EXHIBIT 99.2
Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated balance sheet as of March 4, 2009 presents the financial position of Diedrich Coffee, Inc. and Subsidiaries assuming the Transaction had been completed on that date.
The following unaudited pro forma condensed consolidated statements of operations for the fiscal years ended June 25, 2008, June 27, 2007, and for the thirty-six weeks ended March 4, 2009 and March 5, 2008, present our results of operations assuming that the Transaction had been completed on the first day of these respective periods. In the opinion of our management, these statements include all material adjustments necessary to reflect, on a pro forma basis, the impact of the Transaction on our historical financial information. The adjustments set forth in the “Pro Forma Adjustments” column are described in the Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
The sale of all the issued and outstanding shares of common stock of Praise U.S. Holdings, Inc. (formerly known as Coffee People Worldwide, Inc.) provided $3.1 million, of which $1,500,000 was paid in cash at the closing and the remainder in the form of a twelve-month promissory note with an aggregate principal amount of $1,600,000 and an interest rate equal to 7.0% per annum, issued by Praise to the Company at the closing.
The unaudited pro forma condensed consolidated financial statements for the periods presented do not purport to represent what our consolidated results of operations or financial position actually would have been had the Transaction occurred on the dates noted above, or to project our consolidated results of operations for any future periods. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable under the circumstances. Actual amounts could differ materially from these estimates. The pro forma results should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form l0-K for the year ended June 25, 2008.
DIEDRICH COFFEE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As Reported March 4, 2009 | Pro Forma Adjustments | Footnote | Pro Forma March 4, 2009 | |||||||||||
Assets | ||||||||||||||
Current assets: | ||||||||||||||
Cash | $ | 1,133,000 | $ | 720,000 | A | $ | 1,853,000 | |||||||
Restricted cash and short term investments | 622,000 | — | 622,000 | |||||||||||
Accounts receivable, net | 9,859,000 | (366,000 | ) | A | 9,493,000 | |||||||||
Inventories | 4,846,000 | (131,000 | ) | A | 4,715,000 | |||||||||
Current portion of notes receivable | 2,014,000 | 1,592,000 | A | 3,606,000 | ||||||||||
Prepaid expenses | 793,000 | (134,000 | ) | A | 659,000 | |||||||||
Total current assets | 19,267,000 | 1,681,000 | 20,948,000 | |||||||||||
Property and equipment, net | 6,698,000 | (23,000 | ) | A | 6,675,000 | |||||||||
Notes receivable | 754,000 | — | 754,000 | |||||||||||
Other assets | 720,000 | (3,000 | ) | A | 717,000 | |||||||||
Total assets | $ | 27,439,000 | $ | 1,655,000 | $ | 29,094,000 | ||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||
Current liabilities: | ||||||||||||||
Liabilities of discontinued operations | $ | 34,000 | $ | — | $ | 34,000 | ||||||||
Current portion of note payable, net of discount | 2,647,000 | — | 2,647,000 | |||||||||||
Accounts payable | 8,332,000 | (174,000 | ) | A | 8,158,000 | |||||||||
Accrued compensation | 1,446,000 | (152,000 | ) | A | 1,294,000 | |||||||||
Accrued expenses | 2,067,000 | (294,000 | ) | A | 1,773,000 | |||||||||
Franchisee deposits | 420,000 | (373,000 | ) | A | 47,000 | |||||||||
Deferred franchise fee income | 15,000 | (15,000 | ) | A | — | |||||||||
Advertising fund liabilities | 178,000 | (178,000 | ) | A | — | |||||||||
Accrued provision for store closure | 745,000 | (509,000 | ) | A | 236,000 | |||||||||
Total current liabilities | 15,884,000 | (1,695,000 | ) | 14,189,000 | ||||||||||
Notes Payable | 1,503,000 | — | 1,503,000 | |||||||||||
Income tax liabilities | 274,000 | — | 274,000 | |||||||||||
Deferred rent | 176,000 | (36,000 | ) | A | 140,000 | |||||||||
Total liabilities | 17,837,000 | (1,731,000 | ) | 16,106,000 | ||||||||||
Commitments and contingencies | ||||||||||||||
Stockholders’ equity: | ||||||||||||||
Common stock | 55,000 | — | 55,000 | |||||||||||
Additional paid-in capital | 61,561,000 | — | 61,561,000 | |||||||||||
Accumulated deficit | (52,014,000 | ) | 3,386,000 | A | (48,628,000 | ) | ||||||||
Total stockholders’ equity | 9,602,000 | 3,386,000 | 12,988,000 | |||||||||||
Total liabilities and stockholders’ equity | $ | 27,439,000 | $ | 1,655,000 | $ | 29,094,000 | ||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
2
DIEDRICH COFFEE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
As Reported 36 Weeks Ended March 4, 2009 | Pro Forma Adjustments | Footnote | Pro Forma 36 Weeks Ended March 4, 2009 | |||||||||||
Net revenue: | ||||||||||||||
Wholesale and other | $ | 41,361,000 | $ | — | $ | 41,361,000 | ||||||||
Franchise revenue | 1,649,000 | (1,590,000 | ) | B | 59,000 | |||||||||
Retail sales | 3,833,000 | (3,314,000 | ) | B | 519,000 | |||||||||
Total net revenue | 46,843,000 | (4,904,000 | ) | 41,939,000 | ||||||||||
Costs and expenses: | ||||||||||||||
Cost of sales and related occupancy costs | 35,667,000 | (1,935,000 | ) | B | 33,732,000 | |||||||||
Operating expenses | 5,844,000 | (3,242,000 | ) | B | 2,602,000 | |||||||||
Depreciation and amortization | 1,173,000 | (33,000 | ) | B | 1,140,000 | |||||||||
General and administrative expenses | 4,979,000 | — | 4,979,000 | |||||||||||
Gain on asset disposals | (10,000 | ) | — | (10,000 | ) | |||||||||
Total costs and expenses | 47,653,000 | (5,210,000 | ) | 42,443,000 | ||||||||||
Operating loss from continuing operations | (810,000 | ) | 306,000 | (504,000 | ) | |||||||||
Interest expense | (794,000 | ) | — | (794,000 | ) | |||||||||
Interest and other income, net | 196,000 | — | 196,000 | |||||||||||
Loss from continuing operations before income tax provision | (1,408,000 | ) | 306,000 | (1,102,000 | ) | |||||||||
Income tax provision | 12,000 | — | 12,000 | |||||||||||
Net loss from continuing operations | $ | (1,420,000 | ) | $ | 306,000 | $ | (1,114,000 | ) | ||||||
Basic and diluted net loss per share: | ||||||||||||||
Loss from continuing operations | $ | (0.26 | ) | $ | 0.06 | $ | (0.20 | ) | ||||||
Weighted average and equivalent shares outstanding: | ||||||||||||||
Basic and diluted | 5,468,000 | 5,468,000 | 5,468,000 | |||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
3
DIEDRICH COFFEE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
As Reported 36 Weeks Ended March 5, 2008 | Pro Forma Adjustments | Footnote | Pro Forma 36 Weeks Ended March 5, 2008 | |||||||||||
Net revenue: | ||||||||||||||
Wholesale and other | $ | 26,497,000 | $ | — | $ | 26,497,000 | ||||||||
Franchise revenue | 2,090,000 | (2,033,000 | ) | B | 57,000 | |||||||||
Retail sales | 3,343,000 | (2,059,000 | ) | B | 1,284,000 | |||||||||
Total net revenue | 31,930,000 | (4,092,000 | ) | 27,838,000 | ||||||||||
Costs and expenses: | ||||||||||||||
Cost of sales and related occupancy costs | 24,095,000 | (1,774,000 | ) | B | 22,321,000 | |||||||||
Operating expenses | 6,542,000 | (3,255,000 | ) | B | 3,287,000 | |||||||||
Depreciation and amortization | 835,000 | (96,000 | ) | B | 739,000 | |||||||||
General and administrative expenses | 5,521,000 | — | 5,521,000 | |||||||||||
Loss on asset disposals | 76,000 | — | 76,000 | |||||||||||
Total costs and expenses | 37,069,000 | (5,125,000 | ) | 31,944,000 | ||||||||||
Operating loss from continuing operations | (5,139,000 | ) | 1,033,000 | (4,106,000 | ) | |||||||||
Interest expense | (34,000 | ) | — | (34,000 | ) | |||||||||
Interest and other income, net | 353,000 | — | 353,000 | |||||||||||
Loss from continuing operations before income tax benefit | (4,820,000 | ) | 1,033,000 | (3,787,000 | ) | |||||||||
Income tax benefit | (471,000 | ) | 411,000 | B | (60,000 | ) | ||||||||
Net loss from continuing operations | $ | (4,349,000 | ) | $ | 622,000 | $ | (3,727,000 | ) | ||||||
Basic and diluted net loss per share: | ||||||||||||||
Loss from continuing operations | $ | (0.80 | ) | $ | 0.12 | $ | (0.68 | ) | ||||||
Weighted average and equivalent shares outstanding: | ||||||||||||||
Basic and diluted | 5,462,000 | 5,462,000 | 5,462,000 | |||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
4
DIEDRICH COFFEE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
As Reported Year Ended June 25, 2008 | Pro Forma Adjustments | Footnote | Pro Forma Year Ended June 25, 2008 | |||||||||||
Net revenue: | ||||||||||||||
Wholesale and other | $ | 39,103,000 | $ | — | $ | 39,103,000 | ||||||||
Franchise revenue | 2,843,000 | (2,760,000 | ) | B | 83,000 | |||||||||
Retail sales | 4,394,000 | (2,781,000 | ) | B | 1,613,000 | |||||||||
Total net revenue | 46,340,000 | (5,541,000 | ) | 40,799,000 | ||||||||||
Costs and expenses: | ||||||||||||||
Cost of sales and related occupancy costs | 35,886,000 | (2,239,000 | ) | B | 33,647,000 | |||||||||
Operating expenses | 8,887,000 | (4,498,000 | ) | B | 4,389,000 | |||||||||
Depreciation and amortization | 1,281,000 | (155,000 | ) | B | 1,126,000 | |||||||||
General and administrative expenses | 8,439,000 | — | 8,439,000 | |||||||||||
Provision for goodwill and asset impairment | 7,161,000 | (850,000 | ) | B | 6,311,000 | |||||||||
Loss on asset disposals | 76,000 | — | 76,000 | |||||||||||
Total costs and expenses | 61,730,000 | (7,742,000 | ) | 53,988,000 | ||||||||||
Operating loss from continuing operations | (15,390,000 | ) | 2,201,000 | (13,189,000 | ) | |||||||||
Interest expense | (136,000 | ) | — | (136,000 | ) | |||||||||
Interest and other income, net | 442,000 | — | 442,000 | |||||||||||
Loss from continuing operations before income tax benefit | (15,084,000 | ) | 2,201,000 | (12,883,000 | ) | |||||||||
Income tax benefit | (537,000 | ) | 503,000 | B | (34,000 | ) | ||||||||
Net loss from continuing operations | $ | (14,547,000 | ) | $ | 1,698,000 | $ | (12,849,000 | ) | ||||||
Basic and diluted net loss per share: | ||||||||||||||
Loss from continuing operations | $ | (2.66 | ) | $ | 0.31 | $ | (2.35 | ) | ||||||
Weighted average and equivalent shares outstanding: | ||||||||||||||
Basic and diluted | 5,459,000 | 5,459,000 | 5,459,000 | |||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
5
DIEDRICH COFFEE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
As Reported Year Ended June 27, 2007 | Pro Forma Adjustments | Footnote | Pro Forma Year Ended June 27, 2007 | |||||||||||
Net revenue: | ||||||||||||||
Wholesale and other | $ | 28,145,000 | $ | — | $ | 28,145,000 | ||||||||
Franchise revenue | 3,514,000 | (3,379,000 | ) | B | 135,000 | |||||||||
Retail sales | 4,948,000 | (2,844,000 | ) | B | 2,104,000 | |||||||||
Total net revenue | 36,607,000 | (6,223,000 | ) | 30,384,000 | ||||||||||
Costs and expenses: | ||||||||||||||
Cost of sales and related occupancy costs | 24,244,000 | (1,997,000 | ) | B | 22,247,000 | |||||||||
Operating expenses | 9,631,000 | (4,975,000 | ) | B | 4,656,000 | |||||||||
Depreciation and amortization | 1,059,000 | (214,000 | ) | B | 845,000 | |||||||||
General and administrative expenses | 6,661,000 | — | 6,661,000 | |||||||||||
Provision for asset impairment and restructuring costs | 1,073,000 | (893,000 | ) | B | 180,000 | |||||||||
Loss on asset disposals | 14,000 | — | 14,000 | |||||||||||
Total costs and expenses | 42,682,000 | (8,079,000 | ) | 34,603,000 | ||||||||||
Operating loss from continuing operations | (6,075,000 | ) | 1,856,000 | (4,219,000 | ) | |||||||||
Interest expense | (230,000 | ) | — | (230,000 | ) | |||||||||
Interest and other income, net | 436,000 | — | 436,000 | |||||||||||
Loss from continuing operations before income tax benefit | (5,869,000 | ) | 1,856,000 | (4,013,000 | ) | |||||||||
Income tax benefit | (2,120,000 | ) | 960,000 | B | (1,160,000 | ) | ||||||||
Net loss from continuing operations | $ | (3,749,000 | ) | $ | 896,000 | $ | (2,853,000 | ) | ||||||
Basic and diluted net loss per share: | ||||||||||||||
Loss from continuing operations | $ | (0.70 | ) | $ | 0.17 | $ | (0.53 | ) | ||||||
Weighted average and equivalent shares outstanding: | ||||||||||||||
Basic and diluted | 5,391,000 | 5,391,000 | 5,391,000 | |||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
6
An analysis of the discontinued operations of the franchise and retail business that are part of the Transaction is as follows:
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements of Diedrich Coffee, Inc.
A. | The assets and liabilities transferred upon the sale of the Gloria Jean’s franchise and retail operations to Praise and receipt of cash and notes from Praise |
Purchase price – Cash | $ | 1,500,000 | ||
Purchase price – Note receivable | 1,600,000 | |||
Cash Transferred | (780,000 | ) | ||
Accounts Receivable, net | (366,000 | ) | ||
Inventories | (131,000 | ) | ||
Notes Receivable, net | (8,000 | ) | ||
Prepaid Expenses | (134,000 | ) | ||
Equipment, net | (23,000 | ) | ||
Other Assets | (3,000 | ) | ||
Accounts Payable | 174,000 | |||
Accrued Compensation | 152,000 | |||
Accrued Expenses | 294,000 | |||
Franchise Deposits | 373,000 | |||
Deferred Franchise Fee Income | 15,000 | |||
Provision for Store Closure | 509,000 | |||
Advertising Fund Liability | 178,000 | |||
Deferred Rent | 36,000 | |||
Gain on Sale of Gloria Jean’s franchise and retail operations | $ | 3,386,000 | ||
The Company is in the process of completing its analysis of the income tax implications of this transaction. It is expected that a substantial majority of the gain from this transaction would be offset by net operating loss (“NOL”) carry forward balances. Therefore the Company has not provided any income taxes in the pro forma condensed consolidated financial statements. The utilization of these NOL carry-forwards could be limited due to restrictions imposed under federal and state laws. Because the Company has not completed its income tax analysis of this transaction, the actual tax liability may differ significantly.
B. | To eliminate Gloria Jean’s franchise and retail operations assuming the sale was completed on June 29, 2006: |
36 Weeks Ended March 4, 2009 | 36 Weeks Ended March 5, 2008 | 52 Weeks Ended June 25, 2008 | 52 Weeks Ended June 27, 2007 | |||||||||||||
Net revenue: | ||||||||||||||||
Franchise revenue | $ | (1,590,000 | ) | $ | (2,033,000 | ) | $ | (2,760,000 | ) | $ | (3,379,000 | ) | ||||
Retail sales | (3,314,000 | ) | (2,059,000 | ) | (2,781,000 | ) | (2,844,000 | ) | ||||||||
Total net revenue | (4,904,000 | ) | (4,092,000 | ) | (5,541,000 | ) | (6,223,000 | ) | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of sales and related occupancy costs | (1,935,000 | ) | (1,774,000 | ) | (2,239,000 | ) | (1,997,000 | ) | ||||||||
Operating expenses | (3,242,000 | ) | (3,255,000 | ) | (4,498,000 | ) | (4,975,000 | ) | ||||||||
Depreciation and amortization | (33,000 | ) | (96,000 | ) | (155,000 | ) | (214,000 | ) | ||||||||
Provision for goodwill and asset impairment | — | — | (850,000 | ) | (893,000 | ) | ||||||||||
Total costs and expenses | (5,210,000 | ) | (5,125,000 | ) | (7,742,000 | ) | (8,079,000 | ) | ||||||||
Operating loss | (306,000 | ) | (1,033,000 | ) | (2,201,000 | ) | (1,856,000 | ) | ||||||||
Interest (expense)/income, net | — | — | — | — | ||||||||||||
Loss before income tax | (306,000 | ) | (1,033,000 | ) | (2,201,000 | ) | (1,856,000 | ) | ||||||||
Income tax benefit | — | 411,000 | 503,000 | 960,000 | ||||||||||||
Net loss | $ | (306,000 | ) | $ | (622,000 | ) | $ | (1,698,000 | ) | $ | (896,000 | ) | ||||
7