Diedrich Coffee: Slimmed-Down and in the Black?

Without its coffeehouses, Diedrich Coffee (DDRX) is in the black, but only on a technicality.

According to its financial report for the quarter that ended March 7, its profit from continuing operations was $197,000. Unfortunately for Diedrich, that figure includes one-time charges and a one-time tax benefit that gave it a net $866,000 boost. Subtracting that, the company would still be in the red.

The fiscal third-quarter financial report, released Monday night, gives hints of what Diedrich's future will be like as a company that's focused on wholesale coffee sales. The company has closed the majority of its Diedrich Coffee and Coffee People stores, with 30 of them sold to Starbucks (SBUX) before the quarter ended.

The company's retail sales now are limited to online stores (with sales of only about $289,000, but that's up 25 percent from a year earlier) and a few Gloria Jean's stores, which it will use mostly for franchisee training in connection with its ongoing Gloria Jean's franchise operations.

During the quarter, its wholesale revenue from sales to coffee distributors to offices and food-service customers rose to $5.8 million, a 45 percent increase from a year earlier.

Overall, Diedrich reported net income of $4.4 million compared to a net loss of $1.7 million a year earlier. It had lost money in each of the previous four quarters, dropping a total of more than $8 million. Its total ! revenue increased 20 percent, to $8.6 million, compared to a ! year ea rlier.

A more telling figure is Diedrich's net income from the lines of business it is keeping. Excluding discontinued operations, Diedrich's net income of $197,000 was the equivalent of 4 cents per share. That contrasts with a loss of $1.1 million for those lines of business a year earlier. The quarter's net income includes one-time impairment charges of $316,000 related to two Gloria Jean's stores and an increase in income tax benefit of $1,182,000 over a year earlier.

Through the end of the quarter, Diedrich was paid $11.7 million by Starbucks for 30 stores, with another $1.2 million in escrow. It also received $630,000 for three stores sold to others.

DDRX 1-yr chart

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Comments

[Sr. Pessimist:]

Everybody left Diedrich when the accountants raped the magic from it. Martin Diedrich is the life of any coffee chain he builds. When a corporate accounting body robs a guy of what came from his heart, what drew people there in the first place is lost as well. So Martin just started a new coffee shop, called Kean. That's where the old Diedrich customers go. They didn't go for a cup of hot coffee. They went to be at a coffee shop. Nobody I've ever met can envision a coffee shop better than Martin himself.

2007 Apr 25 11:02 AM