4 million decrease in general and administrative expenses . The decrease in selling expenses during fiscal 2025 was primarily due to decreased spend on facility and healthcare benefits, partially offset by an increase in rent related expenses. The decrease in general and administrative expenses during fiscal 2025 was primarily due to a decrease in consulting related costs and rent.
Our capital expenditures for fiscal 2025 were $9.6 million as compared to $13.8 million in fiscal 2024, a decrease of $4.3 million. This was driven by a decrease in coffee brewing equipment spend.
As of June 30, 2025, the outstanding debt on our Revolver Credit Facility was $14.3 million, a decrease of $9.0 million since June 30, 2024. Our cash increased by $1.0 million to $7.0 million as of June 30, 2025, compared to $6.0 million as of June 30, 2024.
Financial Data Highlights (in thousands, except per share data and percentages)
For The Years Ended June 30, 2025 vs 2024
2025 2024 Favorable (Unfavorable)
Change % Change
Income Statement Data:
Net sales $ 342,281 $ 341,094 $ 1,187 0.3 %
Gross margin 43.5 % 39.3 % 4.2 % 10.7 %
Operating expenses as a % of sales 43.9 % 39.9 % (4.0) % (10.0) %
Net loss $ (14,516) $ (3,875) $ (10,641) NM
Net loss available to common stockholders per common share-basic and diluted $ (0.68) $ (0.19) $ (0.49) NM
Operating Data:
Coffee pounds
19,984 22,169 (2,185) (9.9) %
EBITDA(1) $ (381) $ 10,718 $ (11,099) (103.6) %
EBITDA Margin(1) (0.1) % 3.1 % (3.2) % NM
Adjusted EBITDA(1) $ 14,832 $ 558 $ 14,274 NM
Adjusted EBITDA Margin(1) 4.3 % 0.2 % 4.1 % NM
Percentage of Total Net Sales By Product Category
Coffee (Roasted) 48.1 % 46.4 % 1.7 % 3.7 %
Tea & Other Beverages (2) 27.0 % 26.4 % 0.6 % 2.3 %
Culinary 17.6 % 19.3 % (1.7) % (8.8) %
Spices 6.0 % 6.4 % (0.4) % (6.3) %
Delivery Surcharge 1.3 % 1.5 % (0.2) % NM
Net sales 100.0 % 100.0 %
Other data:
Total capital expenditures 9,591 13,843 4,252 30.7 %
Depreciation & amortization expense 11,448 11,588 140 1.2 %
________________
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, as well as discussion of certain changes we made to our methodology for calculating Adjusted EBITDA beginning with the period ending June 30, 2024.
(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.
Factors Affecting Our Business
We have identified factors that affect our industry and business which we expect will play an important role in our future growth and profitability. Some of these factors include:
•Investment in Manufacturing Facility. We are focused on leveraging our Portland, Oregon facility to produce the highest quality coffee in response to the market shift to premium and specialty coffee and create sustainable long-term growth. We will continue to invest in our facility to ensure reliable production while focusing on overall production costs.
•Supply Chain Efficiencies and Competition. In order to compete effectively and capitalize on growth opportunities, we must retain and continue to grow our customer base, evaluate and undertake initiatives to reduce costs and streamline our supply chain. We continue to look for ways to deploy our personnel, systems, assets and infrastructure to create or enhance stockholder value. Areas of focus include distribution network optimization, methods of procurement, logistics, inventory management, supporting technology, and real estate assets. The ability to attract and retain a skilled workforce, as well as mitigate global supply chain challenges, will affect our future growth and profitability.
•Demographic and Channel Trends. Our success is dependent upon our ability to develop new products in response to demographic and other trends to better compete in areas such as premium coffee and tea, including expansion of our product portfolio by investing resources in what we believe to be key growth categories and different formats.
•Fluctuations in Green Coffee Prices.Our primary raw material is green coffee, an exchange-traded agricultural commodity that is subject to price fluctuations and regulatory changes such as tariffs. The price and availability of green coffee directly impacts our results of operations. For additional details, see Risk Factors in Part I, Item 1A of this Form 10-K.
•Coffee Sourcing and Hedging Strategy. We are exposed to market risk of losses due to changes in coffee commodity prices. Our business model strives to reduce the impact of green coffee price fluctuations on our financial results and to protect and stabilize our margins, principally through strategic vendor pricing and derivative instruments when
appropriate. The impact of derivative instruments is further explained in Note 4, Derivative Instruments, of the Notes to Consolidated Financial Statements included in this Form 10-K.
•Coffee Brewing Equipment Service & Restoration ("Revive"). With Revive, we offer our customers a comprehensive equipment program and 24/7 nationwide equipment service which we believe differentiates us in the marketplace. We offer a full spectrum of equipment needs, which includes brewing equipment installation, water filtration systems, equipment training, and maintenance services to ensure we are able to meet our customer's demands.
Results of Operations
The following table sets forth information regarding our consolidated results of operations for fiscal 2025 and fiscal 2024.
For the Years Ended June 30, 2025 vs 2024
2025 2024 Favorable (Unfavorable)
Change % Change
Net sales $ 342,281 $ 341,094 $ 1,187 0.3 %
Cost of goods sold 193,371 207,201 13,830 6.7 %
Gross profit 148,910 133,893 15,017 11.2 %
Selling expenses 107,749 111,371 3,622 3.3 %
General and administrative expenses 39,275 41,649 2,374 5.7 %
Net losses (gains) on disposal of assets 3,347 (16,877) (20,224) NM
Operating expenses 150,371 136,143 (14,228) (10.5) %
Loss from operations (1,461) (2,250) 789 35.1 %
Other (expense) income:
Interest expense (7,480) (7,835) 355 4.5 %
Pension settlement charge (7,726) - (7,726) - %
Other, net 2,267 6,224 (3,957) NM
Total other expense (12,939) (1,611) (11,328) (703.2) %
Loss from operations before taxes (14,400) (3,861) (10,539) (273.0) %
Income tax expense 116 14 (102) (728.6) %
Net loss $ (14,516) $ (3,875) $ (10,641) (274.6) %
_____________
NM - Not Meaningful
Fiscal 2025 and Fiscal 2024
Net Sales
Net sales in fiscal 2025 increased $1.2 million, or 0.3%, to $342.3 million from $341.1 million in fiscal 2024. The increase in net sales was primarily due to higher pricing compared to prior periods, partially offset by a decline in sales volume. On our sales, average unit price increased due to the increase in pricing.
The following table presents the effect of changes in unit sales, unit pricing and product mix for fiscal 2025 compared to fiscal 2024 (in millions):
Units Sold and Pricing
For Year Ended June 30, 2025 vs 2024 % of Total Mix Change
Effect of change in unit sales (47.4) (4.0) %
Effect of pricing and product mix changes 48.6 4.0 %
Total increase in net sales 1.2 - %
Unit sales decreased 12.3% and average unit price increased by 14.5% in fiscal 2025 as compared to the same prior year period, resulting in a net increase in net sales of 0.3%. Average unit price increased during fiscal 2025 due to a mix of products sold, along with price increases implemented during fiscal 2025. There were no new product category introductions in fiscal 2025 or fiscal 2024 which had a material impact on our net sales.
Gross Profit
Gross profit in fiscal 2025 increased $15.0 million, or 11.2%, to $148.9 million from $133.9 million in fiscal 2024. Gross margin increased by 4.2% to 43.5% in fiscal 2025 from 39.3% in fiscal 2024. The increase in gross profit in fiscal 2025 was primarily driven by improved pricing.
Operating Expenses
In fiscal 2025, operating expenses increased by $14.3 million, or 10.5%, to $150.4 million, from $136.1 million, in fiscal 2024. The change was primarily due to a $3.6 million decrease in selling expenses and a $2.4 million decrease in general and
administrative expenses. Net loss from disposal of assets was $3.3 million in fiscal 2025 compared to a net gain from disposal of assets of $16.9 million in fiscal 2024
The decrease in selling expenses during fiscal 2025 was primarily due to decreased spend on facility and healthcare benefits, partially offset by an increase in rent related expenses. The decrease in general and administrative expenses during fiscal 2025 was primarily due to a decrease in consulting related costs and rent.
Total Other Income (Expense)
Total other income (expense) in fiscal 2025 was $12.9 million of expense compared to $1.6 million of expense in fiscal 2024. The change in total other income (expense) in fiscal 2025 was primarily a result of a charges related to pension settlement and losses from coffee-related derivative instruments in fiscal 2025.
Interest expense in fiscal 2025 decreased $0.4 million to $7.5 million from $7.8 million in the prior year period. The decrease in interest expense in fiscal 2025 was principally due to lower supplier interest expense.
In fiscal 2025, Other, net decreased by $3.9 million to a $2.3 million gain compared to a $6.2 million gain in fiscal 2024. The decrease in Other, net, was primarily a result of mark-to-market net gains on coffee-related derivative instruments not designated as accounting hedges during fiscal 2024.
Income Taxes
In fiscal 2025, we recorded income tax expense of $0.1 million as compared to income tax expense of $14.0 thousand in fiscal 2024. The income tax expense primarily relates to the Hourly Employees' Plan and Death Benefit settlement and state income tax.
Non-GAAP Financial Measures
In addition to net 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 operations excluding the impact of:
•income tax expense (benefit);
•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 excluding the impact of:
•income tax expense (benefit);
•interest expense;
•depreciation and amortization expense;
•401(k) and share-based compensation expense;
•net gains from sales of assets;
•severance costs;
•pension settlement charge;
•strategic initiatives; and
•loss related to sale of business.
"Adjusted EBITDA Margin"is defined as Adjusted EBITDA expressed as a percentage of net sales.
For purposes of calculating EBITDA and EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin, we have excluded the impact of interest expense resulting from non-cash pretax pension and postretirement benefits. For purposes of calculating Adjusted EBITDA and Adjusted EBITDA Margin, we are also excluding the impact of severance and the loss related to sale of business as these items are not reflective of our ongoing operating results.
We believe these non-GAAP financial measures provide a useful measure of the Company's operating results, a meaningful comparison with historical results and with the results of other companies, and insight into the Company's ongoing operating performance. Further, management utilizes these measures, in addition to GAAP measures, when evaluating and comparing the Company's operating performance against internal financial forecasts and budgets.
We believe that EBITDA facilitates operating performance comparisons from period to period by isolating the effects of certain items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. These potential differences may be caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses) and the age and
book depreciation of facilities and equipment (affecting relative depreciation expense). We also present EBITDA and EBITDA Margin because (i) we believe that these measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry, (ii) we believe that investors will find these measures useful in assessing our ability to service or incur indebtedness, and (iii) we use these measures internally as benchmarks to compare our performance to that of our competitors.
EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin, as defined by us, may not be comparable to similarly titled measures reported by other companies. We do not intend for non-GAAP financial measures to be considered in isolation or as a substitute for other measures prepared in accordance with GAAP.
Set forth below is a reconciliation of net loss to EBITDA (non-GAAP):
For the Year Ended June 30,
(In thousands) 2025 2024
Net loss $ (14,516) $ (3,875)
Income tax expense 116 14
Interest expense (1) 2,571 2,991
Depreciation and amortization expense 11,448 11,588
EBITDA $ (381) $ 10,718
EBITDA Margin (0.1) % 3.1 %
____________
(1)Excludes interest expense related to pension plans and postretirement benefits.
Set forth below is a reconciliation of net loss to Adjusted EBITDA (non-GAAP):
Year Ended June 30,
(In thousands) 2025 2024
Net loss $ (14,516) $ (3,875)
Income tax expense 116 14
Interest expense (1) 2,571 2,991
Depreciation and amortization expense 11,448 11,588
401(k) and share-based compensation expense 1,999 3,762
Net losses (gains) on disposal of assets 2,547 (18,091)
Pension settlement charge 7,726 -
Loss related to sale of business (2) 800 1,214
Severance costs 1,882 2,955
Strategic initiative costs (3) 259 -
Adjusted EBITDA $ 14,832 $ 558
Adjusted EBITDA Margin 4.3 % 0.2 %
________
(1)Excludes interest expense related to pension plans and postretirement benefits.
(2)Result related to the divestiture of Direct Ship business which includes the impact of working capital and other adjustments.
(3)Cost related to Strategic Initiative of the Company
Liquidity, Capital Resources and Financial Condition
The following table summarizes the Company's debt obligations, excluding unamortized deferred debt financing costs:
June 30, 2025 June 30, 2024
(In thousands) Debt Origination Date Maturity Principal Amount Borrowed Carrying Value
Weighted Average Interest Rate
Carrying Value Weighted Average Interest Rate
Revolver various 4/26/2027 N/A $ 14,300 6.48 % $ 23,300 7.05 %
Credit Facility
The revolver under the Credit Facility has a commitment of up to $75.0 million and a maturity date of April 26, 2027. Availability under the revolver is calculated as the lesser of (a) $75.0 million or (b) the amount equal to 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 of Eligible Inventory, minus (c) applicable reserve. The term loan under the Term Credit Facility was fully paid down on June 30, 2023.
The Credit Facility contain customary affirmative and negative covenants and restrictions 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 Facility becoming immediately due and payable and termination of the commitments. As of and through June 30, 2025, we were in compliance with all of the covenants under the Credit Facility.
The Credit Facility provides 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 and continue to execute on key strategic initiatives.
At June 30, 2025, we had outstanding borrowings of $14.3 million and utilized $4.7 million of the letters of credit sublimit under the Credit Facility, and had $32.6 million of availability under our Credit Facility.
Liquidity
We generally finance our operations through cash flows from operations and borrowings under our Credit Facility. 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 Facility, to the extent available, in addition to our cash flows from operations, collectively, will be sufficient to fund our working capital and capital expenditure requirements for the next 12 months.
At June 30, 2025, we had $6.8 million of unrestricted cash and cash equivalents. Further changes in commodity prices and the number of coffee-related derivative instruments held could have a significant impact on cash deposit requirements under our broker and counterparty agreements and may adversely affect our liquidity. An economic downturn may also cause substantial changes in consumer behavior and demand for our products, adversely affecting results of operations and our financial position, some of which we may not be able to predict with certainty.
Cash Flows
The significant captions and amounts from our consolidated statements of cash flows are summarized below:
For the Years Ended June 30,
2025 2024
Consolidated Statements of cash flows data (in thousands)
Net cash provided by (used in) operating activities
$ 16,097 (14,147)
Net cash (used in) provided by investing activities
(5,902) 14,723
Net cash (used in) provided by financing activities (9,226) 10
Net increase in cash and cash equivalents
$ 969 $ 586
Operating Activities
Net cash provided by operating activities in fiscal 2025 increased $30.2 million as compared to fiscal 2024. The change was driven by a decrease in inventory and increased margin percentage in fiscal 2025.
Investing Activities
Net cash used in investing activities during fiscal 2025 was $5.9 million as compared to net cash provided by investing activities of $14.7 million during fiscal 2024. In fiscal 2025, proceeds from sale of assets was $4.5 million offset by capital expenditures of $9.6 million. In fiscal 2024, proceeds from sale of assets was $29.8 million offset by capital expenditures of $13.8 million.
Financing Activities
Net cash used in financing activities during fiscal 2025 was $9.2 million as compared to $10.0 thousand of cash provided by financing activities during fiscal 2024. The Revolver Credit Facility decreased to $14.3 million as of June 30, 2024 with $9.0 million of net paydowns on the Revolver Credit Facility in fiscal 2025.
Capital Expenditures
For fiscal 2025 and fiscal 2024 our capital expenditures paid were $9.6 million and $13.8 million, respectively. In fiscal 2026, we anticipate capital expenditures will be between $9.0 million and $11.0 million. We expect to finance these expenditures through cash flows from operations and borrowings under our Revolver Credit Facility.
Depreciation and amortization expense was $11.4 million and $11.6 million in fiscal 2025 and 2024, respectively.
Settlement Agreement
On June 30, 2023, the Company completed its previously announced sale of certain assets related to its direct ship and private label business, including its production facility and corporate office building in Northlake, Texas (the "Sale"), pursuant to that certain Asset Purchase Agreement, dated as of June 6, 2023, by and between the Company and TreeHouse Foods, Inc. (the "Buyer"), as amended by that certain Amendment to Asset Purchase Agreement, dated June 30, 2023. The Company and
the Buyer executed a Settlement Agreement and Release (the "Settlement Agreement") related to the Asset Purchase Agreement, effective March 27, 2025, pursuant to which the Company agreed to pay Buyer an amount equal to $0.8 million.
Recent Accounting Pronouncements
Refer to Note 2,Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for a summary of recently adopted and recently issued accounting standards and their related effects or anticipated effects on our consolidated results of operations and financial condition.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 2025 or June 30, 2024.
Critical Accounting Estimates
We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
Our significant accounting estimates are discussed in additional detail in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in this Form 10-K. We believe that our significant accounting estimates involve a higher degree of judgment and/or complexity for the reasons discussed below:
Fair value of coffee-related derivative instruments
We are exposed to commodity price risk arising from changes in the market price of green coffee. In general, increases in the price of green coffee could cause our cost of goods sold to increase and, if not offset by product price increases, could negatively affect our financial condition and results of operations. As a result, our business model strives to reduce the impact of green coffee price fluctuations on our financial results and to protect and stabilize our margins, principally through customer arrangements and derivative instruments.
We utilize derivative instruments to reduce the impact of changing green coffee commodity prices. We purchase over-the-counter coffee derivative instruments to enable us to lock in the price of green coffee commodity purchases. These derivative instruments may be entered into at the direction of the customer under commodity-based pricing arrangements to effectively lock in the purchase price of green coffee under such customer arrangements, in certain cases up to 18 months or longer in the future. Notwithstanding this customer direction, pursuant to Accounting Standards Codification ("ASC") 815, "Derivatives and Hedging," we are considered the owner of these derivative instruments and, therefore, we are required to account for them as such. In the event the customer fails to purchase the products associated with the underlying derivative instruments for which the price has been locked-in on behalf of the customer, we expect that such derivative instruments will be assigned to, and assumed by, the customer in accordance with contractual terms or, in the absence of such terms, in accordance with standard industry custom and practice. In the event the customer fails to assume such derivative instruments, we will remain obligated on the derivative instruments at settlement. We generally settle derivative instruments to coincide with the receipt of the purchased green coffee or apply the derivative instruments to purchase orders effectively fixing the cost of in-bound green coffee purchases. We do not purchase any derivative instruments to hedge cost fluctuations of any commodities other than green coffee.
The fair value of derivative instruments is based upon broker quotes. We account for certain coffee-related derivative instruments as accounting hedges in order to minimize the volatility created in our quarterly results from utilizing these derivative contracts and to improve comparability between reporting periods. The change in fair value of the derivative is reported in accumulated other comprehensive income (loss) ("AOCI") on our consolidated balance sheet and subsequently reclassified into cost of goods sold in the period or periods when the hedged transaction affects earnings.
Single Employer Pension Plan
The estimation of our single employer Farmer Bros. pension plan requires that we make use of various actuarial assumptions such as discount rates and expected long-term rates of return on plan assets. Material changes in pension costs may occur in the future due to changes in these assumptions. Plan obligations and expenses are based on existing retirement plan provisions.
The assumptions used in developing the required estimates include the following key factors:
•Discount rates.We utilize a yield curve analysis to determine the discount rates for our defined benefit plans' obligations. The yield curve considers pricing and yield information for high quality bonds with maturities matched to estimated payouts of future pension benefits.
•Expected long-term rate of return on plan assets. The expected return on plan assets is based on our expectation of the long-term rates of return on each asset class based on the current asset mix of the funds, considering the historical returns earned on the type of assets in the funds.
The following table illustrates the sensitivity to a change in certain assumptions for the Farmer Bros. pension plan, holding all other assumptions constant:
($ in thousands)
Effect on 2024 Net Periodic Benefit Cost
Effect on June 30, 2024 PBO
50 basis points decrease in discount rate $ (49) $ 2,656
50 basis points increase in discount rate $ 43 $ (2,438)
50 basis points decrease in expected rate of return on assets $ 213 N/A
50 basis points increase in expected rate of return on assets $ (213) N/A
See Note 11, Employee Benefit Plans,of the Notes to Consolidated Financial Statements included in this Form 10-K for further discussions of our various pension plans.
Farmer Brothers Company published this content on September 11, 2025, and is solely responsible for the information contained herein. Distributed via SEC EDGAR on September 11, 2025 at 21:05 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]