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| 8-K - CURRENT REPORT - COFFEE HOLDING CO INC | jva_8k.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Coffee Holding Co., Inc. Reports Year End Results
Year End Results
STATEN ISLAND, New York – January 24, 2014. Coffee Holding Co., Inc. (Nasdaq: JVA) today announced its operating results for the year ended October 31, 2013:
The Company had a net loss of $1,480,235, or $0.23 per share basic and diluted, for the fiscal year ended October 31, 2013 compared to a net income of $2,485,677, or $0.39 per share basic and $0.37 diluted for the fiscal year ended October 31, 2012. The decrease in net income reflects the increased realized loss and decreased unrealized gains on hedging activities during the fiscal year.
Net sales totaled $133,980,759 for the fiscal year ended October 31, 2013, a decrease of $39,675,456, or 22.8%, from $173,656,215 for the fiscal year ended October 31, 2012. The decrease in net sales reflects an approximate 60% lower commodity price during the fiscal year which resulted in a decrease in the price per pound of coffee sold.
Cost of sales for the fiscal year ended October 31, 2013 was $128,011,678, or 95.5% of net sales, as compared to $161,649,282, or 93.1%, of net sales for the fiscal year ended October 31, 2012. 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 our lower green coffee prices offset by increased realized losses and decreased unrealized gains on hedging activities. Cost of sales includes purchases of approximately $31.2 million and $31.9 million in fiscal years 2013 and 2012, respectively, from a related party.
Gross profit for the fiscal year ended October 31, 2013 was $5,969,081, a decrease of $6,037,852 from $12,006,933 for the fiscal year ended October 31, 2012. Gross profit as a percentage of net sales decreased to 4.5% for the fiscal year ended October 31, 2013 from 6.9% for the fiscal year ended October 31, 2012 due to net realized hedging losses and unrealized hedging gains of $6,208,648 and $383,349, respectively, during fiscal 2013 as compared to net realized and unrealized hedging losses and gains of $667,302 and $500,169, respectively, during fiscal 2012.
Total operating expenses decreased $85,359, or 1.1%, to $7,521,910 for the fiscal year ended October 31, 2013 from $7,607,269 for the fiscal year ended October 31, 2012. Selling and administrative expenses increased $39,620, or 0.6%, to $6,939,819 for the year ended October 31, 2013 from $6,900,199 for the year ended October 31, 2012. Officers’ salary decreased $124,979 or 17.7% to $582,091 for the year ended October 31, 2013 from $707,070 for the year ended October 31, 2012.
Share Repurchase Program
The Company also announced today that its Board of Directors has approved a share repurchase program pursuant to which the Company may repurchase up to $1 million of its outstanding common stock from time to time on the open market and in privately negotiated transactions subject to market conditions, share price and other factors. The Company intends to fund the repurchase program with available cash and from future cash flow from operations.
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The timing and amount of any shares repurchased will be determined based on the Company’s evaluation of market conditions and other factors and the program may be discontinued or suspended at any time. Repurchases will be made in accordance with the rules and regulations promulgated by the Securities and Exchange Commission and certain other legal requirements to which the Company may be subject from time to time, including restrictions under its credit facility, if a waiver is not obtained. Repurchases may be made, in part, under a Rule 10b5-1 plan, which allows stock repurchases when the Company might otherwise be precluded from doing so.
“Although 2013 certainly represents a disappointment to management and our fellow shareholders, our company’s overall health should not be measured purely by one metric, net profits. Our history of reporting positive results was disrupted by an unprecedented collapse in the price of green coffee which traded to new seven year lows during our fiscal fourth quarter. Our hedging strategy, which in the past has been an important tool in helping maintain our margins, adversely impacted our results; as there was virtually no abatement in the decline of green coffee prices - with prices falling by almost sixty percent during fiscal 2013. In addition, our gross sales declined in tandem with these lower commodity prices. However, we believe last year’s problems are behind us and 2014 should produce more normalized results in our operations,” said Andrew Gordon, President and Chief Executive Officer.
“We have continued to grow our business during this past year, recording record sales of 65.6 million pounds of coffee (both roasted and sold). Our Café Caribe brand sales continue to improve and it is now ranked as the #2 leading Hispanic Espresso coffee in the Northeast, according to Nielsen IRI data, due, in part, to the continued efforts of our in-house distributor network along with our external sales force. We expect this trend to continue since growing our own brands is vital to our long term performance,” Mr. Gordon continued.
“Sales of our private label coffee and specialty green coffee continue to increase, reaffirming our strong industry position in both these areas, which should enable us to realize our overall target gross profit of 9% during fiscal 2014. In addition, total sales of roasted and raw specialty green coffee in China totaled approximately $1 million as we continue to slowly gain traction in this market, potentially representing an increased source of revenue in the near future. Our balance sheet remains strong and our cash position is solid as shown by our ability to run our normal business operations without extensively using our $7million line of credit,” added Mr. Gordon.
“We further believe that the authorization of our share repurchase program of up to $1 million worth of our shares supports the Board of Director’s confidence in our capacity for growth and the ability to maximize shareholder value. We thank our shareholders for their patience and we believe that their patience will be rewarded in 2014,” concluded Mr. Gordon.
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 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.
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COFFEE HOLDING CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 2013 AND 2012
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2013
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2012
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|||||||
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- ASSETS -
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CURRENT ASSETS:
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Cash
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$ | 4,035,669 | $ | 7,568,583 | ||||
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Accounts receivable, net of allowances of $144,000 and $213,674 for 2013 and 2012, respectively
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12,362,792 | 12,633,128 | ||||||
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Inventories
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9,373,018 | 11,303,581 | ||||||
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Prepaid green coffee
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439,290 | 150,000 | ||||||
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Prepaid expenses and other current assets
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336,494 | 704,013 | ||||||
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Prepaid and refundable income taxes
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1,000,317 | 62,763 | ||||||
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Deferred income tax asset
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1,330,666 | 702,655 | ||||||
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TOTAL CURRENT ASSETS
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28,878,246 | 33,124,723 | ||||||
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Machinery and equipment, at cost, net of accumulated depreciation of $3,130,902 and $2,631,468 for 2013 and 2012, respectively
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2,060,350 | 1,791,754 | ||||||
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Customer list and relationships, net of accumulated amortization of $26,250 and $18,750 for 2013 and 2012, respectively
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123,750 | 131,250 | ||||||
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Trademarks
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180,000 | 180,000 | ||||||
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Goodwill
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440,000 | 440,000 | ||||||
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Equity method investments
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98,178 | 1,931,931 | ||||||
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Deposits and other assets
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618,498 | 648,094 | ||||||
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TOTAL ASSETS
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$ | 32,399,022 | $ | 38,247,752 | ||||
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- LIABILITIES AND STOCKHOLDERS’ EQUITY -
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CURRENT LIABILITIES:
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Accounts payable and accrued expenses
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$ | 7,244,822 | $ | 11,769,107 | ||||
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Line of credit
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1,229,182 | 562,500 | ||||||
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Due to broker
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984,040 | 1,367,389 | ||||||
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Income taxes payable
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- | 21,122 | ||||||
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TOTAL CURRENT LIABILITIES
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9,458,044 | 13,720,118 | ||||||
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Deferred income tax liabilities
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145,666 | 32,655 | ||||||
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Deferred rent payable
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195,452 | 166,668 | ||||||
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Deferred compensation payable
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515,498 | 528,687 | ||||||
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TOTAL LIABILITIES
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10,314,660 | 14,448,128 | ||||||
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STOCKHOLDERS’ EQUITY:
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Coffee Holding Co., Inc. stockholders’ equity:
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Preferred stock, par value $.001 per share; 10,000,000 shares authorized; none issued
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- | - | ||||||
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Common stock, par value $.001 per share; 30,000,000 shares authorized, 6,456,316 shares issued; 6,372,309 shares outstanding for 2013 and 2012
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6,456 | 6,456 | ||||||
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Additional paid-in capital
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15,904,109 | 15,904,109 | ||||||
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Contingent consideration
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- | - | ||||||
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Retained earnings
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6,111,633 | 7,979,247 | ||||||
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Less: Treasury stock, 84,007 common shares, at cost for 2013 and 2012
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(272,133 | ) | (272,133 | ) | ||||
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Total Coffee Holding Co., Inc. Stockholders’ Equity
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21,750,065 | 23,617,679 | ||||||
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Noncontrolling interest
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334,297 | 181,945 | ||||||
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TOTAL EQUITY
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22,084,362 | 23,799,624 | ||||||
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
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$ | 32,399,022 | $ | 38,247,752 | ||||
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COFFEE HOLDING CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FISCAL YEARS ENDED OCTOBER 31, 2013 AND 2012
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2013
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2012
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NET SALES
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$ | 133,980,759 | $ | 173,656,215 | ||||
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COST OF SALES (which include purchases of approximately $31.2 million and $31.9 million in fiscal years 2013 and 2012, respectively, from a related party)
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128,011,678 | 161,649,282 | ||||||
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GROSS PROFIT
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5,969,081 | 12,006,933 | ||||||
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OPERATING EXPENSES:
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Selling and administrative
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6,939,819 | 6,900,199 | ||||||
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Officers’ salaries
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582,091 | 707,070 | ||||||
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TOTAL
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7,521,910 | 7,607,269 | ||||||
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(LOSS) INCOME FROM OPERATIONS
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(1,552,829 | ) | 4,399,664 | |||||
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OTHER INCOME (EXPENSE):
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Interest income
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43,144 | 32,967 | ||||||
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Other income and losses
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(14,690 | ) | ||||||
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Loss from equity method investments
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(105,781 | ) | (168,069 | ) | ||||
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Interest expense
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(106,184 | ) | (195,093 | ) | ||||
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TOTAL
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(168,821 | ) | (344,885 | ) | ||||
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(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES AND
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NON-CONTROLLING INTEREST IN SUBSIDIARY
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(1,721,650 | ) | 4,054,779 | |||||
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(Benefit) provision for income taxes
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(393,767 | ) | 1,470,381 | |||||
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NET (LOSS) INCOME BEFORE NON-CONTROLLING INTEREST IN SUBSIDIARY
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(1,327,883 | ) | 2,584,398 | |||||
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Less: Net income attributable to the non-controlling interest in subsidiary
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(152,352 | ) | (98,721 | ) | ||||
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NET (LOSS) INCOME ATTRIBUTABLE TO COFFEE HOLDING CO., INC.
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$ | (1,480,235 | ) | $ | 2,485,677 | |||
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Basic (loss) earnings per share
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$ | (.23 | ) | $ | .39 | |||
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Diluted (loss) earnings per share
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$ | (.23 | ) | $ | .37 | |||
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Dividends declared per share
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$ | .06 | $ | .12 | ||||
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Weighted average common shares outstanding:
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||||||||
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Basic
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6,372,309 | 6,372,309 | ||||||
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Diluted
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6,372,309 | 6,639,309 | ||||||
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COFFEE HOLDING CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED OCTOBER 31, 2013 AND 2012
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2013
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2012
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OPERATING ACTIVITIES:
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Net (loss) income
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$ | (1,327,883 | ) | $ | 2,584,398 | |||
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Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
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||||||||
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Depreciation and amortization
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506,934 | 447,404 | ||||||
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Unrealized (gain) on commodities
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(383,349 | ) | (500,169 | ) | ||||
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Loss on equity method investments
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105,781 | 168,069 | ||||||
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Deferred rent
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28,784 | 19,747 | ||||||
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Deferred income taxes
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(515,000 | ) | 190,500 | |||||
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Changes in operating assets and liabilities:
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||||||||
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Accounts receivable
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270,336 | 3,388,453 | ||||||
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Inventories
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2,434,063 | 2,172,274 | ||||||
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Prepaid expenses and other current assets
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367,519 | (428,334 | ) | |||||
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Prepaid green coffee
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(289,290 | ) | 238,754 | |||||
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Prepaid and refundable income taxes
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(937,554 | ) | 315,209 | |||||
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Accounts payable and accrued expenses
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(3,531,885 | ) | (610,307 | ) | ||||
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Deposits and other assets
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16,407 | 19,492 | ||||||
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Income taxes payable
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(21,122 | ) | 21,022 | |||||
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Net cash (used in) provided by operating activities
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(3,276,259 | ) | 8,026,512 | |||||
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INVESTING ACTIVITIES:
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Purchases of equity method investments
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- | (2,100,000 | ) | |||||
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Proceeds from disposition of equity method investment
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232,069 | - | ||||||
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Purchases of machinery and equipment
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(768,029 | ) | (569,899 | ) | ||||
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Net cash used in investing activities
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(535,960 | ) | (2,669,899 | ) | ||||
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FINANCING ACTIVITIES:
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Advances under bank line of credit
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6,821,366 | 134,801,724 | ||||||
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Principal payments under bank line of credit
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(6,154,684 | ) | (136,059,333 | ) | ||||
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Payment of dividend
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(387,377 | ) | (774,756 | ) | ||||
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Net cash provided by (used in) financing activities
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279,305 | (2,032,365 | ) | |||||
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NET (DECREASE) INCREASE IN CASH
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(3,532,914 | ) | 3,324,248 | |||||
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CASH, BEGINNING OF PERIOD
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7,568,583 | 4,244,335 | ||||||
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CASH, END OF PERIOD
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$ | 4,035,669 | $ | 7,568,583 | ||||
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2013
|
2012
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:
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Interest paid
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$ | 108,608 | $ | 208,064 | ||||
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Income taxes paid
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$ | 803,626 | $ | 879,756 | ||||
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COFFEE HOLDING CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
OCTOBER 31, 2013 AND 2012
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Schedule of noncash investing and financing activities:
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Proceeds from disposition of equity method investment:
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2013
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2012
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Inventory received
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$ | 503,500 | $ | - | ||||
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Settlement of accounts payable
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992,402 | - | ||||||
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Total noncash proceeds
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$ | 1,495,902 | $ | - | ||||
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