Farmer Bros. Co. (FARM) CEO Deverl Maserang on Q2 2020 Results - Earnings Call Transcript

Feb. 06, 2020 9:02 PM ETFarmer Bros. Co. (FARM)3 Comments
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Farmer Bros. Co. (NASDAQ:FARM) Q2 2020 Earnings Conference Call February 6, 2020 5:00 PM ET

Company Participants

Rachel Goldman - Investor Relations, Joele Frank

Deverl Maserang - President and Chief Executive Officer

Scott Lyon - Interim Principal Financial and Accounting Officer

Conference Call Participants

Gerald Sweeney - ROTH Capital

Kara Anderson - B. Riley FBR


Good afternoon ladies and gentlemen and welcome to the Farmer Brothers' Second Quarter Fiscal 2020 Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to turn the call over to your host, Rachel Goldman. Please go ahead.

Rachel Goldman

Thank you. Good afternoon everyone. Thank you for joining Farmer Brothers second quarter fiscal 2020 earnings conference call. Participating on today's call are Deverl Maserang, President and CEO; and Scott Lyon, Interim Principal Financial and Accounting Officer.

Earlier today, the company issued its earnings press release, which is available on the Investor Relations section of Farmer Brothers' website at The press release is also included as an exhibit to the company's Form 8-K available on the company's website and on the Securities and Exchange Commission's website at A replay of this audio-only webcast will be available approximately two hours after the conclusion of this call. The link to the audio replay will also be available on the company's website.

Before we begin please note that all of the financial information presented is unaudited and that various remarks made by management during this call about the company's future expectations, plans and prospects may constitute forward-looking statements for purposes of the Safe Harbor provisions under the federal securities laws and regulations.

These forward-looking statements represent the company's views only as of today and should not be relied upon as representing the company's views as of any subsequent date. Results could differ materially from those forward-looking statements. Additional information on factors that could cause actual results and other events to differ materially from those forward-looking statements is available in the company's press release and public filings.

On today's call, management will also use certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin in assessing the company's operating performance. Reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures is also included in the company's press release.

I'll now turn the call over to Deverl. Deverl, please go ahead.

Deverl Maserang

Thank you, Rachel. Good afternoon everyone and thanks for joining us. I'm pleased to be with you today to provide an update on the progress against our turnaround strategy and five key initiatives. Since I spoke to all of you on last quarter's earnings call, I have continued to meet with a significant number of our customers, strategic vendors and our Farmer Brothers' team members. The knowledge gained from each of these meetings has further reinforced that the critical initiatives we have identified are the correct initiatives on which we should focus.

Specifically, we need to reverse the sales to call trend in our DSD business, address the significant inefficiencies in our supply chain that creates substantial and unnecessary expense, and improve the processes and our execution throughout the various functional areas of the company. While these challenges will take both time and capital, we do not see any fundamental reasons that we cannot execute on them as part of our previously discussed 5E turnaround plan.

As a reminder, our five key initiatives are: executing our supply chain optimization, owing our execution, enhancing our service capability and building upon our competitive advantage with our coffee brewing equipment program and evolving our product portfolio through innovation, and engaging our talent and refocusing our culture. And of course, while we focus on these improvements to our operation, prudent cash and liquidity management will continue to be important financial objectives.

I'd like to start with a more specific status update on our progress with these initiatives. First, optimizing our supply chain. With Ruben Inofuentes on Board in the role of Chief Supply Chain Officer, we have conducted a thorough analysis of our manufacturing and distribution footprint to identify the right steps to optimize across both direct ship and DSD networks. We are continuing our efforts to derisk Houston by rebalancing volume from Houston plant to our other roasting facilities with the goal of optimizing our production capacity and assets.

Next, given that approximately 40% of our customers are located on the West Coast, we believe that the lack of the West Coast distribution center has led to inefficiencies in our distribution and transportation network. We expect the West Coast distribution center to help eliminate transportation cost and allow us to more effectively manage and rebalance inventory on a local basis.

In turn, we believe this will have an ancillary benefit of reducing scrap expense. We are currently engaged with an engineering firm to assist us in design and deployment of a more efficient distribution network.

Additionally, as part of our supply chain optimization initiative, we are continuing to reduce our SKU count by consolidating blends by category, reducing the number of allied product SKUs and reducing components and packaging options. Ultimately, we expect that this initiative will help us reach our goal of reducing inventory on the balance sheet and reducing scrap.

We remain focused on our on-time and in-full metrics for our A and B products and substantially, increased these during the quarter. We are also focused on improvements in demand planning and sales forecasting. Efficiencies in our demand planning and sales forecasting have been one of our largest contributors to unacceptable levels of inventory and scrap expense that the company has experienced over the last several years.

Finally, as you know, in recent quarters, we have consolidated branches and rerouted our sales representatives, and we are also continuing to evaluate additional opportunities to optimize our DSD sales network. As we continue to optimize our supply chain, we expect to realize annual expense savings across a number of areas, including in procurement, transportation, and in distribution.

Our second key initiative is elevating our execution. We are continuing to see positive results from our route handheld technology pilot program that we discussed on last quarter's call, and we look forward to fully rolling it out by the end of the calendar year 2020.

Additionally, our improved business intelligence store has continued to drive improvements in route productivity, inventory management and team cells morale and has also lowered system maintenance costs. We believe that our improved systems and processes will ultimately raise retention rates with current DSD customers and allow us to capture new business.

Next, our third key initiative is enhancing our service capability. We are building upon our competitive advantage with our robust coffee brewing equipment program and more specifically, our refurbishment program that will allow us to reduce our capital need, manage cost, and drive efficient CapEx spend. We see additional opportunity to drive utilization of our own restored equipment, ultimately contributing to an overall goal of optimizing cost and driving program profitability.

Further, the 24/7 call center pilot program that I mentioned last quarter, is fully functioning as of January 2020 and running smoothly. The national program is now giving us greater centralized information and insight into potential customer issues in the field. This has already allowed us to be more responsive to any customer request, and we believe this will prove extremely helpful with retention and customer satisfaction.

We are also working to identify operationally efficient ways to scale our roastery direct program, and are now servicing approximately 2,000 customers through this channel. As we continue to build out our processes and system initiatives, we believe we will gain enhanced insights and visibility to our key customers and increase our ability to effectively serve them with this program.

Turning to our fourth initiative, innovation. We believe the great opportunities exist with our product portfolio to capitalize on the latest trends and shift in consumer demand. Since I've joined Farmer Brothers, we have identified areas where we have not been offering our customers the products that they want to buy. With a renewed focus on innovation, we are optimistic we can provide Farmer Brothers the opportunity to improve same-store sales as well as the ability to win new customers.

I'm pleased to announce that Nathalie Fontanilla Oetzel has joined Farmer Brothers in the role of VP of Product Marketing and Innovation. She will be a key player in helping us evolve our product portfolio through innovation.

Nathalie was the VP of Marketing and Research Development and Innovation for Danone North America. Nathalie has 23 years of experience in the food industry, having worked on various food categories. She was also a member of the executive leadership team and led Earthbound Farm's marketing and innovation programs.

Nathalie built an impressive team of marketing, creative services, project management, and research and development professionals, along with external agencies that focused on brand and category management to improve brand recognition and grew the category through innovation, go to market, social, and digital strategies. I'm very excited to welcome Nathalie to the Farmer Brothers family and look forward to working closely with her as we reinvigorate the organization through innovation.

In addition, we are making progress on expanding our sustainability program across our product portfolio and equipment. Our stellar sustainability practices differentiate Farmer Brothers, and we intend to continue pursuing these efforts.

Finally, I've always believed that the foundation for success starts with people and culture, and we have already made great strides in reinstalling a winning culture here at Farmer Brothers. We're in the process of expanding our work regarding culture and team member engagement with the goal of instilling a strong sense of ownership and accountability.

We are committed to continuing to develop and retain talent and are also implementing a new recognition and reward program to keep employees engaged and motivated. It has become very clear that this is a key component in our effort to return to operational efficiency and excellence.

As far as our search for a permanent CFO, we are conducting a thorough search process to make sure we hire the right person for the role. I'm pleased to say we are well into this process and we look forward to providing an update when we have more information to share.

Now, turning briefly to our performance in the quarter in direct ship and DSD. During the second quarter, the DSD sales channel was again impacted by a decline in volume because of net customer attrition. We understand the continued trend of declining revenue in our DSD sales channel is unacceptable.

We are confident we can turn this around and improve customer retention through execution of our key initiatives and specifically, the work we're doing in technology and our service capabilities as well as our renewed focus on innovation. I continue to believe that Farmer Brothers legacy DSD network is one of our greatest strengths. And it is critical that we leverage the network we already have.

As for our direct ship business, we saw direct ship volume growth in comparison to second quarter of last year. But revenue remains flat on a continued unfavorable customer mix shift and lower commodity prices. We have completed a customer-by-customer profitability analysis and see opportunity to improve our pricing structure for certain accounts or where it may be best to discontinue the business.

We continue to see growth opportunities with our midsize and smaller customers, which don't require significant incremental investment of capital and people. As mentioned last quarter, these customers come to us for product development, equipment expertise, and additional services, allowing us to achieve better margins.

We also recognize the importance of continuing to pursue our large national customers. We will be disciplined in our future pricing in this segment of our business with an objective to ensure that every direct ship customer is positive contributor to the performance of the company. Ultimately, we remain focused on balancing revenue and margin in line with our efforts to drive improved EBITDA for the company overall.

Before I turn the call over to Scott, I'd like to acknowledge that while there is still a lot of work to be done, I am confident that we are headed in the right direction. We have clearly defined a plan in place to get us where we need to go and the progress we have seen to date is encouraging.

As I've said before, our goal remains to drive revenue and EBITDA growth. Looking forward to our performance in the back half of the year, I'd encourage you to keep in mind the seasonality of our business. If you look at our historical performance, the second quarter is always our strongest and we expect to follow the same cadence through fiscal 2020.

Also, as we execute our five strategic initiatives, we expect to make some investments throughout the remainder of the fiscal year to support the rebalancing of our production across our manufacturing network. Scott will cover this in more detail.

While we may continue to see choppiness in our results along the way, I'm optimistic that initiatives we are executing will put us in a position of strength for the long term. I look forward to being able to provide updates on our continued progress on future earnings calls.

With that, I'll now turn the call over to Scott for a more detailed review of financial results.

Scott Lyon

Thanks Deverl. Now, let me walk through our second quarter results. Beginning with coffee volumes. Green coffee processed and sold in the quarter increased by 2 million to 29.4 million pounds, a 7.2% increase over the prior year period.

The mix of coffee volumes processed and sold during the quarter was approximately 9.0 million pounds or 31% of the total volume through our DSD network while direct ship customers represented approximately 19.9 million pounds of green coffee processed and sold or 68% of total volume. Approximately 500,000 pounds or 1% of the total volume was through distributors.

The improvement in coffee volumes reflects higher sales to several direct ship customers partially offset by declining volume within our DSD network and the sale of our office coffee business in July of this year. The increase in volume did not translate to higher revenues due to customer mix, which I will discuss shortly.

Turning to the income statement, net revenues for the quarter were $152.5 million, which is a decrease of $7.3 million or 4.6% from $159.8 million reported in the same period a year ago. The decline in net revenues was driven primarily by lower sales of coffee, beverage, and allied products through our DSD network due to net customer attrition as well as the sale of our office coffee business in July 2019.

Our direct ship sales were comparable to the prior year period because the increase in direct ship volume was offset by the impact of coffee prices for our cost-plus customers and unfavorable customer mix.

Gross profit in the second quarter of fiscal 2020 was $44.0 million, a decrease of $9.3 million from the prior year period. Gross margin also declined from 33.3% to 28.8%. The decrease in gross profit was primarily driven by lower net sales of $7.3 million between the periods, unfavorable customer mix between our DSD and direct ship sales channels and write-down of slow-moving inventories, partially offset by lower freight costs. I'd like to discuss a few of these items now in more detail.

Excess slow-moving inventories remained a challenge in the second quarter, resulting in higher inventory markdowns and scrap expense as we work through excess product. The majority of this expense was to increase our inventory reserve on our balance sheet at December 31.

Inventories continue to decline as we manage our working capital more effectively compared to a year ago. Our gross profit continues to be negatively impacted by higher costs in our manufacturing network.

As we announced last quarter, we have completed the sale and leaseback of our Houston facility. This will enable us to rebalance volume across our roasting facilities, which in turn should reduce future manufacturing downtime and other variable costs. The proceeds from the sale have given us additional liquidity and flexibility.

Our coffee brewing expenses during the quarter were relatively flat compared to prior year. These costs continue to be a key focus area as part of the five initiatives Deverl outlined earlier. We expect to see improvements throughout the remainder of fiscal 2020 as the controls and process changes take hold.

Turning to operating expenses, our operating expenses for the quarter decreased $17.6 million to $35.1 million from $52.7 million. As a percentage of net sales, operating expenses declined to 23.0% compared to 33.0% of net sales in the second quarter a year ago, which was driven by net gains on the sale of assets.

Excluding these gains, operating expenses declined $5.8 million due to the absence of Boyd's integration expenses, decrease in selling expenses from the efficiencies realized on DSD route optimization and decrease in general and administrative expenses due to reductions in third-party costs and lower headcount as a result of several cost-saving initiatives we implemented this year. This was partially offset by higher employee incentive costs, one-time severance charges, and proxy contest expenses.

Net gains from the sale of assets are primarily associated with the Houston manufacturing facility and four branch properties of $7.3 million and $4.1 million, respectively. Interest expense in the quarter decreased $500,000 from the prior year period to $2.9 million, primarily due to less borrowings on our credit facility. Better working capital management has led to a decline in our borrowings compared to a year ago.

Other net in the second quarter increased by $700,000 to $1.7 million in the quarter compared to $1.0 million in the prior year period. This was primarily due to net mark-to-market gains on coffee-related derivative instruments not designated as accounting hedges during the second quarter of fiscal 2020 compared to net mark-to-market losses a year ago.

Turning to income taxes, we reported an income tax benefit of $100,000 in the second quarter of fiscal 2020 as compared to an income tax benefit of $2.7 million in the prior year period. The lower tax benefit is primarily due to previously recorded valuation allowance and change in our estimated deferred tax liability during the second quarter of fiscal 2020 as compared to the prior year period.

As a result of these factors, net income was $7.8 million in the second quarter as compared to a net loss of $10.1 million in the prior year period. Net income available to common stockholders was $7.6 million or $0.43 per diluted common share in the second quarter of fiscal 2020 compared to net loss available to common stockholders of $10.2 million or $0.60 per diluted common share in the prior year period.

Adjusted EBITDA was $7.4 million in the second quarter of fiscal 2020 as compared to $12.4 million in the prior year period. Our adjusted EBITDA margin declined to 4.9% for the quarter compared to 7.8% for the same period last year.

As you heard from Deverl, there is a seasonality in our business and we expect adjusted EBITDA in the second quarter to be the highest quarterly adjusted EBITDA we achieved in the year as it has been historically.

Now, turning to the balance sheet, overall, we've continued to strengthen our financial flexibility by reducing debt levels and managing our working capital more efficiently over the last 12 months. At the end of the quarter, we had $9.1 million in cash and $70 million borrowed on our revolving credit facility or $60.9 million in debt, net of cash. This compares favorably to debt net of cash of $85 million at June 30, 2019, and $116.7 million from a year ago. Our debt net of cash continues to decline quarter-over-quarter and is the lowest it's been during the last several years.

As of December 31, 2019, the drawn portion under our $150 million credit facility, including 2 million committed letters of credit was $72 million compared to $94 million as of June 30, 2019. During the quarter, our accounts receivable balance increased $5.2 million to $60.4 million compared to $55.2 million at the end of the fourth quarter, and was down $19.1 million from $79.5 million at the end of the prior year period. The increase since June 30, 2019, related to higher sales during the second quarter due to the seasonality of our business.

Overall, our age receivables have improved, causing our bad debt reserve to decline since June 30, 2019. Our inventory levels decreased during the quarter by $2.8 million to $85.1 million compared to $87.9 million at the end of June 30, 2019, and are down $30.4 million from $115.5 million from the prior year period.

Accounts payable decreased during the quarter to $59.8 million compared to $72.7 million at the end of the fourth quarter and is down $18.3 million from the prior year of $78.1 million.

Turning to capital expenditures, CapEx for the second quarter was $3.7 million of which $3.1 million related to maintenance spend. Our maintenance CapEx has declined $4.3 million from $7.4 million a year ago, primarily due to lower planned spending on new coffee brewing equipment and an increase in our use of refurbished coffee brewing equipment, which has a lower cost per unit.

Depreciation and amortization expense was $7.6 million in the second quarter versus $7.9 million in the same period of the prior year. We expect maintenance capital for fiscal 2020 to range between $17 million to $20 million, a decrease from fiscal 2019 maintenance capital of $21 million.

As Deverl mentioned, we expect our expansion CapEx to increase in the back half of the fiscal year as we focus on our key initiatives to rebalance production costs across our plant network and other strategic projects. These are investments we are making with the objective of driving EBITDA growth and free cash flow in future periods.

We anticipate our depreciation and amortization expense will be approximately $7.3 million to $7.6 million per quarter during the remainder of fiscal 2020 based on our existing fixed asset commitments and the useful lives of our intangible assets.

We expect minimal accrued income tax expense and cash payments in fiscal 2020. We expect our debt net of cash to increase slightly from $60.9 million at the end of second quarter to approximately $65 million to $70 million by March 31, 2020, due to planned expansion CapEx that I just mentioned.

As we refine the analysis of capital required to implement the different initiatives that Deverl and I have discussed on today's call, we are taking into consideration the company's financing needs and will ensure we maintain a conservative liquidity position. We are focused on executing our turnaround strategy, and the entire organization is committed to returning Farmer Brothers to growth and profitability.

And with that, I'd like to open the call up for questions. Operator?

Question-and-Answer Session


Thank you. [Operator Instructions]

And our first question is from Gerry Sweeney with ROTH Capital. Please go ahead, your line is open.

Gerard Sweeney

Good afternoon Deverl and Scott. Thanks for taking my call.

Deverl Maserang

Good afternoon Gerry.

Gerard Sweeney

I apologize, I got dropped for a little bit, so maybe I missed some of this, and I had to dial back in. But I wanted to just talk about some of the initiatives that you're looking at, and in particular, maybe some of the items in terms of supply chain.

And they appear, at least from an outsider looking in, that there may be some of the low-hanging fruit. I want to see where they are? And when -- if we're seeing any impact on margins or improvements? Or when we can expect it? And those two, I guess, areas would be the Houston rebalance and maybe the SKU counts.

Deverl Maserang

Hey Gerry thanks for the question. Yes, from a supply chain perspective, we're starting to see the early signs of improvement in those areas. I would just add that on the rebalancing Houston, that is front and center right now. And the first component part of that, and we'll see that come online by April. And then we'll be executing more activity around the network from both. One, manufacturing. Two, the DC. You heard us mention the West Coast distribution network that we need to put in play to help drive supply chain savings. And then third, it's going to come out in transportation, which will have an impact in regards to the network there.

So, from an executional perspective on those areas, I'm very confident that as this year continues to unfold, we will see results within this year on those areas. Speaking of SKU, as you know, when Chris Mottern was in as the interim CEO, he really was pressing on the SKU optimization. We've continued that work, and we're dead center in the middle of executing many of those SKU reductions, and I would expect that's probably some of the earlier work that we'll see bear some fruit here in the coming months and quarters.

Gerard Sweeney

Got it. And then on -- just a follow-up on that. Talking about the West Coast distribution, it sounds like it's still a little bit intermingled with the rebalancing, et cetera. Does that mean some capital outlay in terms of facilities? Or does that mean a sort of restructuring of where facilities are and mapping out some better locations or closing and adding, et cetera? Just any thoughts on that.

Deverl Maserang

Yes. It's definitely not a rebalancing in the context of utilizing existing infrastructure. We've evaluated that. But this would be a lease facility with some capital to bring that facility up based on the size and scale. We're in the midst of determining where we are relative to the network optimization study that will be -- that we're currently performing, which is anywhere from eight to 12-week top study. We've got that underway.

And so as we define with good information, and then we -- while we are in that process, we'll also be looking for the site that we want to go into. We sit with 40% of those customers, as we mentioned, being out in the West in the total network. The fact that we bring product off the West Coast, and then go right back to the West Coast from the Northlake, Texas facility. It's just been incurring a lot of additional transportation expense that we should never incur.

And so, yes, some amount of the capital over the coming quarters would be placed into that, but it's for basic things. We'll do lease situation on the facility, and then we'll look to further optimize the network from a branch and overall D.C. perspective. But it's clear that we need a West Coast facility.

Gerard Sweeney

Got it. And then just switching gears over to maybe the direct ship side. If I heard it right, on the prepared remarks, you've done a customer review of that side of the business. And it sounded as though you may have had some either contracts or customers that maybe you're supplying coffee to on less than advantageous terms. Is that a fair way of looking at it? Is there some opportunity to gain by cuttings on the direct ship side?

Deverl Maserang

I think the best way -- and not -- and I appreciate the question the way you're asking it. I think the way I'd like to talk about it, especially on rationalizing is to focus, first and foremost, on top line growth in that category with a heavy focus toward it being favorable on an EBITDA basis. And I want to continue to reiterate that, that's the way we're going to look at it. And so we're out hunting new customers.

We're evaluating existing customers, and we're having good success across that category. As you saw, we grew direct shift on a total volume basis in the Q over prior, which I was happy to see. And we're going to just continue to slog along in that path. And we've got a lot of promise in that category as we're working with our direct ship customers.

So, this is where -- if I see choppiness in the future, we're going to focus on free cash flow and EBITDA. And we'll see how that fares out over the coming quarters. And we'll report more as we see more success in that category.

Gerard Sweeney

I appreciate those comments and I'll jump back in queue. Thank you very much.

Deverl Maserang

Thank you, Gerry.


Thank you. [Operator Instructions]

Our next question is from Kara Anderson with B. Riley FBR. Please go ahead.

Kara Anderson

Hey, good afternoon guys.

Deverl Maserang

Hello Kara.

Kara Anderson

I kind of wanted to jump back to that direct ship question. I know you were comping kind of a rather lackluster 2Q last year in terms of volume. But anything particular to call out? Was it really just two customers? Are you seeing strength across the Board? Or just is that kind of around the decision to target small or midsized business. Just if you could provide more color on that, that would be helpful.

Scott Lyon

Hey Kara, this is Scott. I'm not going to comment right now around specific customers. We delivered volume growth in our direct ship business in the quarter, and are focused on continuing to deliver volume growth long-term through improvements both in our direct ship and DSD businesses, while also remaining committed to increasing our EBITDA.

From quarter-to-quarter, we may have puts and takes across customers. But as we mentioned in our prepared remarks, we have completed a customer-by-customer profitability analysis and see opportunities to improve our pricing structure for certain accounts. But where it may be best to discontinue the business.

Deverl Maserang

The last thing I'd say, Kara, on that point is, we definitely see a mix of some customers contributing more growth than we expected based on the segment of the industry that they're covering, which has been positive, and we're continuing to cultivate those relationships. And of course, as our national direct ship sales team is out working.

And as I've made many visits here in Northlake along with those customers along with going to visit customers, it's clear that we have lots of opportunity across that piece of business, and we'll continue to focus on that one's again, coming back to the ones that drive the most EBITDA and the topline growth that also impacts free cash flow. So, we're continuing to do that work.

Kara Anderson

Okay. And just kind of a follow-up on that. Since you have completed your profitability analysis of each, can you just comment on sort of what the pricing environment looks like with respect to direct ship customers or national customers?

Deverl Maserang

Let me make sure, you want it from a pricing environment or from a margin perspective? Or--

Kara Anderson

Pricing environment. For instance, are you seeing pressure on prices as you're going out there and bidding new business or even as you think about maybe going back in renegotiating terms? What's the environment look like?

Deverl Maserang

Listen, I think the comment that best would surmise that segment or area of the business would be, the industry is becoming more rational, and we're being more disciplined in regards to working with these direct ship customers.

Kara Anderson

Okay. Just one housekeeping question for me before I jump off. Can you provide the total revenue contribution from roast and ground coffee in the quarter or either as a percentage of sales or just a dollar amount?

Scott Lyon

Sure. So, for the quarter, our -- it was 63% of total revenue.

Kara Anderson

Perfect. Thank you.

Deverl Maserang

Thank you, Kara.


Thank you. And I'm not showing any further questions. I would like to turn the call back to Deverl Maserang with his final remarks.

Deverl Maserang

Thank you. As we enter the second half of the fiscal year, the entire team is motivated and focused on achieving our objectives. And I see great potential in Farmer Brothers and I'm confident that the strategic initiatives that we are focused on are the right ones.

And I also continue to believe that coffee is a tailwind and not a headwind. And I'm encouraged by what I've seen thus far in my first few months here. I look forward to continue to drive toward returning Farmer Brothers to growth and profitability, and I thank you for joining us today and thank you for your continued interest in Farmer Brothers.


And with that, thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating. You may now disconnect.

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