COFFEE HOLDING CO INC - FORM 8-K - EX-99.1 - PRESS RELEASE - September 13, 2011

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8-K - CURRENT REPORT - COFFEE HOLDING CO INCjva_8k.htm

 
Exhibit 99.1
 
Coffee Holding Co., Inc. Reports Results for the Three and Nine Months Ended July 31, 2011
 
STATEN ISLAND, N.Y., Sept. 13, 2011 (GLOBE NEWSWIRE) -- Coffee Holding Co., Inc. ("Coffee Holding") (Nasdaq:JVA) today announced its operating results for the three and nine months ended July 31, 2011. In this release, the Company:
 
●  
Reports net sales of $98,737,976 for the nine months ended July 31, 2011 and $35,764,866 for the three months ended July 31, 2011 compared to net sales of $60,309,228 for the nine months ended July 31, 2010 and $19,032,770 for the three months ended July 31, 2010;
 
●  
Reports sales growth of 88% for the three months ended July 31, 2011 compared to the three months ended July 31, 2010; and
 
●  
Reports net income of $168,236, or $0.03 per share (basic and diluted) for the three months ended July 31, 2011 compared to net income of $424,091, or $0.08 per share (basic and diluted) for the three months ended July 31, 2010.
 
Results of Operations
 
The Company had net income of $168,236, or $0.03 per share (basic and diluted), for the three months ended July 31, 2011 compared to net income of $424,091 or $0.08 per share (basic and diluted), for the three months ended July 31, 2010. The decrease in net income primarily reflects unrealized losses on the Company's option positions of $1,202,443, which were marked to the market at the end of the quarter. The Company had net income of $2,397,265, or $0.44 per share (basic and diluted) for the nine months ended July 31, 2011 compared to net income of $1,782,517 or $0.33 per share (basic and diluted), for the nine months ended July 31, 2010. The increase in net income primarily reflects increased gross profit.
 
Net sales totaled $35,764,866 for the three months ended July 31, 2011, an increase of $16,732,096, or 88%, from $19,032,770 for the three months ended July 31, 2010. The increase in net sales reflects higher sales prices compared to the third quarter of fiscal 2010 as well as additional poundage sold due to the addition of our subsidiary, OPTCO, and additional sales to our largest green coffee customer and three largest private label customers. Net sales totaled $98,737,976 for the nine months ended July 31, 2011, an increase of $38,428,748, or 64%, from $60,309,228 for the nine months ended July 31, 2010. The increase in net sales reflects higher sales prices compared to the second quarter of fiscal 2010 as well as additional poundage sold due to the addition of the Company's subsidiary, OPTCO, as well as additional sales of green coffee to new customers and increased private label sales.
 
Cost of sales for the three months ended July 31, 2011 was $33,670,406 or 94.2% of net sales, as compared to $16,574,355 or 87.1% of net sales for the three months ended July 31, 2010. The increase in cost of sales reflects the increased cost of green coffee, as well as unrealized losses on the Company's option positions of $1,202,443, which were marked to market at the end of the quarter. Cost of sales for the nine months ended July 31, 2011 was $89,963,400 or 91.1% of net sales, as compared to $52,655,415 or 87.3% of net sales for the nine months ended July 31, 2010. The increase in cost of sales reflects the increased cost of green coffee, as well as a greater percentage of sales of green coffee versus roasted coffee sales, as well as the unrealized losses relating to the Company's option positions, which were marked to market at the end of the quarter.
 
Total operating expenses increased by $78,661, or 4.7%, to $1,754,024 for the three months ended July 31, 2011 as compared to operating expenses of $1,675,363 for the three months ended July 31, 2010. The increase in operating expenses was due to increases in selling and administrative expense due to a higher level of business during this period. Total operating expenses increased by $679,129, or 14.9%, to $5,229,089 for the nine months ended July 31, 2011 as compared to operating expenses of $4,549,960 for the nine months ended July 31, 2010. The increase in operating expenses was due to increases in selling and administrative expense resulting from increased trade shows and traveling activities.
 
"This quarter posed many challenges for the Company as market conditions in the coffee industry continued to be volatile. Even with these challenges, the Company continued to deliver growth and good operating results. Our revenues grew 88% during a period in which both outside economic factors, as well as a declining coffee market, worked in tandem against us. Our horizontally integrated business model was an important factor in helping us meet and overcome these headwinds. Although our gross margins declined in the specialty green coffee areas, our sales of private label partially offset that decline as we grew our business in dollars with our five largest accounts as well as increasing our cases sold in three out of these five accounts. Unfortunately, coffee futures fell unexpectedly at the very end of the quarter putting many of our hedging positions underwater. An unrealized loss of $1.2 million (the value of our option positions held as of July 31, 2011) is reflected in our cost of sales, but this loss remains unrealized and could change during our fourth quarter. Without this unrealized loss, our gross margins remained at traditional levels. We remain focused on continued revenue growth and believe that we are taking the necessary steps to achieve the growth necessary to make us a more vital player within this industry," said Mr. Andrew Gordon, President and CEO of Coffee Holding Co.
 
 
 
 
 
Quarterly Dividend
 
The Company's previously announced quarterly cash dividend of $0.03 per share will be paid to stockholders of record as of the close of business on October 17, 2011. The dividend will be paid on October 31, 2011.
 
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. 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, 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
  
JULY 31, 2011 AND OCTOBER 31, 2010
  
             
  
  
July 31,
2011
    
October 31,
2010
  
  
  
(unaudited)
        
- ASSETS --
            
CURRENT ASSETS:
            
Cash and cash equivalents
   $ 3,772,322     $ 1,672,921  
Commodities held at broker
     --       275,499  
Accounts receivable, net of allowances of $197,078 for 2011 and 2010
     13,107,671       8,852,372  
Inventories
     13,125,081       8,190,420  
Prepaid green coffee
     1,167,153       1,335,676  
Prepaid expenses and other current assets
     264,761       502,852  
Prepaid and refundable income taxes
     81,390       9,521  
Deferred income tax asset
     555,150       55,659  
TOTAL CURRENT ASSETS
     32,073,528       20,894,920  
Machinery and equipment, at cost, net of accumulated depreciation of $5,465,207 and $5,147,593
for 2011 and 2010, respectively
     1,662,538       1,560,940  
Customer list and relationships, net of accumulated amortization of $9,375 and $3,750 for 2011
and 2010, respectively
     140,625       146,250  
Trademarks
     180,000       180,000  
Goodwill
     440,000       440,000  
Deferred income tax asset
     68,600       --  
Deposits and other assets
     750,370       699,029  
TOTAL ASSETS
   $ 35,315,661     $ 23,921,139  
- LIABILITIES AND STOCKHOLDERS' EQUITY --
                
CURRENT LIABILITIES:
                
Accounts payable and accrued expenses
   $ 10,899,650     $ 7,124,072  
Line of credit
     6,712,086       2,306,749  
Due to broker
     879,058       --  
Income taxes payable
     629,518       234,744  
Contingent liability
     --       41,000  
TOTAL CURRENT LIABILITIES
     19,120,312       9,706,565  
Deferred income tax liabilities
     --       17,659  
Deferred rent payable
     141,380       124,756  
Deferred compensation payable
     606,599       540,642  
TOTAL LIABILITIES
     19,868,291       10,389,622  
STOCKHOLDERS' EQUITY:
                
Coffee Holding Co., Inc. stockholders' equity:
                
Preferred stock, par value $.001 per share; 10,000,000 shares authorized; 0 issued
     --       --  
Common stock, par value $.001 per share; 30,000,000 shares authorized, 5,579,830 shares
issued; 5,490,823 shares outstanding for 2011 and 2010
     5,580       5,580  
Additional paid-in capital
     7,581,973       7,581,973  
Contingent consideration
     39,000       39,000  
Retained earnings
     8,047,352       6,151,054  
Less: Treasury stock, 89,007 common shares, at cost for 2011 and 2010
     (295,261 )     (295,261 )
Total Coffee Holding Co., Inc. Stockholders' Equity
     15,378,644       13,482,346  
Noncontrolling interest
     68,726       49,171  
TOTAL EQUITY
     15,447,370       13,531,517  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
   $ 35,315,661     $ 23,921,139  
 
 
 
 
 
 

 
COFFEE HOLDING CO., INC.
  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
  
(Unaudited)
  
  
                        
   
Nine Months Ended
July 31,
    
Three Months Ended
July 31,
  
  
  
2011
    
2010
    
2011
    
2010
  
NET SALES
   $ 98,737,976     $ 60,309,228     $ 35,764,866     $ 19,032,770  
  
                                
COST OF SALES (including $18.5 and $15.3 million of related
party costs for the nine months ended July 31, 2011 and 2010,
respectively. Including $6.8 and $3.7 million for the three
months ended July 31, 2011 and 2010, respectively.)
     89,963,400       52,655,415       33,670,406       16,574,355  
  
                                
GROSS PROFIT
     8,774,576       7,653,813       2,094,460       2,458,415  
  
                                
OPERATING EXPENSES:
                                
Selling and administrative
     4,749,540       4,100,410       1,604,175       1,525,513  
Officers' salaries
     479,549       449,550       149,849       149,850  
TOTALS
     5,229,089       4,549,960       1,754,024       1,675,363  
  
                                
INCOME FROM OPERATIONS
     3,545,487       3,103,853       340,436       783,052  
  
                                
OTHER INCOME (EXPENSE)
                                
Interest income
     131,628       8,713       20,297       6,062  
Interest expense
     (195,477 )     (145,927 )     (76,817 )     (51,297 )
TOTALS
     (63,849 )     (137,214 )     (56,520 )     (45,235 )
  
                                
INCOME BEFORE INCOME TAXES AND
NONCONTROLLING INTEREST IN SUBSIDIARIES
     3,481,638       2,966,639       283,916       737,817  
  
                                
Provision for income taxes
     1,064,817       1,181,865       106,161       303,935  
  
                                
NET INCOME
     2,416,821       1,784,774       177,755       433,882  
Less: net (income) loss attributable to the noncontrolling
interest
     (19,556 )     (2,257 )     (9,519 )     (9,791 )
  
                                
NET INCOME ATTRIBUTABLE TO COFFEE HOLDING
CO., INC.
   $ 2,397,265     $ 1,782,517     $ 168,236     $ 424,091  
  
                                
Basic and diluted earnings per share
   $ .44     $ .33     $ .03     $ .08  
  
                                
Dividends declared per share
   $ .09     $ --     $ .03     $ --  
  
                                
Weighted average common shares outstanding:
                                
Basic
     5,490,823       5,454,742       5,490,823       5,482,127  
Diluted
     5,500,823       5,464,742       5,500,823       5,492,127  
 
 
 
 
 

 
COFFEE HOLDING CO., INC.
  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  
NINE MONTHS ENDED JULY 31, 2011 AND 2010
  
(Unaudited)
  
             
  
  
2011
    
2010
  
OPERATING ACTIVITIES:
            
Net income
   $ 2,416,821     $ 1,784,774  
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
                
Depreciation and amortization
     323,239       345,949  
Unrealized loss (gain) on commodities
     1,154,557       (553,819 )
Bad debt expense
     --       13,400  
Deferred rent
     16,624       19,267  
Deferred income taxes
     (585,750 )     98,500  
Changes in operating assets and liabilities:
                
Accounts receivable
     (4,255,299 )     3,414,186  
Inventories
     (4,934,661 )     (1,187,852 )
Prepaid expenses and other current assets
     238,091       (4,776 )
Prepaid green coffee
     168,523       (1,656,300 )
Prepaid and refundable income taxes
     (71,869 )     4,548  
Accounts payable and accrued expenses
     3,734,577       (1,836,075 )
Deposits and other assets
     14,616       35,532  
Income taxes payable
     394,774       (216,979 )
Net cash (used in) provided by operating activities
     (1,385,757 )     260,355  
  
                
INVESTING ACTIVITIES:
                
Purchases of assets of OPTCO
     --       (2,259,924 )
Purchases of machinery and equipment
     (419,212 )     (253,421 )
Net cash used in investing activities
     (419,212 )     (2,513,345 )
  
                
FINANCING ACTIVITIES:
                
Advances under bank line of credit
     96,021,666       65,316,659  
Principal payments under bank line of credit
     (91,616,329 )     (64,048,367 )
Payment of dividend
     (500,967 )     (166,989 )
Net cash provided by financing activities
     3,904,370       1,101,303  
  
                
  
                
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
     2,099,401       (1,151,687 )
  
                
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
     1,672,921       1,367,933  
  
                
CASH AND CASH EQUIVALENTS, END OF PERIOD
   $ 3,772,322     $ 216,246  
 
 
 
 
 

 
COFFEE HOLDING CO., INC.
  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  
NINE MONTHS ENDED JULY 31, 2011 AND 2010
  
(Unaudited)
  
             
  
  
2011
    
2010
  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:
            
Interest paid
   $ 179,857     $ 157,566  
Income taxes paid
   $ 1,317,698     $ 1,218,474  
  
                
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
                
On May 17, 2010, Coffee Holding Co., Inc. acquired substantially all of the assets of Organic
Products Trading Company, Inc. ("OPTCO"):
                
Assets acquired:
                
Inventory
   $ --     $ 1,809,924  
Equipment
     --       15,000  
Customer list and relationships
     --       150,000  
Trademarks
     --       180,000  
Goodwill
     --       440,000  
Total assets acquired:
     --       2,594,924  
Purchase of assets funded by:
                
Contingent liability
     --       41,000  
Contingent consideration
     --       39,000  
Common stock, par value $.001 per share, 50,000 shares
     --       50  
Additional paid-in capital
     --       254,950  
  
     --       335,000  
  
                
Net cash paid
   $ --     $ 2,259,924  
 
 
CONTACT: Coffee Holding Co., Inc.
  Andrew Gordon, President & CEO
  (718) 832-0800
 
                 

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