STATEN ISLAND, N.Y., Jan. 26, 2012 (GLOBE NEWSWIRE) -- Coffee Holding Co., Inc. (Nasdaq:JVA) today announced its operating results for the year ended October 31, 2011. In this release, the Company:
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Reports record net sales of $146,755,165 for the fiscal year ended October 31, 2011;
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Reports sales growth of 75.8% for the fiscal year ended October 31, 2011 compared to the fiscal year ended October 31, 2010;
- Reports net income of $811,930, or $0.15 per share (basic) and $0.14 per share (diluted) for the fiscal year ended October 31, 2011; and
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Reports payment of $0.12 in quarterly dividends in fiscal 2011 as compared to $0.06 paid during the last two quarters of fiscal 2010.
The Company had net income of $811,930, or $0.15 per share (basic) and $0.14 per share (diluted) for the year ended October 31, 2011 compared to a net income of $2,389,361, or $0.44 per share (basic and diluted) for the year ended October 31, 2010. The decrease in net income primarily reflects realized and unrealized hedging losses during fiscal 2011 as discussed below.
Net sales totaled $146,755,165 for the fiscal year ended October 31, 2011, an increase of $63,263,198, or 75.8%, from $83,491,967 for the fiscal year ended October 31, 2010. The increase in net sales reflects higher coffee prices during the fiscal year ended 2011 as compared to the fiscal year ended 2010, as well as an increase in pounds of coffee sold as we surpassed 48 million pounds sold in a fiscal year for the first time in the history of the Company.
Cost of sales for the fiscal year ended October 31, 2011 was $138,210,277, or 94.2% of net sales, as compared to $72,931,626, or 87.3%, of net sales for the fiscal year ended October 31, 2010. 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 increase in cost of sales primarily reflects the increased cost of green coffee and our realized and unrealized losses on hedging activities. We had green coffee purchases of $125,478,382 million and $64,888,163 million for the fiscal years ended 2011 and 2010, of which approximately $25.3 million and $19.3 million for the fiscal years ended 2011 and 2010, respectively, were from a related party. In addition, we had net realized and unrealized hedging losses of approximately $1,222,735 and $2,143,057, respectively, during fiscal 2011 as compared to net realized and unrealized hedging gains of approximately $1,175,028 and $198,193, respectively, during fiscal 2010. Extreme volatility in green coffee prices negatively impacted our hedging activities.
Total operating expenses increased $800,555, or 12.2%, to $7,345,152 for the fiscal year ended October 31, 2011 from $6,544,597 for the fiscal year ended October 31, 2010 due to an increase in selling and administrative expense, partially offset by no bonuses paid to our executive officers. Selling and administrative expenses increased $906,356, or 15.6%, to $6,715,753 for the year ended October 31, 2011 from $5,809,397 for 2010. The increase in selling and administrative expenses reflects several factors, including increases of approximately $391,000 in labor and related taxes, $25,000 in advertising costs, $79,000 in insurance cost, $66,000 in rent expense, $130,000 in bank and credit card fees, $72,000 in licenses, $95,000 in freight costs, $84,000 in travel/show and demo costs, and $62,000 in charitable donations, partially offset by a decrease of approximately $144,000 in professional fees. The increase in selling and administrative expenses was due primarily to the fact that our "OPTCO subsidiary was part of our company for the entire twelve months of the fiscal year ended 2011 as compared to five and half months during the fiscal year ended 2010.
"2011 was a successful growth year for the Company. We had record net sales of approximately $146.7 million and for the first time in our history we surpassed 48 million pounds of coffee sold during the fiscal year. The growth was driven by an increase in sales in all areas of our business - green coffee, private label, Café Caribe, OPTCO and Generations Coffee Company," said Andrew Gordon, President and Chief Operating Officer.
"That said, our cost of sales for the fiscal year were negatively impacted by realized and unrealized losses on our hedging activities during the third and fourth quarters. Outside market forces greatly influenced the daily performance of many asset classes, most notably agricultural commodities and coffee was no exception. Extreme volatility in green coffee prices during the second half of fiscal 2011 negatively impacted the market. For example, in mid August, coffee prices increased $0.50 per pound, or 21%, in just under three weeks, followed by a decrease of $0.60 per pound, or 21%, in the following four week period. As a result of this extreme volatility in coffee prices, our hedging policies, which in the past were highly successful, proved to be inefficient as the market became more and more irrational on a daily basis. A lack of liquidity in the market as more and more players opted to exit the coffee futures market made it more and more difficult for us to maintain our positions. Increased margin pressures and constraints in our short term cash positions, led to our decision to tap the capital markets to strengthen our balance sheet. We also subsequently elected to take short term losses and close out the vast majority of our derivative positions in the New York Arabica market, while continuing to hold our positions in the London Robusta market, rather than risk potentially greater losses resulting from further volatility in the coffee markets which was beyond our control," added Mr. Gordon.
"Going forward, as a result of our significant growth, combined with the change in our revenue mix, we believe we may be less reliant on our past hedging practices since we believe we will be less exposed to market conditions, which could negatively expose us on the sales of our existing and contracted inventories, as well as exposure to our roasted private label accounts where we need to follow national brands regarding implementing price increases. While we do intend to continue to use hedging as part of our overall corporate strategy, we expect that it will be utilized to a lesser extent and we believe this will have less impact on future operating results, giving our investors more transparency as to our gross margins," continued Mr. Gordon.
"Going into fiscal 2012, we believe that with our strong balance sheet and working capital of approximately $19.7 million as of October 31, 2011, combined with our strong strategic alliances, we are well positioned to continue to increase our sales, which we believe will result in more traditional levels of profitability. We intend to continue our dividend program throughout fiscal 2012," added Mr. Gordon. Lastly, in an effort to continue to build shareholder value, I have reduced my base salary as of January 1, 2012 by 10% and neither myself nor David Gordon received bonuses for fiscal 2011," Mr. Gordon added.
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, including the Company's outlook for future growth and the potential impact of its hedging activities. 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.
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COFFEE HOLDING CO., INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS OCTOBER 31, 2011 AND 2010 |
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| 2011 | 2010 | |||
| - ASSETS - | ||||
| CURRENT ASSETS: | ||||
| Cash | $ 4,244,335 | $ 1,672,921 | ||
| Commodities held at broker | -- | 275,499 | ||
| Accounts receivable, net of allowances of $269,611 for 2011 and $197,078 for 2010 | 16,021,581 | 8,852,372 | ||
| Inventories | 13,475,855 | 8,190,420 | ||
| Prepaid green coffee | 388,754 | 1,335,676 | ||
| Prepaid expenses and other current assets | 275,679 | 502,852 | ||
| Prepaid and refundable income taxes | 377,972 | 9,521 | ||
| Deferred income tax asset | 896,400 | 55,659 | ||
| TOTAL CURRENT ASSETS | 35,680,576 | 20,894,920 | ||
| Machinery and equipment, at cost, net of accumulated depreciation of $2,191,566 and $1,765,867 for 2011 and 2010, respectively | 1,661,759 | 1,560,940 | ||
| Customer list and relationships, net of accumulated amortization of $11,250 and $3,750 for 2011 and 2010, respectively | 138,750 | 146,250 | ||
| Trademarks | 180,000 | 180,000 | ||
| Goodwill | 440,000 | 440,000 | ||
| Deposits and other assets | 677,606 | 699,029 | ||
| TOTAL ASSETS | $ 38,778,691 | $ 23,921,139 | ||
| - LIABILITIES AND STOCKHOLDERS' EQUITY - | ||||
| CURRENT LIABILITIES: | ||||
| Accounts payable and accrued expenses | $ 12,379,414 | $ 7,124,072 | ||
| Line of credit | 1,820,109 | 2,306,749 | ||
| Due to broker | 1,867,558 | -- | ||
| Income taxes payable | 100 | 234,744 | ||
| Contingent liability | -- | 41,000 | ||
| TOTAL CURRENT LIABILITIES | 16,067,181 | 9,706,565 | ||
| Deferred income tax liabilities | 35,900 | 17,659 | ||
| Deferred rent payable | 146,921 | 124,756 | ||
| Deferred compensation payable | 538,707 | 540,642 | ||
| TOTAL LIABILITIES | 16,788,709 | 10,389,622 | ||
| 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, 6,456,316 and 5,579,830 shares issued for 2011 and 2010, respectively; 6,372,309 and 5,490,823 shares outstanding for 2011 and 2010, respectively | 6,456 | 5,580 | ||
| Additional paid-in capital | 15,884,609 | 7,581,973 | ||
| Contingent consideration | 19,500 | 39,000 | ||
| Retained earnings | 6,268,326 | 6,151,054 | ||
| Less: Treasury stock, 84,007 and 89,007 common shares, at cost for 2011 and 2010 | (272,133) | (295,261) | ||
| Total Coffee Holding Co., Inc. Stockholders' Equity | 21,906,758 | 13,482,346 | ||
| Noncontrolling interest | 83,224 | 49,171 | ||
| TOTAL EQUITY | 21,989,982 | 13,531,517 | ||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 38,778,691 | $ 23,921,139 | ||
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COFFEE HOLDING CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FISCAL YEARS ENDED OCTOBER 31, 2011 AND 2010 |
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| 2011 | 2010 | |||
| NET SALES | $146,755,165 | $83,491,967 | ||
| COST OF SALES (which include purchases of approximately $25.3 million and $19.3 million in fiscal years 2011 and 2010, respectively, from a related party) | 138,210,277 | 72,931,626 | ||
| GROSS PROFIT | 8,544,888 | 10,560,341 | ||
| OPERATING EXPENSES: | ||||
| Selling and administrative | 6,715,753 | 5,809,397 | ||
| Officers' salaries | 629,399 | 735,200 | ||
| TOTAL | 7,345,152 | 6,544,597 | ||
| INCOME FROM OPERATIONS | 1,199,736 | 4,015,744 | ||
| OTHER INCOME (EXPENSE): | ||||
| Interest income | 150,442 | 94,355 | ||
| Other income and gains | 14,848 | -- | ||
| Interest expense | (289,521) | (237,348) | ||
| TOTAL | (124,231) | (142,993) | ||
| INCOME BEFORE PROVISION FOR INCOME TAXES AND NONCONTROLLING INTEREST IN SUBSIDIARY | 1,075,505 | 3,872,751 | ||
| Provision for income taxes | 229,522 | 1,479,489 | ||
| NET INCOME BEFORE NONCONTROLLING INTEREST IN SUBSIDIARY | 845,983 | 2,393,262 | ||
| Less: Net income attributable to the noncontrolling interest in subsidiary | (34,053) | (3,901) | ||
| NET INCOME ATTRIBUTABLE TO COFFEE HOLDING CO., INC. | $ 811,930 | $ 2,389,361 | ||
| Basic earnings per share | $ .15 | $ .44 | ||
| Diluted earnings per share | $ .14 | $ .44 | ||
| Dividends declared per share | $ .12 | $ .06 | ||
| Weighted average common shares outstanding: | ||||
| Basic | 5,563,802 | 5,463,837 | ||
| Diluted | 5,835,802 | 5,468,439 | ||
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COFFEE HOLDING CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FISCAL YEARS ENDED OCTOBER 31, 2011 AND 2010 |
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Common Stock $.001 Par Value |
Treasury Stock |
Additional Paid - in Capital |
Retained Earnings |
Contingent Consideration |
Non- Controlling Interest |
Total | ||||||||||||
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Number of Shares |
Amount |
Number of Shares |
Amount | |||||||||||||||
| Balance, 10/31/09 | 5,440,823 | $ 5,530 | 89,007 | $ (295,261) | $ 7,327,023 | $ 4,095,671 | $ -- | $ 45,270 | $11,178,233 | |||||||||
| Stock issued | 50,000 | 50 | -- | -- | 254,950 | -- | 255,000 | |||||||||||
| OPTCO | 39,000 | 39,000 | ||||||||||||||||
| Dividend | (333,978) | (333,978) | ||||||||||||||||
| Net income | 2,389,361 | 2,389,361 | ||||||||||||||||
| Non-Controlling Interest | -- | -- | -- | -- | -- | -- | -- | 3,901 | 3,901 | |||||||||
| Balance, 10/31/10 | 5,490,823 | $ 5,580 | 89,007 | $ (295,261) | $ 7,581,973 | $ 6,151,054 | $ 39,000 | $49,171 | $13,531,517 | |||||||||
| Stock issued | 890,000 | 890 | 8,330,900 | -- | 8,331,790 | |||||||||||||
| OPTCO | 5,000 | (5,000) | 23,128 | (3,628) | (19,500) | -- | ||||||||||||
| Shares cancelled | (13,514) | (14) | (24,636) | (24,650) | ||||||||||||||
| Dividend | (694,658) | (694,658) | ||||||||||||||||
| Net income | 811,930 | 811,930 | ||||||||||||||||
| Non-Controlling Interest | -- | -- | -- | -- | -- | -- | -- | 34,053 | 34,053 | |||||||||
| Balance, 10/31/11 | 6,372,309 | $ 6,456 | 84,007 | $ (272,133) | $15,884,609 | $ 6,268,326 | $ 19,500 | $ 83,224 | $21,989,982 | |||||||||
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COFFEE HOLDING CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FISCAL YEARS ENDED OCTOBER 31, 2011 AND 2010 |
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| 2011 | 2010 | |||
| OPERATING ACTIVITIES: | ||||
| Net income | $ 845,983 | $ 2,393,262 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 433,199 | 469,787 | ||
| Unrealized loss (gain) on commodities | 2,143,057 | (198,193) | ||
| Stock cancellation | (24,650) | -- | ||
| Bad debt expense | 72,533 | 17,618 | ||
| Deferred rent | 22,165 | 25,689 | ||
| Deferred income taxes | (822,500) | 112,500 | ||
| Changes in operating assets and liabilities: | ||||
| Accounts receivable | (7,241,742) | 1,304,231 | ||
| Inventories | (5,285,435) | (1,580,353) | ||
| Prepaid expenses and other current assets | 227,173 | (39,482) | ||
| Prepaid green coffee | 946,922 | (1,379,306) | ||
| Prepaid and refundable income taxes | (368,451) | 26,547 | ||
| Accounts payable and accrued expenses | 5,214,342 | 468,156 | ||
| Deposits and other assets | 19,488 | (59,596) | ||
| Income taxes payable | (234,644) | (218,768) | ||
| Net cash (used in) provided by operating activities | (4,052,560) | 1,342,092 | ||
| INVESTING ACTIVITIES: | ||||
| Purchase of assets of OPTCO – net cash paid | -- | (2,259,924) | ||
| Purchases of machinery and equipment | (526,518) | (363,763) | ||
| Net cash used in investing activities | (526,518) | (2,623,687) | ||
| FINANCING ACTIVITIES: | ||||
| Advances under bank line of credit | 128,456,096 | 84,750,863 | ||
| Principal payments under bank line of credit | (128,942,736) | (83,235,742) | ||
| Proceeds from issuance of stock, net of offering costs | 8,331,790 | -- | ||
| Payment of dividend | (694,658) | (333,978) | ||
| Net cash provided by financing activities | 7,150,492 | 1,181,143 | ||
| NET INCREASE (DECREASE) IN CASH | 2,571,414 | (100,452) | ||
| Cash, beginning of PERIOD | 1,672,921 | 1,773,373 | ||
| CASH, END OF PERIOD | $ 4,244,335 | $ 1,672,921 | ||
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COFFEE HOLDING CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FISCAL YEARS ENDED OCTOBER 31, 2011 AND 2010 |
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| 2011 | 2010 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA: | |||||
| Interest paid | $ 289,866 | $ 241,371 | |||
| Income taxes paid | $ 1,041,731 | $ 1,585,757 | |||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES: | |||||
| On May 17, 2010, the Coffee Holding Co., Inc. acquired substantially all of the assets of OPTCO: | |||||
| Assets acquired: | |||||
| Inventory | $ | $ 1,809,924 | |||
| Equipment | 15,000 | ||||
| Customer list and relationships | 150,000 | ||||
| Trademarks | 180,000 | ||||
| Goodwill | 440,000 | ||||
| Total assets acquired: | 2,594,924 | ||||
| Purchase of assets funded by: | |||||
| Contingent liability | 41,000 | ||||
| Contingent consideration | 39,000 | ||||
| Common stock, par value $.001 per share, 50,000 shares | 50 | ||||
| Additional paid-in capital | 254,950 | ||||
| 335,000 | |||||
| Net cash paid | $ | $ 2,259,924 | |||