Keurig Green Mountain, Inc.
Apr 28, 2010
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Green Mountain Coffee Roasters, Inc. Reports Continued Strong Sales and Earnings Growth for Fiscal 2010 Second Quarter

Performance Driven by Success of Keurig® Single-Cup Brewing System

WATERBURY , VT (April 28, 2010) – Green Mountain Coffee Roasters, Inc., (NASDAQ: GMCR) today announced its fiscal 2010 second quarter results for the thirteen weeks ended March 27, 2010, reporting very strong top and bottom line growth.

Net sales for the second quarter of fiscal 2010 increased 68% to $324.9 million as compared to $193.4 million reported in the second quarter of fiscal 2009.

According to Generally Accepted Accounting Principles (GAAP), net income for the second quarter of fiscal 2010 totaled $24.7 million or $0.54 per fully diluted share. Under the new Financial Accounting Standards Board pronouncement on business combinations, effective starting in fiscal 2010 for the Company, acquisition-related transaction expenses are required to be expensed rather than capitalized. In the second quarter of fiscal 2010, the Company incurred approximately $5.0 million, or $0.06 per diluted share, of transaction expenses related to the pending Diedrich Coffee, Inc. (“Diedrich”) acquisition as well as $3.0 million, or $0.04 per diluted share, of amortization of identifiable intangibles related to the Company’s prior acquisitions. Excluding the transaction-related expenses, non-GAAP net income for the second quarter of fiscal 2010 increased 114% to $27.8 million, or $0.60 per diluted share, from $13.0 million, or $0.33 per diluted share, in the second quarter of fiscal 2009.

During fiscal 2010’s second quarter, 720 million K-Cup® portion packs were shipped system-wide by all Keurig licensed roasters, representing an increase of 67% over the year-ago quarter. Supporting continued growth in K-Cup demand, there were 731,000 system-wide brewers with Keurig®-branded brewing technology shipped during the second quarter of fiscal 2010 compared to 486,000 shipped during the second quarter of fiscal 2009.

Lawrence J. Blanford, GMCR’s President and CEO, said, “GMCR’s Keurig Single-Cup Brewing System continues to gain awareness and adoption nationwide, fueling our strong revenue and EPS growth. In our fiscal second quarter, both our Keurig business unit and our Specialty Coffee business unit achieved solid year-on-year revenue growth at 68% and 69% respectively. We are very pleased to be able to deliver these outstanding financial results while remaining true to our commitment to be a socially and environmentally responsible company.”

Blanford continued, “Every GMCR employee is focused on executing the key initiatives that will enable us to scale and expand our business and, as a result, deliver improved consumer and shareholder value. Innovation continues to be a priority and we are excited about the initial success and future opportunity we see for new beverages like our Café Escapes® coffee house offerings, our refreshing Celestial Seasonings® brewed-over-ice teas and our revv™ and revv Pulse™ high-energy coffee beverages. New K-cup products are designed to drive Keurig Single-Cup Brewer adoption and expand brewer usage occasions.”

Separately today, GMCR also announced that its Board of Directors has approved a three-for-one stock split to be effected in the form of a stock dividend. The Company will distribute two additional shares of its common stock for every one share of common stock to all shareholders of record at the close of business on May 10, 2010. The shares will be distributed on Monday, May 17, 2010 and the Company’s common stock will begin trading on a split-adjusted basis on Tuesday, May 18, 2010 at the Monday, May 17, 2010 closing price divided by three.

Fiscal 2010 Second Quarter Financial Review

Key Business Drivers & Metrics

o Total K-Cup net sales increased 92%, or $98.0 million, over the same period in 2009.
o Total Keurig brewer and accessories sales increased 57%, or $23.5 million year-over-year.

o Dollar net sales growth was strongest in channels that benefit from sales of K-Cup portion packs including supermarkets, consumer direct and away from home coffee channels.

o Net sales related to the Timothy’s brand, which are included in the Company’s results since its acquisition in November 2009, represented approximately 21 percentage points of the 69% increase in SCBU’s net sales, and 10 percentage points of the 68% increase in GMCR’s total company sales.

o Fair Trade Certified™ coffees represented approximately 28% percent of coffee pounds shipped this quarter.

Costs, Margins and Income

Balance Sheet Highlights

Business Outlook and Other Forward-Looking Information

Fiscal Year 2010

The Company revised its outlook for its fiscal year 2010 to reflect continued improvement in demand for the Keurig single-cup brewing system. It now expects:

Third Quarter Fiscal Year 2010:

The company today provided its first estimates for its fiscal third quarter 2010 including:

Use of Non-GAAP Financial Measures

In addition to reporting financial results in accordance with generally accepted accounting principles (GAAP), the Company provides non-GAAP operating results that exclude certain charges or credits such as acquisition-related transaction expenses, the one-time operating income related to the settlement of the Company’s Kraft litigation, and non-cash related items such as amortization of identifiable intangibles. These amounts are not in accordance with, or an alternative to, GAAP. The Company’s management believes that these measures provide investors with greater transparency by helping illustrate the underlying financial and business trends relating to the Company’s results of operations and financial condition and comparability between current and prior periods. Management uses the measures to establish and monitor budgets and operational goals and to evaluate the performance of the Company. Please see the “GAAP to Non-GAAP Reconciliation of Unaudited Consolidated Statements of Operations” tables that accompany this press release for a full reconciliation the Company’s GAAP to non-GAAP results.

Green Mountain Coffee Roasters, Inc. will be discussing these financial results and future prospects with analysts and investors in a conference call available via the Internet. The call will take place today at 5:00 PM ET and will be available, with accompanying slides, via live webcast on the Company’s website at www.GMCR.com. The Company archives the latest conference call on the Investor Relations section of its website for a period of time. A replay of the conference call also will be available by telephone at 719-457-0820, Passcode 4848326 from 9:00 PM ET on April 28th through 9:00 PM ET on Monday, May 3rd, 2010.

GMCR routinely posts information that may be of importance to investors in the Investor Relations section of its website, including news releases and its complete financial statements, as filed with the SEC. The Company encourages investors to consult this section of its website regularly for important information and news. Additionally, by subscribing to the Company’s automatic email news release delivery, individuals can receive news directly from GMCR as it is released.

About Green Mountain Coffee Roasters, Inc.

As a leader in the specialty coffee industry, Green Mountain Coffee Roasters, Inc. is recognized for its award-winning coffees, innovative brewing technology, and socially responsible business practices. GMCR’s operations are managed through two business units. The Specialty Coffee business unit produces coffee, tea and hot cocoa from its family of brands, including Tully’s Coffee®, Green Mountain Coffee®, Newman’s Own® Organics coffee and Timothy’s World Coffee®. The Keurig business unit is a pioneer and leading manufacturer of gourmet single-cup brewing systems. K-Cup® portion packs for Keurig® Single-Cup Brewers are produced by a variety of licensed roasters, including Green Mountain Coffee, Tully’s Coffee and Timothy’s. GMCR supports local and global communities by offsetting 100% of its direct greenhouse gas emissions, investing in Fair Trade Certified™ coffee, and donating at least five percent of its pre-tax profits to social and environmental projects. Visit www.gmcr.com for more information.

Forward-Looking Statements

Certain statements contained herein are not based on historical fact and are “forward-looking statements” within the meaning of the applicable securities laws and regulations. Generally, these statements can be identified by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “feel,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “would,” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Owing to the uncertainties inherent in forward-looking statements, actual results could differ materially from those stated here. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the impact on sales and profitability of consumer sentiment in this difficult economic environment, the Company’s success in efficiently expanding operations and capacity to meet growth, the Company’s success in efficiently and effectively integrating Tully’s and Timothy’s wholesale operations and capacity into its Specialty Coffee business unit, the Company’s success in introducing and producing new product offerings, the ability of lenders to honor their commitments under the Company’s credit facility, competition and other business conditions in the coffee industry and food industry in general, fluctuations in availability and cost of high-quality green coffee, any other increases in costs including fuel, Keurig’s ability to continue to grow and build profits with its roaster partners in the At Home and Away from Home businesses, the impact of the loss of major customers for the Company or reduction in the volume of purchases by major customers, delays in the timing of adding new locations with existing customers, the successful completion of the acquisition of Diedrich Coffee, Inc. and subsequent integration, the Company’s level of success in continuing to attract new customers, sales mix variances, weather and special or unusual events, as well as other risks described more fully in the Company’s filings with the SEC. Forward-looking statements reflect management’s analysis as of the date of this press release. The Company does not undertake to revise these statements to reflect subsequent developments, other than in its regular, quarterly earnings releases.

Additional Information

This press release is neither an offer to purchase, nor a solicitation of an offer to sell, any securities. The tender offer to purchase shares of Diedrich common stock referenced in this press release has been made pursuant to a Tender Offer Statement on Schedule TO, containing an offer to purchase, a form of letter of transmittal and other documents relating to the tender offer (the “Tender Offer Statement”), which GMCR and Pebbles Acquisition Sub, Inc., a wholly owned subsidiary of GMCR, filed with the SEC and first mailed to Diedrich stockholders on December 11, 2009. Security holders of Diedrich are advised to read the Tender Offer Statement, because it contains important information about the tender offer. Investors and security holders of Diedrich also are advised that they may obtain free copies of the Tender Offer Statement and other documents filed by GMCR with the SEC on the SEC’s website at http://www.sec.gov. In addition, free copies of the Tender Offer Statement and related materials may be obtained from GMCR by written request to: Green Mountain Coffee Roasters, Inc., Attention: General Counsel, 33 Coffee Lane, Waterbury, Vermont 05676.

-Tables Follow-


GREEN MOUNTAIN COFFEE ROASTERS, INC.
Unaudited Consolidated Statements of Operations
(Dollars in thousands except per share data)

Thirteen weeks ended 3/27/10

Thirteen weeks ended 3/28/09

Twenty-six weeks ended 3/27/10

Twenty-six weeks ended 3/28/09

Net sales

$ 324,915

$ 193,351

$ 674,278

$ 390,331

Cost of sales

216,263

131,370

463,801

275,000

Gross profit

108,652

61,981

210,477

115,331

Selling and operating expenses

42,979

28,094

98,558

64,275

General and administrative expenses

24,464

11,245

47,636

20,456

Patent litigation settlement

-

-

-

(17,000)

Operating income

41,209

22,642

64,283

47,600

Other expense

(133)

(242)

(244)

(285)

Interest expense

(833)

(1,032)

(1,881)

(2,414)

Income before income taxes

40,243

21,368

62,158

44,901

Income tax expense

(15,541)

(8,385)

(24,962)

(17,534)

Net income

$ 24,702

$ 12,983

$ 37,196

$ 27,367

Basic income per share:

Weighted average shares outstanding

43,754,546

37,125,038

43,705,417

36,902,634

Net income

$ 0.56

$ 0.35

$ 0.85

$ 0.74

Diluted income per share:

Weighted average shares outstanding

45,943,858

39,020,058

45,876,132

38,824,107

Net income

$ 0.54

$ 0.33

$ 0.81

$ 0.70

- More -


GREEN MOUNTAIN COFFEE ROASTERS, INC.
Unaudited Consolidated Balance Sheets
(Dollars in thousands)

109,929

March 27,

2010

September 26,
2009

Assets

Current assets:

Cash and cash equivalents

$155,454

$241,811

Restricted cash and cash equivalents

70

280

Short-term investments

-

50,000

Receivables, less allowances of $8,468 and $4,792

at March 27, 2010, and September 26, 2009, respectively

128,198

91,559

Income tax receivable

6,243

-

Inventories

137,294

Other current assets

23,779

9,517

Deferred income taxes, net

11,932

10,151

Total current assets

435,605

540,612

Fixed assets, net

180,043

135,981

Intangibles, net

129,575

36,478

Goodwill

168,895

99,600

Other long-term assets

8,999

3,979

Total assets

$923,117

$816,650

Liabilities and Stockholders' Equity

Current liabilities:

Current portion of long-term debt

$5,062

$5,030

Accounts payable

100,852

79,772

Accrued compensation costs

16,245

17,264

Accrued expenses

32,565

18,570

Income tax payable

-

2,971

Other short-term liabilities

2,525

3,257

Total current liabilities

157,249

126,864

Long-term debt

67,642

73,013

Deferred income taxes, net

53,376

26,599

Other long-term liabilities

5,123

-

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.10 par value: Authorized - 1,000,000 shares;
No shares issued or outstanding

-

-

Common stock, $0.10 par value: Authorized - 200,000,000 shares; Issued – 43,846,000 and 43,603,684 shares at March 27, 2010, and September 26, 2009, respectively

4,384

4,360

Additional paid-in capital

462,565

450,596

Retained earnings

174,358

137,162

Accumulated other comprehensive loss

(1,506)

(1,870)

ESOP unallocated shares, at cost – 12,687 shares

at March 27, 2010, and September 26, 2009

(74)

(74)

Total stockholders' equity

639,727

590,174

Total liabilities and stockholders' equity

$923,117

$816,650

- More -


GREEN MOUNTAIN COFFEE ROASTERS, INC.
Unaudited Consolidated Statements of Cash Flows
(Dollars in thousands)

Twenty-six weeks ended March 27, 2010

Twenty-six weeks ended March 28, 2009

Cash flows from operating activities:

Net income

$ 37,196

$ 27,367

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation

12,667

8,477

Amortization of intangibles

5,204

2,406

Loss on disposal of fixed assets

451

144

Provision for doubtful accounts

240

131

Loss (gain) on futures derivatives

(112)

89

Tax expense from exercise of non-qualified options

and disqualified dispositions of incentive stock options

22

21

Excess tax benefits from equity-based compensation plans

(4,492)

(5,371)

Deferred income taxes

(2,444)

(1,960)

Deferred compensation and stock compensation

3,926

3,027

Changes in assets and liabilities:

Receivables

(28,147)

(16,484)

Inventories

34,276

16,001

Income tax receivable

(4,722)

8,719

Other current assets

(5,558)

(150)

Other long-term assets, net

104

359

Accounts payable

17,867

5,576

Accrued compensation costs

(1,151)

(1,011)

Accrued expenses

11,496

5,642

Net cash provided by operating activities

76,823

52,983

Cash flows from investing activities:

Proceeds from sale of short-term investments

50,000

-

Acquisition of Timothy’s Coffee of the World Inc.

(154,208)

-

Acquisition of Tully’s Coffee Corporation

-

(41,451)

Advance on acquisition of Diedrich Coffee, Inc.

(8,500)

-

Capital expenditures for fixed assets

(53,175)

(14,516)

Proceeds from disposal of fixed assets

183

93

Net cash used for investing activities

(165,700)

(55,874)

Cash flows from financing activities:

Net change in revolving line of credit

(3,000)

(5,000)

Proceeds from issuance of common stock

3,553

4,372

Windfall tax benefit

4,492

5,371

Capital lease obligations

(25)

-

Repayment of long-term debt

(2,500)

(17)

Net cash provided by financing activities

2,520

4,726

Net increase (decrease) in cash and cash equivalents

(86,357)

1,835

Cash and cash equivalents at beginning of period

241,811

804

Cash and cash equivalents at end of period

$ 155,454

$ 2,639

Fixed asset purchases included in accounts payable

and not disbursed at the end of each period:

$ 8,870

$ 5,348

Noncash financing activity:

Debt assumed in conjunction with acquisition

$ 1,533

$ 210


GREEN MOUNTAIN COFFEE ROASTERS, INC.
GAAP to Non-GAAP Reconciliation of Unaudited Consolidated Statements of Operations
(Dollars in thousands)

Thirteen weeks ended March 27, 2010

GAAP

Acquisition-related Transaction Expenses

Acquisition-related Transaction Expenses

Patent Litigation Settlement

Non-GAAP

Timothy's Coffees of the World, Inc.

Diedrich Coffee, Inc.

Net Sales

$ 324,915

-

-

-

$ 324,915

Cost of Sales

216,263

-

-

-

216,263

Gross Profit

108,652

-

-

-

108,652

Selling and operating expenses

42,979

-

-

-

42,979

General and administrative expenses

24,464

-

(5,000)

-

19,464

Operating income

41,209

-

5,000

-

46,209

Other expense

(133)

-

-

-

(133)

Interest expense

(833)

-

-

-

(833)

Income before income taxes

40,243

-

5,000

-

45,243

Income tax expense

(15,541)

-

(1,930)

-

(17,471)

Net income

$ 24,702

$ -

$ 3,070

$ -

$ 27,772

Basic income per share:

Weighted average shares outstanding

43,754,546

43,754,546

43,754,546

43,754,546

43,754,546

Net income

$ 0.56

$ -

$ 0.07

$ -

$ 0.63

Diluted income per share:

Weighted average shares outstanding

45,943,858

45,943,858

45,943,858

45,943,858

45,943,858

Net income

$ 0.54

$ -

$ 0.06

$ -

$ 0.60


GREEN MOUNTAIN COFFEE ROASTERS, INC.
GAAP to Non-GAAP Reconciliation of Unaudited Consolidated Statements of Operations
(Dollars in thousands)

Twenty-six weeks ended March 27, 2010

GAAP

Acquisition-related Transaction Expenses

Acquisition-related Transaction Expenses

Patent Litigation Settlement

Non-GAAP

Timothy's Coffees of the World, Inc.

Diedrich Coffee, Inc.

Net Sales

$ 674,278

-

-

-

$ 674,278

Cost of Sales

463,801

-

-

-

463,801

Gross Profit

210,477

-

-

-

210,477

Selling and operating expenses

98,558

-

-

-

98,558

General and administrative expenses

47,636

(2,000)

(8,000)

-

37,636

Operating income

64,283

2,000

8,000

-

74,283

Other expense

(244)

-

-

-

(244)

Interest expense

(1,881)

-

-

-

(1,881)

Income before income taxes

62,158

2,000

8,000

-

72,158

Income tax expense

(24,962)

-

(3,216)

-

(28,178)

Net income

$ 37,196

$ 2,000

$ 4,784

$ -

$ 43,980

Basic income per share:

Weighted average shares outstanding

43,705,417

43,705,417

43,705,417

43,705,417

43,705,417

Net income

$ 0.85

$ 0.05

$ 0.11

$ -

$ 1.01

Diluted income per share:

Weighted average shares outstanding

45,876,132

45,876,132

45,876,132

45,876,132

45,876,132

Net income

$ 0.81

$ 0.04

$ 0.11

$ -

$ 0.96


GREEN MOUNTAIN COFFEE ROASTERS, INC.
GAAP to Non-GAAP Reconciliation of Unaudited Consolidated Statements of Operations
(Dollars in thousands)

Thirteen weeks ended March 28, 2009

GAAP

Acquisition-related Transaction Expenses

Acquisition-related Transaction Expenses

Patent Litigation Settlement

Non-GAAP

Timothy's Coffees of the World, Inc.

Diedrich Coffee, Inc.

Net Sales

$ 193,351

-

-

-

$ 193,351

Cost of Sales

131,370

-

-

-

131,370

Gross Profit

61,981

-

-

-

61,982

Selling and operating expenses

28,094

-

-

-

28,094

General and administrative expenses

11,245

-

-

-

11,245

Operating income

22,642

-

-

-

22,642

Other expense

(242)

-

-

-

(242)

Interest expense

(1,032)

-

-

-

(1,032)

Income before income taxes

21,368

-

-

-

21,368

Income tax expense

(8,385)

-

-

-

(8,385)

Net income

$ 12,983

$ -

$ -

$ -

$ 12,983

Basic income per share:

Weighted average shares outstanding

37,125,038

37,125,038

37,125,038

37,125,038

37,125,038

Net income

$ 0.35

$ -

$ -

$ -

$ 0.35

Diluted income per share:

Weighted average shares outstanding

39,020,058

39,020,058

39,020,058

39,020,058

39,020,058

Net income

$ 0.33

$ -

$ -

$ -

$ 0.33


GREEN MOUNTAIN COFFEE ROASTERS, INC.
GAAP to Non-GAAP Reconciliation of Unaudited Consolidated Statements of Operations
(Dollars in thousands)

Twenty-six weeks ended March 28, 2009

GAAP

Acquisition-related Transaction Expenses

Acquisition-related Transaction Expenses

Patent Litigation Settlement

Non-GAAP

Timothy's Coffees of the World, Inc.

Diedrich Coffee, Inc.

Net Sales

$ 390,331

-

-

-

$ 390,331

Cost of Sales

275,000

-

-

-

275,000

Gross Profit

115,331

-

-

-

115,331

Selling and operating expenses

64,275

-

-

-

64,275

General and administrative expenses

20,456

-

-

-

20,456

Patent litigation settlement

(17,000)

-

-

17,000

-

Operating income

47,600

-

-

(17,000)

30,600

Other expense

(285)

-

-

-

(285)

Interest expense

(2,414)

-

-

-

(2,414)

Income before income taxes

44,901

-

-

(17,000)

27,901

Income tax expense

(17,534)

-

-

6,639

(10,895)

Net income

$ 27,367

$ -

$ -

$ (10,361)

$ 17,006

Basic income per share:

Weighted average shares outstanding

36,902,634

36,902,634

36,902,634

36,902,634

36,902,634

Net income



$ 0.74

$ -

$ -

$ (0.28)

$ 0. 46

Diluted income per share:

Weighted average shares outstanding

38,824,107

38,824,107

38,824,107

38,824,107

38,824,107

Net income

$ 0.70

$ -

$ -

$ (0.26)

$ 0.44

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