Keurig Green Mountain, Inc.
Jul 27, 2011
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Green Mountain Coffee Roasters, Inc. Reports Third Quarter Fiscal 2011 Results

Spring Advertising and Brand Promotion Raise Awareness of the Keurig Single-Cup Brewing System and Brew Over Ice Beverages

WATERBURY, Vt.--(BUSINESS WIRE)-- Green Mountain Coffee Roasters, Inc., (GMCR) (NASDAQ: GMCR), a leader in specialty coffee and coffeemakers, today announced its fiscal 2011 third quarter results for the thirteen weeks ended June 25, 2011.

Third Quarter Fiscal 2011 Performance Highlights*

Third Quarter Fiscal 2011 Results*

Net sales for the third quarter of fiscal 2011 increased 127% to $717.2 million as compared to $316.6 million for the third quarter of fiscal 2010. Under Generally Accepted Accounting Principles (GAAP), net income for the third quarter of fiscal 2011 totaled $56.3 million, or $0.37 per diluted share, representing an increase of 206% as compared to GAAP net income of $18.4 million, or $0.13 per diluted share, for the third quarter of fiscal 2010.

The Company's non-GAAP net income for the third quarter of fiscal 2011 increased 167% to $75.7 million, from non-GAAP net income of $28.3 million in the third quarter of fiscal 2010. Third quarter fiscal 2011 non-GAAP net income excludes pre-tax items of $11.8 million in amortization of identifiable intangibles related to the Company's acquisitions, $17.1 million in loss on extinguishment of debt, and $0.8 million in legal and accounting expenses related to the SEC inquiry and pending litigation. Third quarter fiscal 2010 non-GAAP net income excludes pre-tax items of $4.0 million in non-deductible acquisition-related expenses for the Diedrich acquisition and $4.3 million in amortization of identifiable intangibles related to the Company's prior acquisitions.

On the same basis of presentation, GMCR's non-GAAP earnings per diluted share increased 140% to $0.49 in the third quarter of fiscal 2011 from $0.21 in the third quarter of fiscal 2010.

"In addition to continued strong consumer adoption of the Keurig® Single-Cup Brewing system, we believe our third quarter benefitted from our first-ever significant spring advertising and brand support programs, designed to raise awareness of the Keurig Single-Cup Brewing system and of our Brew Over Ice™ Teas and Coffees, perfect for the summer months," said Lawrence J. Blanford, GMCR's president and CEO.

The Keurig® Single-Cup Brewing system brews a perfect cup of coffee, tea, hot cocoa or iced beverage in under one minute at the touch of a button.

"Keurig brewing is truly changing the way North America brews and enjoys coffee at home and in the workplace," said Blanford. "We have seen awareness of the Keurig Single-Cup Brewing system grow faster and more broadly than we could have imagined just a few years ago. As we head into preparation for Holiday 2011 and planning for our 2012 fiscal year, we are both excited and humbled by the opportunity we see ahead for our Company, our employees and our valued business partners."

Blanford concluded, "It is particularly rewarding to think that with our growth, the resources we're able to allocate to socially and environmentally focused initiatives grows as well, amplifying the positive change GMCR and its employees continue to bring about in our local communities and in communities around the world."

Fiscal 2011 Third Quarter Financial Review*

Balance Sheet Highlights

Business Outlook and Other Forward-Looking Information*

Company Estimates for Fourth Quarter Fiscal Year 2011

With one quarter remaining, the Company has refined its outlook for its fiscal year 2011 and is providing its estimates for its fourth quarter of fiscal 2011. It expects:

Company Estimates for Fiscal Year 2012

The Company provided the following first estimates for its fiscal year 2012.

*All comparisons to prior periods reflect restated financial results for those periods as reported in Annual Report on Form 10-K filed December 9, 2010. A complete reconciliation of the Company's GAAP to non-GAAP results is provided with this announcement.

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, legal and accounting-related expenses associated with the SEC inquiry, the Company's internal investigation and pending litigation, foreign exchange impact of hedging the risk associated with the Canadian dollar purchase price of the Van Houtte acquisition, and non-cash related items such as amortization of identifiable intangibles, and losses incurred on the extinguishment of debt, each of which include adjustments to show the tax impact of excluding these items. 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 5:00 p.m. ET today, July 27, 2011. Management's prepared remarks on its quarterly 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 8608345 from 9:00 p.m. ET on July 27, 2011 through 9:00 p.m. ET on Sunday, July 31, 2011.

About Green Mountain Coffee Roasters, Inc.

As a leader in specialty coffee and coffee makers, Green Mountain Coffee Roasters, Inc. (GMCR) (NASDAQ: GMCR), is recognized for its award-winning coffees, innovative Keurig Single-Cup brewing technology, and socially responsible business practices. GMCR supports local and global communities by offsetting 100% of its direct greenhouse gas emissions, investing in sustainably-grown coffee, and donating at least five percent of its pre-tax profits to social and environmental projects. 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.

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 the Company's acquisitions, 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, the Company's ability to continue to grow and build profits 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.

GMCR-C

 

GREEN MOUNTAIN COFFEE ROASTERS, INC.

Unaudited Consolidated Statements of Operations

(Dollars in thousands except per share data)

 
Thirteen Thirteen
weeks ended weeks ended
June 25, June 26,
2011 2010
(As Restated)
Net sales $ 717,210 $ 316,583
Cost of sales   453,130     207,698  
Gross profit 264,080 108,885
 
Selling and operating expenses 95,512 45,687
General and administrative expenses   49,258     25,267  
Operating income 119,310 37,931
 
Other income (expense), net (233 ) 27
Gain on financial instruments, net 482 -
Loss on foreign currency, net (981 ) -
Interest expense   (29,830 )   (1,495 )
Income before income taxes 88,748 36,463
 
Income tax expense   (31,778 )   (18,063 )
Net Income 56,970 18,400
 
Net income attributable to noncontrolling interests   622     -  
 
Net income attributable to GMCR $ 56,348   $ 18,400  
 
 
Basic income per share:
Basic weighted average shares outstanding 147,663,350 131,677,459
Net income per common share - basic $ 0.38 $ 0.14
 
Diluted income per share:
Diluted weighted average shares outstanding 153,344,389 137,898,253
Net income per common share - diluted $ 0.37 $ 0.13
   

GREEN MOUNTAIN COFFEE ROASTERS, INC.

Unaudited Consolidated Statements of Operations

(Dollars in thousands except per share data)

 
Thirty-nine Thirty-nine
weeks ended weeks ended
June 25, June 26,
2011 2010
(As Restated)
Net sales $ 1,939,016 $ 983,688
Cost of sales   1,288,481     671,376  
Gross profit 650,535 312,312
 
Selling and operating expenses 253,546 142,313
General and administrative expenses   134,788     72,903  
Operating income 262,201 97,096
 
Other income (expense), net 933 137
Loss on financial instruments, net (11,819 ) (354 )
Gain on foreign currency, net 4,643 -
Interest expense   (52,560 )   (3,376 )
Income before income taxes 203,398 93,503
 
Income tax expense   (78,171 )   (40,988 )
Net Income 125,227 52,515
 
Net income attributable to noncontrolling interests   1,095     -  
 
Net income attributable to GMCR $ 124,132   $ 52,515  
 
 
Basic income per share:
Basic weighted average shares outstanding 143,606,691 131,303,879
Net income per common share - basic $ 0.86 $ 0.40
 
Diluted income per share:
Diluted weighted average shares outstanding 149,357,480 137,681,766
Net income per common share - diluted $ 0.83 $ 0.38
   

GREEN MOUNTAIN COFFEE ROASTERS, INC.

Unaudited Consolidated Balance Sheets

(Dollars in thousands)

 
June 25, September 25,
2011 2010
Assets
Current assets:
Cash and cash equivalents $ 76,138 $ 4,401
Restricted cash and cash equivalents 30,651 355

Receivables, less uncollectible accounts and return allowances of $20,432 and $14,056 at June 25, 2011 and September 25, 2010, respectively

229,420 172,200
Inventories 417,496 262,478
Income taxes receivable 10,736 5,350
Other current assets 25,068 23,488
Current deferred income taxes, net 27,186 26,997
Current assets held for sale   28,303   -  
Total current assets 844,998 495,269
 
Fixed assets, net 499,076 258,923
Intangibles, net 555,416 220,005
Goodwill 806,613 386,416
Other long-term assets 49,137 9,961
Long-term assets held for sale   119,182   -  
 
Total assets $ 2,874,422 $ 1,370,574  
 
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 5,238 $ 19,009
Accounts payable 209,572 139,220
Accrued compensation costs 40,095 24,236
Accrued expenses 76,895 49,279
Income tax payable 2,924 1,934
Current deferred income taxes, net 1,888 -
Other short-term liabilities 39,601 4,377
Current liabilities related to assets held for sale   19,493   -  
Total current liabilities   395,706   238,055  
 
Long-term debt 416,676 335,504
Long-term deferred income taxes, net 195,879 92,579
Other long-term liabilities 27,729 5,191
Long-term liabilities related to assets held for sale 1,039 -
 
Commitments and contingencies
 
Redeemable noncontrolling interests 20,747 -
 
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 and outstanding - 153,044,445 and 132,823,585 shares at June 25, 2011 and September 25, 2010, respectively

15,304 13,282
Additional paid-in capital 1,456,662 473,749
Retained earnings 337,000 213,844
Accumulated other comprehensive income (loss)   7,680   (1,630 )
Total stockholders' equity $ 1,816,646 $ 699,245  
 
Total liabilities and stockholders' equity $ 2,874,422 $ 1,370,574  
   

GREEN MOUNTAIN COFFEE ROASTERS, INC.

Unaudited Consolidated Statements of Cash Flows

(Dollars in thousands)

 
Thirty-nine Thirty-nine
weeks ended weeks ended
June 25, June 26,
2011 2010
(As Restated)
Cash flows from operating activities:
Net income $ 125,227 $ 52,515
 

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

Depreciation 50,176 20,379
Amortization of intangibles 29,587 9,497
Amortization of deferred financing fees 4,643 -
Loss on extinguishment of debt 19,732 -
Unrealized gain on foreign currency (4,956 ) -
Loss on disposal of fixed assets 421 522
Provision for doubtful accounts 2,315 372
Provision for sales returns 48,755 26,291
Unrealized loss (gain) on financial instruments, net 7,671 (188 )

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

38 25
Excess tax benefits from equity-based compensation plans (29,175 ) (5,626 )
Deferred income taxes 3,343 49
Deferred compensation and stock compensation 7,686 6,061
Changes in assets and liabilities, net of effects of acquisition:
Receivables (58,229 ) (44,769 )
Inventories (118,113 ) (31,356 )
Income tax receivable (payable), net 25,533 (1,068 )
Other current assets 2,371 (4,896 )
Other long-term assets, net (11,552 ) 421
Accounts payable 49,134 21,544
Accrued compensation costs (1,106 ) (3,851 )
Accrued expenses 12,054 12,119
Other short-term liabilities (2,388 ) -
Other long-term liabilities   11,541     -  
Net cash provided by operating activities 174,708 58,041
 
Cash flows from investing activities:
Change in restricted cash 98 (660 )
Proceeds from sale of short-term investments - 50,000
Proceeds from notes receivable 449 1,788
Acquisition of Timothy's Coffee of the World Inc. - (154,208 )
Acquisition of Diedrich Coffee, Inc., net of cash acquired - (305,261 )
Acquisition of LJVH Holdings, Inc. (Van Houtte), net of cash acquired (907,835 ) -
Capital expenditures for fixed assets (175,474 ) (84,386 )
Proceeds from disposal of fixed assets 850 253
Other investing activities   (158 )   -  
Net cash used in investing activities (1,082,070 ) (492,474 )
 
Cash flows from financing activities:
Net change in revolving line of credit 165,835 57,001
Proceeds from issuance of common stock under compensation plans 9,577 4,127
Proceeds from issuance of common stock for private placement 291,096 -
Proceeds from issuance of common stock in public equity offering 673,048 -
Financing costs in connection with public equity offering (25,685 ) -
Dividends paid to redeemable noncontrolling interests shareholders (702 ) -
Excess tax benefits from equity-based compensation plans 29,175 5,626
Capital lease obligations (7 ) (42 )
Proceeds from borrowings of long-term debt 796,375 140,000
Deferred financing fees (45,821 ) (1,359 )
Repayment of long-term debt   (906,708 )   (3,750 )
Net cash provided by financing activities 986,183 201,603
 
Change in cash balances included in short-term assets held for sale (8,248 ) -
 
Effect of exchange rate changes on cash and cash equivalents 1,164 -
 
Net increase (decrease) in cash and cash equivalents 71,737 (232,830 )
Cash and cash equivalents at beginning of period   4,401     241,811  
Cash and cash equivalents at end of period $ 76,138   $ 8,981  
 
 
Supplemental disclosures of cash flow information:

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

$ 26,970 $ 12,549
 
Noncash investing activity:
Liabilities assumed in conjunction with acquisitions $ - $ 1,533
 

GREEN MOUNTAIN COFFEE ROASTERS, INC.

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

(Dollars in thousands)

   
Thirteen weeks Thirteen weeks
ended ended
June 25, 2011 June 26, 2010
(As Restated)
Operating income $ 119,310 $ 37,931
Acquisition-related expenses (1) - 3,992
SEC inquiry (2) 799 -
Amortization of identifiable intangibles (3)   11,794   4,293
Non-GAAP operating income $ 131,903 $ 46,216
 
 
Thirteen weeks Thirteen weeks
ended ended
June 25, 2011 June 26, 2010
(As Restated)
Net income $ 56,348 $ 18,400
After tax:
Acquisition-related expenses (5) - 7,208
SEC inquiry (2) 513 -
Amortization of identifiable intangibles (3) 7,859 2,729
Loss on extinguishment of debt (4)   11,027   -
Non-GAAP net income $ 75,747 $ 28,337
 
 
Thirteen weeks Thirteen weeks
ended ended
June 25, 2011 June 26, 2010
(As Restated)
Diluted income per share $ 0.37 $ 0.13
After tax:
Acquisition-related expenses (5) $ - $ 0.05
SEC inquiry (2) $ 0.00 $ -
Amortization of identifiable intangibles (3) $ 0.05 $ 0.02
Loss on extinguishment of debt (4) $ 0.07 $ -
Non-GAAP net income per share $ 0.49 $ 0.21 *
*Does not add due to rounding.

(1) Represents direct acquisition related expenses classified as general and administrative expense.

(2) Represents legal and accounting expenses related to the SEC inquiry and pending litigation classified as general and administrative.

(3) Represents the amortization of intangibles related to the Company's acquisitions classified as general and administrative expense.

(4) Represents the write-off of debt issuance costs and original issue discount primarily associated with the extinguishment of the Term B loan under the Credit Agreement.

(5) Third quarter of fiscal 2010 reflects the reversal of $4.0 million non-deductible acquisition related expenses and the resulting $3.2 million tax effect. The tax effect represents the reversal of the tax benefit associated with acquisition related expenses previously incurred during the Company's first and second quarters of fiscal 2010 for the Diedrich acquisition which closed during the Company's third quarter of fiscal 2010.

   

GREEN MOUNTAIN COFFEE ROASTERS, INC.

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

(Dollars in thousands)

 
Thirty-nine Thirty-nine
weeks ended weeks ended
June 25, 2011 June 26, 2010
(As Restated)
Operating income $ 262,201 $ 97,096
Acquisition-related expenses (1) 10,573 13,889
SEC inquiry (2) 7,193 -
Amortization of identifiable intangibles (3)   29,587   9,497
Non-GAAP operating income   309,554 $ 120,482
 
 
Thirty-nine Thirty-nine
weeks ended weeks ended
June 25, 2011 June 26, 2010
(As Restated)
Net income $ 124,132 $ 52,515
After tax:
Acquisition-related expenses (5) 14,524 13,889
SEC inquiry (2) 4,442 -
Amortization of identifiable intangibles (3) 19,514 6,090
Loss on extinguishment of debt (4)   11,027   -
Non-GAAP net income $ 173,639 $ 72,494
 
 
Thirty-nine Thirty-nine
weeks ended weeks ended
June 25, 2011 June 26, 2010
(As Restated)
Diluted income per share $ 0.83 $ 0.38
After tax:
Acquisition-related expenses (5) $ 0.10 $ 0.10
SEC inquiry (2) $ 0.03 $ -
Amortization of identifiable intangibles (3) $ 0.13 $ 0.04
Loss on extinguishment of debt (4) $ 0.07 $ -
Non-GAAP net income per share $ 1.16 $ 0.53 *
*Does not add due to rounding.

(1) Represents direct acquisition related expenses classified as general and administrative expense.

(2) Represents legal and accounting expenses related to the SEC inquiry, the Company's internal investigation and pending litigation classified as general and administrative.

(3) Represents the amortization of intangibles related to the Company's acquisitions classified as general and administrative expense.

(4) Represents the write-off of debt issuance costs and original issue discount, net of tax, primarily associated with the extinguishment of the Term B loan under the Credit Agreement.

(5) The 2011 YTD period reflects direct acquisition-related expenses of $10.6 million ($8.9 million after-tax). In addition, the 2011 YTD period represents; the write-off of deferred financing expenses as part of the new debt financing of $2.6 million ($1.6 million after-tax) and the foreign exchange impact of hedging the risk associated with the Canadian dollar purchase price of the Van Houtte acquisition of $5.3 million ($4.0 million after-tax).
The 2010 YTD period reflects the reversal of $13.9 million direct acquisition related expenses. The reversal of the acquisition related expenses had no tax effect YTD because the acquisitions were closed as of the third quarter of fiscal 2010 and the expenses are non-deductible for tax purposes.

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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