STATEN ISLAND, N.Y., Jan. 29, 2018 (GLOBE NEWSWIRE) -- Coffee Holding Co., Inc. (Nasdaq:JVA) (the “Company”) today announced its operating results for the fiscal year ended October 31, 2017.

The Company had net income of $467,262 or $0.08 per share basic and diluted, for the fiscal year ended October 31, 2017 compared to a net income of $2,212,288, or $0.36 per share basic and diluted for the fiscal year ended October 31, 2016. The decrease in net income was due primarily to the reasons described below.

Net sales totaled $77,127,595 for the fiscal year ended October 31, 2017, a decrease of $1,820,633, or 2.3%, from $78,948,228 for the fiscal year ended October 31, 2016.  The decrease in net sales reflects reduced wholesale transactions with our largest wholesale green coffee customer during fiscal 2017 of approximately $16,775,000, partially offset by increased sales to both new and existing customers including a fourth quarter increase in revenues of $4,300,000 or 25.0%.

Cost of sales for the fiscal year ended October 31, 2017 was $64,977,632, or 84.3% of net sales, as compared to $67,066,050, or 85.0% of net sales, for the fiscal year ended October 31, 2016.  Cost of sales consists primarily of the cost of green coffee and packaging materials and realized and unrealized gains or losses on hedging activity.  The decrease in cost of sales reflects the change in the product mix due to the Company’s reduced wholesale transactions with its largest wholesale green coffee customer. 

Gross profit for the fiscal year ended October 31, 2017 was $12,149,963, an increase of $267,785 from $11,882,178 for the fiscal year ended October 31, 2016.  Gross profit as a percentage of net sales increased to 15.8% for the fiscal year ended October 31, 2017 from 15.0% for the fiscal year ended October 31, 2016.  Although we experienced improved margins on our wholesale and roasted business during the year our margins have not increased as expected due to our integration of our acquisition of Comfort Foods and reduced profitability of our OPTCO subsidiary.      

Total operating expenses increased by $2,908,136 to $10,927,246 for the fiscal year ended October 31, 2017 from $8,019,110 for the fiscal year ended October 31, 2016. Selling and administrative expenses increased $2,864,796, or 39.0%, to $10,228,506 for the fiscal year ended October 31, 2017 from $7,363,710 for the fiscal year ended October 31, 2016. The primary reasons for this increase were the acquisition of Comfort Foods, the full year of integration of Sonofresco and the increase in our freight costs as we increased and expanded our product distribution. Officers’ salary increased by $43,340 or 6.6% to $698,740 for the fiscal year ended October 31, 2017 from $655,400 for the fiscal year ended October 31, 2016.

“The 2017 fiscal year marked a turning point for us following several years of declines as we increased our revenues during the last two quarters, replacing almost $17 million in lost revenues following the change in ownership at our former largest green coffee customer.  During the third and fourth quarters of 2017, our revenues increased by 3.6% or approximately $625,000, and by 25.0% or approximately $4.3 million, respectively, as compared to the prior year periods.   We achieved this growth through increased marketing of our branded and private label business as we added several new large retailers and wholesalers during the 2017 fiscal year. Our sales of roasted and green coffee are now back to their traditional levels of a 50-50 split where they had been for the majority of our company’s history,” stated Andrew Gordon, CEO and President of the Company.

“We believe this sales balance represents a better mix of sales, which will allow us to continue to expand our overall gross margin as well as build our brand equity at our most important retail and wholesale accounts. We also believe the increased sales of both our branded and private label products are sustainable as we continue to see improved customer loyalty at our existing retail accounts due to expanded product distribution and increased promotional activity designed to gain trial of our products. In order to achieve this growth, we had an increase in freight expense of $636,000, which was the second largest increase in our SG&A after the costs associated with the purchase of Comfort Foods,” added Mr. Gordon.

“In addition, we were awarded several new private label contracts in late fiscal 2017 and will begin manufacturing product in the second quarter of fiscal 2018. We also signed a two-year extension with our current largest private label customer.”

“We believe the biggest headwind over the past nine months has been the integration of Comfort Foods, which has taken longer than expected to become a profitable integration. During our last nine months, Comfort Foods had an operating loss of approximately $300,000 which negatively impacted our overall earnings by approximately $.05 per share. We did expect a loss as we engineered a turnaround and we believe we are almost at the breakeven point in operations.  Strategically, we believe this acquisition will allow us to begin bidding on business in the North East which we could not do previously though our Colorado facility for logistical reasons.  In addition, the Harmony Bay brand has a strong following in New England and we recently placed it in over 700 Food Lion stores in the Mid-Atlantic States.

“We look forward to a successful 2018 as our focus will once again be to continue to grow our sales and increase the distribution of our brands to build on the success achieved during the second half of fiscal 2017,” 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 and its share repurchase program. 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. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 2017 AND 2016
       
  2017  2016 
       
- ASSETS -        
CURRENT ASSETS:        
Cash $2,325,650  $3,227,981 
Accounts receivable, net of allowances of $144,000 for 2017 and 2016  13,441,802   13,517,892 
Inventories  16,310,572   14,276,290 
Prepaid green coffee  171,350   435,577 
Prepaid expenses and other current assets  593,825   535,456 
Prepaid and refundable income taxes  472,814   481,977 
Due from broker  -   134,722 
Deferred income tax asset  339,748   81,545 
TOTAL CURRENT ASSETS  33,655,761   32,691,440 
         
Machinery and equipment, at cost, net of accumulated depreciation of $5,557,899 and $4,819,828 for 2017 and 2016, respectively  2,439,338   2,269,863 
Customer list and relationships, net of accumulated amortization of $72,250 and $50,250 for 2017 and 2016, respectively  367,750   219,750 
Trademarks and tradenames  820,000   180,000 
Other intangible assets  331,124    
Goodwill  1,794,265   1,017,905 
Equity method investments  94,643   95,598 
Deposits and other assets  497,529   549,337 
TOTAL ASSETS $40,000,410  $37,023,893 
         
- LIABILITIES AND STOCKHOLDERS’ EQUITY -        
CURRENT LIABILITIES:        
Accounts payable and accrued expenses $4,430,626  $4,062,573 
Line of credit  8,407,527   6,958,375 
Due to broker  210,862   - 
Income taxes payable  1,346   1,050 
TOTAL CURRENT LIABILITIES  13,050,361   11,021,998 
         
Deferred income tax liabilities  629,680   167,470 
Deferred rent payable  240,379   231,216 
Deferred compensation payable  488,529   489,668 
TOTAL LIABILITIES  14,408,949   11,910,352 
         
Redeemable common stock:        
Common stock subject to possible redemption, at $200,004; -0- and 38,364 shares issued and outstanding at redemption value as of October 31, 2017 and 2016, respectively  -   200,004 
         
COMMITMENTS AND CONTINGENCIES        
STOCKHOLDERS’ EQUITY:        
Coffee Holding Co., Inc. stockholders’ equity:        
Preferred stock, par value $.001 per share; 10,000,000 shares authorized; none issued  -   - 
Common stock, par value $.001 per share; 30,000,000 shares authorized, 6,494,680 shares issued; 5,805,935 and 5,824,938 shares outstanding for 2017 and 2016  6,494   6,456 
Additional paid-in capital  16,104,075   15,904,109 
Retained earnings  12,345,490   11,878,228 
Less: Treasury stock, 688,745 and 631,378 common shares, at cost for 2017 and 2016  (3,504,510)  (3,249,590)
Total Coffee Holding Co., Inc. Stockholders’ Equity  24,951,549   24,539,203 
Noncontrolling interest  639,912   374,334 
TOTAL EQUITY  25,591,461   24,913,537 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $40,000,410  $37,023,893 
         

 

       
COFFEE HOLDING CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED OCTOBER 31, 2017 AND 2016
       
  2017  2016 
NET SALES $77,127,595  $78,948,228 
         
COST OF SALES (which include purchases of approximately $6.7 million and $8.5 million in fiscal years 2017 and 2016, respectively, from a related party)  64,977,632   67,066,050 
         
GROSS PROFIT  12,149,963   11,882,178 
         
OPERATING EXPENSES:        
Selling and administrative  10,228,506   7,363,710 
Officers’ salaries  698,740   655,400 
TOTAL   10,927,246   8,019,110 
         
INCOME FROM OPERATIONS  1,222,717   3,863,068 
         
OTHER INCOME (EXPENSE):        
Interest income  19,436   41,176 
Loss from equity method investments  (956)  (972)
Interest expense  (264,261)  (187,310)
TOTAL   (245,781)  (147,106)
         
INCOME BEFORE PROVISION FOR INCOME TAXES        
AND NON-CONTROLLING INTEREST IN SUBSIDIARY  976,936   3,715,962 
         
Provision for income taxes  244,096   1,365,920 
         
NET INCOME BEFORE NON-CONTROLLING INTEREST IN SUBSIDIARY  732,840   2,350,042 
Less: Net income attributable to the non-controlling interest in subsidiary  (265,578)  (137,754)
         
NET INCOME ATTRIBUTABLE TO COFFEE HOLDING CO., INC. $467,262  $2,212,288 
         
Basic and diluted earnings per share $.08  $.36 
         
Weighted average common shares outstanding:        
Basic and diluted  5,858,376   6,082,777 
         

  

       
COFFEE HOLDING CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 2017 AND 2016
       
  2017  2016 
OPERATING ACTIVITIES:        
         
Net income $732,840  $2,350,042 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  762,043   587,572 
Unrealized loss (gain) on commodities  345,584   (618,557)
Loss on equity method investments  955   973 
Deferred rent  9,163   9,161 
Deferred income taxes  (183,975)  991,275 
Changes in operating assets and liabilities:        
Accounts receivable  661,008   (2,465,513)
Inventories  (917,376)  (143,907)
Prepaid expenses and other current assets  (25,688)  (279,254)
Prepaid green coffee  264,227   184,875 
Prepaid and refundable income taxes  9,163   952,600 
Accounts payable and accrued expenses  (258,827)  (30,860)
Deposits and other assets  77,220   68,331 
Income taxes payable  296   1,050 
Net cash provided by operating activities  1,476,633   1,607,788 
         
INVESTING ACTIVITIES:        
Purchase of business net of cash acquired  (2,893,275)  (819,564)
Purchases of machinery and equipment  (679,921)  (963,435)
Net cash used in investing activities  (3,573,196)  (1,782,999)
         
FINANCING ACTIVITIES:        
Line of credit  1,449,152   1,404,254 
Purchase of treasury stock  (254,920)  (1,754,878)
Payment of dividend  -   (100,000)
Net cash provided by (used in) financing activities  1,194,232   (450,624)
         
NET DECREASE IN CASH  (902,331)  (625,835)
         
CASH, BEGINNING OF PERIOD  3,227,981   3,853,816 
         
CASH, END OF PERIOD $2,325,650  $3,227,981 
         


       
COFFEE HOLDING CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 2017 AND 2016
       
  2017  2016 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:        
Interest paid $261,485  $181,007 
Income taxes paid $391,933  $34,183 
         
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:        
On June 29, 2016 Coffee Holding Co., Inc. acquired certain assets of Coffee Kinetics, LLC:        
         
Fair value of assets acquired $1,091,612     
Less: liabilities assumed  (72,044)    
Net assets acquired:  1,019,568     
         
Common stock, par value $.001 per share, 38,364 shares  39     
Additional paid-in capital  199,965     
Non-cash payment  200,004     
         
Net cash paid $819,564     
         
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:        
On February 23, 2017 Coffee Holding Co., Inc. acquired the assets of Comfort Foods, Inc.:        
         
Accounts receivable $584,918     
Inventory  1,116,906     
Equipment  229,597     
Prepaid expenses  32,681     
Customer lists  170,000     
Other intangible assets  971,124     
Goodwill  388,378     
Other asset  26,551     
         
Less: liabilities  626,880     
         
Net cash paid $2,893,275     


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