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Teavana Holdings, Inc. Announces Third Quarter Fiscal 2012 Financial Results



  Teavana Holdings, Inc. Announces Third Quarter Fiscal 2012 Financial Results

Business Wire

ATLANTA -- December 10, 2012

Teavana Holdings, Inc. (NYSE: TEA) today announced financial results for the
third quarter fiscal 2012 period ended October 28, 2012.

Highlights for the third quarter:

  * Net sales increased by 38% to $46.0 million from $33.4 million in the
    third quarter of fiscal 2011. Net sales for the quarter include $4.1
    million of net sales from the 46 Teaopia stores acquired on June 11, 2012.
  * The Company opened 17 new stores to end the period with 301 company-owned
    stores.
  * Comparable sales increased by 0.4%. Comparable sales include e-commerce
    and exclude the acquired Teaopia stores.
  * Loss from operations, which includes a loss from Teaopia of $1.7 million
    and $0.4 million in other one-time expenses, was $2.2 million compared to
    income from operations of $1.6 million in the third quarter of fiscal
    2011. The Teaopia loss was driven by a $1.4 million loss from operations
    and $0.3 million in one-time transaction and integration expenses. The
    other one-time expenses include transaction costs related to the pending
    Starbucks acquisition and set-up costs for our international entity.
  * Net loss, which includes a loss from Teaopia of $1.0 million after tax and
    $0.2 million after tax in other one-time expenses, was $1.4 million as
    compared to net income of $0.9 million in the third quarter of fiscal
    2011. The Teaopia loss was driven by a $0.8 million after tax loss from
    operations and $0.2 million after tax in one-time transaction and
    integration expenses. The other one-time expenses include transaction
    costs related to the pending Starbucks acquisition and set-up costs for
    our international entity.
  * Net loss per diluted share, which includes a loss from Teaopia of $0.03
    per diluted share and $0.01 per diluted share in other one-time expenses,
    was $0.04 per diluted share as compared to net income per diluted share of
    $0.02 in the third quarter of fiscal 2011. The Teaopia loss was driven by
    a $0.02 per diluted share loss from operations and $0.01 per diluted share
    in one-time transaction and integration expenses. The other one-time
    expenses include transaction costs related to the pending Starbucks
    acquisition and set-up costs for our international entity.

Andrew Mack, Chairman and CEO, stated: “We continued to show progress in the
third quarter with sales growth of 38%, the successful conversion of the
remaining 44 Teaopia stores to Teavana stores and strong performance of our
new stores with non-comp store productivity excluding Teaopia rising to 82% of
comp store productivity. In addition, the first Teavana store in the Middle
East under our Alshaya franchise agreement opened early in the fourth quarter
with week one sales results that exceeded any we have seen in our company’s
history. Of course, we were also thrilled to announce in November our pending
acquisition by Starbucks. We have great respect for what Howard Schultz and
his team have built at Starbucks and believe that with Starbucks we will be
able to truly realize our global potential and fulfill our mission of bringing
premium tea to millions of people across the world.”

Highlights for fiscal year-to-date:

  * Net sales increased by 34% to $133.4 million from $99.7 million in the
    prior year period. Net sales include $6.2 million of net sales from the 46
    Teaopia stores acquired on June 11, 2012.
  * The Company opened 55 new stores and acquired 46 Teaopia stores to end the
    period with 301 company-owned stores.
  * Comparable sales increased by 1.8%. Comparable sales include e-commerce
    and exclude the acquired Teaopia stores.
  * Income from operations, which includes a loss from Teaopia of $4.0 million
    and $0.5 million in other one-time expenses, was $3.7 million as compared
    to $10.4 million in the prior year period. The Teaopia loss was driven by
    a $2.2 million loss from operations and $1.8 million in one-time
    transaction and integration expenses. The other one-time expenses include
    transaction costs related to the pending Starbucks acquisition and set-up
    costs for our international entity.
  * Net income, which includes a loss from Teaopia of $2.4 million after tax
    and $0.3 million after tax in other one-time expenses, was $1.9 million as
    compared to $5.3 million in the prior year period. The Teaopia loss was
    driven by a $1.3 million after tax loss from operations and $1.1 million
    after tax in one-time transaction and integration expenses. The other
    one-time expenses include transaction costs related to the pending
    Starbucks acquisition and set-up costs for our international entity.
  * Net income per diluted share, which includes a loss from Teaopia of $0.06
    per diluted share and $0.01 per diluted share in other one-time expenses,
    was $0.05 per diluted share as compared to $0.14 per diluted share in the
    prior year period. The Teaopia loss was driven by a $0.03 per diluted
    share loss from operations and $0.03 per diluted share in one-time
    transaction and integration expenses. The other one-time expenses include
    transaction costs related to the pending Starbucks acquisition and set-up
    costs for our international entity.

Balance sheet highlights as of October 28, 2012:

  * The Company had $19.6 million in credit facility borrowings and $29.7
    million of availability on the credit facility at the end of the third
    quarter of fiscal 2012, compared to $4.5 million in borrowings and $35.3
    million of availability at the end of the third quarter of fiscal 2011.
  * Inventory was $34.6 million at the end of the third quarter of fiscal
    2012, compared to $32.5 million at the end of the third quarter of fiscal
    2011.

Outlook:

Due to the pending acquisition by Starbucks, no guidance is being provided.

Conference Call Information:

Due to the pending acquisition by Starbucks, the Company will not host a
conference call.

About Teavana:

Teavana is a specialty retailer offering more than 100 varieties of premium
loose-leaf teas, authentic artisanal teawares and other tea-related
merchandise through 301 company-owned stores and on its website. Founded in
1997, the company offers new tea enthusiasts and tea connoisseurs alike its
“Heaven of Tea” retail experience where passionate and knowledgeable
“teaologists” engage and educate them about the ritual and enjoyment of tea.
The company’s mission is to establish Teavana as the most recognized and
respected brand in the tea industry by expanding the culture of tea across the
world. To support the tea culture globally, Teavana donates approximately 1%
of annual net profits to the Cooperative for Assistance and Relief Everywhere,
Inc., or “CARE,” through its Teavana Equatrade program. For more information,
visit www.teavana.com.

Forward-Looking Statements:

This news release includes forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 as contained in
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, which reflect management’s current views and estimates
regarding our industry, business strategy, goals and expectations concerning
our market position, future operations, margins, profitability, capital
expenditures, liquidity and capital resources and other financial and
operating information. You can identify these statements by the fact that they
use words such as “anticipate,” “assume,” “believe,” “continue,” “could,”
“estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,”
“project,” “future” and similar terms and phrases. We cannot assure you that
future developments affecting us will be those that we have anticipated.
Actual results may differ materially from these expectations due to risks
relating to our strategy and expansion plans, the availability of suitable new
store locations, risks that consumer spending may decline and that U.S.,
Canadian and global macroeconomic conditions may worsen, risks related to our
continued retention of our senior management and other key personnel, risks
relating to changes in consumer preferences and economic conditions, risks
relating to our distribution center, quality or health concerns about our teas
and tea-related merchandise, events that may affect our vendors, increased
competition from other tea and beverage retailers, risks relating to trade
restrictions, risks associated with leasing substantial amounts of space,
risks relating to our pending acquisition by Starbucks, including
uncertainties as to the timing of the merger, the possibility that various
closing conditions for the transaction may not be satisfied or waived, and the
effects of disruption from the transaction on relationships with employees,
customers and business partners, and other factors that are set forth in the
Company’s filings with the Securities and Exchange Commission (“SEC”),
including risk factors in our Annual Report on Form 10-K filed with the SEC
and available at www.sec.gov and in all filings with the SEC made by us
subsequent to the filing of the Form 10-K. Other factors that could change
expected outcomes include our ability to integrate Teaopia’s operations as
planned and the continued performance of its locations as planned. If one or
more of these risks or uncertainties materialize, or if any of our assumptions
prove incorrect, our actual results may vary in material respects from those
projected in these forward-looking statements. Any forward-looking statement
made by us in this news release speaks only as of the date on which we make
it. Factors or events that could cause our actual results to differ may emerge
from time to time, and it is not possible for us to predict all of them. We
undertake no obligation to publicly update any forward-looking statement,
whether as a result of new information, future developments or otherwise,
except as may be required by any applicable securities laws.

Teavana Holdings, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income /
(Loss)
(unaudited)
(dollars in thousands, except per share data)
                                                                 
                 Thirteen Weeks Ended              Thirty-Nine Weeks Ended
                 October 28,      October 30,      October 28,    October 30,
                 2012             2011             2012           2011
                                                                   
Net sales        $ 46,037         $ 33,426         $ 133,436      $ 99,679
Cost of goods
sold 
(exclusive of
depreciation       20,320           12,749           54,089         37,386
shown
separately
below)
Gross profit       25,717           20,677           79,347         62,293
Selling,
general and        25,349           17,511           69,158         47,636
administrative
expense
Depreciation
and                2,585            1,554            6,530          4,257
amortization
expense
Income /
(loss) from        (2,217     )     1,612            3,659          10,400
operations
Interest           238              122              441            1,553
expense, net
Income /
(loss) before      (2,455     )     1,490            3,218          8,847
income taxes
Provision for
/ (benefit         (1,040     )     554              1,278          3,556
from) income
taxes
                                                                   
Net income /     $ (1,415     )   $ 936            $ 1,940        $ 5,291
(loss)
Other
comprehensive
income
Net gain on
foreign            168              -                641            -
currency
translation
Comprehensive
income /         $ (1,247     )   $ 936            $ 2,581        $ 5,291
(loss)
                                                                   
Net income /
(loss) per
share:
Basic            $ (0.04      )   $ 0.02           $ 0.05         $ 0.14
Diluted          $ (0.04      )   $ 0.02           $ 0.05         $ 0.14
                                                                   
Weighted
average shares
outstanding:
Basic              38,632,149       38,138,070       38,496,953     37,216,444
Diluted            38,632,149       38,965,104       39,152,380     38,029,119
                                                                     
                                                                     

Teavana Holdings, Inc
Condensed Consolidated Balance Sheets
(dollars in thousands, except per share data)
                                                             
                                           October 28, 2012   January 29, 2012
Assets                                     (unaudited)
Current assets
Cash and cash equivalents                  $   908            $   17,818
Prepaid expenses                               6,099              3,995
Income tax receivable                          2,211              -
Inventory                                      34,627             25,676
Other current assets                           3,592              2,175      
Total current assets                           47,437             49,664
Property and equipment, net                    63,510             42,785
Intangible assets, net                         1,183              -
Goodwill                                       20,698             2,394
Other non-current assets                       672                775
                                                               
Total assets                               $   133,500        $   95,618     
                                                               
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable                           $   8,261          $   3,898
Income taxes payable                           -                  1,821
Other current liabilities                      12,223             6,847      
Total current liabilities                      20,484             12,566
Long-term liabilities
Deferred rent                                  16,835             12,905
Deferred tax liability, non-current            2,420              2,570
Long-term debt                                 19,627             -
Other long-term liabilities                    722                575        
Total long-term liabilities                    39,604             16,050     
Total liabilities                              60,088             28,616     
                                                               
Commitments and contingencies
Stockholders’ equity
Common stock, $0.00003 par value;
100,000,000 shares authorized as of
October
28, 2012 and January 29, 2012;
38,685,783
shares and 38,281,836 shares issued and
outstanding as of October 28, 2012 and
January 29, 2012, respectively                 1                  1
Additional paid-in capital                     280,611            276,782
Accumulated deficit                            (207,852  )        (209,792  )
Accumulated other comprehensive income         652                11         
Total stockholders’ equity                     73,412             67,002     
Total liabilities and stockholders’        $   133,500        $   95,618     
equity

Contact:

ICR, Inc.
Farah Soi or Joseph Teklits, 203-682-8212
investorrelations@teavana.com
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