Diedrich Coffee Reports Third Quarter Fiscal 2010 Financial Results
IRVINE, Calif. /PRNewswire via COMTEX/ - IRVINE, Calif., April 19 // PRNewswire-FirstCall // -- Diedrich Coffee, Inc. (Nasdaq: DDRX), a leading roaster and wholesaler of the world's finest coffees, reported financial results for the third quarter ended March 3, 2010.
Total revenue increased 45% to $25.9 million in the third quarter of fiscal 2010 from $17.9 million in the third quarter of fiscal 2009, led by a 55% or $8.7 million increase in K-Cup sales.
Gross margin in the third quarter of fiscal 2010 increased to 26.8% of total revenue as compared to 25.6% during the same period of last year. In addition to price increases taken during fiscal 2010, the improvement resulted from Diedrich Coffee's continuing ability to leverage fixed manufacturing costs over higher production volumes.
Net loss totaled $778,000 or $(0.14) per basic and diluted share in the third quarter of fiscal 2010, as compared to net income of $1,358,000 or $0.25 per basic and diluted share in the third quarter of fiscal 2009. Net loss in the third quarter of fiscal 2010 included approximately $1.6 million in merger-related costs and an increase of $2.1 million of non-cash stock compensation expense.
Adjusted net income (a non-GAAP financial measure) was $3.3 million or $0.41 per diluted share in the third quarter of fiscal year 2010, an improvement from an adjusted net income of $1.4 million or $0.25 per diluted share in the same quarter of the prior year. Adjusted net income represents net income or loss before merger related costs, non-cash stock compensation expense, severance expenses related to the departure of Diedrich Coffee's former CEO, J. Russell Phillips, loss from discontinued operations and the timing of the fiscal 2009 accrual for management incentive compensation (see important discussion about the presentation of non-GAAP financial information below, including a reconciliation to the most directly comparable GAAP financial measure).
As announced on December 8, 2009, Diedrich Coffee entered into a definitive agreement under which Green Mountain Coffee Roasters, Inc. (Nasdaq: GMCR) ("GMCR") will acquire all of the outstanding common stock of Diedrich Coffee in an all cash transaction valued at $35.00 per share or a total transaction value of approximately $290 million pursuant to a cash tender offer (the "Offer") by GMCR's wholly owned subsidiary, Pebbles Acquisition Sub, Inc. ("Acquisition Sub"), which is currently scheduled to expire on May 3, 2010, and upon completion of the Offer, Acquisition Sub will merge with and into Diedrich Coffee (the "Merger"). For more information, please see Diedrich Coffee's Schedule 14D-9 filed on December 11, 2009 and amendments thereto and other filings made by Diedrich Coffee with the Securities and Exchange Commission (the "SEC").
About Adjusted Net Income (Loss) and the Use of Non-GAAP Financial Information
Adjusted net income (loss) is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles ("GAAP") and should not be considered as an alternative to net income, operating income or any other financial measures calculated and presented in accordance with GAAP. Diedrich Coffee defines adjusted net income as net income (loss) before merger related costs, non-cash stock compensation expense, severance expenses related to a former CEO's departure, loss from discontinued operations and the timing of the fiscal 2009 accrual for management incentive compensation. Diedrich Coffee presents adjusted net income because it believes it to be a meaningful supplemental measure of performance in the evaluation of Diedrich Coffee's results of operations because it excludes amounts that Diedrich Coffee does not consider part of ongoing operating results when assessing the performance of Diedrich Coffee and presents a measure of earnings that facilitates a comparison of results from one period to results from another period on a more consistent basis. Management also uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of Diedrich Coffee nor is it intended to be predictive of potential future results. Investors should not consider adjusted net income in isolation or as a substitute for analysis of results as reported under GAAP. Diedrich Coffee strongly encourages investors to review its financial statements in their entirety and to not rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. See "Reconciliation of Adjusted Net Income (Loss) to GAAP Net Income (Loss)" below for further information on this non-GAAP financial measure and reconciliation of adjusted net income (loss) to GAAP net income (loss) for the periods indicated.
Diedrich Coffee, Inc.
Reconciliation of Adjusted Net Income (Loss) to GAAP Net Income
(Loss)
(in thousands, except per share amounts)
(unaudited)
For the
twelve For the
weeks twelve
ended weeks ended
3/3/2010 3/4/2009
-------- --------
Consolidated Statement of Operations
Reconciliation
------------------------------------
Net income (loss) on a GAAP basis $(778) $1,358
Merger related costs 1,636 -
Non-cash stock option compensation
expenses 2,190 68
Severance expense related to CEO
departure 278 -
Accrued management incentive
compensation (1) - (156)
Loss from discontinued operations - 102
--- ---
Adjusted net income $3,326 $1,372
====== ======
Consolidated Statement of Operations Reconciliation of Basic
and Diluted income (loss) per Share
------------------------------------------------------------
Basic net loss per share on a GAAP
basis $(0.14) $0.25
Merger related costs 0.29 -
Non-cash stock option compensation
expenses 0.38 0.01
Severance expense related to CEO
departure 0.05 -
Accrued management incentive
compensation (1) - (0.03)
Loss from discontinued operations - 0.02
--- ----
Adjusted basic net income per share $0.58 $0.25
===== =====
Adjusted diluted net income per share $0.41 $0.25
===== =====
Basic shares used in the calculation 5,727 5,468
===== =====
Diluted shares used in the
calculation 8,145 5,468
===== =====
(1) The full year expense for the bonus accrual was recorded in the
4th quarter of fiscal 2009. This amount represents the estimated
expense that would have been booked in the 3rd Quarter of fiscal
2009 had the bonus accrual been expensed throughout the year.
For the
For the thirty-
thirty-six six weeks
weeks ended ended
3/3/2010 3/4/2009
-------- --------
Consolidated Statement of Operations
Reconciliation
------------------------------------
Net loss on a GAAP basis $(239) $(1,420)
Merger related costs 4,137 -
Non-cash stock option compensation
expenses 2,675 225
Severance expense related to CEO
departure 278 -
Accrued management incentive
compensation (2) - (469)
Loss from discontinued operations - 501
--- ---
Adjusted net income (loss) $6,851 $(1,163)
====== =======
Consolidated Statement of Operations Reconciliation of Basic and
Diluted net income (loss) per Share
----------------------------------------------------------------
Basic net loss per share on a GAAP
basis $(0.04) $(0.26)
Merger related costs 0.72 -
Non-cash stock option compensation
expenses 0.47 0.04
Severance expense related to CEO
departure 0.05 -
Accrued management incentive
compensation (2) - (0.08)
Loss from discontinued operations - 0.09
--- ----
Adjusted basic net income (loss) per
share $1.20 $(0.21)
===== ======
Adjusted diluted net income (loss)
per share $0.84 $(0.21)
===== ======
Basic shares used in the calculation 5,727 5,468
===== =====
Diluted shares used in the
calculation 8,140 5,468
===== =====
(1) The full year expense for the bonus accrual was recorded in the
4th quarter of fiscal 2009. This amount represents the estimated
expense that would have been booked through the first three quarters
of fiscal 2009 had the bonus accrual been expensed throughout the
year.
Additional Information
On December 11, 2009, in connection with the Offer, GMCR filed a Tender Offer Statement on Schedule TO with the SEC, and Diedrich Coffee filed a Solicitation/Recommendation Statement on Schedule 14D-9 with the SEC. Investors may obtain free copies of the Schedule TO and the Schedule 14D-9, as well as other filings containing information about Diedrich Coffee and GMCR without charge, at the SEC's website as documents are filed with the SEC. A free copy of the Schedule 14D-9 may also be obtained from Diedrich Coffee's website at www.diedrich.com under the heading "Investor Relations" and also by making a request to Investor Relations at Diedrich Coffee, Inc., 28 Executive Park, Suite 200, Irvine, CA 92614.
Forward-Looking Statements
We make forward-looking statements in this earnings release that are subject to risks and uncertainties. These forward-looking statements include information about the proposed transaction with GMCR. The "safe harbor" set forth in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, does not apply to forward-looking statements made in connection with a tender offer. When we use the words "believe," "expect," "anticipate," "estimate" or similar expressions, we are making forward-looking statements. Many possible events or factors could affect our future financial results and performance. This could cause our results or performance to differ materially from those expressed in our forward-looking statements. You should consider these risks when you review this earnings release, along with the following possible events or factors:
- the risk that the Offer and the Merger will not close;
- the risk that Diedrich Coffee's business will be adversely impacted during the pendency of the Offer and the Merger;
- the financial and operating performance of our wholesale operations;
- our ability to achieve and/or maintain profitability over time;
- the successful execution of our growth strategies;
- the impact of competition; and
- the availability of working capital.
Additional risks and uncertainties are described in detail under the caption "Risk Factors Relating to Diedrich Coffee and Its Business" in our annual report on Form 10-K for the fiscal year ended June 24, 2009 and in other reports that we file with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date of this earnings release. There can be no assurance that the proposed transaction with GMCR will in fact be consummated. Except where required by law, we do not undertake an obligation to revise or update any forward-looking statements, whether as a result of new information, future events or changed circumstances.
About Diedrich Coffee
Diedrich Coffee specializes in sourcing, roasting and selling the world's highest quality coffees. The company markets its three leading brands of specialty coffees, Diedrich Coffee, Coffee People and Gloria Jean's Coffees, through office coffee service distributors, restaurants and specialty retailers, and via the company's web stores. Diedrich Coffee is one of only a few roasters under license to produce K-Cups for Keurig, Incorporated's top-selling single-cup brewing system.
Trademarks are the property of their respective owners.
DIEDRICH COFFEE, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share amounts)
(unaudited)
Twelve Twelve Thirty-Six Thirty-Six
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
March 3, March 4, March 3, March 4,
2010 2009 2010 2009
--------- --------- --------- ---------
Net revenue:
Wholesale $25,661 $17,568 $65,758 $41,601
Retail and other 224 316 550 561
--- --- --- ---
Total revenue 25,885 17,884 66,308 42,162
------ ------ ------ ------
Costs and
expenses:
Cost of sales
(exclusive of
depreciation
shown
separately
below) 18,954 13,314 48,783 33,167
Operating
expenses 1,437 1,034 4,058 3,292
Depreciation and
amortization 356 417 1,070 1,151
General and
administrative
expenses 4,228 1,487 8,038 4,878
Gain on asset
disposals - - (3) (7)
--- --- --- ---
Total costs and
expenses 24,975 16,252 61,946 42,481
------ ------ ------ ------
Operating income
(loss) from
continuing
operations 910 1,632 4,362 (319)
Interest expense
and other
income, net 87 164 236 588
Merger related
costs 1,636 - 4,137 -
----- --- ----- ---
Income (loss)
from continuing
operations
before income
tax (813) 1,468 (11) (907)
Income tax
provision
(benefit) (35) 8 228 12
--- --- --- ---
Income (loss)
from continuing
operations (778) 1,460 (239) (919)
Discontinued
operations:
Loss from
discontinued
operations, net
of tax expense
of $0 - (102) - (501)
--- ---- --- ----
Net income
(loss) $(778) $1,358 $(239) $(1,420)
===== ====== ===== =======
Basic and
diluted net
income (loss)
per share:
Income (loss)
from continuing
operations $(0.14) $0.27 $(0.04 ) $(0.17)
Loss from
discontinued
operations, net - (0.02) - (0.09)
--- ----- --- -----
Net income
(loss) $(0.14) $0.25 $(0.04) $(0.26)
====== ===== ====== ======
Weighted average
and equivalent
shares
outstanding:
Basic and
diluted 5,727 5,468 5,727 5,468
===== ===== ===== =====
DIEDRICH COFFEE, INC.
CONSOLIDATED BALANCE SHEET DATA
(in thousands)
(unaudited)
March 3, June 24,
2010 2009
--------- ---------
Cash $5,438 $3,572
Restricted cash 623 623
Accounts receivable, net 12,056 6,335
Inventories 4,115 5,510
Other assets 9,943 10,888
----- ------
Total assets $32,175 $26,928
======= =======
Accounts payable $9,148 $5,228
All other current liabilities 4,931 5,921
Other liabilities 1,886 2,005
Total stockholders' equity 16,210 13,774
------ ------
Total liabilities and
stockholders' equity $32,175 $26,928
======= =======
SOURCE Diedrich Coffee, Inc.
###
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