Loss from operations was $2.7 million compared to $8.6 million in the fourth quarter of the prior fiscal year.
Net loss was $3.0 million, or $0.19 per common share, compared to net loss of $10.3 million, or $0.65 per common share, in the fourth quarter of fiscal 2012.
EBITDAE was $6.5 million compared to $6.6 million in the fourth quarter of fiscal 2012. (EBITDAE is a non-GAAP financial measure.
Fiscal 2013 Results
Net sales in fiscal 2013 increased $14.6 million, or 2.9%, to $510.0 million from $495.4 million in fiscal 2012, primarily due to increases in sales of the Company’s coffee and tea products.
Gross profit in fiscal 2013 increased $18.2 million, or 10.5%, to $191.1 million from $172.9 million in fiscal 2012. Gross profit as a percentage of net sales increased 260 basis points to 37.5% from 34.9% in fiscal 2012.
The increases in dollar and percentage terms were primarily due to the increase in sales and a 31% decrease in the average cost of green coffee purchased in fiscal 2013.
Operating expenses in fiscal 2013 increased $0.2 million, or 0.1%, to $195.2 million from $195.0 million in fiscal 2012. Operating expenses as a percentage of net sales decreased 110 basis points to 38.3% versus 39.4% in fiscal 2012.
The increase in operating expenses in fiscal 2013 is primarily due to a $10.2 million increase in expenses primarily from the Company’s investments in additional sales and marketing training, expenses related to the launch of the Artisan Collection by Farmer Brothers™ and the new Farmer Brothers teas, higher startup costs associated with the increase in national account customers, higher expenses related to severance and storm-related losses in the Company’s Moonachie, Oklahoma City and Houston distribution centers. The increase in operating expenses was partially offset by a $10.0 million decrease in impairment losses on goodwill and intangible assets and pension withdrawal expense.
Total other expense in fiscal 2013 was $5.2 million compared to $4.8 million in fiscal 2012, primarily due to higher net losses on derivatives and investments of $11.1 million in fiscal 2013 compared to $6.2 million in fiscal 2012, offset by $4.5 million in net gains from sales of assets, primarily real estate, in fiscal 2013 compared to $1.4 million in net gains from sales of assets, primarily real estate, in fiscal 2012.
The increase in net realized and unrealized coffee-related derivative losses in fiscal 2013 compared to fiscal 2012 is due in large part to the increase in the number of futures contracts combined with a continued decline in coffee commodity costs in fiscal 2013.
Beginning April 1, 2013, the Company implemented procedures following the guidelines of Accounting Standards Codification 815, “Derivatives and Hedging,” to enable the Company to account for certain coffee-related derivatives as accounting hedges in order to minimize the volatility created in the Company’s results from utilizing these derivative contracts and to improve comparability between reporting periods.
As a result, beginning in the fourth quarter of fiscal 2013, a portion of the gains and losses from re-valuing the coffee-related derivative contracts to their market prices is being recorded in accumulated other comprehensive income (loss) on the Company’s consolidated balance sheet and subsequently reclassified into cost of goods sold in the period or periods when the hedged transaction affects earnings.
In the fourth quarter of fiscal 2013, the Company recorded $7.9 million in coffee-related derivative losses in accumulated other comprehensive income (loss).
There was a significant increase in the number of the Company’s coffee-related derivative contracts as of June 30, 2013 covering 49.6 million pounds of green coffee compared to 18.2 million pounds of green coffee covered as of June 30, 2012.
The increase in the number of such contracts is primarily due to the increase in the number of the Company’s national account customers, as a majority of the contracts are purchased for their accounts. Additionally, during the first three quarters in fiscal 2013, when the Company’s coffee-related derivative instruments were not designated as accounting hedges, the Company recognized in its financial results, the net realized and unrealized losses from the continuing decline in green coffee commodity prices below the Company’s locked-in prices as the derivative contracts were re-valued to their market prices.
Treasurer and Chief Financial Officer, Mark Nelson said, “Our significant hedged green coffee commodity position will allow for greater input cost stability as we enter fiscal 2014. We expect these lower input costs, combined with our ongoing manufacturing efficiency and operating expense reduction initiatives, to result in continued improvements in our financial results in fiscal 2014 and beyond.”
