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Caribou Coffee Company Inc. Reports Operating Results (10-Q)

May 08, 2009 | About:
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Caribou Coffee Company Inc. (CBOU) filed Quarterly Report for the period ended 2009-03-29.

Caribou Coffee is the second largest company-owned gourmet coffeehouse operator in the United States based on the number of coffeehouses. It offers its customers high-quality gourmet coffee and espresso-based beverages as well as specialty teas baked goods whole bean coffee branded merchandise and related products. In addition it sells products to grocery stores and mass merchandisers office coffee providers airlines hotels sports and entertainment venues college campuses and other commercial customers. It also focuses on creating a unique experience for customers through a combination of high-quality products a comfortable and welcoming coffeehouse environment and customer service. Caribou Coffee Company Inc. has a market cap of $106.9 million; its shares were traded at around $5.52 with and P/S ratio of 0.4.

Highlight of Business Operations:

Total net sales decreased $1.4 million, or 2.2%, to $60.4 million in the first thirteen weeks of fiscal 2009 from $61.8 million in the first thirteen weeks of fiscal 2008. This decrease is attributable to 204 fewer operating coffeehouse weeks due to coffeehouse closures in 2008 and a 5.0% decrease in comparable coffeehouse sales in the first thirteen weeks of fiscal 2009 as compared to the same period in fiscal 2008. Commercial sales were $5.7 million in the first quarter of 2009, an increase of 60.6% over the first quarter of 2008. The increase was due to higher sales from existing and new commercial customers, as the company opened 711 new doors. Franchise sales were $1.8 million in the first quarter of 2009, an increase of 14.2% over the first quarter of 2008. The increase was due to higher sales from franchise fees, royalties and product sales from 38 franchise coffeehouses opened during the last 12 months, including 6 coffeehouses opened during the first quarter of 2009.

Depreciation and amortization. Depreciation and amortization decreased $2.2 million, or 36.8%, to $3.7 million in the first thirteen weeks of fiscal 2009, from $5.9 million in the first thirteen weeks of fiscal 2008. The decrease was due to the impairment of company-owned coffeehouses during the first quarter 2008 and lower depreciable assets during 2009 from impairments over the last twelve months. Depreciation and amortization in the first quarter 2008 included $1.5 million in accelerated deprecation associated with the coffeehouse impairments. As a percentage of total net sales, depreciation and amortization was 6.2% in the first thirteen weeks of fiscal 2009, compared to 9.6% in the first thirteen weeks of fiscal 2008. The decrease was due to the impairment of company-owned coffeehouses during the first quarter 2008 and lower depreciable assets during 2009 from impairments in the prior year.

Closing expenses and disposal of assets. Closing expense and disposal of assets decreased $2.5 million to less than $0.1 million in the first thirteen weeks of fiscal 2009 from $2.5 million in the first thirteen weeks of fiscal 2008. This decrease is due to costs associated with 16 coffeehouse closures in the first thirteen weeks of fiscal 2008. There were no coffeehouse closures in the first thirteen weeks of fiscal 2009. We will continue to actively manage our portfolio of coffeehouses. Expenses associated with the closings are variable from coffeehouse to coffeehouse and are dependant upon the amount of time left on the leases and the remaining book value associated with each coffeehouse.

Interest expense. Interest expense decreased $0.4 million to $0.1 million in the first thirteen weeks of fiscal 2009 from $0.5 million in the first thirteen weeks of 2008. Interest expense decreased due to the write-off of a portion of the costs associated with acquiring the our revolving credit facility because we reduced the amount available under our revolving credit facility from $60.0 million to $20.0 during the first thirteen weeks of fiscal 2008. There were no outstanding borrowings as of March 29, 2009 or March 30, 2008.

Depreciation and amortization. Depreciation and amortization decreased $2.2 million, or 36.9%, to $3.7 million for the first thirteen weeks of 2009, from $5.9 million for the first thirteen weeks of 2008. The decrease was due to the impairment of company-owned coffeehouses during the first quarter 2008 and lower depreciable assets during 2009 from impairments over the last twelve months. Depreciation and amortization in the first quarter 2008 included $1.5 million in accelerated deprecation associated with the coffeehouse impairments.

Closing expense and disposal of assets. Closing expense and disposal of assets decreased $2.5 million to less than $0.1 million for the first thirteen weeks of 2009 from $2.5 million for the first thirteen weeks of 2008. The decrease in closing expense and disposal of assets is primarily attributable to asset write-offs and lease termination costs associated with the closing of 16 underperforming company-owned coffeehouses in the first thirteen weeks of 2008. There were no company-owned coffeehouse closures in the first thirteen weeks of fiscal 2009. We will continue to actively manage our portfolio of company-owned coffeehouses. Expenses associated with the closings are variable from coffeehouse to coffeehouse and are dependent upon the amount of time left on the lease and the remaining book value of assets associated with each coffeehouse.

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