Highlight of Business Operations:Sales for the three months ended July 31, 2013 were $18,352,000 compared to $18,463,000 for the corresponding period in 2012, a decrease of $111,000 or 1%. Acquisitions amounted to 1% of sales in the third quarter of 2013. Thus, net of acquisitions, sales in the third quarter were 2% less than the comparable period a year ago.
Sales for the nine months ended July 31, 2013 were $52,742,000 compared to $53,258,000 for the corresponding period in 2012, a decrease of $516,000, or 1%. The decrease was primarily the result of the decrease in traditional coffee sales and equipment rental and, to a lesser extent, decreases in refreshment products and fees that are charged to offset energy costs for delivery and freight, raw materials, and bottling operations that more than offset a small increase in water sales. Acquisitions accounted for 1% of total sales in the comparative period of 2013.
Gross Profit/Cost of Goods Sold – For the nine months ended July 31, 2013, gross profit increased $36,000 to $27,444,000 from $27,408,000, essentially the same compared to the same period in 2012. As a percentage of sales, gross profit increased to 52% in the first nine months of 2013 from 51% in the first nine months of 2012. The slight increase in gross profit and gross profit as a percentage of sales was primarily due to higher water sales and lower equipment service costs in the first nine months of 2013 compared to the first nine months of the prior year.
Selling, general and administrative (SG&A) expenses of $24,095,000 in the first nine months of 2013 increased $981,000, or 4%, from $23,114,000 in the comparable period in 2012. Of total SG&A expenses, route distribution costs increased $782,000, or 8%, as a result of higher lease, fuel, and repair costs for vehicles and higher staffing costs for delivery; Selling costs decreased $398,000, or 10%, as a result of lower computer-related service costs to support the infrastructure improvement of e-commerce and customer relationship management software despite an increase in sales staffing. Administrative costs increased $597,000, or 7%, as a result of higher labor costs for increased administrative staffing as well as software maintenance costs to support the new information systems installation referred to above.
Income from operations for the nine months ended July 31, 2013 was $2,041,000 compared to $2,684,000 in the comparable period in 2012, a decrease of $643,000, or 24%. The decrease is attributable to higher route operating costs as well as higher labor costs related to sales and administration. This resulted in higher total operating costs despite lower net software support and sales and advertising costs.
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