Diedrich Coffee (DDRX, Financial) filed Quarterly Report for the period ended 2008-12-10.
Diedrich Coffee is a specialty coffee retailer that sells specialtybrewed coffee and espresso-based beverages such as cappuccinos lattes mochas and espressos and various blended drinks through its retail locations. To complement beverage sales they also sell light food items specialty whole bean coffee and accessories at retail locations. Brands include Diedrich Coffee Gloria Jean's Coffee People and Coffee Plantation. Diedrich Coffee has a market cap of $3.42 million; its shares were traded at around $0.455 with and P/S ratio of 0.07.
Operating Expenses. Total operating expenses for the twelve weeks ended December 10, 2008 decreased $367,000 and as a percentage of retail and wholesale sales, decreased from 20.1% of retail and wholesale sales to 13.2% for the twelve weeks ended December 10, 2008. The decrease in operating costs primarily resulted from decreases in franchise and wholesale of $349,000 and $63,000 respectively, and was offset by an increase in retail of $45,000. The decrease in wholesale costs of $63,000 resulted primarily from a decrease in equipment costs, compensation, travel and other of $57,000, $85,000 and $111,000 respectively. These decreases in wholesale operating costs were partially offset by an increase in marketing and allowances for doubtful accounts of $43,000, and $147,000, respectively. Franchise operating expense decreased by $349,000 and primarily resulted from a decrease in compensation of $324,000 along with decreases in marketing, travel and other costs of $25,000. The increase in retail operating costs of $45,000 resulted primarily from a $56,000 net increase in costs associated with new company-operated retail stores. This increase in retail operating costs was partially offset by a net decrease of $11,000 in marketing and labor costs associated with our internet business.
Cost of Sales and Related Occupancy Costs. Cost of sales and related occupancy costs for the twenty-four weeks ended December 10, 2008 increased $6,301,000, or 41.1%, to $21,635,000 from $15,334,000 in the prior year period. As a percentage of total revenue, cost of sales and related occupancy increased from 74.4% for the twenty-four weeks ended December 12, 2007 to 79.2% in the current fiscal quarter. Because none of these costs relate to franchise revenue, the most relevant benchmark of these costs is their relationship to total retail and wholesale sales. Using that measure, cost of sales and related occupancy costs increased as a percentage of total retail and wholesale sales from 80.0% for the twenty-four weeks ended December 12, 2007 to 82.4% for the twenty-four weeks ended December 10, 2008. Retail cost of sales increased from 36.8% to 41.1% of retail sales in the current year period whereas wholesale cost of sales increased from 81.4% to 84.1% of wholesale sales in the current year period due to a higher percentage of higher cost Keurig business over the prior year period. Wholesale sales, which carry a higher cost of goods sold than retail sales, also slightly increased as a percentage of the retail and wholesale sales mix from 87.8% to 91.3%. Occupancy costs for the twenty-four weeks ended December 10, 2008 decreased $231,000, to $537,000 from $768,000 in the prior year period primarily due to a decrease in franchise rent expense of $352,000 associated with closed stores and offset by an increase in rent for retail of $121,000 due to an increase in company-operated locations compared to the prior year period.
Operating Expenses. Total operating expenses for the twenty-four weeks ended December 10, 2008 decreased $745,000 and as a percentage of retail and wholesale sales, decreased from 23.9% of retail and wholesale sales to 14.6% for the twenty-four weeks ended December 10, 2008. The decrease in operating costs primarily resulted from a decrease in wholesale operating costs of $225,000, a decrease in franchise operating costs of $470,000 along with a decrease in retail operating costs of $50,000. The decrease in retail operating costs of $50,000 resulted primarily from a $96,000 net decrease in costs associated with company-operated stores and was partially offset by a net increase of $46,000 for labor, marketing and other costs associated with our internet business. The decrease in wholesale costs of $225,000 resulted primarily from decreases in compensation, equipment and other costs of $138,000, $152,000 and $132,000 and was offset by increases in allowance for doubtful accounts and marketing on $119,000 and $78,000, respectively. Franchise operating expense decreased by $470,000 and primarily resulted from a decrease in compensation $550,000 and other costs of $25,000 and was partially offset by increases in legal, consulting and outside services of $105,000.
Current Financial Condition. At December 10, 2008, we had working capital of $3,000, long term debt, tax liabilities, and deferred rent of $1,889,000 and $8,176,000 of stockholders equity, compared to working capital of $135,000, long term tax liabilities, deferred rent and deferred compensation of $677,000 and $9,742,000 of stockholders equity at June 25, 2008. As of December 10, 2008 and June 25, 2008, we had $5,000,000 and $2,000,000 outstanding, respectively, under our credit agreements.
Net cash provided by investing activities for the twenty-four weeks ended December 10, 2008 totaled $203,000 as compared with net cash used in investing activities of $619,000 for the twenty-four weeks ended December 12, 2007. During the twenty-four weeks ended December 10, 2008, a total of $451,000 was used to invest in property and equipment primarily related to our Castroville roasting facility of $293,000, wholesale of $2,000, retail of $154,000 and our home office facility of $2,000. These expenditures were offset by $644,000 of payments received on notes receivable and $10,000 of other proceeds from the sale of assets. During the twenty-four weeks ended December 12, 2007, a total of $2,490,000 was used to invest in property and equipment primarily related to our Castroville roasting facility of $1,862,000, wholesale of $217,000, our retail stores of $198,000 and our home office facility of $213,000. These expenditures were primarily offset by $544,000 of payments received on notes receivable and $1,274,000, net of related expenses, received from the sale of retail stores to Starbucks.
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Diedrich Coffee is a specialty coffee retailer that sells specialtybrewed coffee and espresso-based beverages such as cappuccinos lattes mochas and espressos and various blended drinks through its retail locations. To complement beverage sales they also sell light food items specialty whole bean coffee and accessories at retail locations. Brands include Diedrich Coffee Gloria Jean's Coffee People and Coffee Plantation. Diedrich Coffee has a market cap of $3.42 million; its shares were traded at around $0.455 with and P/S ratio of 0.07.
Highlight of Business Operations:
Wholesale Revenue. Our wholesale sales for the twelve weeks ended December 10, 2008 increased by $3,295,000, or 31.8%, to $13,665,000 from $10,370,000 for the twelve weeks ended December 12, 2007. Wholesale sales to OCS and food service customers for the twelve weeks ended December 10, 2008 increased by $3,622,000, or 41.4%, to $12,360,000 from $8,738,000 for the twelve weeks ended December 12, 2007 led by a 48.6%, or $3,793,000, net increase in Keurig K-cup sales. The Company generated 74.3% and 62.6% of its total revenues from the sale of K-cups for the quarter ended December 10, 2008 and December 12, 2007, respectively. Our manufacturing and distribution of K-cups is licensed from a single licensor. Sales to our licensor represented approximately 33.1% and 24.0% of wholesale sales for the quarter ended December 10, 2008 and December 12, 2007, respectively. Sales of roasted coffee to our franchisees decreased $327,000, or 20.1%, for the twelve weeks ended December 10, 2008 as compared to the twelve weeks ended December 12, 2007.Operating Expenses. Total operating expenses for the twelve weeks ended December 10, 2008 decreased $367,000 and as a percentage of retail and wholesale sales, decreased from 20.1% of retail and wholesale sales to 13.2% for the twelve weeks ended December 10, 2008. The decrease in operating costs primarily resulted from decreases in franchise and wholesale of $349,000 and $63,000 respectively, and was offset by an increase in retail of $45,000. The decrease in wholesale costs of $63,000 resulted primarily from a decrease in equipment costs, compensation, travel and other of $57,000, $85,000 and $111,000 respectively. These decreases in wholesale operating costs were partially offset by an increase in marketing and allowances for doubtful accounts of $43,000, and $147,000, respectively. Franchise operating expense decreased by $349,000 and primarily resulted from a decrease in compensation of $324,000 along with decreases in marketing, travel and other costs of $25,000. The increase in retail operating costs of $45,000 resulted primarily from a $56,000 net increase in costs associated with new company-operated retail stores. This increase in retail operating costs was partially offset by a net decrease of $11,000 in marketing and labor costs associated with our internet business.
Cost of Sales and Related Occupancy Costs. Cost of sales and related occupancy costs for the twenty-four weeks ended December 10, 2008 increased $6,301,000, or 41.1%, to $21,635,000 from $15,334,000 in the prior year period. As a percentage of total revenue, cost of sales and related occupancy increased from 74.4% for the twenty-four weeks ended December 12, 2007 to 79.2% in the current fiscal quarter. Because none of these costs relate to franchise revenue, the most relevant benchmark of these costs is their relationship to total retail and wholesale sales. Using that measure, cost of sales and related occupancy costs increased as a percentage of total retail and wholesale sales from 80.0% for the twenty-four weeks ended December 12, 2007 to 82.4% for the twenty-four weeks ended December 10, 2008. Retail cost of sales increased from 36.8% to 41.1% of retail sales in the current year period whereas wholesale cost of sales increased from 81.4% to 84.1% of wholesale sales in the current year period due to a higher percentage of higher cost Keurig business over the prior year period. Wholesale sales, which carry a higher cost of goods sold than retail sales, also slightly increased as a percentage of the retail and wholesale sales mix from 87.8% to 91.3%. Occupancy costs for the twenty-four weeks ended December 10, 2008 decreased $231,000, to $537,000 from $768,000 in the prior year period primarily due to a decrease in franchise rent expense of $352,000 associated with closed stores and offset by an increase in rent for retail of $121,000 due to an increase in company-operated locations compared to the prior year period.
Operating Expenses. Total operating expenses for the twenty-four weeks ended December 10, 2008 decreased $745,000 and as a percentage of retail and wholesale sales, decreased from 23.9% of retail and wholesale sales to 14.6% for the twenty-four weeks ended December 10, 2008. The decrease in operating costs primarily resulted from a decrease in wholesale operating costs of $225,000, a decrease in franchise operating costs of $470,000 along with a decrease in retail operating costs of $50,000. The decrease in retail operating costs of $50,000 resulted primarily from a $96,000 net decrease in costs associated with company-operated stores and was partially offset by a net increase of $46,000 for labor, marketing and other costs associated with our internet business. The decrease in wholesale costs of $225,000 resulted primarily from decreases in compensation, equipment and other costs of $138,000, $152,000 and $132,000 and was offset by increases in allowance for doubtful accounts and marketing on $119,000 and $78,000, respectively. Franchise operating expense decreased by $470,000 and primarily resulted from a decrease in compensation $550,000 and other costs of $25,000 and was partially offset by increases in legal, consulting and outside services of $105,000.
Current Financial Condition. At December 10, 2008, we had working capital of $3,000, long term debt, tax liabilities, and deferred rent of $1,889,000 and $8,176,000 of stockholders equity, compared to working capital of $135,000, long term tax liabilities, deferred rent and deferred compensation of $677,000 and $9,742,000 of stockholders equity at June 25, 2008. As of December 10, 2008 and June 25, 2008, we had $5,000,000 and $2,000,000 outstanding, respectively, under our credit agreements.
Net cash provided by investing activities for the twenty-four weeks ended December 10, 2008 totaled $203,000 as compared with net cash used in investing activities of $619,000 for the twenty-four weeks ended December 12, 2007. During the twenty-four weeks ended December 10, 2008, a total of $451,000 was used to invest in property and equipment primarily related to our Castroville roasting facility of $293,000, wholesale of $2,000, retail of $154,000 and our home office facility of $2,000. These expenditures were offset by $644,000 of payments received on notes receivable and $10,000 of other proceeds from the sale of assets. During the twenty-four weeks ended December 12, 2007, a total of $2,490,000 was used to invest in property and equipment primarily related to our Castroville roasting facility of $1,862,000, wholesale of $217,000, our retail stores of $198,000 and our home office facility of $213,000. These expenditures were primarily offset by $544,000 of payments received on notes receivable and $1,274,000, net of related expenses, received from the sale of retail stores to Starbucks.
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