Coffee Holding Co., Inc. Reports Results for Three and Nine Months Ended July 31, 2019

9/13, 3:00 PM (Source: GlobeNewswire)

STATEN ISLAND, New York, Sept. 13, 2019 (GLOBE NEWSWIRE) -- Coffee Holding Co., Inc. (Nasdaq: JVA) (the “Company” or “Coffee Holding Company”) today announced its operating results for the three months and nine months ended July 31, 2019.

Net Sales. Net sales totaled $21,594,285 for the three months ended July 31, 2019, a decrease of $1,845,618, or 7.8%, from $23,439,903 for the three months ended July 31, 2018. Net sales totaled $65,944,583 for the nine months ended July 31, 2019, a decrease of $1,772,436 from $67,717,019 for the nine months ended July 31, 2018. The decrease in net sales reflects the lower selling price of coffee during this period due to the continued depressed price of the green coffee market as well as a decrease in sales of approximately $7,400,000 to the Company’s former largest wholesale green coffee customer.

Cost of Sales. Cost of sales for the three months ended July 31, 2019 was $17,465,685, or 80.9% of net sales, as compared to $19,648,710, or 83.8% of net sales, for the three months July 31, 2018. Cost of sales for the nine months ended July 31, 2019 was $53,705,272, or 81.4% of net sales, as compared to $56,263,183, or 83.1% of net sales, for the nine months July 31, 2018. The decrease in cost of sales was due to the Company’s decreased sales offset by the increased cost of steel cans due to the increased tariffs, inbound trucking costs and the Company’s increased losses from its hedging of futures and option contracts.

Gross Profit. Gross profit for the three months ended July 31, 2019 was $4,128,600, an increase of $337,407 from $3,791,193 for the three months ended July 31, 2018. Gross profit for the nine months ended July 31, 2019 was $12,239,311, an increase of $785,475 from $11,453,836 for the nine months ended July 31, 2018. The increase in gross profits resulted from improved margins on the Company’s wholesale and roasted business, partially offset by higher steel and trucking costs and losses from the Company’s hedging of futures and options contracts for the nine months ended July 31, 2019.

Operating Expenses. Total operating expenses increased by $348,844 to $3,871,362 for the three months ended July 31, 2019 from $3,522,518 for the three months ended July 31, 2018. Total operating expenses increased by $1,967,665 to $11,384,245 for the nine months ended July 31, 2019 from $9,416,580 for the nine months ended July 31, 2018. The primary reasons for this increase were the acquisition of Steep & Brew and the increase in the Company’s outbound freight costs as it increased and expanded its product distribution.

Net Income. The Company had net income of $111,494 or $0.02 per share basic and diluted, for the three months ended July 31, 2019 compared to net income of $15,690, or $0.00 per share basic and diluted for the three months ended July 31, 2018. The Company had net income of $187,741 or $0.03 per share basic and diluted, for the nine months ended July 31, 2019 compared to net income of $957,926, or $0.17 per share basic and diluted for the nine months ended July 31, 2018. The decrease in net income was due primarily to the reasons described above.

“During our fiscal third quarter we were able to maintain our sales volumes and earn a small profit despite coffee prices trading to their lowest levels since 2005. The decrease in sales was almost entirely the result of a decline in sales to our former largest green coffee customer, which for the nine months ended July 31, 2019 were down $7.4 million. However, excluding sales to our former largest green coffee customer, sales to all of our other customers are up $5.7 million, an increase of 8.4%. Further, we earned $0.02 cents a share on both a basic and diluted basis, including a onetime non-cash charge of $0.04 per share on a basic and diluted basis relating to option grants under our option plan. Without this non-cash charge, we would have earned $0.06 cents a share,” stated Andrew Gordon, President and CEO of Coffee Holding Company. “We continue to operate in an extremely challenging environment. Historically low coffee prices, steel tariffs, as well as increased competitive pressure at the grocery store level due to the low coffee prices, continue to erode our earnings potential in the near term. However, I remain positive about our company’s long term outlook as we have weathered these industry forces before while managing to strengthen our core business of private label and green coffee sales and expand our distribution network for our brands. Despite these headwinds, we have seen a dramatic increase in the sales of our Café Caribe single serve during this period, partially offset by a modest decline in sales of our Harmony Bay brand bag and can lines which were acquired in February 2017 as part of our Comfort Foods acquisition. Although I am never pleased to see declines in sales of our brands, we recognize that the Harmony Bay brand is a very mature brand compared to Café Caribe. Café Caribe’s importance within our brand portfolio remains second to none. The sales of espresso in the Latin coffee category continues to outperform the sales of mainstream and private label coffees in supermarkets and we are extremely pleased to be participating in that growth as well,” stated Mr. Gordon.

“Lastly, we continue to closely monitor the regulatory environment as it relates to CBD products being sold in the mainstream market. We believe given our diverse portfolio of branded coffees, we will have the opportunity to service multiple demographics in consumer tastes and preference when the opportunity finally presents itself,” concluded Mr. Gordon.

About Coffee Holding

Coffee Holding Co., Inc. is a leading integrated wholesale coffee roaster and dealer in the United States and one of the few coffee companies that offers a broad array of coffee products across the entire spectrum of consumer tastes, preferences and price points. Coffee Holding has been a family-operated business for three generations and has remained profitable through varying cycles in the coffee industry and the economy. The Company’s private label and branded coffee products are sold throughout the United States, Canada and abroad to supermarkets, wholesalers, and individually owned and multi-unit retail customers.

Any statements that are not historical facts contained in this release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including the Company’s outlook on future margin performance. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. We have based these forward-looking statements upon information available to management as of the date of this release and management’s expectations and projections about certain future events. It is possible that the assumptions made by management for purposes of such statements may not materialize. Such statements may involve risks and uncertainties, including but not limited to those relating to product demand, pricing, market acceptance, hedging activities, the effect of economic conditions, intellectual property rights, the outcome of competitive products, risks in product development, the results of financing efforts, the ability to complete transactions, and other factors discussed from time to time in the Company’s Securities and Exchange Commission filings. The Company undertakes no obligation to update or revise any forward-looking statement for events or circumstances after the date on which such statement is made.

Company Contact

Coffee Holding Co., Inc.
Andrew Gordon
President& CEO
718-832-0800

COFFEE HOLDING CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JULY 31, 2019 AND OCTOBER 31, 2018

  July 31, 2019  October 31, 2018 
  (Unaudited)    
- ASSETS -        
CURRENT ASSETS:        
Cash $2,568,780  $4,611,384 
Accounts receivable, net of allowances of $144,000 for 2019 and 2018  8,492,642   9,914,297 
Inventories  17,702,156   15,271,106 
Prepaid expenses and other current assets  686,359   578,861 
Prepaid and refundable income taxes  288,639   383,206 
TOTAL CURRENT ASSETS  29,738,576   30,758,854 
         
Machinery and equipment, at cost, net of accumulated depreciation of $6,753,814 and $6,251,828 for 2019 and 2018, respectively  2,416,457   2,350,208 
Customer list and relationships, net of accumulated amortization of $139,522 and $108,875 for 2019 and 2018, respectively  545,478   576,125 
Trademarks and tradenames  1,488,000   1,488,000 
Other intangible assets  331,124   331,124 
Non-compete, net of accumulated amortization of $24,750 and $9,900 for 2019 and 2018, respectively  74,250   89,100 
Goodwill  2,157,661   2,157,661 
Equity method investments  87,085   89,776 
Deferred income tax asset  446,823   440,325 
Deposits and other assets  462,050   552,904 
TOTAL ASSETS $37,747,504  $38,834,077 
         
- LIABILITIES AND STOCKHOLDERS’ EQUITY -        
CURRENT LIABILITIES:        
Accounts payable and accrued expenses $3,627,521  $4,833,548 
Line of credit  5,767,640   6,260,014 
Due to broker  96,704   22,046 
Note payable      70,255 
Income taxes payable  200   1,505 
TOTAL CURRENT LIABILITIES  9,492,065   11,187,368 
         
Deferred income tax liabilities  844,532   882,022 
Deferred rent payable  205,992   242,143 
Deferred compensation payable  435,987   532,726 
TOTAL LIABILITIES  10,978,576   12,844,259 
         
STOCKHOLDERS’ EQUITY:        
Coffee Holding Co., Inc. stockholders’ equity:        
Preferred stock, par value $.001 per share; 10,000,000 shares authorized; no shares issued and outstanding  -   - 
Common stock, par value $.001 per share; 30,000,000 shares authorized, 6,494,680 shares issued; 5,569,349 shares outstanding as of July 31 2019 and October 31, 2018  6,494   6,494 
Additional paid-in capital  16,332,943   16,104,075 
Retained earnings  13,592,508   13,404,767 
Less: Treasury stock, 925,331 common shares, at cost as of July 31, 2019 and October 31, 2018  (4,633,560)  (4,633,560)
Total Coffee Holding Co., Inc. Stockholders’ Equity  25,298,385   24,881,776 
Noncontrolling interest  1,470,543   1,108,042 
TOTAL EQUITY  26,768,928   25,989,818 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $37,747,504  $38,834,077 


COFFEE HOLDING CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE AND THREE MONTHS ENDED JULY 31, 2019 AND 2018
(Unaudited)

  Nine Months Ended July 31,  Three Months Ended July 31, 
  2019  2018  2019  2018 
NET SALES $65,944,583  $67,717,019  $21,594,285  $23,439,903 
                 
COST OF SALES (including $5.9 and $7.0 million related party cots for the nine months ended July 31, 2019 and 2018, respectively and $1.8 and $2.6 million for the three months ended July 31, 2019 and 2018, respectively.)  53,705,272   56,263,183   17,465,685   19,648,710 
                 
GROSS PROFIT  12,239,311   11,453,836   4,128,600   3,791,193 
                 
OPERATING EXPENSES:                
Selling and administrative  10,853,495   8,905,830   3,701,112   3,352,268 
Officers’ salaries  530,750   510,750   170,250   170,250 
TOTAL  11,384,245   9,416,580   3,871,362   3,522,518 
                 
INCOME FROM OPERATIONS  855,066   2,037,256   257,238   268,675 
                 
OTHER INCOME (EXPENSE)                
Interest income  8,903   11,170   3,548   3,433 
(Loss) gain from equity method investment  (2,691)  (4,359)  (2,613)  199 
Interest expense  (195,493)  (286,555)  (64,625)  (99,906)
TOTAL  (189,281)  (279,744)  (63,690)  (96,274)
                 
INCOME BEFORE PROVISION FOR INCOME TAXES AND NON-CONTROLLING INTEREST IN SUBSIDIARY  665,785   1,757,412   193,548   172,401 
                 
Provision for income taxes  115,543   447,105   34,413   35,721 
                 
NET INCOME BEFORE NON-CONTROLLING INTEREST IN SUBSIDIARY  550,242   1,310,407   159,135   136,680 
Less: Net (income) attributable to the non-controlling interest  (362,501)  (352,481)  (47,641)  (120,990)
                 
NET INCOME ATTRIBUTABLE TO COFFEE HOLDING CO., INC. $187,741  $957,926  $111,494  $15,690 
                 
Basic and diluted earnings per share $.03  $.17  $.02  $.00 
                 
Weighted average common shares outstanding:                
Basic and diluted  5,569,349   5,720,360   5,569,349   5,673,914 


COFFEE HOLDING CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JULY 31, 2019 AND 2018
(Unaudited)

  2019  2018 
OPERATING ACTIVITIES:        
Net income $550,242  $1,310,407 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  547,483   544,564 
Stock-based compensation  228,868   - 
Unrealized loss (gain) on commodities  74,658   317,176 
Loss (gain) on equity method investments  2,691   4,359 
Deferred rent  (36,151)  1,323 
Deferred income taxes  (43,988)  3,750 
Changes in operating assets and liabilities:        
Accounts receivable  1,421,655   4,917,860 
Inventories  (2,431,050)  2,240,892 
Prepaid expenses and other current assets  (107,498)  (50,625)
Prepaid green coffee  -   171,350 
Prepaid and refundable income taxes  94,567   178,848 
Accounts payable and accrued expenses  (1,206,027)  (1,698,518)
Deposits and other assets  90,854     
Deferred compensation payable  (96,739)    
Income taxes payable  (1,305)  5,889 
Net cash (used in) provided by operating activities  (911,740)  7,947,275 
         
INVESTING ACTIVITIES:        
Cash paid for business acquisition  -   (2,740,217)
Purchases of machinery and equipment  (568,235)  (299,554)
Net cash used in investing activities  (568,235)  (3,039,771)
         
FINANCING ACTIVITIES:        
Advances under bank line of credit  7,626   3,800,200 
Purchase of treasury stock  -   (894,368)
Principal payment on note payable  (70,255)    
Principal payments under bank line of credit  (500,000)  (5,059,065)
Net cash used in financing activities  (562,629)  (2,153,133)
         
NET (DECREASE) INCREASE IN CASH  (2,042,604)  2,754,371 
         
CASH, BEGINNING OF PERIOD  4,611,384   2,325,650 
         
CASH, END OF PERIOD $2,568,780  $5,080,021 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:        
Interest paid $197,216  $285,603 
Income taxes paid $66,269  $245,838 


COFFEE HOLDING CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED APRIL 30, 2019 AND 2018
(Unaudited)

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:    
On April 24, 2018 Generations Coffee Company acquired the assets of Steep & Brew, Inc.:    
     
Accounts receivable $86,442 
Inventory  1,140,893 
Equipment  450,000 
Prepaid expenses  62,882 
Non-compete  150,000 
Goodwill  1,000,000 
Less: Note payable  150,000 
Net cash paid $2,740,217 

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