10-Q 1 farm-20221231.htm 10-Q farm-20221231
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission file number: 001-34249
FARMER BROS. CO.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 95-0725980
(State or Other Jurisdiction of Incorporation of Organization) (I.R.S. Employer Identification No.)
1912 Farmer Brothers Drive, Northlake, Texas 76262
(Address of Principal Executive Offices; Zip Code)
682-549-6600
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, par value $1.00 per share
FARM
Nasdaq Global Select Market
None
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    NO  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    NO  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
☐

  Accelerated filer ☒
Non-accelerated filer
☐

  Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
YES ☐ NO  ☒
As of February 3, 2023, the registrant had 19,953,781 shares outstanding of its common stock, par value $1.00 per share, which is the registrant’s only class of common stock.


TABLE OF CONTENTS
 
 Page



PART I - FINANCIAL INFORMATION (UNAUDITED)
Item 1. Financial Statements
FARMER BROS. CO.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per share data)
December 31, 2022June 30, 2022
ASSETS
Current assets:
Cash and cash equivalents$17,624 $9,819 
Restricted cash2,316 175 
Accounts receivable, net of allowance for credit losses of $190 and $195, respectively
50,313 46,935 
Inventories83,537 99,618 
Short-term derivative assets1,836 3,022 
Prepaid expenses4,480 4,491 
Assets held for sale110 1,032 
Total current assets160,216 165,092 
Property, plant and equipment, net133,726 138,150 
Intangible assets, net14,678 15,863 
Right-of-use operating lease assets27,341 27,957 
Other assets3,033 3,009 
Total assets$338,994 $350,071 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable62,616 52,877 
Accrued payroll expenses8,925 14,761 
Right-of-use operating lease liabilities - current7,974 7,721 
Term loan - current3,133 3,800 
Short term derivative liability5,352 2,349 
Other current liabilities5,626 6,095 
Total current liabilities93,626 87,603 
Long-term borrowings under revolving credit facility67,000 63,000 
Term loan - noncurrent42,131 40,123 
Accrued pension liabilities28,513 28,540 
Accrued postretirement benefits807 787 
Accrued workers’ compensation liabilities2,704 3,169 
Right-of-use operating lease liabilities - noncurrent19,938 20,762 
Other long-term liabilities1,337 1,339 
Total liabilities$256,056 $245,323 
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $1.00 par value, 500,000 shares authorized; Series A Convertible Participating Cumulative Perpetual Preferred Stock, 21,000 shares authorized; no shares outstanding as of December 31, 2022 and 14,700 shares issued and outstanding as of June 30, 2022; liquidation preference of $17,346 as of June 30, 2022
— 15 
Common stock, $1.00 par value, 50,000,000 shares authorized; 19,681,943 and 18,464,966 shares issued and outstanding as of December 31, 2022 and June 30, 2022, respectively
19,683 18,466 
Additional paid-in capital74,094 71,997 
Retained earnings31,719 52,701 
Accumulated other comprehensive loss(42,558)(38,431)
Total stockholders’ equity$82,938 $104,748 
Total liabilities and stockholders’ equity$338,994 $350,071 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
1

FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except share and per share data)
 
 Three Months Ended December 31,Six Months Ended December 31,
 2022202120222021
Net sales$132,692 $118,445 $254,073 $226,807 
Cost of goods sold102,303 83,451 197,086 160,359 
Gross profit30,389 34,994 56,987 66,448 
Selling expenses27,220 28,019 54,811 54,028 
General and administrative expenses9,832 11,394 20,319 23,201 
Net loss (gains) from sales of assets55 153 (7,127)(4,429)
Operating expenses37,107 39,566 68,003 72,800 
Loss from operations(6,718)(4,572)(11,016)(6,352)
Other (expense) income:
Interest expense(3,580)(2,489)(8,221)(5,515)
Other, net(3,270)1,767 (1,662)4,211 
Total other expense(6,850)(722)(9,883)(1,304)
Loss before taxes(13,568)(5,294)(20,899)(7,656)
Income tax expense40 126 83 188 
Net loss$(13,608)$(5,420)$(20,982)$(7,844)
Less: Cumulative preferred dividends, undeclared and unpaid— 148 — 295 
Net loss available to common stockholders$(13,608)$(5,568)$(20,982)$(8,139)
Net loss available to common stockholders per common share—basic$(0.73)$(0.31)$(1.09)$(0.45)
Net loss available to common stockholders per common share—diluted$(0.73)$(0.31)$(1.09)$(0.45)
Weighted average common shares outstanding—basic
18,723,957 18,106,151 19,243,707 18,034,658 
Weighted average common shares outstanding—diluted
18,723,957 18,106,151 19,243,707 18,034,658 

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

2

FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
(In thousands)
Three Months Ended December 31,Six Months Ended December 31,
2022202120222021
Net loss$(13,608)$(5,420)$(20,982)$(7,844)
Other comprehensive (loss) income:
Unrealized (losses) gains on derivatives designated as cash flow hedges(2,284)5,132 (2,812)10,991 
Gains on derivatives designated as cash flow hedges reclassified to cost of goods sold(600)(3,712)(1,881)(5,632)
Losses on derivative instruments undesignated as cash flow hedges reclassified to interest expense, net of tax279 308 566 622 
Total comprehensive loss, net of tax$(16,213)$(3,692)$(25,109)$(1,863)

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



3



FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(In thousands, except share and per share data) 
Preferred SharesPreferred Stock AmountCommon
Shares		Common Stock
Amount		Additional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total
Balance at June 30, 202214,700 $15 18,464,966 $18,466 $71,997 $52,701 $(38,431)$104,748 
Net loss— — — — — (7,374)— (7,374)
Cash flow hedges, net of taxes— — — — — — (1,521)(1,521)
401(k) compensation expense, including reclassifications— — 257,052 257 940 — — 1,197 
Share-based compensation— — — — 1,165 — — 1,165 
Issuance of common stock and stock option exercises— — 158,744 159 (159)— — — 
Conversion and cancellation of preferred shares(14,700)(15)399,208 399 (1,750)— — (1,366)
Balance at September 30, 2022— — 19,279,970 19,281 72,193 45,327 (39,952)96,849 
Net loss— — — — — (13,608)— (13,608)
Cash flow hedges, net of taxes— — — — — — (2,606)(2,606)
401(k) compensation expense, including reclassifications— — 264,712 265 1,059 — — 1,324 
Share-based compensation— — — — 979 — — 979 
Issuance of common stock and stock option exercises— — 137,261 137 (137)— — — 
Balance at December 31, 2022— $— 19,681,943 $19,683 $74,094 $31,719 $(42,558)$82,938 


FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(In thousands, except share and per share data) 
Preferred SharesPreferred Stock AmountCommon
Shares		Common Stock
Amount		Additional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total
Balance at June 30, 202114,700 $15 17,852,793 $17,853 $66,109 $66,311 $(45,329)$104,959 
Net loss— — — — — (2,424)— (2,424)
Cash flow hedges, net of taxes— — — — — — 4,253 4,253 
ESOP and 401(k) compensation expense, including reclassifications— — 51,597 52 619 — — 671 
Share-based compensation— — — — 721 — — 721 
Issuance of common stock and stock option exercises— — 94,407 94 (94)— — — 
Conversion and cancellation of preferred shares— — — — — (147)— (147)
Balance at September 30, 202114,700 15 17,998,797 17,999 67,355 63,740 (41,076)108,033 
Net loss— — — — — (5,420)— (5,420)
Cash flow hedges, net of taxes— — — — — — 1,728 1,728 
ESOP and 401(k) compensation expense, including reclassifications— — 82,437 84 664 — — 748 
Share-based compensation— — — — 858 — — 858 
Issuance of common stock and stock option exercises— — 129,292 129 (618)— — (489)
Conversion and cancellation of preferred shares— — — — — (148)— (148)
Balance at December 31, 202114,700 $15 18,210,526 $18,212 $68,259 $58,172 $(39,348)$105,310 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
4

 
FARMER BROS. CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
 Six Months Ended December 31,
20222021
Cash flows from operating activities:
Net loss$(20,982)$(7,844)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization11,316 12,328 
Gain on settlement related to Boyd's acquisition(1,917)— 
Net gains from sales of assets(7,127)(4,429)
Net loss (gains) on derivatives instruments2,074 (7,952)
401(k), ESOP and share-based compensation expense4,665 2,507 
Provision for credit losses211 301 
Change in operating assets and liabilities:
Accounts receivable(3,589)(8,458)
Inventories16,081 (11,634)
Derivative (liabilities) assets, net(1,668)8,201 
Other assets(219)2,273 
Accounts payable9,877 8,237 
Accrued expenses and other (5,159)(2,125)
Net cash provided by (used in) operating activities3,563 (8,595)
Cash flows from investing activities:
Purchases of property, plant and equipment(7,714)(5,887)
Proceeds from sales of property, plant and equipment9,933 8,175 
Net cash provided by investing activities2,219 2,288 
Cash flows from financing activities:
Proceeds from Credit Facilities54,000 4,000 
Repayments on Credit Facilities(49,383)(4,000)
Payments of finance lease obligations(96)(23)
Payment of financing costs(357)(309)
Net cash provided by (used in) financing activities4,164 (332)
Net increase (decrease) in cash and cash equivalents and restricted cash9,946 (6,639)
Cash and cash equivalents and restricted cash at beginning of period9,994 10,438 
Cash and cash equivalents and restricted cash at end of period$19,940 $3,799 
Supplemental disclosure of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities$2,965 $4,892 
Non-cash issuance of ESOP and 401(K) common stock522 134 
Non cash additions to property, plant and equipment138 406 
Cumulative preferred dividends, undeclared and unpaid— 295 

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

5


FARMER BROS. CO.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Introduction and Basis of Presentation
Farmer Bros. Co., a Delaware corporation (including its consolidated subsidiaries unless the context otherwise requires, the “Company”), is a leading coffee roaster, wholesaler, equipment servicer and distributor of coffee, tea, and other allied products manufactured under our owned brands, as well as under private labels on behalf of certain customers.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the interim financial data have been included. Operating results for the six months ended December 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2023.
The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022, filed with the Securities and Exchange Commission (the “SEC”) on September 2, 2022, and the Form 10-K/A filed on October 27, 2022 (the “2022 Form 10-K”).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its direct and indirect wholly owned subsidiaries FBC Finance Company, a California corporation, Coffee Bean Holding Co., Inc., a Delaware corporation and, the parent company of Coffee Bean International, Inc., an Oregon corporation, China Mist Brands, Inc., a Delaware corporation, and Boyd Assets Co., a Delaware corporation. All intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company reviews its estimates on an ongoing basis using currently available information. Changes in facts and circumstances may result in revised estimates and actual results may differ from those estimates.
Note 2. Summary of Significant Accounting Policies
For a detailed discussion about the Company’s significant accounting policies, see Note 2, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements in the 2022 Form 10-K.
During the six months ended December 31, 2022, there were no significant updates made to the Company’s significant accounting policies.
Cash Equivalents
At December 31, 2022, we had $17.6 million of unrestricted cash and cash equivalents and $2.3 million in restricted cash on deposit in broker accounts to satisfy margin requirements associated with certain coffee-related derivative instruments resulting from a decline in the “C” market price of green coffee during the three months ended December 31, 2022. Further changes in commodity prices and the number of coffee-related derivative instruments held could have a significant impact on cash deposit requirements under our broker and counterparty agreements and may adversely affect our liquidity. At June 30, 2022, none of the cash in the Company’s coffee-related derivative margin accounts was restricted. Further changes in commodity prices and the number of coffee-related derivative instruments held could have a significant impact on cash deposit requirements under certain of the Company's broker and counterparty agreements.
Concentration of Credit Risk
At December 31, 2022 and June 30, 2022, the financial instruments which potentially expose the Company to concentration of credit risk consist of cash in financial institutions (in excess of federally insured limits), derivative instruments and trade receivables.
6
Farmer Bros. Co.
Notes to Unaudited Consolidated Financial Statements (continued)








The Company does not have any credit-risk related contingent features that would require it to post additional collateral in support of its net derivative asset positions.
Approximately 36% and 35% of the Company’s accounts receivable balance was with five customers at December 31, 2022 and June 30, 2022, respectively. The Company estimates its maximum credit risk for accounts receivable at the amount recorded on the balance sheet. The accounts receivables are generally short-term and all estimated credit losses have been appropriately considered in establishing the allowance for credit losses.
Recent Accounting Pronouncements
The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (the “FASB”). ASUs not listed below were assessed and either determined to be not applicable or expected to have minimal impact on its consolidated financial statements.
The following table provides a brief description of the recent ASUs applicable to the Company:
StandardDescriptionEffective DateEffect on the Financial Statements or Other Significant Matters
In March 2020, the FASB issued ASU No. 2020-04, “Facilitation of the Effect of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”)
The London Interbank Offered Rate (LIBOR) is being discontinued between December 2021 and June 2023. The Company has not entered into any new contracts after December 31, 2021. With the overnight, 1-month, 3-month, 6-month and 12-month USD LIBOR rates being published through June 30, 2023, we will continue to leverage these for the existing contracts.
ASU 2020-04 provides temporary optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the transition from LIBOR to alternative reference rate.
 Issuance date of March 12, 2020 through December 31, 2024.The Company does not anticipate any material impacts on its consolidated financial statements.
Note 3. Leases
The Company has entered into leases for building facilities, vehicles and other equipment. The Company’s leases have remaining contractual terms through January 31, 2030, some of which have options to extend the lease for up to 10 years. For purposes of calculating operating lease liabilities, lease terms are deemed not to include options to extend the lease renewal until it is reasonably certain that the Company will exercise that option. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The components of lease expense are as follows:
Three Months Ended December 31,Six Months Ended December 31,
(In thousands)2022202120222021
Operating lease expense$1,986 $1,888 $3,946 $3,670 
Finance lease expense:
Amortization of finance lease assets
41 41 82 82 
Interest on finance lease liabilities
9 11 18 23 
Total lease expense$2,036 $1,940 $4,046 $3,775 
Maturities of lease liabilities are as follows:
December 31, 2022
(In thousands)Operating LeasesFinance Leases
2023$4,001 $96 
20247,829 193 
20256,650 193 
20265,567 96 
20274,127 — 
Thereafter4,008 — 
Total lease payments32,182 578 
Less: interest (4,270)(54)
Total lease obligations$27,912 $524 
7
Farmer Bros. Co.
Notes to Unaudited Consolidated Financial Statements (continued)








Lease term and discount rate:
December 31, 2022June 30, 2022
Weighted-average remaining lease terms (in years):
Operating lease6.36.3
Finance lease3.03.5
Weighted-average discount rate:
Operating lease6.00 %5.69 %
Finance lease6.50 %6.50 %
Other Information:
Six Months Ended December 31,
(In thousands)20222021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$3,882 $3,351 
Operating cash flows from finance leases18 73 
Financing cash flows from finance leases96 23 
Note 4. Derivative Instruments
Derivative Instruments Held
Coffee-Related Derivative Instruments
The Company is exposed to commodity price risk associated with its price to be fixed green coffee purchase contracts, which are described further in Note 2, “Summary of Significant Accounting Policies,” in the Notes to the Consolidated Financial Statements in the 2022 Form 10-K. The Company utilizes forward and option contracts to manage exposure to the variability in expected future cash flows from forecasted purchases of green coffee attributable to commodity price risk. Certain of these coffee-related derivative instruments utilized for risk management purposes have been designated as cash flow hedges, while other coffee-related derivative instruments have not been designated as cash flow hedges or do not qualify for hedge accounting despite hedging the Company’s future cash flows on an economic basis.
The following table summarizes the notional volumes for the coffee-related derivative instruments held by the Company at December 31, 2022 and June 30, 2022:
(In thousands)December 31, 2022June 30, 2022
Derivative instruments designated as cash flow hedges:
  Long coffee pounds3,638 4,200 
Derivative instruments not designated as cash flow hedges:
  Long coffee pounds8,377 516 
  Short coffee pounds(4,688)— 
      Total7,327 4,716 
Coffee-related derivative instruments designated as cash flow hedges outstanding as of December 31, 2022 will expire within 12 months. At December 31, 2022 and June 30, 2022 approximately 50% and 89%, respectively, of the Company's outstanding coffee-related derivative instruments were designated as cash flow hedges.
Interest Rate Swap Derivative Instruments
Pursuant to an International Swap Dealers Association, Inc. (“ISDA”) Master Agreement which was effective March 20, 2019, the Company on March 27, 2019, entered into an interest rate swap transaction utilizing a notional amount of $80.0 million, with an effective date of April 11, 2019 and a maturity date of October 11, 2023 (the “Rate Swap”). In December 2019, the Company amended the notional amount to $65.0 million. The Rate Swap was intended to manage the Company’s interest rate risk on its floating-rate indebtedness under the Company’s revolving credit facility. Under the terms of the Rate Swap, the Company received 1-month LIBOR, subject to a 0% floor, and made payments based on a fixed rate of 2.1975%.
The Company had designated the Rate Swap derivative instrument as a cash flow hedge; however, during the three months ended September 30, 2020, the Company de-designated the Rate Swap derivative instrument. As a result, the balance in accumulated other comprehensive income, or “AOCI” was frozen at the time of de-designation. The Company recognized $0.3 million and $0.6 million, out of AOCI and into interest expense for the three and six months ended
8
Farmer Bros. Co.
Notes to Unaudited Consolidated Financial Statements (continued)








December 31, 2022. The remaining balance of $0.8 million frozen in AOCI will be amortized over the life of the Rate Swap through October 11, 2023.
In connection with the revolver credit facility agreement entered into by the Company in April 2021 (see Note 11 for details), the Company also executed a new ISDA agreement (the “Amended Rate Swap”) to transfer its interest swap to Wells Fargo Bank, N.A. (“Wells Fargo”). Under the terms of the Amended Rate Swap, the Company receives 1-month LIBOR, subject to a 0% floor, and makes payments based on a fixed rate of 2.4725%, an increase of 0.275% from its original Rate Swap fixed rate of 2.1975%. The Amended Rate Swap utilizes the same notional amount of $65.0 million and maturity date of October 11, 2023 as the original interest rate swap.
The Company did not designate the Amended Rate Swap as a cash flow hedge. The Company’s obligations under the Amended Rate Swap are secured by the collateral which secures the loans under the new Revolver Credit Facility (see Note 11 for details) on a pari passu and pro rata basis with the principal of such loans.
Effect of Derivative Instruments on the Financial Statements
Balance Sheets
Fair values of derivative instruments on the Company’s consolidated balance sheets:
Derivative Instruments
Designated as Cash Flow Hedges		Derivative Instruments Not Designated as Accounting Hedges
(In thousands)December 31, 2022June 30, 2022December 31, 2022June 30, 2022
Financial Statement Location:
Short-term derivative assets:
Coffee-related derivative instruments (1)$271 $2,144 $295 $555 
Interest rate swap derivative instruments (1)— — 1,270 323 
Long-term derivative assets:
    Coffee-related derivative instruments (2)— 37 — 140 
Interest rate swap derivative instruments (2)— — — 166 
Short-term derivative liabilities:
Coffee-related derivative instruments (3)885 3 4,467 2,346 
________________
(1) Included in “Short-term derivative assets” on the Company's consolidated balance sheets.
(2) Included in “Long-term derivative assets” on the Company's consolidated balance sheets.
(3) Included in “Short-term derivative liabilities” on the Company's consolidated balance sheets.
Statements of Operations
The following table presents pretax net gains and losses for the Company's derivative instruments designated as cash flow hedges, as recognized in “AOCI,” “Cost of goods sold” and “Interest expense”.
Three Months Ended December 31,Six Months Ended December 31,Financial Statement Classification
(In thousands)2022202120222021
Net (gains) losses recognized from AOCI to earnings - Interest rate swap(6)(4)386 (4)Interest Expense
Net losses reclassified from AOCI to earnings for de-designated Interest rate swap(273)(304)(952)(618)Interest Expense
Net (losses) gains recognized in AOCI - Coffee-related(2,284)5,132 (2,812)10,991 AOCI
Net gains recognized in earnings - Coffee - related600 3,712 1,881 5,632 Cost of goods sold
For the three and six months ended December 31, 2022 and 2021, there were no gains or losses recognized in earnings as a result of excluding amounts from the assessment of hedge effectiveness.
Net (gains) losses on derivative instruments in the Company’s consolidated statements of cash flows also include net (gains) losses on coffee-related derivative instruments designated as cash flow hedges reclassified to cost of goods sold from AOCI in the three and six months ended December 31, 2022 and 2021. Gains and losses on coffee-related derivative instruments not designated as accounting hedges are included in “Other, net” in the Company’s consolidated statements of operations and in Net (gains) losses on derivative instruments in the Company’s consolidated statements of cash flows.
9
Farmer Bros. Co.
Notes to Unaudited Consolidated Financial Statements (continued)








Net gains and losses recorded in “Other, net” are as follows:
 Three Months Ended December 31,Six Months Ended December 31,
(In thousands)2022202120222021
Net (losses) gains on coffee-related derivative instruments (1)$(4,167)$872 $(3,605)$2,422 
Non-operating pension and other postretirement benefits727 895 1,455 1,789 
Other gains, net170 — 488 — 
             Other, net $(3,270)$1,767 $(1,662)$4,211 
___________
(1) Excludes net gains and losses on coffee-related derivative instruments designated as cash flow hedges recorded in cost of goods sold in the three and six months ended December 31, 2022 and 2021.
Statement of Comprehensive Income (Loss)
The following table provides the balances and changes in accumulated other comprehensive income (loss) related to derivative instruments for the indicated periods:
Three Months Ended December 31,Six Months Ended December 31,
(In thousands)2022202120222021
Accumulated other comprehensive income beginning balance$(170)$(8,429)$(1,692)$(4,176)
Net (gains) losses recognized from AOCI to earnings - Interest rate swap(6)(4)386 (4)
Net losses reclassified from AOCI to earnings for partial unwind of interest swap - Interest rate swap(273)(304)(952)(618)
Net losses (gains) recognized in AOCI - Coffee-related2,284 (5,132)2,812 (10,991)
Net gains recognized in earnings - Coffee-related600 3,712 1,881 5,632 
Accumulated other comprehensive income ending balance$2,435 $(10,157)$2,435 $(10,157)
Offsetting of Derivative Assets and Liabilities
The Company has agreements in place that allow for the financial right of offset for derivative assets and liabilities at settlement or in the event of default under the agreements. Additionally, under certain coffee derivative agreements, the Company maintains accounts with its counterparties to facilitate financial derivative transactions in support of its risk management activities.
The following table presents the Company’s net exposure from its offsetting derivative asset and liability positions, as well as cash collateral on deposit with its counterparties as of the reporting dates indicated:
(In thousands)Gross Amount Reported on Balance SheetNetting AdjustmentsCash Collateral PostedNet Exposure
December 31, 2022Derivative Assets$1,836 $(566)$— $1,270 
Derivative Liabilities5,352 (566)— 4,786 
June 30, 2022Derivative Assets3,365 (2,349)— 1,016 
Derivative Liabilities