Crumbs Bake Shop, Inc. Second Quarter 2013 Net Sales Up 11.5%

 

 

Net sales increased 11.5% to $12.4 million from $11.1 million in the second quarter of 2012. The increase was primarily attributable to $2.9 million in sales from the 32 stores not in the same store sales base offset by a $1.7 million decrease in sales from the 49 stores in the same store sales base.

Crumbs Bake Shop, Inc. (NASDAQ: CRMB), the largest cupcake specialty store chain in the U.S., reported financial results for the second quarter ended June 30, 2013.

“While we are not pleased with our performance, we remain focused on the initiatives and strategies that we have discussed in the past and which we still believe will be the vehicles that will ultimately change the trajectory and vitality of our business in the future.”

Highlights of the Second Quarter 2013 Compared to the Second Quarter 2012:

  • Net sales increased 11.5% to $12.4 million from $11.1 million.
  • Store operating weeks increased 38.2% to 916 from 663.
  • Gross profit increased 6.2% to $6.7 million from $6.3 million.
  • Net loss attributable to stockholders was $(2.8) million or $(0.23) per share compared to $(0.4) million or $(0.08) per share.
  • Adjusted EBITDA1, a non GAAP measure, was $(2.1) million compared to $(0.5) million.

Julian R. Geiger, President and Chief Executive Officer, said, “While we are not pleased with our performance, we remain focused on the initiatives and strategies that we have discussed in the past and which we still believe will be the vehicles that will ultimately change the trajectory and vitality of our business in the future.”

Second Quarter 2013 Financial Results

Net sales increased 11.5% to $12.4 million from $11.1 million in the second quarter of 2012. The increase was primarily attributable to $2.9 million in sales from the 32 stores not in the same store sales base offset by a $1.7 million decrease in sales from the 49 stores in the same store sales base. Same store sales represent the change in sales for stores after their 15th full calendar month of operation. Four stores moved into the same store sales base during the quarter itself. Store operating weeks increased 38.2% to 916 from 663 in the second quarter last year.

Cost of sales was $5.7 million compared to $4.8 million in the second quarter of 2012 and increased 270 basis points to 45.8% as a percentage of net sales. Gross profit increased 6.2% to $6.7 million from $6.3 million in the second quarter of last year.

Staff expenses were $4.1 million compared to $3.3 million in the second quarter of 2012 and increased 265 basis points to 32.9% as a percentage of net sales.

Occupancy expenses were $3.3 million compared to $2.4 million in the second quarter of last year and increased 480 basis points to 26.7% as a percentage of net sales.

General and administrative expenses were $1.0 million compared to $0.8 million in the second quarter of 2012 and increased 90 basis points to 8.5% as a percentage of net sales.

Adjusted EBITDA was $(2.1) million compared to $(.05) million in the second quarter of last year. See financial tables for a reconciliation of adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), a non-GAAP measure, to GAAP results.

Net loss attributable to the stockholders was $(2.7) million, or $(0.23) per basic and diluted share, compared to a net loss of $(0.4) million, or $(0.08) per basic and diluted share, last year. The weighted average number of common shares outstanding was 11.7 million in the second quarter of 2013 and 5.5 million in the second quarter of 2012.

Store Portfolio

In the first half of the year we have opened a total of 18 mall-based stores, including 10 in line stores and 8 kiosks. During the second quarter of 2013, Crumbs opened 7 mall-based stores and 3 kiosks in, or adjacent to, current trading areas.

The Company has also expressed its intention to close certain street-level stores in California, Connecticut, Illinois, Metropolitan New York City, and Washington D.C that management believes will be unable to reach acceptable levels of financial performance. Although none of those stores were closed during the second quarter, Crumbs has reached agreements and expects to close at least five stores in Connecticut, California, Illinois and Metropolitan New York City by the end of the year.

2013 Outlook

Based upon actual results through the first half of 2013 along with its revised outlook for the balance of the year, Crumbs is lowering its annual expectations to net sales of approximately $53 million from $57 million and adjusted EBITDA of approximately $(4.9) million from $(3.9) million. The Company’s updated sales projection reflects continued weakness at street-level stores that is being only partially offset by positive contributions from newer mall-based stores and kiosks. Any additional store closures would also further impact both sales and adjusted EBITDA.

See financial tables for a reconciliation of projected adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), a non-GAAP measure, to projected GAAP results.

The Company has opened 21 mall-based stores and kiosks within its current geographic footprint in 2013 and anticipates opening one additional location by the end of the year.

About Crumbs Bake Shop, Inc.

The first Crumbs bake shop opened in March 2003 on the Upper West Side of Manhattan and is well known for its innovative and oversized gourmet cupcakes. The Company currently has 78 locations in 12 states and the District of Columbia.

Non-GAAP Information

This press release includes certain numerical measures that are or may be considered “non-GAP financial measures” under the SEC’s Regulation G. “GAAP” refers to generally accepted accounting principles in the United States. The reconciliations of such measures to the most comparable GAAP figures, in accordance with Regulation G, are included herein. Crumbs presents its results in the way it believes will be most meaningful and useful, as well as most transparent, to the investing public, including use of Adjusted EBITDA as a financial measure, which also facilitates comparisons to our historical performance.

The Company is providing Adjusted EBITDA information, which is defined as net income of the combined company, including net income attributable to any non-controlling interest, determined in accordance with all applicable and effective GAAP pronouncements up to December 31, 2010, before interest income or expense, income taxes and any gains or losses resulting from the change in estimate relating to our tax receivable agreement, depreciation, amortization, deferred rent expense, losses or gains resulting from adjustments to the fair value of the contingent consideration, stock-based compensation expense, extraordinary or non-recurring expenses and all other extraordinary non-cash items for the applicable period as a compliment to GAAP results. Adjusted EBITDA measures are commonly used by management and investors as a measure of leverage capacity, debt service ability and liquidity. Adjusted EBITDA is not considered a measure of financial performance under GAAP, and the items excluded from Adjusted EBITDA are significant components in understanding and assessing our financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to, or superior to, such GAAP measures as net income, cash flows provided by or used in operating, investing or financing activities or other financial statement data presented in our consolidated financial statements as an indicator of financial performance or liquidity. Reconciliations of non-GAAP financial measures are provided in the accompanying tables. Since Adjusted EBITDA is not a measure determined in accordance with GAAP and is susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies.

CRUMBS BAKE SHOP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
       
 
Three Months Ended June 30, Six Months Ended June 30,
2013   2012   2013   2012  
 
 
Net sales $ 12,350 $ 11,081 $ 24,430 $ 22,358
 
Cost of sales   5,651     4,775     11,008     9,537  
 
Gross profit   6,699     6,306     13,422     12,821  
 
Operating expenses
Selling expenses 542 397 1,113 686
Staff expenses 4,060 3,350 7,892 6,745
Occupancy expenses 3,302 2,427 6,177 4,793
General and administrative 1,049 838 2,022 1,629
New store expenses 271 72 391 181
Depreciation and amortization 631 467 1,190 915
Loss on sale of property and equipment   58     14     100     14  
 
  9,913     7,565     18,885     14,963  
 
Loss from operations   (3,214 )   (1,259 )   (5,463 )   (2,142 )
 
Other income (expense)
Interest expense (75 ) - (75 ) -
Interest and other income 5 10 7 18
Abandoned projects (5 ) (32 ) (15 ) (45 )
Change in fair value of warrant liability   -     546     (109 )   109  
 
  (75 )   524     (192 )   82  
 
Net loss attributable to the controlling and
non-controlling interests (3,289 ) (735 ) (5,655 ) (2,060 )
 
Less: Net loss attributable to
non-controlling interest   537     296     929     182  
 
Net loss attributable to stockholders $ (2,752 ) $ (439 ) $ (4,726 ) $ (1,878 )
 
 
Net loss per common share, basic $ (0.23 )   (0.08 ) $ (0.41 )   (0.22 )
 
Weighted average number of common shares outstanding, basic and diluted
  11,719     5,506     11,569     5,506  
CRUMBS BAKE SHOP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
   
 
June 30, December 31,
2013 2012
ASSETS
 
Current assets
Cash $ 6,573 $ 6,270
Trade receivables 657 259
Inventories 570 559
Prepaid rent 724 600
Other current assets   663     410  
 
Total current assets   9,187     8,098  
 
Property and equipment, net   17,090     13,209  
 
Other Assets
Deferred tax asset 4,773 4,773
Restricted certificates of deposit 673 673
Intangible assets, net 298 367
Capitalized lease costs 818 440
Deposits 282 289
Debt issuance costs 909 0
Other   19     38  
 
Total other assets   7,772     6,580  
 
$ 34,049   $ 27,887  
 
LIABILITIES, MEMBERS' EQUITY AND STOCKHOLDERS' EQUITY
 
Current liabilities
Accounts payable and accrued expenses $ 2,775 $ 2,080
Payroll liabilities 337 357
Sales tax payable 251 110
Gift cards and certificates outstanding   221     234  
 
Total current liabilities 3,584 2,781
 
Long-term liabilities
Deferred rent 4,374 3,791
Payable to related parties pursuant to tax receivable agreement 2,387 2,387
Warranty liability 491 381
Convertible notes payable   10,000     -  
 
Total liabilities   20,836     9,340  
 
Commitments and contingencies
 
Stockholders' equity
Preferred stock, $.0001 par value; 1,000 shares authorized;
390 shares issued and outstanding at June 30, 2012
and December 31, 2012 - -
Common stock, $.0001 par value; 100,000 shares authorized;
7,372 shares issued, 5,777 outstanding at June 30, 2012 and
7,100 shares issued, 5,506 outstanding at December 31, 2011 1 1
Additional paid-in capital 39,440 39,117
Accumulated deficit (14,502 ) (9,776 )
Treasury stock, at cost   (15,914 )   (15,914 )
 
Total Crumbs Bake Shop, Inc. stockholders' equity 9,025 13,428
 
Non-controlling interest   4,188     5,117  
 
Total stockholders' equity   13,213     18,545  
 
$ 34,049   $ 27,885  
CRUMBS BAKE SHOP, INC. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA TO NEAREST COMPARABLE GAAP MEASURE
(in thousands)
           
Three Months Ended June 30, Six Months Ended June 30,
2013   2012   2013   2012  
 
Net income (loss) attributed to the controlling
and non-controlling interest $ (3,289 ) $ (735 ) $ (5,655 ) $ (2,060 )
Depreciation and amortization 631 467 1,190 915
Interest expense 75 - 75 -
Interest income (4 ) (2 ) (4 ) -
Loss on disposal of property and equipment 58 14 100 14
Abandoned projects 5 32 15 45
Deferred rent expense 230 165 431 396
Stock based compensation 172 116 323 163
Change in fair value of warrant liability - (546 ) 109 (109 )
Non-recurring expenses   -     4     -     8  
Adjusted EBITDA $ (2,122 ) $ (485 ) $ (3,416 ) $ (628 )


Logos, product and company names mentioned are the property of their respective owners.