þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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95-0725980
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(State of Incorporation)
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(I.R.S. Employer Identification No.)
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1912 Farmer Brothers Drive, Northlake, Texas 76262
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(Address of Principal Executive Offices; Zip Code)
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888-998-2468
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(Registrant’s Telephone Number, Including Area Code)
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $1.00 par value
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The NASDAQ Global Select Market
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PART I
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ITEM 1.
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Business
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ITEM 1A.
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Risk Factors
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ITEM 1B.
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Unresolved Staff Comments
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ITEM 2.
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Properties
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ITEM 3.
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Legal Proceedings
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ITEM 4.
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Mine Safety Disclosures
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PART II
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ITEM 5.
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Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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ITEM 6.
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Selected Financial Data
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ITEM 7.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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ITEM 7A.
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Quantitative and Qualitative Disclosures About Market Risk
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ITEM 8.
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Financial Statements and Supplementary Data
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ITEM 9.
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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ITEM 9A.
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Controls and Procedures
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ITEM 9B.
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Other Information
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PART III
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ITEM 10.
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Directors, Executive Officers and Corporate Governance
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ITEM 11.
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Executive Compensation
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ITEM 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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ITEM 13.
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Certain Relationships and Related Transactions, and Director Independence
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ITEM 14.
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Principal Accountant Fees and Services
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PART IV
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ITEM 15.
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Exhibits and Financial Statement Schedules
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ITEM 16.
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Form 10-K Summary
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SIGNATURES
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Item 1.
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Business
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•
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a robust line of roast and ground coffee, including organic, Direct Trade, DTVS and other sustainably-produced offerings;
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•
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frozen liquid coffee;
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•
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flavored and unflavored iced and hot teas;
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•
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culinary products including gelatins and puddings, soup bases, dressings, gravy and sauce mixes, pancake and biscuit mixes, jellies and preserves, and coffee-related products such as coffee filters, sugar and creamers;
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•
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spices; and
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•
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other beverages including cappuccino, cocoa, granitas, and ready-to-drink iced coffee.
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•
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develop new products in response to demographic and other trends to better compete in areas such as premium coffees and teas;
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•
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grow through acquisitions to broaden our geographic reach and to increase our presence in the high-growth premium tea industry;
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•
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implement a channel-based selling strategy to better address the unique needs of each customer channel, more quickly respond to industry trends, and improve sales growth while maintaining the value-add provided by the DSD delivery and service model;
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•
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rethink aspects of our Company culture to improve productivity and employee engagement and to attract and retain talent;
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•
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embrace sustainability across our operations, in the quality of our products, as well as, how we treat our coffee growers; and
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•
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ensure our systems and processes provide the highest quality products at a competitive cost, protection against cyber threats, and a safe environment for our employees and partners.
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•
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a wide variety of coffee product offerings and packaging options across numerous brands and three quality tiers-value, premium and specialty;
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•
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consumer-branded coffee and tea products;
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•
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beverage equipment placement and service;
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•
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hassle-free inventory and product procurement management;
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•
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DSD service;
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•
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merchandising support;
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•
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product and menu insights; and
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•
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a robust approach to social, environmental and economic sustainability throughout our business.
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•
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New Facility
. In fiscal 2017, we completed construction of and relocation to our state-of-the-art facility in Northlake, Texas. We undertook this endeavor, in part, to pursue improved production efficiency to allow us to provide a more cost-competitive offering of high-quality products. We believe the ongoing improvements in production efficiency will allow us to operate at a lower cost, generally.
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•
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DSD Restructuring Plan.
As a result of an ongoing operational review of various initiatives within our DSD selling organization, in the third quarter of fiscal 2017, we commenced the DSD Restructuring Plan to reorganize our DSD operations in an effort to realign functions into a channel-based selling organization, streamline operations, acquire certain channel specific expertise, and improve selling effectiveness and financial results. We began recognizing cost benefits associated with the restructuring in the fourth quarter of fiscal 2017 and we anticipate annualized savings from the restructuring plan beginning in the second quarter of fiscal 2018. We expect to complete the DSD Restructuring Plan by the end of the second quarter of fiscal 2018. We continue to analyze our DSD organization and evaluate other potential restructuring opportunities in light of our strategic priorities.
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•
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Third-Party Logistics
. During the second half of fiscal 2016, we replaced our long-haul fleet operations with third-party logistics (“3PL“). In fiscal 2017, we experienced a reduction in our fuel consumption and empty
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•
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Vendor Managed Inventory.
During the second half of fiscal 2016, we entered into a third-party vendor managed inventory arrangement. The use of vendor managed inventory arrangements has begun to yield benefits in fiscal 2017 by enabling us to reconfigure our packaging methodology, eliminating duplication but resulting in the same strength packaging with less material, thereby reducing waste and contributing to our sustainability efforts.
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•
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Warehouse Management
. In the first quarter of fiscal 2017, we entered into an agreement with a third party to provide warehouse management services for our New Facility. We expect the warehouse management services to facilitate cost savings by leveraging the third party's expertise in opening new facilities, implementing lean management practices, improving performance on certain key performance metrics, and standardizing best practices.
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•
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Pricing and Products.
In fiscal 2016, we built capability to more strategically optimize our pricing strategy across product, channel, customer and geographic segments, which we continued in fiscal 2017. This process is designed to improve our average margins as well as retention rates. In addition, in fiscal 2017, we continued our prior work optimizing SKU count and identifying opportunities to consolidate suppliers to improve costs and supply chain efficiency.
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•
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Channel-Based Selling Organization
. Changing from a geographic to a channel-based selling strategy as part of the DSD Restructuring Plan is expected to allow us to better serve our customers and improve sales growth while maintaining the value-add provided by the DSD delivery and service model. We believe this new, channel-based sales strategy will empower our sales organization to better address the unique needs of each customer channel thereby deepening our customer relationships, allow us to create a more comprehensive customer support structure, enhance our marketing efforts, and allow us to respond more quickly to industry trends.
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•
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Acquisitions.
One of our investment priorities is exploring acquisitions that we believe will enhance long-term stockholder value and complement or enhance our product, equipment, service and/or distribution offerings to existing and new customer bases. For example, in fiscal 2017, we completed the China Mist acquisition to extend our tea product offerings and give us a greater presence in the high-growth premium tea industry, and the West Coast Coffee acquisition to broaden our reach in the Northwestern United States. Additionally, on August 18, 2017, we entered into an agreement to acquire Boyd Coffee Company. The Boyd Coffee Company acquisition is expected to add to our product portfolio, improve our growth potential, broaden our distribution footprint with a deeper penetration on the West Coast of the United States, and increase our capacity utilization at our production facilities. The transaction is expected to close in the second quarter of fiscal 2018, subject to certain closing conditions. See
Note 3
,
Acquisitions,
and
Note 26
,
Subsequent Events—Boyd’s Purchase Agreement,
of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report.
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•
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Asset Utilization.
We continue to look for ways to deploy our personnel, systems, assets and infrastructure to create or enhance stockholder value. Areas of focus have included corporate staffing and structure, methods of procurement, logistics, inventory management, supporting technology, and real estate assets.
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•
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Branch Consolidation and Property Sales
. In an effort to streamline our branch operations, in the fourth quarter of fiscal 2016, we sold two Northern California branch properties, with a third Northern California property under contract for sale, and we acquired a new branch facility in Hayward, California. The third Northern California property was sold in fiscal 2017. We evaluate our branch operation structure on an ongoing basis to identify opportunities to streamline the supply chain and reduce costs.
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•
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Investment in Human Resources.
In February 2017, we hired David G. Robson as our Treasurer and Chief Financial Officer and Ellen D. Iobst as our Chief Operations Officer. We also promoted Scott Siers to our
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•
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Commitment to Employee Wellness.
We are committed to creating a healthier and happier workforce which we believe contributes to our success. We have received certifications as a Fit-Friendly Worksite and a Blue Zone Workplace based on the activities and environment created in our workplace to support healthy living and promote wellness of our associates.
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•
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Employee Development.
We have invested in a Learning Management System to enable training facilitation and tracking of training modules to support the development of employees at all levels and functions within the organization. We recently completed a Talent Planning Process of all exempt level employees across the organization. We calibrated the assessment of talent and created succession charts for all critical roles to ensure we have the right talent and capabilities to support the business today and in the future.
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•
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In fiscal 2017, we continued to emphasize greater alignment of employee individual goals with Company goals under our compensation plans in order to focus the entire organization on the effort to create value for our stockholders.
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•
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Introduction of Collaborative Coffee™ and Redesign of Un Momento
®
Branded Retail Products.
In an effort to address what we believe to be unmet consumer needs and improve margin within the retail grocery environment, in fiscal 2016 we launched the Collaborative Coffee
™
brand into the retail grocery channel and completed a packaging redesign and product portfolio optimization of our Un Momento
®
retail branded product line. Collaborative Coffee™ offers coffee enthusiasts a super-premium, verified direct trade coffee at an approachable price. Un Momento
®
delivers Millennial Hispanic consumers appealing flavor variety and premium coffee at an exceptional value.
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•
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Growth in Premium Tea Industry.
In fiscal 2017, we increased our presence in the high-growth premium tea industry through the China Mist acquisition. In fiscal 2017, we introduced a new retail line of China Mist naturally flavored iced teas which are naturally gluten-free and blended with all-natural flavorings, and a new line of Artisan hot teas.
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•
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Product Development Lab.
In fiscal 2017, we opened our product development lab at the New Facility where we are focused on developing innovative products in response to industry trends and customer needs. In fiscal 2017, we developed new products including Artisan Cold Brew Coffee and Artisan Direct Trade Coffee.
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•
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SQF Certification.
We are committed to the highest standards in food quality and safety. We have obtained the Safety Quality Food (“SQF”) certification under the Global Food Safety Initiative in our Portland and Houston facilities and are in the process of obtaining the SQF certification for the New Facility.
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•
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Sustainability.
We believe that our collective efforts in measuring our social and environmental impact, creating programs for waste, water and energy reduction, promoting partnerships in our supply chain that aim at supply chain stability and food security, and focusing on employee engagement place us in a unique position to help retailers and foodservice operators create differentiated coffee and tea programs that can include sustainable supply chains, direct trade purchasing, training and technical assistance, recycling and composting networks, and packaging material reductions. During fiscal 2017, we submitted our third third-party verified Carbon Disclosure Project survey for Scope 1, 2 and 3 emissions (direct emissions, indirect emissions from consumption of purchased electricity, heat or steam and other indirect emissions). Further, we published sustainability reports based on the Global Reporting Initiative’s core compliance standard in fiscal 2017 and 2016 relating to our fiscal 2016 and 2015 operations, respectively. In addition, China Mist is a member of the Ethical Tea Partnership (the “ETP”), a non-profit organization that works to improve the sustainability of the tea sector, the lives of tea
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•
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LEED® Certified Facilities.
Our Portland production and distribution facility was one of the first in the Northwest to achieve LEED® Silver Certification. We anticipate that our corporate offices at the New Facility will also be LEED
®
certified.
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•
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Expansion of DTVS Program.
In fiscal 2017, we completed our second third-party audit and verification of our DTVS program for sourcing green coffee. DTVS is an impact-based product or raw material sourcing framework that utilizes data-based sustainability metrics to influence an inclusive, collaborative approach to sustainability along the supply chain. To evaluate whether coffee is DTVS, we follow an outcome-based evaluation framework. The outcome of this evaluation weighs on where we invest our resources within our supply chain and has led to an increased level of transparency for us. DTVS represents a growing part of our coffee portfolio.
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•
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Green Coffee Traceability.
We are committed to the inclusion of more sustainably-sourced coffees in our supply chain. Regulatory and reputational risks can increase when customers, roasters and suppliers cannot see back into their supply chain. To address these concerns, as well as to deepen our commitment to the longevity of the coffee industry, in fiscal 2017 we began tracking traceability levels from all green coffee suppliers on a per contract basis.
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•
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Supplier Sustainability.
We are committed to working with suppliers who share our social, environmental and economic sustainability goals. Regulatory and reputational risks can increase when suppliers are not held to the same strict standards to which we hold ourselves. To address this concern, in fiscal 2017, we surveyed all green coffee suppliers along with our top non-raw coffee suppliers to assess their social, environmental, and economic sustainability practices and alignment with the United Nations Global Compact, a United Nations initiative to encourage businesses worldwide to adopt sustainable and socially responsible policies.
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•
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Recipient organizations include Feeding America, Ronald McDonald House, and local food banks.
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•
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We support industry organizations such as World Coffee Research, which commits to grow, protect, and enhance supplies of quality coffee while improving the livelihoods of the families who produce it, and the Specialty Coffee Association (“SCA”) Sustainability Council and the Coalition for Coffee Communities, which are focused on sustainability in coffee growing regions.
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•
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Our employee-driven CAFÉ Crew organizes employee involvement at local charities and fund raisers, including running in the Chicago Marathon in support of Team Ronald McDonald House, riding in the Ride Against Hunger supported by Tarrant Area Food Bank, supporting delivery for Meals on Wheels, and hosting local food drives.
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•
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All of our usable and near expiring products or products with damaged packaging are donated to Feeding America affiliated food banks nationwide, in an effort to fully eliminate edible food waste from the landfill.
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•
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Coffee Industry Leadership.
Through our dedication to the craft of sourcing, blending and roasting coffee, and our participation and/or leadership positions with the SCA, National Coffee Association, Coalition for Coffee Communities, International Women's Coffee Alliance, International Foodservice Manufacturers Association, Pacific Coast Coffee Association, Roasters Guild and World Coffee Research, we work to help shape the future of the coffee industry. We believe that due to our commitment to the industry, large retail and foodservice operators are drawn to working with us. We were among the first coffee roasters in the nation to receive SCA certification of a state-of-the-art coffee lab and operate Public Domain
®
, a specialty coffeehouse in Portland, Oregon. We plan to submit our product development lab at the New Facility for SCA certification.
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•
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Market Insight and Consumer Research.
We have developed a market insight capability internally that reinforces our business-to-business positioning as a thought leader in the coffee and tea industries. We provide trend insights that help our customers create winning products and integrated marketing strategies. Within this, we are focused on understanding key demographic groups such as Millennials and Hispanics, and key channel trends.
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Item 1A.
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Risk Factors
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•
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requiring a substantial portion of our cash flow from operations to make payments on our indebtedness;
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•
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reducing the cash flow available or limiting our ability to borrow additional funds, to pay dividends, to fund capital expenditures and other corporate purposes and to pursue our business strategies;
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•
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limiting our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate;
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•
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increasing our vulnerability to general adverse economic and industry conditions; and
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•
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placing us at a competitive disadvantage compared to our competitors that have less debt.
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•
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seek additional financing in the debt or equity markets;
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•
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refinance or restructure all or a portion of our indebtedness;
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•
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sell selected assets; or
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•
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reduce or delay planned capital or operating expenditures, strategic acquisitions or investments.
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Item 1.B.
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Unresolved Staff Comments
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Item 2.
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Properties
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Location
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Approximate Area
(Square Feet)
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Purpose
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Status
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Northlake, TX
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538,000
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Corporate headquarters, manufacturing, distribution, warehouse, product development lab
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Owned
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Houston, TX
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330,877
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Manufacturing and warehouse
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Owned
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Portland, OR
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114,000
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Manufacturing and distribution
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Leased
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Northlake, IL
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89,837
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Distribution and warehouse
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Leased
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Moonachie, NY
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41,404
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Distribution and warehouse
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Leased
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Hillsboro, OR
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20,400
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Manufacturing, distribution and warehouse
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Leased
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Scottsdale, AZ
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17,400
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Manufacturing, distribution and warehouse
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Leased
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Item 3.
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Legal Proceedings
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Item 4.
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Mine Safety Disclosures
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Item 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
|
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Year Ended June 30, 2017
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Year Ended June 30, 2016
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||||||||||||
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High
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Low
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High
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Low
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||||||||
1st Quarter
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$
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36.96
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$
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29.16
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$
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28.16
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$
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20.90
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2nd Quarter
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$
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37.55
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$
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30.05
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$
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32.94
|
|
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$
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26.99
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3rd Quarter
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$
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37.15
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$
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31.25
|
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$
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31.63
|
|
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$
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24.04
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4th Quarter
|
|
$
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37.35
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|
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$
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29.30
|
|
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$
|
32.50
|
|
|
$
|
26.69
|
|
|
|
2012
|
|
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2013
|
|
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2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
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|
||||||
Farmer Bros. Co.
|
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$
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100.00
|
|
|
$
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176.63
|
|
|
$
|
271.48
|
|
|
$
|
295.23
|
|
|
$
|
402.76
|
|
|
$
|
380.03
|
|
Russell 2000 Index
|
|
$
|
100.00
|
|
|
$
|
124.21
|
|
|
$
|
153.57
|
|
|
$
|
164.02
|
|
|
$
|
153.90
|
|
|
$
|
195.20
|
|
Value Line Food Processing Index
|
|
$
|
100.00
|
|
|
$
|
119.96
|
|
|
$
|
146.81
|
|
|
$
|
156.96
|
|
|
$
|
185.97
|
|
|
$
|
198.18
|
|
Peer Group Index
|
|
$
|
100.00
|
|
|
$
|
120.41
|
|
|
$
|
133.80
|
|
|
$
|
152.14
|
|
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$
|
186.31
|
|
|
$
|
191.75
|
|
Item 6.
|
Selected Financial Data
|
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Year Ended June 30,
|
||||||||||||||||||
(In thousands, except per share data)
|
2017(1)
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
Consolidated Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net sales
|
$
|
541,500
|
|
|
$
|
544,382
|
|
|
$
|
545,882
|
|
|
$
|
528,380
|
|
|
$
|
513,869
|
|
Cost of goods sold
|
$
|
327,765
|
|
|
$
|
335,907
|
|
|
$
|
348,846
|
|
|
$
|
332,466
|
|
|
$
|
328,693
|
|
Restructuring and other transition expenses(2)
|
$
|
11,016
|
|
|
$
|
16,533
|
|
|
$
|
10,432
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net gain from sale of Torrance Facility (3)
|
$
|
(37,449
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net gains from sale of Spice Assets(4)
|
$
|
(919
|
)
|
|
$
|
(5,603
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net (gains) losses from sales of other assets
|
$
|
(1,210
|
)
|
|
$
|
(2,802
|
)
|
|
$
|
394
|
|
|
$
|
(3,814
|
)
|
|
$
|
(4,467
|
)
|
Impairment losses on intangible assets
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
92
|
|
Income from operations
|
$
|
42,166
|
|
|
$
|
8,179
|
|
|
$
|
3,284
|
|
|
$
|
8,916
|
|
|
$
|
372
|
|
Income from operations per common share—diluted
|
$
|
2.51
|
|
|
$
|
0.49
|
|
|
$
|
0.20
|
|
|
$
|
0.56
|
|
|
$
|
0.02
|
|
Income tax expense (benefit)(5)
|
$
|
15,954
|
|
|
$
|
(79,997
|
)
|
|
$
|
402
|
|
|
$
|
705
|
|
|
$
|
(825
|
)
|
Net income (loss)(6)
|
$
|
24,400
|
|
|
$
|
89,918
|
|
|
$
|
652
|
|
|
$
|
12,132
|
|
|
$
|
(8,462
|
)
|
Net income (loss) per common share—basic
|
$
|
1.46
|
|
|
$
|
5.45
|
|
|
$
|
0.04
|
|
|
$
|
0.76
|
|
|
$
|
(0.54
|
)
|
Net income (loss) per common share—diluted
|
$
|
1.45
|
|
|
$
|
5.41
|
|
|
$
|
0.04
|
|
|
$
|
0.76
|
|
|
$
|
(0.54
|
)
|
Cash dividends declared per common share
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
June 30,
|
||||||||||||||||||
(In thousands)
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total current assets(7)
|
$
|
117,164
|
|
|
$
|
153,365
|
|
|
$
|
135,685
|
|
|
$
|
157,460
|
|
|
$
|
139,749
|
|
Property, plant and equipment, net(8)
|
$
|
176,066
|
|
|
$
|
118,416
|
|
|
$
|
90,201
|
|
|
$
|
95,641
|
|
|
$
|
92,159
|
|
Goodwill(9)
|
$
|
10,996
|
|
|
$
|
272
|
|
|
$
|
272
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Intangible assets, net(9)
|
$
|
18,618
|
|
|
$
|
6,219
|
|
|
$
|
6,419
|
|
|
$
|
5,628
|
|
|
$
|
6,277
|
|
Deferred income taxes
|
$
|
63,055
|
|
|
$
|
80,786
|
|
|
$
|
751
|
|
|
$
|
414
|
|
|
$
|
467
|
|
Total assets
|
$
|
392,736
|
|
|
$
|
368,991
|
|
|
$
|
240,943
|
|
|
$
|
266,177
|
|
|
$
|
244,136
|
|
Short-term borrowings under revolving credit facility(10)
|
$
|
27,621
|
|
|
$
|
109
|
|
|
$
|
78
|
|
|
$
|
78
|
|
|
$
|
9,654
|
|
Capital lease obligations(11)
|
$
|
1,195
|
|
|
$
|
2,359
|
|
|
$
|
5,848
|
|
|
$
|
9,703
|
|
|
$
|
12,168
|
|
Long-term borrowings under revolving credit facility
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,000
|
|
Earn-out payable(12)
|
$
|
1,100
|
|
|
$
|
100
|
|
|
$
|
200
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Long-term derivative liabilities
|
$
|
380
|
|
|
$
|
—
|
|
|
$
|
25
|
|
|
$
|
—
|
|
|
$
|
1,129
|
|
Total liabilities
|
$
|
177,601
|
|
|
$
|
186,397
|
|
|
$
|
150,932
|
|
|
$
|
151,313
|
|
|
$
|
162,298
|
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Event
|
|
Date
|
Announced Corporate Relocation Plan
|
|
Q3 fiscal 2015
|
Transitioned coffee processing and packaging from Torrance production facility
and consolidated them with Houston and Portland production facilities
|
|
Q4 fiscal 2015
|
Moved Houston distribution operations to Oklahoma City distribution center
|
|
Q4 fiscal 2015
|
Entered into lease agreement and development management agreement for New Facility
|
|
Q1 fiscal 2016
|
Commenced construction of New Facility
|
|
Q1 fiscal 2016
|
Transitioned primary administrative offices from Torrance to temporary leased offices in Fort Worth, Texas
|
|
Q1-Q2 fiscal 2016
|
Sold Spice Assets to Harris
|
|
Q2 fiscal 2016
|
Principal design work completed on New Facility
|
|
Q3 fiscal 2016
|
Completed transition services to Harris and ceased spice processing and packaging at Torrance Facility
|
|
Q4 fiscal 2016
|
Entered into purchase and sale agreement to sell Torrance Facility
|
|
Q4 fiscal 2016
|
Exercised purchase option on New Facility
|
|
Q4 fiscal 2016
|
Closed sale of Torrance Facility
|
|
Q1 fiscal 2017
|
Closed purchase option for New Facility
|
|
Q1 fiscal 2017
|
Entered into amended building contract with The Haskell Company
|
|
Q1 fiscal 2017
|
Exited from Torrance Facility
|
|
Q2 fiscal 2017
|
Commenced distribution from New Facility
|
|
Q2 fiscal 2017
|
Substantial completion of construction and relocation to New Facility
|
|
Q3 fiscal 2017
|
Transitioned Oklahoma City distribution operations to New Facility
|
|
Q3 fiscal 2017
|
Coffee roasting commenced in New Facility
|
|
Q4 fiscal 2017
|
Completed Corporate Relocation Plan
|
|
Q4 fiscal 2017
|
•
|
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, including the launch of our Metropolitan™ single cup coffee, expanded seasonal coffee and specialty beverages, new shelf-stable coffee products, new hot teas, the introduction of Collaborative Coffee™ branded products into the retail grocery channel, and the packaging redesign and product portfolio optimization of our Un Momento
®
retail branded product line.
|
•
|
Fluctuations in Green Coffee Prices.
Our primary raw material is green coffee, an agricultural commodity traded on the Commodities and Futures Exchange that is subject to price fluctuations. Over the past five years, coffee “C” market price per pound ranged from approximately $1.02 to $2.22. The coffee “C” market price as of June 30, 2017 and 2016 was
$1.26
and
$1.46
per pound, respectively. 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 report.
|
•
|
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 customer arrangements and derivative instruments, as further explained in
Note 7
,
Derivative Instruments
, of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report.
|
•
|
Sustainability
.
With an increasing focus on sustainability across the coffee and foodservice industry, and particularly from the customers we serve, it is important for us to embrace sustainability across our operations, in the quality of our products, as well as, how we treat our coffee growers. We believe that our collective efforts in measuring our social and environmental impact, creating programs for waste, water and energy reduction, promoting partnerships in our supply chain that aim at supply chain stability and food security, and focusing on employee engagement place us in a unique position to help retailers and foodservice operators create differentiated coffee programs that can include sustainable supply chains, direct trade purchasing, training and technical assistance, recycling and composting networks, and packaging material reductions.
|
•
|
Supply Chain Efficiencies and Competition
.
In order to compete effectively and capitalize on growth opportunities, we must continue to evaluate and undertake initiatives to reduce costs and streamline our supply chain. We undertook the Corporate Relocation Plan, in part, to pursue improved production efficiency to allow us to provide a more cost-competitive offering of high-quality products. We continue to look for ways to deploy our personnel, systems, assets and infrastructure to create or enhance stockholder value. Areas of focus have included corporate staffing and structure, methods of procurement, logistics, inventory management, supporting technology, and real estate assets.
|
•
|
Market Opportunities.
We have invested and in the future may invest in acquisitions that we believe will enhance long-term stockholder value and complement or enhance our product, equipment, service and/or distribution offerings to existing and new customer bases. For example, in fiscal 2017, we completed the China
|
•
|
Capacity Utilization
.
We calculate our utilization for all of our coffee roasting facilities on an aggregate basis based on the number of product pounds manufactured during the actual number of production shifts worked during an average week, compared to the number of product pounds that could be manufactured based on the maximum number of production shifts that could be operated during the week (assuming three shifts per day, five days per week), in each case, based on our current product mix. Utilization rates for our coffee roasting facilities were approximately 93%, 90% and 66% during the fiscal years ended June 30, 2017, 2016 and 2015, respectively. The utilization rate in fiscal 2017 excludes the New Facility where we began roasting coffee in the fourth quarter of fiscal 2017. The utilization rate in fiscal 2016 excludes the Torrance Facility due to the transition of coffee processing and packaging to our Houston and Portland production facilities in the fourth quarter of fiscal 2015.
|
•
|
Volume of green coffee pounds processed and sold increased
5.3%
in fiscal 2017 as compared to fiscal 2016.
|
•
|
Gross profit increased
2.5%
to
$213.7 million
in fiscal 2017 from $208.5 million in fiscal 2016.
|
•
|
Gross margin increased to
39.5%
in fiscal 2017 from 38.3% in fiscal 2016.
|
•
|
Income from operations increased
415.5%
to
$42.2 million
in fiscal 2017 from $8.2 million in fiscal 2016. Income from operations included a $37.4 million net gain from the sale of the Torrance Facility in fiscal 2017 and net gains of
$5.6 million
from the sale of Spice Assets in fiscal 2016.
|
•
|
Net income was
$24.4 million
, or
$1.45
per common share—diluted, in fiscal 2017, primarily due to
$37.4 million
in net gain from the sale of the Torrance Facility and non-cash income tax expense of
$16.0 million
, compared to net income of
$89.9 million
, or $5.41 per common share—diluted, in fiscal 2016, primarily due to non-cash income tax benefit of $80.3 million from the release of valuation allowance on deferred tax assets.
|
•
|
EBITDA increased
110.5%
to
$65.5 million
and EBITDA Margin was
12.1%
in fiscal 2017, as compared to EBITDA of
$31.1 million
and EBITDA Margin of
5.7%
in fiscal 2016.*
|
•
|
Adjusted EBITDA increased
11.1%
to $
46.0 million
and Adjusted EBITDA Margin was
8.5%
in fiscal 2017, as compared to Adjusted EBITDA of
$41.4 million
and Adjusted EBITDA Margin of
7.6%
in fiscal 2016.*
|
•
|
Corporate Relocation Plan.
We completed the Corporate Relocation Plan that was initiated in the third quarter of fiscal 2015 by executing on the milestones described above under
Corporate Relocation
. We commenced distribution activities at the New Facility during the second quarter of fiscal 2017 and initial production activities late in the third quarter of fiscal 2017. We began roasting coffee in the New Facility in the fourth quarter of fiscal 2017. The roasting facility in the New Facility has increased our capacity to support existing and future customers and accommodate volume growth. We are in the process of obtaining SQF certification under the Global Food Safety Initiative for the New Facility.
|
•
|
Acquisition of China Mist and West Coast Coffee.
In fiscal 2017, we completed the China Mist acquisition to extend our tea product offerings and give us a greater presence in the high-growth premium tea industry, and the West Coast Coffee acquisition to broaden our reach in the Northwestern United States.
|
•
|
DSD Restructuring Plan.
In the third quarter of fiscal 2017, we commenced the DSD Restructuring Plan. The strategic decision to undertake the DSD Restructuring Plan resulted from an ongoing operational review of various initiatives within the DSD selling organization. We began recognizing cost benefits associated with the restructuring in the fourth quarter of fiscal 2017 and we anticipate annualized savings from the restructuring plan beginning in the second quarter of fiscal 2018. We expect to complete the DSD Restructuring Plan by the end of the second quarter of fiscal 2018.
|
•
|
Third-Party Logistics.
During the second half of fiscal 2016, we replaced our long-haul fleet operations with 3PL. In fiscal 2017, we experienced a reduction in our fuel consumption and empty trailer miles, while improving our intermodal and trailer cube utilization as compared to the prior fiscal year.
Aligning with our 3PL partner has allowed us to more efficiently manage routing thereby reducing diesel pollution in support of our sustainability efforts. Dynamic routing is expected to allow for further reduction of our carbon emissions in fiscal 2018.
|
•
|
Vendor Managed Inventory.
During the second half of fiscal 2016, we entered into a third-party vendor managed inventory arrangement. The use of vendor managed inventory arrangements has begun to yield benefits in fiscal 2017 by enabling us to reconfigure our packaging methodology, eliminating duplication but resulting in the same strength packaging with less material, thereby reducing waste and contributing to our sustainability efforts.
|
•
|
Warehouse Management
. In the first quarter of fiscal 2017, we entered into an agreement with a third party to provide warehouse management services for our New Facility. We expect the warehouse management services to facilitate cost savings by leveraging the third party's expertise in opening new facilities, implementing lean management practices, improving performance on certain key performance metrics, and standardizing best practices.
|
•
|
Product Development and Expansion.
In fiscal 2017, we opened our product development lab at the New Facility where we are focused on developing innovative products in response to industry trends and customer needs. In fiscal 2017, we introduced a new retail line of China Mist naturally flavored iced teas, a new line of Artisan hot teas, an Artisan Cold Brew Coffee and an Artisan Direct Trade Coffee.
|
(In millions)
|
Year Ended June 30,
2017 vs. 2016
|
||
Effect of change in unit sales
|
$
|
(7.4
|
)
|
Effect of pricing and product mix changes
|
4.5
|
|
|
Total decrease in net sales
|
$
|
(2.9
|
)
|
|
|
Year Ended June 30,
|
||||||||||||
|
|
2017
|
|
2016
|
||||||||||
(In thousands)
|
|
$
|
|
% of total
|
|
$
|
|
% of total
|
||||||
Net Sales by Product Category:
|
|
|
|
|
|
|
|
|
||||||
Coffee (Roast & Ground)
|
|
$
|
339,358
|
|
|
63
|
%
|
|
$
|
332,533
|
|
|
61
|
%
|
Coffee (Frozen Liquid)
|
|
32,827
|
|
|
6
|
%
|
|
35,933
|
|
|
7
|
%
|
||
Tea (Iced & Hot)
|
|
29,256
|
|
|
5
|
%
|
|
25,096
|
|
|
4
|
%
|
||
Culinary
|
|
55,592
|
|
|
10
|
%
|
|
54,036
|
|
|
10
|
%
|
||
Spice(1)
|
|
24,895
|
|
|
5
|
%
|
|
35,789
|
|
|
6
|
%
|
||
Other beverages(2)
|
|
56,653
|
|
|
10
|
%
|
|
57,690
|
|
|
11
|
%
|
||
Net sales by product category
|
|
538,581
|
|
|
99
|
%
|
|
541,077
|
|
|
99
|
%
|
||
Fuel surcharge
|
|
2,919
|
|
|
1
|
%
|
|
3,305
|
|
|
1
|
%
|
||
Net sales
|
|
$
|
541,500
|
|
|
100
|
%
|
|
$
|
544,382
|
|
|
100
|
%
|
•
|
Gross profit increased
5.8%
to
$208.5 million
in fiscal 2016 from
$197.0 million
in fiscal 2015.
|
•
|
Gross margin increased to
38.3%
in fiscal 2016 from
36.1%
in fiscal 2015.
|
•
|
Income from operations increased
149.1%
to
$8.2 million
in fiscal 2016 from
$3.3 million
in fiscal 2015.
|
•
|
Net income was
$89.9 million
, or
$5.41
per diluted common share, in fiscal 2016, primarily due to non-cash income tax benefit of
$80.3 million
from the release of valuation allowance on deferred tax assets, compared to
$0.7 million
, or
$0.04
per diluted common share, in fiscal 2015.
|
•
|
Corporate Relocation Plan.
We continued to execute on the Corporate Relocation Plan that we initiated in the third quarter of fiscal 2015 by executing on the milestones described above under
Corporate Relocation
.
|
•
|
Third-Party Logistics.
During the second half of fiscal 2016, we replaced our long-haul fleet operations with 3PL. We expect that this transportation arrangement will reduce our fuel consumption and empty trailer miles, while improving our intermodal and trailer cube utilization.
|
•
|
Vendor Managed Inventory.
During the second half of fiscal 2016, we entered into a vendor managed inventory arrangement with a third party. We anticipate that the use of vendor managed inventory arrangements will result in a reduction in raw material, finished goods and logistics costs, while improving packaging innovation and fulfillment.
|
•
|
DSD Reorganization.
In fiscal 2016, we continued our efforts to improve efficiencies in our sales and product offerings. During the second half of fiscal 2016, we began to realign our DSD organization by undertaking initiatives intended to streamline communication and decision making, enhance branch organizational structure, and improve customer focus, including toward a comprehensive training program for all DSD team members to strengthen customer engagement. In fiscal 2016, we executed a regional test of our first advertising and lead generation campaign designed to improve our new customer acquisition rate within our DSD network.
|
•
|
Branch Consolidation and Property Sales.
In an effort to streamline our branch operations, in the fourth quarter of fiscal 2016 we sold two Northern California branch properties, with a third Northern California property under contract for sale, and we acquired a new branch facility in Hayward, California.
|
•
|
Introduction of Collaborative Coffee™ and Redesign of Un Momento
®
Branded Retail Products.
In an effort to address what we believe to be unmet consumer needs and improve margin within the retail grocery environment, in fiscal 2016, we launched Collaborative Coffee™, a new brand of ethically sourced, whole bean direct trade coffees into the retail grocery channel. In addition, we completed a packaging redesign and product portfolio optimization of our Un Momento® retail branded product line.
|
(In millions)
|
Year Ended June 30,
2016 vs. 2015
|
||
Effect of change in unit sales
|
$
|
14.4
|
|
Effect of pricing and product mix changes
|
(15.9
|
)
|
|
Total decrease in net sales
|
$
|
(1.5
|
)
|
|
|
Year Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
||||||||||
(In thousands)
|
|
$
|
|
% of total
|
|
$
|
|
% of total
|
||||||
Net Sales by Product Category:
|
|
|
|
|
|
|
|
|
||||||
Coffee (Roast & Ground)
|
|
$
|
332,533
|
|
|
61
|
%
|
|
$
|
336,129
|
|
|
60
|
%
|
Coffee (Frozen Liquid)
|
|
35,933
|
|
|
7
|
%
|
|
37,428
|
|
|
7
|
%
|
||
Tea (Iced & Hot)
|
|
25,096
|
|
|
4
|
%
|
|
27,172
|
|
|
5
|
%
|
||
Culinary
|
|
54,036
|
|
|
10
|
%
|
|
54,208
|
|
|
11
|
%
|
||
Spice(1)
|
|
35,789
|
|
|
6
|
%
|
|
32,336
|
|
|
6
|
%
|
||
Other beverages(2)
|
|
57,690
|
|
|
11
|
%
|
|
54,933
|
|
|
10
|
%
|
||
Net sales by product category
|
|
541,077
|
|
|
99
|
%
|
|
542,206
|
|
|
99
|
%
|
||
Fuel surcharge
|
|
3,305
|
|
|
1
|
%
|
|
3,676
|
|
|
1
|
%
|
||
Net sales
|
|
$
|
544,382
|
|
|
100
|
%
|
|
$
|
545,882
|
|
|
100
|
%
|
•
|
restructuring and other transition expenses;
|
•
|
net gains and losses from sales of assets;
|
•
|
non-cash income tax expense (benefit), including the release of valuation allowance on deferred tax assets;
|
•
|
non-recurring 2016 proxy contest-related expenses;
|
•
|
non-cash interest expense accrued on the Torrance Facility sale-leaseback financing obligation;
|
•
|
acquisition and integration costs;
|
•
|
income taxes on non-GAAP adjustments.
|
•
|
income taxes;
|
•
|
interest expense; and
|
•
|
depreciation and amortization expense.
|
•
|
income taxes;
|
•
|
interest expense;
|
•
|
income from short-term investments;
|
•
|
depreciation and amortization expense;
|
•
|
ESOP and share-based compensation expense;
|
•
|
non-cash impairment losses;
|
•
|
non-cash pension withdrawal expense;
|
•
|
other similar non-cash expenses;
|
•
|
restructuring and other transition expenses;
|
•
|
net gains and losses from sales of assets;
|
•
|
non-recurring 2016 proxy contest-related expenses; and
|
•
|
acquisition and integration costs.
|
|
|
Year Ended June 30,
|
||||||||||
(In thousands)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net income, as reported
|
|
$
|
24,400
|
|
|
$
|
89,918
|
|
|
$
|
652
|
|
Restructuring and other transition expenses
|
|
11,016
|
|
|
16,533
|
|
|
10,432
|
|
|||
Net gain from sale of Torrance Facility
|
|
(37,449
|
)
|
|
—
|
|
|
—
|
|
|||
Net gains from sale of Spice Assets
|
|
(919
|
)
|
|
(5,603
|
)
|
|
—
|
|
|||
Net (gains) losses from sales of other assets
|
|
(1,210
|
)
|
|
(2,802
|
)
|
|
394
|
|
|||
Non-recurring 2016 proxy contest-related expenses
|
|
5,186
|
|
|
—
|
|
|
—
|
|
|||
Non-cash income tax benefit, including release of valuation allowance on deferred tax assets
|
|
—
|
|
|
(80,439
|
)
|
|
—
|
|
|||
Interest expense on sale-leaseback financing obligation
|
|
681
|
|
|
—
|
|
|
—
|
|
|||
Acquisition and integration costs(1)
|
|
1,734
|
|
|
—
|
|
|
—
|
|
|||
Income tax expense on non-GAAP adjustments
|
|
8,175
|
|
|
—
|
|
|
—
|
|
|||
Non-GAAP net income(1)
|
|
$
|
11,614
|
|
|
$
|
17,607
|
|
|
$
|
11,478
|
|
|
|
|
|
|
|
|
||||||
Net income per common share—diluted, as reported
|
|
$
|
1.45
|
|
|
$
|
5.41
|
|
|
$
|
0.04
|
|
Impact of restructuring and other transition expenses
|
|
$
|
0.66
|
|
|
$
|
1.00
|
|
|
$
|
0.64
|
|
Impact of net gain from sale of Torrance Facility
|
|
$
|
(2.23
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Impact of net gains from sale of Spice Assets
|
|
$
|
(0.05
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
—
|
|
Impact of net gains from sales of other assets
|
|
$
|
(0.07
|
)
|
|
$
|
(0.17
|
)
|
|
$
|
0.03
|
|
Impact of non-recurring 2016 proxy contest-related expenses
|
|
$
|
0.31
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Impact of non-cash income tax benefit, including release of valuation allowance on deferred tax assets
|
|
$
|
—
|
|
|
$
|
(4.84
|
)
|
|
$
|
—
|
|
Impact of interest expense on sale-leaseback financing obligation
|
|
$
|
0.04
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Impact of acquisition and integration costs(1)
|
|
$
|
0.10
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Impact of income tax expense on non-GAAP adjustments
|
|
$
|
0.49
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-GAAP net income per diluted common share(1)
|
|
$
|
0.70
|
|
|
$
|
1.06
|
|
|
$
|
0.71
|
|
(1)
|
Acquisition and integration costs related to Boyd Coffee transaction only and include $244 and $1,490 incurred in the third and fourth quarters of fiscal 2017, respectively. In the interim disclosures, while the Boyd Coffee Company transaction remained confidential, the expenses incurred in the third quarter were included in operating expenses and described as consulting expenses. Acquisition and integration costs incurred in prior periods were not material to the Company’s results of operations.
|
|
|
Year Ended June 30,
|
||||||||||
(In thousands)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net income, as reported
|
|
$
|
24,400
|
|
|
$
|
89,918
|
|
|
$
|
652
|
|
Income tax expense (benefit)
|
|
15,954
|
|
|
(79,997
|
)
|
|
402
|
|
|||
Interest expense
|
|
2,185
|
|
|
425
|
|
|
769
|
|
|||
Depreciation and amortization expense
|
|
22,970
|
|
|
20,774
|
|
|
24,179
|
|
|||
EBITDA
|
|
$
|
65,509
|
|
|
$
|
31,120
|
|
|
$
|
26,002
|
|
EBITDA Margin
|
|
12.1
|
%
|
|
5.7
|
%
|
|
4.8
|
%
|
|
|
Year Ended June 30,
|
||||||||||
(In thousands)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net income, as reported
|
|
$
|
24,400
|
|
|
$
|
89,918
|
|
|
$
|
652
|
|
Income tax expense (benefit)
|
|
15,954
|
|
|
(79,997
|
)
|
|
402
|
|
|||
Interest expense
|
|
2,185
|
|
|
425
|
|
|
769
|
|
|||
Income from short-term investments
|
|
(1,853
|
)
|
|
(2,204
|
)
|
|
(1,251
|
)
|
|||
Depreciation and amortization expense
|
|
22,970
|
|
|
20,774
|
|
|
24,179
|
|
|||
ESOP and share-based compensation expense
|
|
3,959
|
|
|
4,342
|
|
|
5,691
|
|
|||
Restructuring and other transition expenses
|
|
11,016
|
|
|
16,533
|
|
|
10,432
|
|
|||
Net gain from sale of Torrance Facility
|
|
(37,449
|
)
|
|
—
|
|
|
—
|
|
|||
Net gains from sale of Spice Assets
|
|
(919
|
)
|
|
(5,603
|
)
|
|
—
|
|
|||
Net (gains) losses from sales of other assets
|
|
(1,210
|
)
|
|
(2,802
|
)
|
|
394
|
|
|||
Non-recurring proxy contest-related expenses
|
|
5,186
|
|
|
—
|
|
|
—
|
|
|||
Acquisition and integration costs(1)
|
|
1,734
|
|
|
—
|
|
|
—
|
|
|||
Adjusted EBITDA(1)
|
|
$
|
45,973
|
|
|
$
|
41,386
|
|
|
$
|
41,268
|
|
Adjusted EBITDA Margin(1)
|
|
8.5
|
%
|
|
7.6
|
%
|
|
7.6
|
%
|
(1)
|
Acquisition and integration costs related to Boyd Coffee transaction only and include $244 and $1,490 incurred in the third and fourth quarters of fiscal 2017, respectively. In the interim disclosures, while the Boyd Coffee Company transaction remained confidential, the expenses incurred in the third quarter were included in operating expenses and described as consulting expenses. Acquisition and integration costs incurred in prior periods were not material to the Company’s results of operations.
|
|
|
Expenditures Incurred
|
|
Budget
|
||||||||||||||||
(In thousands)
|
|
Fiscal Year Ended June 30, 2017
|
|
Through Fiscal Year Ended June 30, 2016
|
|
Total
|
|
Lower bound
|
|
Upper bound
|
||||||||||
Building and facilities, including land
|
|
$
|
32,660
|
|
|
$
|
28,110
|
|
|
$
|
60,770
|
|
|
$
|
55,000
|
|
|
$
|
60,000
|
|
Machinery and equipment; furniture and fixtures
|
|
28,798
|
|
|
4,443
|
|
|
$
|
33,241
|
|
|
35,000
|
|
|
39,000
|
|
||||
Total
|
|
$
|
61,458
|
|
|
$
|
32,553
|
|
|
$
|
94,011
|
|
|
$
|
90,000
|
|
|
$
|
99,000
|
|
|
|
June 30,
|
||||||||||
(In thousands)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Coffee brewing equipment
|
|
$
|
10,758
|
|
|
$
|
8,375
|
|
|
$
|
10,709
|
|
Building and facilities
|
|
345
|
|
|
3,354
|
|
|
1,460
|
|
|||
Vehicles, machinery and equipment
|
|
7,445
|
|
|
10,254
|
|
|
6,079
|
|
|||
Software, office furniture and equipment
|
|
698
|
|
|
3,165
|
|
|
946
|
|
|||
Land
|
|
—
|
|
|
1,458
|
|
|
—
|
|
|||
Capital expenditures, excluding New Facility
|
|
$
|
19,246
|
|
|
$
|
26,606
|
|
|
$
|
19,194
|
|
New Facility:
|
|
|
|
|
|
|
||||||
Building and facilities, including land(1)
|
|
$
|
39,754
|
|
|
$
|
19,426
|
|
|
$
|
—
|
|
Machinery and equipment
|
|
20,089
|
|
|
4,443
|
|
|
22
|
|
|||
Software, office furniture and equipment
|
|
5,860
|
|
|
—
|
|
|
—
|
|
|||
Capital expenditures, New Facility
|
|
$
|
65,703
|
|
|
$
|
23,869
|
|
|
$
|
22
|
|
Total capital expenditures(1)
|
|
$
|
84,949
|
|
|
$
|
50,475
|
|
|
$
|
19,216
|
|
|
|
June 30,
|
||||||
(In thousands)
|
|
2017
|
|
2016
|
||||
Current assets
|
|
$
|
117,164
|
|
|
$
|
153,365
|
|
Current liabilities
|
|
97,267
|
|
|
56,837
|
|
||
Working capital
|
|
$
|
19,897
|
|
|
$
|
96,528
|
|
|
|
Payment due by period
|
||||||||||||||||||
(In thousands)
|
|
Total
|
|
Less Than
One Year
|
|
1-3
Years
|
|
3-5
Years
|
|
More Than
5 Years
|
||||||||||
Contractual obligations:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating lease obligations
|
|
$
|
12,009
|
|
|
$
|
4,907
|
|
|
$
|
6,147
|
|
|
$
|
955
|
|
|
$
|
—
|
|
New Facility construction and equipment contracts(1)
|
|
4,439
|
|
|
4,439
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Capital lease obligations(2)
|
|
1,235
|
|
|
994
|
|
|
237
|
|
|
4
|
|
|
—
|
|
|||||
Pension plan obligations(3)
|
|
92,677
|
|
|
14,097
|
|
|
16,390
|
|
|
17,320
|
|
|
44,870
|
|
|||||
Postretirement benefits other than
pension plans(4)
|
|
15,801
|
|
|
5,880
|
|
|
1,960
|
|
|
2,131
|
|
|
5,830
|
|
|||||
Revolving credit facility
|
|
27,621
|
|
|
27,621
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Purchase commitments(5)
|
|
76,359
|
|
|
76,359
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total contractual obligations
|
|
$
|
230,141
|
|
|
$
|
134,297
|
|
|
$
|
24,734
|
|
|
$
|
20,410
|
|
|
$
|
50,700
|
|
(4)
|
Includes
$10.8 million
in estimated future benefit payments on single employer postretirement plan obligations and
$5.0 million
in estimated 2018 contributions to multiemployer plans other than pension plans. See
Note 15
,
Employee Benefit Plans,
of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report.
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
($ in thousands)
|
|
Market Value of
Preferred
Securities at
June 30, 2017
|
|
Change in Market
Value
|
||||
Interest Rate Changes
|
|
|
||||||
–150 basis points
|
|
$
|
367.5
|
|
|
$
|
(0.2
|
)
|
–100 basis points
|
|
$
|
367.6
|
|
|
$
|
(0.1
|
)
|
Unchanged
|
|
$
|
367.7
|
|
|
$
|
—
|
|
+100 basis points
|
|
$
|
367.6
|
|
|
$
|
(0.1
|
)
|
+150 basis points
|
|
$
|
367.6
|
|
|
$
|
(0.1
|
)
|
($ in thousands)
|
|
Principal
|
|
Interest Rate
|
|
Annual Interest Expense
|
|||
–150 basis points
|
|
$27,621
|
|
1.52
|
%
|
|
$
|
420
|
|
–100 basis points
|
|
$27,621
|
|
2.02
|
%
|
|
$
|
558
|
|
Unchanged
|
|
$27,621
|
|
3.02
|
%
|
|
$
|
834
|
|
+100 basis points
|
|
$27,621
|
|
4.02
|
%
|
|
$
|
1,110
|
|
+150 basis points
|
|
$27,621
|
|
4.52
|
%
|
|
$
|
1,248
|
|
|
|
Increase (Decrease) to Net Income
|
|
Increase (Decrease) to AOCI
|
||||||||||||
|
|
10% Increase in Underlying Rate
|
|
10% Decrease in Underlying Rate
|
|
10% Increase in Underlying Rate
|
|
10% Decrease in Underlying Rate
|
||||||||
(In thousands)
|
|
|||||||||||||||
Coffee-related derivative instruments(1)
|
|
$
|
274
|
|
|
$
|
(274
|
)
|
|
$
|
4,474
|
|
|
$
|
(4,474
|
)
|
Item 8.
|
Financial Statements and Supplementary Data
|
|
June 30, 2017
|
|
June 30, 2016
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
6,241
|
|
|
$
|
21,095
|
|
Short-term investments
|
368
|
|
|
25,591
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $721 and $714, respectively
|
46,446
|
|
|
44,364
|
|
||
Inventories
|
56,251
|
|
|
46,378
|
|
||
Income tax receivable
|
318
|
|
|
247
|
|
||
Short-term derivative assets
|
—
|
|
|
3,954
|
|
||
Prepaid expenses
|
7,540
|
|
|
4,557
|
|
||
Assets held for sale
|
—
|
|
|
7,179
|
|
||
Total current assets
|
117,164
|
|
|
153,365
|
|
||
Property, plant and equipment, net
|
176,066
|
|
|
118,416
|
|
||
Goodwill
|
10,996
|
|
|
272
|
|
||
Intangible assets, net
|
18,618
|
|
|
6,219
|
|
||
Other assets
|
6,837
|
|
|
9,933
|
|
||
Deferred income taxes
|
63,055
|
|
|
80,786
|
|
||
Total assets
|
$
|
392,736
|
|
|
$
|
368,991
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
39,784
|
|
|
23,919
|
|
||
Accrued payroll expenses
|
17,345
|
|
|
24,540
|
|
||
Short-term borrowings under revolving credit facility
|
27,621
|
|
|
109
|
|
||
Short-term obligations under capital leases
|
958
|
|
|
1,323
|
|
||
Short-term derivative liabilities
|
1,857
|
|
|
—
|
|
||
Other current liabilities
|
9,702
|
|
|
6,946
|
|
||
Total current liabilities
|
97,267
|
|
|
56,837
|
|
||
Accrued pension liabilities
|
51,281
|
|
|
68,047
|
|
||
Accrued postretirement benefits
|
19,788
|
|
|
20,808
|
|
||
Accrued workers’ compensation liabilities
|
7,548
|
|
|
11,459
|
|
||
Other long-term liabilities-capital leases
|
237
|
|
|
1,036
|
|
||
Other long-term liabilities
|
1,480
|
|
|
28,210
|
|
||
Total liabilities
|
$
|
177,601
|
|
|
$
|
186,397
|
|
Commitments and contingencies (Note 23)
|
—
|
|
|
—
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, $1.00 par value, 500,000 shares authorized and none issued
|
—
|
|
|
—
|
|
||
Common stock, $1.00 par value, 25,000,000 shares authorized; 16,846,002 and 16,781,561 shares issued and outstanding at June 30, 2017 and 2016, respectively
|
16,846
|
|
|
16,782
|
|
||
Additional paid-in capital
|
41,495
|
|
|
39,096
|
|
||
Retained earnings
|
221,182
|
|
|
196,782
|
|
||
Unearned ESOP shares
|
(4,289
|
)
|
|
(6,434
|
)
|
||
Accumulated other comprehensive loss
|
(60,099
|
)
|
|
(63,632
|
)
|
||
Total stockholders’ equity
|
$
|
215,135
|
|
|
$
|
182,594
|
|
Total liabilities and stockholders’ equity
|
$
|
392,736
|
|
|
$
|
368,991
|
|
|
Year Ended June 30,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Net sales
|
$
|
541,500
|
|
|
$
|
544,382
|
|
|
$
|
545,882
|
|
Cost of goods sold
|
327,765
|
|
|
335,907
|
|
|
348,846
|
|
|||
Gross profit
|
213,735
|
|
|
208,475
|
|
|
197,036
|
|
|||
Selling expenses
|
157,198
|
|
|
150,198
|
|
|
151,753
|
|
|||
General and administrative expenses
|
42,933
|
|
|
41,970
|
|
|
31,173
|
|
|||
Restructuring and other transition expenses
|
11,016
|
|
|
16,533
|
|
|
10,432
|
|
|||
Net gain from sale of Torrance Facility
|
(37,449
|
)
|
|
—
|
|
|
—
|
|
|||
Net gains from sale of Spice Assets
|
(919
|
)
|
|
(5,603
|
)
|
|
—
|
|
|||
Net (gains) losses from sales of other assets
|
(1,210
|
)
|
|
(2,802
|
)
|
|
394
|
|
|||
Operating expenses
|
171,569
|
|
|
200,296
|
|
|
193,752
|
|
|||
Income from operations
|
42,166
|
|
|
8,179
|
|
|
3,284
|
|
|||
Other (expense) income:
|
|
|
|
|
|
||||||
Dividend income
|
1,007
|
|
|
1,115
|
|
|
1,172
|
|
|||
Interest income
|
567
|
|
|
496
|
|
|
381
|
|
|||
Interest expense
|
(2,185
|
)
|
|
(425
|
)
|
|
(769
|
)
|
|||
Other, net
|
(1,201
|
)
|
|
556
|
|
|
(3,014
|
)
|
|||
Total other (expense) income
|
(1,812
|
)
|
|
1,742
|
|
|
(2,230
|
)
|
|||
Income before taxes
|
40,354
|
|
|
9,921
|
|
|
1,054
|
|
|||
Income tax expense (benefit)
|
15,954
|
|
|
(79,997
|
)
|
|
402
|
|
|||
Net income
|
$
|
24,400
|
|
|
$
|
89,918
|
|
|
$
|
652
|
|
Net income per common share—basic
|
$
|
1.46
|
|
|
$
|
5.45
|
|
|
$
|
0.04
|
|
Net income per common share—diluted
|
$
|
1.45
|
|
|
$
|
5.41
|
|
|
$
|
0.04
|
|
Weighted average common shares outstanding—basic
|
16,668,745
|
|
|
16,502,523
|
|
|
16,127,610
|
|
|||
Weighted average common shares outstanding—diluted
|
16,785,752
|
|
|
16,627,402
|
|
|
16,267,134
|
|
|
Year Ended June 30,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Net income
|
$
|
24,400
|
|
|
$
|
89,918
|
|
|
$
|
652
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
||||||
Unrealized (losses) gains on derivative instruments designated as cash flow hedges, net of tax
|
(2,875
|
)
|
|
185
|
|
|
(14,295
|
)
|
|||
(Gains) losses on derivative instruments designated as cash flow hedges reclassified to cost of goods sold, net of tax
|
(1,058
|
)
|
|
8,064
|
|
|
(4,211
|
)
|
|||
Change in the funded status of retiree benefit obligations, net of tax
|
7,466
|
|
|
(11,461
|
)
|
|
(14,122
|
)
|
|||
Total comprehensive income (loss), net of tax
|
$
|
27,933
|
|
|
$
|
86,706
|
|
|
$
|
(31,976
|
)
|
FARMER BROS. CO.
|
|||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||||||||
(In thousands)
|
|||||||||||
|
Year Ended June 30,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
24,400
|
|
|
$
|
89,918
|
|
|
$
|
652
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|||||||||
Depreciation and amortization
|
22,970
|
|
|
20,774
|
|
|
24,179
|
|
|||
Provision for (recovery of) doubtful accounts
|
325
|
|
|
71
|
|
|
(8
|
)
|
|||
Restructuring and other transition expenses, net of payments
|
1,034
|
|
|
(2,697
|
)
|
|
6,608
|
|
|||
Interest on sale-leaseback financing obligation
|
681
|
|
|
—
|
|
|
—
|
|
|||
Deferred income taxes
|
15,482
|
|
|
(80,314
|
)
|
|
123
|
|
|||
Net gain from sale of Torrance Facility
|
(37,449
|
)
|
|
—
|
|
|
—
|
|
|||
Net (gains) losses from sales of Spice Assets and other assets
|
(2,129
|
)
|
|
(8,405
|
)
|
|
394
|
|
|||
ESOP and share-based compensation expense
|
3,959
|
|
|
4,342
|
|
|
5,691
|
|
|||
Net (gains) losses on derivative instruments and investments
|
(205
|
)
|
|
12,910
|
|
|
(950
|
)
|
|||
Change in operating assets and liabilities:
|
|
|
|||||||||
Restricted cash
|
—
|
|
|
1,002
|
|
|
(1,002
|
)
|
|||
Purchases of trading securities
|
(5,136
|
)
|
|
(7,255
|
)
|
|
(3,661
|
)
|
|||
Proceeds from sales of trading securities
|
30,645
|
|
|
5,901
|
|
|
2,358
|
|
|||
Accounts receivable
|
(14
|
)
|
|
(3,476
|
)
|
|
2,078
|
|
|||
Inventories
|
(8,504
|
)
|
|
3,608
|
|
|
20,470
|
|
|||
Income tax receivable
|
(71
|
)
|
|
288
|
|
|
(307
|
)
|
|||
Derivative assets (liabilities), net
|
2,305
|
|
|
(10,583
|
)
|
|
(7,269
|
)
|
|||
Prepaid expenses and other assets
|
(2,506
|
)
|
|
(111
|
)
|
|
(1,332
|
)
|
|||
Accounts payable
|
8,885
|
|
|
(3,343
|
)
|
|
(16,841
|
)
|
|||
Accrued payroll expenses and other current liabilities
|
(2,983
|
)
|
|
5,829
|
|
|
(4,606
|
)
|
|||
Accrued postretirement benefits
|
(1,020
|
)
|
|
(358
|
)
|
|
(1,507
|
)
|
|||
Other long-term liabilities
|
(8,557
|
)
|
|
(473
|
)
|
|
1,860
|
|
|||
Net cash provided by operating activities
|
$
|
42,112
|
|
|
$
|
27,628
|
|
|
$
|
26,930
|
|
Cash flows from investing activities:
|
|
|
|||||||||
Acquisitions of businesses, net of cash acquired
|
$
|
(25,853
|
)
|
|
$
|
—
|
|
|
$
|
(1,200
|
)
|
Purchases of property, plant and equipment
|
(45,195
|
)
|
|
(31,050
|
)
|
|
(19,216
|
)
|
|||
Purchases of construction-in-progress assets for New Facility
|
(39,754
|
)
|
|
(19,426
|
)
|
|
—
|
|
|||
Proceeds from sales of property, plant and equipment
|
4,078
|
|
|
10,946
|
|
|
273
|
|
|||
Net cash used in investing activities
|
$
|
(106,724
|
)
|
|
$
|
(39,530
|
)
|
|
$
|
(20,143
|
)
|
FARMER BROS. CO.
|
|||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||||||||
(In thousands)
|
|||||||||||
|
Year Ended June 30,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows from financing activities:
|
|
|
|||||||||
Proceeds from revolving credit facility
|
$
|
77,985
|
|
|
$
|
405
|
|
|
$
|
63,376
|
|
Repayments on revolving credit facility
|
(50,473
|
)
|
|
(374
|
)
|
|
(63,947
|
)
|
|||
Proceeds from sale-leaseback financing obligation
|
42,455
|
|
|
—
|
|
|
—
|
|
|||
Proceeds from New Facility lease financing obligation
|
16,346
|
|
|
19,426
|
|
|
—
|
|
|||
Repayments of New Facility lease financing
|
(35,772
|
)
|
|
—
|
|
|
—
|
|
|||
Payments of capital lease obligations
|
(1,433
|
)
|
|
(3,147
|
)
|
|
(3,910
|
)
|
|||
Payment of financing costs
|
—
|
|
|
(8
|
)
|
|
(571
|
)
|
|||
Proceeds from stock option exercises
|
688
|
|
|
1,694
|
|
|
1,548
|
|
|||
Tax withholding payment - net share settlement of equity awards
|
(38
|
)
|
|
(159
|
)
|
|
(116
|
)
|
|||
Net cash provided by (used in) financing activities
|
$
|
49,758
|
|
|
$
|
17,837
|
|
|
$
|
(3,620
|
)
|
|
|
|
|
|
|
||||||
Net (decrease) increase in cash and cash equivalents
|
$
|
(14,854
|
)
|
|
$
|
5,935
|
|
|
$
|
3,167
|
|
Cash and cash equivalents at beginning of year
|
21,095
|
|
|
15,160
|
|
|
11,993
|
|
|||
Cash and cash equivalents at end of year
|
$
|
6,241
|
|
|
$
|
21,095
|
|
|
$
|
15,160
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
||||||
Cash paid for interest
|
$
|
1,504
|
|
|
$
|
425
|
|
|
$
|
769
|
|
Cash paid for income taxes
|
$
|
567
|
|
|
$
|
324
|
|
|
$
|
858
|
|
Supplemental disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
||||||
Equipment acquired under capital leases
|
$
|
417
|
|
|
$
|
—
|
|
|
$
|
55
|
|
Net change in derivative assets and liabilities
included in other comprehensive income (loss), net of tax
|
$
|
(3,933
|
)
|
|
$
|
8,249
|
|
|
$
|
(18,506
|
)
|
Construction-in-progress assets under New Facility lease
|
$
|
—
|
|
|
$
|
8,684
|
|
|
$
|
—
|
|
New Facility lease obligation
|
$
|
—
|
|
|
$
|
8,684
|
|
|
$
|
—
|
|
Non-cash additions to property, plant and equipment
|
$
|
5,517
|
|
|
$
|
441
|
|
|
$
|
51
|
|
Assets held for sale
|
$
|
—
|
|
|
$
|
7,179
|
|
|
$
|
—
|
|
Non-cash portion of earnout receivable recognized-Spice Assets sale
|
$
|
419
|
|
|
$
|
496
|
|
|
$
|
—
|
|
Non-cash portion of earnout payable recognized-China Mist acquisition
|
$
|
500
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-cash portion of earnout payable recognized-West Coast Coffee acquisition
|
$
|
600
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-cash working capital adjustment payable recognized-China Mist acquisition
|
$
|
553
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Option costs paid with exercised shares
|
$
|
550
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Common
Shares
|
|
Stock
Amount
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Unearned
ESOP
Shares
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Total
|
|||||||||||||
Balance at July 1, 2014
|
16,562,450
|
|
|
$
|
16,562
|
|
|
$
|
35,917
|
|
|
$
|
106,212
|
|
|
$
|
(16,035
|
)
|
|
$
|
(27,792
|
)
|
|
$
|
114,864
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
652
|
|
|
—
|
|
|
—
|
|
|
652
|
|
||||||
Unrealized losses on derivative instruments designated as cash flow hedges, net of reclassifications to cost of goods sold
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,506
|
)
|
|
(18,506
|
)
|
||||||
Change in the funded status of retiree benefit obligations, net of tax of zero
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14,122
|
)
|
|
(14,122
|
)
|
||||||
ESOP compensation expense, including reclassifications
|
—
|
|
|
—
|
|
|
(377
|
)
|
|
—
|
|
|
4,801
|
|
|
—
|
|
|
4,424
|
|
||||||
Share-based compensation
|
4,272
|
|
|
4
|
|
|
1,263
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,267
|
|
||||||
Stock option exercises
|
95,723
|
|
|
96
|
|
|
1,452
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,548
|
|
||||||
Shares withheld to cover taxes
|
(4,297
|
)
|
|
(4
|
)
|
|
(112
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(116
|
)
|
||||||
Balance at June 30, 2015
|
16,658,148
|
|
|
$
|
16,658
|
|
|
$
|
38,143
|
|
|
$
|
106,864
|
|
|
$
|
(11,234
|
)
|
|
$
|
(60,420
|
)
|
|
$
|
90,011
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
89,918
|
|
|
—
|
|
|
—
|
|
|
89,918
|
|
||||||
Unrealized gains on derivative instruments designated as cash flow hedges, net of reclassifications to cost of goods sold, net of tax expense of $5,238
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,249
|
|
|
8,249
|
|
||||||
Change in the funded status of retiree benefit obligations, net of tax expense of $7,277
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,461
|
)
|
|
(11,461
|
)
|
||||||
ESOP compensation expense, including reclassifications
|
—
|
|
|
—
|
|
|
(1,413
|
)
|
|
—
|
|
|
4,800
|
|
|
—
|
|
|
3,387
|
|
||||||
Share-based compensation
|
1,551
|
|
|
2
|
|
|
954
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
956
|
|
||||||
Stock option exercises
|
127,039
|
|
|
127
|
|
|
1,566
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,693
|
|
||||||
Shares withheld to cover taxes
|
(5,177
|
)
|
|
(5
|
)
|
|
(154
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(159
|
)
|
||||||
Balance at June 30, 2016
|
16,781,561
|
|
|
$
|
16,782
|
|
|
$
|
39,096
|
|
|
$
|
196,782
|
|
|
$
|
(6,434
|
)
|
|
$
|
(63,632
|
)
|
|
$
|
182,594
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
24,400
|
|
|
—
|
|
|
—
|
|
|
24,400
|
|
||||||
Unrealized losses on derivative instruments designated as cash flow hedges, net of reclassifications to cost of goods sold, net of tax benefit of $2,504
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,933
|
)
|
|
(3,933
|
)
|
||||||
Change in the funded status of retiree benefit obligations, net of tax expense of $4,754
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,466
|
|
|
7,466
|
|
||||||
ESOP compensation expense, including reclassifications
|
—
|
|
|
—
|
|
|
342
|
|
|
—
|
|
|
2,145
|
|
|
—
|
|
|
2,487
|
|
||||||
Share-based compensation
|
(889
|
)
|
|
(1
|
)
|
|
1,473
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,472
|
|
||||||
Stock option exercises
|
82,803
|
|
|
83
|
|
|
604
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
687
|
|
||||||
Shares withheld to cover taxes
|
(17,473
|
)
|
|
(18
|
)
|
|
(20
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(38
|
)
|
||||||
Balance at June 30, 2017
|
16,846,002
|
|
|
$
|
16,846
|
|
|
$
|
41,495
|
|
|
$
|
221,182
|
|
|
$
|
(4,289
|
)
|
|
$
|
(60,099
|
)
|
|
$
|
215,135
|
|
Derivative Treatment
|
|
Accounting Method
|
Normal purchases and normal sales exception
|
|
Accrual accounting
|
Designated in a qualifying hedging relationship
|
|
Hedge accounting
|
All other derivative instruments
|
|
Mark-to-market accounting
|
•
|
Gains and losses on all derivative instruments that are not designated as cash flow hedges and for which the normal purchases and normal sales exception has not been elected; and
|
•
|
The ineffective portion of unrealized gains and losses on derivative instruments that are designated as cash flow hedges.
|
Buildings and facilities
|
10 to 30 years
|
Machinery and equipment
|
3 to 10 years
|
Equipment under capital leases
|
Shorter of term of lease or estimated useful life
|
Office furniture and equipment
|
5 to 7 years
|
Capitalized software
|
3 to 5 years
|
(In thousands)
|
Fair Value
|
|
Estimated Useful Life (years)
|
||
|
|
|
|
||
Cash paid, net of cash acquired
|
$
|
11,183
|
|
|
|
Post-closing final working capital adjustments
|
553
|
|
|
|
|
Contingent consideration
|
500
|
|
|
|
|
Total consideration
|
$
|
12,236
|
|
|
|
|
|
|
|
||
Accounts receivable
|
$
|
811
|
|
|
|
Inventory
|
544
|
|
|
|
|
Prepaid assets
|
48
|
|
|
|
|
Property, plant and equipment
|
189
|
|
|
|
|
Goodwill
|
2,927
|
|
|
|
|
Intangible assets:
|
|
|
|
||
Recipes
|
930
|
|
|
7
|
|
Non-compete agreement
|
100
|
|
|
5
|
|
Customer relationships
|
2,000
|
|
|
10
|
|
Trade name/Trademark—indefinite-lived
|
5,070
|
|
|
|
|
Accounts payable
|
(383
|
)
|
|
|
|
Total consideration, net of cash acquired
|
$
|
12,236
|
|
|
|
(In thousands)
|
Fair Value
|
|
Estimated Useful Life (years)
|
||
|
|
|
|
||
Cash paid, net of cash acquired
|
$
|
14,671
|
|
|
|
Contingent consideration
|
600
|
|
|
|
|
Total consideration
|
$
|
15,271
|
|
|
|
|
|
|
|
||
Accounts receivable
|
$
|
955
|
|
|
|
Inventory
|
939
|
|
|
|
|
Prepaid assets
|
20
|
|
|
|
|
Property, plant and equipment
|
1,546
|
|
|
|
|
Goodwill
|
7,797
|
|
|
|
|
Intangible assets:
|
|
|
|
||
Non-compete agreements
|
100
|
|
|
5
|
|
Customer relationships
|
4,400
|
|
|
10
|
|
Trade name—finite-lived
|
260
|
|
|
7
|
|
Brand name—finite-lived
|
250
|
|
|
1.7
|
|
Accounts payable
|
(814
|
)
|
|
|
|
Other liabilities
|
(182
|
)
|
|
|
|
Total consideration, net of cash acquired
|
$
|
15,271
|
|
|
|
Fair Values of Assets Acquired
|
|
Estimated Useful Life (years)
|
|||
(In thousands)
|
|
|
|
||
Property, plant and equipment
|
$
|
338
|
|
|
|
Intangible assets:
|
|
|
|
||
Non-compete agreement
|
20
|
|
|
3.0
|
|
Customer relationships
|
870
|
|
|
4.5
|
|
Total finite-lived intangible assets
|
890
|
|
|
|
|
Goodwill
|
272
|
|
|
|
|
Total assets acquired
|
$
|
1,500
|
|
|
|
(In thousands)
|
Balances,
June 30, 2016
|
|
Additions
|
|
Payments
|
|
Non-Cash Settled(2)
|
|
Adjustments
|
|
Balances,
June 30, 2017(1)
|
||||||||||||
Employee-related costs(1)
|
$
|
2,342
|
|
|
$
|
1,109
|
|
|
$
|
3,150
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
301
|
|
Facility-related costs
|
—
|
|
|
6,187
|
|
|
3,712
|
|
|
2,475
|
|
|
—
|
|
|
—
|
|
||||||
Other
|
200
|
|
|
1,294
|
|
|
1,494
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
2,542
|
|
|
$
|
8,590
|
|
|
$
|
8,356
|
|
|
$
|
2,475
|
|
|
$
|
—
|
|
|
$
|
301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current portion
|
$
|
2,542
|
|
|
|
|
|
|
|
|
|
|
$
|
301
|
|
||||||||
Non-current portion
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
||||||||
Total
|
$
|
2,542
|
|
|
|
|
|
|
|
|
|
|
$
|
301
|
|
(In thousands)
|
Balances,
June 30, 2014
|
|
Additions
|
|
Payments
|
|
Non-Cash Settled
|
|
Adjustments
|
|
Balances,
June 30, 2017 |
||||||||||||
Employee-related costs(1)
|
$
|
—
|
|
|
$
|
17,352
|
|
|
$
|
17,051
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
301
|
|
Facility-related costs(2)
|
—
|
|
|
10,779
|
|
|
7,048
|
|
|
3,731
|
|
|
—
|
|
|
—
|
|
||||||
Other
|
—
|
|
|
7,424
|
|
|
7,424
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total(2)
|
$
|
—
|
|
|
$
|
35,555
|
|
|
$
|
31,523
|
|
|
$
|
3,731
|
|
|
$
|
—
|
|
|
$
|
301
|
|
|
|
June 30,
|
||||
(In thousands)
|
|
2017
|
|
2016
|
||
Derivative instruments designated as cash flow hedges:
|
|
|
|
|
||
Long coffee pounds
|
|
33,038
|
|
|
32,550
|
|
Derivative instruments not designated as cash flow hedges:
|
|
|
|
|
||
Long coffee pounds
|
|
2,121
|
|
|
1,618
|
|
Less: Short coffee pounds
|
|
—
|
|
|
(188
|
)
|
Total
|
|
35,159
|
|
|
33,980
|
|
|
|
Derivative Instruments
Designated as Cash Flow Hedges
|
|
Derivative Instruments Not Designated as Accounting Hedges
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
(In thousands)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Financial Statement Location:
|
|
|
|
|
|
|
|
|
||||||||
Short-term derivative assets:
|
|
|
|
|
|
|
|
|
||||||||
Coffee-related derivative instruments(1)
|
|
$
|
66
|
|
|
$
|
3,771
|
|
|
$
|
—
|
|
|
$
|
183
|
|
Long-term derivative assets:
|
|
|
|
|
|
|
|
|
||||||||
Coffee-related derivative instruments(2)
|
|
$
|
66
|
|
|
$
|
2,575
|
|
|
$
|
—
|
|
|
$
|
57
|
|
Short-term derivative liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Coffee-related derivative instruments
|
|
$
|
1,733
|
|
|
$
|
—
|
|
|
$
|
190
|
|
|
$
|
—
|
|
Long-term derivative liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Coffee-related derivative instruments(2)
|
|
$
|
446
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Year Ended June 30,
|
|
Financial Statement Classification
|
||||||||||
(In thousands)
|
|
2017
|
|
2016
|
|
2015
|
|
|||||||
Net (losses) gains recognized in AOCI (effective portion)
|
|
$
|
(4,705
|
)
|
|
$
|
303
|
|
|
$
|
(14,295
|
)
|
|
AOCI
|
Net gains (losses) recognized in earnings (effective portion)
|
|
$
|
1,732
|
|
|
$
|
(13,184
|
)
|
|
$
|
4,211
|
|
|
Costs of goods sold
|
Net losses recognized in earnings (ineffective portion)
|
|
$
|
(456
|
)
|
|
$
|
(575
|
)
|
|
$
|
(325
|
)
|
|
Other, net
|
|
|
Year Ended June 30,
|
||||||||||
(In thousands)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net losses on coffee-related derivative instruments
|
|
$
|
(1,812
|
)
|
|
$
|
(298
|
)
|
|
$
|
(2,992
|
)
|
Net gains (losses) on investments
|
|
286
|
|
|
611
|
|
|
(270
|
)
|
|||
Net (losses) gains on derivative instruments and investments(1)
|
|
(1,526
|
)
|
|
313
|
|
|
(3,262
|
)
|
|||
Other gains, net
|
|
325
|
|
|
243
|
|
|
248
|
|
|||
Other, net
|
|
$
|
(1,201
|
)
|
|
$
|
556
|
|
|
$
|
(3,014
|
)
|
(In thousands)
|
|
|
|
Gross Amount Reported on Balance Sheet
|
|
Netting Adjustments
|
|
Cash Collateral Posted
|
|
Net Exposure
|
||||||||
June 30, 2017
|
|
Derivative Assets
|
|
$
|
132
|
|
|
$
|
(132
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Derivative Liabilities
|
|
$
|
2,369
|
|
|
$
|
(132
|
)
|
|
$
|
—
|
|
|
$
|
2,237
|
|
June 30, 2016
|
|
Derivative Assets
|
|
$
|
6,586
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,586
|
|
|
|
Year Ended June 30,
|
||||||||||
(In thousands)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Total gains (losses) recognized from trading securities
|
|
$
|
286
|
|
|
$
|
611
|
|
|
$
|
(270
|
)
|
Less: Realized gains from sales of trading securities
|
|
1,909
|
|
|
29
|
|
|
89
|
|
|||
Unrealized (losses) gains from trading securities
|
|
$
|
(1,623
|
)
|
|
$
|
582
|
|
|
$
|
(359
|
)
|
(In thousands)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
June 30, 2017
|
|
|
|
|
|
|
|
|
||||||||
Preferred stock(1)
|
|
$
|
368
|
|
|
$
|
—
|
|
|
$
|
368
|
|
|
$
|
—
|
|
Derivative instruments designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
||||||||
Coffee-related derivative assets(2)
|
|
$
|
132
|
|
|
$
|
—
|
|
|
$
|
132
|
|
|
$
|
—
|
|
Coffee-related derivative liabilities(2)
|
|
$
|
2,179
|
|
|
$
|
—
|
|
|
$
|
2,179
|
|
|
$
|
—
|
|
Derivative instruments not designated as accounting hedges:
|
|
|
|
|
|
|
|
|
||||||||
Coffee-related derivative liabilities(2)
|
|
$
|
190
|
|
|
$
|
—
|
|
|
$
|
190
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
(In thousands)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
June 30, 2016
|
|
|
|
|
|
|
|
|
||||||||
Preferred stock(1)
|
|
$
|
25,591
|
|
|
$
|
21,976
|
|
|
$
|
3,615
|
|
|
$
|
—
|
|
Derivative instruments designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
||||||||
Coffee-related derivative assets(2)
|
|
$
|
6,346
|
|
|
$
|
—
|
|
|
$
|
6,346
|
|
|
$
|
—
|
|
Derivative instruments not designated as accounting hedges:
|
|
|
|
|
|
|
|
|
||||||||
Coffee-related derivative assets(2)
|
|
$
|
240
|
|
|
$
|
—
|
|
|
$
|
240
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Included in “Short-term investments” on the Company's consolidated balance sheets.
|
(2)
|
The Company's coffee derivative instruments are traded over-the-counter and, therefore, classified as Level 2.
|
|
|
June 30,
|
||||||
(In thousands)
|
|
2017
|
|
2016
|
||||
Trade receivables
|
|
$
|
44,531
|
|
|
$
|
43,113
|
|
Other receivables(1)
|
|
2,636
|
|
|
1,965
|
|
||
Allowance for doubtful accounts
|
|
(721
|
)
|
|
(714
|
)
|
||
Accounts receivable, net
|
|
$
|
46,446
|
|
|
$
|
44,364
|
|
|
|
June 30,
|
||||||
(In thousands)
|
|
2017
|
|
2016
|
||||
Coffee
|
|
|
|
|
||||
Processed
|
|
$
|
14,085
|
|
|
$
|
12,362
|
|
Unprocessed
|
|
17,083
|
|
|
13,534
|
|
||
Total
|
|
$
|
31,168
|
|
|
$
|
25,896
|
|
Tea and culinary products
|
|
|
|
|
||||
Processed
|
|
$
|
20,741
|
|
|
$
|
15,384
|
|
Unprocessed
|
|
74
|
|
|
377
|
|
||
Total
|
|
$
|
20,815
|
|
|
$
|
15,761
|
|
Coffee brewing equipment parts
|
|
$
|
4,268
|
|
|
$
|
4,721
|
|
Total inventories
|
|
$
|
56,251
|
|
|
$
|
46,378
|
|
|
|
June 30,
|
||||||
(In thousands)
|
|
2017
|
|
2016
|
||||
Coffee
|
|
$
|
13,351
|
|
|
$
|
14,462
|
|
Tea and culinary products
|
|
4,043
|
|
|
7,139
|
|
||
Total
|
|
$
|
17,394
|
|
|
$
|
21,601
|
|
|
|
June 30,
|
||||||
(In thousands)
|
|
2017
|
|
2016
|
||||
Buildings and facilities
|
|
$
|
108,682
|
|
|
$
|
82,878
|
|
Machinery and equipment
|
|
201,236
|
|
|
182,227
|
|
||
Equipment under capital leases
|
|
7,540
|
|
|
11,982
|
|
||
Capitalized software
|
|
21,794
|
|
|
21,545
|
|
||
Office furniture and equipment
|
|
12,758
|
|
|
16,077
|
|
||
|
|
$
|
352,010
|
|
|
$
|
314,709
|
|
Accumulated depreciation
|
|
(192,280
|
)
|
|
(206,162
|
)
|
||
Land
|
|
16,336
|
|
|
9,869
|
|
||
Property, plant and equipment, net
|
|
$
|
176,066
|
|
|
$
|
118,416
|
|
(In thousands)
|
||||
Balance at June 30, 2015
|
|
$
|
272
|
|
Additions
|
|
—
|
|
|
Balance at June 30, 2016
|
|
$
|
272
|
|
Additions (China Mist)
|
|
2,927
|
|
|
Additions (West Coast Coffee)(1)
|
|
7,797
|
|
|
Balance at June 30, 2017
|
|
$
|
10,996
|
|
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||||||
(In thousands)
|
|
Gross
Carrying
Amount(1)
|
|
Accumulated
Amortization(1)
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
||||||||
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
||||||||
Customer relationships
|
|
$
|
17,353
|
|
|
$
|
(10,883
|
)
|
|
$
|
10,953
|
|
|
$
|
(10,373
|
)
|
Non-compete agreements
|
|
220
|
|
|
(38
|
)
|
|
20
|
|
|
(10
|
)
|
||||
Recipes
|
|
930
|
|
|
(88
|
)
|
|
—
|
|
|
—
|
|
||||
Trade name/brand name
|
|
510
|
|
|
(84
|
)
|
|
—
|
|
|
—
|
|
||||
Total amortized intangible assets
|
|
$
|
19,013
|
|
|
$
|
(11,093
|
)
|
|
$
|
10,973
|
|
|
$
|
(10,383
|
)
|
Unamortized intangible assets:
|
|
|
|
|
|
|
|
|
||||||||
Trade names with indefinite lives
|
|
$
|
3,640
|
|
|
$
|
—
|
|
|
$
|
3,640
|
|
|
$
|
—
|
|
Trademarks and brand name with indefinite lives
|
|
7,058
|
|
|
—
|
|
|
1,988
|
|
|
—
|
|
||||
Total unamortized intangible assets
|
|
$
|
10,698
|
|
|
$
|
—
|
|
|
$
|
5,628
|
|
|
$
|
—
|
|
Total intangible assets
|
|
$
|
29,711
|
|
|
$
|
(11,093
|
)
|
|
$
|
16,601
|
|
|
$
|
(10,383
|
)
|
(In thousands)
|
|
|
||
For the fiscal year ending:
|
|
|
||
June 30, 2018
|
|
$
|
1,197
|
|
June 30, 2019
|
|
$
|
1,081
|
|
June 30, 2020
|
|
$
|
866
|
|
June 30, 2021
|
|
$
|
850
|
|
June 30, 2022
|
|
$
|
828
|
|
|
|
Farmer Bros. Plan
June 30,
|
|
Brewmatic Plan
June 30,
|
|
Hourly Employees’ Plan
June 30,
|
||||||||||||||||||
($ in thousands)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||
Change in projected benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Benefit obligation at the beginning of the year
|
|
$
|
152,325
|
|
|
$
|
136,962
|
|
|
$
|
4,574
|
|
|
$
|
4,064
|
|
|
$
|
4,329
|
|
|
$
|
3,145
|
|
Service cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
124
|
|
|
389
|
|
||||||
Interest cost
|
|
5,277
|
|
|
5,875
|
|
|
157
|
|
|
172
|
|
|
152
|
|
|
137
|
|
||||||
Actuarial (gain) loss
|
|
(4,556
|
)
|
|
15,999
|
|
|
(370
|
)
|
|
682
|
|
|
(233
|
)
|
|
687
|
|
||||||
Benefits paid
|
|
(6,755
|
)
|
|
(6,511
|
)
|
|
(282
|
)
|
|
(344
|
)
|
|
(43
|
)
|
|
(29
|
)
|
||||||
Projected benefit obligation at the end of the year
|
|
$
|
146,291
|
|
|
$
|
152,325
|
|
|
$
|
4,079
|
|
|
$
|
4,574
|
|
|
$
|
4,329
|
|
|
$
|
4,329
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fair value of plan assets at the beginning of the year
|
|
$
|
91,201
|
|
|
$
|
94,815
|
|
|
$
|
2,989
|
|
|
$
|
3,291
|
|
|
$
|
2,447
|
|
|
$
|
2,104
|
|
Actual return on plan assets
|
|
10,874
|
|
|
1,556
|
|
|
337
|
|
|
42
|
|
|
256
|
|
|
85
|
|
||||||
Employer contributions
|
|
1,984
|
|
|
1,341
|
|
|
71
|
|
|
—
|
|
|
339
|
|
|
287
|
|
||||||
Benefits paid
|
|
(6,755
|
)
|
|
(6,511
|
)
|
|
(282
|
)
|
|
(344
|
)
|
|
(43
|
)
|
|
(29
|
)
|
||||||
Fair value of plan assets at the end of the year
|
|
$
|
97,304
|
|
|
$
|
91,201
|
|
|
$
|
3,115
|
|
|
$
|
2,989
|
|
|
$
|
2,999
|
|
|
$
|
2,447
|
|
Funded status at end of year (underfunded) overfunded
|
|
$
|
(48,987
|
)
|
|
$
|
(61,124
|
)
|
|
$
|
(964
|
)
|
|
$
|
(1,585
|
)
|
|
$
|
(1,330
|
)
|
|
$
|
(1,882
|
)
|
Amounts recognized in consolidated balance sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Non-current liabilities
|
|
(48,987
|
)
|
|
(61,124
|
)
|
|
(964
|
)
|
|
(1,585
|
)
|
|
(1,330
|
)
|
|
(1,882
|
)
|
||||||
Total
|
|
$
|
(48,987
|
)
|
|
$
|
(61,124
|
)
|
|
$
|
(964
|
)
|
|
$
|
(1,585
|
)
|
|
$
|
(1,330
|
)
|
|
$
|
(1,882
|
)
|
Amounts recognized in AOCI
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net loss
|
|
59,007
|
|
|
70,246
|
|
|
2,135
|
|
|
2,756
|
|
|
618
|
|
|
988
|
|
||||||
Total AOCI (not adjusted for applicable tax)
|
|
$
|
59,007
|
|
|
$
|
70,246
|
|
|
$
|
2,135
|
|
|
$
|
2,756
|
|
|
$
|
618
|
|
|
$
|
988
|
|
Weighted average assumptions used to determine benefit obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Discount rate
|
|
3.80
|
%
|
|
3.55
|
%
|
|
3.80
|
%
|
|
3.55
|
%
|
|
3.80
|
%
|
|
3.55
|
%
|
||||||
Rate of compensation increase
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
Farmer Bros. Plan
June 30,
|
|
Brewmatic Plan
June 30,
|
|
Hourly Employees’ Plan
June 30,
|
||||||||||||||||||
($ in thousands)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
124
|
|
|
$
|
389
|
|
Interest cost
|
|
5,277
|
|
|
5,875
|
|
|
157
|
|
|
172
|
|
|
152
|
|
|
137
|
|
||||||
Expected return on plan assets
|
|
(6,067
|
)
|
|
(6,470
|
)
|
|
(188
|
)
|
|
(219
|
)
|
|
(172
|
)
|
|
(149
|
)
|
||||||
Amortization of net loss
|
|
1,875
|
|
|
1,411
|
|
|
102
|
|
|
68
|
|
|
53
|
|
|
—
|
|
||||||
Net periodic benefit cost
|
|
$
|
1,085
|
|
|
$
|
816
|
|
|
$
|
71
|
|
|
$
|
21
|
|
|
$
|
157
|
|
|
$
|
377
|
|
Other changes recognized in OCI
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net loss
|
|
$
|
(9,363
|
)
|
|
$
|
20,913
|
|
|
$
|
(519
|
)
|
|
$
|
859
|
|
|
$
|
(317
|
)
|
|
$
|
750
|
|
Amortization of net loss
|
|
(1,875
|
)
|
|
(1,411
|
)
|
|
(102
|
)
|
|
(68
|
)
|
|
(53
|
)
|
|
—
|
|
||||||
Total recognized in OCI
|
|
$
|
(11,238
|
)
|
|
$
|
19,502
|
|
|
$
|
(621
|
)
|
|
$
|
791
|
|
|
$
|
(370
|
)
|
|
$
|
750
|
|
Total recognized in net periodic benefit cost and OCI
|
|
$
|
(10,153
|
)
|
|
$
|
20,318
|
|
|
$
|
(550
|
)
|
|
$
|
812
|
|
|
$
|
(213
|
)
|
|
$
|
1,127
|
|
Weighted-average assumptions used to determine net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Discount rate
|
|
3.55
|
%
|
|
4.40
|
%
|
|
3.55
|
%
|
|
4.40
|
%
|
|
3.55
|
%
|
|
4.40
|
%
|
||||||
Expected long-term return on plan assets
|
|
7.75
|
%
|
|
7.50
|
%
|
|
7.75
|
%
|
|
7.50
|
%
|
|
7.75
|
%
|
|
7.50
|
%
|
||||||
Rate of compensation increase
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
Farmer Bros. Plan
June 30,
|
|
Brewmatic Plan
June 30,
|
|
Hourly Employees’ Plan
June 30,
|
||||||||||||||||||
($ in thousands)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||
Comparison of obligations to plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Projected benefit obligation
|
|
$
|
146,291
|
|
|
$
|
152,325
|
|
|
$
|
4,079
|
|
|
$
|
4,574
|
|
|
$
|
4,329
|
|
|
$
|
4,329
|
|
Accumulated benefit obligation
|
|
$
|
146,291
|
|
|
$
|
152,325
|
|
|
$
|
4,079
|
|
|
$
|
4,574
|
|
|
$
|
4,329
|
|
|
$
|
4,329
|
|
Fair value of plan assets at measurement date
|
|
$
|
97,304
|
|
|
$
|
91,201
|
|
|
$
|
3,115
|
|
|
$
|
2,989
|
|
|
$
|
2,999
|
|
|
$
|
2,447
|
|
Plan assets by category
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Equity securities
|
|
$
|
65,270
|
|
|
$
|
58,094
|
|
|
$
|
2,133
|
|
|
$
|
1,909
|
|
|
$
|
1,973
|
|
|
$
|
1,542
|
|
Debt securities
|
|
26,241
|
|
|
27,586
|
|
|
793
|
|
|
899
|
|
|
851
|
|
|
758
|
|
||||||
Real estate
|
|
5,793
|
|
|
5,521
|
|
|
189
|
|
|
181
|
|
|
175
|
|
|
147
|
|
||||||
Total
|
|
$
|
97,304
|
|
|
$
|
91,201
|
|
|
$
|
3,115
|
|
|
$
|
2,989
|
|
|
$
|
2,999
|
|
|
$
|
2,447
|
|
Plan assets by category
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Equity securities
|
|
67
|
%
|
|
64
|
%
|
|
69
|
%
|
|
64
|
%
|
|
66
|
%
|
|
63
|
%
|
||||||
Debt securities
|
|
27
|
%
|
|
30
|
%
|
|
25
|
%
|
|
30
|
%
|
|
28
|
%
|
|
31
|
%
|
||||||
Real estate
|
|
6
|
%
|
|
6
|
%
|
|
6
|
%
|
|
6
|
%
|
|
6
|
%
|
|
6
|
%
|
||||||
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
June 30, 2017
|
||||||||||||||
(In thousands)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Farmer Bros. Plan
|
|
$
|
97,304
|
|
|
$
|
—
|
|
|
$
|
97,304
|
|
|
$
|
—
|
|
Brewmatic Plan
|
|
$
|
3,115
|
|
|
$
|
—
|
|
|
$
|
3,115
|
|
|
$
|
—
|
|
Hourly Employees’ Plan
|
|
$
|
2,999
|
|
|
$
|
—
|
|
|
$
|
2,999
|
|
|
$
|
—
|
|
|
|
June 30, 2016
|
||||||||||||||
(In thousands)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Farmer Bros. Plan
|
|
$
|
91,201
|
|
|
$
|
—
|
|
|
$
|
91,201
|
|
|
$
|
—
|
|
Brewmatic Plan
|
|
$
|
2,989
|
|
|
$
|
—
|
|
|
$
|
2,989
|
|
|
$
|
—
|
|
Hourly Employees’ Plan
|
|
$
|
2,447
|
|
|
$
|
—
|
|
|
$
|
2,447
|
|
|
$
|
—
|
|
|
Fiscal 2018
|
|
U.S. large cap equity securities
|
40.0
|
%
|
U.S. small cap equity securities
|
4.8
|
%
|
International equity securities
|
19.2
|
%
|
Debt securities
|
30.0
|
%
|
Real estate
|
6.0
|
%
|
Total
|
100.0
|
%
|
(In thousands)
|
|
Farmer Bros. Plan
|
|
Brewmatic Plan
|
|
Hourly Employees’
Plan
|
||||||
Year Ending:
|
|
|
||||||||||
June 30, 2018
|
|
$
|
7,490
|
|
|
$
|
310
|
|
|
$
|
100
|
|
June 30, 2019
|
|
$
|
7,650
|
|
|
$
|
290
|
|
|
$
|
110
|
|
June 30, 2020
|
|
$
|
7,930
|
|
|
$
|
280
|
|
|
$
|
130
|
|
June 30, 2021
|
|
$
|
8,130
|
|
|
$
|
280
|
|
|
$
|
150
|
|
June 30, 2022
|
|
$
|
8,330
|
|
|
$
|
270
|
|
|
$
|
160
|
|
June 30, 2023 to June 30, 2027
|
|
$
|
42,660
|
|
|
$
|
1,220
|
|
|
$
|
990
|
|
Pension Plan
|
|
Employer
Identification
Number
|
|
Pension
Plan
Number
|
|
PPA Zone Status
|
|
FIP/RP
Status
Pending/
Implemented
|
|
Surcharge
Imposed
|
|
Expiration Date
of Collective
Bargaining
Agreements
|
|||
July 1, 2016
|
|
July 1,
2015
|
|||||||||||||
Western Conference of Teamsters Pension Plan
|
|
91-6145047
|
|
001
|
|
Green
|
|
Green
|
|
No
|
|
No
|
|
January 31, 2020
|
(In thousands)
|
|
WCTPP(1)(2)(3)
|
|
All Other Plans(4)
|
||||
Year Ended:
|
|
|
|
|
||||
June 30, 2017
|
|
$
|
2,114
|
|
|
$
|
39
|
|
June 30, 2016
|
|
$
|
2,587
|
|
|
$
|
39
|
|
June 30, 2015
|
|
$
|
3,593
|
|
|
$
|
41
|
|
(1)
|
Individually significant plan.
|
(2)
|
Less than
5%
of total contribution to WCTPP based on WCTPP's FASB Disclosure Statement for the calendar year ended December 31, 2016.
|
(3)
|
The Company guarantees that one hundred seventy-three (
173
) hours will be contributed upon for all employees who are compensated for all available straight time hours for each calendar month. An additional
6.5%
of the basic contribution must be paid for PEER or the Program for Enhanced Early Retirement.
|
(4)
|
Includes one plan that is not individually significant.
|
|
|
Year Ended June 30,
|
||||||||||
(In thousands)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Components of Net Periodic Postretirement Benefit Cost (Credit):
|
|
|
|
|
|
|
||||||
Service cost
|
|
$
|
760
|
|
|
$
|
1,388
|
|
|
$
|
1,195
|
|
Interest cost
|
|
829
|
|
|
1,194
|
|
|
943
|
|
|||
Amortization of net gain
|
|
(630
|
)
|
|
(196
|
)
|
|
(500
|
)
|
|||
Amortization of prior service credit
|
|
(1,757
|
)
|
|
(1,757
|
)
|
|
(1,757
|
)
|
|||
Net periodic postretirement benefit (credit) cost
|
|
$
|
(798
|
)
|
|
$
|
629
|
|
|
$
|
(119
|
)
|
Amortization Schedule
|
|
|
Transition (Asset) Obligation: The transition (asset) obligations have been fully amortized.
|
Date Established
|
|
Balance at
July 1, 2016
|
|
Annual
Amortization
|
|
Years Remaining
|
|
Curtailment
|
|
Balance at
June 30, 2017
|
|||||||
January 1, 2008
|
|
$
|
(732
|
)
|
|
$
|
230
|
|
|
2.2
|
|
—
|
|
|
$
|
(502
|
)
|
July 1, 2012
|
|
(11,475
|
)
|
|
1,526
|
|
|
6.5
|
|
—
|
|
|
(9,949
|
)
|
|||
|
|
$
|
(12,207
|
)
|
|
$
|
1,756
|
|
|
|
|
|
|
$
|
(10,451
|
)
|
|
|
Retiree Medical Plan
|
|
Death Benefit
|
||||||||||||
|
|
Year Ended June 30,
|
|
Year Ended June 30,
|
||||||||||||
($ in thousands)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Amortization of Net (Gain) Loss:
|
|
|
|
|
|
|
|
|
||||||||
Net (gain) loss as of July 1
|
|
$
|
(10,298
|
)
|
|
$
|
(8,710
|
)
|
|
$
|
1,523
|
|
|
$
|
690
|
|
Net (gain) loss subject to amortization
|
|
(10,298
|
)
|
|
(8,710
|
)
|
|
1,523
|
|
|
690
|
|
||||
Corridor (10% of greater of APBO or assets)
|
|
1,214
|
|
|
1,724
|
|
|
(854
|
)
|
|
(729
|
)
|
||||
Net (gain) loss in excess of corridor
|
|
$
|
(9,084
|
)
|
|
$
|
(6,986
|
)
|
|
$
|
669
|
|
|
$
|
—
|
|
Amortization years
|
|
9.7
|
|
|
10.0
|
|
|
7.0
|
|
|
7.7
|
|
|
|
Year Ended June 30,
|
||||||
(In thousands)
|
|
2017
|
|
2016
|
||||
Change in Benefit Obligation:
|
|
|
|
|
||||
Projected postretirement benefit obligation at beginning of year
|
|
$
|
21,867
|
|
|
$
|
24,522
|
|
Service cost
|
|
760
|
|
|
1,388
|
|
||
Interest cost
|
|
829
|
|
|
1,194
|
|
||
Participant contributions
|
|
741
|
|
|
795
|
|
||
Actuarial losses
|
|
(2,377
|
)
|
|
(4,259
|
)
|
||
Benefits paid
|
|
(1,140
|
)
|
|
(1,773
|
)
|
||
Projected postretirement benefit obligation at end of year
|
|
$
|
20,680
|
|
|
$
|
21,867
|
|
|
|
Year Ended June 30,
|
||||||
(In thousands)
|
|
2017
|
|
2016
|
||||
Change in Plan Assets:
|
|
|
|
|
||||
Fair value of plan assets at beginning of year
|
|
$
|
—
|
|
|
$
|
—
|
|
Employer contributions
|
|
399
|
|
|
978
|
|
||
Participant contributions
|
|
741
|
|
|
795
|
|
||
Benefits paid
|
|
(1,140
|
)
|
|
(1,773
|
)
|
||
Fair value of plan assets at end of year
|
|
$
|
—
|
|
|
$
|
—
|
|
Projected postretirement benefit obligation at end of year
|
|
20,680
|
|
|
21,867
|
|
||
Funded status of plan
|
|
$
|
(20,680
|
)
|
|
$
|
(21,867
|
)
|
|
|
June 30,
|
||||||
(In thousands)
|
|
2017
|
|
2016
|
||||
Amounts Recognized in the Consolidated Balance Sheets Consist of:
|
|
|
|
|
||||
Non-current assets
|
|
$
|
—
|
|
|
$
|
—
|
|
Current liabilities
|
|
(893
|
)
|
|
(1,060
|
)
|
||
Non-current liabilities
|
|
(19,787
|
)
|
|
(20,807
|
)
|
||
Total
|
|
$
|
(20,680
|
)
|
|
$
|
(21,867
|
)
|
|
|
Year Ended June 30,
|
||||||
(In thousands)
|
|
2017
|
|
2016
|
||||
Amounts Recognized in AOCI Consist of:
|
|
|
|
|
||||
Net gain
|
|
$
|
(8,775
|
)
|
|
$
|
(7,027
|
)
|
Prior service credit
|
|
(10,450
|
)
|
|
(12,207
|
)
|
||
Total AOCI
|
|
$
|
(19,225
|
)
|
|
$
|
(19,234
|
)
|
|
|
Year Ended June 30,
|
||||||
(In thousands)
|
|
2017
|
|
2016
|
||||
Other Changes in Plan Assets and Benefit Obligations Recognized in OCI:
|
|
|
|
|
||||
Unrecognized actuarial loss
|
|
$
|
(2,377
|
)
|
|
$
|
(4,259
|
)
|
Amortization of net loss
|
|
630
|
|
|
196
|
|
||
Amortization of prior service cost
|
|
1,757
|
|
|
1,757
|
|
||
Total recognized in OCI
|
|
10
|
|
|
(2,306
|
)
|
||
Net periodic benefit (cost) credit
|
|
(798
|
)
|
|
629
|
|
||
Total recognized in net periodic benefit cost and OCI
|
|
$
|
(788
|
)
|
|
$
|
(1,677
|
)
|
|
|
1-Percentage Point
|
||||||
(In thousands)
|
|
Increase
|
|
Decrease
|
||||
Effect on total of service and interest cost components
|
|
$
|
96
|
|
|
$
|
(92
|
)
|
Effect on accumulated postretirement benefit obligation
|
|
$
|
983
|
|
|
$
|
(963
|
)
|
|
|
As of and for the years ended June 30,
|
||||
|
|
2017
|
|
2016
|
|
2015
|
Loan amount (in thousands)
|
|
$4,289
|
|
$6,434
|
|
$11,234
|
|
|
June 30,
|
||||||
|
|
2017
|
|
2016
|
||||
Allocated shares
|
|
1,717,608
|
|
|
1,941,934
|
|
||
Committed to be released shares
|
|
74,983
|
|
|
169,603
|
|
||
Unallocated shares
|
|
145,941
|
|
|
220,925
|
|
||
Total ESOP shares
|
|
1,938,532
|
|
|
2,332,462
|
|
||
|
|
|
|
|
||||
(In thousands)
|
|
|
|
|
||||
Fair value of ESOP shares
|
|
$
|
58,641
|
|
|
$
|
74,779
|
|
|
|
Year Ended June 30,
|
||||||
|
|
2016
|
|
2015
|
||||
Weighted average fair value of NQOs
|
|
$
|
12.63
|
|
|
$
|
10.38
|
|
Risk-free interest rate
|
|
1.6
|
%
|
|
1.5
|
%
|
||
Dividend yield
|
|
—
|
|
|
—
|
|
||
Average expected term (years)
|
|
5.1
|
|
|
5.1
|
|
||
Expected stock price volatility
|
|
47.1
|
%
|
|
47.9
|
%
|
Outstanding NQOs:
|
|
Number
of NQOs
|
|
Weighted
Average
Exercise
Price ($)
|
|
Weighted
Average
Grant Date
Fair Value ($)
|
|
Weighted
Average
Remaining
Life
(Years)
|
|
Aggregate
Intrinsic
Value
($ in thousands)
|
||
Outstanding at June 30, 2014
|
|
412,454
|
|
|
12.44
|
|
5.30
|
|
4.4
|
|
3,782
|
|
Granted
|
|
25,703
|
|
|
23.91
|
|
10.38
|
|
6.8
|
|
—
|
|
Exercised
|
|
(95,723
|
)
|
|
16.17
|
|
5.86
|
|
—
|
|
747
|
|
Cancelled/Forfeited
|
|
(13,134
|
)
|
|
11.26
|
|
5.00
|
|
—
|
|
—
|
|
Outstanding at June 30, 2015
|
|
329,300
|
|
|
12.30
|
|
5.54
|
|
3.9
|
|
3,700
|
|
Granted
|
|
21,595
|
|
|
29.48
|
|
12.63
|
|
6.4
|
|
—
|
|
Exercised
|
|
(112,895
|
)
|
|
12.35
|
|
5.37
|
|
—
|
|
1,853
|
|
Cancelled/Forfeited
|
|
(18,371
|
)
|
|
13.45
|
|
6.17
|
|
—
|
|
—
|
|
Outstanding at June 30, 2016
|
|
219,629
|
|
|
13.87
|
|
6.28
|
|
3.7
|
|
3,995
|
|
Granted
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Exercised(1)
|
|
(67,482
|
)
|
|
12.38
|
|
5.57
|
|
—
|
|
1,407
|
|
Cancelled/Forfeited
|
|
(18,683
|
)
|
|
25.13
|
|
10.90
|
|
—
|
|
—
|
|
Outstanding at June 30, 2017
|
|
133,464
|
|
|
13.05
|
|
5.99
|
|
2.6
|
|
2,299
|
|
Vested and exercisable at June 30, 2017
|
|
125,376
|
|
|
12.13
|
|
5.64
|
|
2.5
|
|
2,274
|
|
Vested and expected to vest at June 30, 2017
|
|
133,073
|
|
|
13.00
|
|
5.97
|
|
2.6
|
|
2,298
|
|
Nonvested NQOs:
|
|
Number
of
NQOs
|
|
Weighted
Average
Exercise
Price ($)
|
|
Weighted
Average
Grant Date
Fair Value ($)
|
|
Weighted
Average
Remaining
Life (Years)
|
|
Outstanding at June 30, 2014
|
|
167,798
|
|
|
10.65
|
|
5.06
|
|
5.3
|
Granted
|
|
25,703
|
|
|
23.91
|
|
10.38
|
|
6.8
|
Vested
|
|
(101,172
|
)
|
|
9.87
|
|
4.72
|
|
—
|
Forfeited
|
|
(12,134
|
)
|
|
10.31
|
|
4.91
|
|
—
|
Outstanding at June 30, 2015
|
|
80,195
|
|
|
15.94
|
|
7.21
|
|
5.2
|
Granted
|
|
21,595
|
|
|
29.48
|
|
12.63
|
|
6.4
|
Vested
|
|
(47,418
|
)
|
|
14.05
|
|
6.44
|
|
—
|
Forfeited
|
|
(15,641
|
)
|
|
12.95
|
|
6.09
|
|
—
|
Outstanding at June 30, 2016
|
|
38,731
|
|
|
27.02
|
|
11.63
|
|
6.1
|
Vested
|
|
(15,765
|
)
|
|
26.45
|
|
11.41
|
|
—
|
Forfeited
|
|
(14,878
|
)
|
|
27.44
|
|
11.96
|
|
—
|
Outstanding at June 30, 2017
|
|
8,088
|
|
|
27.33
|
|
11.47
|
|
5.3
|
|
|
Year Ended June 30,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Weighted average fair value of PNQs
|
|
$
|
11.42
|
|
|
$
|
11.38
|
|
|
$
|
10.16
|
|
Risk-free interest rate
|
|
1.5
|
%
|
|
1.6
|
%
|
|
1.5
|
%
|
|||
Dividend yield
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Average expected term (years)
|
|
4.9
|
|
|
4.9
|
|
|
5.0
|
|
|||
Expected stock price volatility
|
|
37.7
|
%
|
|
42.5
|
%
|
|
47.9
|
%
|
Outstanding PNQs:
|
|
Number
of
PNQs
|
|
Weighted
Average
Exercise
Price ($)
|
|
Weighted
Average
Grant Date
Fair Value ($)
|
|
Weighted
Average
Remaining
Life
(Years)
|
|
Aggregate
Intrinsic
Value
($ in
thousands)
|
||
Outstanding at June 30, 2014
|
|
112,442
|
|
|
21.27
|
|
10.49
|
|
6.5
|
|
38
|
|
Granted
|
|
121,024
|
|
|
23.44
|
|
10.16
|
|
6.6
|
|
—
|
|
Cancelled/Forfeited
|
|
(9,399
|
)
|
|
21.33
|
|
10.52
|
|
—
|
|
—
|
|
Outstanding at June 30, 2015
|
|
224,067
|
|
|
22.44
|
|
10.31
|
|
6.0
|
|
237
|
|
Granted
|
|
143,466
|
|
|
29.48
|
|
11.38
|
|
6.2
|
|
—
|
|
Exercised
|
|
(14,144
|
)
|
|
21.20
|
|
10.45
|
|
—
|
|
107
|
|
Cancelled/Forfeited
|
|
(64,790
|
)
|
|
23.20
|
|
10.37
|
|
—
|
|
—
|
|
Outstanding at June 30, 2016
|
|
288,599
|
|
|
25.83
|
|
10.82
|
|
5.7
|
|
1,798
|
|
Granted
|
|
149,223
|
|
|
32.85
|
|
11.42
|
|
4.6
|
|
—
|
|
Exercised(1)
|
|
(15,321
|
)
|
|
26.26
|
|
10.98
|
|
—
|
|
109
|
|
Cancelled/Forfeited
|
|
(63,715
|
)
|
|
31.39
|
|
11.39
|
|
—
|
|
—
|
|
Outstanding at June 30, 2017
|
|
358,786
|
|
|
27.75
|
|
10.96
|
|
5.2
|
|
1,181
|
|
Vested and exercisable at June 30, 2017
|
|
150,761
|
|
|
23.97
|
|
10.58
|
|
4.3
|
|
947
|
|
Vested and expected to vest at June 30, 2017
|
|
347,766
|
|
|
27.64
|
|
10.95
|
|
5.2
|
|
1,173
|
|
Nonvested PNQs:
|
|
Number
of
PNQs
|
|
Weighted
Average
Exercise
Price ($)
|
|
Weighted
Average
Grant Date
Fair Value ($)
|
|
Weighted
Average
Remaining
Life (Years)
|
||||
Outstanding at June 30, 2014
|
|
112,442
|
|
|
21.27
|
|
|
10.49
|
|
|
6.5
|
|
Granted
|
|
121,024
|
|
|
23.44
|
|
|
10.16
|
|
|
6.6
|
|
Vested
|
|
(34,959
|
)
|
|
21.27
|
|
|
10.49
|
|
|
—
|
|
Forfeited
|
|
(9,399
|
)
|
|
21.33
|
|
|
10.52
|
|
|
—
|
|
Outstanding at June 30, 2015
|
|
189,108
|
|
|
22.66
|
|
|
10.28
|
|
|
6.2
|
|
Granted
|
|
143,466
|
|
|
29.48
|
|
|
11.38
|
|
|
6.2
|
|
Vested
|
|
(27,317
|
)
|
|
10.16
|
|
|
23.44
|
|
|
—
|
|
Forfeited
|
|
(64,790
|
)
|
|
23.20
|
|
|
10.37
|
|
|
—
|
|
Outstanding at June 30, 2016
|
|
240,467
|
|
|
26.49
|
|
|
10.92
|
|
|
5.9
|
|
Granted
|
|
149,223
|
|
|
32.85
|
|
|
11.42
|
|
|
4.6
|
|
Vested
|
|
(119,403
|
)
|
|
24.91
|
|
|
10.75
|
|
|
—
|
|
Forfeited
|
|
(62,262
|
)
|
|
31.39
|
|
|
11.39
|
|
|
—
|
|
Outstanding at June 30, 2017
|
|
208,025
|
|
|
30.48
|
|
|
11.24
|
|
|
5.8
|
|
Outstanding and Nonvested Restricted Stock Awards:
|
|
Shares
Awarded
|
|
Weighted
Average
Grant Date
Fair Value
($)
|
|
Weighted
Average
Remaining
Life
(Years)
|
|
Aggregate
Intrinsic
Value
($ in thousands)
|
|||
Outstanding at June 30, 2014
|
|
96,212
|
|
|
10.27
|
|
|
1.5
|
|
2,079
|
|
Granted
|
|
13,256
|
|
|
23.64
|
|
|
—
|
|
313
|
|
Exercised/Released(1)
|
|
(53,402
|
)
|
|
8.43
|
|
|
—
|
|
1,377
|
|
Cancelled/Forfeited
|
|
(8,984
|
)
|
|
8.36
|
|
|
—
|
|
—
|
|
Outstanding at June 30, 2015
|
|
47,082
|
|
|
16.48
|
|
|
1.2
|
|
1,106
|
|
Granted
|
|
10,170
|
|
|
29.99
|
|
|
—
|
|
305
|
|
Exercised/Released(2)
|
|
(24,841
|
)
|
|
14.08
|
|
|
—
|
|
747
|
|
Cancelled/Forfeited
|
|
(8,619
|
)
|
|
13.06
|
|
|
—
|
|
—
|
|
Outstanding at June 30, 2016
|
|
23,792
|
|
|
26.00
|
|
|
1.8
|
|
763
|
|
Granted
|
|
5,106
|
|
|
35.25
|
|
|
—
|
|
180
|
|
Exercised/Released
|
|
(7,458
|
)
|
|
24.16
|
|
|
—
|
|
253
|
|
Cancelled/Forfeited
|
|
(5,995
|
)
|
|
26.41
|
|
|
—
|
|
—
|
|
Outstanding at June 30, 2017
|
|
15,445
|
|
|
29.79
|
|
|
0.9
|
|
467
|
|
Expected to vest at June 30, 2017
|
|
14,989
|
|
|
29.79
|
|
|
0.9
|
|
453
|
|
|
|
June 30,
|
||||||
(In thousands)
|
|
2017
|
|
2016
|
||||
Accrued postretirement benefits
|
|
$
|
893
|
|
|
$
|
1,060
|
|
Accrued workers’ compensation liabilities
|
|
1,885
|
|
|
3,225
|
|
||
Short-term pension liabilities
|
|
3,956
|
|
|
347
|
|
||
Earnout payable—RLC acquisition
|
|
100
|
|
|
100
|
|
||
Other (including net taxes payable)
|
|
2,868
|
|
|
2,214
|
|
||
Other current liabilities
|
|
$
|
9,702
|
|
|
$
|
6,946
|
|
|
|
June 30,
|
||||||
(In thousands)
|
|
2017
|
|
2016
|
||||
New Facility lease obligation(1)
|
|
$
|
—
|
|
|
$
|
28,110
|
|
Earnout payable(2)
|
|
1,100
|
|
|
100
|
|
||
Derivative liabilities—noncurrent
|
|
380
|
|
|
—
|
|
||
Other long-term liabilities
|
|
$
|
1,480
|
|
|
$
|
28,210
|
|
|
|
June 30,
|
||||||||||
(In thousands)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Current:
|
|
|
|
|
|
|
||||||
Federal
|
|
$
|
132
|
|
|
$
|
214
|
|
|
$
|
(30
|
)
|
State
|
|
340
|
|
|
103
|
|
|
309
|
|
|||
Total current income tax expense
|
|
472
|
|
|
317
|
|
|
279
|
|
|||
Deferred:
|
|
|
|
|
|
|
||||||
Federal
|
|
13,110
|
|
|
(66,648
|
)
|
|
106
|
|
|||
State
|
|
2,372
|
|
|
(13,666
|
)
|
|
17
|
|
|||
Total deferred income tax expense (benefit)
|
|
15,482
|
|
|
(80,314
|
)
|
|
123
|
|
|||
Income tax expense (benefit)
|
|
$
|
15,954
|
|
|
$
|
(79,997
|
)
|
|
$
|
402
|
|
|
|
June 30,
|
||||||||||
(In thousands)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Statutory tax rate
|
|
35
|
%
|
|
35
|
%
|
|
34
|
%
|
|||
Income tax expense at statutory rate
|
|
$
|
14,121
|
|
|
$
|
3,472
|
|
|
$
|
358
|
|
State income tax expense, net of federal tax benefit
|
|
1,819
|
|
|
557
|
|
|
260
|
|
|||
Dividend income exclusion
|
|
(134
|
)
|
|
(140
|
)
|
|
(54
|
)
|
|||
Valuation allowance
|
|
(13
|
)
|
|
(83,230
|
)
|
|
(185
|
)
|
|||
Change in tax rate
|
|
—
|
|
|
(1,061
|
)
|
|
—
|
|
|||
Retiree life insurance
|
|
(69
|
)
|
|
135
|
|
|
—
|
|
|||
Change in contingency reserve (net)
|
|
1
|
|
|
—
|
|
|
—
|
|
|||
Other (net)
|
|
229
|
|
|
270
|
|
|
23
|
|
|||
Income tax expense (benefit)
|
|
$
|
15,954
|
|
|
$
|
(79,997
|
)
|
|
$
|
402
|
|
|
|
June 30,
|
||||||||||
(In thousands)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Deferred tax assets:
|
|
|
|
|
|
|
||||||
Postretirement benefits
|
|
$
|
30,253
|
|
|
$
|
33,273
|
|
|
$
|
31,100
|
|
Accrued liabilities
|
|
7,885
|
|
|
11,760
|
|
|
10,091
|
|
|||
Net operating loss carryforwards
|
|
38,985
|
|
|
38,196
|
|
|
41,544
|
|
|||
Intangible assets
|
|
—
|
|
|
71
|
|
|
594
|
|
|||
Other
|
|
6,824
|
|
|
6,881
|
|
|
6,794
|
|
|||
Total deferred tax assets
|
|
83,947
|
|
|
90,181
|
|
|
90,123
|
|
|||
Deferred tax liabilities:
|
|
|
|
|
|
|
||||||
Unrealized gain on investments
|
|
—
|
|
|
(609
|
)
|
|
(2,242
|
)
|
|||
Fixed assets
|
|
(17,096
|
)
|
|
(5,370
|
)
|
|
(2,647
|
)
|
|||
Other
|
|
(2,181
|
)
|
|
(1,789
|
)
|
|
(1,943
|
)
|
|||
Total deferred tax liabilities
|
|
(19,277
|
)
|
|
(7,768
|
)
|
|
(6,832
|
)
|
|||
Valuation allowance
|
|
(1,615
|
)
|
|
(1,627
|
)
|
|
(84,857
|
)
|
|||
Net deferred tax assets (liabilities)
|
|
$
|
63,055
|
|
|
$
|
80,786
|
|
|
$
|
(1,566
|
)
|
|
|
Year Ended June 30,
|
||||||||||
(In thousands, except share and per share amounts)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net income attributable to common stockholders—basic
|
|
$
|
24,370
|
|
|
$
|
89,812
|
|
|
$
|
651
|
|
Net income attributable to nonvested restricted stockholders
|
|
30
|
|
|
106
|
|
|
1
|
|
|||
Net income
|
|
$
|
24,400
|
|
|
$
|
89,918
|
|
|
$
|
652
|
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding—basic
|
|
16,668,745
|
|
|
16,502,523
|
|
|
16,127,610
|
|
|||
Effect of dilutive securities:
|
|
|
|
|
|
|
||||||
Shares issuable under stock options
|
|
117,007
|
|
|
124,879
|
|
|
139,524
|
|
|||
Weighted average common shares outstanding—diluted
|
|
16,785,752
|
|
|
16,627,402
|
|
|
16,267,134
|
|
|||
Net income per common share—basic
|
|
$
|
1.46
|
|
|
$
|
5.45
|
|
|
$
|
0.04
|
|
Net income per common share—diluted
|
|
$
|
1.45
|
|
|
$
|
5.41
|
|
|
$
|
0.04
|
|
|
|
Contractual Obligations
|
||||||||||||||||||||||||||
(In thousands)
|
|
Capital Lease
Obligations
|
|
Operating
Lease
Obligations
|
|
New Facility Construction and Equipment Contracts (1)
|
|
Pension Plan
Obligations(2)
|
|
Postretirement
Benefits Other
Than Pension Plans(3)
|
|
Revolving Credit Facility
|
|
Purchase Commitments (4)
|
||||||||||||||
Year Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
2018
|
|
$
|
994
|
|
|
$
|
4,907
|
|
|
$
|
4,439
|
|
|
$
|
14,097
|
|
|
$
|
5,880
|
|
|
$
|
27,621
|
|
|
$
|
76,359
|
|
2019
|
|
$
|
186
|
|
|
$
|
3,996
|
|
|
$
|
—
|
|
|
$
|
8,050
|
|
|
$
|
956
|
|
|
$
|
—
|
|
|
$
|
—
|
|
2020
|
|
$
|
51
|
|
|
$
|
2,151
|
|
|
$
|
—
|
|
|
$
|
8,340
|
|
|
$
|
1,004
|
|
|
$
|
—
|
|
|
$
|
—
|
|
2021
|
|
$
|
4
|
|
|
$
|
769
|
|
|
$
|
—
|
|
|
$
|
8,560
|
|
|
$
|
1,049
|
|
|
$
|
—
|
|
|
$
|
—
|
|
2022
|
|
$
|
—
|
|
|
$
|
186
|
|
|
$
|
—
|
|
|
$
|
8,760
|
|
|
$
|
1,082
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Thereafter
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
44,870
|
|
|
$
|
5,830
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
$
|
12,009
|
|
|
$
|
4,439
|
|
|
$
|
92,677
|
|
|
$
|
15,801
|
|
|
$
|
27,621
|
|
|
$
|
76,359
|
|
||
Total minimum lease payments
|
|
$
|
1,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Less: imputed interest
(0.82% to 10.66%)
|
|
$
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Present value of future minimum lease payments
|
|
$
|
1,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Less: current portion
|
|
$
|
958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Long-term capital lease obligations
|
|
$
|
237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2016 |
|
December 31,
2016 |
|
March 31,
2017 |
|
June 30,
2017 |
||||||||
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
||||||||
Net sales
|
|
$
|
130,488
|
|
|
$
|
139,025
|
|
|
$
|
138,187
|
|
|
$
|
133,800
|
|
Gross profit
|
|
$
|
51,198
|
|
|
$
|
55,096
|
|
|
$
|
53,820
|
|
|
$
|
53,618
|
|
Income from operations
|
|
$
|
2,505
|
|
|
$
|
35,910
|
|
|
$
|
2,058
|
|
|
$
|
1,693
|
|
Net income
|
|
$
|
1,618
|
|
|
$
|
20,076
|
|
|
$
|
1,594
|
|
|
$
|
1,112
|
|
Net income per common share—basic
|
|
$
|
0.10
|
|
|
$
|
1.21
|
|
|
$
|
0.10
|
|
|
$
|
0.07
|
|
Net income per common share—diluted
|
|
$
|
0.10
|
|
|
$
|
1.20
|
|
|
$
|
0.10
|
|
|
$
|
0.07
|
|
|
|
September 30,
2015 |
|
December 31,
2015 |
|
March 31,
2016 |
|
June 30,
2016 |
||||||||
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
||||||||
Net sales
|
|
$
|
133,445
|
|
|
$
|
142,307
|
|
|
$
|
134,468
|
|
|
$
|
134,162
|
|
Gross profit
|
|
$
|
50,579
|
|
|
$
|
52,908
|
|
|
$
|
52,560
|
|
|
$
|
52,428
|
|
(Loss) income from operations
|
|
$
|
(563
|
)
|
|
$
|
5,361
|
|
|
$
|
306
|
|
|
$
|
3,075
|
|
Net (loss) income
|
|
$
|
(1,074
|
)
|
|
$
|
5,561
|
|
|
$
|
1,192
|
|
|
$
|
84,239
|
|
Net (loss) income) per common share—basic
|
|
$
|
(0.07
|
)
|
|
$
|
0.34
|
|
|
$
|
0.07
|
|
|
$
|
5.09
|
|
Net (loss) income per common share—diluted
|
|
$
|
(0.07
|
)
|
|
$
|
0.34
|
|
|
$
|
0.07
|
|
|
$
|
5.05
|
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
Item 9B.
|
Other Information
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
Item 11.
|
Executive Compensation
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Plan Category
|
|
Number of
Shares to be
Issued Upon
Exercise of
Outstanding
Options
|
|
Weighted
Average
Exercise
Price of
Outstanding
Options
|
|
Number of
Shares
Remaining
Available
for Future
Issuance(3)
|
Equity compensation plans approved by stockholders(1)
|
|
492,250
|
|
$23.76
|
|
—
|
Equity compensation plans approved by stockholders(2)
|
|
—
|
|
—
|
|
900,000
|
Equity compensation plans not approved by stockholders
|
|
—
|
|
—
|
|
—
|
Total
|
|
492,250
|
|
$23.76
|
|
900,000
|
(3)
|
The 2017 Plan succeeded the Prior Plans. On the Effective Date of the 2017 Plan, the Company ceased granting awards under the Prior Plans; however, awards outstanding under the Prior Plans will remain subject to the terms of the applicable Prior Plan. The 2017 Plan authorizes the issuance of (i) 900,000 shares of common stock plus (ii) the number of shares of common stock subject to awards under the Company’s Prior Plans that are outstanding as of the Effective Date and that expire or are forfeited, cancelled or similarly lapse following the Effective Date. Subject to certain limitations, shares of common stock covered by awards granted under the 2017 Plan that are forfeited, expire or lapse, or are repurchased for or paid in cash, may be used again for new grants under the 2017 Plan. Shares of common stock granted under the 2017 Plan may be authorized but unissued shares, shares purchased on the open market or treasury shares. In no event will more than 900,000 shares of common stock be issuable pursuant to the exercise of incentive stock options under the 2017 Plan. The 2017 Plan provides for the grant of stock options (including incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, performance shares and other stock- or cash-based awards to eligible participants. The 2017 Plan also authorizes the grant of awards that are intended to qualify as “qualified performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code (the “Code”). Non-employee directors of the Company and employees of the Company or any of its subsidiaries are eligible to receive awards under the 2017 Plan.
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
Item 14.
|
Principal Accountant Fees and Services
|
Item 15.
|
Exhibits and Financial Statement Schedules
|
(a)
|
List of Financial Statements and Financial Statement Schedules:
|
|
Consolidated Balance Sheets as of June 30, 2017 and 2016
|
|
Consolidated Statements of Operations for the Years Ended June 30, 2017, 2016 and 2015
|
|
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended June 30, 2017, 2016 and 2015
|
|
Consolidated Statements of Cash Flows for the Years Ended June 30, 2017, 2016 and 2015
|
|
Consolidated Statements of Stockholders’ Equity for the Years Ended June 30, 2017, 2016 and 2015
|
|
Notes to Consolidated Financial Statements
|
(b)
|
Exhibits: See Exhibit Index.
|
Item 16.
|
Form 10-K Summary
|
|
|
|
|
|
|
|
F
ARMER
B
ROS
. C
O
.
|
||||
|
|
|
|||
|
By:
|
|
/s/Michael H. Keown
|
||
|
|
|
Michael H. Keown
President and Chief Executive Officer (chief executive officer) |
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September 28, 2017
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By:
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/s/ David G. Robson
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David G. Robson
Treasurer and Chief Financial Officer (principal financial and accounting officer) |
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September 28, 2017
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/s/ Randy E. Clark
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Chairman of the Board and Director
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September 28, 2017
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Randy E. Clark
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/s/ Guenter W. Berger
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Chairman Emeritus and Director
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September 28, 2017
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Guenter W. Berger
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/s/ Hamideh Assadi
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Director
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September 28, 2017
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Hamideh Assadi
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Director
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Jeanne Farmer Grossman
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/s/ Michael H. Keown
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Director
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September 28, 2017
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Michael H. Keown
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/s/ Charles F. Marcy
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Director
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September 28, 2017
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Charles F. Marcy
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/s/ Christopher P. Mottern
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Director
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September 28, 2017
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Christopher P. Mottern
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2.1
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2.2
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2.3
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3.1
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3.2
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3.3
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3.4
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3.5
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4.1
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4.2
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10.1
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10.2
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10.3
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10.4
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10.5
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10.6
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10.7
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10.8
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10.9
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10.10
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10.11
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10.12
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10.13
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10.14
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10.15
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10.16
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10.17
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10.18
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10.19
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10.20
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10.21
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10.22
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10.23
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10.24
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10.25
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10.26
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10.27
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10.28
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10.29
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10.30
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10.31
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10.32
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10.33
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10.34
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10.35
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10.36
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10.37
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10.38
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10.39
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10.40
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10.41
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10.42
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10.43
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10.44
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10.45
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10.46
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10.47
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10.48
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10.49
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10.50
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14.1
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21.1
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23.1
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31.1
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31.2
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32.1
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32.2
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101
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The following financial statements from the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2017, formatted in eXtensible Business Reporting Language: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Stockholders' Equity, and (vi) Notes to Consolidated Financial Statements (furnished herewith).
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*
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Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and/or exhibits to this agreement have been omitted. The Registrant undertakes to supplementally furnish copies of the omitted schedules and/or exhibits to the Securities and Exchange Commission upon request.
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**
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Management contract or compensatory plan or arrangement.
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/s/ Pat Quiggle
Title: Vice President of Human Resources
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/s/ Hortensia Gomez
Title: Vice President, Controller
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/s/ Jeffrey A. Wahba
Title: CFO
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_____________________________________
Title: ________________________________
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1.
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Purpose and Scope
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•
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Compliance standards of conduct and procedures to be followed by Farmer Bros. employees, officers and directors in order to reduce the prospect of criminal conduct;
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Assignment of overall responsibility to oversee compliance to individuals with high-level responsibility in the organization;
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Policies and procedures designed to prevent the delegation of substantial discretionary authority to individuals who have a propensity to engage in illegal activities;
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Procedures for effectively communicating policies and procedures broadly to Farmer Bros. employees, officers and directors through publication and dissemination of this Code, and through required participation in training programs;
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Systems designed to detect criminal conduct by Farmer Bros. employees, officers and directors, including reporting systems through which employees and others can report criminal conduct within the organization without fear of retribution;
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Appropriate disciplinary mechanisms; and
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Procedures to ensure an appropriate and timely response to detected violations and procedures to prevent further offenses, including modification of this Code, when necessary.
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2.
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Policy Overview
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3.
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Compliance Monitoring
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4.
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Specific Obligations
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a.
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General Business Ethics
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b.
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Confidential Information
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c.
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Maintenance of Company Books, Records, Documents and Accounts
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d.
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Financial Integrity and Public Reporting
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e.
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Protection and Proper Use of Company Assets
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f.
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Political Contributions and Activities
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g.
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Relationships With Vendors/Customers
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h.
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Conflicts of Interest
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Employment by (including consulting for) or service on the board of a competitor, customer, supplier or other service provider. Activity that enhances or supports the position of a competitor to the detriment of Farmer Bros. is prohibited, including employment by or service on the board of a competitor. Employment by or service on the board of a customer or supplier or other service provider is generally
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Owning, directly or indirectly, a significant financial interest in any entity that does business, seeks to do business or competes with us. In addition to the factors described above, persons evaluating ownership for conflicts of interest will consider the size and nature of the investment; the nature of the relationship between the other entity and Farmer Bros.; the employee’s access to confidential information and the employee’s ability to influence Farmer Bros.’ decisions. If you would like to acquire a financial interest of that kind, you must seek approval of the Chief Compliance Officer in advance.
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Soliciting or accepting gifts, favors, loans or preferential treatment from any person or entity that does business or seeks to do business with us.
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Soliciting contributions to any charity or for any political candidate from any person or entity that does business or seeks to do business with us.
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Taking personal advantage of corporate opportunities or confidential Company business information.
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Conducting our business transactions with your family member, significant other or person who shares your household or a business in which you have a significant financial interest.
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Exercising supervisory or other authority on behalf of Farmer Bros. over a co-worker who is also a family member. The employee’s supervisor and/or the Chief Compliance Officer will consult with the Human Resources department to assess the advisability of reassignment.
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Loans to, or guarantees of obligations of, employees or their family members by Farmer Bros. could constitute an improper personal benefit to the recipients of such loans or guarantees, depending on the facts and circumstances. Some loans are expressly prohibited by law and others may require approval by the Board of Directors or one of its committees.
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i.
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Related Person Transactions
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The related person’s name and relationship to you and the Company and, if more than one related person, to each other;
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The related person’s interest in the transaction with the Company, including his or her position or relationship with, or ownership in, a firm, corporation or other entity that is a party to or has an interest in the transaction; and
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The approximate dollar value of the amount involved in the transaction and of the related person’s interest in the transaction.
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j.
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Corporate Opportunities
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k.
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Insider Trading
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l.
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Company Proprietary Information and Trade Secrets
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m.
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Antitrust
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Any agreements among competitors about price, or allocation of markets, territories or customers;
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Any agreements with customers not to deal with a competitor;
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Restrictions on resale; or
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Sales conditioned on agreements to purchase other products.
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n.
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Environmental, Health and Safety Laws and Regulations
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o.
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International Business
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p.
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Media and Public Discussions
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q.
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Workplace Behavior
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r.
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Interference With an Audit
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s.
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Preservation of Documents
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5.
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Role of Supervisory Personnel
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Providing that the employees they supervise receive copies of this Code;
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Using their best efforts to ensure that they comply with this Code; and
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Maintaining an organizational culture where employees feel free to raise questions and concerns.
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6.
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Special Responsibilities of the CEO and Senior Financial Officers
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7.
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Reporting Procedures and Complaint Investigation
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a.
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Reporting Procedures
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i.
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Open Door Policy
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ii.
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Reporting Illegal Activities or Violations
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b.
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Complaint Investigation Procedures
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c.
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Policy Against Retaliation
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8.
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Disciplinary Sanctions and Waivers
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a.
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Accountability
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b.
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Violations by Covered Officers
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c.
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Waivers
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9.
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Communication and Training
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a.
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Dissemination of Information
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b.
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Training
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Employees, including all new employees, shall receive a copy of this Code; and
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Each executive officer, manager and supervisor is responsible for ensuring that employees under his or her supervision receive training in this Code, and applicable laws and regulations, on at least an annual basis.
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10.
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At-Will Employment
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/
S
/ MICHAEL H. KEOWN
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Michael H. Keown
President and Chief Executive Officer
(principal executive officer)
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/
S
/ DAVID G. ROBSON
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David G. Robson
Treasurer and Chief Financial Officer
(principal financial and accounting officer)
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/
S
/ MICHAEL H. KEOWN
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Michael H. Keown
President and Chief Executive Officer
(principal executive officer)
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/
S
/ DAVID G. ROBSON
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David G. Robson
Treasurer and Chief Financial Officer
(principal financial and accounting officer)
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