Mr. Frank Dennis reports

TEN PEAKS COFFEE COMPANY REPORTS RESULTS FOR FOURTH QUARTER AND FULL YEAR 2016

Ten Peaks Coffee Company Inc. will hold a conference call to discuss its financial results for the three months and year ended Dec. 31, 2016, on March 16 at 9 a.m. Pacific Time (12 p.m. Eastern Time). To participate, please dial 866-682-6100 (toll-free) or 862-255-5401 (international) approximately five minutes before the call and provide the company name. A replay will be available through March 30, 2017, at 877-481-4010 (toll-free) or 919-882-2331 (international), passcode 10281.

Ten Peaks Coffee Company has reported financial results for the three months and year ended Dec. 31, 2016. The three-month period represents the fourth quarter of the company's 2016 fiscal year. Ten Peaks is a leading specialty coffee company doing business through two wholly owned subsidiaries: Swiss Water Decaffeinated Coffee Company Inc. (SWDCC) and Seaforth Supply Chain Solutions Inc., the company's green coffee handling and storage subsidiary. SWDCC is a premium green coffee decaffeinator located in Burnaby, B.C., which employs the proprietary Swiss Water process to decaffeinate green coffee without the use of chemicals. It is the company's primary business, and the results reported here reflect SWDCC's operating performance.

During the three months ended Dec. 31, 2016, Ten Peaks recorded its highest quarterly processing volumes ever. Fourth quarter volumes grew by 9 per cent over the same period in 2015, driving year-over-year increases in quarterly revenues, gross profit, operating income, net income and EBITDA (net income before interest, depreciation, amortization, impairments, share-based compensation, gains/losses on foreign exchange, gains/losses on disposal of capital equipment and provision for income taxes).

Strong volume growth in the fourth quarter significantly offset the volume declines SWDCC experienced during the first nine months of the year. As a result, annual processing volumes and revenues were down by 2 per cent compared with 2015. Volumes were strong in 2015 in part due to a declining coffee futures price, which prompted customers to increase their inventories at historically low prices. By comparison, the coffee futures price rose for most of 2016. This suppressed demand, with customers postponing new orders and consuming coffee inventories on hand.

Additionally, the industry saw significant demands for extended payment terms by major roasters during 2016. The longer carrying periods squeezed coffee importers, which resulted in inventory reductions and reduced ordering throughout the year. Despite these challenges, the company's success in improving margins led to higher gross profit, operating income and net income, compared with 2015.

"Given the tough market conditions we experienced through most of 2016, we are pleased with our recent financial results," said Frank Dennis, president and chief executive officer of Ten Peaks Coffee Company. "While our volume growth was constrained for much of the year, a very strong fourth quarter, combined with good margin enhancement, enabled us to record solid overall results for 2016. The record-setting processing volumes we achieved in the fourth quarter were the direct result of the capacity expansion we undertook in the first quarter of the year. This gives us confidence that we are well positioned to respond to anticipated strong demand for our coffees during the next two years, while we build our new decaffeination facility in Delta, B.C."

                                            FINANCIAL HIGHLIGHTS
                                                   ($000)

                                                  Three            Three                12               12 
                                           months ended     months ended      months ended     months ended
                                          Dec. 31, 2016    Dec. 31, 2015     Dec. 31, 2016    Dec. 31, 2015

Sales                                           $22,448          $21,401           $81,927          $83,641
Gross profit                                      3,216            3,166            12,050           11,313
Operating income                                  1,526              753             5,017            3,874
EBITDA (1)                                        1,998            1,043             5,772            8,034
Net income (loss)                                 1,328             (572)            4,149            1,312
Cash flow from operating activities (3)           3,153            2,401             9,235            9,121
Per share (2)                                                                                             
Net income (loss) -- basic and diluted             0.15            (0.06)             0.46             0.17

(1) EBITDA is a non-international financial reporting standard measure.
(2) Per-share calculations are based on the weighted-average number of shares 
outstanding during the period.
(3) Excluding movements in non-cash working capital.                                                        

During the fourth quarter, SWDCC saw volumes to its specialty regional customers grow by 28 per cent over fourth quarter 2015. Shipments to its large national customers were also up for the period, rising by 1 per cent. For the full year, volumes to specialty regional accounts fell by 7 per cent, while volumes to national customers were flat.

SWDCC's customers can also be categorized into two groups -- coffee importers and coffee roasters -- by the nature of their business. Coffee importers act like grocery stores to roasters, sourcing and importing green coffee from various origins and carrying a selection of different origins and quality levels for roasters to choose from. Importers buy coffee from SWDCC to resell it to roasters when and where they need it. Roasters are in the business of roasting and packaging coffee for sale to consumers in their own coffee shops, or for home or office use. Roasters either buy directly from SWDCC, or they buy from an importer. They generally carry lower inventories of green coffee than importers, as roasters tend to take delivery of green coffee shortly before roasting it. During the first nine months of 2016, SWDCC recorded an 18-per-cent decline in volumes to importers. The negative trend reversed during the fourth quarter, with shipments to importers increasing by 30 per cent. This suggests the importers reduced their inventory levels while the coffee futures price was high, and then replenished their stocks during the last months of the year, when the coffee futures price fell. Over all, annual volumes to importers declined by 7 per cent compared with 2015.

Revenue for fourth quarter 2016 was $22.4-million, an increase of 5 per cent on a year-over-year basis. Process revenue (the amount SWDCC charges its customers for decaffeinating green coffee beans) increased by $400,000, or 8 per cent, while green revenue (the amount SWDCC charges its customers for the green coffee purchased for decaffeination) increased by $700,000, or 4 per cent, in the fourth quarter. In both cases, the higher revenue was related to higher volumes. Distribution revenue (shipping, handling and warehousing charges billed to customers) was unchanged from fourth quarter 2015.

For the full year, revenues declined by 2 per cent to $81.9-million, primarily due to lower processing volumes. Although volumes declined, process revenue rose by $400,000, or 2 per cent, due to a positive hedge accounting adjustment on revenue hedges. Green revenue decreased by $2.2-million, or 4 per cent, reflecting lower sales volumes and the sale of coffee that had been price fixed by customers at a lower coffee futures price. Distribution revenue rose by 2 per cent for the year, reflecting growth in Seaforth's business, partially offset by lower volumes.

Ten Peaks' financial results reflect the company's adoption of hedge accounting, effective Jan. 1, 2016, which allows the company to better align its accounting practices with the way the business is managed. Now, only gains and losses on hedged transactions that occur in a fiscal period are recorded in that period. Gains or losses on derivatives that hedge future transactions are held on the balance sheet or in other comprehensive income for future periods. The adoption of hedge accounting reduces Ten Peaks' earnings volatility and provides gross profit that reflects the costs/benefits of its risk management activities.

Cost of sales totalled $19.2-million during fourth quarter 2016, up by 5 per cent compared with the same period in 2015. The increase was due to a combination of higher green coffee costs, increased packaging and processing charges, and higher depreciation on manufacturing equipment following the expansion of one of SWDCC's processing lines in the first quarter. For the full year, cost of sales declined by 3 per cent to $69.9-million. Costs declined with the lower processing volumes and green coffee costs. Lower freight charges, due to lower volumes and savings on shipping costs, also contributed to the decline.

Gross profit for the fourth quarter grew by 2 per cent to $3.2-million, due to the higher revenue in the period. For the full year, gross profit grew by 7 per cent to $12.1-million, as lower cost of sales more than offset lower revenues.

Sales and marketing expenses for the fourth quarter were $700,000, down by $100,000, compared with fourth quarter 2015. Annual sales and marketing expenses totalled $2.4-million, which was largely unchanged from 2015.

During 2016, administration expenses fell by 38 per cent to $1.0-million for the fourth quarter and by 9 per cent to $4.5-million for the full year. In both periods, the decreases reflect lower stock-based compensation expenses due to a decline in Ten Peaks' share price, as well as lower accrued bonuses in the period. This was partially offset by increased staff-related expenditures and higher professional fees.

Over all, operating income rose significantly in 2016, growing by 103 per cent to $1.5-million in the fourth quarter and by 30 per cent to $5.0-million for the full year.

SWDCC enters into commodity futures and foreign exchange forward contracts to manage the effect of changes in the coffee futures price and U.S. dollar exchange rates on the business. The company's hedging strategies have not changed with the adoption of hedge accounting. Now, however, the majority of gains/losses on derivative instruments is deferred on the balance sheet (for fair value hedges) or in other comprehensive income (for cash flow hedges) until the hedge transaction is realized. This helps minimize the earnings volatility historically caused by the revaluation of derivatives instruments associated with SWDCC's risk management activities. This contributed to the reduction in losses on financial instruments, year over year, and thus improved Ten Peaks' net income in 2016.

Net income rose in both periods, to $1.3-million in the quarter (compared with a loss of $600,000 in fourth quarter 2015), and to $4.1-million for the year. Improved margins and a reduction in expenses contributed to the increases.

EBITDA for the fourth quarter doubled to $2.0-million, due to the higher processing volumes and revenues, as well as lower expenses. However, the strong performance in the fourth quarter was not sufficient to offset declines in EBITDA recorded earlier in the year. As a result, EBITDA for the full year fell by 28 per cent to $5.8-million. Of note in 2015, Ten Peaks' results were boosted by $1.8-million in gains on green coffee sales, which related to a rising U.S. dollar. No similar gains were recorded in 2016.

Ten Peaks generated $9.2-million in cash from operations before changes in working capital accounts during 2016, compared with $9.1-million in 2015.

Outlook

According to market research firm Studylogic, in the 12 months ended Jan. 31, 2017, total decaffeinated coffee sales in the United States were up year over year. Additionally, specialty decaffeinated coffee is growing faster than the coffee market as a whole, especially in out-of-home markets. Premium specialty decaffeinated coffee is also growing faster than regular coffee in the made-to-order and single-serve formats. In fact, growth in the sales of decaffeinated coffee is offsetting declines in regular (caffeinated) coffees (1).

SWDCC is well positioned to benefit from growth in the decaf category, as its proven commitment to 100-per-cent-chemical-free processing and to preserving the unique quality of fine coffees through the decaffeination process is already well recognized, valued and respected by the coffee trade and its customers. Accordingly, the company's processing volumes are expected to increase in 2017, with growth skewed to the second half of the year.

"As the market leader in premium-quality, 100-per-cent-chemical-free decaffeinated coffee, we will continue to invest in growing the category, and in ensuring that roasters and consumers know that they have a choice in decaffeination processes and coffee quality," said Mr. Dennis. "When consumers become aware that they can have amazing coffee without caffeine any time of the day or night, they choose to drink more coffee. This enables roaster retailers, in turn, to extend their coffee sales later into the day and, thus, grow their business. Our key objective for 2017 is to focus on executing our expansion plan, while growing our market share in the U.S. and internationally."

As announced previously, Ten Peaks is preparing to build a state-of-the-art production facility, which is expected to be operational by mid- to late 2018. During 2016, management finalized a lease for the build-to-suit facility, to be located in Delta, B.C. The new processing area will accommodate up to two production lines, and the 100,000-square-foot building will also include offices, a state-of-the-art lab and a coffee warehouse. Importantly, the site is large enough to accommodate growth well into the future. The new facility will be leased to SWDCC for an initial term of five years. The lease agreement includes multiple renewal periods, as well as multiple options to purchase the land and building at specified future dates. As this will be a purpose-built facility, the lease will be accounted for as a financing lease.

(1) Studylogic report of February, 2017.

Quarterly dividends

On Jan. 16, 2017, Ten Peaks paid an eligible quarterly dividend of 6.25 cents per share to shareholders of record on Dec. 31, 2016.

On March 14, 2017, the company declared an eligible dividend of 6.25 cents per share, to be paid on April 17, 2017, to shareholders of record on March 31, 2017.

Additional information

A more detailed discussion of Ten Peaks' recent financial results and management's outlook can be found in the company's management's discussion and analysis for the three months and year ended Dec. 31, 2016. This document, along with Ten Peaks' audited financial statements, will be posted on SEDAR and on the company's website on March 15, 2017.

About Ten Peaks Coffee Company Inc.

Ten Peaks is a publicly traded company that owns all of the interests of Swiss Water Decaffeinated Coffee Company, a premium green coffee decaffeinator, located in Burnaby, B.C. It also owns and operates Seaforth Supply Chain Solutions, a green coffee handling and storage business, located in metro Vancouver.

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