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I will now turn the call over to Mike. Mike, please go ahead.

Michael H. Keown -- President, Chief Executive Officer & Director

Thank you, Rachel. Welcome everyone and thanks for joining us this afternoon. As we pass the halfway mark in fiscal 2019, we are continuing to make important progress in executing our strategy and implementing initiatives to strengthen our platform for long-term growth. We passed the one-year anniversary of the closing of the Boyd's acquisition in October and we have completed integrating this business into Farmer Brothers. Our results in the second quarter reflect the realization of these synergies just as we had anticipated and we expect those to continue to increase in the back half of the year as these synergies are fully realized.

We are adding new customers to our pipeline in both direct ship and DSD, and we are continuing to make progress in further enhancing our DSD organization through our route and branch optimization. Year-over-year volume and sales in the second quarter were down as expected. However, we are pleased to have improved adjusted EBITDA by 18% to $12.4 million and remain on track to achieve our targeted range for the fiscal year of $49 million to $52 million.

I'd like to turn now to review a few key initiatives we focused on in the second quarter. First, as I noted, we have completed our Boyd's integration work and remain on track to fully realize the targeted synergies and benefits from this transaction in the second half of the fiscal year. I remain incredibly proud of how our team has successfully executed our plan to bring Boyd's direct ship and DSD customers into our business, transfer coffee production to our plants and transition other production-related functions.

As I mentioned on last quarter's call, 100% of Boyd's branches have been integrated into our DSD network and we now produce 100% of Boyd's SKUs in our Farmer Brothers facilities. With the transition services arrangements having ended at the start of October, our second quarter operating expense and adjusted EBITDA results demonstrate the synergies we are seeing from this transaction and how we are able to bolster our long-term growth by acquiring complementary businesses.

Turning to our DSD business, you'll recall that we have added additional street sales resources in targeted markets who are now focused on new business acquisition and building route density. We are beginning to see the benefits from this investment, both in the development of a robust pipeline as well as new business wins and are confident it will help drive profitable growth.

In addition, we have continued to make progress in our efforts to optimize our DSD routes and consolidate branches. To date, we have successfully consolidated 60 routes and we expect to eliminate up to 75 routes total by the end of the third quarter and up to approximately 80 routes total by the end of the fiscal year. Throughout the quarter, we continued to convert and onboard customers in the new business pipeline created by our channel sales teams. We are continuing to see increased traction from our channel based selling approach.

We had a strong quarter in terms of installations, with over 1,500 new installations. Many of these came through customers such as Foodbuy, Taco Cabana, Baylor Scott & White Health, and Choctaw Casinos. Leveraging our leadership and sustainability, as we mentioned last quarter, we have established a partnership with the major food (Technical Difficulty) colleges, that is also yielding new installs. We expect this to be a growing segment of our business as students seek products that are ethically sourced. We have already begun to generate revenue from these new installations, with more expected over the course of the fiscal year.

With our new street sales team resources and continued progress on our route and branch optimization plan, we feel we have made great strides in making our DSD business more efficient and continue to believe that these changes to our DSD business will drive improvement in operating expenses, as well as the top line. We remain confident that we have taken and continue to take the right actions to drive more consistent DSD growth over the long term and that we are poised to see further improvements in this business over the course of fiscal 2019.

Now turning to our direct ship business, as expected, we again experienced headwind from production for two of the brands we previously serviced being brought in-house by the owner of those brands. We also continue to see softer volume from two of our top customers, similar to what we've seen in the last several quarters. I spoke last quarter about significant new direct ship customer relationships being initiated and I'd like to provide an update on each of those.

For the large global convenience store retailer we had mentioned, we are very pleased to share that we have now completed the on-boarding and qualification process. We have already begun commercial production and shipments to this customer in January and we expect to ramp up volume aggressively over the remainder of the year. We then expect this customer to grow to be one of our top three customers by the end of fiscal 2020.

We have also moved forward in our relationship with a larger international beverage customer for a new line of products and we are continuing discussions with one of our online retailer customers to significantly increase the size of their program. They view us as their coffee expert and we are expecting them to continue to expand their portfolio with us.

Progress continues with a very significant customer that we discussed last quarter. This customer is very methodical and the process has taken longer than we expected initially. We remain in the final on-boarding and qualification stage and continue to believe this customer has the potential to grow to become one of our top three accounts over time.

Looking ahead, we are maintaining our adjusted EBITDA guidance of $49 million to $52 million. We remain optimistic about the second half of fiscal 2019 as our Company is positioned to realize the full benefits of the Boyd's integration and capture opportunities in our customer pipeline.

I'll now turn the call over to David for a more detailed review of our financial results.

David Robson -- Treasurer & Chief Financial Officer

Thanks, Mike. I'll now go into further detail regarding our results for the second quarter. Beginning with coffee volumes, green coffee processed and sold in the quarter decreased by 1.7 million pounds or 5.8% to 27.4 million pounds compared to the second quarter of fiscal 2018. The decline was driven largely by lower volume from two of our top customers, as well as the impact of two brands that we serviced in the prior year that were brought in-house by the owner of those brands.

In addition to softness in our DSD channel, the mix of coffee volumes processed and sold during the quarter was approximately 9.9 million pounds or 36% of the total volume through our DSD network. Direct ship customers represented approximately 17 million pounds of green coffee processed and sold or 62.2% of the total volume and 0.5 million pounds or 1.8% of the total volume was through distributors.

Turning next to the income statement, net sales for the quarter were $159.8 million, a decrease of $7.6 million or 4.5% from $167.4 million reported in the same period of the prior year. The decline was driven by lower volume in our direct ship business that I mentioned a moment ago, the impact of lower coffee prices for our cost plus customers, a reduction in industrial soup base revenues associated with the Boyd's acquisition, which we stopped selling in the first quarter of the current fiscal year, and a decline in revenue sold through our DSD network.

Gross profit in the second quarter of fiscal 2019 decreased by $3 million or 5.4% to $53.2 million from $56.3 million and gross margin decreased 30 basis points to 33.3% from 33.6% in the prior year period. The decrease in gross margin rate was primarily due to higher freight expense of 75 basis points, higher coffee green equipment costs associated with increased installation activity during the quarter of 107 basis points, and higher production cost of 70 basis points, offset by higher product margins, driven by lower coffee prices and increased product pricing within our DSD network.

Turning to operating expenses, operating expenses for the quarter decreased to $52.7 million or 33% of net sales as compared to $56.3 million or 33.6% of net sales recorded in the second quarter of the prior year. The decrease in operating expenses was primarily due to a $2.5 million decrease in selling expenses associated with headcount reductions and other efficiencies from DSD route optimization and a $2.2 million decrease in G&A expenses associated with synergies achieved through the Boyd's acquisition at the end of the transition service arrangements with Boyd's at the beginning of October, offset by higher acquisition and integration costs and bad debt expense.

During the quarter, we experienced elevated past due receivables balances across some direct ship and DSD customers, and we increased the allowance for doubtful accounts accordingly. The decrease in operating expenses was also offset by an increase in net losses from the sale of other assets of $0.9 million and a reduction in gains from sale of spice assets of $0.3 million. The losses on asset sales primarily relates to assets we acquired from Boyd's, some of which we sold and disposed of when we exited the Boyd's facility in December.

As we look to the back half of the year, we expect our operating leverage to continue to improve, now that Boyd's coffee production is fully integrated into our production facilities and we can more fully realize synergies related to the integration. We also expect to realize year-over-year cost savings resulting from our route and branch optimization efforts that we executed during the second quarter.

Also during the quarter, we recorded a $10.9 million pension settlement charge associated with the termination of the Farmer Brothers Company pension plan for salaried employees effective December 1, 2018. By terminating the plan we reduced overall pension benefit obligations by approximately $24.4 million. The $10.9 million settlement charge is non-cash. As a result of the pension plan termination, we expect to realize lower Pension Benefit Guaranty Corporation expenses of approximately $300,000 to $400,000 per year.

Now turning to interest expense, net interest expense increased by $0.8 million to $3.3 million in the quarter compared to $2.5 million for the second quarter of last year, principally due to higher borrowings primarily related to the Boyd's acquisition and the write-off of deferred financing costs associated with ending of our prior loan agreement, which was replaced with a new facility in November 2018.

Other income decreased by $1.3 million from $1 million in the quarter compared to $2.2 million for the second quarter of last year, primarily due to increased losses on coffee related derivative instruments in the quarter of $0.9 million compared to $0.2 million in the comparable period of the prior fiscal year. Given these derivative losses related to coffee hedges we entered into for the benefit of our customer base, the markdown and inventory values now of $0.9 million in higher expense results in future lower cost of sale in associated higher gross margin rates once we sell through the associated inventory, which is carrying a discounted inventory value from our hedge cost.

Turning to income taxes, we recorded an income tax benefit of $2.7 million in the quarter and our tax rate was 21%. The higher tax expense of $16.8 million in the prior year quarter was impacted by the Tax Cuts and Jobs Act of 2017, that resulted in a reduction of our estimated effective tax rate and a recalculation of our deferred tax assets.

Net loss available to common stockholders for the quarter was $10.2 million or a loss of $0.60 per diluted share compared to a net loss available to common stockholders of $17.2 million or a loss of $1.03 per diluted share in the prior year period. Adjusted EBITDA improved 18.4% to $12.4 million for the quarter compared to $10.5 million in the prior year while adjusted EBITDA margins improved to 7.8% for the quarter compared to 6.3% for the same period last year.

Now let's turn to the balance sheet. At the end of the quarter we had $13.3 million in cash and we had $130 million borrowed on our revolving credit facility. Our debt, net of cash, at fiscal year-end was $116.7 million compared to $90 million as of September 30, 2018. Our debt, net of cash, increased primarily due to the purchase of plant, property and equipment, higher inventory levels and receivables, offset by higher accounts payables.

The higher inventory levels we were carrying at the end of the quarter were planned in anticipation of ending the Boyd's transitions service arrangements as of October and the shutdown of Boyd's production. These higher inventory levels were important to ensure we continue to meet customer demand while we transition production from the Boyd's facility into our facilities. Over the course of the year these higher inventory levels we expect to fall, which should deliver improved working capital as we run down the excess inventory build.

We also saw our accounts receivable balances increase during the quarter above historical levels. This was primarily driven by short-term interruption of collection activities of distribution customers acquired with the Boyd's acquisition as we are integrating their collection processes into our ERP system during the quarter. The elevated receivable balances have begun to come down through February and we anticipate further improvement during the remainder of the quarter.

Our bank availability under our credit facility at the end of the quarter was $20 million compared to $21.2 million as of September 30, 2018. As we discussed on our last conference call, we replaced our existing asset-based credit facility on November 5th with the new cash flow-based senior secured revolving credit facility with a borrowing limit of up to $150 million and an accordion feature allowing us to increase the commitment by up to an additional $75 million subject to certain conditions.

Now turning to capital expenditures, for the second quarter our capital expenditures in cash were $15.3 million, with $7.1 million related to maintenance and $8.2 million to add further capabilities to our Northlake, Texas facility. Depreciation and amortization expense was $7.9 million in the second quarter versus $8.1 million in the same period of the prior year. The decrease in this expense primarily related to assets that became fully depreciated.

Based on our existing fixed asset commitments and the useful lives of our intangible assets, including the addition of assets from the Boyd's acquisition, we continue to expect depreciation and amortization expense to run at approximately $8.0 million to $8.5 million per quarter for the next several quarters.

Now turning to our outlook for the remainder of fiscal 2019. As we look toward the back half of the fiscal year, we expect year-over-year pounds and revenues to decline in the third quarter, principally driven by continued softness in our direct ship business in addition to the impact of lower year-over-year coffee prices on revenues charged to our cost plus customers. In addition, we will continue to experience the negative impacts from the volume loss for two of the brands we had historically serviced being brought in-house by the owner of those brands.

We expect the growth trends to improve in the fourth quarter compared with the third quarter as we realized increased shipments from new account wins in both our large direct ship business and channel business, although both pounds and revenue in the fourth quarter are expected to be down from a year ago. And as Mike noted, we continue to anticipate adjusted EBITDA in the range of $49 million to $52 million, benefiting from higher synergies on Boyd's and lower cost to be realized from route optimization, offset by softer revenues.

Finally, regarding the acquisition of Boyd's, subsequent to the quarter-end, on January 23rd, 2019, PricewaterhouseCooper, the party appointed to resolve our working capital dispute with Boyd's, issued its determination letter. Prior to the resolution, the best estimate of the post-closing working capital adjustment was $8.1 million. The post closing net working capital adjustment as finally determined by the independent expert is $6.3 million. Under the terms of the asset purchase agreement, Boyd's, the seller, is required to pay the Company the absolute value of the amount by wire transfer of immediately available funds or at the option of the Company, we may resort to the hold back to satisfy this amount or net against certain amounts otherwise due to the seller under the asset purchase agreement.

We are currently discussing funding methods of the working capital shortfall along with the Company's other indemnity claims with the seller. We have not yet agreed on whether this deficiency will be settled in a cash payment or through retention of amounts held in the hold back. Due to the conversion pricing specified in the asset purchase agreement for using hold back stock to settle amounts (Technical Difficulty) agreed upon funding method may impact the amount of working capital shortfall realized upon final resolution.

Now I'll turn the call back to Mike for closing remarks.

Michael H. Keown -- President, Chief Executive Officer & Director

Thanks, David. The first half of our fiscal year has unfolded largely as we had anticipated. We anticipate delivering stronger results in the second half of the year as we more fully realize synergies from Boyd's and generate cost savings from our route and branch optimization in our DSD business. We believe that Farmer Brothers' sustainable sourcing, manufacturing and distribution practices help make us a more attractive partner and our competitive advantage for us.

Looking to the remainder of fiscal 2019 and beyond, we continue to see both organic and inorganic growth opportunities and remain focused on adding new customers as well as increasing our business with already existing customers. Our long-term view of the industry and prospects for Farmer Brothers remains very optimistic as we are confident that we have found the right foundation to deliver growth and value for our shareholders. We remain excited about unlocking Farmer Brothers full potential and our future growth opportunities. As always, I thank those on the call for your continued interest in Farmer Brothers.

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

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question comes from Gerry Sweeney of ROTH Capital, your line is now open.

Gerry Sweeney -- ROTH Capital -- Analyst

Good morning, Mike and David, thanks for taking my call. Good afternoon -- sorry.

Michael H. Keown -- President, Chief Executive Officer & Director

Good afternoon.

Gerry Sweeney -- ROTH Capital -- Analyst

So my question for you on the -- you ran down some list of customer wins and on boarding. Did you say there were two top three potential customers, one was -- the one that was on-boarded in January and then I think you said a very significant customer that you're still working on on-boarding that thought to be a top three accounts. Is that...

Michael H. Keown -- President, Chief Executive Officer & Director

That's right. The large convenience store retailer, we have up and running. The other customer that we've discussed is incredibly methodical in their process and we're moving through that process and we are in the final on-boarding and qualification stage.

Gerry Sweeney -- ROTH Capital -- Analyst

And any sort of timeline on how much longer that on-boarding and qualification stage would take. And then correct me if I'm wrong there, the current supplier has they -- will they run down their inventory of their current supplier before you start to deliver pounds to them. Is that correct as well?

Michael H. Keown -- President, Chief Executive Officer & Director

That's right, that's right. So the way the process generally works is once we've gone through that, we would work in partnership with the other supplier to take on the volume as their volume runs down and we've had good experience with that in the past. In terms of timing, it's difficult to tell. The customer has expectations and those can move over time as you've heard us talk about wins in the past and our job is to just stay on it, keep moving through at the appropriate pace and then take on the new customer.

Gerry Sweeney -- ROTH Capital -- Analyst

Got it. And as this sort of elongated process, has this impacted your original fall for the second half of '19 in terms...

Michael H. Keown -- President, Chief Executive Officer & Director

Yeah. You heard in David's comment the softer volume in the third quarter and while we see trends improving in the fourth, a lot of that is regarding just the overall speed of how these customers come on board. And so, you know, there is always a bit of judgment and we thought it was appropriate at this point to say there is more risk than upside, but a lot of that again just depends on execution and the partnership we have with these customers.

Gerry Sweeney -- ROTH Capital -- Analyst

Got it. Now that makes sense. And then the other part I wanted to talk about on the sales side is, when you got the food qualification, I think last February or March, (multiple speakers) yeah SQF certification, you had -- there are a bunch of potential accounts always looking at the Northlake. What does that sales funnel look like, are there -- is it still driving a lot of attention. Do you still have a lot of people coming through just maybe from a qualitative standpoint, you know, how much activity is being driven through Northlake on a potential...

Michael H. Keown -- President, Chief Executive Officer & Director

As I've said before, we think the Northlake facility is a terrific facility and it makes us a good partner, that's been instrumental in some of the wins that we have had, be it the larger ones we tend to focus on, but also our channel wins.

Also of note, I mentioned a larger international beverage customer that we're working on for a new line of products and certainly this facility and the capabilities of the people who work here were instrumental in getting us to this point and then we'll see how things go. So I'd say it's still a good pipeline, as I've mentioned in the last couple of calls and we are knocking down wins though never as fast as we'd like.

Gerry Sweeney -- ROTH Capital -- Analyst

Got it. And then just one final question, then I'll jump back in queue. The softness from the -- I think your two larger customers that we've experienced, that should -- that anniversaries at the end of the second quarter. So that headwind should subside at least unless accelerated. Is that fair to assume?

David Robson -- Treasurer & Chief Financial Officer

Well, this is David. One of them will start to anniversary, the other will not anniversary until we get into the beginning of next year (inaudible) see some of that benefit, but it won't fully anniversary until next year.

Gerry Sweeney -- ROTH Capital -- Analyst

Until next year. Okay, got it. Okay, perfect. I appreciate. I'll jump back in line.

Michael H. Keown -- President, Chief Executive Officer & Director

Thank you.

Operator

(Operator Instructions) Thank you. Our next question comes from Marc Wiesenberger of B. Riley FBR, your line is now open.

Marc Wiesenberger -- B. Riley FBR -- Analyst

Thank you. Can you quantify what the typical quarterly revenues were for the industrial soup business?

David Robson -- Treasurer & Chief Financial Officer

I don't think we've given that out, but it was -- if you look at the Boyd's volume decline, it was essentially year-over-year decline with last year.

Marc Wiesenberger -- B. Riley FBR -- Analyst

Okay. And then with regards to some of the street team enhancements, could you provide a little more granularity and color around that and how you expect that to kind of impact to sales?

Michael H. Keown -- President, Chief Executive Officer & Director

Sure. So, overall we're very pleased with the street team talent that we brought on the organization and we're beginning to see that pay off. They've largely been in the market now, call it, six months, maybe a little bit longer. It's difficult to give it a number though as it's moving. But I think we've seen at this point is they are certainly bringing on new business and as we have gone through the branch and route consolidation, they've been a very important stabilizing influence because we've got a fair amount of turmoil that we've successfully navigated to and now I think we'll begin to see the impact of their efforts.

Marc Wiesenberger -- B. Riley FBR -- Analyst

Great, thank you. With regards to the headcount reductions in the DSD, was that more of a proactive or reactive kind of action based on some of the other things you've talked about in the previous quarters?

Michael H. Keown -- President, Chief Executive Officer & Director

Sure. Definitely proactive. So this was a multi-staged effort to bring more efficiency into our DSD operation and allow for resources to be brought on for the street team. So as I think I've mentioned either on the call or at some investor conferences, we've better leveraged technology to improve the efficiency of our operation. We have definitely looked at how the Boyd's network allows for efficiency and effectiveness and other tools to try to drive this and headcount was a portion of it though as we've mentioned, some of that money has gone back to acquire resources and a whole host of areas to help us become more effective in the future.

David Robson -- Treasurer & Chief Financial Officer

Yeah, I don't think we're going to really ever be done with route optimization and how we deliver more efficiently through the network. We embarked on it this last quarter and it's going to continue throughout the year as more technology comes into play to make more -- the network more efficient.

Marc Wiesenberger -- B. Riley FBR -- Analyst

Understood. And final one from me, you mentioned some higher production costs, were these onetime issues or is that something that you kind of foresee over the next few quarters?

David Robson -- Treasurer & Chief Financial Officer

No, it's never something we foresee. Our volume was a little bit softer than we planned. As Mike indicated, it's taken a little bit longer to bring on a large customer as well as we were in the throes of the Boyd's integration which add some complexities. So I wouldn't call it one time. But we don't plan for that (inaudible).

Michael H. Keown -- President, Chief Executive Officer & Director

To give you a sense, we successfully brought in approximately 200 SKUs into our system over a relatively short period of time and that can lead to some inefficiencies. But what we are very proud of is how that team was able to work with many, many new customers and get the products successfully qualified and now we're ramped up.

David Robson -- Treasurer & Chief Financial Officer

We, by the way, completed decommissioning of the Boyd's plant in December. So, the good new is we're pretty much behind the integration efforts of further plant production as of 12/31 and now we are fully producing the product here.

Marc Wiesenberger -- B. Riley FBR -- Analyst

Great, thank you very much.

Michael H. Keown -- President, Chief Executive Officer & Director

Thank you.

Operator

(Operator Instructions) Thank you. Our next question comes from Chris Krueger of Lake Street Capital, your line is now open.

Chris Krueger -- Lake Street Capital -- Analyst

Good afternoon.

Michael H. Keown -- President, Chief Executive Officer & Director

Hi, Chris.

Chris Krueger -- Lake Street Capital -- Analyst

Hi, just a couple of questions. First, I want to make sure I have a handle on back half sales trends and you gave some detail there. If we looked at the third quarter, just looking at the dollar amount,, would you think the year-over-year decline would be very similar to the second quarter and how has it been so far in the first half to second -- of the third quarter?

David Robson -- Treasurer & Chief Financial Officer

No, we can't give you a current view where we are at, we don't do that, but I think you're right, the trends we saw last quarter would be roughly what we're going to see in this current quarter. And then as Mike said, it's going to improve in the forth quarter.

Chris Krueger -- Lake Street Capital -- Analyst

Got it. And then two callers ago asked about the two brands have brought their production in-house and I didn't quite catch the answer yet, you kind of faded as far as anniversary date of those customers leaving. Can you state that again, please?

David Robson -- Treasurer & Chief Financial Officer

Yeah, that was in the beginning of our fiscal year. So, we'll anniversary that when we start next year.

Chris Krueger -- Lake Street Capital -- Analyst

And the other one was the -- a year ago right now?

David Robson -- Treasurer & Chief Financial Officer

Well, they were related to the same owner of those brands, so they both have...

Chris Krueger -- Lake Street Capital -- Analyst

Got it. All right. That's all I got. Thanks.

Operator

(Operator Instructions) Thank you. And ladies and gentlemen, this does conclude our question-and-answer session. I would now like to turn the call back over to Mike Keown for any closing remarks.

Michael H. Keown -- President, Chief Executive Officer & Director

Well, once again, we appreciate everybody's interest in Farmer Brothers and look forward in updating you on our continued progress in the future. Thank you very much.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.

Duration: 33 minutes

Call participants:

Rachel Gomez -- Investor Relations

Michael H. Keown -- President, Chief Executive Officer & Director

David Robson -- Treasurer & Chief Financial Officer

Gerry Sweeney -- ROTH Capital -- Analyst

Marc Wiesenberger -- B. Riley FBR -- Analyst

Chris Krueger -- Lake Street Capital -- Analyst

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