SOURCE: Coffee Holding Co., Inc.

Coffee Holding Co., Inc.

June 10, 2014 09:00 ET

Coffee Holding Co., Inc. Reports Results for the Three and Six Months Ended April 30, 2014

STATEN ISLAND, NY--(Marketwired - Jun 10, 2014) - Coffee Holding Co., Inc. ("Coffee Holding") (NASDAQ: JVA) today announced its operating results for the three and six months ended April 30, 2014. In this release, the Company:

  • Reports an increase in gross profit of 186% for the three months ended April 30, 2014;

  • Reports net sales of $52,745,098 for the six months ended April 30, 2014 and $25,398,751 for the three months ended April 30, 2014 compared to net sales of $68,004,850 for the six months ended April 30, 2013 and $36,686,047 for the three months ended April 30, 2013; and

  • Reports net income of $2,632,960 for the six months ended April 30, 2014 and $1,261,220 for the three months ended April 30, 2014 compared to $542,025 for the six months ended April 30, 2013 and a net loss of $395,512 for the three months ended April 30, 2013

Results of Operations

The Company had net income of $1,261,220, or $0.20 per share basic and $0.19 per share diluted, for the three months ended April 30, 2014 compared to a net loss of $395,512, or ($0.06) per share basic and diluted, for the three months ended April 30, 2013. The increase in net income reflects increased profitability on our sales. The Company had net income of $2,632,960, or $0.41 per share basic and $0.40 diluted, for the six months ended April 30, 2014 compared to net income of $542,025, or $0.09 per share basic and $0.08 diluted, for the six months ended April 30, 2013. The increase in net income reflects increased profitability on our sales.

Net sales totaled $25,398,751 for the three months ended April 30, 2014, a decrease of $11,287,296, or 30.8%, from $36,686,047 for the three months ended April 30, 2013. The decrease in net sales primarily reflected a decrease of 20% in pounds of green coffee sold during the quarter as compared to the quarter ended April 30, 2013. We believe that the decrease in pounds sold resulted from a decrease in purchases by customers as a result of market volatility and a significant increase in coffee prices during the quarter. Net sales totaled $52,745,098 for the six months ended April 30, 2014, a decrease of $15,259,752, or 22.4%, from $68,004,850 for the six months ended April 30, 2013. The decrease in net sales primarily reflected a decrease of 5% in pounds of green coffee sold during the six month period ended April 30, 2014 as compared to the six months ended April 30, 2013. We believe that the decrease in pounds sold resulted from a decrease in purchases by customers as a result of market volatility and a significant increase in coffee prices during the quarter ended April 30, 2014.

Cost of sales for the three months ended April 30, 2014 was $21,439,484 or 84.4% of net sales, as compared to $35,301,868 or 96.2% of net sales for the three months ended April 30, 2013. The decrease in cost of sales reflects favorable inventory positions and increased coffee prices which allowed for improved margins during the quarter. Cost of sales for the six months ended April 30, 2014 was $44,667,209 or 84.7% of net sales, as compared to $62,936,854 or 92.6% of net sales for the six months ended April 30, 2013. The decrease in cost of sales reflects favorable inventory positions and increased coffee prices which allowed for improved margins during the period.

Total operating expenses decreased by $29,514, or 1.6%, to $1,864,741 for the three months ended April 30, 2014 as compared to operating expenses of $1,894,255 for the three months ended April 30, 2013. The decrease in operating expenses was due to a decrease in selling and administrative expenses of $29,514. Total operating expenses decreased by $56,202, or 1.5%, to $3,734,449 for the six months ended April 30, 2014 as compared to operating expenses of $3,790,651 for the six months ended April 30, 2013. The decrease in operating expenses was due to a decrease in selling and administrative expense of $85,365, partially offset by an increase in officers' salaries of $29,163.

"We are pleased to report that our gross profit for the three months ended April 30, 2014 increased by 186% as compared to the same quarter of 2013 as our continued efforts on margin expansion were aided by the increase in green coffee commodity prices during the recent quarter. However, these same increases had a surprisingly negative effect on revenues due to the rapid rise in the green coffee market. Although we did increase our margins, as we generally benefit from high commodity prices, many of our customers chose to reduce or curtail purchases during the quarter due to increasing uncertainty as well as the consistent increase of the commodity price during such a short period of time. We believe increased volatility in daily market conditions exacerbated this situation to further add to the unease of our customers' mindsets. Rather than keep inventory levels at normal rates, our customers drew down their inventories and adopted a hand to mouth approach rather than pay increased prices in the current market," said Andrew Gordon, President and Chief Executive Officer.

"The fact that the leading national brands held off on raising their coffee prices until this past week further impacted purchases as competitors were uncertain as to the level they could comfortably buy coffee while continuing to maintain their existing profit margins. Therefore, we also maintained our existing pricing structure on all of our private label and branded coffee products during this time which put pressure on our margins towards the end of the quarter," continued Mr. Gordon.

"Fortunately, we were able to increase prices on our wholesale green coffee sales and food service offerings, which offset margin compression on our branded and private label businesses. We believe the recent announcement by Folgers of a 9% price increase should help normalize our margins in these two areas and additionally have the effect of changing the 'buy and hold for now' mentality that has pervaded over the commercial retail roasted coffee market for the past several months. We look forward to continuing to post solid results in the upcoming quarters," concluded Mr. Gordon.

About Coffee Holding

Coffee Holding 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, future performance, and involve unknown and known 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 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. Actual results may differ materially from those projected or implied in any forward-looking statements. Such statements may involve risks and uncertainties, including but not limited to those relating to product demand, hedging activities, coffee prices, pricing of our products, market acceptance, 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.

   
   
COFFEE HOLDING CO., INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
APRIL 30, 2014 AND OCTOBER 31, 2013  
   
    April 30,
2014
    October 31,
2013
 
    (Unaudited)        
- ASSETS -  
CURRENT ASSETS:                
  Cash   $ 6,421,815     $ 4,035,669  
  Accounts receivable, net of allowances of $144,000 for 2014 and 2013     11,286,799       12,362,792  
  Inventories     10,207,348       9,373,018  
  Prepaid green coffee     100,000       439,290  
  Prepaid expenses and other current assets     588,114       336,494  
  Prepaid and refundable income taxes     26,271       1,000,317  
  Deferred income tax, net     21,748       1,330,666  
    TOTAL CURRENT ASSETS     28,652,095       28,878,246  
Machinery and equipment, at cost, net of accumulated depreciation of $3,421,438 and $3,130,902 for 2014 and 2013, respectively     1,935,228       2,060,350  
Customer list and relationships, net of accumulated amortization of $30,000 and $26,250 for 2014 and 2013, respectively     120,000       123,750  
Trademarks     180,000       180,000  
Goodwill     440,000       440,000  
Equity method investment     98,089       98,178  
Deposits and other assets     618,523       618,498  
      TOTAL ASSETS   $ 32,043,935     $ 32,399,022  
- LIABILITIES AND STOCKHOLDERS' EQUITY -  
CURRENT LIABILITIES:                
  Accounts payable and accrued expenses   $ 6,278,287     $ 7,244,822  
  Line of credit     -       1,229,182  
  Due to broker     -       984,040  
  Income taxes payable     216,658       -  
    TOTAL CURRENT LIABILITIES     6,494,945       9,458,044  
                 
Deferred income tax liabilities     127,548       145,666  
Deferred rent payable     203,433       195,452  
Deferred compensation payable     515,523       515,498  
    TOTAL LIABILITIES     7,341,449       10,314,660  
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, 6,456,316 shares issued; 6,372,309 shares outstanding for 2014 and 2013     6,456       6,456  
  Additional paid-in capital     15,904,109       15,904,109  
  Retained earnings     8,744,593       6,111,633  
  Less: Treasury stock, 84,007 common shares, at cost for 2014 and 2013     (272,133 )     (272,133 )
    Total Coffee Holding Co., Inc. Stockholders' Equity     24,383,025       21,750,065  
  Non-controlling interest     319,461       334,297  
  TOTAL EQUITY     24,702,486       22,084,362  
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 32,043,935     $ 32,399,022  
                     
                     
                     
COFFEE HOLDING CO., INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
   
    Six Months Ended
April 30
,
    Three Months Ended
April 30,
 
    2014     2013     2014     2013  
NET SALES   $ 52,745,098     $ 68,004,850     $ 25,398,751     $ 36,686,047  
                                 
COST OF SALES (including $9.1 and $18.4 million of related party costs for the six months ended April 30, 2014 and 2013, respectively. Including $4.1 and $8.7 million for the three months ended April 30, 2014 and 2013, respectively.)     44,667,209       62,936,854       21,439,484       35,301,868  
                                 
GROSS PROFIT     8,077,889       5,067,996       3,959,267       1,384,179  
                                 
OPERATING EXPENSES:                                
  Selling and administrative     3,434,249       3,519,614       1,723,641       1,753,155  
  Officers' salaries     300,200       271,037       141,100       141,100  
TOTAL     3,734,449       3,790,651       1,864,741       1,894,255  
                                 
INCOME (LOSS) FROM OPERATIONS     4,343,440       1,277,345       2,094,526       (510,076 )
                                 
OTHER INCOME (EXPENSE)                                
  Interest income     16,796       17,805       15,913       10,226  
  Gain (loss) from equity method investment     (89 )     (105,046 )     93       (609 )
  Interest expense     (26,069 )     (60,779 )     (7,981 )     (22,379 )
TOTAL     (9,362 )     (148,020 )     8,025       (12,762 )
                                 
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES AND NON-CONTROLLING INTEREST IN SUBSIDIARY     4,334,078       1,129,325       2,102,551       (522,838 )
                                 
  Provision (benefit) for income taxes     1,663,953       507,510       838,028       (127,974 )
                                 
NET INCOME (LOSS) BEFORE NON-CONTROLLING INTEREST IN SUBSIDIARY     2,670,125       621,815       1,264,523       (394,864 )
  Less: Net (income) attributable to the non-controlling interest     (37,165 )     (79,790 )     (3,303 )     (648 )
                                 
NET INCOME (LOSS) ATTRIBUTABLE TO COFFEE HOLDING CO., INC.   $ 2,632,960     $ 542,025     $ 1,261,220     $ (395,512 )
                                 
Basic earnings (loss) per share   $ .41     $ .09     $ .20     $ (.06 )
Diluted earnings (loss) per share   $ .40     $ .08     $ .19     $ (.06 )
Dividends declared per share   $ .00     $ .06     $ .00     $ .00  
                                 
Weighted average common shares outstanding:                                
    Basic     6,372,309       6,372,309       6,372,309       6,372,309  
    Diluted     6,639,309       6,639,309       6,639,309       6,372,309  
                                 
                                 
                                 
COFFEE HOLDING CO., INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
SIX MONTHS ENDED APRIL 30, 2014 AND 2013  
(Unaudited)  
   
    2014     2013  
OPERATING ACTIVITIES:                
  Net income   $ 2,670,125     $ 621,815  
  Adjustments to reconcile net income to net cash provided by operating activities:                
      Depreciation and amortization     295,723       234,476  
      Unrealized gain on commodities     (1,173,103 )     (30,555 )
      Loss on equity method investment     89       989  
      Loss on disposition of equity method investment     -       104,057  
      Deferred rent     7,981       8,023  
      Deferred income taxes     1,290,800       39,000  
    Changes in operating assets and liabilities:                
      Accounts receivable     1,075,993       1,906,712  
      Inventories     (834,330 )     3,055,239  
      Prepaid expenses and other current assets     (62,557 )     44,076  
      Prepaid green coffee     339,290       (309,473 )
      Prepaid and refundable income taxes     974,046       (402,967 )
      Accounts payable and accrued expenses     (966,536 )     (4,023,176 )
      Deposits and other assets     -       6,746  
      Income taxes payable     216,658       (20,752 )
        Net cash provided by operating activities     3,834,179       1,234,210  
                 
INVESTING ACTIVITIES:                
  Proceeds from disposition of equity method investment     -       232,069  
  Purchases of machinery and equipment     (166,851 )     (469,844 )
        Net cash used in investing activities     (166,851 )     (237,775 )
                 
FINANCING ACTIVITIES:                
  Advances under bank line of credit     48,814       3,466,969  
  Principal payments under bank line of credit     (1,277,996 )     (4,029,469 )
  Distribution to non-controlling interest     (52,000 )     -  
  Payment of dividend     -       (387,377 )
        Net cash used in financing activities     (1,281,182 )     (949,877 )
                 
NET INCREASE IN CASH     2,386,146       46,558  
                 
CASH, BEGINNING OF PERIOD     4,035,669       7,568,583  
                 
CASH, END OF PERIOD   $ 6,421,815     $ 7,615,141  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:                
  Interest paid   $ 29,836     $ 64,177  
  Income taxes paid   $ 8,500     $ 477,991  
                 
                 
                 
COFFEE HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED APRIL 30, 2014 AND 2013
(Unaudited)
 
Schedule of noncash investing and financing activities:
 
Proceeds from disposition of equity method investment:
    2014   2013
             
Inventory received   $ -   $ 503,500
Settlement of accounts payable     -     992,402
Total noncash proceeds   $ -   $ 1,495,902
             

Contact Information

  • CONTACT:
    Coffee Holding Co., Inc.
    Andrew Gordon
    President & CEO
    (718) 832-0800