STATEN ISLAND, N.Y., Jan. 29, 2018 (GLOBE NEWSWIRE) -- Coffee Holding Co., Inc. (Nasdaq:JVA) (the “Company”) today announced its operating results for the fiscal year ended October 31, 2017.
The Company had net income of $467,262 or $0.08 per share basic and diluted, for the fiscal year ended October 31, 2017 compared to a net income of $2,212,288, or $0.36 per share basic and diluted for the fiscal year ended October 31, 2016. The decrease in net income was due primarily to the reasons described below.
Net sales totaled $77,127,595 for the fiscal year ended October 31, 2017, a decrease of $1,820,633, or 2.3%, from $78,948,228 for the fiscal year ended October 31, 2016. The decrease in net sales reflects reduced wholesale transactions with our largest wholesale green coffee customer during fiscal 2017 of approximately $16,775,000, partially offset by increased sales to both new and existing customers including a fourth quarter increase in revenues of $4,300,000 or 25.0%.
Cost of sales for the fiscal year ended October 31, 2017 was $64,977,632, or 84.3% of net sales, as compared to $67,066,050, or 85.0% of net sales, for the fiscal year ended October 31, 2016. 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 the change in the product mix due to the Company’s reduced wholesale transactions with its largest wholesale green coffee customer.
Gross profit for the fiscal year ended October 31, 2017 was $12,149,963, an increase of $267,785 from $11,882,178 for the fiscal year ended October 31, 2016. Gross profit as a percentage of net sales increased to 15.8% for the fiscal year ended October 31, 2017 from 15.0% for the fiscal year ended October 31, 2016. Although we experienced improved margins on our wholesale and roasted business during the year our margins have not increased as expected due to our integration of our acquisition of Comfort Foods and reduced profitability of our OPTCO subsidiary.
Total operating expenses increased by $2,908,136 to $10,927,246 for the fiscal year ended October 31, 2017 from $8,019,110 for the fiscal year ended October 31, 2016. Selling and administrative expenses increased $2,864,796, or 39.0%, to $10,228,506 for the fiscal year ended October 31, 2017 from $7,363,710 for the fiscal year ended October 31, 2016. The primary reasons for this increase were the acquisition of Comfort Foods, the full year of integration of Sonofresco and the increase in our freight costs as we increased and expanded our product distribution. Officers’ salary increased by $43,340 or 6.6% to $698,740 for the fiscal year ended October 31, 2017 from $655,400 for the fiscal year ended October 31, 2016.
“The 2017 fiscal year marked a turning point for us following several years of declines as we increased our revenues during the last two quarters, replacing almost $17 million in lost revenues following the change in ownership at our former largest green coffee customer. During the third and fourth quarters of 2017, our revenues increased by 3.6% or approximately $625,000, and by 25.0% or approximately $4.3 million, respectively, as compared to the prior year periods. We achieved this growth through increased marketing of our branded and private label business as we added several new large retailers and wholesalers during the 2017 fiscal year. Our sales of roasted and green coffee are now back to their traditional levels of a 50-50 split where they had been for the majority of our company’s history,” stated Andrew Gordon, CEO and President of the Company.
“We believe this sales balance represents a better mix of sales, which will allow us to continue to expand our overall gross margin as well as build our brand equity at our most important retail and wholesale accounts. We also believe the increased sales of both our branded and private label products are sustainable as we continue to see improved customer loyalty at our existing retail accounts due to expanded product distribution and increased promotional activity designed to gain trial of our products. In order to achieve this growth, we had an increase in freight expense of $636,000, which was the second largest increase in our SG&A after the costs associated with the purchase of Comfort Foods,” added Mr. Gordon.
“In addition, we were awarded several new private label contracts in late fiscal 2017 and will begin manufacturing product in the second quarter of fiscal 2018. We also signed a two-year extension with our current largest private label customer.”
“We believe the biggest headwind over the past nine months has been the integration of Comfort Foods, which has taken longer than expected to become a profitable integration. During our last nine months, Comfort Foods had an operating loss of approximately $300,000 which negatively impacted our overall earnings by approximately $.05 per share. We did expect a loss as we engineered a turnaround and we believe we are almost at the breakeven point in operations. Strategically, we believe this acquisition will allow us to begin bidding on business in the North East which we could not do previously though our Colorado facility for logistical reasons. In addition, the Harmony Bay brand has a strong following in New England and we recently placed it in over 700 Food Lion stores in the Mid-Atlantic States.
“We look forward to a successful 2018 as our focus will once again be to continue to grow our sales and increase the distribution of our brands to build on the success achieved during the second half of fiscal 2017,” 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.