Diedrich Coffee Reports Second Quarter Results Basic Net Income of
$0.10 Per Share IRVINE, Calif., Feb. 7 /PRNewswire-FirstCall/ --
Diedrich Coffee, Inc. (NASDAQ:DDRX) today announced operating
results for its second quarter of Fiscal 2005. For the twelve weeks
ended December 15, 2004, the Company reported net income of
$522,000, or $0.10 per basic share, compared to $543,000, or $0.11
per basic share, reported during the second quarter of Fiscal 2004.
Results for the second quarter declined from the prior year quarter
despite strong performance from the franchise and third party
wholesale business segments primarily due to $169,000, or $0.03 per
share, of expenses incurred in completing the proposed sale of the
Company's international franchise operations. There was a slight
decline in retail sales as positive same store sales in the retail
segment were offset by the effect of store closures. For the 24
weeks ended December 15, 2004, the Company reported a net income of
$54,000, or $0.01 per share, compared to net income of $355,000, or
$0.07 per share, in the first half of Fiscal 2004. The first half
of the current year included $212,000, or $0.04 per share of
expenses related to the international transaction. Same store sales
were strong in the company-operated units, but weak in the domestic
franchise operations. Comparable sales at Coffee People stores
increased 5.5% for the quarter and 6.5% for the first half of the
year. At Diedrich Coffee stores, comparable sales increased 2.9%
for the quarter and 4.9% for the first half of the year. Gloria
Jean's system-wide same store sales were down 5.3% for the quarter
and 3.7% for the first half. The decline was primarily due to weak
traffic at the malls in which many of the franchise units are
located. Gift card sales increased 70.2% in the quarter to $255,000
and e-commerce sales increased 25.8% in the quarter to $196,000.
Wholesale sales of Keurig and other office coffee supplies
increased 13.1% for the second quarter and 18.1% for the first
half. Roger Laverty, President and Chief Executive Officer of the
Company stated "We are very pleased with revenue growth in all
three of the Company's business segments in the first half of the
year. The investment in increased in-store labor and supervision
expense that we've made in the last two years is paying off and we
hope this year's investment in increased franchise development and
support will help that business segment as well. Growth in the
domestic franchise business is a major strategic objective for the
Company." Revenue Revenue increased by $274,000, or 1.9%, for the
second quarter as compared with the prior year quarter. For the
second quarter retail sales were down $15,000, or 0.2%. This
decline resulted from a reduction in retail sales due to the sale
or closure of coffeehouses in the amount of $537,000. Comparable
retail sales at company-operated units increased by $225,000 or
3.6%. Internet sales increased by $40,000, or 25.8%, from the prior
year quarter. For the first half of this year revenue increased by
$1,112,000 or 4.3%, over the first half of the prior year. For the
first half, retail sales increased $242,000, or 1.7%, from the
prior year despite a reduction in retail sales due to the sale or
closure of six coffeehouses in the amount of $480,000. Comparable
sales at company-operated units increased $657,000, or 4.9%.
Internet sales increased by $65,000, or 29.8%, from the first half
of the prior year. Wholesale revenue from third party customers
rose sharply in the quarter and first half, but wholesale revenue
from domestic franchise units declined due to a reduced number of
units operating and due to weakening sales at domestic franchise
units. Wholesale sales to third parties increased $282,000, or
13.1%, in the quarter and $704,000, or 18.1%, in the first half,
primarily due to strong growth in the Keurig "K-cup" line where
sales rose 17.2% in the quarter and 22.7% in the first half.
Wholesale sales to domestic franchise units declined $167,000, or
6.2%, in the quarter and decreased $99,000, or 2.6%, in the first
half. There were sales or closures of six domestic franchise units
since the beginning of the prior year. Franchise revenues were up
$174,000, or 9.4%, for the second quarter and $265,000, or 7.5%,
for the first half of the year, compared to the prior year quarter
and half. Compared to the start of the prior year, the Company had
six fewer domestic franchise stores at the end of the quarter
versus the prior year, but 116 more international franchised
outlets have been opened since the start of the prior fiscal year.
The first half of fiscal 2004 included a $263,000 dissolution
settlement of the Malaysian franchise agreement, while the first
half of the current year included a $165,000 dissolution settlement
of the Thailand franchise agreement. Dissolution settlements were
recorded in the first quarter of each of the years, but there were
none in the second quarter of either year. Costs and Expenses Cost
of sales and related occupancy costs declined from 54.3% of retail
and wholesale sales to 53.9% for the quarter and increased from
53.5% of such sales to 53.7% for the first half of the year. The
prior year second quarter included an expense reduction of $106,000
from a favorable lease settlement. Operating expenses, as a
percentage of retail and wholesale sales, increased as a percentage
of such sales from 31.0% in the prior year quarter to 31.2% in the
current quarter. For the first half of each of the current and
prior years, these expenses as a percentage of retail and wholesale
sales were 33.9%. Depreciation expense increased 33.9% from the
prior year quarter and 10.3% from the prior year first half
primarily due to the store-remodeling program that began in the
prior year. General and administrative expense increased in amount
and as a percentage of revenue for the second quarter primarily as
a result of the transaction costs incurred in completing the
proposed sale of the international franchise operations and
increased company-operated stores field supervision and, for the
first half, due to the transaction costs, higher supervision costs
and increased costs of franchise development and support made to
manage planned increased franchise growth. Review of Accounting for
Leases The Company leases a substantial number of properties on
which significant improvements have been made. A number of
restaurant companies have recently announced their intent to
re-evaluate their current accounting practices in order to
determine that they are in compliance with generally accepted
accounting principles with respect to leases, leasehold
improvements and rent expense. Certain of those companies that have
completed this re-evaluation have recorded adjustments to
depreciation and rent expense, often including a restatement of
prior year charges. The Company is currently reviewing its
accounting practices in this area and the results of the review may
require similar adjustments to current and prior year depreciation
and rent expense. Such adjustments, if necessary, will be recorded
after the Company's review that it expects to complete prior to the
planned release of its third quarter results in April 2005.
Conference Call Diedrich Coffee will be discussing these financial
results and future prospects with analysts and investors in a
conference call. The conference call, hosted by Roger Laverty, CEO,
and Marty Lynch, CFO, is to take place on Tuesday, February 8, 2005
at 11:00 a.m. Pacific Time, 2:00 p.m. Eastern Time. The conference
call is simultaneously being webcast by CCBN and can be accessed at
Diedrich Coffee's website at http://www.diedrich.com/. A replay of
the conference call will also be available by telephone at
(888)-203-1112, pass code I.D. 7984519, from 2:00 p.m. EST on
February 8, 2005 through midnight on February 22, 2005. About
Diedrich Coffee With headquarters in Irvine, California, Diedrich
Coffee specializes in sourcing, roasting and selling the world's
highest quality coffees. The Company's three brands are Gloria
Jean's Coffees, Diedrich Coffee, and Coffee People. The Company's
524 retail outlets, the majority of which are franchised, are
located in 14 countries and 33 states. Diedrich Coffee also sells
its coffees through more than 460 wholesale accounts including
office coffee service distributors, restaurants and specialty
retailers, via mail order and the Internet. For more information
about Diedrich Coffee, call (800)-354-5282, or visit the Company's
Web sites at http://www.diedrich.com/, http://www.gloriajeans.com/,
or http://www.coffeepeople.com/. Forward Looking Statements
Statements in this news release that relate to future plans,
financial results or projections, events or performance are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and fall under the
safe harbor. Actual results and financial position could differ
materially from those anticipated in the forward-looking statements
as a result of a number of factors, including, but not limited to,
the successful management of Diedrich Coffee's growth strategy,
risks that arise in the context of operating a business with
significant franchise operations, the impact of competition, the
availability of working capital and other risks and uncertainties
described in detail under "Risk Factors and Trends Affecting
Diedrich Coffee and its Business" in the Company's annual report on
Form 10-K/A for the fiscal year ended June 30, 2004. Information
Contact: Marty Lynch, Chief Financial Officer (949) 260-6788
DIEDRICH COFFEE, INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED) ($ in thousands, except per share amounts) OPERATIONS
DATA: Twelve Twelve Twenty-four Twenty-Four Weeks Ended Weeks Ended
Weeks Ended Weeks Ended December 15, December 17, December 15,
December 17, 2004 2003 2004 2003 (Restated) (Restated) Retail sales
$7,556 $7,571 $14,686 $14,444 Wholesale and other revenue 4,948
4,833 8,312 7,707 Franchise revenue 2,022 1,848 3,789 3,524 Total
revenue 14,526 14,252 26,787 25,675 Cost of sales and related
occupancy costs 6,744 6,745 12,351 11,855 Operating expenses 3,893
3,991 7,801 7,683 Depreciation and amortization 589 440 1,134 1,028
General & administrative expenses 2,722 2,374 5,355 4,525
Provision for asset impairment and restructuring costs -- 90 -- 94
(Gain) loss on asset disposals 2 -- (12) -- Total costs and
expenses 13,950 13,640 26,629 25,185 Operating income (loss) 576
612 158 490 Interest and other expense, net (50) (68) (93) (125)
Income (loss) before income tax provision 526 544 65 365 Income tax
provision 4 1 11 10 Net income (loss) $522 $543 $54 $355 Basic net
income (loss) per share: $0.10 $0.11 $0.01 $0.07 Diluted net income
(loss) per share: $0.10 $0.10 $0.01 $0.07 Shares used in per share
Computations: Basic 5,165 5,161 5,165 5,161 Diluted 5,344 5,211
5,521 5,186 BALANCE SHEET AND RETAIL UNIT COUNT DATA: December 15,
2004 June 30, 2004 Cash $1,315 $1,799 Accounts receivable, net
4,026 2,337 Inventories 2,841 2,815 All other assets 19,196 18,691
Total assets $27,378 $25,642 Accounts payable $2,591 $2,144 Current
portion of long-term debt 425 200 All other current liabilities
5,087 4,758 Long-term debt, excluding current portion 1,394 783
Other non-current liabilities 826 880 Total stockholders' equity
17,055 16,877 Total liabilities and stockholders' equity $27,378
$25,642 Domestic retail units 202 200 International retail units
322 282 Total retail units (company and franchise, all brands) 524
482 DATASOURCE: Diedrich Coffee, Inc. CONTACT: Marty Lynch, Chief
Financial Officer of Diedrich Coffee, Inc., +1-949-260-6788 Web
site: http://www.coffeepeople.com/ Web site:
http://www.gloriajeans.com/ Web site: http://www.diedrich.com/
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