Diedrich Coffee Reports Third Quarter Earnings

IRVINE, Calif., April 20 /PRNewswire-FirstCall/ --Diedrich Coffee, Inc.
(Nasdaq: DDRX) today announced operating results for its third quarter ended
March 4, 2009. For the quarter, the Company reported net income of $1,358,000
or $0.25 per share, compared to a net loss of $2,153,000, or $0.39 loss per
share, for the third quarter of the prior fiscal year.

Year-to-date, the Company reported a net loss of $1,420,000, or $0.26 loss per
share, compared to a net loss of $3,582,000, or $0.66 loss per share, for the
comparable period in the prior fiscal year. The year-to-date results of the
prior fiscal year included an after-tax gain of $767,000, or $0.14 per share,
from escrow proceeds received in the first quarter of fiscal year 2008 from
the sale of the majority of the Company's Diedrich Coffee and Coffee People
company-operated locations, which was completed in the 2007 fiscal year.

Revenue
Total revenue increased by $8,187,000, or 72.3%, to $19,509,000 for the third
quarter of fiscal year 2009 as compared with total revenue of $11,322,000 in
the same period of the prior year. With respect to the components of total
revenue, wholesale revenue increased $7,721,000, up 79.9% from the prior year
period, franchise revenue decreased $78,000, down 11.9% from the prior year
period, and retail sales increased $544,000, up 54.3% from the prior year
period. Year-to-date, total revenue increased by $14,913,000, or 46.7%, to
$46,843,000 as compared with $31,930,000 in the same period of the prior year.
With respect to the components of total revenue, wholesale revenue increased
$14,864,000, up 56.1% from the prior year period, franchise revenue declined
$441,000, down 21.1% from the prior year period, and retail sales increased
$490,000, up 14.7% from the prior year period, as compared to the same period
of the prior year.

For the current quarter, wholesale sales to office coffee service distributors
("OCS"), specialty retailers and foodservice customers increased $7,478,000,
or 84.5%, from the prior year quarter. Wholesale sales to franchise locations
increased $243,000, or 30.0%, for the third quarter of the current fiscal
year. Year-to-date, wholesale revenue increased $14,864,000 or 56.1% to
$41,361,000 from $26,497,000 compared to the same period in the prior fiscal
year. Wholesale sales to OCS, specialty retailers and foodservice customers
increased $15,104,000, or 65.4%, for the year to date period from the same
period of the prior year. Wholesale sales to franchise locations decreased
$240,000, or 7.1% from the same period of the prior year.

Franchise revenue decreased by $78,000 for the third quarter of the current
fiscal year from the prior year period and by $441,000 for the current
year-to-date period from the prior year period, primarily due to a net
decrease in unit count and negative comparable store sales. Comparable store
sales reported by the Gloria Jean's franchise system for the year-to-date
period of fiscal year 2009 as compared to the comparable fiscal 2008 period
were down 3.8% due to decreases in consumer spending in a weakened economy.

Retail sales increased $544,000 for the third quarter of fiscal year 2009 from
the prior year period and by $490,000 for the current year-to-date period from
the prior year period primarily due to an increase in the number of
company-operated retail locations. Ecommerce related sales increased $85,000,
or 21.9% for the third quarter of fiscal year 2009 from the prior year period,
and increased $82,000 for the fiscal 2009 year-to-date period at $1,216,000
compared to $1,134,000 for the comparable prior fiscal year period.

Costs and Expenses
Cost of sales and related occupancy costs for the third quarter of fiscal year
2009 increased $5,271,000, or 60.2%, to $14,032,000 from $8,761,000 in the
prior year period. Cost of goods sold as a percentage of wholesale and retail
revenues decreased from 79.5% in the prior year quarter to 73.2% in the
current year quarter primarily due to lower green coffee and packaging
material costs, lower temporary labor costs, improved material usage and price
increases taken earlier in the fiscal year. These improvements were offset by
higher royalties paid under the License and Distribution Agreement with
Keurig, Inc.

Year-to-date cost of sales and related occupancy costs increased $11,572,000,
or 48.0%, to $35,667,000 from $24,095,000 in the prior year period. Cost of
goods sold as a percentage of wholesale and retail revenues was relatively
flat year over year, increasing from 77.2% in the prior year period to 77.3%
in the current year period due primarily to higher payroll, equipment and
freight costs and royalties paid under the License and Distribution Agreement
with Keurig, Inc.

Occupancy costs decreased $103,000 for the third quarter of fiscal year 2009
and decreased $335,000 for the year-to-date period compared to the prior year
period. The decrease in occupancy costs resulted primarily from a decrease in
franchise rent expense associated with closed stores.

Operating expenses for the third quarter of fiscal year 2009 increased $47,000
from the prior year period but decreased as a percentage of total revenue to
10.3% in the third quarter of the current fiscal year from 17.3% in the third
quarter of last year due primarily to the growth in Wholesale revenue.
Wholesale operating costs decreased due to lower bad debt expense and
equipment costs which were partially offset by increases in marketing costs.

Year-to-date fiscal 2009 operating expenses decreased $698,000, or 10.7%, to
$5,844,000 from $6,542,000 for the prior year period and decreased as a
percentage of total revenue to 12.5% in the current fiscal year from 20.5% in
the prior year period. Wholesale operating costs decreased primarily from
lower compensation and equipment costs which were partially offset by higher
marketing costs.

For the third quarter of fiscal year 2009, general and administrative expenses
decreased $865,000 and decreased as a percentage of revenues to 7.7% in the
current year quarter from 21.0% in the third quarter of the prior year. The
decrease in general and administrative costs was due to lower legal and
consulting costs which were partially offset by higher insurance costs and
license fees. Year-to-date, general and administrative expenses decreased
$542,000 and as a percentage of revenues decreased to 10.6% in the current
year from 17.3% in the same period of the prior year. For the year-to-date
period, the decrease resulted primarily from lower consulting costs and legal
settlement fees.

Discontinued Operations
Income from Discontinued Operations for the year-to-date period of the prior
fiscal year was $767,000, or $0.14 per share, and was the result of the escrow
proceeds received from the sale of the majority of the Company's Diedrich
Coffee and Coffee People company-operated locations, which was completed in
the 2007 fiscal year.

Recent Developments
On April 8, 2009, Timothy J. Ryan was appointed Vice Chairman of the Company's
Board of Directors. Mr. Ryan joined the Board of Directors in October 2005
and had previously served as the Company's Chief Executive Officer from
November 1997 to October 2000.

On March 27, 2009, as part of its strategy to capitalize on the growth of the
wholesale specialty coffee market and its strength as a premier roaster and
distributor of the world's finest coffees, the Company announced that it has
signed a definitive agreement with Praise International North America, Inc.,
an affiliate of Gloria Jean's Coffees International for the sale of its Gloria
Jean's Coffees domestic franchise operations. Gloria Jean's Coffees
International holds the rights to the Gloria Jean's Coffees brand for all
countries in the world except the United States.

The sale of the Gloria Jean's Coffees domestic franchise operations to Praise
International North America includes a total of 102 franchise and
company-operated locations in 24 states. The purchase price is approximately
$3.1 million, of which $1,500,000 will be paid in cash at the closing and the
remainder to be paid in the form of a twelve-month promissory note with an
aggregate principal amount of $1,600,000, and the transaction is anticipated
to close within 60 days after the date of the agreement, provided that certain
conditions are met. Terms of the sale include a five-year roasting agreement
and rights to use the Gloria Jean's Coffee brand names in perpetuity in the
Company's various wholesale business channels and Keurig K-cup product lines.
For more information, please see the most recently filed Form 10-Q for the
fiscal quarter ended March 4, 2009 and the Form 8-K filed on April 2, 2009.

About Diedrich Coffee
With headquarters in Irvine, California, Diedrich Coffee specializes in
sourcing, roasting and selling the world's highest quality coffees. The
Company's three brands are Diedrich Coffee, Gloria Jean's Coffees and Coffee
People. Diedrich Coffee sells its coffees through franchise and
company-operated retail locations, office coffee service distributors,
restaurants and specialty retailers and via the Company's web stores. For
more information about Diedrich Coffee, call (800)354-5282 or visit the
Company's web sites at www.diedrich.com, www.gloriajeans.com,
www.coffeepeople.com or www.coffeeteastore.com.

Forward Looking Statements
Statements in this news release that relate to future plans, financial results
or projections, events or performance are forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and fall under
the safe harbor. Actual results and financial position could differ materially
from those anticipated in the forward-looking statements as a result of a
number of factors, including, but not limited to, the financial and operating
performance of the Company's wholesale operations, the Company's ability to
maintain profitability over time, the successful execution of the Company's
growth strategies, franchisee's adherence to the Company's practices, policies
and procedures, the impact of competition, the availability of working
capital, and other risks and uncertainties described in detail under "Risk
Factors and Trends Affecting Diedrich Coffee and its Business" in the
Company's annual report on Form 10-K for the fiscal year ended June 25, 2008
and other reports filed with the Securities and Exchange Commission. Except
where required by law, the Company does not undertake an obligation to revise
or update any forward-looking statements, whether as a result of new
information, future events or changed circumstances.

Information Contact:
Sean McCarthy
Chief Financial Officer
(949) 260-6734

DIEDRICH COFFEE, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share amounts)

OPERATIONS DATA (unaudited): Twelve Twelve Thirty-six Thirty-six
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
March 4, March 5, March 4, March 5,
2009 2008 2009 2008

Wholesale revenue $17,384 $9,663 $41,361 $26,497
Franchise revenue 580 658 1,649 2,090
Retail sales 1,545 1,001 3,833 3,343
Total net revenue 19,509 11,322 46,843 31,930
Cost of sales and related
occupancy costs 14,032 8,761 35,667 24,095
Operating expenses 2,011 1,964 5,844 6,542
Depreciation and amortization 429 303 1,173 835
General and administrative
expenses 1,507 2,372 4,979 5,521
Gain on asset disposals -- 83 (10) 76
Total costs and expenses 17,979 13,483 47,653 37,069
Operating income (loss) from
continuing operations 1,530 (2,161) (810) (5,139)
Interest income (expense) and
other income, net (164) 77 (598) 319
Income (loss) from continuing
operations before
income tax provision (benefit) 1,366 (2,084) (1,408) (4,820)

Income tax provision (benefit) 8 69 12 (471)
Income (loss) from continuing
operations 1,358 (2,153) (1,420) (4,349)
Gain on sale of discontinued
operation, net of tax -- -- -- 767

Net income (loss) $1,358 $(2,153) $(1,420) $(3,582)

Basic and diluted net income
(loss) per share:
Income (loss) from continuing
operations $0.25 $(0.39) $(0.26) $(0.80)
Income from discontinued
operations, net $-- $-- $-- $0.14
Net income (loss) per
share-basic $0.25 $(0.39) $(0.26) $(0.66)

Weighted average and equivalent
shares outstanding:
Basic and diluted 5,468 5,454 5,468 5,462

BALANCE SHEET DATA:
(in thousands)

March 4, 2009 June 25, 2008
(unaudited)
Cash $1,133 $670
Accounts receivable, net 9,859 5,015
Inventories 4,846 4,652
Other assets 11,601 12,399
Total assets $27,439 $22,736

Accounts payable $8,332 $5,169
All other current liabilities 7,552 7,148
Other liabilities 1,953 677
Total stockholders' equity 9,602 9,742
Total liabilities and
stockholders' equity $27,439 $22,736

SOURCE Diedrich Coffee, Inc.

Sean McCarthy, Chief Financial Officer Diedrich Coffee, Inc., +1-949-260-6734