Crumbs Bake Shop, Inc. Reports Second Quarter 2013 Financial Results

  Crumbs Bake Shop, Inc. Reports Second Quarter 2013 Financial Results                      Company Updates 2013 Financial Outlook  Business Wire  NEW YORK -- August 8, 2013  Crumbs Bake Shop, Inc. (“Crumbs”) (NASDAQ: CRMB), the largest cupcake specialty store chain in the U.S., today reported financial results for the second quarter ended June 30, 2013.  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 EBITDA^1, a non GAAP measure, was $(2.1) million compared to     $(0.5) million.  1. See financial tables for a reconciliation of adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), a non-GAAP measure, to GAAP results.  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 15^th 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.  Earnings Call  Crumbs will host an earnings call to discuss second quarter 2013 financial results today at 5:00 PM Eastern Time. Hosting the call will be Julian R. Geiger, President and Chief Executive Officer, and John D. Ireland, Senior VP of Finance, Chief Financial Officer and Treasurer.  The conference call can be accessed live over the phone by dialing 888-208-1812 or for international callers by dialing 719-325-2481. A replay will be available one hour after the call and can be accessed by dialing 877-870-5176 or 858-384-5517 for international callers; the password is 6013500. The replay will be available until August 22, 2013.  The call will also be webcast live from the Company’s Web site at www.crumbs.com under the Investor Relations section. An archived webcast will be available beginning approximately one hour after the end of the call.  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.  Forward Looking Statements  Some of the statements in this press release constitute forward-looking statements within the meaning of the federal securities laws. Words such as “anticipate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “aim,” “will” and words and terms of similar substance and any financial projections used in connection with any discussion of future plans, strategies, objectives, actions, or events identify forward-looking statements. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. These statements are based on the beliefs of our management as well as assumptions made by and information currently available to us and reflect our current views concerning future events. As such, they are subject to risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, among many others: the risk that any projections, including earnings, revenues, expenses, synergies, margins or any other financial items that form the basis for management’s plans and assumptions are not realized; the risk of disruption from being a public company, making it more difficult to maintain relationships with customers, employees or suppliers; a reduction in industry profit margin; the inability to continue the development of the Crumbs brand; the timing of and ability to achieve profitability of new stores; the inability to manage or fund rapid growth; requirements or changes affecting the business in which Crumbs Bake Shop, Inc. and Crumbs Holdings LLC and its wholly-owned subsidiaries are engaged; our ability to successfully implement new strategies; operating hazards; and competition and the loss of key personnel; changing interpretations of generally accepted accounting principles; continued compliance with government regulations; changing legislation and regulatory environments; the ability to meet the NASDAQ Stock Market’s continued listing standards; a lower return on investment; and the general volatility of the market prices of our securities and general economic conditions. These and other risks are discussed in detail in the periodic reports that Crumbs Bake Shop, Inc. files with the Securities and Exchange Commission (the “SEC”), including in the “Risk Factors” section of its Annual Report on Form 10-K for the year ended December 31, 2012, and investors are urged to review those periodic reports and its other filings with the SEC, which are accessible on the SEC’s website at www.sec.gov, before making an investment decision. Crumbs Bake Shop, Inc.’s forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC. We assume no obligation to update these forward-looking statements except as required by law.  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               1,049          838            2,022         1,629 administrative New store expenses        271            72             391           181 Depreciation and          631            467            1,190         915 amortization Loss on sale of          58           14           100         14      property and equipment                                                                                                 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        5              10             7             18 income Abandoned projects        (5      )      (32    )       (15     )     (45    ) Change in fair value     -            546          (109    )    109     of warrant liability                                                                                                 (75     )     524          (192    )    82                                                                             Net loss attributable to the controlling and non-controlling           (3,289  )      (735   )       (5,655  )     (2,060 ) interests                                                                        Less: Net loss attributable to non-controlling          537          296          929         182     interest                                                                        Net loss attributable  $  (2,752  )    $ (439   )    $  (4,726  )   $ (1,878 ) to stockholders                                                                                                                                               Net loss per common    $  (0.23   )     (0.08  )    $  (0.41   )    (0.22  ) share, basic                                                                        Weighted average number of common shares outstanding,      11,719       5,506        11,569      5,506   basic and diluted  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 2,387          2,387 agreement 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    1              1 31, 2011 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       Six Months Ended June                          30,                           30,                          2013            2012        2013          2012                                                                           Net income (loss) attributed to the controlling    and    non-controlling     $ (3,289  )     $  (735  )    $ (5,655  )    $ (2,060 )    interest    Depreciation and      631              467          1,190          915    amortization    Interest expense      75               -            75             -    Interest income       (4      )        (2    )      (4      )      -    Loss on disposal    of property and       58               14           100            14    equipment    Abandoned             5                32           15             45    projects    Deferred rent         230              165          431            396    expense    Stock based           172              116          323            163    compensation    Change in fair    value of warrant      -                (546  )      109            (109   )    liability    Non-recurring        -              4          -            8          expenses Adjusted EBITDA        $ (2,122  )     $  (485  )    $ (3,416  )    $ (628   )  Contact:  Investor Relations: ICR Tom Ryan/Raphael Gross 646-478-9917 IR@crumbs.com or Media Relations: Crumbs Quinn Solomon, 212-221-7105 qsolomon@crumbs.com  
Press spacebar to pause and continue. Press esc to stop.