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SEATTLE - Nov. 12, 2003 -Tully's Coffee Corporation ("Tully's") announced on Wednesday, November 12, 2003 that operating results for the second quarter of its 2004 fiscal year, which ended Sunday, September 28, 2003 ("second quarter 2004") were significantly improved compared to the same quarter in fiscal 2003 (the "prior year quarter"). For second quarter 2004, Tully's had EBITDA (earnings before interest, taxes, depreciation and amortization) of $646,000, which reflected an improvement of $471,000 compared to the prior year quarter. Operating losses for second quarter 2004 were $302,000, which were improved by $997,000 (76.8 percent), compared to the prior year quarter. Improved operating results in the retail and wholesale business divisions, combined with a 28.4 percent decrease in corporate and other expenses, contributed to the significant improvement in Tully's operating results in second quarter 2004. Tully's net loss for second quarter 2004 was $483,000, an improvement of $538,000 (52.7 percent) versus the $1,021,000 net loss in the prior year. Total net sales were $13.3 million for the quarter, up $271,000 from the prior year quarter.
Comparable-store sales for the retail division increased by 3.5 percent for second quarter 2004 compared to the prior year quarter (comparable-store sales are defined as sales from stores open for the full quarter in both the current and comparative prior year periods). Retail division operating income improved by $145,000 to $577,000, on net sales of $10.5 million.
The wholesale division increased net sales by 40.5 percent for second quarter 2004 compared to the prior year quarter primarily due to continued growth in the supermarket channel. For second quarter 2004, wholesale division operating income increased by 35.4 percent to $321,000, on net sales of $1,989,000.
Tully's licensee for Japan continues to shift its purchasing from Tully's to local sources, which reduces Tully's coffee and supply sales to Japan, but increases coffee roasting fees paid to Tully's. Tully's international division net sales were $799,000 in second quarter 2004, $528,000 less than the prior year quarter. The division produced operating income of $723,000 for second quarter 2004, $140,000 less than the prior year quarter.
"Our second quarter financial results are evidence of the continuing efforts of our employees to improve and build the business," said Tony Gioia, president and CEO of Tully's. "The sales growth in our retail and wholesale divisions is the result of the loyalty of our long-time customers and the new Tully's customers at our stores, in food service, and at supermarkets."
"We are very pleased to report another quarter of improved results," said Tom O'Keefe, founder of Tully's Coffee and chairman of the board of directors. "Our fiscal 2004 business strategy, which focuses on continued improvement in operating results, prudently growing net sales, and conservative use of capital resources, is positioning Tully's for future growth and long-term success."
For the first two fiscal 2004 quarters ending September 28, 2003 (the "26-week period"), Tully's had EBITDA of $1,106,000, which reflected an improvement of $1.5 million compared to the loss before interest, taxes, depreciation and amortization of $422,000 for the previous fiscal year's first two quarters, which ended September 29, 2002 (the "prior year 26-week period"). Operating losses for the 26-week period were $788,000, which were improved by $2.2 million (74.1 percent), compared to the prior year 26-week period. Tully's net loss for the 26-week period was $1.1 million, reflecting a $4.8 million improvement versus the $5.9 million net loss in the prior year 26-week period (which included a $3.0 million charge from a change in accounting for goodwill). Total net sales were $26.2 million for the 26-week period, up $285,000 from the prior year 26-week period.
Comparable-store sales for the retail division increased by 4.2 percent for the 26-week period (comparable-store sales are defined as sales from stores open for the full 26-week period in both the current and comparative prior year periods). In the period, the retail division produced operating income of $1,231,000, a $563,000 improvement compared to the prior year 26-week period.
The wholesale division increased net sales by 30.4 percent for the 26-week period compared to the prior year 26-week period due primarily to continued growth in the supermarket channel. For the 26-week period, wholesale division operating income increased by 53.8 percent to $623,000.
International division net sales were $1,684,000 for the 26-week period. The $1,092,000 decrease in international division sales compared to the prior year 26-week period resulted from the shift to more local sourcing by Tully's Japanese licensee. Tully's international division produced operating income of $1,462,000 for the 26-week period, compared to $1,606,000 for the prior year 26-week period.
"The improved operating results in our retail and wholesale business divisions, combined with the decrease in corporate and other expenses, all contributed to the significant improvement in our operating results in the first six months of fiscal 2004," said Kristopher Galvin, Tully's chief financial officer. "We are pleased that our strategies and execution have resulted in $913,000 of positive cash flow from operations in the first six months of fiscal 2004, which is a $2.8 million improvement compared to the $1.9 million of cash used by operations in the same period last year."
Additional information about Tully's second quarter 2004 results is contained in its quarterly report on Form 10-Q that was filed with the U.S. Securities and Exchange Commission today.
About Tully's Coffee Corporation
Founded in 1992, Tully's Coffee Corporation is a leading specialty coffee retailer, wholesaler and roaster. Tully's retail division operates specialty retail stores in Washington, Oregon, California, and Idaho, serving premium coffees from around the world, along with other complementary products. The wholesale division distributes Tully's fine coffees and related products through offices, food service outlets and leading supermarkets throughout the West. Tully's international division supports Tully's licensees in Asia. Tully's corporate headquarters and roasting plant are located at 3100 Airport Way S., in Seattle. For more information, call (800) 96-Tully or visit the Web site at www.tullys.com.
Statements made in this release concerning the Company's or management's intentions, expectations, or predictions about future results or events are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are necessarily subject to risks and uncertainties that could cause actual results to vary from stated expectations, and such variations could be material and adverse. Factors that could result in such a variations include, but are not limited to, the inherent unreliability of earnings and revenue growth predictions due to numerous factors, including many beyond the Company's control; potential difficulties, delays and unanticipated expenses inherent in the development and marketing of new products and services; competitive factors; and the numerous risks and potential additional costs, disruptions and delays associated with the establishment of new business initiatives. Additional information concerning these and other factors that could cause actual results to differ materially from the Company's current expectations is contained in the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 2003.