IRVINE, Calif., April 21 /PRNewswire-FirstCall/ -- Diedrich Coffee,
Inc. (NASDAQ:DDRX) today announced operating results for its third
fiscal quarter ended March 5, 2008. For the third quarter of fiscal
year 2008, the Company reported a net loss of $2,153,000, or $0.39
per share, compared to a net income of $4,354,000, or $0.79 per
share, for the third quarter of the prior fiscal year. Results for
the third quarter of fiscal year 2007 include net income from
Discontinued Operations of $4,210,000, or $0.77 per share.
Year-to-date, the Company reported a net loss of $3,582,000, or
$0.66 per share, compared to net income of $578,000, or $0.11 per
share, for the comparable period in the prior fiscal year. The
year-to-date results include an after-tax gain of $767,000, or
$0.14 per share, from escrow proceeds received in the first quarter
of fiscal year 2008 from the sale of the majority of the Company's
Diedrich Coffee and Coffee People company-operated locations, which
was completed in the prior fiscal year. Year-to-date results from
the prior fiscal year include net income from Discontinued
Operations of $2,819,000, or $0.52 per share. Continuing Operations
As previously announced, the Company closed the majority of its
Diedrich Coffee and Coffee People company-operated locations in
fiscal 2007 and continues to focus on strengthening the wholesale
business and related distribution channels including franchise
locations. In fiscal year 2007, the Company accounted for its
Diedrich Coffee and Coffee People company-operated retail
operations as Discontinued Operations. The Company continues to own
and operate the wholesale, Gloria Jean's retail and Gloria Jean's
domestic franchise businesses that together comprise Continuing
Operations. The Company retained the Diedrich Coffee and Coffee
People brands for its wholesale and franchise operations. Results
from Continuing Operations for the third quarter of fiscal year
2008 were a loss of $2,153,000, or $0.39 per share, compared to
income from Continuing Operations of $144,000, or $0.03 per share,
for the third quarter of the prior year. Year-to-date, results from
Continuing Operations were a loss of $4,349,000, or $0.80 per
share, compared to a loss from Continuing Operations of $2,241,000,
or $0.41 per share, for the same period of the prior year. Revenue
Total revenue increased by $2,347,000, or 26.1%, to $11,322,000 for
the third quarter of fiscal year 2008 as compared with total
revenue of $8,975,000 in the same period of the prior year. With
respect to the components of total revenue, wholesale revenue for
the third quarter of fiscal year 2008 increased $2,773,000, up
40.2% from the prior year period, franchise revenue declined
$198,000, down 23.1% from the prior year period, and retail sales
decreased $228,000, down 18.6% from the prior year period.
Year-to-date, total revenue increased by $6,538,000, or 25.7%, to
$31,930,000 as compared with $25,392,000 in the same period of the
prior year. With respect to the components of total revenue,
wholesale revenue increased $7,148,000, up 36.9% from the prior
year period, franchise revenue declined $524,000, down 20.0% from
the prior year period, and retail sales decreased $86,000, down
2.5% from the prior year period, as compared to the same period of
the prior year. Wholesale revenue from sales to office coffee
distributors (OCS) and foodservice customers rose sharply for the
third quarter of fiscal year 2008 while roasted coffee sales to
franchise locations declined. For the third quarter of fiscal year
2008, wholesale sales to OCS and foodservice customers increased
$3,031,000, or 52.1%, from the prior year quarter, with Keurig
"K-cup" sales increasing 59.6% from the prior year quarter.
Wholesale sales to franchise locations decreased $258,000, or 24.2%
for the third quarter of fiscal year 2008. Year-to-date, wholesale
sales to OCS and foodservice customers increased $8,034,000, or
53.3%, from the same period of the prior year, with Keurig "K-cup"
sales increasing 61.4% from the prior year and wholesale sales to
franchise locations decreasing $886,000, or 20.7%. Franchise
revenue declined by $198,000 for the third quarter of fiscal year
2008 and by $524,000 year-to-date, primarily due to a net decrease
in unit count and negative comparable store sales. Gloria Jean's
has been affected by the same weak macroeconomic and consumer
environments cited by many other mall-based retail operators that
include low customer traffic, a larger-than-expected slowdown in
discretionary consumer spending and inclement weather in major
markets during the peak holiday shopping season that combined to
hurt sales. These factors contributed to the negative comparable
store sales reported by the Gloria Jean's franchise system for the
third quarter of fiscal year 2008 and year-to-date of 4.4% and
6.9%, respectively. Retail sales decreased $228,000 for the third
quarter of fiscal year 2008 and decreased $86,000 year-to-date,
primarily due to a net decrease of four company-operated stores
since the beginning of the current fiscal year in addition to a
10.0% decrease in same store sales. This decrease in retail was
partially offset by an increase of $99,000, or 34.0% in e-commerce
sales for the third quarter of fiscal year 2008 as compared to the
prior year quarter and an increase year-to-date by $326,000, or
40.4%, as compared to the prior year period. Costs and Expenses
Cost of sales and related occupancy costs for the third quarter of
fiscal year 2008 increased $2,983,000, or 51.6%, to $8,761,000 from
$5,778,000 in the prior year period. Cost of sales and related
occupancy increased as a percentage of wholesale and retail
revenues to 82.1% for the current quarter compared to 71.2% in the
prior year period. Year-to-date cost of sales and related occupancy
costs increased $7,845,000, or 48.3%, to $24,095,000 from
$16,250,000 in the prior year period. Cost of sales and related
occupancy increased as a percentage of wholesale and retail
revenues to 80.8% for the year to date period compared to 71.3% in
the prior year period. Cost of sales for the third quarter of
fiscal year 2008 increased $2,831,000, or 50.2%, to $8,474,000 from
$5,643,000 in the prior year period. Cost of sales increased as a
percentage of wholesale and retail revenues to 79.5% for the
current quarter compared to 69.5% in the prior year period. The
increase is primarily due to the significant increase in wholesale
sales over the prior year period, sales mix changes related to the
higher percentage of K-cups sales which have a lower margin than
other coffee products and higher manufacturing costs related to the
addition of production lines and other capital improvements at the
roasting facility to increase production capacity. In addition, the
increase in cost of sales is due to several factors affecting the
coffee industry in general including historically high green coffee
costs, increases in prices of other raw materials and higher energy
and transportation costs. Prices for the high-quality coffees
roasted by Diedrich Coffee have in most cases increased at a higher
rate than the general commodity ("C Grade") price which has been
trading at a 10-year high. Year-to-date, cost of sales increased by
$7,601,000, or 49.2%, to $23,039,000 from $15,438,000 in the prior
year period primarily due the aforementioned factors. Year-to-date
cost of sales increased as a percentage of wholesale and retail
revenues to 77.2% for the current year period compared to 67.8% in
the prior year period. Occupancy costs for the third quarter of
fiscal year 2008 increased $152,000 to $287,000 from $135,000 in
the prior year period primarily due to an increase in rent
associated with closed retail stores. Year-to-date, occupancy costs
increased by $244,000, or 30.0%, to $1,056,000 from $812,000 in the
prior year period primarily due to an increase in the closed store
reserve associated with Gloria Jean's leases offset by a decrease
in rent expense associated with fewer company-operated retail
stores. Operating expenses decreased $220,000, or 10.1%, to $
1,964,000 from $2,184,000 and decreased as a percentage of total
revenue to 17.3% in the third quarter of the current fiscal year
from 24.3% in the third quarter of last year. Year-to-date,
operating expenses increased $163,000, or 2.6%, to $6,542,000 from
$6,379,000 and decreased as a percentage of total revenue to 20.5%
in the current fiscal year from 25.1% in the prior year period. The
increase is due primarily to an increase in overhead costs
associated with the increase in wholesale sales of more than 36.0%
for the current fiscal year compared to the prior year period. For
the third quarter of fiscal year 2008, general and administrative
expenses increased $842,000 and increased as a percentage of
revenues to 20.9% in the current year quarter from 17.0% in the
third quarter of last year. Year-to-date, general and
administrative expenses increased $588,000 and as a percentage of
revenues decreased to 17.3% in the current year from 19.4% in the
same period of the prior year. For the current year period, the
increase is due primarily to legal settlement reserves of $693,000,
and increase in consulting, legal and outside services of $564,000
and partially offset by a decrease in compensation, management
incentive and other costs of $669,000. Discontinued Operations The
Company accounts for its Diedrich Coffee and Coffee People
company-operated retail operations that were sold or closed in
fiscal 2007 as Discontinued Operations. The Company's retail sales
will be primarily limited to its e-commerce web stores, and the
Company will continue to 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. For more information, please refer to the
Form 10-K for the fiscal year ended June 27, 2007 and Form 10-Q for
the quarter ended March 5, 2008 and other SEC reports. Through the
end of the third quarter of fiscal 2007, the Company transferred 30
company-operated stores to Starbucks Corporation in exchange for
cash payments of approximately $11,774,000 and the deposit of
approximately $1,204,000 into an escrow fund. Income from
Discontinued Operations for the third quarter of fiscal year 2007
was $4,210,000, or $0.76 per diluted share. Results for third
quarter of fiscal 2007 included the after-tax gain of $5,884,000,
or $1.07 per diluted share. Income from Discontinued Operations for
the year-to-date period of the current fiscal year was $767,000, or
$0.14 per share, compared to income of $2,819,000, or $0.52 per
share in the prior year period. The income for the year to date
period of fiscal 2008 was the result of the escrow proceeds
received from the sale of the majority of the Company's Diedrich
Coffee and Coffee People company-operated locations, which was
completed in the prior fiscal 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 include Diedrich Coffee, Gloria Jean's
Coffees and Coffee People. Diedrich Coffee sells its coffees
through wholesale accounts including office coffee service
distributors, restaurants and specialty retailers, and via the
Company's web stores. As of March 5, 2008, the Company's 130 retail
outlets, the majority of which are franchised, are located in 30
states. 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 wholesale operations, 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 27, 2007 and quarterly report on From 10-Q
for the quarter ended March 5, 2008. Information Contact: Sean
McCarthy Chief Financial Officer (949) 260-6734 DIEDRICH COFFEE,
INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION (in thousands,
except per share amounts) OPERATIONS DATA Twelve Twelve Thirty-Six
Thirty-Six (unaudited): Weeks Ended Weeks Ended Weeks Ended Weeks
Ended March 5, 2008 March 7, 2007 March 5, 2008 March 7, 2007
Wholesale revenue $9,663 $6,890 $26,497 $19,349 Franchise revenue
658 856 2,090 2,614 Retail sales 1,001 1,229 3,343 3,429 Total net
revenue 11,322 8,975 31,930 25,392 Cost of sales and related
occupancy costs 8,761 5,778 24,095 16,250 Operating expenses 1,964
2,184 6,542 6,379 Depreciation and amortization 303 239 835 739
General and administrative expenses 2,372 1,530 5,521 4,933 Loss
(gain) on asset disposals 83 (11) 76 (22) Asset impairment and
other -- 379 -- 717 Total costs and expenses 13,483 10,099 37,069
28,996 Operating loss from continuing operations (2,161) (1,124)
(5,139) (3,604) Interest income (expense) and other income, net 77
(36) 319 59 Loss from continuing operations before income tax
provision (benefit) (2,084) (1,160) (4,820) (3,545) Income tax
provision (benefit) 69 (1,304) 471 (1,304) Net income (loss) from
continuing operations (2,153) 144 (4,349) (2,241) Gain on sale of
discontinued operation, net of tax -- 5,884 767 5,884 Loss from
discontinued , net of tax -- (1,674) -- (3,065) Income from
discontinued -- 4,210 767 2,819 Net income (loss) $(2,153) $4,354
$(3,582) $578 Basic net income (loss) per share: Income (loss) from
continuing operations $(0.39) $0.03 $(0.80) $(0.41) Income from
discontinued operations, net $ -- $0.77 $0.14 $0.52 Net income
(loss) per share-basic $(0.39) $0.80 $(0.66) $0.11 Diluted net
income (loss) per share: Income (loss) from continuing operations
$(0.39) $0.03 $(0.80) $(0.41) Income from discontinued operations,
net $ -- $0.76 $0.14 $0.52 Net income (loss) per share-diluted
$(0.39) $0.79 $(0.66) $0.11 Weighted average and equivalent shares
outstanding: Basic 5,454 5,438 5,462 5,371 Diluted 5,454 5,500
5,462 5,371 BALANCE SHEET AND RETAIL UNIT COUNT DATA: (in
thousands, except stores data) March 5, 2008 June 27, 2007
(unaudited) Cash $821 $6,873 Restricted Cash 623 669 Accounts
receivable, net 5,876 4,069 Inventories 4,341 4,323 All other
assets 20,338 17,399 Total assets $31,999 $33,333 Accounts payable
$5,691 $3,814 All other current liabilities 5,722 5,683 Deferred
rent 195 216 Other non-current liabilities 846 468 Total
stockholders' equity 19,545 23,152 Total liabilities and
stockholders' equity $31,999 $33,333 Total retail stores (Company
and franchise, all brands) 130 153 DATASOURCE: Diedrich Coffee,
Inc. CONTACT: Sean McCarthy, Chief Financial Officer of Diedrich
Coffee, Inc., +1-949-260-6734 Web site: http://www.diedrich.com/
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