Coffee Holding Co., Inc. Reports 14% Increase in Net Sales, But Records Small Net Loss Due to Losses at Steep N Brew Subsidiary
STATEN ISLAND, New York, June 14, 2022 (GLOBE NEWSWIRE) -- Coffee Holding Co., Inc. (NASDAQ:JVA) (the "Company") today announced its operating results for the fiscal quarter ended April 30, 2022:
Net Sales. Net sales totaled $16,498,169 for the three months ended April 30, 2022, an increase of $2,029,611, or 14.0%, from $14,468,558 for the three months ended April 30, 2021. The increase in net sales was due to an increase of sales to the Company's legacy customers partially offset by a decrease in sales from the Company's Generations/Steep N Brew subsidiary.
Cost of Sales. Cost of sales for the three months ended April 30, 2022 was $14,505,415, or 87.9% of net sales, as compared to $10,699,090, or 74% of net sales, for the three months April 30, 2021. The increase in cost of sales was due to the Company's increased sales to the Company's legacy customers, increased prices of green coffee and packaging materials and the Company's continued losses from the Company's Generations/Steep N Brew subsidiary, which included obsolete inventory write-off of approximately $718,000.
Gross Profit. Gross profit for the three months ended April 30, 2022 amounted to $1,992,754 or 12.1% of net sales, as compared to $3,769,468 or 26.1% of net sales, for the three months ended April 30, 2021. The decrease in gross profits on a percentage basis was attributable to the factors listed above.
Operating Expenses. Total operating expenses increased by $50,899 to $3,366,223 for the three months ended April 30, 2022 from $3,315,324 for the three months ended April 30, 2021. Selling and administrative expenses increased by $53,399 and officers' salaries decreased by $2,500.
Net (Loss) Income. The Company had a net loss of $368,096 or $(0.06) per share basic and diluted, for the three months ended April 30, 2022 compared to net income of $357,044, or $0.06 per share basic and diluted for the three months ended April 30, 2021. The decrease in net income was due primarily to the continued losses from the Company's Generations/Steep N Brew subsidiary.
"Although we increased sales by approximately $2.0 million or 14.0% compared to last year and business remained strong in both the Coffee Holding legacy and Optco divisions, we recorded a loss of $0.06 per share for this fiscal period, primarily as a result of an operating loss at our Generations/Steep N Brew division. After several periods of losses at Generations/Steep N Brew, stemming from increasing costs, impacts of the COVID pandemic and poor performance, we are now looking to restructure the operational activities at Generations/Steep N Brew. Unfortunately, we incurred write offs relating to accounts receivables, inventory and packaging materials at this division, resulting in an operating loss of approximately $508,000 (net of tax) or $0.09 per share," said Andrew Gordon, President and CEO of Coffee Holding Company.
"Moving forward, I believe we have a clear direction on how to grow both our sales and profits as we had in the past by focusing on sales of unroasted green coffee beans to small and medium size roasters, sales of private label products to large wholesalers and retailers and a continued push on our own legacy brands. I believe this has been and will continue to be a winning formula in our efforts to grow both our sales and profits. We have increased our sales now for seven consecutive months compared to the prior year despite low meaningful sales from our Generations/Steep N Brew subsidiary, including a 14% increase this quarter and I anticipate that trend will continue in spite of the inflationary headwinds that many of our green coffee customers now face. We appreciate our shareholders' loyalty and patience and we look forward to a clearer path forward in the immediate future," 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 its revenue growth and operations. 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 the Company's control, and which may cause the Company's 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. The Company has 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 any pandemics including the one caused by Covid-19, 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
| April 30, 2022 | October 31, 2021 | |||||||
| (Unaudited) | ||||||||
| - ASSETS - | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 3,025,137 | $ | 3,696,275 | ||||
| Accounts receivable, net of allowances of $144,000 for 2022 and 2021 | 7,335,947 | 9,299,978 | ||||||
| Inventories | 15,972,528 | 15,961,866 | ||||||
| Prepaid expenses and other current assets | 430,938 | 542,224 | ||||||
| Due from broker | 261,250 | 725,000 | ||||||
| Prepaid and refundable income taxes | 375,417 | 75,952 | ||||||
| TOTAL CURRENT ASSETS | 27,401,217 | 30,301,295 | ||||||
| Building machinery and equipment, net | 3,277,216 | 2,662,628 | ||||||
| Customer list and relationships, net of accumulated amortization of $255,444 and $237,131 for 2022 and 2021, respectively | 429,556 | 447,869 | ||||||
| Trademarks and tradenames | 408,000 | 408,000 | ||||||
| Non-compete, net of accumulated amortization of $74,250 and $69,300 for 2022 and 2021, respectively | 24,750 | 29,700 | ||||||
| Goodwill | 2,488,785 | 2,488,785 | ||||||
| Equity method investments | 366,444 | 402,245 | ||||||
| Investment - other | 2,500,000 | 2,500,000 | ||||||
| Deferred income tax asset - net | 114,961 | 77,394 | ||||||
| Right of Use Asset | 3,365,837 | 3,545,786 | ||||||
| Deposits and other assets | 508,522 | 449,225 | ||||||
| TOTAL ASSETS | $ | 40,885,288 | $ | 43,312,927 | ||||
| - LIABILITIES AND STOCKHOLDERS' EQUITY - | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | 2,623,805 | $ | 5,047,640 | ||||
| Line of credit – current portion | 5,900,000 | 3,800,850 | ||||||
| Lease liability – current portion | 191,374 | 340,400 | ||||||
| Note payable – current portion | 4,200 | 4,200 | ||||||
| Due to broker | 132,125 | 708,321 | ||||||
| Income taxes payable | 6,214 | 416,449 | ||||||
| TOTAL CURRENT LIABILITIES | 8,857,718 | 10,317,860 | ||||||
| Lease liabilities | 3,295,876 | 3,299,784 | ||||||
| Note payable – long term | 10,461 | 13,092 | ||||||
| Deferred compensation payable | 302,412 | 311,872 | ||||||
| TOTAL LIABILITIES | 12,466,467 | 13,942,608 | ||||||
| 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, 6,633,930 shares issued as of April 30, 2022 and October 31, 2021; 5,708,599 shares outstanding as of April 30, 2022 and October 31, 2021 | 6,634 | 6,634 | ||||||
| Additional paid-in capital | 19,052,806 | 18,688,797 | ||||||
| Retained earnings | 13,984,989 | 14,471,222 | ||||||
| Less: Treasury stock, 925,331 common shares, at cost as of April 30, 2022 and October 31, 2021 | (4,633,560 | ) | (4,633,560 | ) | ||||
| Total Coffee Holding Co., Inc. Stockholders' Equity | 28,410,869 | 28,533,093 | ||||||
| Non-controlling interest | 7,952 | 837,226 | ||||||
| TOTAL EQUITY | 28,418,821 | 29,370,319 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 40,885,288 | $ | 43,312,927 | ||||
COFFEE HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX AND THREE MONTHS ENDED APRIL 30, 2022 AND 2021
(Unaudited)
| Six Months Ended April 30, | Three Months Ended April 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| NET SALES | $ | 33,203,029 | $ | 32,602,395 | $ | 16,498,169 | $ | 14,468,558 | ||||||||
| COST OF SALES | 26,938,669 | 24,353,356 | 14,505,415 | 10,699,090 | ||||||||||||
| GROSS PROFIT | 6,264,360 | 8,249,039 | 1,992,754 | 3,769,468 | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Selling and administrative | 6,784,824 | 6,321,651 | 3,215,085 | 3,161,686 | ||||||||||||
| Officers' salaries | 302,275 | 306,863 | 151,138 | 153,638 | ||||||||||||
| TOTAL | 7,087,099 | 6,628,514 | 3,366,223 | 3,315,324 | ||||||||||||
| (LOSS) INCOME FROM OPERATIONS | (822,739 | ) | 1,620,525 | (1,373,469 | ) | 454,144 | ||||||||||
| OTHER (EXPENSE) INCOME | ||||||||||||||||
| Interest income | 4,094 | 929 | 2,556 | 519 | ||||||||||||
| Loss from equity method investment | (35,801 | ) | (3,915 | ) | (4,075 | ) | (1,317 | ) | ||||||||
| Interest expense | (90,293 | ) | (43,507 | ) | (49,683 | ) | (16,839 | ) | ||||||||
| TOTAL | (122,000 | ) | (46,493 | ) | (51,202 | ) | (17,637 | ) | ||||||||
| (LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR INCOME TAXES AND NON-CONTROLLING INTEREST IN SUBSIDIARY | (944,739 | ) | 1,574,032 | (1,424,671 | ) | 436,507 | ||||||||||
| (Benefit) provision for income taxes | (248,275 | ) | 510,329 | (385,681 | ) | 129,086 | ||||||||||
| NET (LOSS) INCOME BEFORE NON-CONTROLLING INTEREST IN SUBSIDIARY | (696,464 | ) | 1,063,703 | (1,038,990 | ) | 307,421 | ||||||||||
| Less: Net loss (income) attributable to the non-controlling interest | 609,231 | (29,348 | ) | 670,894 | 49,623 | |||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO COFFEE HOLDING CO., INC. | $ | (87,233 | ) | $ | 1,034,355 | $ | (368,096 | ) | $ | 357,044 | ||||||
| Basic and diluted (loss) earnings per share | $ | (.02 | ) | $ | .18 | $ | (.06 | ) | $ | .06 | ||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic and diluted | 5,708,599 | 5,708,599 | 5,708,599 | 5,708,599 | ||||||||||||
COFFEE HOLDING CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED APRIL 30, 2022 AND 2021
(Unaudited)
| 2022 | 2021 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net (loss) income | $ | (696,464 | ) | $ | 1,063,703 | |||
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | ||||||||
| Depreciation and amortization | 280,594 | 337,353 | ||||||
| Stock-based compensation | 364,009 | 379,537 | ||||||
| Unrealized gain on commodities | (112,446 | ) | (559,408 | ) | ||||
| Loss on equity method investments | 35,801 | 3,915 | ||||||
| Write-off of accounts receivable | 415,096 | - | ||||||
| Write-down of obsolete inventory | 718,353 | - | ||||||
| Amortization of right of use asset | 179,949 | 226,155 | ||||||
| Deferred income taxes | (37,567 | ) | 154,550 | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 1,548,935 | 709,476 | ||||||
| Inventories | (949,058 | ) | 1,935,996 | |||||
| Prepaid expenses and other current assets | 111,286 | (173,177 | ) | |||||
| Prepaid and refundable income taxes | (299,465 | ) | 91,684 | |||||
| Accounts payable and accrued expenses | (2,423,835 | ) | 970,875 | |||||
| Deposits and other assets | (68,757 | ) | (100,000 | ) | ||||
| Change in lease liability | (152,934 | ) | (248,980 | ) | ||||
| Income taxes payable | (410,235 | ) | 255,611 | |||||
| Net cash (used in) provided by operating activities | (1,496,738 | ) | 5,047,290 | |||||
| INVESTING ACTIVITIES: | ||||||||
| Purchases of machinery and equipment | (871,919 | ) | (597,444 | ) | ||||
| Net cash used in investing activities | (871,919 | ) | (597,444 | ) | ||||
| FINANCING ACTIVITIES: | ||||||||
| Advances under bank line of credit | 2,500,000 | 15,563 | ||||||
| Principal payments on note payable | (2,631 | ) | (2,507 | ) | ||||
| Payment of dividend | (399,000 | ) | - | |||||
| Principal payments under bank line of credit | (400,850 | ) | (3,809,885 | ) | ||||
| Net cash provided by (used in) financing activities | 1,697,519 | (3,796,829 | ) | |||||
| NET (DECREASE) INCREASE IN CASH | (671,138 | ) | 653,017 | |||||
| CASH, BEGINNING OF PERIOD | 3,696,275 | 2,875,120 | ||||||
| CASH, END OF PERIOD | $ | 3,025,137 | $ | 3,528,137 | ||||
| 2022 | 2021 | |||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA: | ||||||||
| Interest paid | $ | 84,967 | $ | 54,943 | ||||
| Income taxes paid | $ | 498,992 | $ | 8,485 | ||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Purchase of inventory by non-controlling interest | $ | 220,043 | ||||||
| Initial recognition of operating lease right of use asset | - | $ | 65,999 | |||||
| Initial recognition of operating lease liabilities | - | $ | 65,999 | |||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
To supplement Coffee Holding's consolidated financial statements presented in accordance with U.S. GAAP, Coffee Holding uses a non-GAAP measure, Adjusted Earnings Before Interest, Income Taxes (benefits), Depreciation and Amortization (Adjusted EBITDA). This non-GAAP measure is provided to enhance overall understanding of Coffee Holding's current financial performance. Reconciliation of the nearest GAAP measure to Adjusted EBITDA follows:
| Net income (GAAP measure) | $ | (368,096 | ) | |
| Addback: Interest expense | 49,683 | |||
| Income tax provision | (385,681 | ) | ||
| Depreciation and amortization | 124,835 | |||
| Stock compensation | 174,241 | |||
| Total adjusted EBITDA | $ | (405,018 | ) |
