Coffee Holding Co., Inc. (Nasdaq: JVA) (the “Company”) today
re-circulated its operating results for the three months and nine
months ended July 31, 2020 which the Company originally announced
on September 11, 2020:
Net sales Net sales totaled
$17,344,009 for the three months ended July 31, 2020, a decrease of
$4,250,276, or 19.7%, from $21,594,285 for the three months ended
July 31, 2019. Net sales totaled $56,725,386 for the nine months
ended July 31, 2020, a decrease of $9,219,197, or 14%, from
$65,944,583 for the nine months ended July 31, 2019. The decrease
in net sales was due to the COVID-19 pandemic which caused many of
the Company’s green coffee customers who service the restaurant and
food service industry to either close or suspend their business
operations during the period resulting in lost revenues from that
segment of the Company’s customer base.
Cost of sales Cost of sales for
the three months ended July 31, 2020 was $13,517,482, or 77.9% of
net sales, as compared to $17,465,685, or 80.9% of net sales, for
the three months July 31, 2019. Cost of sales for the nine months
ended July 31, 2020 was $45,287,198, or 79.8% of net sales, as
compared to $53,705,272, or 81.4% of net sales, for the nine months
July 31, 2019. The decrease in cost of sales was due to the
Company’s decreased sales partially offset by its favorable green
coffee position.
Gross profit Gross profit for
the three months ended July 31, 2020 amounted to $3,826,527, or
22.1% of net sales, as compared to $4,128,600, or 19.1% of net
sales, for the three months ended July 31, 2019. Gross profit for
the nine months ended July 31, 2020 amounted to $11,438,188, or
20.2% of net sales, as compared to $12,239,311, or 18.6% of net
sales, for the nine months ended July 31, 2019. The increase in
gross profits as a percentage of sales is attributable to a change
in the Company’s product mix where it sold a higher percentage of
branded and private label roasted coffee.
Total operating expenses Total
operating expenses decreased by $619,127 to $3,252,235 for the
three months ended July 31, 2020 from $3,871,362 for the three
months ended July 31, 2019. Total operating expenses decreased by
$853,598 to $10,530,647 for the nine months ended July 31, 2020
from $11,384,245 for the nine months ended July 31, 2019. The
Company’s efforts to control costs through the elimination of
redundancy in its operations and the elimination of certain
unnecessary variable costs were the primary reasons for this
decrease.
The Company had a net income of $391,324, or
$0.07 per share basic and diluted, for the three months ended July
31, 2020 compared to net income of $111,494, or $0.02 per share
basic and diluted for the three months ended July 31, 2019. The
Company had net income of $289,994, or $0.05 per share basic and
diluted, for the nine months ended July 31, 2020 compared to net
income of $187,741, or $0.03 per share basic and diluted for the
nine months ended July 31, 2019. The increase in net income was due
primarily to the reasons described above.
“I’m pleased to report our second consecutive
profitable quarter, as we earned $.07 per share despite a 19.7%
decline in sales as the impact of the COVID-19 pandemic continues
to negatively impact sales of green coffee. Unlike last quarter,
sales of our roasted private label products were unable to offset
the lower sales of green coffee. Unfortunately, the surge in
overall industry supermarket sales of coffee seen from March
through June of this year, which saw overall industry coffee sales
throughout the market spike by 8.1% year over year, did not
continue into the summer months,” stated Andrew Gordon, President
and CEO of Coffee Holding Company. “However, heading into the
September through November period, which have traditionally been
our strongest months from a sales perspective, I expect to see a
buying surge from our supermarket customers, for both private label
and branded products, as our customers’ inventory stockpiles have
likely been reduced to pre-pandemic levels.
“In addition, as most states begin to ease
restrictions on commercial and recreational activities, I believe
we may begin to see increases in sales of green coffee, as our
customers begin to reopen their restaurants, cafes and food service
operations,” stated Mr. Gordon.
“Also, during this quarter, coffee prices
recovered from their bear market levels below $1.00 per pound, and
have subsequently traded to one year highs. We expect this to be a
tailwind for us once our sales of green coffee normalize at these
higher market levels and we will be able to sell from the favorable
inventory position we acquired during the first half of 2020. We
have also paid down our bank line by almost 50% during the quarter
ended July 31, 2020, as we reduced inventory and were able to
generate free cash from our profits,” added Mr. Gordon. “Further,
this quarter we continued to have the negative, but non-cash,
impact on our profits resulting from our previously established
employee option plan. The effect this quarter was $189,769, or an
impact on earnings of $.03 per share.
“Lastly, in keeping pace with the times, both
myself and my brother, our VP of Operations, will be taking pay
cuts of between 5% to 15%, to become effective at the start of our
fiscal year 2021. These pay cuts will ensure and promote continued
equality within our organization as well as act as a direct cost
reduction strategy which will offset any additional sales slowdown
due to COVID-19,” 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.
Forward looking statements
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 the revenue growth at
Steep N Brew and Comfort Foods. 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, the effect of the
COVID-19 pandemic, 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 SHEETSJULY
31, 2020 AND OCTOBER 31, 2019
|
|
July 31, 2020 |
|
|
October 31, 2019 |
|
|
|
(Unaudited) |
|
|
|
|
- ASSETS - |
|
|
|
|
|
|
|
|
CURRENT
ASSETS: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
2,192,778 |
|
|
$ |
2,402,556 |
|
Accounts receivable, net of allowances of $144,000 for 2020 and
2019 |
|
|
6,833,826 |
|
|
|
9,421,427 |
|
Inventories |
|
|
18,541,976 |
|
|
|
18,841,225 |
|
Due from broker |
|
|
456,110 |
|
|
|
101,031 |
|
Prepaid expenses and other current assets |
|
|
708,189 |
|
|
|
587,626 |
|
Prepaid and refundable income taxes |
|
|
231,776 |
|
|
|
385,934 |
|
TOTAL CURRENT ASSETS |
|
|
28,964,655 |
|
|
|
31,739,799 |
|
|
|
|
|
|
|
|
|
|
Machinery and equipment, at
cost, net of accumulated depreciation of $7,449,842 and $6,931,913
for 2020 and 2019, respectively |
|
|
2,314,434 |
|
|
|
2,413,533 |
|
Customer list and
relationships, net of accumulated amortization of $183,691 and
$151,627 for 2020 and 2019, respectively |
|
|
501,309 |
|
|
|
533,373 |
|
Trademarks and tradenames |
|
|
1,488,000 |
|
|
|
1,488,000 |
|
Non-compete, net of
accumulated amortization of $44,550 and $29,700 for 2020 and 2019,
respectively |
|
|
54,450 |
|
|
|
69,300 |
|
Goodwill |
|
|
2,488,785 |
|
|
|
2,488,785 |
|
Equity method investments |
|
|
81,469 |
|
|
|
86,008 |
|
Deferred income tax asset |
|
|
487,500 |
|
|
|
480,473 |
|
Right of use asset |
|
|
2,186,882 |
|
|
|
|
|
Deposits and other assets |
|
|
312,609 |
|
|
|
387,453 |
|
TOTAL ASSETS |
|
$ |
38,880,093 |
|
|
$ |
39,686,724 |
|
|
|
|
|
|
|
|
|
|
- LIABILITIES AND STOCKHOLDERS’ EQUITY - |
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
2,906,586 |
|
|
$ |
4,344,015 |
|
Line of credit |
|
|
|
|
|
|
7,167,740 |
|
Note payable – current portion |
|
|
2,220 |
|
|
|
- |
|
Paycheck Protection Program loan |
|
|
634,400 |
|
|
|
|
|
Lease liability – current portion |
|
|
464,517 |
|
|
|
- |
|
Income taxes payable |
|
|
317 |
|
|
|
100 |
|
TOTAL CURRENT LIABILITIES |
|
|
4,008,040 |
|
|
|
11,511,855 |
|
|
|
|
|
|
|
|
|
|
Deferred income tax
liabilities |
|
|
952,732 |
|
|
|
872,232 |
|
Line of credit – long
term |
|
|
3,796,822 |
|
|
|
- |
|
Deferred rent payable |
|
|
|
|
|
|
193,461 |
|
Lease liability |
|
|
1,883,681 |
|
|
|
- |
|
Note payable – long term |
|
|
21,377 |
|
|
|
- |
|
Deferred compensation
payable |
|
|
303,609 |
|
|
|
378,453 |
|
TOTAL LIABILITIES |
|
|
10,966,261 |
|
|
|
12,956,001 |
|
Commitments and
Contingencies |
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY: |
|
|
|
|
|
|
|
|
Coffee Holding Co., Inc. stockholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock, par value $.001 per share; 10,000,000 shares
authorized; none issued |
|
|
- |
|
|
|
- |
|
Common stock, par value $.001 per share; 30,000,000 shares
authorized, 6,494,680 shares issued; 5,569,349 shares outstanding
for 2020 and 2019, respectively |
|
|
6,494 |
|
|
|
6,494 |
|
Additional paid-in capital |
|
|
17,259,683 |
|
|
|
16,580,974 |
|
Retained earnings |
|
|
13,600,163 |
|
|
|
13,310,169 |
|
Less: Treasury stock, 925,331 common shares, at cost for 2020 and
2019, respectively |
|
|
(4,633,560 |
) |
|
|
(4,633,560 |
) |
Total Coffee Holding Co., Inc. Stockholders’ Equity |
|
|
26,232,780 |
|
|
|
25,264,077 |
|
Noncontrolling interest |
|
|
1,681,052 |
|
|
|
1,466,646 |
|
TOTAL EQUITY |
|
|
27,913,832 |
|
|
|
26,730,723 |
|
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
$ |
38,880,093 |
|
|
$ |
39,686,724 |
|
COFFEE HOLDING CO.,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONSNINE AND THREE MONTHS ENDED JULY 31,
2020 AND 2019(Unaudited)
|
|
Nine Months EndedJuly 31, |
|
|
Three Months Ended July 31, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
NET
SALES |
|
$ |
56,725,386 |
|
|
$ |
65,944,583 |
|
|
$ |
17,344,009 |
|
|
$ |
21,594,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF SALES
(including $4.5 and $5.9 million of related party costs for the
nine months ended July 31, 2020 and 2019, respectively. Including
$1.5 and $1.8 million for the three months ended July 31, 2020 and
2019, respectively.) |
|
|
45,287,198 |
|
|
|
53,705,272 |
|
|
|
13,517,482 |
|
|
|
17,465,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT |
|
|
11,438,188 |
|
|
|
12,239,311 |
|
|
|
3,826,527 |
|
|
|
4,128,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative |
|
|
10,032,993 |
|
|
|
10,853,495 |
|
|
|
3,081,985 |
|
|
|
3,701,112 |
|
Officers’ salaries |
|
|
497,654 |
|
|
|
530,750 |
|
|
|
170,250 |
|
|
|
170,250 |
|
TOTAL |
|
|
10,530,647 |
|
|
|
11,384,245 |
|
|
|
3,252,235 |
|
|
|
3,871,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM
OPERATIONS |
|
|
907,541 |
|
|
|
855,066 |
|
|
|
574,292 |
|
|
|
257,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
2,944 |
|
|
|
8,903 |
|
|
|
247 |
|
|
|
3,548 |
|
Loss from equity method investment |
|
|
(4,539 |
) |
|
|
(2,691 |
) |
|
|
(1,547 |
) |
|
|
(2,613 |
) |
Interest expense |
|
|
(150,742 |
) |
|
|
(195,493 |
) |
|
|
(45,283 |
) |
|
|
(64,625 |
) |
TOTAL |
|
|
(152,337 |
) |
|
|
(189,281 |
) |
|
|
(46,583 |
) |
|
|
(63,690 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE
PROVISION FOR INCOME TAXES AND NON-CONTROLLING INTEREST IN
SUBSIDIARY |
|
|
755,204 |
|
|
|
665,785 |
|
|
|
527,709 |
|
|
|
193,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
250,804 |
|
|
|
115,543 |
|
|
|
161,454 |
|
|
|
34,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME BEFORE
NON-CONTROLLING INTEREST IN SUBSIDIARY |
|
|
504,400 |
|
|
|
550,242 |
|
|
|
366,255 |
|
|
|
159,135 |
|
Less: Net (income) loss attributable to the non-controlling
interest |
|
|
(214,406 |
) |
|
|
(362,501 |
) |
|
|
25,069 |
|
|
|
(47,641 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
ATTRIBUTABLE TO COFFEE HOLDING CO., INC. |
|
$ |
289,994 |
|
|
$ |
187,741 |
|
|
$ |
391,324 |
|
|
$ |
111,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per
share |
|
$ |
.05 |
|
|
$ |
.03 |
|
|
$ |
.07 |
|
|
$ |
.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
5,569,349 |
|
|
|
5,569,349 |
|
|
|
5,569,349 |
|
|
|
5,569,349 |
|
COFFEE HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWSNINE MONTHS ENDED JULY 31, 2020 AND
2019(Unaudited)
|
|
2020 |
|
|
2019 |
|
OPERATING
ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
504,400 |
|
|
$ |
550,242 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
564,843 |
|
|
|
547,483 |
|
Stock-based compensation |
|
|
678,709 |
|
|
|
228,868 |
|
Unrealized (gain) loss on commodities |
|
|
(355,079 |
) |
|
|
74,658 |
|
Loss on equity method investments |
|
|
4,539 |
|
|
|
2,691 |
|
Deferred rent |
|
|
- |
|
|
|
(36,151 |
) |
Amortization of right to use asset |
|
|
325,140 |
|
|
|
- |
|
Deferred income taxes |
|
|
73,473 |
|
|
|
(43,988 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
2,587,601 |
|
|
|
1,421,655 |
|
Inventories |
|
|
299,249 |
|
|
|
(2,431,050 |
) |
Prepaid expenses and other current assets |
|
|
(120,563 |
) |
|
|
(107,498 |
) |
Prepaid and refundable income taxes |
|
|
154,158 |
|
|
|
94,567 |
|
Accounts payable and accrued expenses |
|
|
(1,437,428 |
) |
|
|
(1,206,027 |
) |
Change in lease liability |
|
|
(357,286 |
) |
|
|
- |
|
Deposits and other assets |
|
|
|
|
|
|
(5,885 |
) |
Income taxes payable |
|
|
217 |
|
|
|
(1,305 |
) |
Net cash provided by (used in) operating
activities |
|
|
2,921,973 |
|
|
|
(911,740 |
) |
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchases of machinery and equipment |
|
|
(392,023 |
) |
|
|
(568,235 |
) |
Net cash used in investing activities |
|
|
(392,023 |
) |
|
|
(568,235 |
) |
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Advances under bank line of credit |
|
|
1,141,132 |
|
|
|
7,626 |
|
Proceeds from PPP loan |
|
|
634,400 |
|
|
|
|
|
Principal payment on note payable |
|
|
(3,210 |
) |
|
|
(70,255 |
) |
Principal payments under bank line of credit |
|
|
(4,512,050 |
) |
|
|
(500,000 |
) |
Net cash used in financing activities |
|
|
(2,739,728 |
) |
|
|
(562,629 |
) |
|
|
|
|
|
|
|
|
|
NET DECREASE IN
CASH |
|
|
(209,778 |
) |
|
|
(2,042,604 |
) |
|
|
|
|
|
|
|
|
|
CASH, BEGINNING OF
PERIOD |
|
|
2,402,556 |
|
|
|
4,611,384 |
|
|
|
|
|
|
|
|
|
|
CASH, END OF
PERIOD |
|
$ |
2,192,778 |
|
|
$ |
2,568,780 |
|
|
|
2020 |
|
|
2019 |
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW DATA: |
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
159,484 |
|
|
$ |
197,216 |
|
Income taxes paid |
|
$ |
22,956 |
|
|
$ |
66,269 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial recognition of operating lease right of use asset |
|
$ |
2,512,022 |
|
|
|
|
|
Initial recognition of operating lease liabilities |
|
$ |
2,705,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery and equipment acquired through financing |
|
$ |
26,807 |
|
|
|
|
|
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