Caribou Coffee Co., Inc. Reports 7.8 Percent First Quarter Net Sales Gain

Caribou Coffee Co., Inc. reported financial results for the first quarter of 2011 (13 weeks ended April 3, 2011) and re-confirmed fiscal 2011 guidance.

Net income attributable to Caribou Coffee Co., Inc. was $24.1 million, or $1.17 per diluted share which includes a $21.3 million tax benefit related to the reversal of a tax valuation allowance

Non-GAAP pro forma net income was $1.6 million, or $0.08 per diluted share, compared to pro forma net income of $0.5 million, or $0.03 per diluted share for the same period in 2010.

Michael Tattersfield, president and CEO, said in a prepared statement, "Our financial performance during the recent quarter underscores our successful execution against our strategy of becoming a true multi-channel coffee company. We continue to see success across our three lines of business, each of which contributed significantly to our 8 percent growth in consolidated sales and earnings per share performance. As always, we are committed to enhancing returns for our shareholders while building the community place loved by our guests."

Net sales for the quarter of $72.3 million increased $5.2 million, or 7.8 percent, from $67.1 million in the comparable quarter of 2010.

Coffeehouse sales were $57.6 million in the first quarter of 2011, an increase of 3.6 percent compared to $55.6 million in the first quarter of 2010. This growth was driven by a 4.3 percent increase in comparable coffeehouse sales in the first quarter of 2011, primarily due to the successful expansion of the company's food platform through the launch of breakfast sandwiches.

Commercial sales were $11.7 million in the first quarter of 2011, an increase of 29.7 percent compared to $9.0 million in the first quarter of 2010. Sales growth in the commercial channel was achieved through sales growth from existing and new customers in the company's grocery channel, sales related to the Keurig single-serve platform and increasing penetration in foodservice channels.

Franchise sales were $3.0 million in the first quarter of 2011, an increase of 21.9 percent as compared with $2.5 million in the first quarter of 2010. Increased product sales and royalties from 135 franchise locations, a net increase of 12 locations on a year over year basis, drove the increase in franchise sales versus the prior year.

Cost of sales and related occupancy costs in the first quarter of 2011 were $33.2 million, an increase of $1.8 million or 5.9 percent compared to the first quarter of 2010, driven by the Company's consolidated sales growth. As a percentage of revenue, cost of sales and related occupancy costs were 46.0 percent in the first quarter of 2011 versus 46.8 percent in the first quarter of 2010. This decrease as a percentage of sales was due to pricing action taken in the quarter, as well as leveraging the company's higher sales volume over fixed occupancy costs.

Operating expenses in the first quarter of 2011 rose $0.4 million or 1.8 percent to $25.4 million compared to $25.0 million in the same period of the prior year. The increase in operating expenses was related to variable costs related to increased sales in the quarter such as labor in the company's retail coffeehouse channel. As a percentage of revenue, operating costs were 35.2 percent, down from 37.2 percent in the same period of the prior year, as the company gained leverage on fixed costs within their business channels and benefitted from a shift in their overall sales mix to their commercial channel, which has a lower operating expense component than their retail coffeehouses.

General and administrative expenses increased $1.3 million, or 19.9 percent, to $7.8 million in the first quarter of 2011, from $6.5 million in the first quarter of 2010. As a percentage of total net sales, general and administrative expenses increased to 10.8 percent in the first quarter of 2011 from 9.7 percent in the first quarter of 2010. This increase was due to resources added in the latter half of 2010 to support key initiatives, including marketing, product management and real estate.

EBITDA was $6.2 million in the first quarter of 2011, compared to EBITDA of $4.6 million in the first quarter of 2010, an improvement of 35.0 percent. EBITDA increased primarily due to improved performance within the retail coffeehouses and continued growth in the commercial and franchise segments. (EBITDA is a non-GAAP measure. See EBITDA reconciliation at the end of this release).

Depreciation and amortization decreased $0.2 million to $2.9 million during the first quarter of 2011. Depreciation and amortization was lower in the quarter due to a lower depreciable asset base.

In the first quarter of 2011, the company recorded a tax benefit of $21.3 million compared to a tax benefit of $0.2 million in first quarter of 2010. The tax benefit in 2011 related to the reversal of a portion of the company's valuation allowance against accumulated net operating losses and other deferred tax assets and the corresponding recognition of those deferred tax assets on the company's balance sheet.

The company's net income for the first quarter of 2011 was $24.1 million or $1.17 per diluted share compared to $1.0 million or $0.05 per diluted share for the same period in 2010.

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