Coffee Holdings-Insider Buying Spree Alert: CEO, CFO And Outside Director All Buy Shares
Long/Short Equity
Seeking Alpha Analyst Since 2008
Summary
- Andy and David Gordon both buy shares in the open market. John Rotelli- Board member, joins the buying spree too.
- earnings rose 250% from 2 cents to 7 cents, despite a 20% drop in sales.
- CEO and CFO offer paycut.
- bank loan reduced 50%.
- 630,000 shares in options granted.
It was a great third quarter indeed. The fact that the company's (JVA) sales fell 19.7%, (from $22.1 million to $17.3 million) yet they were still able to more than triple their earnings, is a testament to a fantastically run organization. If it wasn't for the non cash charge of $189,769 recorded to the company's employee option plan, JVA would of produced a 10 cent bottom line (a 500% increase). In terms of shareholder's equity (book value), JVA was able to improve that entry 2% on a sequential basis, from $27.35 million to $27.91 million
how did they do it? They cut expenses and sold higher margined products (branded and private label) rather than wholesale green beans. The company's gross profit margin increased 300 basis points from 19.10% to 22.10%, while its operating expenses fell from 16% from $3.82 million to $3.25 million.
The coffee purveyor also revealed that they were able to pay their bank loan down nearly 50% during the quarter. During the end of quarter two, that "line of credit" figure stood at $5.1 million. Interest expense fell 30% from $64,625 to $45,283. In addition, JVA received a paycheck protection loan of $634,480.
CEO Andy Gordon mentioned in his commentary that their fourth quarter is seasonally their strongest, and he expects the reopening of coffee shops and restaurants to add to that momentum. He also revealed that coffee prices have reached a new high on the year (although recently, prices have fallen nearly 15%) that will surely provide a tailwind. In addition, he announced that he and his brother will be taking a 5% to 15% pay-cut, starting next fiscal year.
Finally, both Andy Gordon and his brother David Gordon each reported purchasing more shares for their own accounts, in the open market via form 4 filings with the SEC. Insiders buy shares for only one reason and one reason alone-to make money. Their buying certainly boosts the confidence level for the market. These guys are smart. They were able to get the stock up to $20 a share, in 2011. Just 1.5 year's ago, the stock saw a run to $7. Unfortunately, I was too greedy and undisciplined to ring the cash register, OUCH.
What's next? look for Mr. Market to show his appreciation, by marking up the shares, slowly but surely. A trip to the $4 area by the end of the year is not too far fetched. Although the shares have recently given up 20% from their recent highs, in the past two weeks, that discount should be pounced on. why? because it sets up buyers for a 33% return in just the next three months.
The low down on the officer's options: the CEO has the right to purchase 349,000 shares at $5.43 . The CFO has the same strike price, but his qty is slightly smaller at 281,000 shares. The expiration of the options occurs on 4/18 /29, while vesting is initiated in three equal installments, beginning 4/18/20.
here is the press release: https://finance.yahoo.com/news/coffee-holding-co-inc-reports-205800862.html
Fourth quarter results: the end of the year results won't be out until the last part of January, 2021. Until then, I assume the company will be as quiet as a "church mouse".
Analyst's Disclosure: I am/we are long JVA.
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