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Coffee Holding Co., Inc. Reports Results for Three and Nine Months Ended July 31, 2020

Coffee Holding Co., Inc.

STATEN ISLAND, New York, Sept. 11, 2020 (GLOBE NEWSWIRE) -- Coffee Holding Co., Inc. (Nasdaq: JVA) (the “Company”) today announced its operating results for the three months and nine months ended July 31, 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 SHEETS
JULY 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 OPERATIONS
NINE AND THREE MONTHS ENDED JULY 31, 2020 AND 2019
(Unaudited)

 

 

Nine Months Ended
July 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 FLOWS
NINE 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