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Coffee Holding Co., Inc. Reports Year End Results

Year End Results

STATEN ISLAND, NY / ACCESSWIRE / January 27, 2017 / Coffee Holding Co., Inc. (JVA) (the "Company") today announced its operating results for the fiscal year ended October 31, 2016:

The Company had net income of $2,212,288 or $0.36 per share basic and diluted, for the fiscal year ended October 31, 2016 compared to a net loss of $(1,413,228), or $(0.23) per share basic and diluted for the fiscal year ended October 31, 2015. The increase in net income was due primarily to the reasons described below.

Net sales totaled $78,948,228 for the fiscal year ended October 31, 2016, a decrease of $39,205,313, or approximately 33%, from $118,153,541 for the fiscal year ended October 31, 2015. The decrease in net sales reflects reduced wholesale transactions with our largest wholesale green coffee customer during fiscal 2016 of approximately $41,044,000.

Cost of sales for the fiscal year ended October 31, 2016 was $67,066,050, or approximately 85% of net sales, as compared to $112,436,831, or approximately 95% of net sales, for the fiscal year ended October 31, 2015. 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 decrease in cost of sales reflects a more favorable inventory position during fiscal 2016 and our reduced wholesale transactions with our largest wholesale green coffee customer.

Gross profit for the fiscal year ended October 31, 2016 was $11,882,178, an increase of $6,165,468 from $5,716,710 for the fiscal year ended October 31, 2015. Gross profit as a percentage of net sales increased to approximately 15% for the fiscal year ended October 31, 2016 from approximately 5% for the fiscal year ended October 31, 2015. The increase in our margins was due to improved margins on our wholesale and roasted business as well as a decrease in our losses period to period on our hedging operations.

Total operating expenses increased by $365,081 to $8,019,110 for the fiscal year ended October 31, 2016 from $7,654,029 for the fiscal year ended October 31, 2015. Selling and administrative expenses increased $362,966, or approximately 5%, to $7,363,710 for the fiscal year ended October 31, 2016 from $7,000,744 for the fiscal year ended October 31, 2015.

"A combination of improved margins, a 26% jump in revenues from our JV Generations Coffee LLC combined with increased sales of our Hispanic brand espresso Café Caribe enabled us to show a strong increase in our profitability despite a 33% decrease in revenues year over year. The decline in revenues was from a single customer and was not unexpected," said Andrew Gordon CEO and President of Coffee Holding Company.

"Our focus in 2016 was to return to profitability and to increase margins across our three key business areas, wholesale green sales, private label and branded coffee sales; and in those respects, we accomplished our goals. In addition, our acquisition in Q3 of Sonofresco, a manufacturer and seller of table top coffee roasters and gourmet green coffee beans is an exciting addition to our already strong horizontally and vertically integrated business model. We believe we will have the ability to expand their roaster sales to a much larger customer base using our highly visible presence in the specialty gourmet coffee space, as well as our connections with supermarkets and retailers in the U.S., Canada and the Pacific Rim. Last year's fiscal results were not materially impacted by this transaction but I believe they will have a positive impact in fiscal 2017. In addition, we implemented other business initiatives late in Q3 and Q4 which did not impact 2016 results, but we look forward to the positive impact on our financial results that we expect in 2017 from these developments. As many of the initial start-up costs associated with these new business activities were expensed in 2016, we expect the bottom line impact will be even greater going forward. Finally, in fiscal 2016 we increased our in-house sales team for the first time in several years. Our intent is to use our expanded sales force to assist in increasing our revenues in food service, tea sales and wholesale green coffee container sales as well support our anticipated entry into the highly contested and rapidly expanding cold brew space; areas in which we have previously underperformed but believe with a renewed focus can be accretive to our overall business performance.

Our ability to accomplish the goals outlined above along with the strength we are experiencing across our three key business areas should solidify and build revenues and profitability in fiscal 2017."

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.

Company Contact

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

COFFEE HOLDING CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 2016 AND 2015

2016

2015

- ASSETS -

CURRENT ASSETS:

Cash

$

3,227,981

$

3,853,816

Accounts receivable, net of allowances of $144,000 for 2016 and 2015

13,517,892

10,968,237

Inventories

14,276,290

13,862,818

Prepaid green coffee

435,577

620,452

Prepaid expenses and other current assets

535,456

256,202

Prepaid and refundable income taxes

481,977

1,434,577

Due from broker

134,722

Deferred income tax asset

81,545

997,720

TOTAL CURRENT ASSETS

32,691,440

31,993,822

Machinery and equipment, at cost, net of accumulated depreciation of $4,819,828 and $4,241,256 for 2016 and 2015, respectively

2,269,863

1,845,000

Customer list and relationships, net of accumulated amortization of $50,250 and $41,250 for 2016 and 2015, respectively

219,750

108,750

Trademarks

180,000

180,000

Goodwill

1,017,905

440,000

Equity method investments

95,598

96,571

Deposits and other assets

549,337

610,499

TOTAL ASSETS

$

37,023,893

$

35,274,642

- LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY -

CURRENT LIABILITIES:

Accounts payable and accrued expenses

$

4,062,573

$

4,021,389

Line of credit

6,958,375

5,554,121

Due to broker

-

483,835

Income taxes payable

1,050

-

TOTAL CURRENT LIABILITIES

11,021,998

10,059,345

Deferred income tax liabilities

167,470

92,370

Deferred rent payable

231,216

222,055

Deferred compensation payable

489,668

482,499

TOTAL LIABILITIES

11,910,352

10,856,269

Redeemable common stock:

Common stock subject to possible redemption, at $200,004; 38,364 shares issued and outstanding at redemption value as of October 31, 2016, none as of October 31, 2015

200,004


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 and 6,456,316 shares issued; 5,824,938 and 6,162,207 shares outstanding for 2016 and 2015

6,456

6,456

Additional paid-in capital

15,904,109

15,904,109

Retained earnings

11,878,228

9,665,940

Less: Treasury stock, 631,378 and 294,109 common shares, at cost for 2016 and 2015

(3,249,590

)

(1,494,712

)

Total Coffee Holding Co., Inc. Stockholders' Equity

24,539,203

24,081,793

Noncontrolling interest

374,334

336,580

TOTAL EQUITY

24,913,537

24,418,373

TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY

$

37,023,893

$

35,274,642


COFFEE HOLDING CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED OCTOBER 31, 2016 AND 2015

2016

2015

NET SALES

$

78,948,228

$

118,153,541

COST OF SALES (which include purchases of approximately $8.5 million and $22.1 million in fiscal years 2016 and 2015, respectively, from a related party)

67,066,050

112,436,831

GROSS PROFIT

11,882,178

5,716,710

OPERATING EXPENSES:

Selling and administrative

7,363,710

7,000,744

Officers' salaries

655,400

653,285

TOTAL

8,019,110

7,654,029

INCOME (LOSS) FROM OPERATIONS

3,863,068

(1,937,319

)

OTHER INCOME (EXPENSE):

Interest income

41,176

45,049

Loss from equity method investments

(972

)

(833

)

Interest expense

(187,310

)

(200,074

)

TOTAL

(147,106

)

(155,858

)

INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES

AND NON-CONTROLLING INTEREST IN SUBSIDIARY

3,715,962

(2,093,177

)

Provision (benefit) for income taxes

1,365,920

(763,647

)

NET INCOME (LOSS) BEFORE NON-CONTROLLING INTEREST IN SUBSIDIARY

2,350,042

(1,329,530

)

Less: Net income attributable to the non-controlling interest in subsidiary

(137,754

)

(83,698

)

NET INCOME (LOSS) ATTRIBUTABLE TO COFFEE HOLDING CO., INC.

$

2,212,288

$

(1,413,228

)

Basic and diluted earnings (loss) per share

$

.36

$

(.23

)

Weighted average common shares outstanding:

Basic and diluted

6,082,777

6,212,929


COFFEE HOLDING CO., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED OCTOBER 31, 2016 AND 2015


2016

2015

OPERATING ACTIVITIES:

Net income (loss)

$

2,350,042

$

(1,329,530

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

587,572

545,390

Unrealized (gain) on commodities

(618,557

)

(1,089

)

Loss on equity method investments

972

833

Deferred rent

9,161

12,415

Deferred income taxes

991,275

(726,850

)

Changes in operating assets and liabilities:

Accounts receivable

(2,465,512

)

4,451,623

Inventories

(143,907

)

1,347,335

Prepaid expenses and other current assets

(279,254

)

3,910

Prepaid green coffee

184,875

(153,297

)

Prepaid and refundable income taxes

952,600

(1,433,818

)

Accounts payable and accrued expenses

(30,860

)

(4,671,711

)

Deposits and other assets

68,331

-

Income taxes payable

1,050

(331,051

)

Net cash provided by (used in) operating activities

1,607,788

(2,285,840

)

INVESTING ACTIVITIES:

Cash paid for acquisition of business

(819,564

)

-

Purchases of machinery and equipment

(963,435

)

(391,796

)

Net cash used in investing activities

(1,782,999

)

(391,796

)

FINANCING ACTIVITIES:

Line of credit

1,404,254

3,055,663

Purchase of treasury stock

(1,754,878

)

(226,850

)

Payment of dividend

(100,000

)

(80,000

)

Net cash (used in) provided by financing activities

(450,624

)

2,748,813

NET (DECREASE) INCREASE IN CASH

(625,835

)

71,177

CASH, BEGINNING OF PERIOD

3,853,816

3,782,639

CASH, END OF PERIOD

$

3,227,981

$

3,853,816

COFFEE HOLDING CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 2016 AND 2015

2016

2015

SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:

Interest paid

$

181,007

$

196,556

Income taxes paid

$

34,183

$

1,651,156

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

On June 29, 2016 Coffee Holding Co., Inc. acquired certain assets of Coffee Kinetics, LLC:

Accounts receivable

$

84,142

Inventory

269,565

Equipment

40,000

Customer list

120,000

Goodwill

577,905

Less: liabilities assumed

(72,044

)

Net assets acquired:

1,019,568

Redeemable Common Stock

200,004

Net cash paid

$

819,564

SOURCE: Coffee Holding Co., Inc.