Good afternoon, everyone, and thank you for participating in today's conference call to discuss Coffee Holding Company's Financial Results for the Fiscal Second Quarter ended April 30, 2015. Joining us today is Coffee Holding Company's President and CEO, Andrew Gordon. Following his remarks we will open the call for your questions..

Remarks made on this call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended.

The words anticipate, believe, estimate, expect, intend, guidance, confidence, target, projects and other similar expressions typically are used to identify forward-looking statements.

All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the company.

Listeners are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speaks only of the date, hereof, and may involve and are subject to risks, uncertainties and other factors that Coffee Holding Company's business, financial conditions and operating results, which include but are not limited to the risk factors and other qualifications contained in Coffee Holding's Annual Report on Form 10-K, quarterly reports on Form 10-Q and other reports filed by Coffee Holding Company with the Securities and Exchange Commission to which your attention is directed.

Therefore, actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. Coffee Holding expressly disclaims any intent or obligation to update these forward-looking statements. .

I would like to remind everyone that this call is being recorded and will be available for replay through June 18, 2015 starting later this evening. It will be accessible via the replay number provided in today's earnings release..

With that, I will now turn the call over to the President and Chief Executive Officer of Coffee Holding Company, Mr. Andrew Gordon. Sir, please go ahead. .

Thank you, Heather. As you saw early this morning, we issued a press release announcing our results for fiscal second quarter ending April 30, 2015. Despite the continued industry decline in coffee commodity prices during this quarter, we maintained our topline momentum with our second consecutive quarter of year-over-year revenue growth.

These results were driven by strong performance across all 3 of our core business operations, which include our Specialty Green Coffee distribution operations and sales of both private label and branded products. Our results may be viewed with guarded optimism given the sales declines reported by the leading national brand last week. .

As part of our long-term strategic growth plan introduced in April, we have significantly reduced our hedging and trading activities to focus on our core operations.

With the advent of the electrading [ph] platform and elimination of the open air [indiscernible] trading, the coffee market has become more volatile and irrational over the past few years.

Unfortunately, this was the second commodity-based loss reported by ourselves over the past few years due to this fundamental change which negatively impacted our historically profitable hedging operations. Fortunately, we came back strongly from the first loss as we expect to once again from this one.

With the previously announced decision to greatly curtail this part of the business, we do not anticipate a reoccurrence of this event..

Now before continuing to comment further on operations, I'd like to provide a quick overview of our business for newcomers to the Coffee Holding story as well as our financial results for the fiscal quarter..

Wholesale Specialty Gourmet Green Coffee distribution, private label and branded product sales. In our Specialty Green Coffee business, we sell unroasted high-end Arabica green coffee beans to roasters and coffee shop operators of all sizes through North America, the Caribbean and the Asian-Pacific markets.

Specialty Green Coffee is widely considered the fastest-growing category in the coffee industry and with roughly 115 different high-end Arabica specialty coffees to offer our over 300 customer accounts. .

In our Private Label business, we roast, blend and package coffee to over 30 different private labels for wholesalers and retailers who then sell them as their own brands. It's an ideal arrangement for wholesalers and retailers that want to sell their own coffee label without entering a coffee manufacturing business. .

Our high-quality coffee enables these retail chains to provide coffee that's equivalent to major national brands at a lower cost..

And finally, our Branded Coffee business. This business includes 5 proprietary brands, most notably, our flagship brand, Café Caribe, which is 50-plus years old and sold to most major chains in the Northeast. .

The S&W label, which we have an exclusive license with Del Monte and is packed in multiple flavors in both cans, bags and organics, is sold through grocery stores and retail chains throughout the country as well as the Asian-Pacific region.

It's important to note that each brand has different price points and flavor profiles that target a particular consumer in the coffee market leading to a limited cannibalization amongst our brands..

Across our 3 business segments, our range of coffee flavor profiles and price points spanning the entire industry, pricing and quality segments makes us one of the only coffee companies that's both vertically and horizontally integrated within our business model. .

Now moving on to our financial results for the fiscal second quarter. Net sales increased 19% to $30.3 million compared to $25.4 million in the year ago quarter.

As I mentioned earlier, the increase was driven by strong performance across our core business of operations including Specialty Green Coffee distribution and increased sales of both private label and branded products, especially the Café Caribe with new distribution in both the Northeast and Southwest markets..

Gross profits in the second quarter was a negative $1.1 million compared to $4 million profit in the year ago quarter. This was largely a result of losses from our hedging activities, which includes options and futures contracts which we entered into earlier this year that was subsequently liquidated during the quarter.

The net loss from the liquidation totaled $3.3 million or a loss of $0.53 per diluted share..

We expect these kinds of fluctuations in our cost of goods to subside as we are no longer actively participating in trading coffee derivatives to the extents we once were. We will, of course, maintain a moderate hedging program as we are still a commodity-driven organization.

However, we will no longer pursue derivative transactions with the intent on making gains or profits on the trading activity, but we will solely look to lock in profits on our existing core businesses..

Our SG&A expenses for the fiscal second quarter totaled $2.1 million compared to $1.9 million in the year ago quarter. As a percentage of revenues, SG&A declined 50 basis points to 6.8%. The drop in operating expenses relative to our revenues is a reflection of the operating leverage in our model.

We have limited overhead expenses and capital requirements, which provides us with the opportunity to scale our business effectively as we continue to grow green coffee sales and land new accounts in both our private label and branded businesses..

Our net loss in the fiscal second quarter totaled $2.1 million or a loss of $0.33 per diluted share. This compares with net incomes of $1.3 million or $0.19 per share in the year-ago quarter. Again, these losses were due to the options and futures contracts which we liquidated as mentioned earlier in the call..

On April 30th, our cash balance totaled $3.6 million, a decline of about $200,000 since the end of our fiscal last year, with total debt increasing to $5.8 million from $2.5 million. The increase in debt was largely the result of the build-up in our inventories combined with the paying down of our accounts payable..

Now turning back to our operations. As noted in the press release this morning, in April, we officially launched our gourmet tea offering. This new tea initiative provides an even greater target market and also enables us to enhance relationships with our existing wholesale green coffee customers.

Nearly all 300 of our green coffee customers also have a tea offering, so there's ample runway for growth as we can potentially service a one-stop shop for these roasters and coffee shop operators. It's also worth noting that margins on tea are nearly twice as high as those on coffee..

To provide a little more color on the product itself, we currently have over 27 high-end specialty teas in the collection, which include propriety blends and categories of black, herbal, certified organic green and oolong teas.

Within these categories, there's also iced tea, which is imperative to the market penetration as the majority of tea consumed in America is iced tea. .

I believe our organization is now at an inflection point, where we should begin to see a greater divergence between our operational results and coffee commodity markets. A key indicator of our ability to grow the top line when commodity prices decline similar to our 19% year-over-year revenue growth in the second quarter.

We have the tools in place to drive profitability though our operations do not completely rely on high-commodity prices to drive these results. .

One of the key differentiators in our business that inflects foreign commodity prices is the quality of our green coffee offerings. Our high-quality, rare, Arabica Specialty Green Coffee beans command premiums to the market regardless of the conditions..

In regards to possible acquisitions, we remain opportunistic and continue to target the companies that can easily be integrated into our coffee platform and be accretive to our bottom line. Most importantly, however, we will look for the best opportunities that could drive incremental value to our shareholders. .

For the remainder of 2015 and beyond, we expect to continue driving growth through our 3 core business operations and potential acquisitions. With that I'd like to open up the floor for questions.

Operator?.

[Operator Instructions] And we will take our first question from Dennis Leverty with Oak Ridge Financial. .

Andrew, Denny calling.

I was wondering are you in the process of getting any coverage by analysts at all?.

Yes. I've met with an analyst just recently. We've had multiple conversations, and I believe we will have some sell side coverage very soon. His comment to me as for the delay was that he's in the middle of the earnings season. And once he's done with that, I believe we should have some coverage in the immediate future. .

That would be great.

The other thing, can you elaborate at all on the -- on your China operation, how that's going or moving forward?.

Sure. Yes. We continue to visit China as well as having boots on the ground there. Our most recent trip was just in early May.

However, given the makeup of how the business over in China is done, it takes multiple visits and several years to gain the trust and build the business relationship-wise that needs to be done to do the type of business which we want to get accomplished over there. So once again, things are progressing.

However, it does take numerous trips and a number of years to get it to the levels that we're hoping to really impact our both top and bottom line. .

[Operator Instructions] At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Gordon for closing remarks. .

Thank you, Heather, and thanks to everyone for joining the call. I want to thank our hard-working team of employees, and we look forward to speaking with our investors when we report our fiscal third quarter results in September. .

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation..