IRVINE, Calif., Nov. 6 /PRNewswire-FirstCall/ -- Diedrich Coffee,
Inc. (NASDAQ:DDRX) today announced operating results for its first
fiscal quarter ended September 20, 2006. For the quarter, the
Company reported a net loss of $1,646,000, or $0.31 per share,
compared to a net loss of $1,552,000, or $0.29 per share, for the
first quarter of the prior fiscal year. Discontinued Operations As
previously announced, the Company will close its Diedrich Coffee
and Coffee People company-owned locations as part of its plan to
focus on strengthening its wholesale business and related
distribution channels including franchise locations. The Company
will retain the Diedrich Coffee and Coffee People brands for its
wholesale and franchise operations. To this end, the Company
announced on September 14, 2006 that it entered into an agreement
to sell up to 40 of its 47 company-owned Diedrich Coffee and Coffee
People locations to Starbucks Coffee Company for up to
approximately $13.5 million. The completion of the sale is subject
to a number of conditions including the approval of the Company's
stockholders and the receipt of various approvals, permits and
consents in connection with the transfer of the store locations.
Assuming these conditions are met, it is anticipated that the
initial closing of the sale will be completed shortly after receipt
of shareholder approval at the Company's annual meeting of
stockholders scheduled to occur December 12, 2006. For more
information, please refer to our annual report on Form 10-K for the
fiscal year ended June 28, 2006. The Company currently accounts for
its Diedrich Coffee and Coffee People company-operated retail
operations as Discontinued Operations. The Company's retail sales
will be limited to its e-commerce web stores and will operate a
limited number of Gloria Jean's retail locations primarily for use
as franchise training stores. The Company continues to own and
operate the Gloria Jean's domestic franchise and wholesale
businesses that together comprise Continuing Operations. The loss
for the current year quarter from Discontinued Operations was
$451,000, or $0.08 per basic share, compared to a loss of $262,000,
or $0.05 per basic share, in the prior year quarter. Continuing
Operations Results from Continuing Operations for the first quarter
of fiscal year 2007 were a loss of $1,195,000, or $0.23 per basic
share, compared to a loss of $1,290,000, or $0.24 per basic share,
for the first quarter of the prior year. Revenue Total revenue
increased by $1,288,000, or 25.1%, to $6,424,000 for the first
quarter of fiscal year 2007 as compared with $5,136,000 in the
prior year. With respect to the components of total revenue,
wholesale revenue increased $1,549,000 (43.4%), franchise revenue
increased $47,000 (6.5%), and retail sales declined $308,000
(36.5%). Wholesale revenue from sales to office coffee distributors
(OCS) and foodservice customers rose sharply for the quarter while
roasted coffee sales to franchise locations increased marginally.
For the first quarter, wholesale sales to OCS and foodservice
customers increased $1,520,000, or 59.7%, from the prior year
quarter, with Keurig "K-cup" sales increasing 65.2% from the prior
year quarter. Wholesale sales to franchise locations increased
$28,000, or 2.7% for the first quarter. For the first quarter,
franchise revenue increased by $47,000 primarily due to a $56,000
net increase in royalties that was offset by slightly lower
franchise store fees. Since the beginning of fiscal 2006, the
domestic franchise store count for all three brands increased by a
net of ten locations (21 stores were opened, 19 were closed and a
net of eight company stores were transferred to franchisees).
Comparable store sales at Diedrich franchise locations increased
0.4% and decreased 0.7% at Gloria Jean's franchise locations during
the first quarter. Retail sales for the quarter decreased $308,000
primarily as the result of a net decrease of six company-operated
Gloria Jean's locations. Retail sales associated with e-commerce
activities increased by $69,000, or 51.1%, as compared to the prior
year quarter. Comparable store sales at Gloria Jean's
company-operated locations increased 6.0% during the first quarter.
Costs and Expenses Cost of sales and related occupancy costs for
the twelve weeks ended September 20, 2006 increased $853,000, or
26.3%, to $4,102,000 from $3,249,000 in the prior year period, but
remained relatively flat as a percentage of total revenue at 63.9%
in the current quarter when compared to 63.3% in the prior year.
Wholesale cost of sales remained flat year over year at 74.0% as a
percentage of wholesale revenue. Occupancy costs for the twelve
weeks ended September 20, 2006 decreased $146,000, or 55.5%, to
$117,000 from $263,000 in the prior year period primarily due to a
decrease in franchise rent expense associated with closed stores.
Operating expenses increased $636,000, or 68.5%, to $1,565,000 from
$929,000 and increased as a percentage of total revenue to 24.4% in
the first quarter of the current fiscal year from 18.1% in the
first quarter of last year. The increase is primarily related to
the change in the classification for franchise direct overhead
costs previously reflected in general and administrative expenses
in the prior year and allocating them to the appropriate profit
center. These expenses are related to franchise administration,
operations, training, sales, store design and marketing. For the
first quarter, general and administrative expenses decreased
$676,000 and decreased as a percentage of revenues to 28.0% in the
current year quarter from 48.2% in the first quarter of fiscal
2006. The decrease was primarily a result in the change in the
classification for franchise direct overhead costs previously
reflected in general and administrative expenses in the prior year
that are recognized as operating expenses in the current year.
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
Diedrich Coffee, Gloria Jean's Coffees and Coffee People. The
Company's 201 retail outlets, the majority of which are franchised,
are located in 33 states. Diedrich Coffee also sells its coffees
through more than 800 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 financial and
operating performance of the Company's retail operations, the
timing and success of the pending sale of retail store locations to
Starbucks, the Company's ability to maintain profitability over
time, the successful execution of the Company's growth strategies,
franchisee's adherence to the Company's practices, policies and
procedures, 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 for the
fiscal year ended June 28, 2006 and subsequently filed quarterly
reports on Form 10-Q. Information Contact: Sean McCarthy Chief
Financial Officer (949) 260-6734 DIEDRICH COFFEE, INC. SELECTED
CONDENSED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) (in
thousands, except per share amounts and store counts) OPERATIONS
DATA: Twelve Weeks Ended Twelve Weeks Ended September 20, 2006
September 21, 2005 Net revenue: Wholesale revenue $5,120 $3,571
Franchise revenue 768 721 Retail sales 536 844 Total revenue 6,424
5,136 Costs and expenses: Cost of sales and related occupancy costs
4,102 3,249 Operating expenses 1,565 929 Depreciation and
amortization 230 252 General and administrative expenses 1,799
2,475 Gain on asset disposals (12) (5) Total costs and expenses
7,684 6,900 Operating loss from continuing operations (1,260)
(1,764) Interest expense (26) (26) Interest and other income, net
91 152 Loss from continuing operations before income tax benefit
(1,195) (1,638) Income tax benefit -- (348) Loss from continuing
operations (1,195) (1,290) Loss from discontinued operations (451)
(262) Net loss $(1,646) $(1,552) Basic and diluted net income
(loss) per share: Loss from continuing operations $(0.23) $(0.24)
Loss from discontinued operations $(0.08) $(0.05) Net loss $(0.31)
$(0.29) Weighted average and equivalent shares outstanding: Basic
and diluted 5,308 5,287 SELECTED CONDENSED CONSOLIDATED FINANCIAL
INFORMATION (UNAUDITED) (in thousands, except store counts) BALANCE
SHEET AND RETAIL UNIT COUNT DATA: September 20, June 28, 2006 2006
Cash $1,706 $2,593 Accounts receivable, net 3,446 2,829 Inventories
3,716 3,846 Assets held for sale 6,182 6,568 Other assets 18,300
18,294 Total assets $33,350 $34,130 Accounts payable $3,103 $2,929
All other current liabilities 5,563 5,600 Other liabilities 2,026
1,334 Stockholders' equity 22,658 24,267 Total liabilities and
stockholders' equity $33,350 $34,130 Total retail units (company
and franchise, all brands) 201 200 DATASOURCE: Diedrich Coffee,
Inc. CONTACT: Sean McCarthy, Chief Financial Officer of Diedrich
Coffee, Inc., +1-949-260-6734 Web site: http://www.gloriajeans.com/
Web site: http://www.coffeepeople.com/ Web site:
http://www.diedrich.com/
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