Irvine, Calif., Sept. 21 - Diedrich Coffee, Inc., a leading roaster and wholesaler of the world's finest coffees, reported financial results for the fourth quarter and fiscal year ended June 24, 2009.
Fourth Quarter 2009 Highlights
-
Net revenue in the fourth quarter increased 57% to $20.1 million when compared with the same period of the prior year, led by a 75% or $7.8 million increase in Keurig K-Cup sales.
-
Net income was $3.0 million or $0.54 per basic share vs. a net loss of $10.2 million or $(1.86) per basic share compared to the same period of the prior year.
-
Completed transition to premier coffee roaster and wholesaler with divesture of Gloria Jean's franchise operations for approximately $3.1 million.
-
Initiated expansion and upgrade of K-Cup production lines to be completed by the fall, designed to increase output capacity by more than 40%.
Fourth Quarter and Fiscal Year 2009 Financial Results
Net revenue in the fourth quarter increased 57% to $20.1 million from $12.9 million in the fourth quarter of 2008. For fiscal year 2009, total revenue increased 56% to $62.3 million from $40.0 million reported in fiscal 2008.
Net income was $3.0 million or $0.54 per basic share in the fourth quarter of fiscal 2009, an improvement from a net loss of $10.2 million or $(1.86) per basic share in the fourth quarter of fiscal 2008. For fiscal year 2009, net income was $1.6 million or $0.29 per basic share versus a net loss of $13.8 million or $(2.52) per basic share in fiscal 2008.
Adjusted net income (a non-GAAP financial measure) was $1.6 million or $0.29 per basic share in the fourth quarter of fiscal year 2009, an improvement from an adjusted net loss of $2.0 million or $(0.37) per basic share in the same quarter of the prior year. For fiscal year 2009, adjusted net income was $0.3 million or $0.05 per basic share, an improvement from an adjusted net loss of $5.1 million or $(0.92) per basic share in fiscal year 2008. Adjusted net income represents net income or loss before the gain on the sale of discontinued operations, a one-time non-cash interest charge related to warrants issued, and the income contribution from discontinued operations (see important discussion about the presentation of non-GAAP financial information below, including a reconciliation to the most directly comparable GAAP financial measure).
At the end of the fourth quarter of fiscal 2009, cash and restricted cash was $4.2 million, as compared to $1.8 million at the end of the third fiscal quarter of 2009 and $1.3 million at the end of fiscal 2008.
Management Commentary
"Our long term plan to exit the retail coffee business and concentrate on roasting and K-Cup wholesale distribution ignited a company transformation that culminated in the fourth quarter of 2009," said J. Russell Phillips, president and CEO of Diedrich Coffee. "The success of this new direction is evident in our financial performance, producing a third sequential year of revenue growth. This growth is attributed to record sales of our leading Diedrich Coffee, Gloria Jean's Coffee and Coffee People brands in the K-Cup format."
"During 2009," continued Phillips, "Diedrich Coffee climbed in rank to become the second largest K-Cup roaster out of the four exclusively licensed in the Keurig system. We attribute much of our success to our unmatched bean quality and roasting recipes which have become very popular with Keurig brewer owners. Our Coffee People Donut Shop coffee is now one of the best selling K-Cups in the entire Keurig system after just 18 months on the market. Our Gloria Jean's Hazelnut coffee is also ranked as the number one flavored K-Cup."
Paul Heeschen, the company's chairman of the board, said, "We expect the demand for our K-Cups will continue to be fueled by the rapidly expanding base of installed Keurig brewers and demand for specialty coffees in homes, restaurants, and offices. In fiscal 2010, we plan to build upon our online, big box retail and foodservice channels and focus on the development of grocery wholesale distribution as a means to reach the 55% of consumers who spend their grocery dollars at their local supermarket. We anticipate meeting the emerging demands and capitalizing on the opportunities in the K-Cup marketplace with new products and packaging enhancements, as well as increased production capacity coming on line this fall."
Business Outlook
Based on current business conditions and expectations, Diedrich Coffee expects revenues for the fiscal year ending June 30, 2010 to be in the range of $90 to $95 million, or an increase of approximately 44% to 52% over fiscal year 2009. The company also expects fully diluted GAAP net income per share in the range of $0.90 to $1.00. This guidance is supported by a number of factors, including the forecasted strong growth in Keurig brewer sales and the increasing number of retail locations selling Keurig K-Cups. Consistent with the historical seasonality of Diedrich Coffee, the company expects the first fiscal quarter of 2010 to be its weakest while the second and third to be its strongest.
DIEDRICH COFFEE, INC.
RECONCILIATION OF ADJUSTED INCOME (LOSS) TO GAAP INCOME (LOSS)
(in thousands, except per share amounts)
(unaudited)
For the For the For the For the For the
sixteen twelve twelve twelve sixteen
weeks weeks weeks weeks weeks
ended ended ended ended ended
------- ------- ------- ------- -------
6/24/2009 3/4/2009 12/10/2008 9/17/2008 6/25/2008
--------- -------- ---------- --------- ---------
Consolidated
Statement of
Operations
Reconciliation
---------------
Net income
(loss) on a
GAAP basis $3,012 $1,358 $(995) $(1,783) $(10,194)
Accrued management
incentive
compensation (1) 469 (156) (156) (157) -
One-time non-cash
interest expense
(2) 440 - - - -
Gain on sale of
Gloria Jean's
franchise
operations (2,609) - - - -
Loss from
discontinued
operations 337 102 83 316 1,899
Impairment of
Goodwill
associated with
the 1999
acquisition of
Coffee People, Inc - - - - 6,311
------ ------ ---------- ---------- ----------
Adjusted net income
(loss) $1,649 $1,304 $(1,068) $(1,624) $(1,984)
====== ====== ======= ======= =======
Consolidated
Statement of
Operations
Reconciliation per
Basic Share
-------------------
Net income
(loss) per
basic share on
a GAAP basis $0.54 $0.25 $(0.18) $(0.33) $(1.86)
Accrued management
incentive
compensation (1) 0.08 (0.03) (0.03) (0.03) -
One-time non-cash
interest expense
(2) 0.08 - - - -
Gain on sale of
Gloria Jean's
franchise
operations (0.47) - - - -
Loss from
discontinued
operations 0.06 0.02 0.02 0.06 0.34
Impairment of
Goodwill
associated with
the 1999
acquisition of
Coffee People, Inc - - - - 1.15
----- ----- ------ ------ ------
Adjusted net income
(loss) per basic
share $0.29 $0.24 $(0.19) $(0.30) $(0.37)
===== ===== ====== ====== ======
Basic shares
used in
calculation 5,593 5,468 5,468 5,468 5,468
===== ===== ===== ===== =====
(1) Prior three quarters expense for bonus accrual recorded in Q4
(2) Warrants issued to extend the Note Purchase Agreement
For the For the
fifty-two fifty-two
weeks weeks
ended ended
------- -----------
6/24/2009 6/25/2008
--------- ---------
Consolidated Statement of Operations
Reconciliation
------------------------------------
Net income (loss) on a GAAP basis $1,592 $(13,776)
One-time non-cash interest expense 440 -
Gain on sale of Gloria Jean's franchise
operations (2,609) -
Loss from discontinued operations 838 3,667
Impairment of Goodwill associated with the 1999
acquisition of Coffee People, Inc - 6,311
Gain on sale related to 2006 Starbucks
transaction - (1,276)
---- ----------
Adjusted net income (loss) $261 $(5,074)
==== =======
Consolidated Statement of Operations
Reconciliation per Basic Share
------------------------------------
Net income (loss) per basic share on a GAAP basis $0.29 ($2.52)
One-time non-cash interest expense 0.08 -
Gain on sale of Gloria Jean's franchise
operations (0.47) -
Loss from discontinued operations 0.15 0.67
Impairment of Goodwill associated with the 1999
acquisition of Coffee People, Inc - 1.16
Gain on sale related to 2006 Starbucks
transaction - (0.23)
----- ------
Adjusted net income (loss) per basic share $0.05 $(0.92)
===== ======
Weighted average basic shares outstanding 5,593 5,459
===== =====
DIEDRICH COFFEE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Sixteen Sixteen Fifty-Two Fifty-Two
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
June 24, June 25, June 24, June 25,
2009 2008 2009 2008
Wholesale revenue $19,828 $12,606 $61,427 $39,103
Franchise revenue 20 26 80 83
Retail sales 300 218 803 793
--- --- --- ---
Total net revenue 20,148 12,850 62,310 39,979
------ ------ ------ ------
Cost of sales and related
occupancy costs 14,751 11,247 47,918 32,968
Operating expenses 1,069 1,017 4,360 4,182
Depreciation and
amortization 737 392 1,889 1,146
General and administrative
expenses 2,329 2,561 7,197 7,016
(Gain) loss on asset
disposals (7) - (14) 77
Provision for Asset
Impairment &
Restructuring 6,311 - 6,311
------ ----- --- -----
Total costs and expenses 18,879 21,528 61,350 51,700
----- ------ --- -------
Operating income (loss)
from continuing
operations 1,269 (8,678) 960 (11,721)
Interest income (expense)
and other income, net (636) (13) (1,234) 302
---- --- ------ ---
Income (loss) from
continuing operations
before income tax benefit 633 (8,691) (274) (11,419)
Income tax benefit 107 396 95 34
--- --- --- ---
Income (loss) from
continuing operations 740 (8,295) (179) (11,385)
Loss from discontinuing
operations (334) (1,899) (838) (3,667)
Gain on sale of
discontinued operations,
net of tax 2,606 - 2,609 1,276
----- --- ----- -----
Net income (loss) $3,012 $(10,194) $1,592 $(13,776)
====== ======== ====== ========
Basic net income (loss)
per share:
Income (loss) from
continuing operations $0.13 $(1.51) $(0.03) $(2.08)
===== ====== ====== ======
Income (loss) from
discontinued operations,
net $0.41 $(0.35) $0.32 $(0.44)
===== ====== ===== ======
Net income (loss) per
share-basic $0.54 $(1.86) $0.29 $(2.52)
===== ====== ===== ======
Diluted net income (loss)
per share:
Income (loss) from
continuing operations $0.10 $(1.51) $(0.03) $(2.08)
===== ====== ====== ======
Income (loss) from
discontinued operations,
net $0.30 $(0.35) $0.32 $(0.44)
===== ====== ===== ======
Net income (loss) per
share-diluted $0.40 $(1.86) $0.29 $(2.52)
===== ====== ===== ======
Weighted average and
equivalent shares
outstanding:
Basic: 5,593 5,468 5,507 5,459
===== ===== ===== =====
Dilutive: 7,464 5,468 5,507 5,459
===== ===== ===== =====
DIEDRICH COFFEE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
June 24, 2009 June 25, 2008
------------- -------------
Cash $3,572 $670
Restricted cash 623 623
Accounts
receivable, net 6,335 5,015
Inventories 5,510 4,652
Other assets 10,888 11,206
------ ------
Total assets $26,928 $22,166
======= =======
Accounts payable $5,228 $5,169
All other current
liabilites 5,921 7,148
Other liabilities 2,005 677
Total
stockholders'
equity 13,774 9,172
------ -----
Total liabilities
and stockholders'
equity $26,928 $22,166
======= =======