Keurig Green Mountain, Inc.
Jul 28, 2010
PDF

GREEN MOUNTAIN COFFEE ROASTERS, INC. REPORTS CONTINUED STRONG SALES AND EARNINGS GROWTH FOR FISCAL 2010 THIRD QUARTER

- 64% Net Sales Growth Driven by Success of Keurig(R) Single-Cup Brewing System; Q3 2010 GAAP EPS of $0.13 and Non-GAAP EPS of $0.19; Company Provides Initial Outlook For Fiscal 2011 -

WATERBURY, Vt., Jul 28, 2010 (BUSINESS WIRE) -- Green Mountain Coffee Roasters, Inc., (NASDAQ: GMCR) today announced its fiscal 2010 third quarter results for the thirteen weeks ended June 26, 2010.

Net sales for the third quarter of fiscal 2010 increased 64% to $311.5 million as compared to $190.5 million reported in the third quarter of fiscal 2009. According to Generally Accepted Accounting Principles ("GAAP"), net income for the third quarter of fiscal 2010 totaled $18.6 million, or $0.13 per fully diluted share.

Excluding transaction-related expenses incurred in the quarter, and the resulting tax effect of reversing the tax benefit associated with previously incurred acquisition-related expenses, the Company's non-GAAP net income for the third quarter of fiscal 2010 was $25.8 million, or $0.19 per diluted share, representing an increase of 82% from $14.1 million, or $0.12 per diluted share, in the third quarter of fiscal 2009.1

The Company completed its acquisition of Diedrich Coffee Inc. ("Diedrich") on May 11, 2010 for $35 per share of common stock in a transaction with a total value of approximately $300 million. The recent Financial Accounting Standards Board ("FASB") pronouncement on business combinations, effective in fiscal 2010 for the Company, requires acquisition-related costs be expensed rather than capitalized. The Company's fiscal third quarter GAAP net income is inclusive of approximately $4.0 million of non-deductible expenses associated with the Diedrich acquisition incurred during the fiscal third quarter. In accordance with the FASB pronouncement, because the Diedrich acquisition closed during the fiscal third quarter, this quarter's GAAP net income also reflects the tax effect of reversing the tax benefit of $3.2 million associated with the $8.1 million of acquisition-related costs for the Diedrich acquisition recorded during the first and second quarters of fiscal 2010.

During fiscal 2010's third quarter, 683 million K-Cup(R) portion packs were shipped system-wide by all Keurig licensed roasters, representing an increase of 72% over the year-ago quarter. Supporting continued growth in K-Cup demand, there were 846,000 system brewers with Keurig(R)-branded brewing technology shipped during the third quarter of fiscal 2010 compared to 444,000 shipped during the third quarter of fiscal 2009.

The Company completed a three-for-one stock split during the third quarter, effected in the form of a stock dividend. Shareholders of record at the close of business on May 10, 2010 received two additional shares of common stock for every one share of common stock held on that date.

Lawrence J. Blanford, GMCR's President and CEO, said, "In our fiscal third quarter, through the strong efforts of all our employees, we delivered excellent results on our key financial performance metrics including revenue, gross margin, operating margin and net income. We have now achieved 11 consecutive quarters of better than 40 percent net sales growth. For the first nine months of fiscal 2010 we have produced net sales growth of 70% and non-GAAP earnings per share growth of 89% over the same period for fiscal year 2009."

"Continued execution of our strategic business initiatives, including most recently, our acquisition of Diedrich, is driving GMCR's growth and enabling us to advance adoption and awareness of our growing portfolio of compelling brands," said Blanford. "We believe the inherent strength of our business model, combined with our passionate employees, the strong support of our business partners and our fervent belief that we can transform the way the world views business are key drivers behind our growth and success.

Blanford concluded, "The coming holiday buying season is shaping up to be another exciting opportunity for us to help more consumers discover and enjoy outstanding beverages with the convenience and choice of the Keurig Single-Cup brewing system. We are looking for a strong kickoff to our fiscal year 2011 and are providing our initial fiscal year 2011 estimate for sales growth in a range of between 44% to 50% and earnings per share of $1.15 to $1.20."

Fiscal 2010 Third Quarter Financial Review

Key Business Drivers & Metrics

Costs, Margins and Income

Balance Sheet Highlights

Business Outlook and Other Forward-Looking Information

Fourth Quarter and Fiscal Year 2010

With one quarter remaining, the Company has refined its outlook for its fiscal year 2010 and is providing its first estimates for its fourth quarter of fiscal 2010. It now expects:

First Issue of Company Estimates for Fiscal Year 2011

The company also is providing its first estimates for fiscal year 2011:

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 2978546 from 9:00 PM ET on July 28th through 9:00 PM ET on Monday, August 2, 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(R), Green Mountain Coffee(R), Newman's Own(R) Organics coffee, Timothy's World Coffee(R) and Diedrich, Coffee People and Gloria Jeans(R), a trademark licensed to the Company for use in North America and owned by Gloria Jeans Coffees International Pty. Ltd. The Keurig business unit is a pioneer and leading manufacturer of gourmet single-cup brewing systems. K-Cup(R) portion packs for Keurig(R) Single-Cup Brewers are produced by a variety of roasters, including Green Mountain Coffee, Tully's, Timothy's and Diedrich. GMCR supports local and global communities by offsetting 100% of its direct greenhouse gas emissions, investing in Fair Trade Certified(TM) 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 Timothy's and Diedrich'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 Company experiencing product liability, product recall and higher than anticipated rates of warranty expense or sales returns associated with a product quality or safety issue, 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 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.

-Tables Follow-

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

Thirteen
weeks ended
6/26/10

Thirteen
weeks ended
6/27/09

Thirty-nine
weeks ended
6/26/10

Thirty-nine
weeks ended
6/27/09

Net sales $ 311,514 $ 190,509 $ 985,792 $ 580,841
Cost of sales 201,783 126,428 665,584 401,428
Gross profit 109,731 64,081 320,208 179,413
Selling and operating expenses 46,277 28,597 144,835 92,873
General and administrative expenses 25,267 12,708 72,903 33,165
Patent litigation settlement - - - (17,000 )
Operating income 38,187 22,776 102,470 70,375
Other income (expense) 27 (39 ) (217 ) (323 )
Interest expense (1,495 ) (1,080 ) (3,376 ) (3,494 )
Income before income taxes 36,719 21,657 98,877 66,558
Income tax expense (18,165 ) (7,517 ) (43,127 ) (25,051 )
Net income $ 18,554 $ 14,140 $ 55,750 $ 41,507
===== ===== ====== ======
Basic income per share:
Weighted average shares outstanding 131,677,459 112,775,280 131,303,879 111,397,302
Net income $ 0.14 $ 0.13 $ 0.42 $ 0.37
Diluted income per share:

Weighted average shares outstanding

137,898,253 119,010,138 137,681,766 117,318,258
Net income $ 0.13 $ 0.12 $ 0.40 $ 0.35
GREEN MOUNTAIN COFFEE ROASTERS, INC.
Unaudited Consolidated Balance Sheets
(Dollars in thousands)

June 26,
2010

September 26,
2009

Assets
Current assets:
Cash and cash equivalents $ 8,981 $ 241,811
Restricted cash and cash equivalents 940 280
Short-term investments - 50,000
Receivables, less allowances of $8,852 and $4,792

at June 26, 2010, and September 26, 2009, respectively

128,758 91,559
Income tax receivable 1,700 -
Inventories 186,262 137,294
Other current assets 16,611 9,517
Deferred income taxes, net 12,819 10,151
Total current assets 356,071 540,612
Fixed assets, net 218,821 135,981
Intangibles, net 225,481 36,478
Goodwill 386,416 99,600
Other long-term assets 10,230 3,979
Total assets $ 1,197,019 $ 816,650
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 19,058 $ 5,030
Accounts payable 112,044 79,772
Accrued compensation costs 22,215 17,264
Accrued expenses 36,049 18,570
Income tax payable - 2,971
Other short-term liabilities 2,514 3,257
Total current liabilities 191,880 126,864
Long-term debt 252,380 73,013
Deferred income taxes, net 85,469 26,599
Other long-term liabilities 5,157 -
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 - 131,783,168 and 130,811,052 shares at June 26, 2010,
and September 26, 2009, respectively

13,178 13,081
Additional paid-in capital 457,617 441,875
Retained earnings 192,912 137,162
Accumulated other comprehensive loss (1,500 ) (1,870 )

ESOP unallocated shares, at cost - 38,061 shares
at June 26, 2010, and September 26, 2009

(74 ) (74 )
Total stockholders' equity 662,133 590,174
Total liabilities and stockholders' equity $ 1,197,019 $ 816,650
GREEN MOUNTAIN COFFEE ROASTERS, INC.
Unaudited Consolidated Statements of Cash Flows
(Dollars in thousands)

Thirty-nine
weeks ended
June 26, 2010

Thirty-nine
weeks ended
June 27, 2009

Cash flows from operating activities:
Net income $ 55,750 $ 41,507

Adjustments to reconcile net income to net cash
provided by operating activities:

Depreciation 20,379 13,054
Amortization 9,497 3,861
Loss on disposal of fixed assets 522 168
Provision for doubtful accounts 372 327
(Gain) loss on futures derivatives (188 ) 207

Tax benefit (expense) from exercise of non-qualified options
and disqualified dispositions of incentive stock options

25 (163 )
Excess tax benefits from equity-based compensation plans (5,626 ) (9,123 )
Deferred income taxes 49 (1,940 )
Deferred compensation and stock compensation 6,061 4,892
Changes in assets and liabilities:
Receivables (18,478 ) (14,003 )
Inventories (35,325 ) (15,640 )
Income tax receivable, net 1,071 6,759
Other current assets (6,342 ) 187
Other long-term assets, net 421 587
Accounts payable 21,544 15,474
Accrued compensation costs (3,851 ) 4,018
Accrued expenses 11,500 5,681
Net cash provided by operating activities 57,381 55,853
Cash flows from investing activities:
Proceeds from sale of short-term investments 50,000 -
Proceeds from payment of note receivable 1,788
Acquisition of Timothy's Coffee of the World Inc. (154,208 ) -
Acquisition of Diedrich Coffee, Inc. (305,261 ) -
Acquisition of certain assets of Tully's Coffee Corporation - (41,451 )
Capital expenditures for fixed assets (84,386 ) (29,027 )
Proceeds from disposal of fixed assets 253 152
Net cash used for investing activities (491,814 ) (70,326 )
Cash flows from financing activities:
Net change in revolving line of credit 57,001 2,500
Proceeds from borrowings of long-term debt 140,000 -
Deferred financing fees (1,359 ) -
Repayments of long-term debt (3,750 ) (205 )
Proceeds from issuance of common stock 4,127 6,351
Capital lease obligations (42 ) -
Excess tax benefits from equity-based compensation plans 5,626 9,123

Net cash provided by financing activities

201,603 17,769
Net (decrease) increase in cash and cash equivalents (232,830 ) 3,296
Cash and cash equivalents at beginning of period 241,811 804
Cash and cash equivalents at end of period $ 8,981 $ 4,100

Fixed asset purchases included in accounts payable
and not disbursed at the end of each period:

$ 12,549 $ 7,399
Noncash investing activity:
Debt assumed in conjunction with acquisitions $ 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 June 26, 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 $ 311,514 - - - $ 311,514
Cost of Sales 201,783 - - - 201,783
Gross Profit 109,731 - - - 109,731

Selling and
operating
expenses

46,277 - - - 46,277

General and
administrative
expenses

25,267 - (3,992 ) - 21,275

Operating
income

38,187 - 3,992 - 42,179
Other expense 27 - - - 27
Interest expense (1,495 ) - - - (1,495 )

Income before
income taxes

36,719 - 3,992 - 40,711

Income tax
benefit (expense)

(18,165 ) - 3,216 - (14,949 )
Net income $ 18,554 $ - $ 7,208 $ - $ 25,762

Basic income per
share:

Weighted
average shares
outstanding

131,677,459 131,677,459 131,677,459 131,677,459 131,677,459
Net income $ 0.14 $ - $ 0.05 $ - $ 0.20

Diluted income
per share:

Weighted
average shares
outstanding

137,898,253 137,898,253 137,898,253 137,898,253 137,898,253
Net income $ 0.13 $ - $ 0.05 $ - $ 0.19
GREEN MOUNTAIN COFFEE ROASTERS, INC.
GAAP to Non-GAAP Reconciliation of Unaudited Consolidated Statements of Operations
(Dollars in thousands)
Thirty-nine weeks ended June 26, 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 $ 985,792 - - - $ 985,792
Cost of Sales 665,584 - - - 665,584
Gross Profit 320,208 - - - 320,208

Selling and
operating
expenses

144,835 - - - 144,835

General and
administrative
expenses

72,903 (1,927 ) (12,124 ) - 58,852

Operating
income

102,470 1,927 12,124 - 116,521
Other expense (217 ) - - - (217 )

Interest
expense

(3,376 ) - - - (3,376 )

Income before
income taxes

98,877 1,927 12,124 - 112,928

Income tax
benefit
(expense)

(43,127 ) - - - (43,127 )
Net income $ 55,750 $ 1,927 $ 12,124 $ - $ 69,801

Basic income
per share:

Weighted
average shares
outstanding

131,303,879 131,303,879 131,303,879 131,303,879 131,303,879
Net income $ 0.42 $ 0.01 $ 0.09 $ - $ 0.53

Diluted income
per share:

Weighted
average shares
outstanding

137,681,766 137,681,766 137,681,766 137,681,766 137,681,766
Net income $ 0.40 $ 0.01 $ 0.09 $ - $ 0.51
GREEN MOUNTAIN COFFEE ROASTERS, INC.
GAAP to Non-GAAP Reconciliation of Unaudited Consolidated Statements of Operations
(Dollars in thousands)
Thirteen weeks ended June 27, 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 $ 190,509 - - - $ 190,509
Cost of Sales 126,428 - - - 126,428
Gross Profit 64,081 - - - 64,081

Selling and
operating
expenses

28,597 - - - 28,597

General and
administrative
expenses

12,708 - - - 12,708

Operating
income

22,776 - - - 22,776
Other expense (39 ) - - - (39 )
Interest expense (1,080 ) - - - (1,080 )

Income before
income taxes

21,657 - - - 21,657

Income tax
expense

(7,517 ) - - - (7,517 )
Net income $ 14,140 $ - $ - $ - $ 14,140

Basic income per
share:

Weighted
average shares
outstanding

112,775,280 112,775,280 112,775,280 112,775,280 112,775,280
Net income $ 0.13 $ - $ - $ - $ 0.13

Diluted income
per share:

Weighted
average shares
outstanding

119,010,138 119,010,138 119,010,138 119,010,138 119,010,138
Net income $ 0.12 $ - $ - $ - $ 0.12
GREEN MOUNTAIN COFFEE ROASTERS, INC.
GAAP to Non-GAAP Reconciliation of Unaudited Consolidated Statements of Operations
(Dollars in thousands)
Thirty-nine weeks ended June 27, 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 $ 580,841 - - - $ 580,841
Cost of Sales 401,428 - - - 401,428
Gross Profit 179,413 - - - 179,413

Selling and
operating
expenses

92,873 - - - 92,873

General and
administrative
expenses

33,165 - - - 33,165

Patent litigation
settlement

(17,000 ) - - 17,000 -

Operating
income

70,375 - - (17,000 ) 53,375
Other expense (323 ) - - - (323 )

Interest
expense

(3,494 ) - - - (3,494 )

Income before
income taxes

66,558 - - (17,000 ) 49,558

Income tax
benefit
(expense)

(25,051 ) - - 6,639 (18,412 )
Net income $ 41,507 $ - $ - $ (10,361 ) $ 31,146

Basic income
per share:

Weighted
average shares
outstanding

111,397,302 111,397,302 111,397,302 111,397,302 111,397,302
Net income $ 0.37 $ - $ - $ (0.09 ) $ 0.28

Diluted income
per share:

Weighted
average shares
outstanding

117,318,258 117,318,258 117,318,258 117,318,258 117,318,258
Net income $ 0.35 $ - $ - $ (0.09 ) $ 0.27

1 A complete reconciliation of the Company's GAAP to non-GAAP results is provided with this announcement.

SOURCE: Green Mountain Coffee Roasters, Inc.

Green Mountain Coffee Roasters, Inc.
Suzanne DuLong, 802-882-2100
VP IR & Corporate Comm
Investor.Services@GMCR.com

Copyright Business Wire 2010