Coffee Holding Co., Inc. Reports Results for Three and Six Months Ended April 30, 2018


STATEN ISLAND, New York, June 07, 2018 (GLOBE NEWSWIRE) -- Coffee Holding Co., Inc. (Nasdaq: JVA) (the “Company” or “Coffee Holding Company”) today announced its operating results for the three and six months ended April 30, 2018.

Net Sales. Net sales totaled $22,193,898 for the three months ended April 30, 2018, an increase of $4,406,795, or 24.8%, from $17,787,103 for the three months ended April 30, 2017. Net sales totaled $44,277,116 for the six months ended April 30, 2018, an increase of $6,857,647, or 18.3%, from $37,419,469 for the six months ended April 30, 2017. The increase in net sales reflects the Company’s increased sales of branded and private label coffee and wholesale green beans to both new and existing customers.

Cost of Sales. Cost of sales for the three months ended April 30, 2018 was $18,326,914, or 82.6% of net sales, as compared to $15,144,534, or 85.1% of net sales, for the three months April 30, 2017. Cost of sales for the six months ended April 30, 2018 was $36,614,421, or 82.7% of net sales, as compared to $31,645,614, or 84.6% of net sales, for the six months April 30, 2017. The increase in cost of sales reflects the change in the product mix and the inclusion of results of the Company’s subsidiary CFI which results were partially included for the six months ended April 30, 2017.

Gross Profit. Gross profit for the three months ended April 30 2018 was $3,866,984, an increase of $1,224,415 from $2,642,569 for the three months ended April 30, 2017. Gross profit as a percentage of net sales increased to 17.4% for the three months ended April 30, 2018 from 14.9% for the three months ended April 30, 2017. Gross profit for the six months ended April 30 2018 was $7,662,695, an increase of $1,888,840 from $5,773,855 for the six months ended April 30, 2017. Gross profit as a percentage of net sales increased to 17.3% for the six months ended April 30, 2018 from 15.4% for the six months ended April 30, 2017. The increase in gross profits resulted from improved margins on the Company’s wholesale and roasted business.

Operating Expenses. Total operating expenses increased by $458,853 to $3,003,498 for the three months ended April 30, 2018 from $2,544,645 for the three months ended April 30, 2017. These increases are all the result of the Company’s reinvestment in the Company’s growth and expansion strategy. Total operating expenses increased by $847,063 to $5,910,582 for the six months ended April 30, 2018 from $5,063,519 for the six months ended April 30, 2017.

Net Income. The Company had net income of $510,849 or $0.09 per share basic and diluted, for the three months ended April 30, 2018 compared to net income of $1,737, or $0.00 per share basic and diluted for the three months ended April 30, 2017. The increase in net income was due primarily to the reasons described above. The Company had net income of $942,236 or $0.16 per share basic and diluted, for the six months ended April 30, 2018 compared to net income of $377,519, or $0.06 per share basic and diluted for the six months ended April 30, 2017. The increase in net income was due primarily to the reasons described above.

“For the fourth consecutive reporting period, we have achieved strong top line growth. We increased our sales by 24.8% this quarter as compared to the same period last year. For the first six months of fiscal 2018, we have grown our revenues by 18.3% as compared to the same period last year. Our sales growth has been accompanied by an increase in our gross profit margins of 1.9% during the first six months to 17.3% compared to 15.4% during the first six months of fiscal 2017. This margin expansion has been the result of an improved mix of our product sales and has occurred over all three core areas of our business - Green coffee sales, sales of our Brands and sales of our Private Label to our customers. Although our gross margins improved, I believe that such improvement would have been even better if it were not for the fact that coffee prices remain overly depressed during this period putting pressure on our selling prices for wholesale green coffee, as well as necessitating additional promotions on private label to remain competitive with the national brands. Despite this commodity headwind, we earned $0.09 per share this quarter, which is a notable improvement over recent quarters, reinforcing my belief that we have made the necessary internal changes and have turned the corner in our ability to translate efforts into profits.

Finally, in late April, we acquired substantially all of the assets of Steep N Brew Coffee Company through Generations Coffee Company LLC, the Company’s specialty coffee joint venture in Ohio (“Generations”). Steep N Brew, located in Madison, Wisconsin, is a high-end specialty roaster with a strong presence in the Midwest, with a large widespread customer base. We believe we can leverage their customer base in our favor by expanding our existing branded portfolio into their distribution network as well as utilizing our existing customer base for their coffee brands and ancillary products. Trailing twelve-month revenues at Steep N Brew at the time of the acquisition were approximately $7.0 million. The purchase price was comprised of (i) a cash payment of $1.6 million, (ii) a cash payment of $1.1 million for the payment for the inventory purchased under the asset purchase agreement and (iii) the issuance of a promissory note in the principal amount of $150,000. This acquisition will be operated as part of Generations as Steep N Brew’s business model is highly similar to our highly successful Generations operation and we expect the transaction will be immediately accretive to future earnings,” stated Andrew Gordon, President and CEO of Coffee Holding.

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.
CONDENSED CONSOLIDATED BALANCE SHEETS
APRIL 30, 2018 AND OCTOBER 31, 2017

  April 30, 2018  October 31, 2017 
  (Unaudited)    
- ASSETS -        
CURRENT ASSETS:        
Cash $3,232,113  $2,325,650 
Accounts receivable, net of allowances of $144,000 for 2018 and 2017  13,931,417   13,441,802 
Inventories  16,345,937   16,310,572 
Prepaid green coffee  112,397   171,350 
Prepaid expenses and other current assets  350,294   593,825 
Prepaid and refundable income taxes  447,351   472,814 
Due from broker  642,046     
TOTAL CURRENT ASSETS  35,061,555   33,316,013 
         
Machinery and equipment, at cost, net of accumulated depreciation of $5,895,426 and $5,557,899 for 2018 and 2017, respectively  2,831,939   2,439,338 
Customer list and relationships, net of accumulated amortization of $87,500 and $72,250 for 2018 and 2017, respectively  352,500   367,750 
Trademarks  820,000   820,000 
Other intangible assets  331,124   331,124 
Non-compete  150,000     
Goodwill  2,548,969   1,794,265 
Equity method investments  90,085   94,643 
Deferred income tax asset  13,968    339,748 
Deposits and other assets  522,633   497,529 
TOTAL ASSETS $42,722,773  $40,000,410 
         
- LIABILITIES AND STOCKHOLDERS’ EQUITY -        
CURRENT LIABILITIES:        
Accounts payable and accrued expenses $2,917,399  $4,430,626 
Line of credit  12,207,727   8,407,527 
Due to broker      210,862 
Note payable  150,000     
Income taxes payable  300   1,346 
TOTAL CURRENT LIABILITIES  15,275,426   13,050,361 
         
Deferred income tax liabilities  366,054   629,680 
Deferred rent payable  241,261   240,379 
Deferred compensation payable  513,633   488,529 
TOTAL LIABILITIES  16,396,374   14,408,949 
         
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; 5,702,342 and 5,805,935 shares outstanding as of April 30 2018 and October 31, 2017, respectively  6,494   6,494 
Additional paid-in capital  16,103,283   16,104,075 
Retained earnings  13,287,726   12,345,490 
Less: Treasury stock, 792,338 and 688,745 common shares, at cost as of April 30, 2018 and October 31, 2017, respectively  (3,942,508)  (3,504,510)
Total Coffee Holding Co., Inc. Stockholders’ Equity  25,454,995   24,951,549 
Noncontrolling interest  871,404   639,912 
TOTAL EQUITY  26,326,399   25,591,461 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $42,722,773  $40,000,410 

COFFEE HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE AND SIX MONTHS ENDED APRIL 30, 2018 AND 2017
(Unaudited)

  Six Months Ended
April 30,
  Three Months Ended
April 30,
 
  2018  2017  2018  2017 
NET SALES $44,277,116  $37,419,469  $22,193,898  $17,787,103 
                 
COST OF SALES (including $4.4 and $2.2 million of related party costs for the six months ended April 30, 2018 and 2017, respectively. Including $3.0 and $1.4 million for the three months ended April 30, 2018 and 2017, respectively.)  36,614,421   31,645,614   18,326,914   15,144,534 
                 
GROSS PROFIT  7,662,695   5,773,855   3,866,984   2,642,569 
                 
OPERATING EXPENSES:                
Selling and administrative  5,570,082   4,715,679   2,833,248   2,365,395 
Officers’ salaries  340,500   347,840   170,250   179,250 
TOTAL  5,910,582   5,063,519   3,003,498   2,544,645 
                 
INCOME FROM OPERATIONS  1,752,113   710,336   863,486   97,924 
                 
OTHER INCOME (EXPENSE)                
Interest income  7,737   23,389   4,690   10,958 
Gain (loss) from equity method investment  (4,558)  252   257   (1,067)
Interest expense  (186,649)  (124,239)  (94,141)  (66,495)
TOTAL  (183,470)  (100,598)  (89,194)  (56,604)
                 
INCOME BEFORE PROVISION (BENEFIT) FOR INCOME TAXES AND NON-CONTROLLING INTEREST IN SUBSIDIARY  1,568,643   609,738   774,292   41,320 
                 
Provision (benefit) for income taxes  394,916   135,220   181,152   (35,893)
                 
NET INCOME BEFORE NON-CONTROLLING INTEREST IN SUBSIDIARY  1,173,727   474,518   593,140   77,213 
Less: Net (income) attributable to the non-controlling interest  (231,491)  (96,999)  (82,291)  (75,476)
                 
NET INCOME ATTRIBUTABLE TO COFFEE HOLDING CO., INC. $942,236  $377,519  $510,849  $1,737 
                 
Basic and diluted earnings per share $.16  $.06  $.09  $.00 
                 
Weighted average common shares outstanding:                
Basic and diluted  5,743,967   5,862,722   5,721,635   5,862,123 

COFFEE HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED APRIL 30, 2018 AND 2017
(Unaudited)

  2018  2017 
OPERATING ACTIVITIES:        
Net income $1,173,727  $474,518 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  352,777   372,962 
Unrealized (gain) loss on commodities  (852,908)  735,331 
(Gain) loss on equity method investments  4,558   (252)
Deferred rent  882   4,582 
Deferred income taxes  307,450   (340,077)
Changes in operating assets and liabilities:        
Accounts receivable  (403,173)  3,024,956 
Inventories  1,105,528   (407,059)
Prepaid expenses and other current assets  306,413   94,304 
Prepaid green coffee  58,953   45,756 
Prepaid and refundable income taxes  25,463   363,156 
Accounts payable and accrued expenses  (1,513,226)  (1,298,619)
Deposits and other assets      4,156 
Income taxes payable  (1,046)  25,511 
Net cash provided by operating activities  565,398   3,099,225 
         
INVESTING ACTIVITIES:        
Cash paid for investment in subsidiary, net of cash acquired      (2,893,275)
Purchases of machinery and equipment  (280,128)  (386,666)
Cash paid for business acquisition  (2,740,217)    
Net cash used in investing activities  (3,020,345)  (3,279,941)
         
FINANCING ACTIVITIES:        
Advances under bank line of credit  3,800,200   3,900,200 
Purchase of treasury stock  (438,790)  (15,829)
Principal payments under bank line of credit      (3,465,000)
Net cash provided by financing activities  3,361,410   419,371 
         
NET INCREASE IN CASH  906,463   238,655 
         
CASH, BEGINNING OF PERIOD  2,325,650   3,227,981 
         
CASH, END OF PERIOD $3,232,113  $3,466,636 
         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:        
Interest paid $178,293  $121,000 
Income taxes paid $26,863  $74,826 

COFFEE HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED APRIL 30, 2018 AND 2017
(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