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Coffee Holding Co., Inc. Reports Results for Three and Nine Months Ended July 31, 2017 and Announces Stock Repurchase Program

/EINPresswire.com/ -- STATEN ISLAND, NY--(Marketwired - Sep 13, 2017) -  Coffee Holding Co., Inc. (NASDAQ: JVA) (the "Company") today announced its operating results for the three and nine months ended July 31, 2017:

Net sales totaled $17,979,068 for the three months ended July 31, 2017, an increase of $624,535, or 3.6% from $17,354,533 for the three months ended July 31, 2016. The increase in net sales reflects our gain of approximately $4,000,000 in sales of both branded and private label coffee to both new and existing customers, partially offset by reduced wholesale transactions with our largest wholesale green coffee customer of approximately $3,400,000.

Cost of sales for the three months ended July 31, 2017 was $14,903,594, or 82.9% of net sales, as compared to $14,203,343, or 81.9% of net sales, for the three months July 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 increase in cost of sales reflects the change in the product mix due to our reduced wholesale transactions with our largest wholesale green coffee customer.

Gross profit for the three months ended July 31 2017 was $3,075,474, a decrease of $75,716 from $3,151,190 for the three months ended July 31, 2016. Gross profit as a percentage of net sales decreased to 17.1% for the three months ended July 31, 2017 from 18.1% for the three months ended July 31, 2016. Although we experienced improved margins on our wholesale and roasted business during the quarter, the decrease in gross profits was due in part to the purchase price paid for our acquisition of Comfort Foods, Inc., or CFI.

Total operating expenses increased by $1,027,420 to $2,895,643 for the three months ended July 31, 2017 from $1,868,223 for the three months ended July 31, 2016. The quarter ended July 31, 2017 included approximately $208,409 of selling and administrative expenses from our subsidiary Sonofresco, LLC, or SONO, and approximately $444,530 of selling and administrative expenses from our subsidiary CFI which were not fully included in the July 31, 2016 numbers since the SONO transaction was completed in late June 2016 and the CFI transaction occurred in 2017. Also, we incurred increases in shipping expenses of $175,481, salary expense of $42,169 and medical insurance expense of $22,946. These increases were the result of our reinvestment in our growth and expansion strategy.

The Company had net income of $32,800 or $0.01 per share basic and diluted, for the three months ended July 31, 2017 compared to net income of $755,518, or $0.12 per share basic and diluted for the three months ended July 31, 2016. The decrease in net income was due primarily to the reasons described above.

Additionally, the Company's Board of Directors has approved a share repurchase program pursuant to which the Company may repurchase up to $2 million in value of its outstanding common stock, par value, $0.001 per share, from time to time on the open market and in privately negotiated transactions subject to market conditions, share price and other factors (the "Share Repurchase Program"). The Company intends to fund the Share Repurchase Program with available cash and from future cash flow from operations.

The timing and amount of any shares repurchased will be determined based on the Company's evaluation of market conditions and other factors and the program may be discontinued or suspended at any time. Repurchases will be made in accordance with the rules and regulations promulgated by the Securities and Exchange Commission and certain other legal requirements to which the Company may be subject. Repurchases may be made, in part, under a Rule 10b5-1 plan, which allows stock repurchases when the Company might otherwise be precluded from doing so.

"We are pleased to report to our shareholders a sales increase during our third fiscal quarter of 2017. Our revenue grew by approximately 3.5% to approximately $18 million compared to approximately $17.4 million for the same period in 2016. This revenue figure includes a decrease in sales of approximately $3.4 million during the quarter to our former largest wholesale green coffee customer demonstrating that we have successfully offset all of the lost revenue from one customer by increasing our sales of branded, private label and green coffee sales to existing and new customers.

Sales of our flagship brand, Café Caribe, continue to improve, especially in the Texas market as our customer base in the region continues to grow along with the increased number of stores which now carry our brand. Sales of our private label grew by nearly 100% during the quarter from our last fiscal quarter. Sales of green coffee to our smaller, regional roaster clientele remained steady, reflecting the continuing sales growth of higher end, 100% Arabica micro brewed specialty beverages favored by the millennial coffee drinking demographic.

As our increased efforts in key areas of our business are now reflected in our revenues, I believe we have turned the page on our previous declines in revenue caused by the reduced sales to our former largest green coffee customer.

Once the integration of our most recent acquisition, Comfort Foods, Inc. in North Andover, Massachusetts, is completed, we expect to return to a profitable position as our overall gross margins continue to improve in conjunction with the changes in our overall sales mix, due in part to our efforts to replace our lower margin business with increased sales of our roasted product offerings.

Lastly, as we believe the public market is not reflecting the true value of our company, we have decided to initiate a share repurchase program whereby we may repurchase up to $2 million of our outstanding shares in the open market. Going forward, our focus will continue to be on growing our revenues over the next several years."

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.

   
   
COFFEE HOLDING CO., INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
JULY 31, 2017 AND OCTOBER 31, 2016  
   
    July 31, 2017     October 31, 2016  
    (Unaudited)        
- ASSETS -            
CURRENT ASSETS:                
  Cash   $ 2,687,724     $ 3,227,981  
  Accounts receivable, net of allowances of $144,000 for 2017 and 2016     10,418,086       13,517,892  
  Inventories     15,663,719       14,276,290  
  Prepaid green coffee     280,254       435,577  
  Prepaid expenses and other current assets     621,877       535,456  
  Prepaid and refundable income taxes     797,939       481,977  
  Due from broker     778,556       134,722  
  Deferred income tax asset     -       81,545  
TOTAL CURRENT ASSETS     31,248,155       32,691,440  
                 
Machinery and equipment, at cost, net of accumulated depreciation of $5,377,379 and $4,819,828 for 2017 and 2016, respectively     2,526,486       2,269,863  
Customer list and relationships, net of accumulated amortization of $64,625 and $50,250 for the periods ended July 31, 2017 and 2016, respectively     375,375       219,750  
Trademarks     180,000       180,000  
Goodwill     2,377,407       1,017,905  
Equity method investments     95,528       95,598  
Deposits and other assets     535,750       549,337  
    TOTAL ASSETS   $ 37,338,701     $ 37,023,893  
                 
- LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY -                
CURRENT LIABILITIES:                
  Accounts payable and accrued expenses   $ 3,254,991     $ 4,062,573  
  Line of credit     7,406,325       6,958,375  
  Deferred income tax liabilities     60,785       -  
  Income taxes payable     -       1,050  
TOTAL CURRENT LIABILITIES     10,722,101       11,021,998  
                 
Deferred income tax liabilities     203,600       167,470  
Deferred rent payable     238,088       231,216  
Deferred compensation payable     509,170       489,668  
TOTAL LIABILITIES     11,672,959       11,910,352  
Redeemable common stock:                
  Common stock subject to possible redemption, at $200,004; 38,364 shares issued and outstanding at redemption value as of July 31, 2017 and October 31, 2016     200,004       200,004  
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; 5,821,554 and 5,824,938 shares outstanding as of July 31 2017 and October 31, 2016, respectively     6,456       6,456  
    Additional paid-in capital     15,904,109       15,904,109  
    Retained earnings     12,288,547       11,878,228  
    Less: Treasury stock, 634,762 and 631,378 common shares, at cost as of July 31, 2017 and October 31, 2016, respectively     (3,265,419 )     (3,249,590 )
      Total Coffee Holding Co., Inc. Stockholders' Equity     25,133,697       24,539,203  
  Noncontrolling interest     532,045       374,334  
      TOTAL EQUITY     25,665,742       24,913,537  
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY   $ 37,338,701     $ 37,023,893  
                 
                 
                 
COFFEE HOLDING CO., INC.  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  
THREE AND NINE MONTHS ENDED JULY 31, 2017 AND 2016  
(Unaudited)  
   
    Nine Months Ended
July 31,
    Three Months Ended
July 31,
 
    2017     2016     2017     2016  
NET SALES   $ 55,398,538     $ 61,566,868     $ 17,979,068     $ 17,354,533  
                                 
COST OF SALES (including $4.8 and $7.4 million of related party costs for the nine months ended July 31, 2017 and 2016, respectively. Including $2.6 and $1.9 million for the three months ended July 31, 2017 and 2016, respectively.)     46,469,896       52,455,081       14,903,594       14,203,343  
                                 
GROSS PROFIT     8,928,642       9,111,787       3,075,474       3,151,190  
                                 
OPERATING EXPENSES:                                
  Selling and administrative     7,517,062       5,170,915       2,716,393       1,704,373  
  Officers' salaries     527,090       491,550       179,250       163,850  
    TOTAL     8,044,152       5,662,465       2,895,643       1,868,223  
                                 
INCOME FROM OPERATIONS     884,490       3,449,322       179,831       1,282,967  
                                 
OTHER INCOME (EXPENSE)                                
  Interest income     29,381       30,889       5,993       9,890  
  Loss from equity method investment     (71 )     (1,049 )     (322 )     (805 )
  Interest expense     (192,317 )     (116,114 )     (68,079 )     (42,671 )
    TOTAL     (163,007 )     (86,304 )     (62,408 )     (33,586 )
                                 
INCOME BEFORE PROVISION FOR INCOME TAXES AND NON-CONTROLLING INTEREST IN SUBSIDIARY     721,483       3,363,018       117,423       1,249,381  
                                 
  Provision for income taxes     153,453       1,236,319       23,911       448,399  
                                 
NET INCOME BEFORE NON-CONTROLLING INTEREST IN SUBSIDIARY     568,030       2,126,699       93,512       800,982  
  Less: Net income attributable to the non-controlling interest     (157,711 )     (100,811 )     (60,712 )     (45,464 )
                                 
NET INCOME ATTRIBUTABLE TO COFFEE HOLDING CO., INC.   $ 410,319     $ 2,025,888     $ 32,800     $ 755,518  
                                 
Basic and diluted earnings per share   $ .07     $ .33     $ .01     $ .12  
                                 
Weighted average common shares outstanding:                                
  Basic and diluted     5,861,777       6,117,610       5,859,918       6,056,420  
                                 
                                 
                                 
COFFEE HOLDING CO., INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
NINE MONTHS ENDED JULY 31, 2017 AND 2016  
(Unaudited)  
   
    2017     2016  
OPERATING ACTIVITIES:                
  Net income   $ 568,030     $ 2,126,699  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation and amortization     573,447       425,977  
    Unrealized (gain) on commodities     (643,834 )     (591,566 )
    Loss on equity method investments     70       1,049  
    Deferred rent     6,872       6,872  
    Deferred income taxes     178,460       890,750  
  Changes in operating assets and liabilities:                
    Accounts receivable     3,684,724       (4,766,640 )
    Inventories     (270,523 )     1,432,701  
    Prepaid expenses and other current assets     (53,740 )     (262,707 )
    Prepaid green coffee     155,323       58,310  
    Prepaid and refundable income taxes     (315,962 )     931,250  
    Accounts payable and accrued expenses     (1,434,462 )     (1,554,385 )
    Deposits and other assets     59,640       31,558  
    Income taxes payable     (1,050 )     925  
Net cash provided by (used in) operating activities     2,506,995       (1,269,207 )
                 
INVESTING ACTIVITIES:                
  Purchase of business net of cash acquired     (2,893,275 )     (856,904 )
  Purchases of machinery and equipment     (586,098 )     (661,591 )
Net cash used in investing activities     (3,479,373 )     (1,518,495 )
                 
FINANCING ACTIVITIES:                
  Advances under bank line of credit     4,512,950       5,204,254  
  Payment of dividend     -       (100,000 )
  Purchase of treasury stock     (15,829 )     (839,927 )
  Principal payments under bank line of credit     (4,065,000 )     (3,500,000 )
Net cash provided by financing activities     432,121       764,327  
                 
NET DECREASE IN CASH     (540,257 )     (2,023,375 )
                 
CASH, BEGINNING OF PERIOD     3,227,981       3,853,816  
                 
CASH, END OF PERIOD   $ 2,687,724     $ 1,830,441  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:                
  Interest paid   $ 189,933     $ 111,060  
  Income taxes paid   $ 281,538     $ 26,582  
                   
                   
                   
COFFEE HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JULY 31, 2017 AND 2016
(Unaudited)
 
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
Goodwill     1,359,502
Other asset     26,551
       
Less: liabilities     626,880
       
  Net cash paid   $ 2,893,275

Company Contact

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