Fiscal Six Month Results:
Net sales for the first half of fiscal 2013 increased $1.9 million, or 1%, to $254.9 million from $253.0 million during the first half of the prior fiscal year primarily due to increases in sales of coffee and tea products.
Gross profit in the first half of fiscal 2013 increased $10.7 million, or 13%, to $94.9 million, as compared to $84.2 million during the first half of the prior fiscal year. Gross profit in the first half of fiscal 2013 includes the expected beneficial effect of the liquidation of LIFO inventory quantities in the amount of $0.5 million as compared to $5.5 million in the same period in the prior fiscal year. Gross margin increased to 37% in the first half of fiscal 2013 from 33% in the first half of the prior fiscal year. This gross margin increase is primarily due to a 32% lower average cost of green coffee beans purchased compared to the same period in the prior fiscal year.
Operating expenses in the first half of fiscal 2013 increased $1.6 million, or 2%, to $96.1 million, or 38% of sales, from $94.5 million, or 37% of sales, in the first half of the prior fiscal year. Operating expenses increased primarily due to higher payroll and related expenses resulting from the Company's investments in additional sales and marketing personnel, higher startup costs related to the increase in national customers, higher expenses related to sales training and losses in one of the Company's distribution centers affected by hurricane Sandy. Operating expenses in the first half of the prior fiscal year included $4.3 million in pension withdrawal expense related to a multiemployer pension plan.Total other expense in the first half of fiscal 2013 was $2.9 million compared to $1.0 million in the first half of last fiscal year. Total other expense in the first half of fiscal 2013 included $7.2 million, or $0.46 per share, in net unrealized and realized losses on coffee-related derivatives compared to $4.2 million, or $0.27 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 first half of fiscal 2013 is due in large part to the increase in the number of futures contracts compared to the same period of the prior fiscal year, combined with the decline in coffee commodity costs of approximately 15% per pound during the first half of fiscal 2013.
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