Coffee Holding Co., Inc. Reports Results for the Three and Nine Months Ended July 31, 2012

Marketwired

STATEN ISLAND, NY--(Marketwire - Sep 12, 2012) -  Coffee Holding Co., Inc. ("Coffee Holding") (NASDAQ: JVA) today announced its operating results for the three and nine months ended July 31, 2012. In this release, the Company:

  • Reports net sales of $138,171,695 for the nine months ended July 31, 2012 and $44,484,453 for the three months ended July 31, 2012 compared to 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;

  • Reports sales growth of 24% for the three months ended July 31, 2012 compared to the three months ended July 31, 2011; and

  • Reports net income of $1,231,196, or $0.19 per share (basic and diluted) for the three months ended July 31, 2012 compared to net income of $168,236, or $0.03 per share (basic and diluted) for the three months ended July 31, 2011.

Results of Operations

The Company had a net income of $1,231,196, or $0.19 per share (basic and diluted), for the three months ended July 31, 2012 compared to net income of $168,236 or $0.03 per share (basic and diluted), for the three months ended July 31, 2011. The Company had net income of $2,439,293, or $0.38 per share basic and $0.37 per share diluted, for the nine months ended July 31, 2012 compared to net income of $2,397,265 or $0.44 per share (basic and diluted), for the nine months ended July 31, 2011. The increase in net income primarily reflects increased gross profit.

Net sales totaled $44,484,453 for the three months ended July 31, 2012, an increase of $8,719,587, or 24%, from $35,764,866 for the three months ended July 31, 2011. The increase in net sales primarily reflects increased sales volume compared to the third quarter of fiscal 2011 due to an increase in sales of green coffee, as well as an increase in private label and branded sales. Net sales totaled $138,171,695 for the nine months ended July 31, 2012, an increase of $39,433,719, or 40%, from $98,737,976 for the nine months ended July 31, 2011. The increase in net sales primarily reflects additional poundage sold in all key areas of the business. 

Cost of sales for the three months ended July 31, 2012 was $40,606,840 or 91.3% of net sales, as compared to $33,670,406 or 94.2% of net sales for the three months ended July 31, 2011. The increase in cost of sales reflects the increase in net sales and the increased cost of green coffee. However, our cost of sales as a percentage of net sales decreased as a result of purchases of inventory at better pricing during the three month period.  Cost of sales for the nine months ended July 31, 2012 was $128,472,249 or 93% of net sales, as compared to $89,963,400 or 91.1% of net sales for the nine months ended July 31, 2011. The increase in cost of sales, and cost of sales as a percentage of revenue, reflects the increase in net sales and the increased cost of green coffee due to additional poundage sold and lower returns from our hedging operations. 

Total operating expenses increased by $104,648, or 6%, to $1,858,672 for the three months ended July 31, 2012 as compared to operating expenses of $1,754,024 for the three months ended July 31, 2011. The increase in operating expenses was due to increases in selling and administrative expenses of $113,297 as result of increased freight costs, insurance and travel and payroll due to increased sales partially offset by a decrease in overhead, licenses and fees and officers' salaries. Total operating expenses increased by $350,022, or 6.7%, to $5,579,111 for the nine months ended July 31, 2012 as compared to operating expenses of $5,229,089 for the nine months ended July 31, 2011. The increase in operating expenses was due to increases in selling and administrative expense of $400,113 as a result of increased freight costs, insurance and payroll due to increased sales partially offset by a decrease in travel costs, professional service fees and officers' salaries of $50,091.

"We are pleased to report this quarter's results to our shareholder base as we overcame many obstacles to achieve strong results during the past ninety days. Despite substantially lower commodity prices, we were still able to increase our revenues by 24% over the same period from last year. Although coffee prices on average were lower by $1.00 per pound, we achieved growth in our sales in all key areas, including green coffee sales, private labels sales and branded sales, building upon our momentum from last quarter, while improving our gross margin by almost three percentage points as well," noted Andrew Gordon, our President and CEO.

"Our increase in earnings per share was also accomplished in spite of losses incurred by OPTCO. In the case of OPTCO, losses totaled almost $200,000 as we were forced to liquidate an oversupply of inventories into a weak commodity and buyer's market. We are hopeful that these temporary conditions at OPTCO will improve and have a positive impact on earnings in the fourth quarter," continued Mr. Gordon.

"Finally, while achieving greater sales growth, we controlled both our variable and fixed costs in the process. Our balance sheet is as strong as it has ever been over our forty plus years of existence and if and when commodity and macro conditions stabilize, we believe our revenues and earnings will reflect the benefits of a normalized business environment," stated Mr. Gordon.

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 16, 2012. The dividend will be paid on October 29, 2012.

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.

ITEM 1. FINANCIAL STATEMENTS

   
COFFEE HOLDING CO., INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
JULY 31, 2012 AND OCTOBER 31, 2011  
   
    July 31, 2012     October 31, 2011  
    (unaudited)        
- ASSETS -                
CURRENT ASSETS:                
  Cash   $ 1,373,344     $ 4,244,335  
  Accounts receivable, net of allowances of $269,611 for 2012 and 2011     13,587,974       16,021,581  
  Inventories     11,198,755       13,475,855  
  Prepaid green coffee     201,300       388,754  
  Prepaid expenses and other current assets     188,866       275,679  
  Prepaid and refundable income taxes     202,033       377,972  
  Deferred income tax asset     233,474       896,400  
    TOTAL CURRENT ASSETS     26,985,746       35,680,576  
Machinery and equipment, at cost, net of accumulated depreciation of $2,518,570 and $2,191,566 for 2012 and 2011, respectively     1,851,787       1,661,759  
Customer list and relationships, net of accumulated amortization of $16,875 and $11,250 for 2012 and 2011, respectively     133,125       138,750  
Trademarks     180,000       180,000  
Goodwill     440,000       440,000  
Equity investments     2,072,529       -  
Deposits and other assets     645,447       677,606  
      TOTAL ASSETS   $ 32,308,634     $ 38,778,691  
- LIABILITIES AND STOCKHOLDERS' EQUITY -                
CURRENT LIABILITIES:                
  Accounts payable and accrued expenses   $ 6,163,171     $ 12,379,414  
  Line of credit     1,379,445       1,820,109  
  Due to broker     166,301       1,867,558  
  Income taxes payable     242       100  
    TOTAL CURRENT LIABILITIES     7,709,159       16,067,181  
                 
Deferred income tax liabilities     974       35,900  
Deferred rent payable     161,732       146,921  
Deferred compensation payable     521,167       538,707  
    TOTAL LIABILITIES     8,393,032       16,788,709  
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, 6,456,316 shares issued; 6,372,309 shares outstanding for 2012 and 2011     6,456       6,456  
  Additional paid-in capital     15,904,109       15,884,609  
  Contingent consideration     -       19,500  
  Retained earnings     8,126,552       6,268,326  
  Less: Treasury stock, 84,007 common shares, at cost for 2012 and 2011     (272,133 )     (272,133 )
    Total Coffee Holding Co., Inc. Stockholders' Equity     23,764,984       21,906,758  
  Noncontrolling interest     150,618       83,224  
TOTAL EQUITY     23,915,602       21,989,982  
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 32,308,634     $ 38,778,691  
                     
   
COFFEE HOLDING CO., INC.  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  
(Unaudited)  
   
  Nine Months Ended
July 31
,
  Three Months Ended
July 31,
 
 
  2012   2011   2012   2011  
NET SALES $ 138,171,695   $ 98,737,976   $ 44,484,453   $ 35,764,866  
                         
COST OF SALES (including $23.4 and $18.5 million of related party costs for the nine months ended July 31, 2012 and 2011, respectively. Including $5.9 and $6.8 million for the three months ended July 31, 2012 and 2011, respectively.)   128,472,249     89,963,400     40,606,840     33,670,406  
                         
GROSS PROFIT   9,699,446     8,774,576     3,877,613     2,094,460  
                         
OPERATING EXPENSES:                        
  Selling and administrative   5,149,653     4,749,540     1,717,472     1,604,175  
  Officers' salaries   429,458     479,549     141,200     149,849  
    TOTALS   5,579,111     5,229,089     1,858,672     1,754,024  
                         
INCOME FROM OPERATIONS   4,120,335     3,545,487     2,018,941     340,436  
                         
OTHER INCOME (EXPENSE)                        
  Interest income   27,909     131,628     9,268     20,297  
  (Loss) income from equity investment   (27,471 )   -     3,627     -  
  Interest expense   (153,294 )   (195,477 )   (46,762 )   (76,817 )
    TOTALS   (152,856 )   (63,849 )   (33,867 )   (56,520 )
                         
INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTEREST IN SUBSIDIARIES   3,967,479     3,481,638     1,985,074     283,916  
                         
  Provision for income taxes   1,460,792     1,064,817     729,979     106,161  
                         
NET INCOME   2,506,687     2,416,821     1,255,095     177,755  
  Less: net income attributable to the noncontrolling interest   (67,394 )   (19,556 )   (23,899 )   (9,519 )
                         
NET INCOME ATTRIBUTABLE TO COFFEE HOLDING CO., INC. $ 2,439,293   $ 2,397,265   $ 1,231,196   $ 168,236  
                         
Basic earnings per share $ .38   $ .44   $ .19   $ .03  
                         
Diluted earnings per share $ .37   $ .44   $ .19   $ .03  
                         
Dividends declared per share $ .09   $ .09   $ .03   $ .03  
                         
Weighted average common shares outstanding:                        
    Basic   6,372,309     5,490,823     6,372,309     5,490,823  
    Diluted   6,639,309     5,500,823     6,639,309     5,500,823  
                             
   
COFFEE HOLDING CO., INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
NINE MONTHS ENDED July 31, 2012 AND 2011  
(Unaudited)  
   
    2012     2011  
OPERATING ACTIVITIES:                
  Net income   $ 2,506,687     $ 2,416,821  
  Adjustments to reconcile net income to net cash (used in) provided by operating activities:                
    Depreciation and amortization     332,630       323,239  
    Unrealized (gain) loss on commodities     (1,701,257 )     1,154,557  
    Loss on equity investments     27,471       -  
    Deferred rent     14,811       16,624  
    Deferred income taxes     628,000       (585,750 )
  Changes in operating assets and liabilities:                
    Accounts receivable     2,433,607       (4,255,299 )
    Inventories     2,277,100       (4,934,661 )
    Prepaid expenses and other current assets     86,813       238,091  
    Prepaid green coffee     187,454       168,523  
    Prepaid and refundable income taxes     175,939       (71,869 )
    Accounts payable and accrued expenses     (6,216,243 )     3,734,577  
    Deposits and other assets     14,619       14,616  
    Income taxes payable     142       394,774  
      Net cash provided by (used in) operating activities     767,773       (1,385,757 )
                 
INVESTING ACTIVITIES:                
  Equity investments     (2,100,000 )     -  
  Purchases of machinery and equipment     (517,033 )     (419,212 )
      Net cash used in investing activities     (2,617,033 )     (419,212 )
                 
FINANCING ACTIVITIES:                
  Advances under bank line of credit     129,236,460       96,021,666  
  Principal payments under bank line of credit     (129,677,124 )     (91,616,329 )
  Payment of dividend     (581,067 )     (500,967 )
      Net cash (used in) provided by financing activities     (1,021,731 )     3,904,370  
                 
                 
NET (DECREASE) INCREASE IN CASH     (2,870,991 )     2,099,401  
                 
CASH, BEGINNING OF PERIOD     4,244,335       1,672,921  
                 
CASH, END OF PERIOD   $ 1,373,344     $ 3,772,322  
                 
                 
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:                
    Interest paid   $ 168,428     $ 179,857  
    Income taxes paid   $ 570,160       1,317,698  
                 
Contact:
CONTACT:
Coffee Holding Co., Inc.
Andrew Gordon
President & CEO
(718) 832-0800
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