Caribou Coffee Company, Inc. (NASDAQ:CBOU), the second largest
company-owned premium coffeehouse operator in the United States
based on the number of coffeehouses, today reported financial
results for the third quarter of 2012 (thirteen weeks ended
September 30, 2012). The Company also provided a preliminary view
of fiscal 2013.
HIGHLIGHTS FOR THE THIRD QUARTER OF 2012 INCLUDE:
- Comparable coffeehouse store sales
increased 3.5%
- Net income attributable to Caribou
Coffee Company, Inc. was $1.7 million, or $0.08 per diluted share
compared to $1.8 million, or $0.09 per diluted share, in the third
quarter of 2011. Non-GAAP pro forma net income attributable to
Caribou Coffee Company, Inc. in the third quarter of 2011 was $1.6
million, or $0.07 per diluted share. (see non-GAAP reconciliation
at the end of this release).
Speaking on behalf of the Company, Michael Tattersfield, the
Company’s President and Chief Executive Officer commented, “Our
third quarter performance was in-line with our expectations. We
leveraged on-going product innovation and an unyielding focus on
customer service to grow comparable coffeehouse sales of 3.5% in
the quarter. We also opened 20 new coffeehouses in the quarter, six
of which were company owned. We continue to focus on our
multi-channel premium coffee business model to build the Caribou
brand, and are confident in our ability to drive future growth
across all of our lines of business.”
Tattersfield continued, “Subsequent to our fiscal third quarter,
Hurricane Sandy caused damage to a portion of our green coffee
inventory that is being stored in a third-party warehouse in New
Jersey. We are currently assessing the extent of the damage,
including the reclamation and usability potential of the product,
as well as possible avenues for recovery. While this situation is
rather unfortunate, we estimate our maximum liability will not
exceed $5 million, and thankfully, our coffeehouse operations were
not materially impacted by the storm.”
THIRD QUARTER 2012 RESULTS
Net sales for the quarter of $77.2 million decreased $4.2
million, or 5.2%, from $81.4 million in the comparable quarter of
2011.
- Coffeehouse sales were $61.0 million in
the third quarter of 2012, an increase of 4.0% compared to $58.7
million in the third quarter of 2011. Growth was driven by a 3.5%
increase in comparable coffeehouse sales, primarily due to
increased beverage sales.
- Commercial sales were $11.9 million in
the third quarter of 2012, a decrease of 39.9% compared to $19.8
million in the third quarter of 2011. The change was driven by a
decrease in sales of blended coffee into the Keurig® single-serve
platform and related royalties, partially offset by increased sales
to new and existing customers in the Company’s grocery and
foodservice channels.
- Franchise sales were $4.3 million in
the third quarter of 2012, an increase of 45.0% compared to $3.0
million in the third quarter of 2011. Growth in product sales and
royalties from 202 franchise locations, a net increase of 52
locations from the prior year, drove the increase in franchise
sales versus last year.
Cost of sales and related occupancy costs in the third quarter
of 2012 were $37.2 million, a decrease of $4.7 million, or 11.3%,
compared to the third quarter of 2011, and were driven by lower
sales of blended coffee in the Keurig® single-serve platform. As a
percentage of revenue, cost of sales and related occupancy costs
were 48.2% in the third quarter of 2012 versus 51.5% in the same
period of the prior year. The favorability in cost of sales was
driven by lower sales of green coffee related to Caribou Coffee
K-cups, which have significantly lower margins.
Operating expenses in the third quarter of 2012 were $26.6
million, an increase of $0.3 million, or 1.0%, compared to $26.3
million in the third quarter of 2011. The increase in operating
expenses was driven by higher fees for debit card transactions due
to recent legislation changes, partially offset by lower labor
costs. As a percentage of revenue, operating costs were 34.4%,
compared to 32.3% in the same period of the prior year. The
increase as a percentage of sales was the result of deleveraging on
lower green coffee sales and royalties related to Caribou Coffee
K-cups which have lower operating expenses associated with those
sales.
General and administrative expenses increased $0.4 million, or
5.1%, to $8.2 million in the third quarter of 2012, from $7.8
million in the third quarter of 2011. As a percentage of total net
sales, general and administrative expenses increased to 10.6% in
the third quarter of 2012 from 9.5% in the third quarter of 2011.
The increase was due to deleveraging on lower green coffee sales
and royalties related to Caribou Coffee K-cups.
Depreciation and amortization decreased $0.1 million to $2.5
million during the third quarter of 2012 due to a lower depreciable
asset base.
Tax expense was $0.9 million in the third quarter of 2012
compared to a tax expense of $0.8 million in the third quarter of
2011.
The Company’s net income attributable to Caribou Coffee Company,
Inc. in the third quarter of 2012 was $1.7 million, or $0.08 per
diluted share, compared to $1.8 million, or $0.09 per diluted
share, in the same period in 2011.
FINANCIAL OUTLOOK
The Company has updated its guidance for the full year 2012
based upon the following assumptions:
- Net sales flat compared with 2011.
- Coffeehouse unit growth of 10% to 12%,
of which approximately 15 units will be Company-owned coffeehouse
openings.
- Diluted earnings per share of $0.44 to
$0.46, excluding any potential financial impact related to
Hurricane Sandy.
The Company is also providing a preliminary view for the full
year 2013 based upon the following assumptions:
- Net sales growth of approximately 6% to
8%.
- Comparable coffeehouse sales growth of
2% to 4%.
- Commercial sales growth of
approximately 10%.
- Coffeehouse unit growth of 10% to 12%,
of which approximately 15 to 20 units will be Company-owned
coffeehouse openings.
- Diluted earnings per share of $0.52 to
$0.55.
CONFERENCE CALL
The Company will host a conference call on November 8, 2012, at
4:30 p.m. (Eastern Time) to discuss these results. Hosting the call
will be Mike Tattersfield, Chief Executive Officer, and Tim
Hennessy, Chief Financial Officer.
Listeners may access the call by dialing 888-505-4375 or
719-325-2454 for international callers. A replay of the call will
be available until Thursday, November 15, 2012, by dialing
877-870-5176 or 858-384-5517 for international callers; the
password is 6466229.
The conference call will also be webcast and can be accessed
from the Investor Relations section of the Caribou Coffee website
at www.cariboucoffee.com.
ABOUT THE COMPANY
Founded in 1992, Caribou Coffee Company is one of the leading
branded coffee companies in the United States, with a compelling
multi-channel approach to their customers. Based on the number of
coffeehouses, Caribou Coffee is the second largest company-operated
premium coffeehouse operator in the United States. As of September
30, 2012, the Company had 610 coffeehouses, including 202
franchised locations, in 22 states, the District of Columbia
and ten international markets. The Company’s coffeehouses aspire to
be the community place loved by guests who are provided an
extraordinary experience that makes their day better. Caribou
Coffee provides the highest quality handcrafted beverages, foods
and coffee lifestyle items with a unique blend of expertise, fun
and authentic human connection in a comfortable and welcoming
coffeehouse environment. In addition, Caribou Coffee’s unique
coffees are available within grocery stores, mass merchandisers,
club stores, office coffee and foodservice providers, hotels,
entertainment venues and e-commerce channels. Caribou Coffee is a
proud recipient of the Rainforest Alliance Corporate Green Globe
Award and is committed to operating practices that promote
sustainability and environmental protection. For more information,
visit the Caribou Coffee web site at www.cariboucoffee.com.
FORWARD-LOOKING STATEMENTS
Certain statements in this release, and other written or oral
statements made by or on behalf of Caribou Coffee contain
forward-looking statements concerning Caribou Coffee’s expected
financial performance, as well as Caribou Coffee’s strategic and
operational plans. Risks and uncertainties may cause actual results
to differ materially from the results predicted, and reported
results should not be considered as an indication of future
performance. The potential risks and uncertainties include, among
others, our ability to develop and maintain our brand; our ability
to maintain or expand our commercial business, including
maintaining our relationship with Keurig; our ability to locate
superior sites and increase the density of our coffeehouses;
Caribou Coffee’s ability to compete with new or existing
competitors; the implementation and results of Caribou Coffee’s
ongoing strategic and cost initiatives; the fluctuations in cost
and availability of our raw ingredients; the demand by customers
for Caribou Coffee’s premium products; acceptance by customers of
new products and services; dependence on third parties for
supplies, services, and distribution; dependence on key personnel;
failure to manage growth and diversification; risks related to
Caribou Coffee’s international franchise operations; Caribou
Coffee’s ability to protect its intellectual property and the value
of its brands; and general economic conditions and changes in
economic conditions. All information set forth in this press
release and its attachments is as of November 9, 2012. Caribou
Coffee does not intend, and undertakes no duty, to update this
information to reflect subsequent events or circumstances; however,
Caribou Coffee may update its business outlook or any portion
thereof at any time in its discretion. More information about
potential factors that could affect the Company’s business and
financial results is included under the captions “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in the Company’s Annual Report on Form 10-K
for the year ended January 1, 2012, which is on file with the SEC
and available on the SEC’s website at www.sec.gov. Additional
information will also be set forth in those sections in any future
filings we may make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act.
CARIBOU COFFEE COMPANY, INC. AND
AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
Thirteen Weeks Ended
Thirty-Nine Weeks Ended
September 30,
2012
October 2,
2011
September 30,
2012
October 2,
2011
(In thousands, except for per share amounts)
(Unaudited)
Coffeehouse sales $ 61,032 $ 58,695 $ 182,777 $ 176,338 Commercial
and franchise sales
16,210
22,744 56,131
57,646 Total net sales 77,242 81,439 238,908
233,984 Cost of sales and related occupancy costs 37,210 41,941
119,071 113,100 Operating expenses 26,555 26,291 79,535 78,512
Depreciation and amortization 2,547 2,669 7,519 8,373 General and
administrative expenses
8,161
7,763 23,009
23,703 Operating income 2,769 2,775 9,774
10,296 Other income (expense): Interest income 11 3 35 15 Interest
expense
(20 )
(70 )
(61 )
(184 ) Income before provision for (benefit from)
income taxes 2,760 2,708 9,748 10,127 Provision for (benefit from)
income taxes
925 803
3,782 (20,484
) Net income 1,835 1,905 5,966 30,611 Less: Net income
attributable to noncontrolling interest
113
118 244
328 Net income attributable to
Caribou Coffee Company, Inc.
$ 1,722
$ 1,787 $
5,722 $ 30,283
Basic net income attributable to Caribou Coffee Company, Inc.
common shareholders per share
$ 0.09
$ 0.09 $
0.28 $ 1.51
Diluted net income attributable to Caribou Coffee Company, Inc.
common shareholders per share
$ 0.08
$ 0.09 $
0.27 $ 1.46
Basic weighted average number of shares outstanding
19,918 20,232
20,311 20,076
Diluted weighted average number of shares outstanding
20,445 20,953
20,934 20,751
CARIBOU COFFEE COMPANY, INC. AND
AFFILIATES
CONDENSED CONSOLIDATED BALANCE
SHEETS
September 30,
2012
January 1,
2012
In thousands, except per share amounts
(Unaudited)
ASSETS Current assets: Cash and cash equivalents $ 28,586 $
44,495 Accounts receivable, net 7,574 14,646 Other receivables, net
2,158 1,743 Inventories 45,557 22,965 Deferred tax assets - current
3,465 6,766 Prepaid expenses and other current assets
1,076 1,514 Total
current assets 88,416 92,129 Property and equipment, net of
accumulated depreciation and amortization 36,699 36,965 Deferred
tax assets – non-current 15,664 13,947 Other assets
300 323 Total assets
$ 141,079 $
143,364 LIABILITIES AND SHAREHOLDERS’
EQUITY Current liabilities: Accounts payable $ 13,143 $
10,480 Accrued compensation 5,087 6,272 Accrued expenses 9,694
8,502 Deferred revenue
5,804
8,591 Total current liabilities 33,728 33,845
Asset retirement liability 1,237 1,248 Deferred rent
liability 4,216 5,132 Deferred revenue
1,853
1,883 Total long term liabilities
7,306 8,263 Equity: Caribou Coffee Company, Inc.
Shareholders’ equity: Preferred stock, par value $.01, 20,000
shares authorized; no shares issued and outstanding — — Common
stock, par value $.01, 200,000 shares authorized; 20,334 and 20,848
shares issued and outstanding at September 30, 2012 and January 1,
2012, respectively 203 208 Additional paid-in capital 126,027
132,643 Accumulated comprehensive loss (358 ) — Accumulated deficit
(25,996 )
(31,718 ) Total Caribou Coffee Company, Inc.
shareholders’ equity 99,876 101,133 Noncontrolling interest
169 123 Total equity
100,045 101,256
Total liabilities and equity
$
141,079 $ 143,364
Thirteen Weeks
Ended Thirty-Nine Weeks Ended
September 30, October 2, September 30,
October 2, 2012 2011 2012 2011
(In thousands, except operating data) Non-GAAP
Metrics: EBITDA(1) $ 5,706 5,812 $ 18,603 19,811
Operating Data: Percentage change in comparable coffeehouse
net sales(2) 3.5 % 4.1 % 2.9 % 4.3 % Company-Owned: Coffeehouses
open at beginning of period 408 407 412 410 Coffeehouses opened
during the period 6 3 7 3 Coffeehouses closed during the period
6 1
11 4 Coffeehouses open at
end of period: Total Company-Owned 408 409 408 409 Franchised:
Coffeehouses opened at beginning of period 188 147 169 131
Coffeehouses opened during the period 14 5 39 26 Coffeehouses
closed during the period
0
2 6 7
Coffeehouses open at end of period: Total Franchised
202 150
202 150 Total coffeehouses
open at end of period
610
559 610
559 ___________
(1)
See reconciliation and discussion of
non-GAAP measures which follow at the end of this section.
(2)
Percentage change in comparable
coffeehouse net sales compares the net sales of coffeehouses during
a fiscal period to the net sales from the same coffeehouses for the
equivalent period in the prior year. A coffeehouse is included in
this calculation beginning in its thirteenth full fiscal month of
operations. A closed coffeehouse is included in the calculation for
each full month that the coffeehouse was open in both fiscal
periods. Franchised coffeehouses are not included in the comparable
coffeehouse net sales calculations.
NON-GAAP FINANCIAL
INFORMATION(Unaudited, in thousands, except per share data)
The following reconciliations and non-GAAP financial information
are provided to assist the reader with understanding the financial
impact of the 2011 reversal of the valuation allowance against
accumulated net operating losses and other deferred tax assets on
the Company’s net income attributable to Caribou Coffee Company,
Inc. and earnings per share when comparing current thirteen week
period and thirty-nine week period results to the Company’s 2011
results.
Thirteen Weeks
Ended October 2, 2011
Thirty-Nine Weeks
Ended October 2, 2011
Thousands Diluted
EPS Thousands
Diluted EPS Net income attributable to Caribou
Coffee Company, Inc. as reported $ 1,787 $ 0.09 $ 30,283 $ 1.46
Provision for (benefit from) income taxes (1)
803 0.03
(20,484 ) (0.99
) Non-GAAP pro-forma pre-tax income attributable to
Caribou Coffee Company, Inc. 2,590 0.12 9,799 0.47 Pro forma tax
expense at 40% effective tax rate (2)
1,036
0.05 3,920
0.19 Non-GAAP pro forma net income attributable
to Caribou Coffee Company, Inc.
$ 1,554
$ 0.07 $ 5,879
$ 0.28 Diluted weighted
average number of shares outstanding
20,953
20,953 20,751
20,751
(1)
Relates to the tax benefit from the
reversal of an accounting reserve against tax net operating loss
carryforwards and other deferred tax assets.
(2)
Pro forma effective tax rate for
illustrative purposes. Actual results could differ.
EBITDA RECONCILIATION
Thirteen Weeks Ended
Thirty-Nine Weeks Ended September 30,
October 2, September 30,
October 2, 2012 2011 2012 2011
(Thousands) Net income attributable to Caribou Coffee
Company, Inc. $ 1,722 $ 1,787 $ 5,722 $ 30,283 Interest expense 20
70 61 184 Interest income (11 ) (3 ) (35 ) (15 ) Depreciation and
amortization(1) 3,050 3,155 9,073 9,843 Provision for (benefit
from) income taxes
925
803 3,782
(20,484 ) EBITDA $
5,706
$
5,812 $
18,603 $
19,811 _______
(1)
Includes depreciation and amortization
associated with the headquarters and roasting facility that are
categorized as general and administrative expenses and cost of
sales and related occupancy costs on the statement of
operations.
EBITDA is equal to net income excluding: (a) interest expense;
(b) interest income; (c) depreciation and amortization; and (d)
income taxes.
Management believes EBITDA is useful to investors in evaluating
the Company’s operating performance for the following reason:
- Coffeehouse leases are generally
short-term and Caribou 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). The Company
opened a net 202 company-operated coffeehouses from the beginning
of fiscal 2003 through the end of the third quarter of fiscal 2012.
As a result, management believes depreciation expense is
disproportionately large when compared to the sales from a
significant percentage of the 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, management believes
that adjusting for depreciation and amortization is useful for
evaluating the operating performance of the coffeehouses.
Furthermore, the Company recorded a significant tax benefit in the
first quarter of fiscal 2011 related to the reversal of a valuation
allowance against accumulated net operating losses and other
deferred tax assets. Consequently, management believes that
adjusting for the impact of income taxes is useful in evaluating
the overall performance of the Company.
Management uses EBITDA:
- As a measurement of operating
performance because it assists management in comparing its
operating performance on a consistent basis as it removes the
impact of items not directly resulting from coffeehouse
operations;
- For planning purposes, including the
preparation of our internal annual operating budget; and
- To evaluate the Company’s capacity to
incur and service debt, fund capital expenditures and expand the
business.
EBITDA as calculated by Caribou Coffee is not necessarily
comparable to similarly titled measures used by other companies. In
addition, EBITDA: (a) does not represent net income or cash flows
from operating activities as defined by GAAP; (b) is not
necessarily indicative of cash available to fund cash flow needs;
and (c) should not be considered an alternative to net income,
operating income, cash flows from operating activities or Caribou
Coffee’s other financial information as determined under GAAP.
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