Good afternoon, ladies and gentlemen, and welcome to the Farmer Brothers First Quarter Fiscal 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to your host, Jeff Majtyka. Please go ahead.

Thank you. Good afternoon, everyone. Thank you for joining Farmer Brothers first quarter fiscal 2021 earnings conference call. Participating on today's call are Deverl Maserang, President and Chief Executive Officer; and Scott Drake, Chief Financial. Officer. Earlier today, the company issued its earnings press release, which is available on the Investor Relations section of Farmer Brothers' website at www.farmerbros.com. 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 www.sec.gov. 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 the call, 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. Please go ahead.

Thank you, Jeff. Good afternoon, everyone, and thanks for joining us. We hope you and your families are continuing to stay safe and healthy. Since the onset of the pandemic, Farmer Brothers had made great strides in stabilizing the business in the face of unprecedented challenges. On today's call, I'll discuss the important steps Farmer Brothers had to continue to take early in our new fiscal year to lay the strong foundation that we can build upon as we move forward. Then Scott will discuss our first quarter results in more detail. We will then take your questions. Throughout the first quarter, we continue to deliver on our strategic initiatives, made solid progress in executing our turnaround strategy. And we fundamentally strengthen Farmer Brothers for the long-term. In response to challenges associated with the COVID-19 environment, we have learned to operate more efficiently and effectively. I'm incredibly proud of how we pivoted and adapted with the current environment. Early in the year, we primarily work to stabilize the business and this quarter, we have laid solid groundwork to build upon the future. I firmly believe the progress we are making will enable us to emerge from this unprecedented time, able to better serve our customers for years to come. Before I walk through our turnaround strategy and progress we've made across our 5Es, I'd like to provide an overview of our DSD and direct ship businesses. First and foremost, we saw continued stability and recovery in the DSD business throughout the quarter with steady improvement reported each month. By the end of the quarter DSD revenues improved to a decline in the low 30% range from pre COVID-19 levels that we average prior to the start of the pandemic, with some days reaching the 20% range. As we have mentioned,…

Thanks, Deverl. Now let me walk through our first quarter results in more detail. Beginning with coffee volumes, volumes in the quarter decreased by 5 million to 20.9 million pounds a 19.4% decrease from the prior year period. Primarily due to the impact of the COVID-19 pandemic. However, volumes increased by 1.2 million pounds a 6.1% increase as compared with the June quarter of 2020 figure of 19.7b million pounds. The mix of coffee volumes processed and sold during the quarter was 4.8 million pounds, or 22.8% of the total volume through our DSD network, while direct ship customers represented 16.2 million pounds of green coffee processed and sold, or 77.2% of total volume. As this volume ratio is usually closer to one thirds through a DSD network and two thirds to direct ship customers, you can continue to see one of the primary impacts to our business from the COVID-19 environment. Turning to the income statement. Net sales for the quarter were $97.3 million, which is a decrease of $41.3 million, or 29.8% from the prior year period. The decline in net sales was driven primarily by lower sales of coffee, beverage and allied products sold through our DSD network due to the COVID-19 pandemic. At the beginning of our fiscal first quarter, sales from our DSD customers were down by approximately 45% from pre COVID-19 weekly average sales. However, as of September 30 2020, due to lifting of some government restrictions and reopening of some of our customers businesses, our DSD revenues had improved to an approximate decline of 33% from the pre COVID-19 weekly average sales. As Deverl mentioned, the largest DSD revenue declines were from restaurants, hotels and casino channels. While sales are clearly below prior year levels, it is a positive to see recovery of…

[Operator Instructions] Our first question comes from the line of Kara Anderson with B. Riley Securities. Your line is open.

Hi, good afternoon.

Hi, Kara.

First, can you reconcile the moving parts behind the 30% revenue decline and the 19% volume decline in the quarter? Was it lower pricing pass through mix? I guess maybe just help us there.

On the DSD side of the business which you're asking,

And I think I gave you for the goal DSD and direction combined metrics. But it's all good, however you want to break out would be helpful.

Yes, I was just saying first, so versus prior years of decline. Because obviously, was that versus last quarter.

Yes. Prior year?

Yes. So the normal shift in the business that we've seen since COVID broke, that, obviously, we're seeing more, a little more than two thirds of the coffee pounds go through the direct Ship Channel, as the grocers, and those online retailers have kind of hung in there. And you cannot the same thing going on with the revenues as well. We don't break out the revenues by each of those channels that we operate within. But if you call the follow the pounds, and then that, obviously the sales per pound on the DSD side of the business is going to be a little bit higher, you can kind of back into that that change year-over-year. But obviously the vast majority of is driven by DSD declines.

Got it, understand that makes total sense. And then I think I missed it, but kind of with the daily COVID cases sort of rising, essentially, the beginning of what is your second quarter? How is the business trending? And do you see it kind of tied to changes in the COVID trajectory and our volume still coming back or you're seeing weakening in demand.

We've seen a steady improvement. As we reported in the former remarks, we saw this last month, continuing to improve, we see it tied very much to state openings. We've seen an ebb and flow from various states where they become more restrictive and move back down in the context of being tighter, especially in restaurants, and other large gathering places, big casinos, hotels or convention centers and the like, or see a track pretty close to that. However, we are winning in business acquisition across the network. And that's covering up some of those declines, but not enough to continue to move us in a substantial direction until such time as you see the country fully reopening or substantially reopening beyond where it's been. And just to kind of put the final pin in that, what we have been seeing is a steady recovery since we'll call it the Phase II COVID wave that we saw on the Fourth of July and then we've steady climb back from that. So we continue to see improvements, some weeks we see flat lines the prior week, but overall throughout the quarter as a whole and this last month we've continued to see steady improvement.

Got it. And then what percentage of the team or employees that were furloughed on at the beginning of the pandemic? Have you brought back?

We have what we do week to week. And we have a meeting whereby we discuss all functional areas that have opportunities for people to return with what we've absolutely stated in post COVID, we would see us in a better SG&A position. Overall, the total number of terminated or furloughed employees that come back, and I'm combining those two Kara is around 30% of the total, we laid off and we got up to a number, right at a total headcount a term and furloughed somewhere in the 600 range. So its 30% of those have come back. Is that helpful?

Yes. Thank you. And then on with respect to Houston, I thought I heard the comments about continuing to be good, I guess maybe just help us out with maybe talking a little bit about what's left, there, some time left on the lease back, just kind of updated volume plans that they've changed at all.

Not sure. As you know, from what's been over a year ago, prior to my arrival, we sold the facility leased it back, we have three-year lease, we have about a little over a year and a half left on that lease. And as we previously discussed, we're currently in the process of rebalancing that volume from Houston plant, to our other facilities to improve EBITDA. And we've accelerated the rebalancing of the de risking infusion during the pandemic. But in terms of at this point, this hour speculating, by some timing, we have not been reporting that level of detail. But in the formal remarks, as you may remember, we talked about adding roaster, a large roaster here in DFW, we've added packaging lines. And we will continue to do that through the balance of the current quarter we're in, second quarter. And we feel real good about a capability in additional EBITDA opportunities we have as we continue to leverage the newer DFW facility. And the Houston facility has been a very old data facility, and we feel confident that might be risking it, it's going to put us in a much, much better position. But we'll have more to say. And clearly by the next quarter, while a lot more to say. And we'll continue to go down that path together.

Got it. Thanks and the West Coast distribution facility that you guys are going to be opening up, have you quantified the amount of savings that might come from doing that?

At this point, well, yes, we've gone down a path of what it's going to mean to the company, in terms of providing guidance into term in terms of cost savings, we have yet to - we haven't been providing guidance, I think I won't rule out providing guidance in the future. But right now with the fact that we're in the midst of COVID and we're navigating those uncertain times and protecting our employees and customers and executing on the strategy we've been very specific about laying out, I look forward to, at some point being able, and I would have said if COVID hadn't occurred, we would have been giving much more direct perspective and definitely guidance on cost savings initiatives. And I think, give us a little bit more time to get through COVID and the impacts and the swings that's creating for the business. And we can get more specific on these initiatives. But without question, the initiatives that we've outlined, you're very familiar with, we continue to do those initiatives to improve the overall top line and bottom line profitability of the company.

Great. Just one last, and it's a housekeeping question that I asked every quarter. The percentage of revenue related to coffee and roasting grains in the quarter.

Yes, so the percentage of total sales that was roasted ground was 68% for this quarter, versus the 63%, we sell in the same quarter last year.

Got it. Thank you so much.

Thanks Kara.

Thank you. I'm showing no further question is in the queue. I would now like to turn the call back over to Mr. Deverl Maserang for closing remarks.

Thanks you, as we continue to navigate the COVID-19 environment we continue to prioritize the health and safety of our team members and customers, as well as take actions to support the long-term sustainability of our business. I want you to know we're confident on our strategy and believe the actions we have taken will put Farmer Brothers in a position of strength when the nation emerges from the state of crisis. And we appreciate you joining us today and thank you for your continued interest in Farmer Brothers.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect