Skip to main content

Coffee Holding Company Announces Huge Sales Growth

Staten Island, N.Y.-based coffee roaster and dealer Coffee Holding Company has announced more than 75 percent sales growth over last fiscal year.

“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, Cafe Caribe, OPTCO and Generations Coffee Company,” said Andrew Gordon, President and Chief Operating Officer.

From Coffee Holding Company:

Coffee Holding Company sales upThe 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, Cafe 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.


                        
                        
                        
                        
                        

Comment