Second quarter fiscal 2013 operating income improved $6.1 million to $0.4 million as compared to an operating loss of $5.6 million in the second quarter of the prior fiscal year.
"We are pleased with the consistent improvement in our business as we were able to leverage our sales increase to expand our margins and generate the Company's first positive operating income results in six years," stated Michael Keown, Farmer Bros. President and Chief Executive Officer. "Our team was able to achieve these results despite the negative impact from hurricane Sandy on our New Jersey distribution center and many of our customers across the Northeast."
Mr. Keown continued, "In the second quarter we made strategic investments in our sales and marketing personnel to help us further grow our business with new and existing customers. Going forward, we believe the Company is better positioned with the right team to capitalize on our strategic growth opportunities."
Total other expense in the second quarter ended December 31, 2012 was $7.7 million compared to total other income of $1.6 million in the second quarter of last fiscal year. Total other expense in the second quarter of fiscal 2013 included $7.9 million, or $0.51 per share, in net unrealized and realized losses on coffee-related derivatives compared to $0.5 million, or $0.03 per share, in the comparable period of the prior fiscal year. The increase in net unrealized and realized losses from coffee-related derivatives in the second quarter of fiscal 2013 is due in large part to the increase in the number of derivative contracts compared to the second quarter of the prior fiscal year, combined with the decline in coffee commodity costs of approximately 17% per pound during the second quarter of fiscal 2013. There was a four-fold increase in the number of the Company's coffee-related derivative contracts as of December 31, 2012 covering 28.2 million pounds of green coffee compared to 6.6 million pounds of green coffee covered as of December 31, 2011. The increase in the number of such contracts is primarily due to the increase in the number of the Company's national customers since a majority of the contracts are purchased for their accounts.