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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 22, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________________ to ____________________
COMMISSION FILE NUMBER 0-21203
DIEDRICH COFFEE, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 33-0086628
- ------------------------------- -------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
2144 MICHELSON DRIVE
IRVINE, CALIFORNIA 92612
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(Address of Principal Executive Offices including Zip Code)
(949) 260-1600
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(Registrant's Telephone Number including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
As of November 5, 1999, there were 12,616,833 shares of common stock of
the registrant outstanding.
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DIEDRICH COFFEE, INC.
INDEX
PAGE NO.
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PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets.................................. 3
Condensed Consolidated Statements of Operations........................ 4
Condensed Consolidated Statements of Cash Flows........................ 5
Notes to Condensed Consolidated Financial Statements................... 6
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 10
Item 3 Quantitative and Qualitative Disclosures About Market Risk............. 14
PART II - OTHER INFORMATION
Item 1 Legal Proceedings...................................................... 14
Item 5 Other Information...................................................... 14
Item 6 Exhibits and Reports on Form 8-K....................................... 15
Signatures............................................................. 18
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DIEDRICH COFFEE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 22, JUNE 30,
1999 1999
------------ ------------
ASSETS (NOTE 4)
Current Assets:
Cash $ 5,534,941 $ 552,124
Accounts receivable 3,489,060 335,903
Note receivable 100,000 100,000
Inventories (Note 3) 5,063,875 1,432,249
Prepaid expenses 1,011,891 153,113
Income taxes receivable 17,686 17,686
------------ ------------
Total current assets 15,217,453 2,591,075
Property and equipment, net 16,290,497 7,504,439
Costs in excess of net assets acquired, net 29,002,894 317,741
Note receivable - long-term 40,000 40,000
Other assets 832,433 1,329,185
------------ ------------
Total assets $ 61,383,277 $ 11,782,440
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current installments of obligations under capital lease $ 281,887 $ 169,488
Current installments of long-term debt 2,000,000 1,000,000
Accounts payable 2,374,322 1,978,325
Accrued compensation 2,110,456 900,565
Accrued expenses 4,283,584 886,903
Reserve for disposal of stores (Note 2) 1,338,736 --
Reserve for store closings and restructuring costs 23,660 95,195
------------ ------------
Total current liabilities 12,412,645 5,030,476
Obligations under capital lease, excluding current installments 745,233 239,049
Long-term debt, excluding current installments (Note 4) 10,000,000 2,500,000
Deferred rent 441,012 233,548
------------ ------------
Total liabilities 23,598,890 8,003,073
------------ ------------
Stockholders' Equity: (Note 5)
Common stock 126,035 61,736
Additional paid-in capital 53,147,705 18,826,473
Accumulated deficit (15,489,353) (15,108,842)
------------ ------------
Total stockholders' equity 37,784,387 3,779,367
------------ ------------
Commitments and contingencies
Total liabilities and stockholders' equity $ 61,383,277 $ 11,782,440
============ ============
See accompanying notes to condensed consolidated financial statements.
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DIEDRICH COFFEE, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
TWELVE WEEKS THIRTEEN WEEKS
ENDED ENDED
SEPTEMBER 22, OCTOBER 28,
1999 1998
------------- --------------
Revenues:
Retail $ 10,463,138 $ 5,268,622
Wholesale and other 4,634,569 674,630
Franchise revenue 1,174,818 100,000
------------ ------------
Total revenues 16,272,525 6,043,252
------------ ------------
Cost and Expenses:
Cost of sales and related occupancy costs 7,961,390 2,718,436
Store operating expenses 4,952,351 2,187,605
Other operating expenses 462,160 165,595
Depreciation and amortization 806,879 490,531
General and administrative expenses 2,251,828 1,002,556
------------ ------------
Total 16,434,608 6,564,723
------------ ------------
Operating loss (162,083) (521,471)
Interest expense (286,889) (94,640)
Interest and other income 66,681 7,280
------------ ------------
Loss before income tax provision (382,291) (608,831)
Income tax provision 7,200 --
------------ ------------
Net loss $ (389,491) $ (608,831)
============ ============
Net loss per share - basic and diluted $ (0.03) $ (0.10)
============ ============
Weighted average shares outstanding -
basic and diluted 12,022,467 5,944,146
============ ============
See accompanying notes to condensed consolidated financial statements.
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DIEDRICH COFFEE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
TWELVE WEEKS THIRTEEN WEEKS
ENDED ENDED
SEPTEMBER 22, OCTOBER 28,
1999 1998
------------- --------------
Cash flows from operating activities:
Net loss $ (389,491) $ (608,831)
Adjustments to reconcile net loss to cash provided
by (used in) operating activities:
Depreciation and amortization 922,385 490,531
Changes in assets and liabilities:
Accounts receivable (799,084) 43,009
Inventories (88,149) (70,555)
Prepaid expenses (286,366) (56,825)
Income taxes receivable -- 1,677
Other assets (65,288) (25,000)
Accounts payable (260,060) 443,091
Accrued compensation 274,408 (93,532)
Accrued expenses and restructuring charge (1,234,032) 11,419
Deferred rent 7,400 8,595
------------ ------------
Net cash provided by (used in) operating activities (1,918,277) 143,579
------------ ------------
Cash flows from investing activities:
Capital expenditures for property and equipment (312,516) (291,574)
Cash paid for acquisition, net (22,937,351) --
Decrease in reserve for stores to be disposed of (237,980) --
------------ ------------
Net cash used in investing activities (23,487,847) (291,574)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock 25,979,511 32,236
Proceeds from the issuance of note payable,
net of fees paid 11,645,558 --
Repayment of long-term debt (7,141,691) --
Repayment on capital lease obligations (94,437) (22,136)
------------ ------------
Net cash provided by financing activities 30,388,941 10,100
------------ ------------
Net increase (decrease) in cash 4,982,817 (137,895)
Cash at beginning of period 552,124 1,001,625
------------ ------------
Cash at end of period $ 5,534,941 $ 863,730
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 110,724 $ 55,950
============ ============
Income taxes $ 10,806 $ --
============ ============
Non-cash transactions:
Issuance of common stock to acquire Coffee People $ 8,415,000 $ --
============ ============
See accompanying notes to condensed consolidated financial statements.
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DIEDRICH COFFEE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 22, 1999
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited condensed consolidated financial statements of Diedrich
Coffee, Inc. (the "Company") and subsidiaries have been prepared in accordance
with generally accepted accounting principles, the instructions to form 10-Q and
Article 10 of Regulation S-X. Information relating to the periods ending prior
to July 7, 1999 included in this report relates to the historical operations of
Diedrich Coffee, Inc. and, except as otherwise indicated, does not reflect the
operations of Coffee People, Inc., which the Company acquired on July 7, 1999.
These statements should be read in conjunction with the financial statements and
the notes thereto included in the Company's Annual Report on Form 10-K for the
year ended January 27, 1999 and the Company's transition report on Form 10-Q for
the transition period January 28, 1999 to June 30, 1999.
In the opinion of management, all adjustments (consisting of normal,
recurring adjustments and accruals) considered necessary for a fair presentation
have been included. Operating results for interim periods are not necessarily
indicative of the results expected for a full year.
Change in Fiscal Year
In an effort to align its fiscal year with that of Coffee People, Inc.
("Coffee People"), which the Company acquired on July 7, 1999 (note 2), the
Company changed its year end from a fiscal year ending on the Wednesday nearest
January 31 to a fiscal year ending on the Wednesday nearest June 30.
Accordingly, the condensed statements of operations and cash flows for the
twelve weeks ended September 22, 1999 are not necessarily comparable to the
accompanying thirteen weeks ended October 28, 1998.
2. ACQUISITION OF COFFEE PEOPLE, INC.
On July 7, 1999, the Company acquired Coffee People pursuant to an
Agreement and Plan of Merger. The acquisition was affected through the merger of
CP Acquisition Corp., an indirect wholly owned subsidiary of the Company, with
and into Coffee People. As a result of the acquisition, each share of Coffee
People common stock was converted into the right to receive $2.11 in cash and
0.14 share of the Company's common stock. At the time of the acquisition, Coffee
People owned 67 retail stores and franchised 253 retail stores in 36 states and
7 foreign countries under the names Gloria Jean's, Coffee People and Coffee
Plantation.
The Company, in recording the fair value of assets acquired and
liabilities assumed, has made certain estimates. These estimates consist
primarily of (i) recording property and equipment at estimated fair value and
(ii) providing for contractual lease obligations on negative operating cash
flows on certain underperforming stores. The acquisition has been accounted for
as a purchase and the resulting estimated costs in excess of net assets acquired
in the amount of $28,879,473 are being amortized using the straight-line method
over a 40 year period. The allocation of purchase price to the fair value of
assets acquired and liabilities assumed is dependent upon certain valuations and
other studies that have not progressed to a stage where there is sufficient
information to make a definitive allocation. Although the purchase price
allocation is preliminary, management is unaware of any significant changes
necessary to arrive at a final allocation.
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DIEDRICH COFFEE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SEPTEMBER 22, 1999
(UNAUDITED)
The assets acquired, including the costs in excess of net assets
acquired, and liabilities assumed in the acquisition of Coffee People are
summarized in the following table.
Fair value of tangible assets acquired $ 15,852,123
Costs in excess of net assets acquired 28,879,473
Liabilities assumed at fair value (13,379,245)
Common stock issued (8,415,000)
------------
Net cash paid for acquisition 22,937,351
Cash acquired in acquisition 1,780,578
------------
Cash paid for acquisition $ 24,717,929
============
In conjunction with the transaction, the Company acquired 29
Company-owned Gloria Jean's stores, of which 28 are intended to be closed or
disposed of by June 30, 2000. Under the provisions of Emerging Issues Task Force
87-11 Allocation of Purchase Price to Assets to Be Sold, the Company has
excluded the operating results of the 28 stores from the condensed consolidated
statement of operations for the twelve weeks ended September 22, 1999.
Additionally, the Company established a reserve of $1.6 million for the
estimated net cash holding costs of these stores until the estimated date of
closure or disposal.
The total revenues excluded from the Company's condensed consolidated
statement of operations for the twelve weeks ended September 22, 1999 totaled
$1.5 million and the related net losses totaled $238,000. Such net losses have
been charged against the reserve for disposal of stores.
The following table presents selected unaudited pro forma results of
operations for the Company, assuming the Coffee People acquisition had occurred
on July 1, 1998. The unaudited pro forma results of operations do not include
the operating results of the 28 Gloria Jean's Company-owned stores to be closed
or disposed of. The pro forma results of operations are not indicative of the
results of operations of the combined companies that would have occurred had the
acquisition occurred on July 1, 1998, nor are they indicative of future
operating results.
THIRTEEN WEEKS ENDED
OCTOBER 28, 1998
--------------------
Total revenues $ 17,049,457
Net loss $ (1,197,324)
Net loss per share - basic and diluted $ (0.10)
Weighted average shares outstanding --
basic and diluted 12,374,146
3. INVENTORIES
Inventories consist of the following:
SEPTEMBER 22, JUNE 30,
1999 1998
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Green coffee (raw materials) $1,862,561 $ 574,745
Roasted coffee (finished goods) 766,729 157,115
Accessory and specialty items 1,212,738 258,889
Other food, beverage and supplies 1,221,847 441,500
---------- ----------
$5,063,875 $1,432,249
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DIEDRICH COFFEE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SEPTEMBER 22, 1999
(UNAUDITED)
4. LONG-TERM DEBT
Long-term debt consists of the following:
SEPTEMBER 22, JUNE 30,
1999 1999
------------- -----------
NUVRTY, INC.
Note payable bearing interest at prime rate
plus 3 1/2%, interest payable monthly
Note was secured by the assets of the
Company. Paid in full July 7, 1999 -- $ 1,000,000
GRANDVIEW TRUST
Note payable bearing interest at prime rate
plus 3 1/2%, interest payable monthly
Note was secured by the assets of the
Company. Paid in full July 7, 1999 -- 750,000
OCEAN TRUST
Note payable bearing interest at prime rate
plus 3 1/2%, interest payable monthly
Note was secured by the assets of the
Company. Paid in full July 7, 1999 -- 750,000
BANCBOSTON, N.A
Note payable bearing interest at a rate of
8.31% as of September 22, 1999 and payable
in quarterly installments of $666,667,
commencing December 31, 1999, due July 6,
2004. Note is secured by the assets of the
Company and its subsidiaries' stock $12,000,000 --
----------- -----------
Less: Current installments 2,000,000 --
----------- -----------
Long-term debt, excluding current installments $10,000,000 $ 2,500,000
=========== ===========
On July 7, 1999, the Company entered into a credit agreement with
BankBoston, N.A. that is secured by pledges of all of the Company's assets and
its subsidiaries' stock and provides for a $12 million term loan and a $3
million revolving credit facility, payable in quarterly installments of
$666,667. The Company used the proceeds of the term loan to repay existing
indebtedness and to pay expenses related to the acquisition of Coffee People.
The Company intends to use the proceeds from the revolving credit facility to
finance additional and remodel existing company-owned retail locations and for
general corporate purposes. Amounts outstanding under the credit agreement bear
interest, at the Company's option, at BankBoston's base rate plus 1.25% or an
adjusted Eurodollar rate.
5. STOCKHOLDERS' EQUITY
On July 7, 1999, the Company completed a secondary offering of
4,930,000 shares (including an over-allotment option). All of the shares of
common stock were sold on behalf of the Company, of which 330,000 shares of
common stock were sold pursuant to the exercise of the underwriters'
over-allotment option. The net proceeds of the offering to the Company, after
deducting approximately $3.5 million in underwriters' commissions and related
expenses, were approximately $26.0 million.
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DIEDRICH COFFEE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SEPTEMBER 22, 1999
(UNAUDITED)
On July 7, 1999, the Company issued 1,500,000 shares of the Company's
common stock to Coffee People stockholders in connection with the acquisition of
Coffee People.
6. SEGMENT AND RELATED INFORMATION
The Company has three reportable segments which include retail
operations, wholesale operations and franchise operations. The Company evaluates
performance of its operating segments based on income before income taxes.
Summarized financial information concerning the Company's reportable
segments is shown in the following table. The other assets consist of corporate
cash, costs in excess of net assets acquired and corporate property, plant and
equipment. The other component of segment profit before tax includes corporate
general and administrative expenses, amortization expense and interest expense.
RETAIL WHOLESALE FRANCHISE
OPERATIONS OPERATIONS OPERATIONS OTHER TOTAL
------------ ------------ ----------- ------------ ------------
Twelve Weeks ended September 22, 1999
Revenues $ 10,463,138 $ 4,634,569 $ 1,174,818 $ -- $ 16,272,525
Interest expense -- -- -- 286,889 286,889
Depreciation and amortization 448,120 33,716 -- 325,043 806,879
Segment profit before tax 374,248 1,001,709 692,232 (2,450,480) (382,291)
Total assets as of September 22, 1999 $ 12,083,893 $ 4,655,902 $ 2,256,938 $ 42,386,544 $ 61,383,277
RETAIL WHOLESALE FRANCHISE
OPERATIONS OPERATIONS OPERATIONS OTHER TOTAL
------------ ------------ ----------- ------------ ------------
Thirteen Weeks ended October 28, 1998
Revenues $ 5,268,622 $ 674,630 $ 100,000 $ -- $ 6,043,252
Interest expense -- -- -- 94,640 94,640
Depreciation and amortization 380,030 34,362 -- 76,139 490,531
Segment profit before tax (738,479) 81,328 48,320 -- (608,831)
Total assets as of June 30, 1999 $ 6,276,410 $ 1,579,591 $ 10,015 $ 3,916,424 $ 11,782,440
7. SUBSEQUENT EVENT
On October 4, 1999, the Company signed a franchise area development
agreement by and between Gloria Jean's Gourmet Coffees Franchising Corp.
("GJGC") and Affluent Degree SDN, BHD (the "Developer"). The agreement calls for
the developer to open 30 Gloria Jean's stores and kiosks over the development
period of five years within the geographic area of Malaysia, Singapore and
Brunei. Concurrent with the execution of the agreement the Company received
$500,000 as a development fee and franchise fee for satisfaction of the
development quota.
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PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
We make forward-looking statements in this document that are subject to
risks and uncertainties. These forward-looking statements include information
about possible or assumed future results of Diedrich Coffee's financial
condition, operations, plans, objectives and performance. Additionally, when we
use the words "believe," "expect," "anticipate," "estimate" or similar
expressions, we are making forward-looking statements. Many possible events or
factors could affect our future financial results and performance. This could
cause our results or performance to differ materially from those expressed in
our forward-looking statements. You should consider these risks when you review
this document, along with the following possible events or factors:
o our growth strategy may not be as successful as we expect if we
are unable to attract franchise area developers or single store
franchisees;
o our growth strategy may not be as successful if franchisees are
unable to secure attractive real estate;
o we may encounter difficulties and incur additional expenses as we
integrate Diedrich Coffee's and Coffee People's business, brands
or operating systems or retaining key personnel;
o competition within the retail specialty coffee market may
intensify;
o inclement weather or adverse political changes in the countries
where we source our green coffee may significantly increase our
coffee costs; and
o adverse changes may occur in the securities or financial markets.
Foreseeable risks and uncertainties are described elsewhere in this
report and in detail under "Risk Factors and Trends Affecting Diedrich Coffee
and Its Business" in our Annual Report on Form 10-K for the fiscal year ended
January 27, 1999 and in reports that we file with the Securities and Exchange
Commission.
GENERAL
The first retail store operating under the name of Diedrich Coffee
commenced operations in 1972. Following our acquisition of Coffee People at the
beginning of this quarter, we became the second largest specialty coffee
retailer in the United States with annual systemwide sales of more than $150
million through 356 retail locations in 38 states and 6 foreign countries. Our
primary brands are Diedrich Coffee coffeehouses and Gloria Jean's, the nation's
largest chain of mall coffee stores. We sell specialty brewed coffee and
espresso-based beverages such as cappuccinos, lattes, mochas and espressos and
various blended drinks through these company-owned and franchised retail
locations. To complement beverage sales, we also sell light food items, whole
bean coffee and accessories at our retail locations. In addition, we have a
strong wholesale division that markets its products directly to independent and
chain food service establishments, as well as to businesses for office coffee
systems through brokers and sales representatives. We also sell our products
directly to customers through mail orders and our website.
Coffee People Acquisition. On July 7, 1999, we completed our
acquisition of Coffee People pursuant to an Agreement and Plan of Merger, dated
as of March 16, 1999. The acquisition was effected by way of a merger of CP
Acquisition Corp., an indirect wholly owned subsidiary of Diedrich Coffee, with
and into Coffee People. As a result of the merger, each share of Coffee People
common stock was converted into the right to receive $2.11 in cash and 0.14
share of our common stock. The cash payment to Coffee People stockholders was
financed by a portion of the net proceeds of a public equity offering of
4,930,000 shares of our common stock at a price of $6.00 per share.
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On July 7, 1999, we entered into a credit agreement with BankBoston,
N.A. that is secured by pledges of all of our assets and our subsidiaries' stock
and provides for a $12 million term loan and a $3 million revolving credit
facility, payable in quarterly installments with final maturity in July 2004. We
used the proceeds of the term loan to repay existing indebtedness and to pay
expenses related to the acquisition of Coffee People and our public equity
offering. We intend to use the proceeds from the revolving credit facility to
finance additional and remodel existing company-owned retail locations and for
general corporate purposes. Amounts outstanding under the credit agreement bear
interest, at our option, at BankBoston's base rate plus 1.25% or an adjusted
Eurodollar rate plus 3.0%
Franchise Area Development Agreements. Management's franchise area
development goal is to enter into franchise area development agreements covering
most major U. S. markets. Presently, we have entered into six franchise area
development agreements calling for the development of up to 324 Diedrich
coffeehouses, as well as carts and kiosks, over the next 5 to 7 years. In
addition, one of these agreements contains options to develop an additional 103
coffeehouses in the San Francisco Bay Area.
Prior to the twelve week period ended September 22, 1999, we entered
into four franchise area development agreements calling for the development of
224 Diedrich coffeehouses with options to develop an additional 103
coffeehouses. We had also entered into an agreement covering the states of
Kentucky and Tennessee, which was subsequently terminated. On August 23, 1999,
we announced our fifth franchise area development agreement which calls for the
development of 50 coffeehouses in Wyoming, Montana and Colorado. In connection
with the signing of this agreement, we recognized an area development fee of
$4,000. On October 19, 1999 we announced our seventh franchise area development
agreement which provides for the development of 50 coffeehouses in various
counties in Southern California including Kern, San Luis Obispo, Ventura and
Santa Barbara as well as portions of Los Angeles, San Bernardino, Riverside and
Orange. In connection with the signing of this agreement, we will recognize an
area development fee of $20,000 in the second quarter of fiscal 2000.
We are currently in various stages of discussion and negotiations with
several additional potential area developers. We recently added two franchise
sales organizations to assist in the sales program. These sales organizations
are compensated through success-fees based on the execution of area development
agreements. There can be no assurances, however, that positive sales will result
from these activities.
Year 2000. We are currently working to resolve the potential impact of
the year 2000 on the processing of data-sensitive information by our
computerized information systems. The year 2000 problem is the result of
computer programs being written using two digits rather than four to define the
applicable year. Any of our programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000, which
could result in miscalculations or system failures. We have investigated the
impact of the year 2000 problem on our business, including our operational,
information and financial systems. Based on our review of our existing
businesses, we do not expect the year 2000 problem, including the cost of making
our computerized information systems year 2000 compliant, to have a material
adverse impact on our financial position or results of operations in future
periods. However, our failure to resolve any year 2000 problems could have a
material adverse impact on Diedrich Coffee. We have communicated with
significant suppliers and key business partners on which we rely in an effort to
determine the extent to which our business is vulnerable to the failure by these
third parties' to remediate their year 2000 problems. Although we have not been
informed of any material risks associated with the year 2000 problem on these
entities, there can be no assurance that the computerized information systems of
these third parties' will be year 2000 compliant on a timely basis. The
inability of these third parties to remediate their year 2000 problems could
have a material adverse impact on Diedrich Coffee.
We have modified certain applications and replaced some of the hardware
used in the processing of financial information. We believe we have addressed
any potential significant year 2000 issues. As of September 22, 1999, we have
incurred and expensed approximately $34,000 of expenditures consisting of
internal staff costs, outside consulting and other expenditures related to this
upgrade process. To the extent possible, we are in the process of executing
contingency plans designed to allow continued operation in the event of failure
of our or third parties' computer information systems.
Seasonality and Quarterly Results. Our business is subject to seasonal
fluctuations as well as economic trends that affect retailers in general.
Historically, our net revenues have not been realized proportionately in each
quarter, with net revenues being the highest during the last fiscal quarter
(prior to the change in our fiscal year) which includes the December holiday
season. Hot weather tends to reduce revenues.
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Quarterly results are affected by the timing of the opening of new stores, which
may not occur as anticipated due to events outside our control. As a result of
these factors, and of the other contingencies and risk factors described
elsewhere in this report, our Annual Report on Form 10-K and our Transition
Report on Form 10-Q, the financial results for any individual quarter may not be
indicative of the results that may be achieved in a full fiscal year.
RESULTS OF OPERATIONS
Coffee People Acquisition. On July 7, 1999, we acquired Coffee People
in a transaction that was accounted for using the purchase method of accounting;
and accordingly, the assets acquired and liabilities assumed were recorded as of
their fair values on that date. The results of operations for Coffee People are
include in the accompanying financial statements from the date of acquisition,
accordingly, Diedrich Coffee's consolidated financial statements for the period
ended September 22, 1999 and October 29, 1998 are not comparable. The resulting
estimated costs in excess of net assets of the business acquired in the amount
of $28,879,473 are being amortized using the straight-line method over a 40 year
period.
Change in Fiscal Year. In an effort to align our fiscal year with that
of Coffee People which we acquired on July 7, 1999, we changed our year end from
a fiscal year ending on the Wednesday nearest January 31 to a fiscal year ending
on the Wednesday nearest June 30. Accordingly, the condensed consolidated
financial statements for the twelve weeks ended September 22, 1999 are not
necessarily comparable to the accompanying thirteen weeks ended October 28, 1998
nor are they indicative of a full fiscal years results of operations.
Twelve Weeks Ended September 22, 1999 Compared with the Thirteen Weeks Ended
October 28, 1998
Total revenues. Total revenues for the twelve weeks ended September 22,
1999 increased 169.3% to $16,272,525 from $6,043,252 for the thirteen weeks
ended October 28, 1998 principally due to the acquisition of Coffee People and
an increase in comparable store sales. During this most recent quarter, we
derived 64.3% of total revenues from our retail coffeehouse operations.
Wholesale and mail order revenue accounted for 28.5% of total revenues and
franchise revenues counted for 7.2% of total revenues.
Retail revenues for the twelve weeks ended September 22, 1999
increased 98.6% to $10,463,138 from $5,268,622 in the thirteen weeks October 28,
1998. This increase was a result of the acquisition of Coffee People and an
increase in comparable store sales. As of September 22, 1999, we operated 105
retail locations; whereas on October 28, 1998, we operated 43 retail locations.
The percentage increase in comparable store sales was 6.1% for the Diedrich
Coffee coffeehouses, 4.1% for the Gloria Jean's coffee stores, 0.7% for the
Coffee People concept, and 2.1% for the Coffee Plantation concept during the
twelve weeks ended September 22, 1999. This increase was principally a result of
improved targeted marketing programs.
Wholesale and other revenues increased 587.0% to $4,634,569 in the
twelve weeks ended September 22, 1999 from $674,630 for the thirteen weeks ended
October 28, 1998. The increase reflects the addition of the Gloria Jean's
franchisee operations which purchase roasted coffee from Diedrich Coffee.
Franchise revenue increased to $1,174,818 for the twelve weeks ended
September 22, 1999, from $100,000 for the thirteen weeks ended October 28, 1998.
Franchise revenue consists of initial franchise fees and royalties received on
sales made at each franchise location. As of September 22, 1999, we had three
franchised neighborhood coffeehouses and 252 franchised mall coffee stores.
Cost of Sales and Related Occupancy Costs. Cost of roasted coffee,
dairy, food, paper and bar supplies, accessories and clothing (cost of sales)
and rent (related occupancy costs) for the twelve weeks ended September 22, 1999
increased to $7,961,390 from $2,718,436 for the thirteen weeks ended October 28,
1998. As a percentage of total revenue, cost of sales and related occupancy
costs increased to 48.9% in the twelve weeks ended September 22, 1999 from 45.0%
for the thirteen weeks ended October 28, 1998. The increase is primarily related
to the smaller margin received on coffee and products sold to franchisees.
12
13
Store Operating Expenses. Store operating expenses increased to
$4,952,351 for the twelve weeks ended September 22, 1999 from $2,187,605 for the
thirteen weeks ended October 28, 1998. As a percentage of retail and franchise
revenues, store operating expenses increased to 42.6% in the twelve weeks ended
September 22, 1999 from 40.7% in the thirteen weeks ended October 28, 1998. The
increase can be attributed to an increase in labor expenses due to additional
staff training at the store level as well as the addition of the Coffee People
Oregon stores. Oregon has a higher minimum wage compared to the states in which
we were operating during the prior year.
Other Operating Expenses. Other operating expenses (those associated
with wholesale and other revenues) increased to $462,160 for twelve weeks ended
September 22, 1999 from $165,595 in thirteen weeks ended October 28, 1999. These
expenses, as a percentage of the revenues from the wholesale division, decreased
to 10.0% from 24.5%. The decrease can be attributed to a larger revenue base
with the addition of the Gloria Jean's' franchisees and a decline in franchise
bad debt expense due to improved credit and collection efforts.
Depreciation and Amortization. Depreciation and amortization increased
to $806,879 for the twelve weeks ended September 22, 1999 from $490,531 for the
thirteen weeks ended October 28, 1998. As a percentage of total revenue,
depreciation and amortization decreased to 5.0% in comparison to 8.1% for the
thirteen weeks ended October 28, 1998.
General and Administrative Expenses. General and administrative
expenses increased to $2,251,828 for the twelve weeks ended September 22, 1999
from $1,002,556 for the thirteen weeks ended October 28, 1999. As a percentage
of total revenue, general and administrative expenses decreased to 13.8% from
16.6%. This decrease in general and administrative expenses as a percentage of
total revenue was primarily a result of cost savings incurred with the
acquisition due to the result of the elimination of management personnel who
were not essential to our growth strategy.
Interest Expense. Interest expense increased to $286,889 for the twelve
weeks ended September 22, 1999 from $94,640 for the thirteen weeks ended October
28, 1998. The increase is a result of the $12 million term loan which closed on
July 7, 1999.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our capital requirements in recent years principally
through public and private placements of our common stock and long-term debt. We
had working capital of $2,804,808 as of September 22, 1999 compared to working
capital deficit of $2,439,401 as of June 30, 1999. Cash provided by (used in)
operating activities for the twelve weeks ended September 22, 1999 totaled
$(1,918,277) as compared to $143,579 for the thirteen weeks ended October 28,
1998.
Net cash used in investing activities for the twelve weeks ended
September 22, 1999 totaled $23,487,847, which was primarily used for the
acquisition of Coffee People. Net cash provided by financing activities for the
twelve weeks ended September 22, 1999 totaled $30,388,941 which consisted of
proceeds from the issuance of common stock and long-term debt.
As of September 22, 1999, we had $12 million of long-term debt that
consisted of a term loan with BankBoston, N.A. that is secured by pledges of all
of our assets and subsidiaries' stock and was bearing interest at a rate of
8.31%. The credit agreement with BankBoston, N.A. also provides for a $3 million
revolving credit facility, which we have not presently drawn down. The term loan
and the revolving credit facility both require quarterly payments and have a
final maturity in July 2004. The Company used the proceeds of the term loan to
repay existing indebtedness and to pay expenses related to the acquisition of
Coffee People. The Company intends to use the remaining proceeds from the
revolving credit facility to finance additional and remodel existing
company-owned retail locations and for general corporate purposes. Amounts
outstanding under the credit agreement bear interest, at the Company's option,
at BankBoston's base rate plus 1.25% or an adjusted Eurodollar rate plus 3.00%.
Diedrich Coffee may change the interest rate from the BankBoston base rate to
the adjusted Eurodollar rate at any time with 3 day's notice and from the
adjusted Eurodollar rate to the BankBoston base rate at the end of each calendar
quarter.
We believe that the credit facility described above will be sufficient
to satisfy our working capital needs at the anticipated operating levels for the
next twelve months.
13
14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Derivative Instruments. We did not invest in market risk sensitive
instruments in fiscal 1999, the transition period ended June 30, 1999 nor in the
twelve weeks ended September 22, 1999. From time to time, however, we enter into
agreements to purchase green coffee in the future at prices to be determined
within two to twelve months of the time of actual purchase. At September 22,
1999 these commitments totaled $3,387,000. These agreements are tied to specific
market prices (defined by both the origin of the coffee and the month of
delivery) but we have significant flexibility in selecting the date of the
market price to be used in each contract. We do not use commodity based
financial instruments to hedge coffee or any other commodity, as we believe
there will continue to be a high probability of maintaining a strong correlation
between increases in green coffee prices and the final selling prices of our
products.
We have not used derivative financial instruments for any purpose,
including hedging or mitigating interest rate risk.
New Accounting Pronouncements. In June 1998, the Financial Accounting
Standards Board issues Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS
133 establishes accounting and reporting standards for derivative instruments
embedded in other contracts and hedging activities. SFAS 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. Application
of SFAS 133 is not expected to have a material impact on our business, results
of operations or liquidity.
Market Risk. Our market risk exposure with regard to financial
instruments outstanding as of September 22, 1999 was to changes in an adjusted
Eurodollar rate. We borrowed $12 million on July 7, 1999 in connection with our
acquisition of Coffee People, which bears interest at our option, at
BankBoston's base rate plus 1.25%, or an adjusted Eurodollar rate plus 3.0%.
Diedrich Coffee may convert the interest rate from the BankBoston base rate to
the adjusted Eurodollar rate at anytime with 3 day's notice. We may convert the
interest rate from the adjusted Eurodollar rate to the BankBoston base rate at
the end of each calendar quarter. The $12 million outstanding under the term
loan was bearing interest at the BankBoston base rate plus 1.25% from July 7,
1999 to July 10, 1999 at which time the interest rate was converted to the
adjusted Eurodollar rate plus 3.0% for the remainder of the twelve week period
ending September 22, 1999. At September 22, 1999 the adjusted Eurodollar rate
was 5.31%. At September 22, 1999, a hypothetical 100 basis point increase in the
rate would result in additional interest expense of $120,000 on an annualized
basis. The credit agreement also provides for a $3 million line of credit which
also bears interest at our option, at BankBoston's base rate plus 1.25%, or an
adjusted Eurodollar rate plus 3.00%
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of its business, we may become involved in legal
proceedings from time to time. During the twelve week period ending September
22, 1999, no material developments occurred in any material pending legal
proceedings. A discussion of our material pending legal proceedings appears in
our registration statement on Form S-1 (Reg. No. 333-78083) under the heading
"Business - Legal Proceedings."
ITEM 5. OTHER INFORMATION
Minimum Advance Notice of Stockholder Proposals. Diedrich Coffee
stockholders are advised that we must be notified at least 45 days prior to the
month and day of mailing the prior year's proxy statement of any proposal or
solicitation that any stockholder intends to present at the next annual meeting
of stockholders and which the stockholder has not sought to have included in our
proxy statement for the meeting in accordance with Rule 14a-8 under the
Securities Exchange Act of 1934. If a proponent fails to notify us before the
required deadline, management proxies will be allowed to use their discretionary
voting authority when the proposal is raised at the annual meeting, without any
discussion of the matter in the proxy statement.
14
15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Set forth below is a list of the exhibits included as part of this
Quarterly Report.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 Form of Agreement and Plan of merger by and between Diedrich
Coffee, a California corporation, and Diedrich Coffee, Inc., a
Delaware corporation (1)
2.2 Agreement and Plan of Merger dated as of March 16, 1999, by and
among Diedrich Coffee, CP Acquisition Corp., a wholly owned
subsidiary of Diedrich Coffee, and Coffee People (2)
3.1 Certificate of Incorporation of the Company (1)
3.2 Bylaws of the Company (1)
4.1 Purchase Agreement for Series A Preferred Stock dated as of
December 11, 1992 by and among Diedrich Coffee, Martin R.
Diedrich, Donald M. Holly, SNV Enterprises and D.C.H., L.P. (1)
4.2 Purchase Agreement for Series B Preferred Stock dated as of June
29, 1995 by and among Diedrich Coffee, Martin R. Diedrich,
Steven A. Lupinacci, Redwood Enterprises VII, L.P. and Diedrich
Partners I, L.P. (1)
4.3 Specimen Stock Certificate (1)
4.4 Form of conversation Agreement in the connection with the
conversion of Series A and Series B Preferred Stock into Common
Stock (1)
4.5 Form of Lock-up Letter Agreement among The Second Cup, Ltd. And
Diedrich Coffee, Inc. (3)
4.6 Voting Agreement and Irrevocable Proxy dated as of March 16,
1999 by and among Diedrich Coffee, Inc., D.C.H., L.P., Peter
Churm, Martin R. Diedrich, Lawrence Goelman, Paul C. Heeschen,
John E. Martin, Timothy J. Ryan, and Second Cup USA Holdings
Ltd. (3)
10.1 Form of Indemnification Agreement (1)
10.2 Amended and Restated Diedrich Coffee 1996 Stock Incentive Plan *
10.3 Diedrich Coffee 1996 Non-Employee Directors Stock Option Plan
(1)
10.4 Agreement of Sale dated as of February 23, 1996 by and among
Diedrich Coffee (as purchaser) and Brothers Coffee Bars, Inc.
and Brothers Gourmet Coffees, Inc. (as sellers) (1)
10.5 Separation agreement dated May 13, 1997 between Steven A.
Lupinacci and Diedrich Coffee, Inc. (4)
10.6 Letter agreement by and between the Company and John E. Martin
appointing Mr. Martin Chairman of the Board, dated as of
November 17, 1997 (5)
15
16
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.7 Stock Option Plan and Agreement by and between the company and
John E. Martin granting Mr. Martin the option to purchase up to
850,000 shares of the Common Stock of the Company, dated as of
November 17, 1997 (5)
10.8 Common Stock Purchase Agreement by and between the company and
John E. Martin under which Mr. Martin agrees to purchase 333,333
shares of the Common Stock of the Company, dated as of November
17, 1997 (5)
10.9 Employment Agreement by and between the Company and Timothy J.
Ryan retaining Mr. Ryan as Chief Executive Officer, dated as of
November 17, 1997 (5)
10.10 Stock Option Plan and Agreement by and between the company and
Timothy J. Ryan granting Mr. Ryan up to 600,000 shares of the
Common Stock of the Company, dated as of November 17, 1997 (5)
10.11 Common Stock Purchase Agreement by and between the Company and
Timothy J. Ryan under which Mr. Ryan agrees to purchase 16,667
shares of the Common Stock of the Company, dated as of November
17, 1997 (5)
10.12 Form of Promissory Note made in favor of Nuvrty, Inc., the Ocean
Trust and the Grandview Trust (6)
10.13 Form of Term Loan Agreement made in favor of Nuvrty, Inc., the
Ocean Trust and the Grandview Trust (6)
10.14 Form of Security Agreement made in favor of Nuvrty, Inc., the
Ocean Trust and the Grandview Trust (6)
10.15 Form of Warrant Agreement made in favor of Nuvrty, Inc., the
Ocean Trust and the Grandview Trust (6)
10.16 Form of Intercreditor Agreement made in favor of Nuvrty, Inc.,
the Ocean Trust and the Grandview Trust (6)
10.17 Form of Common Stock and Option Purchase Agreement with
Franchise Mortgage Acceptance Company dated as of April 3, 1998
(7)
10.18 Separation and Release Agreement dated January 28, 1998 with
Kerry W. Coin (7)
10.19 Employment Agreement with Ann Wride dated April 8, 1998 (8)
10.20 Employment Agreement with Dolf Berle dated April 8, 1998 (9)
10.21 Employment Agreement with Catherine Saar dated June 11, 1998 (9)
10.22 Form of Franchise Agreement (10)
10.23 Form of Area Development Agreement (10)
10.24 Employment Agreement with Martin R. Diedrich dated June 29, 1998
(3)
10.25 Credit Agreement, dated, as of July 7, 1999, by and among
BankBoston, N.A., Diedrich Coffee and its subsidiaries (11)
10.26 Security Agreement, dated, as of July 7, 1999, by and among
BankBoston, N.A., Diedrich Coffee and its subsidiaries (11)
10.27 Securities Pledge Agreement, dated, as of July 7, 1999, by and
among BankBoston, N.A., Diedrich Coffee and its subsidiaries
(11)
16
17
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.28 Trademark Security Agreement, dated, as of July 7, 1999, by
and among BankBoston, N.A., Diedrich Coffee and its subsidiaries
(11)
10.29 Form of Term Note made in favor of BankBoston, N.A. (11)
10.30 Form of Revolving Note made in favor of BankBoston, N.A. (11)
27 Financial Data Schedule*
- --------------
* Filed with this Form 10-Q
(1) Previously filed as an exhibit to Diedrich Coffee's Registration
Statement on Form S-1 (No. 333-08633), as amended, as declared
effective by the Securities and Exchange Commission on September 11,
1996.
(2) Previously filed as Appendix A to Diedrich Coffee's Registration
Statement on Form S-4, filed with the Securities and Exchange
Commission on April 23, 1999.
(3) Previously filed as an exhibit to Diedrich Coffee's Registration
Statement on Form S-4, filed with the Securities and Exchange
Commission on April 23, 1999.
(4) Previously filed as an exhibit to Diedrich Coffee's Quarterly Report on
Form 10-Q, for the period ended April 30, 1997, filed with the
Securities and Exchange Commission on June 13, 1997.
(5) Previously filed as an exhibit to Diedrich Coffee's Current Report on
Form 8-K, filed with the Securities and Exchange Commission on November
25, 1997.
(6) Previously filed as an exhibit to Diedrich Coffee's Quarterly Report on
Form 10-Q, for the period ended October 29, 1997, filed with the
Securities and Exchange Commission on December 11, 1997.
(7) Previously filed as an exhibit to Diedrich Coffee's annual report on
Form 10-K, for the fiscal year ended January 28, 1998.
(8) Previously filed as an exhibit to Diedrich Coffee's Quarterly Report on
Form 10-Q, for the period ended October 28, 1998, filed with the
Securities and Exchange Commission on June 11, 1998.
(9) Previously filed as an exhibit to Diedrich Coffee's Quarterly Report on
Form 10-Q, for the period ended July 29, 1998, filed with the
Securities and Exchange Commission on September 10, 1998.
(10) Previously filed as an exhibit to Diedrich Coffee's Quarterly Report on
Form 10-Q, for the period ended October 28, 1998, filed with the
Securities and Exchange Commission on December 11, 1998.
(11) Incorporated by reference to Diedrich Coffee's Transition Report on
Form 10-Q, for the period from January 28, 1999 to June 30, 1999, filed
with the Securities and Exchange Commission on August 16, 1999.
(b) REPORTS ON FORM 8-K
A report on form 8-K was filed on July 7, 1999 reporting that Diedrich
Coffee had completed its acquisition of Coffee People, Inc. The
financial statements of Coffee People, Inc. and pro forma financial
information were included in Amendment No. 1 to Form S-1, filed on June
7, 1999.
17
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 5, 1999 DIEDRICH COFFEE, INC.
/s/ TIMOTHY J. RYAN
-------------------------------------
Timothy J. Ryan,
President and Chief Executive Officer
(Principal Executive Officer)
/s/ ANN WRIDE
-------------------------------------
Ann Wride
Vice President and Chief Financial
Officer (Principal Financial and
Accounting Officer)
18
19
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 Form of Agreement and Plan of merger by and between Diedrich
Coffee, a California corporation, and Diedrich Coffee, Inc., a
Delaware corporation (1)
2.2 Agreement and Plan of Merger dated as of March 16, 1999, by and
among Diedrich Coffee, CP Acquisition Corp., a wholly owned
subsidiary of Diedrich Coffee, and Coffee People (2)
3.1 Certificate of Incorporation of the Company (1)
3.2 Bylaws of the Company (1)
4.1 Purchase Agreement for Series A Preferred Stock dated as of
December 11, 1992 by and among Diedrich Coffee, Martin R.
Diedrich, Donald M. Holly, SNV Enterprises and D.C.H., L.P. (1)
4.2 Purchase Agreement for Series B Preferred Stock dated as of June
29, 1995 by and among Diedrich Coffee, Martin R. Diedrich,
Steven A. Lupinacci, Redwood Enterprises VII, L.P. and Diedrich
Partners I, L.P. (1)
4.3 Specimen Stock Certificate (1)
4.4 Form of conversation Agreement in the connection with the
conversion of Series A and Series B Preferred Stock into Common
Stock (1)
4.5 Form of Lock-up Letter Agreement among The Second Cup, Ltd. And
Diedrich Coffee, Inc. (3)
4.6 Voting Agreement and Irrevocable Proxy dated as of March 16,
1999 by and among Diedrich Coffee, Inc., D.C.H., L.P., Peter
Churm, Martin R. Diedrich, Lawrence Goelman, Paul C. Heeschen,
John E. Martin, Timothy J. Ryan, and Second Cup USA Holdings
Ltd. (3)
10.1 Form of Indemnification Agreement (1)
10.2 Amended and Restated Diedrich Coffee 1996 Stock Incentive Plan *
10.3 Diedrich Coffee 1996 Non-Employee Directors Stock Option Plan
(1)
10.4 Agreement of Sale dated as of February 23, 1996 by and among
Diedrich Coffee (as purchaser) and Brothers Coffee Bars, Inc.
and Brothers Gourmet Coffees, Inc. (as sellers) (1)
10.5 Separation agreement dated May 13, 1997 between Steven A.
Lupinacci and Diedrich Coffee, Inc. (4)
10.6 Letter agreement by and between the Company and John E. Martin
appointing Mr. Martin Chairman of the Board, dated as of
November 17, 1997 (5)
20
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.7 Stock Option Plan and Agreement by and between the company and
John E. Martin granting Mr. Martin the option to purchase up to
850,000 shares of the Common Stock of the Company, dated as of
November 17, 1997 (5)
10.8 Common Stock Purchase Agreement by and between the company and
John E. Martin under which Mr. Martin agrees to purchase 333,333
shares of the Common Stock of the Company, dated as of November
17, 1997 (5)
10.9 Employment Agreement by and between the Company and Timothy J.
Ryan retaining Mr. Ryan as Chief Executive Officer, dated as of
November 17, 1997 (5)
10.10 Stock Option Plan and Agreement by and between the company and
Timothy J. Ryan granting Mr. Ryan up to 600,00 shares of the
Common Stock of the Company, dated as of November 17, 1997 (5)
10.11 Common Stock Purchase Agreement by and between the Company and
Timothy J. Ryan under which Mr. Ryan agrees to purchase 16,667
shares of the Common Stock of the Company, dated as of November
17, 1997 (5)
10.12 Form of Promissory Note made in favor of Nuvrty, Inc., the Ocean
Trust and the Grandview Trust (6)
10.13 Form of Term Loan Agreement made in favor of Nuvrty, Inc., the
Ocean Trust and the Grandview Trust (6)
10.14 Form of Security Agreement made in favor of Nuvrty, Inc., the
Ocean Trust and the Grandview Trust (6)
10.15 Form of Warrant Agreement made in favor of Nuvrty, Inc., the
Ocean Trust and the Grandview Trust (6)
10.16 Form of Intercreditor Agreement made in favor of Nuvrty, Inc.,
the Ocean Trust and the Grandview Trust (6)
10.17 Form of Common Stock and Option Purchase Agreement with
Franchise Mortgage Acceptance Company dated as of April 3, 1998
(7)
10.18 Separation and Release Agreement dated January 28, 1998 with
Kerry W. Coin (7)
10.19 Employment Agreement with Ann Wride dated April 8, 1998 (8)
10.20 Employment Agreement with Dolf Berle dated April 8, 1998 (9)
10.21 Employment Agreement with Catherine Saar dated June 11, 1998 (9)
10.22 Form of Franchise Agreement (10)
10.23 Form of Area Development Agreement (10)
10.24 Employment Agreement with Martin R. Diedrich dated June 29, 1998
(3)
10.25 Credit Agreement, dated, as of July 7, 1999, by and among
BankBoston, N.A., Diedrich Coffee and its subsidiaries (11)
10.26 Security Agreement, dated, as of July 7, 1999, by and among
BankBoston, N.A., Diedrich Coffee and its subsidiaries (11)
10.27 Securities Pledge Agreement, dated, as of July 7, 1999, by and
among BankBoston, N.A., Diedrich Coffee and its subsidiaries
(11)
21
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.28 Trademark Security Agreement, dated, as of July 7, 1999, by
and among BankBoston, N.A., Diedrich Coffee and its subsidiaries
(11)
10.29 Form of Term Note made in favor of BankBoston, N.A. (11)
10.30 Form of Revolving Note made in favor of BankBoston, N.A. (11)
27 Financial Data Schedule*
- --------------
* Filed with this Form 10-Q
(1) Previously filed as an exhibit to Diedrich Coffee's Registration
Statement on Form S-1 (No. 333-08633), as amended, as declared
effective by the Securities and Exchange Commission on September 11,
1996.
(2) Previously filed as Appendix A to Diedrich Coffee's Registration
Statement on Form S-4, filed with the Securities and Exchange
Commission on April 23, 1999.
(3) Previously filed as an exhibit to Diedrich Coffee's Registration
Statement on Form S-4, filed with the Securities and Exchange
Commission on April 23, 1999.
(4) Previously filed as an exhibit to Diedrich Coffee's Quarterly Report on
Form 10-Q, for the period ended April 30, 1997, filed with the
Securities and Exchange Commission on June 13, 1997.
(5) Previously filed as an exhibit to Diedrich Coffee's Current Report on
Form 8-K, filed with the Securities and Exchange Commission on November
25, 1997.
(6) Previously filed as an exhibit to Diedrich Coffee's Quarterly Report on
Form 10-Q, for the period ended October 29, 1997, filed with the
Securities and Exchange Commission on December 11, 1997.
(7) Previously filed as an exhibit to Diedrich Coffee's annual report on
Form 10-K, for the fiscal year ended January 28, 1998.
(8) Previously filed as an exhibit to Diedrich Coffee's Quarterly Report on
Form 10-Q, for the period ended October 28, 1998, filed with the
Securities and Exchange Commission on June 11, 1998.
(9) Previously filed as an exhibit to Diedrich Coffee's Quarterly Report on
Form 10-Q, for the period ended July 29, 1998, filed with the
Securities and Exchange Commission on September 10, 1998.
(10) Previously filed as an exhibit to Diedrich Coffee's Quarterly Report on
Form 10-Q, for the period ended October 28, 1998, filed with the
Securities and Exchange Commission on December 11, 1998.
(11) Incorporated by reference to Diedrich Coffee's Transition Report on
Form 10-Q, for the period from January 28, 1999 to June 30, 1999, filed
with the Securities and Exchange Commission on August 16, 1999.