CBOU Caribou Coffee Company, Inc. (MM)

Caribou Coffee Company, Inc. (Nasdaq:CBOU), the second largest U.S.-based company-owned gourmet coffeehouse operator based on the number of coffeehouses, today reported financial results for first quarter 2006 (thirteen weeks ended April 2, 2006.) HIGHLIGHTS FOR THE FIRST QUARTER OF 2006 INCLUDE: -- Total net sales grew 24% to $56.0 million compared to the first quarter of 2005 -- Opened 10 company-operated coffeehouses and one licensed coffeehouse -- "Other Sales" increased 158% compared to the first quarter of 2005 Michael Coles, Chairman, CEO and President commented, "We are pleased to have increased total net sales by 24% and other sales by 158%. We are encouraged by recent trends and have several new initiatives underway to drive sales in other distribution channels as well as co-branding opportunities." Mr. Coles added, "We believe co-branding is an excellent way to gain brand recognition for the Caribou name." FIRST QUARTER 2006 RESULTS Total net sales increased $11.0 million, or 24%, to $56.0 million for the thirteen weeks ended April 2, 2006 from $45.0 million for the thirteen weeks ended April 3, 2005. This increase is primarily attributable to the opening of 86 new company-owned coffeehouses during the last twelve months. "Other Sales" increased by $1.6 million, or 158% to $2.7 million for the thirteen weeks ended April 2, 2006 from $1.0 million for the thirteen weeks ended April 3, 2005, as a result of an increase in club store, mass merchandiser, grocery and office coffee service sales. This increase was due to growth in our existing accounts and new accounts added during the last twelve months. Comparable coffeehouse net sales decreased 1% for the thirteen weeks ended April 2, 2006 compared with the same thirteen weeks in the prior year. During the thirteen weeks ended April 3, 2005 comparable coffeehouse net sales increased 10% when compared to the thirteen weeks ended March 28, 2004. Licensed coffeehouses are not included in the comparable coffeehouse net sales calculations. The Company recognized $0.1 million of compensation expense related to the implementation of FAS 123(R) for stock based compensation during the thirteen weeks ended April 2, 2006. Adjusted EBITDA decreased $0.4 million to $3.8 million during the thirteen weeks ended April 2, 2006 from $4.2 million during the thirteen weeks ended April 3, 2005. (EBITDA and Adjusted EBITDA are non-GAAP measures. See EBITDA reconciliation at the end of this release.) The Company's net loss for the thirteen weeks ended April 2, 2006 increased $1.2 million to a net loss of $1.6 million or ($0.08) per share from a net loss of $0.4 million or ($0.03) per share for the thirteen weeks ended April 3, 2005. The increase in the net loss is attributable to general and administrative expenses increases for staffing to support the Company's growth plan and public company costs and higher coffeehouse occupancy, marketing and depreciation expense. 2006 OUTLOOK The Company does not anticipate updating its guidance for fiscal year 2006 until after release of second quarter results on or about August 3, 2006. CONFERENCE CALL Caribou Coffee will host a conference call today, Thursday May 4, 2006, at 4:30pm Eastern Time to discuss these results. Hosting the call will be Michael Coles, Chairman of the Board, Chief Executive Officer and President, and George Mileusnic, Chief Financial Officer. The call will be webcast live from the Company's website at www.cariboucoffee.com. The webcast link will be available under the investor relations section. If you are unable to join the call, a replay will be available beginning at 7:30pm Eastern Time and can be accessed by dialing 1-888-203-1112, passcode 1558234. ABOUT THE COMPANY Caribou Coffee Company, Inc., founded in 1992 and headquartered in Minneapolis, Minnesota, is the second largest company-owned gourmet coffeehouse operator in the United States based on the number of coffeehouses. As of April 2, 2006, Caribou Coffee had 402 coffeehouses, including eight licensed locations. Caribou Coffee's coffeehouses are located in 16 states and the District of Columbia. Caribou Coffee offers its customers high-quality gourmet coffee and espresso-based beverages, as well as specialty teas, baked goods, whole bean coffee, branded merchandise and related products. In addition, Caribou Coffee sells products to club stores, grocery stores, mass merchandisers, office coffee providers, airlines, hotels, sports and entertainment venues, college campuses and other commercial customers. In addition, Caribou Coffee licenses third parties to use the Caribou Coffee brand on quality food and merchandise items. Caribou Coffee focuses on creating a unique experience for customers through a combination of high-quality products, a comfortable and welcoming coffeehouse environment and customer service. FORWARD-LOOKING STATEMENTS Certain statements in this release, and other written or oral statements made by or on behalf of Caribou Coffee are "forward-looking statements" within the meaning of the federal securities laws. Statements regarding future events and developments and our future performance, as well as management's current expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. These forward-looking statements are subject to a number of risks and uncertainties. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: fluctuations in quarterly and annual results, incurrence of net losses, adverse effects of management focusing on implementation of a growth strategy, failure to develop and maintain the Caribou Coffee brand and other factors disclosed in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release. -0- *T CARIBOU COFFEE COMPANY, INC. AND AFFILIATES (A Majority Owned Subsidiary of Caribou Holding Company Limited) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Thirteen Weeks Ended ------------------------ April 3, April 2, 2005 2006 ------------------------ (Unaudited) Coffeehouse sales $43,997,861 $53,283,822 Other sales 1,041,818 2,682,389 ------------------------ Total net sales 45,039,679 55,966,211 Cost of sales and related occupancy costs 18,044,840 23,266,067 Operating expenses 18,372,178 23,100,856 Opening expenses 308,320 415,251 Depreciation and amortization 3,686,938 4,805,233 General and administrative expenses 4,600,953 6,101,178 Closing expense and disposal of assets 897 7,998 ------------------------ Operating income (loss) 25,553 (1,730,372) Other income (expense): Other income 193,443 322,950 Interest income 1,365 187,003 Interest expense (424,233) (147,742) ------------------------ Loss before provision for income taxes and minority interest (203,872) (1,368,161) Provision for income taxes 151,323 147,039 ------------------------ Loss before minority interest (355,195) (1,515,200) Minority interest 82,022 56,865 ------------------------ Net loss $ (437,217)$(1,572,065) ======================== Basic and diluted net loss per share $ (0.03) $ (0.08) ======================== Basic and diluted weighted average number of shares outstanding 13,802,021 19,274,102 ======================== CARIBOU COFFEE COMPANY, INC. AND AFFILIATES (A Majority Owned Subsidiary of Caribou Holding Company Limited) CONDENSED CONSOLIDATED BALANCE SHEETS January 1, April 2, 2006 2006 -------------------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $33,846,111 $20,521,846 Accounts receivable (net of allowance for doubtful accounts of approximately $237,595 and $85,735 at January 1, 2006 and April 2,2005) 1,137,120 1,452,945 Other receivables 2,260,254 1,254,967 Income tax receivable 135,750 53,355 Inventories 11,182,512 10,456,268 Prepaid expenses and other current assets 1,251,555 1,356,919 -------------------------- Total current assets 49,813,302 35,096,300 Property and equipment, net of accumulated depreciation and amortization 96,022,720 95,469,325 Notes receivable 64,531 60,501 Restricted cash 321,030 321,030 Other assets 1,738,717 1,638,507 -------------------------- Total assets $147,960,300 $132,585,663 ========================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $14,553,743 $7,314,547 Accrued compensation 5,462,657 3,241,629 Accrued expenses 8,504,552 6,275,981 Deferred revenue 8,165,260 5,507,739 -------------------------- Total current liabilities 36,686,212 22,339,896 Revolving credit facility -- -- Asset retirement liability 760,997 781,992 Deferred rent liability 10,485,177 10,847,109 Deferred revenue 2,964,000 2,956,000 Minority interests in affiliates 138,159 167,844 -------------------------- Total long term liabilities 14,348,333 14,752,945 Commitments and contingencies Shareholders' equity: Preferred stock, par value $.01, 20,000,000 shares authorized; no shares issued and outstanding -- -- Common stock, par value $.01, 200,000,000 shares authorized; 19,269,133 and 19,278,980 shares issued and outstanding at January 1, 2006 and April 2, 2006, respectively 192,699 192,790 Treasury stock (9,011) -- Additional paid-in capital 121,626,855 121,756,885 Accumulated deficit (24,884,788) (26,456,853) -------------------------- Total shareholders' equity 96,925,755 95,492,822 -------------------------- Total liabilities and shareholders' equity $147,960,300 $132,585,663 ========================== EBITDA RECONCILIATION The following is a reconciliation of the Company's net loss to EBITDA and Adjusted EBITDA. Thirteen Weeks Ended -------------------- April 3, April 2, 2005 2006 -------------------- (Thousands) Net loss $ (437)$(1,572) Interest expense 424 148 Interest income (1) (187) Depreciation and amortization(1) 4,106 5,281 Provision for income taxes 151 147 -------------------- EBITDA 4,243 3,817 Adjusted EBITDA $ 4,243 $ 3,817 ==================== (1) Includes depreciation and amortization associated with our headquarters and roasting facility that are categorized as general and administrative expenses and cost of sales and related occupancy costs on our statement of operations. *T EBITDA is equal to net income (loss) excluding: (a) interest expense; (b) interest income; (c) depreciation and amortization; and (d) income taxes. Adjusted EBITDA may be different from EBITDA due to one-time nonrecurring costs or charges. For the periods presented, there are no such one-time costs or charges, and EBITDA is equal to Adjusted EBITDA. We believe EBITDA and Adjusted EBITDA are useful to investors in evaluating our operating performance for the following reasons: -- Our coffeehouse leases are generally short-term (5-10 years) and we must depreciate all of the cost associated with those leases on a straight-line basis over the initial lease term excluding renewal options (unless such renewal periods are reasonably assured at the inception of the lease). We opened 265 coffeehouses from the beginning of fiscal 2001 through the first thirteen weeks of 2006. As a result, we believe depreciation expense is disproportionately large when compared to the sales from a significant percentage of our coffeehouses that are in their initial years of operations. Also, many of the assets being depreciated have actual useful lives that exceed the initial lease term excluding renewal options. Consequently, we believe that adjusting for depreciation and amortization is useful for evaluating the operating performance of our coffeehouses. Our management uses EBITDA and Adjusted EBITDA: -- As measurements of operating performance because they assist us in comparing our operating performance on a consistent basis as they remove the impact of items not directly resulting from our coffeehouse operations; -- For planning purposes, including the preparation of our internal annual operating budget; -- To establish targets for certain management compensation matters; and -- To evaluate our capacity to incur and service debt, fund capital expenditures and expand our business. EBITDA and Adjusted EBITDA as calculated by us are not necessarily comparable to similarly titled measures used by other companies. In addition, EBITDA and Adjusted EBITDA: (a) do not represent net income or cash flows from operating activities as defined by GAAP; (b) are not necessarily indicative of cash available to fund our cash flow needs; and (c) should not be considered as alternatives to net income, operating income, cash flows from operating activities or our other financial information as determined under GAAP. We prepare Adjusted EBITDA by adjusting EBITDA to eliminate the impact of a number of items that we do not consider indicative of our core operating performance. You are encouraged to evaluate each adjustment and the reasons we consider them appropriate for supplemental analysis. As an analytical tool, Adjusted EBITDA is subject to all of the limitations applicable to EBITDA. In addition, in evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an implication that our future results will be unaffected by unusual or non-recurring items.