Keurig Green Mountain, Inc.
Dec 9, 2010
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Green Mountain Coffee Roasters, Inc. Reports Strong Fourth Quarter and Year-End Fiscal 2010 Results Driven by the Keurig® Single-Cup Brewing System

WATERBURY, Vt.--(BUSINESS WIRE)-- Green Mountain Coffee Roasters, Inc., (NASDAQ: GMCR), a leader in specialty coffee and coffeemakers, today announced its fiscal 2010 fourth quarter and year-end results for the thirteen weeks and fiscal year ended September 25, 2010.

Performance Highlights

Fourth Quarter Fiscal 2010

Fiscal 2010

Restated Financial Results

As set forth in the Company's Annual Report on Form 10-K for the fiscal year ended September 25, 2010, the Company has restated its previously issued financial statements for the fiscal years ended September 30, 2006, September 29, 2007, September 27, 2008 and September 26, 2009 and the first three quarters of fiscal 2010, including the quarterly data for fiscal years 2009 and 2010 and its selected financial data for the relevant periods. Any comparisons to prior periods reflect restated financial results for those periods. Accordingly, investors should no longer rely upon the Company's previously released financial statements for these periods and any earnings releases or other communications relating to these periods.

Fourth Quarter 2010 Results

Net sales for the fourth quarter of fiscal 2010 increased 73% to $373.1 million as compared to $216.0 million for the fourth quarter of fiscal 2009. GAAP net income for the fourth quarter of fiscal 2010 totaled $27.0 million, or $0.20 per fully diluted share, representing an increase of 92% as compared to GAAP net income of $14.1 million, or $0.11 per diluted share for the fourth quarter of fiscal 2009.

Excluding transaction-related expenses in the quarter, the Company's non-GAAP net income for the fourth quarter of fiscal 2010 increased 112% to $29.8 million from $14.1 million in the fourth quarter of fiscal 2009.1 Non-GAAP earnings per diluted share increased 97% to $0.22 from $0.11 in the fourth quarter of fiscal 2009.1

Fiscal Year 2010 Results

Net sales for the 2010 fiscal year increased 73% to $1,356.8 million as compared to $786.1 million for the 2009 fiscal year. Under Generally Accepted Accounting Principles (GAAP), net income for the 2010 fiscal year totaled $79.5 million, or $0.58 per diluted share, representing an increase of 46% as compared to GAAP net income of $54.4 million, or $0.45 per diluted share for the 2009 fiscal year.

Excluding transaction-related expenses incurred during fiscal 2010, and the $17.0 million pre-tax Kraft patent litigation settlement recorded in fiscal 2009, the Company's non-GAAP net income for fiscal 2010 increased 119% to $96.3 million from $43.9 million in fiscal 2009.1 Non-GAAP earnings per fully diluted share increased 92% to $0.70 from $0.36 in fiscal 2009.1 Fiscal 2010 and fiscal 2009 non-GAAP earnings per diluted share include $0.06 and $0.03 of amortization of identifiable intangibles related to the companies acquisitions per diluted share, respectively.

In alignment with its purpose: "To create the ultimate coffee experience in every life we touch from tree to cup — transforming the way the world views business," GMCR allocates at least 5% of its pre-tax profits to socially and environmentally responsible initiatives.

"Our fiscal 2010 results demonstrate increasing consumer awareness of and interest in the convenience and value represented by the Keurig Single-Cup system," said Lawrence J. Blanford, GMCR's President and CEO. "We estimate Keurig systems are currently active in approximately 6% of the 90 million coffee-drinking households in the United States, and we believe there is room to expand our presence going forward."

"The GMCR team remains focused, continuing to execute in a way that enables us to capitalize on what we believe is substantial opportunity for growth," continued Blanford. "We are very excited about the 2010 Holiday season and the support we're seeing from our customers and licensed-brand partners. We continue to expect a strong start to our fiscal 2011 and anticipate total consolidated net sales growth of 55% to 65% for the first quarter of 2011."

Fiscal 2010 Fourth Quarter Financial Review

Key Business Drivers & Metrics

Costs, Margins and Income

Balance Sheet Highlights

Proposed Acquisition of Van Houtte

Business Outlook and Other Forward-Looking Information

Company Estimates for Fiscal Year 2011

The Company provided the following revised and/or first issuance of estimates for its fiscal year 2011:

Company Estimates for First Quarter Fiscal Year 2011

The Company also provided its first estimates for its first quarter of fiscal 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 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.

Conference Call and Webcast

Green Mountain Coffee Roasters, Inc. will be discussing these financial results with analysts and investors in a conference call and live webcast available via the Internet at 5:30 p.m. ET today, December 9, 2010. Management's prepared remarks on its quarterly and annual results will be provided via a Current Report on Form 8-K and also posted under the events link in the Investor Relations section of the Company's website at www.GMCR.com. As a result, the conference call will include only brief remarks by management followed by a question and answer session. The call along with accompanying slides is accessible, via live webcast from the events link in the Investor Relations portion of the Company's website at http://investor.gmcr.com/events.cfm. The Company archives the latest conference call for a period of time. A replay of the conference call also will be available by telephone at (719) 457-0820, Passcode 4442884 from 9:00 p.m. ET on December 9th through 9:00 PM ET on Wednesday, December 15, 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 a family of brands, including Tully's Coffee®, Green Mountain Coffee®, Newman's Own® Organics coffee, Timothy's World Coffee® and Diedrich®, Coffee People® and Gloria Jeans®, 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 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™ 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, the impact of the inquiry initiated by the SEC and any related litigation or additional governmental investigative or enforcement proceedings, 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 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
9/25/10

Thirteen
weeks ended
9/26/09

Fifty-two
weeks ended
9/25/10

Fifty-two
weeks ended
9/26/09

(As Restated) (As Restated)
 
Net sales $ 373,087 $ 215,965 $ 1,356,775 $ 786,135
Cost of sales   259,641     147,097     931,017     540,744  
Gross profit 113,446 68,868 425,758 245,391
 
Selling and operating expenses 44,105 30,112 186,418 121,350
General and administrative expenses 27,665 13,939 100,568 47,655
Patent litigation settlement   -     -     -     (17,000 )
Operating income 41,676 24,817 138,772 93,386
 
Other income (expense) (52 ) (338 ) (269 ) (662 )
Interest expense   (1,918 )   (1,199 )   (5,294 )   (4,693 )
Income before income taxes 39,706 23,280 133,209 88,031
 
Income tax expense   (12,715 )   (9,228 )   (53,703 )   (33,592 )
Net income $ 26,991   $ 14,052   $ 79,506   $ 54,439  
 
Basic income per share:
Weighted average shares outstanding 132,210,938 121,743,135 131,529,412 113,979,588
Net income $ 0.20 $ 0.12 $ 0.60 $ 0.48
 
Diluted income per share:
Weighted average shares outstanding 138,256,219 128,401,764 137,834,123 120,370,659
Net income $ 0.20 $ 0.11 $ 0.58 $ 0.45

GREEN MOUNTAIN COFFEE ROASTERS, INC.

Unaudited Consolidated Balance Sheets

(Dollars in thousands)

   

September 25,
2010

September 26,
2009

(As Restated)
Assets
Current assets:
Cash and cash equivalents $ 4,401 $ 241,811
Restricted cash and cash equivalents 355 280
Short-term investments - 50,000

Receivables, less allowances of $14,056 and $4,792
at September 25, 2010, and September 26, 2009, respectively

172,200 91,559
Income tax receivable 5,350 -
Inventories 262,478 132,182
Other current assets 23,488 11,384
Deferred income taxes, net   26,997     10,151  
Total current assets 495,269 537,367
 
Fixed assets, net 258,923 135,981
Intangibles, net 220,005 36,478
Goodwill 386,416 99,600
Other long-term assets   9,961     3,979  
 
Total assets $ 1,370,574   $ 813,405  
 
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 19,009 $ 5,030
Accounts payable 139,220 79,772
Accrued compensation costs 24,236 17,264
Accrued expenses 49,279 19,895
Income tax payable 1,934 1,225
Other short-term liabilities   4,377     3,257  
Total current liabilities 238,055 126,443
 
Long-term debt 335,504 73,013
Deferred income taxes, net 92,579 26,599
Other long-term liabilities 5,191 -
 
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 — 132,823,585 and 130,811,052 shares at September 25,
2010, and September 26, 2009, respectively

13,282 13,081
Additional paid-in capital 473,749 441,875
Retained earnings 213,844 134,338
Accumulated other comprehensive loss (1,630 ) (1,870 )

ESOP unallocated shares, at cost — 0 and 38,060 shares
at September 25, 2010, and September 26, 2009, respectively

  -     (74 )
Total stockholders' equity   699,245     587,350  
 
Total liabilities and stockholders' equity $ 1,370,574   $ 813,405  

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

   

Fifty-two weeks
ended
September 25,
2010

Fifty-two
weeks ended
September 26,
2009

(As Restated)
Cash flows from operating activities:
Net income $ 79,506 $ 54,439
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 29,484 17,987
Amortization of intangibles 14,973 5,318
Loss on disposal of fixed assets 573 679
Provision for doubtful accounts 610 243
Provision for sales returns 40,139 15,943
(Gain) loss on futures derivatives (188 ) 264
Tax benefit (expense) from exercise of non-qualified options
and disqualified dispositions of incentive stock options (713 ) (399 )
Excess tax benefits from equity-based compensation plans (14,590 ) (10,761 )
Tax expense from allocation of ESOP shares - (3 )
Deferred income taxes (6,931 ) 1,683
Deferred compensation and stock compensation 8,110 6,819
Contributions to the ESOP 1,376 1,000
Changes in assets and liabilities:
Receivables (102,297 ) (52,963 )
Inventories (116,653 ) (47,650 )
Income tax receivable, net 10,065 10,769
Other current assets (10,767 ) (3,703 )
Other long-term assets, net (4,487 ) 1,769
Accounts payable 32,844 25,834
Accrued compensation costs (1,830 ) 6,147
Accrued expenses 23,405 5,083
Other short-term liabilities 1,645 -
Other long-term liabilities   5,191     -  
Net cash (used in) provided by operating activities (10,535 ) 38,498
 
Cash flows from investing activities:
Proceeds from sale of short-term investments 50,000 -
Purchases of short-term investments - (50,000 )
Proceeds from receipt of note receivable 1,788 -
Acquisition of Diedrich Coffee, Inc. (305,261 ) -
Acquisition of Timothy's Coffee of the World Inc. (154,208 ) -
Acquisition of certain assets of Tully's Coffee Corporation - (41,361 )
Capital expenditures for fixed assets (118,042 ) (48,298 )
Proceeds from disposal of fixed assets   526     162  
Net cash used in investing activities (525,197 ) (139,497 )
 
Cash flows from financing activities:
Net change in revolving line of credit 145,000 (95,500 )
Proceeds from borrowings of long-term debt 140,000 50,000
Deferred financing fees (1,339 ) (1,084 )
Repayments of long-term debt (8,500 ) (217 )
Proceeds from issuance of common stock under compensation plans 8,788 8,253
Proceeds from issuance of common stock for public equity offering - 386,688
Financing costs in connection with public equity offering - (16,895 )
Capital lease obligations (217 ) -
Excess tax benefits from equity-based compensation plans   14,590     10,761  
Net cash provided by financing activities 298,322 342,006
 
Net increase (decrease) in cash and cash equivalents (237,410 ) 241,007
Cash and cash equivalents at beginning of period   241,811     804  
Cash and cash equivalents at end of period $ 4,401   $ 241,811  
 
Supplemental disclosures of cash flow information:
Cash paid for interest $ 6,486 $ 5,118
Cash paid for income taxes $ 42,313 $ 20,368

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

$ 28,424 $ 12,509
 

Noncash investing activity:

Liabilities 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 September 25, 2010
GAAP  

Acquisition-
related
Transaction
Expenses

 

Patent
Litigation
Settlement

 

Non-GAAP

Net Sales $ 373,087   $ -   $ -   $ 373,087
Cost of Sales   259,641       -       -     259,641  
Gross Profit 113,446 - - 113,446
Selling and operating expenses 44,105 - - 44,105
General and administrative expenses 27,665 (4,956 ) - 22,709
             
Operating income 41,676 4,956 - 46,632
Other income (expense) (52 ) - - (52 )
Interest expense   (1,918 )     -       -     (1,918 )
Income before income taxes 39,706 4,956 - 44,662
Income tax expense   (12,715 )     (2,133 )     -     (14,848 )
Net income $ 26,991     $ 2,823     $ -   $ 29,814  
 
Basic income per share:
Weighted average shares outstanding 132,210,938 132,210,938 132,210,938 132,210,938
Net income $ 0.20 $ 0.02 $ - $ 0.23
 
Diluted income per share:
Weighted average shares outstanding 138,256,219 138,256,219 138,256,219 138,256,219
Net income $ 0.20 $ 0.02 $ - $ 0.22

GREEN MOUNTAIN COFFEE ROASTERS, INC.

GAAP to Non-GAAP Reconciliation of Unaudited Consolidated Statements of Operations

(Dollars in thousands)

 
Fifty-Two weeks ended September 25, 2010
GAAP  

Acquisition-
related
Transaction
Expenses

 

Patent
Litigation
Settlement

  Non-GAAP
Net Sales $ 1,356,775   $ -   $ -   $ 1,356,775
Cost of Sales   931,017       -       -     931,017  
Gross Profit 425,758 - - 425,758
Selling and operating expenses 186,418 - - 186,418
General and administrative expenses 100,568 (18,906 ) - 81,662
             
Operating income 138,772 18,906 - 157,678
Other income (expense) (269 ) - - (269 )
Interest expense   (5,294 )     -       -     (5,294 )
Income before income taxes 133,209 18,906 - 152,115
Income tax expense   (53,703 )     (2,133 )     -     (55,836 )
Net income $ 79,506     $ 16,773     $ -   $ 96,279  
 
Basic income per share:
Weighted average shares outstanding 131,529,412 131,529,412 131,529,412 131,529,412
Net income $ 0.60 $ 0.13 $ - $ 0.73
 
Diluted income per share:
Weighted average shares outstanding 137,834,123 137,834,123 137,834,123 137,834,123
Net income $ 0.58 $ 0.12 $ - $ 0.70

GREEN MOUNTAIN COFFEE ROASTERS, INC.

GAAP to Non-GAAP Reconciliation of Unaudited Consolidated Statements of Operations

(Dollars in thousands)

 
Thirteen weeks ended September 26, 2009

GAAP
(As Restated)

 

Acquisition-
related
Transaction
Expenses

 

Patent
Litigation
Settlement

 

Non-GAAP
(As Restated)

Net Sales $ 215,965   $ -   $ -   $ 215,965
Cost of Sales   147,097       -     -     147,097  
Gross Profit 68,868 - - 68,868
Selling and operating expenses 30,112 - - 30,112
General and administrative expenses 13,939 - - 13,939
             
Operating income 24,817 - - 24,817
Other income (expense) (338 ) - - (338 )
Interest expense   (1,199 )     -     -     (1,199 )
Income before income taxes 23,280 - - 23,280
Income tax expense   (9,228 )     -     -     (9,228 )
Net income $ 14,052     $ -   $ -   $ 14,052  
 
Basic income per share:
Weighted average shares outstanding 121,743,135 121,743,135 121,743,135 121,743,135
Net income $ 0.12 $ - $ - $ 0.12
 
Diluted income per share:
Weighted average shares outstanding 128,401,764 128,401,764 128,401,764 128,401,764
Net income $ 0.11 $ - $ - $ 0.11

GREEN MOUNTAIN COFFEE ROASTERS, INC.

GAAP to Non-GAAP Reconciliation of Unaudited Consolidated Statements of Operations

(Dollars in thousands)

 
Fifty-Two weeks ended September 26, 2009

GAAP
(As Restated)

 

Acquisition-
related
Transaction
Expenses

 

Patent
Litigation
Settlement

 

Non-GAAP
(As Restated)

Net Sales $ 786,135   $ -   $ -   $ 786,135
Cost of Sales   540,744       -     -       540,744  
Gross Profit 245,391 - - 245,391
Selling and operating expenses 121,350 - - 121,350
General and administrative expenses 47,655 - - 47,655
Patent litigation settlement   (17,000 )     -     17,000       -  
Operating income 93,386 - (17,000 ) 76,386
Other income (expense) (662 ) - - (662 )
Interest expense   (4,693 )     -     -       (4,693 )
Income before income taxes 88,031 - (17,000 ) 71,031
Income tax expense   (33,592 )     -     6,443       (27,149 )
Net income $ 54,439     $ -   $ (10,557 )   $ 43,882  
 
Basic income per share:
Weighted average shares outstanding 113,979,588 113,979,588 113,979,588 113,979,588
Net income $ 0.48 $ - $ (0.09 ) $ 0.38
 
Diluted income per share:
Weighted average shares outstanding 120,370,659 120,370,659 120,370,659 120,370,659
Net income $ 0.45 $ - $ (0.09 ) $ 0.36

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

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

Source: Green Mountain Coffee Roasters, Inc.

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