Coffee Holding Co., Inc. (Nasdaq: JVA) (the “Company” or “Coffee
Holding Company”) today announced its operating results for the
three months and nine months ended July 31, 2019.
Net Sales. Net sales totaled
$21,594,285 for the three months ended July 31, 2019, a decrease of
$1,845,618, or 7.8%, from $23,439,903 for the three months ended
July 31, 2018. Net sales totaled $65,944,583 for the nine months
ended July 31, 2019, a decrease of $1,772,436 from $67,717,019 for
the nine months ended July 31, 2018. The decrease in net sales
reflects the lower selling price of coffee during this period due
to the continued depressed price of the green coffee market as well
as a decrease in sales of approximately $7,400,000 to the Company’s
former largest wholesale green coffee customer.
Cost of Sales. Cost of sales
for the three months ended July 31, 2019 was $17,465,685, or 80.9%
of net sales, as compared to $19,648,710, or 83.8% of net sales,
for the three months July 31, 2018. Cost of sales for the nine
months ended July 31, 2019 was $53,705,272, or 81.4% of net sales,
as compared to $56,263,183, or 83.1% of net sales, for the nine
months July 31, 2018. The decrease in cost of sales was due to the
Company’s decreased sales offset by the increased cost of steel
cans due to the increased tariffs, inbound trucking costs and the
Company’s increased losses from its hedging of futures and option
contracts.
Gross Profit. Gross profit for
the three months ended July 31, 2019 was $4,128,600, an increase of
$337,407 from $3,791,193 for the three months ended July 31, 2018.
Gross profit for the nine months ended July 31, 2019 was
$12,239,311, an increase of $785,475 from $11,453,836 for the nine
months ended July 31, 2018. The increase in gross profits resulted
from improved margins on the Company’s wholesale and roasted
business, partially offset by higher steel and trucking costs and
losses from the Company’s hedging of futures and options contracts
for the nine months ended July 31, 2019.
Operating Expenses. Total
operating expenses increased by $348,844 to $3,871,362 for the
three months ended July 31, 2019 from $3,522,518 for the three
months ended July 31, 2018. Total operating expenses increased by
$1,967,665 to $11,384,245 for the nine months ended July 31, 2019
from $9,416,580 for the nine months ended July 31, 2018. The
primary reasons for this increase were the acquisition of Steep
& Brew and the increase in the Company’s outbound freight costs
as it increased and expanded its product distribution.
Net Income.
The Company had net income of $111,494 or $0.02 per share basic and
diluted, for the three months ended July 31, 2019 compared to net
income of $15,690, or $0.00 per share basic and diluted for the
three months ended July 31, 2018. The Company had net income of
$187,741 or $0.03 per share basic and diluted, for the nine months
ended July 31, 2019 compared to net income of $957,926, or $0.17
per share basic and diluted for the nine months ended July 31,
2018. The decrease in net income was due primarily to the reasons
described above.
“During our fiscal third quarter we were able to
maintain our sales volumes and earn a small profit despite coffee
prices trading to their lowest levels since 2005. The decrease in
sales was almost entirely the result of a decline in sales to our
former largest green coffee customer, which for the nine months
ended July 31, 2019 were down $7.4 million. However, excluding
sales to our former largest green coffee customer, sales to all of
our other customers are up $5.7 million, an increase of 8.4%.
Further, we earned $0.02 cents a share on both a basic and diluted
basis, including a onetime non-cash charge of $0.04 per share on a
basic and diluted basis relating to option grants under our option
plan. Without this non-cash charge, we would have earned $0.06
cents a share,” stated Andrew Gordon, President and CEO of Coffee
Holding Company. “We continue to operate in an extremely
challenging environment. Historically low coffee prices, steel
tariffs, as well as increased competitive pressure at the grocery
store level due to the low coffee prices, continue to erode our
earnings potential in the near term. However, I remain
positive about our company’s long term outlook as we have weathered
these industry forces before while managing to strengthen our core
business of private label and green coffee sales and expand our
distribution network for our brands. Despite these headwinds, we
have seen a dramatic increase in the sales of our Café Caribe
single serve during this period, partially offset by a modest
decline in sales of our Harmony Bay brand bag and can lines
which were acquired in February 2017 as part of our Comfort Foods
acquisition. Although I am never pleased to see declines in sales
of our brands, we recognize that the Harmony Bay brand is a very
mature brand compared to Café Caribe. Café Caribe’s importance
within our brand portfolio remains second to none. The sales of
espresso in the Latin coffee category continues to outperform the
sales of mainstream and private label coffees in supermarkets and
we are extremely pleased to be participating in that growth as
well,” stated Mr. Gordon.
“Lastly, we continue to closely monitor the
regulatory environment as it relates to CBD products being sold in
the mainstream market. We believe given our diverse portfolio of
branded coffees, we will have the opportunity to service multiple
demographics in consumer tastes and preference when the opportunity
finally presents itself,” 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.
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
GordonPresident& CEO718-832-0800
COFFEE HOLDING CO.,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETSJULY 31, 2019 AND OCTOBER 31,
2018
| |
|
July 31, 2019 |
|
|
October 31, 2018 |
|
| |
|
(Unaudited) |
|
|
|
|
|
- ASSETS - |
|
|
|
|
|
|
|
|
| CURRENT
ASSETS: |
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
2,568,780 |
|
|
$ |
4,611,384 |
|
|
Accounts receivable, net of allowances of $144,000 for 2019 and
2018 |
|
|
8,492,642 |
|
|
|
9,914,297 |
|
|
Inventories |
|
|
17,702,156 |
|
|
|
15,271,106 |
|
|
Prepaid expenses and other current assets |
|
|
686,359 |
|
|
|
578,861 |
|
|
Prepaid and refundable income taxes |
|
|
288,639 |
|
|
|
383,206 |
|
| TOTAL CURRENT
ASSETS |
|
|
29,738,576 |
|
|
|
30,758,854 |
|
| |
|
|
|
|
|
|
|
|
| Machinery and equipment, at
cost, net of accumulated depreciation of $6,753,814 and $6,251,828
for 2019 and 2018, respectively |
|
|
2,416,457 |
|
|
|
2,350,208 |
|
| Customer list and
relationships, net of accumulated amortization of $139,522 and
$108,875 for 2019 and 2018, respectively |
|
|
545,478 |
|
|
|
576,125 |
|
| Trademarks and tradenames |
|
|
1,488,000 |
|
|
|
1,488,000 |
|
| Other intangible assets |
|
|
331,124 |
|
|
|
331,124 |
|
| Non-compete, net of
accumulated amortization of $24,750 and $9,900 for 2019 and 2018,
respectively |
|
|
74,250 |
|
|
|
89,100 |
|
| Goodwill |
|
|
2,157,661 |
|
|
|
2,157,661 |
|
| Equity method investments |
|
|
87,085 |
|
|
|
89,776 |
|
| Deferred income tax asset |
|
|
446,823 |
|
|
|
440,325 |
|
| Deposits and other assets |
|
|
462,050 |
|
|
|
552,904 |
|
|
TOTAL ASSETS |
|
$ |
37,747,504 |
|
|
$ |
38,834,077 |
|
| |
|
|
|
|
|
|
|
|
|
- LIABILITIES AND STOCKHOLDERS’ EQUITY - |
|
|
|
|
|
|
|
|
| CURRENT
LIABILITIES: |
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
3,627,521 |
|
|
$ |
4,833,548 |
|
|
Line of credit |
|
|
5,767,640 |
|
|
|
6,260,014 |
|
|
Due to broker |
|
|
96,704 |
|
|
|
22,046 |
|
|
Note payable |
|
|
|
|
|
|
70,255 |
|
|
Income taxes payable |
|
|
200 |
|
|
|
1,505 |
|
| TOTAL CURRENT
LIABILITIES |
|
|
9,492,065 |
|
|
|
11,187,368 |
|
| |
|
|
|
|
|
|
|
|
| Deferred income tax
liabilities |
|
|
844,532 |
|
|
|
882,022 |
|
| Deferred rent payable |
|
|
205,992 |
|
|
|
242,143 |
|
| Deferred compensation
payable |
|
|
435,987 |
|
|
|
532,726 |
|
| TOTAL
LIABILITIES |
|
|
10,978,576 |
|
|
|
12,844,259 |
|
| |
|
|
|
|
|
|
|
|
| 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; 5,569,349 shares outstanding
as of July 31 2019 and October 31, 2018 |
|
|
6,494 |
|
|
|
6,494 |
|
|
Additional paid-in capital |
|
|
16,332,943 |
|
|
|
16,104,075 |
|
|
Retained earnings |
|
|
13,592,508 |
|
|
|
13,404,767 |
|
|
Less: Treasury stock, 925,331 common shares, at cost as of July 31,
2019 and October 31, 2018 |
|
|
(4,633,560 |
) |
|
|
(4,633,560 |
) |
|
Total Coffee Holding Co., Inc. Stockholders’ Equity |
|
|
25,298,385 |
|
|
|
24,881,776 |
|
|
Noncontrolling interest |
|
|
1,470,543 |
|
|
|
1,108,042 |
|
|
TOTAL EQUITY |
|
|
26,768,928 |
|
|
|
25,989,818 |
|
| TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
$ |
37,747,504 |
|
|
$ |
38,834,077 |
|
COFFEE HOLDING CO.,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
INCOMEFOR THE NINE AND THREE MONTHS ENDED JULY 31,
2019 AND 2018(Unaudited)
|
|
|
Nine Months Ended July 31, |
|
|
Three Months Ended July 31, |
|
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
| NET
SALES |
|
$ |
65,944,583 |
|
|
$ |
67,717,019 |
|
|
$ |
21,594,285 |
|
|
$ |
23,439,903 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| COST OF SALES
(including $5.9 and $7.0 million related party cots for the nine
months ended July 31, 2019 and 2018, respectively and $1.8 and $2.6
million for the three months ended July 31, 2019 and 2018,
respectively.) |
|
|
53,705,272 |
|
|
|
56,263,183 |
|
|
|
17,465,685 |
|
|
|
19,648,710 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GROSS
PROFIT |
|
|
12,239,311 |
|
|
|
11,453,836 |
|
|
|
4,128,600 |
|
|
|
3,791,193 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| OPERATING
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative |
|
|
10,853,495 |
|
|
|
8,905,830 |
|
|
|
3,701,112 |
|
|
|
3,352,268 |
|
|
Officers’ salaries |
|
|
530,750 |
|
|
|
510,750 |
|
|
|
170,250 |
|
|
|
170,250 |
|
|
TOTAL |
|
|
11,384,245 |
|
|
|
9,416,580 |
|
|
|
3,871,362 |
|
|
|
3,522,518 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| INCOME FROM
OPERATIONS |
|
|
855,066 |
|
|
|
2,037,256 |
|
|
|
257,238 |
|
|
|
268,675 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| OTHER INCOME
(EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
8,903 |
|
|
|
11,170 |
|
|
|
3,548 |
|
|
|
3,433 |
|
|
(Loss) gain from equity method investment |
|
|
(2,691 |
) |
|
|
(4,359 |
) |
|
|
(2,613 |
) |
|
|
199 |
|
|
Interest expense |
|
|
(195,493 |
) |
|
|
(286,555 |
) |
|
|
(64,625 |
) |
|
|
(99,906 |
) |
|
TOTAL |
|
|
(189,281 |
) |
|
|
(279,744 |
) |
|
|
(63,690 |
) |
|
|
(96,274 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| INCOME BEFORE
PROVISION FOR INCOME TAXES AND NON-CONTROLLING INTEREST IN
SUBSIDIARY |
|
|
665,785 |
|
|
|
1,757,412 |
|
|
|
193,548 |
|
|
|
172,401 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
115,543 |
|
|
|
447,105 |
|
|
|
34,413 |
|
|
|
35,721 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NET INCOME BEFORE
NON-CONTROLLING INTEREST IN SUBSIDIARY |
|
|
550,242 |
|
|
|
1,310,407 |
|
|
|
159,135 |
|
|
|
136,680 |
|
|
Less: Net (income) attributable to the non-controlling
interest |
|
|
(362,501 |
) |
|
|
(352,481 |
) |
|
|
(47,641 |
) |
|
|
(120,990 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NET INCOME
ATTRIBUTABLE TO COFFEE HOLDING CO., INC. |
|
$ |
187,741 |
|
|
$ |
957,926 |
|
|
$ |
111,494 |
|
|
$ |
15,690 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted earnings per
share |
|
$ |
.03 |
|
|
$ |
.17 |
|
|
$ |
.02 |
|
|
$ |
.00 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
5,569,349 |
|
|
|
5,720,360 |
|
|
|
5,569,349 |
|
|
|
5,673,914 |
|
COFFEE HOLDING CO.,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWSNINE MONTHS ENDED JULY 31, 2019 AND
2018(Unaudited)
| |
|
2019 |
|
|
2018 |
|
| OPERATING
ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
550,242 |
|
|
$ |
1,310,407 |
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
547,483 |
|
|
|
544,564 |
|
|
Stock-based compensation |
|
|
228,868 |
|
|
|
- |
|
|
Unrealized loss (gain) on commodities |
|
|
74,658 |
|
|
|
317,176 |
|
|
Loss (gain) on equity method investments |
|
|
2,691 |
|
|
|
4,359 |
|
|
Deferred rent |
|
|
(36,151 |
) |
|
|
1,323 |
|
|
Deferred income taxes |
|
|
(43,988 |
) |
|
|
3,750 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
1,421,655 |
|
|
|
4,917,860 |
|
|
Inventories |
|
|
(2,431,050 |
) |
|
|
2,240,892 |
|
|
Prepaid expenses and other current assets |
|
|
(107,498 |
) |
|
|
(50,625 |
) |
|
Prepaid green coffee |
|
|
- |
|
|
|
171,350 |
|
|
Prepaid and refundable income taxes |
|
|
94,567 |
|
|
|
178,848 |
|
|
Accounts payable and accrued expenses |
|
|
(1,206,027 |
) |
|
|
(1,698,518 |
) |
|
Deposits and other assets |
|
|
90,854 |
|
|
|
|
|
|
Deferred compensation payable |
|
|
(96,739 |
) |
|
|
|
|
|
Income taxes payable |
|
|
(1,305 |
) |
|
|
5,889 |
|
| Net cash (used in)
provided by operating activities |
|
|
(911,740 |
) |
|
|
7,947,275 |
|
| |
|
|
|
|
|
|
|
|
| INVESTING
ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Cash paid for business acquisition |
|
|
- |
|
|
|
(2,740,217 |
) |
|
Purchases of machinery and equipment |
|
|
(568,235 |
) |
|
|
(299,554 |
) |
| Net cash used in
investing activities |
|
|
(568,235 |
) |
|
|
(3,039,771 |
) |
| |
|
|
|
|
|
|
|
|
| FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Advances under bank line of credit |
|
|
7,626 |
|
|
|
3,800,200 |
|
|
Purchase of treasury stock |
|
|
- |
|
|
|
(894,368 |
) |
|
Principal payment on note payable |
|
|
(70,255 |
) |
|
|
|
|
|
Principal payments under bank line of credit |
|
|
(500,000 |
) |
|
|
(5,059,065 |
) |
| Net cash used in
financing activities |
|
|
(562,629 |
) |
|
|
(2,153,133 |
) |
| |
|
|
|
|
|
|
|
|
| NET (DECREASE)
INCREASE IN CASH |
|
|
(2,042,604 |
) |
|
|
2,754,371 |
|
| |
|
|
|
|
|
|
|
|
| CASH, BEGINNING OF
PERIOD |
|
|
4,611,384 |
|
|
|
2,325,650 |
|
| |
|
|
|
|
|
|
|
|
| CASH, END OF
PERIOD |
|
$ |
2,568,780 |
|
|
$ |
5,080,021 |
|
| |
|
|
|
|
|
|
|
|
| SUPPLEMENTAL
DISCLOSURE OF CASH FLOW DATA: |
|
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
197,216 |
|
|
$ |
285,603 |
|
|
Income taxes paid |
|
$ |
66,269 |
|
|
$ |
245,838 |
|
COFFEE HOLDING CO.,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWSNINE MONTHS ENDED APRIL 30, 2019 AND
2018(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 |
|
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