Mr. Frank Dennis reports

TEN PEAKS COFFEE COMPANY REPORTS RESULTS FOR SECOND QUARTER AND YTD 2017

Ten Peaks Coffee Company Inc. will hold a conference call to discuss its financial results for the three and six months ended June 30, 2017, today, Monday, Aug. 14, at 9 a.m. Pacific Time (12 p.m. Eastern Time). To participate, please dial 888-567-1603 (toll-free) or 862-255-5347 (international) approximately five minutes before the call and provide the company name. A replay will be available through Aug. 28, 2017, at 877-481-4010 (toll-free) or 919-882-2331 (international) pass code: 19773.

Ten Peaks Coffee Company has released financial results for the three and six months ended June 30, 2017. The three-month period represents the second quarter of the company's 2017 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. This is the company's primary business, and the results reported here reflect SWDCC's operating performance.

During the three and six months ended June 30, 2017, Ten Peaks recorded year-over-year increases in revenue, gross profit, operating income, net income and EBITDA (earnings before interest, taxes, depreciation and amortization). The gains were related to several factors, including higher shipped volumes and margin expansion.

"Demand for our Swiss Water process decaffeinated coffees continued to build through the first half of this year," said Frank Dennis, president and chief executive officer of Ten Peaks. "During the second quarter, shipments of our decaffeinated coffees rose by 19 per cent over the same period last year and were up by 10 per cent for the year to date. This is the third quarter in a row we have recorded volume growth, with gains coming from across the business. Looking ahead, we expect our volume shipments to continue increasing, but to slow somewhat, as the second half of last year was particularly strong. As a result, we anticipate our annual volumes will be up by between 3 per cent and 7 per cent over 2016."

                                     PERFORMANCE HIGHLIGHTS                                                                  
                           (in thousands except per-share amounts) 

                                        Three months ended June 30 Six months ended June 30
                                                   2017       2016        2017         2016
                                                                                        
Sales                                           $21,915    $18,074     $41,138      $38,726
Gross profit                                      3,364      2,601       6,399        5,616
Operating income                                  1,470        999       2,739        2,161
EBITDA                                            2,235      1,000       3,914        2,261
Net income                                        1,720        758       3,156        1,946
Earnings per share, basic                          0.19       0.08        0.35         0.22
Earnings per share, diluted                        0.17       0.08        0.25         0.22

Looking at six-month volumes by customer type, shipments to coffee importers and coffee roasters grew by 22 per cent and 4 per cent, respectively. SWDCC's large commercial accounts recorded gains of 12 per cent, while shipments to its specialty accounts rose by 6 per cent for the year to date.

During the first half of this year, the New York C Arabica coffee futures price averaged $1.38 (U.S.) per pound compared with $1.24 (U.S.) per pound in the first six months of 2016. However, while the NYC was higher on average, it has trended downward through 2017. This has had a positive impact on SWDCC's business, contributing to its higher year-over-year volumes. When the NYC declines over a sustained period, customers tend to add to their inventories. In 2016, sales orders declined when the NYC started rising, as customers chose to consume inventories rather than build them.

Higher volumes boosted revenues for both the second quarter and year to date. Second quarter sales totalled $21.9-million, an increase of $3.8-million, or 21 per cent, over the same period last year. Process revenue (the amount SWDCC charges its customers for decaffeinating green coffee) increased by 15 per cent due to higher volumes. This was partially offset by lower processing rates due to the sales mix. Green revenue (the amount SWDCC charges its customers for the green coffee it purchases for decaffeination) increased by 24 per cent, reflecting higher volumes and the higher NYC year over year. Distribution revenue (the shipping, handling and warehousing charges billed to customers) rose by 14 per cent, due to higher volumes and growth in Seaforth's business.

Six-month sales totalled $41.1-million, an increase of $2.4-million, or 6 per cent, over the same period last year. Process revenue and green revenue also increased by 6 per cent due to higher volumes. Distribution revenue rose by 14 per cent, with higher volumes and growth in Seaforth's business driving the increase.

Cost of sales for the second quarter grew by 20 per cent to $18.6-million, due to higher volumes. Six-month cost of sales was $34.7-million, up by $1.6-million, or 5 per cent over the first half of 2016. The increase in both periods was driven by higher volumes and higher depreciation expenses, which rose following the expansion of SWDCC's capacity in the first quarter of 2016. This was partially offset by lower labour, repair and maintenance costs.

Gross profit grew by 29 per cent in the second quarter and by 14 per cent in the first half of 2017, as higher revenues more than offset the increases in cost of sales.

Second quarter administration expenses increased by 10 per cent to $1.2-million. The increase related to share-based compensation expense, as well as higher research and development expenses. First half administration expenses grew by 2 per cent to $2.4-million, also due to a change in share-based compensation expense.

Operating income was up by 47 per cent to $1.5-million for the second quarter and by 27 per cent to $2.7-million for the year to date. The higher gross profit in both periods more than offset the increase in operating expenses.

Ten Peaks entered into a convertible debenture in October, 2016. Under IFRS (international financial reporting standards), this instrument is deemed to contain an embedded option which must be revalued at each balance sheet date. Revaluation of this option resulted in a gain of $100,000 in the second quarter and a gain of $1-million for the year to date. These were recorded as income in each of the respective periods.

Net income for the second quarter increased by 127 per cent to $1.7-million and by 62 per cent to $3.2-million for the year to date, compared with the same periods last year. Higher operating income, gains on risk management activities and a fair value adjustment boosted net income in both periods.

EBITDA for the second quarter rose by 124 per cent to $2.2-million. EBITDA for the year to date grew by 73 per cent to $3.9-million. In both periods, higher operating income and improved performance on risk management activities contributed to the year-over-year increase.

Outlook

For the balance of 2017, the company will continue to focus on executing its capacity expansion plan, and working to grow its market share in the United States and internationally. Margins in the second half of this year may be reduced if the current weakness in the U.S. dollar continues.

A number of factors support an expectation of future growth in SWDCC's (and therefore Ten Peaks') business. The most recent market research from StudyLogic continues to show that decaffeinated coffee is the fastest-growing segment of the U.S. coffee market. Total decaffeinated coffee sales are up year over year, and specialty decaffeinated coffee sales are particularly strong, especially in out-of-home markets. In fact, growth in the sales of decaffeinated coffee is offsetting declines in regular (caffeinated) coffees.

"Thanks to amazing, premium decaffeinated coffees like ours, more people are discovering that they can drink great coffee all day long without worrying about the side effects of caffeine," said Mr. Dennis. "Our coffees also satisfy a growing consumer desire for higher-quality, chemical-free ingredients -- a fact that's spurring more food companies to offer Swiss Water process coffees to their customers."

At the same time, Ten Peaks' commitment to sustainability responds to heightened awareness from consumers regarding how their food is produced. The Swiss Water process is inherently sustainable and the company pays close attention to coffee sourcing sustainability, community involvement, a healthy workplace and sustainable manufacturing. Readers can learn more about the company's sustainability initiatives in its first-ever sustainability report, found on SWDCC's website.

In addition to consumer-driven trends, changes in the global decaffeination market are enhancing SWDCC's growth prospects. Certain older decaffeination plants in Europe have closed recently, reducing the available third party decaffeinators. SWDCC expects to win some additional business from coffee companies affected by these shutdowns, as they seek alternative providers.

As noted previously, Ten Peaks is building a new state-of-the-art production facility that will enable the company to meet the anticipated long-term growth in demand for its decaffeinated coffees. Construction of the facility, which will be located in Delta, B.C., began in May, 2017, and is expected to be completed in mid-2018. Initially, the plant will house one new production line, although the site is large enough for expansion to meet growing demand well into the future. Construction of the new production line is expected to be completed in early 2019 and commissioned in the first half of 2019. The additional capacity that was added at Ten Peaks' Burnaby, B.C., facility in the first quarter of 2016 is expected to be sufficient to meet anticipated growth in demand until the new line is operational.

Quarterly dividends

On July 17, 2017, Ten Peaks paid an eligible quarterly dividend of 6.25 cents per share to shareholders of record on June 30, 2017.

About Ten Peaks Coffee Company Inc.

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, B.C. It also owns and operates Seaforth Supply Chain Solutions Inc., a green coffee handling and storage business located in Vancouver.

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