Ten Peaks Coffee Company Inc. Reports Second Quarter and First Half Results for 2011

Six-Month Processing Volumes, Revenue, Gross Profit and Net Income All Up Over 2010

Ten Peaks Coffee Company Inc. will hold a conference call to discuss its financial results for the three and six months ended June 30, 2011 on Friday, August 5, 2011 at 8:00 am Pacific Time (11:00 am Eastern Time). To participate, please dial 1-888-231-8191 (toll free) or 647-427-7450 (GTA and international) approximately five minutes before the call.  A replay will be available through Friday, August 19, 2011 at 1-855-859-2056 (toll free), 778-371-8506 or 416-849-0833, passcode: 87114739. In addition, a live and archived webcast can be accessed at http://www.investorcalendar.com/IC/CEPage.asp?ID=165499 or on Ten Peaks' website at www.tenpeakscoffee.ca

VANCOUVER, Aug. 4, 2011 /CNW/ - Ten Peaks Coffee Company Inc. ("Ten Peaks" or "the company") today reported its financial results for the three and six months ended June 30, 2011. Ten Peaks holds all of the outstanding securities of Swiss Water Decaffeinated Coffee Company, Inc. ("SWDCC"), a premium green coffee decaffeinator located in Burnaby, BC. The results reported here are based on SWDCC's operating performance.

Prior to the first quarter of this year, all of the outstanding securities of SWDCC were held by Swiss Water Decaffeinated Coffee Income Fund (the "Fund"). On January 1, 2011, the Fund was wound up into Ten Peaks, a newly formed company which was created to effect the Fund's conversion from an income trust to a corporation.

Operating Results

⁽¹⁾     EBITDA is defined in the company's Management's Discussion and Analysis, which will be posted on SEDAR on or before August 5, 2011.

Ten Peaks recorded good financial results for the first half of 2011, with sales, processing volumes, gross profit and net income all up over the same period last year. Six-month EBITDA was down, due to higher operating expenses.

"We are satisfied with our results for the first half of 2011," said Frank Dennis, President and CEO of Ten Peaks. "While the specialty coffee industry has been hampered by a tight supply of premium green coffees and a rapid rise in coffee commodity prices, we were still able to realize modest volume growth. We believe this is due to Ten Peaks' solid growth strategy, which has seen us invest more time and money in several key areas of our business."

Over the past two years, management has been working to strengthen the company's market position by directing more resources toward quality and process improvements, enhanced inventory practices and increased consumer and trade marketing and promotion. Additionally, in the second half of 2010, Ten Peaks augmented its sales and marketing resources, which better positioned the company to win new accounts and grow its business with existing customers. These efforts have generated a positive response, with first half processing volumes up by 4% over the same period in 2010.

During the three months ended June 30, 2011, SWDCC's processing volumes fell by 8% on a year-over-year basis. Management believes this was a timing issue, as the decrease was linked to national accounts placing exceptionally large orders during the first quarter of the year.

The company's six-month volume gains were recorded despite extremely challenging market conditions. Colombia - traditionally the world's third largest coffee-producing country - has yielded dramatically smaller coffee crops for more than two years, owing to poor weather, pests and diseases that attack coffee trees. Other coffee-growing countries have faced similar challenges, reducing the availability of higher quality Arabica coffees. As a result, global supplies have fallen to historically low levels.

The shortage has spurred strong, steady increases in the coffee commodity price (NY'C') since June 2010, with the NY'C' averaging US$2.64 during the first half of 2011 compared to US$1.38 for the same period last year. A high coffee price affects Ten Peaks' business in a number of ways, increasing both its revenues and its cost of sales, while also limiting the ability of some smaller customers to fully replenish their coffee inventories due to credit constraints. Although the NY'C' has declined somewhat from the peak reached in May 2011, it is expected to remain elevated for the balance of the year.

Sales revenue for the three and six months ended June 30, 2011 was up significantly, increasing by 84% and 82%, respectively, over the same periods last year. In both periods, the growth was due to the significant increases in the commodity cost of green coffee, together with a proportionate rise in SWDCC's "non-toll" business.

SWDCC generates revenue in two ways. First, it decaffeinates customer-owned coffees, including organically certified coffees, for a fee - its "toll" business. Secondly, it purchases high-quality green coffees, decaffeinates them and markets them to the green coffee trade - its "regular" or "non-toll" business.  Revenue from its toll arrangements consists entirely of processing revenue, while revenue from its non-toll business includes both processing revenue and green coffee cost recovery revenue. Accordingly, growth in SWDCC's non-toll business will drive up the company's revenues, as well as its cost of sales.

During the first half of 2011, SWDCC's regular business grew 74% by volume, while its toll volumes declined by 48%. This was mainly because two large customers transitioned from using SWDCC's toll services to purchasing the company's premium decaffeinated green coffee at the end of 2010. Additionally, SWDCC's non-toll business has been growing as a percentage of its total sales for the past few years, as more customers seek to reduce their working capital commitments.

Sales revenue for the three and six months ended June 30, 2011 was negatively affected by a decline in foreign exchange. During the first half of 2011, the Canadian dollar remained strong relative to the US dollar ("US$"), which reduced revenues from US$ sales upon conversion. On the cost side, the stronger Canadian dollar helped to partially offset an increase in green coffee costs, as coffee commodity prices are quoted in US dollars.

Despite the positive foreign exchange impact, the company's cost of sales for the second quarter and first half of 2011 increased significantly on a year-over-year basis, rising by 92% and 88%, respectively. In both cases, the jump was related to higher coffee commodity prices, as well as an increase in regular volumes, as discussed above. This was partially offset by reduced depreciation on production-related equipment and leasehold improvements, due to changes in their estimated useful lives.

Gross profit for the three and six months ended June 30, 2011 was up by 43% and 49% respectively, compared to the same periods last year.  The growth was mainly related to margin gains realized on green coffee sales, as SWDCC sells its coffees at current market prices and not at the price it paid for it. The improved gross profit was also related to the company's volume growth during the first half of the 2011, together with lower depreciation costs.

Operating expenses for the second quarter and first half were higher this year than in 2010, reflecting the incremental sales and marketing resources added to grow SWDCC's business. Administrative expenses were also up, reflecting additional accounting staff, and increased investor relations expenses and professional fees.

EBITDA was $1.0 million in the second quarter of 2011, unchanged from the prior year. For the first half of the year, EBITDA fell by 11% due to higher operating expenses in the current period.

During the six months ended June 30, 2011, Ten Peaks paid out $0.6 million to shareholders, compared to $1.2 million during the first half of last year. Of the 2011 payments, $0.4 million represents the first quarterly dividend, paid in April 2011, and $0.2 million represents the last monthly distribution to unitholders of the former Fund, paid in January 2011. The payout ratio of dividends to EBITDA was 31% this year, compared to 53% in the first half of 2010. The decreased payout ratio reflects a reduction in the total amount the company pays to shareholders each quarter, which took effect when the Fund converted to a corporation.

In order to offset the impact of changing commodity prices and exchange rates on its cash flows, Ten Peaks enters into coffee futures and foreign exchange forward contracts. However, as it does not use hedge accounting, the current market value of its hedge position must be recognized at each balance sheet date, even though the underlying value of these derivative instruments may change before the contracts mature.

During the three and six months ended June 30, 2011, Ten Peaks recorded reduced overall losses on its derivative financial instruments, compared to the same periods last year. Realized losses of $2.1 million and $2.2 million in Q2 and the first half of 2011 were largely offset by unrealized gains of $2.2 million and $1.7 million. As a result, net income was $0.4 million in each of the second quarter and first half of 2011, compared to net losses of $0.7 million and $0.1 million in the prior periods.

Management remains optimistic about Ten Peaks' future prospects. Nevertheless, the company expects that a number of external market factors, such as tight coffee supplies, ongoing volatility in the NY'C' and widespread economic uncertainty, will continue to create challenging market conditions over the near term. This may dampen SWDCC's ability to grow its 2011 volumes, as some customers may reduce their orders with the company while they wait for conditions to improve.

"We believe that our growth strategy is sound and that we will continue to make steady progress against our business objectives in the coming periods," said Dennis. "More broadly, we also continue to explore other growth opportunities that will complement our existing business. Our long-term vision is to build Ten Peaks into a global coffee company by growing our base business and expanding into other coffee-related businesses, and we are confident that our efforts will generate positive results."

Payment of Quarterly Dividend

In June 2011, Ten Peaks' board of directors declared a cash dividend of $0.0625 per share for the quarter ended June 30, 2011. It was paid on July 15, 2011 to shareholders of record at the close of business on June 30, 2011.

Additional Information

A more detailed discussion of Ten Peaks' second quarter and first half 2011 financial results and management's outlook can be found in the company's Management's Discussion and Analysis ("MDA") for the three and six months ended June 30, 2011. This document, along with Ten Peaks' condensed consolidated interim financial statements for the periods, will be posted on SEDAR (www.sedar.com) on or before August 5, 2011. The MDA and financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes of the former Swiss Water Decaffeinated Coffee Income Fund for the year ended December 31, 2010, which are also posted on SEDAR.

Readers are cautioned that the summary information contained in this press release is not a suitable source of information for readers who are unfamiliar with Ten Peaks or the former Fund. This press release should be considered a precursor to, and not a substitute for, reading the financial statements and MDA, which provide more detailed information related to the company's performance and future prospects.

Company Profile

Ten Peaks is a publicly traded company that owns all of the interests of the Swiss Water Decaffeinated Coffee Company Inc. (SWDCC), a premium green coffee decaffeinator located in Burnaby, BC. Currently, Ten Peaks' business and financial results are wholly based on the business and financial results of SWDCC.

Established in 2000, SWDCC is one of the few chemical free coffee decaffeinators in the world. It employs the SWISS WATER® Process, a proprietary, chemical free decaffeination method.  Accordingly, SWISS WATER® Process decaffeinated green coffees are distinct from the majority of the world's decaffeinated coffees, which are exposed to chemical solvents such as methylene chloride and ethyl acetate during decaffeination.

Certified organic by the Organic Crop Improvement Association, the SWISS WATER® Process is the world's only branded decaffeination process and enjoys substantial recognition in the specialty coffee trade and with consumers.

SWISS WATER® Process decaffeinated green coffees are sold to many of North America's leading specialty roaster retailers, specialty coffee importers and commercial coffee roasters. SWDCC also sells coffees internationally through regional distributors.

Forward-Looking Statements

Certain statements in this press release may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. When used in this press release, such statements may include such words as "may", "will", "expect", "believe", "plan" and other similar terminology. These statements reflect management's current expectations regarding future events and operating performance, as well as management's current estimates, but which are based on numerous assumptions and may prove to be incorrect. These statements are neither promises nor guarantees, but involve known and unknown risks and uncertainties, including, but not limited to, risks related to processing volumes and sales growth, operating results, supply of coffee, general industry conditions, commodity price risks, technology, competition, foreign exchange rates and general economic conditions.

The forward-looking statements and financial outlook information contained herein are made as of the date of this press release and are expressly qualified in their entirety by this cautionary statement. Except to the extent required by applicable securities law, Ten Peaks Coffee Company Inc. undertakes no obligation to publicly update or revise any such statements to reflect any change in management's expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those described herein.