Keurig Green Mountain, Inc.
May 2, 2012
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Green Mountain Coffee Roasters, Inc. Reports Second Quarter Fiscal Year 2012 Results

Keurig Single Cup Brewing System Continues to Drive Growth

Company Revises 2012 Non-GAAP Earnings per Share Outlook to $2.40 to $2.50

WATERBURY, Vt.--(BUSINESS WIRE)-- Green Mountain Coffee Roasters, Inc., (GMCR) (NASDAQ: GMCR), a leader in specialty coffee and coffee makers, today announced its second quarter fiscal year 2012 results for the thirteen and twenty-six weeks ended March 24, 2012.

Performance Highlights

Second Quarter Fiscal Year 2012

"Over the past several years we achieved a strong net sales growth rate driven by consumers' rapid acceptance of our innovative Keurig® Single Cup Brewing system," said Lawrence J. Blanford, GMCR's president and CEO. "Additionally, during this timeframe we made a number of strategic acquisitions that strengthened our long-term position and contributed to our growth rate. During the second fiscal quarter our 37% net sales growth resulted from more consumers adopting the ease and convenience of Keurig's® Choose. Brew. Enjoy.™ approach to beverages. Despite lower-than-anticipated portion pack sales, and to a lesser degree, brewer sales, in the quarter we were able to control sales, general and administrative expenses enabling us to achieve non-GAAP earnings per share growth of 33%."

"Based on the consumer surveys conducted on our behalf, we estimate our U.S. Keurig® Single Cup Brewer installed base has increased to between 10.8 and 12.2 million brewers in use in households as of March 2012, a substantial increase from where we believe our installed base was just one year ago," continued Blanford. "After several quarters of robust adoption, we now expect a more moderated growth trajectory going forward for both Keurig® brewer and K-Cup® pack sales. Based upon our estimate that our installed base represents a relatively small percentage of the total estimated 90 million U.S. households with a coffee maker, we remain enthusiastic about the long-term opportunity for continued Keurig® brewer adoption as well as initial consumer reaction to our recently introduced Vue™ brewer."

Second Quarter Fiscal Year 2012 Financial Review

 

Net Sales by Products (in millions)

 
  Thirteen weeks ended      
March 24,   March 26,

$ Increase

% Increase

  2012     2011

(Decrease)

 

(Decrease)

Single Serve Packs $ 655.0 $ 411.8 $ 243.2 59 %
Brewers and Accessories 140.2 116.2 24.0 21 %
Other Products and Royalties   89.9   119.7   (29.8 ) (25 )%
Total Net Sales $ 885.1 $ 647.7 $ 237.4   37 %
 

Balance Sheet Highlights

Business Outlook and Other Forward-Looking Information

Company Estimates for Fiscal Year 2012

The Company provided revised estimates for its fiscal year 2012:

Company Estimates for Third Quarter Fiscal Year 2012

The Company is providing initial estimates for the third quarter of fiscal year 2012:

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 transaction expenses related to the Company's acquisitions including the foreign exchange impact of hedging the risk associated with the Canadian dollar purchase price of the Van Houtte acquisition; any gain from sale of the Filterfresh U.S.-based coffee services business; legal and accounting expenses related to the SEC inquiry and pending litigation; non-cash related items such as amortization of identifiable intangibles and losses incurred on the extinguishment of debt; and the effect of net operating and capital loss carryforwards, 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 document 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, May 2, 2012. 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 2624910 from 9:00 p.m. ET on May 2, 2012 through 9:00 p.m. ET on Sunday, May 6, 2012.

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 difficulty in forecasting sales and production levels, the degree to which there are changes in 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 ability to maximize or successfully assert our intellectual property rights, the Company's success in introducing and producing new product offerings, the Company's dependence on external capital, including 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's ability to attract and retain senior management, the continued availability of a consistent supply of parts for our brewers, and the brewers themselves, 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 extent to which the data security of the Company's websites may be compromised, 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 Annual Report on Form 10-K for fiscal year 2011 and other 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
March 24, March 26,
  2012     2011  
Net sales $ 885,052 $ 647,658
Cost of sales   572,014     404,803  
Gross profit 313,038 242,855
 
Selling and operating expenses 111,105 79,745
General and administrative expenses   52,340     43,499  
Operating income 149,593 119,611
 
Other income (expense), net 669 1,078
Loss on financial instruments, net (2,112 ) (5,959 )
Gain on foreign currency, net 3,613 4,045
Interest expense   (6,042 )   (16,672 )
Income before income taxes 145,721 102,103
 
Income tax expense   (52,458 )   (36,295 )
Net Income $ 93,263 $ 65,808
 
Net income attributable to noncontrolling interests   232     436  
 
Net income attributable to GMCR $ 93,031   $ 65,372  
 
 
Basic income per share:
Basic weighted average shares outstanding 155,049,294 141,784,994
Net income per common share - basic $ 0.60 $ 0.46
 
Diluted income per share:
Diluted weighted average shares outstanding 159,374,545 147,558,595
Net income per common share - diluted $ 0.58 $ 0.44
 

 
GREEN MOUNTAIN COFFEE ROASTERS, INC.
Unaudited Consolidated Statements of Operations
(Dollars in thousands except per share data)
     
Twenty-six Twenty-six
weeks ended weeks ended
March 24, March 26,
  2012     2011  
Net sales $ 2,043,268 $ 1,221,806
Cost of sales   1,393,626     835,351  
Gross profit 649,642 386,455
 
Selling and operating expenses 252,463 158,034
General and administrative expenses   101,748     85,530  
Operating income 295,431 142,891
 
Other income (expense), net 1,360 1,166
Loss on financial instruments, net (3,246 ) (12,301 )
Gain on foreign currency, net 6,299 5,624
Gain on sale of subsidiary 26,311 -
Interest expense   (12,505 )   (22,730 )
Income before income taxes 313,650 114,650
 
Income tax expense   (115,705 )   (46,393 )
Net Income $ 197,945 $ 68,257
 
Net income attributable to noncontrolling interests   500     473  
 
Net income attributable to GMCR $ 197,445   $ 67,784  
 
 
Basic income per share:
Basic weighted average shares outstanding 154,876,465 141,579,543
Net income per common share - basic $ 1.27 $ 0.48
 
Diluted income per share:
Diluted weighted average shares outstanding 159,368,142 147,310,364
Net income per common share - diluted $ 1.24 $ 0.46
 

 
GREEN MOUNTAIN COFFEE ROASTERS, INC.
Unaudited Consolidated Balance Sheets
(Dollars in thousands)
     
March 24, September 24,
  2012   2011  
Assets
Current assets:
Cash and cash equivalents $ 146,003 $ 12,989
Restricted cash and cash equivalents 9,202 27,523

Receivables, less uncollectible accounts and return allowances of $48,393 and $21,407 at March 24, 2012 and September 24, 2011, respectively

300,713 310,321
Inventories 602,121 672,248
Income taxes receivable 2,576 18,258
Other current assets 45,856 28,072
Deferred income taxes, net 46,251 36,231
Current assets held for sale   -   25,885  

Total current assets

1,152,722 1,131,527
 
Fixed assets, net 793,293 579,219
Intangibles, net 516,491 529,494
Goodwill 801,690 789,305
Other long-term assets 45,011 47,759
Long-term assets held for sale   -   120,583  
 
Total assets $ 3,309,207 $ 3,197,887  
 
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 9,742 $ 6,669
Accounts payable 246,899 265,511
Accrued compensation costs 36,796 43,260
Accrued expenses 120,436 92,120
Income tax payable 48,012 9,617
Deferred income taxes, net - 243
Other current liabilities 27,181 34,613

Current liabilities related to assets held for sale

  -   19,341  
Total current liabilities 489,066 471,374
 
Long-term debt 431,471 575,969
Deferred income taxes, net 211,013 189,637
Other long-term liabilities 18,229 27,184
Long-term liabilities related to assets held for sale - 474
 
Commitments and contingencies
 
Redeemable noncontrolling interests 11,252 21,034
 
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 - 500,000,000 shares;

Issued and outstanding - 155,213,176 and 154,466,463 shares at March 24, 2012 and September 24, 2011, respectively

15,521 15,447
Additional paid-in capital 1,522,283 1,499,616
Retained earnings 609,307 411,727
Accumulated other comprehensive income (loss)   1,065   (14,575 )
Total stockholders' equity   2,148,176   1,912,215  
 
Total liabilities and stockholders' equity $ 3,309,207 $ 3,197,887  
 

 
GREEN MOUNTAIN COFFEE ROASTERS, INC.
Unaudited Consolidated Statements of Cash Flows
(Dollars in thousands)
     
Twenty-six Twenty-six
weeks ended weeks ended
March 24, March 26,
  2012     2011  
Cash flows from operating activities:
Net income $ 197,945 $ 68,257

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation 55,822 30,991
Amortization of intangibles 23,021 17,793
Amortization deferred financing fees 3,025 2,620
Loss on extinguishment of debt - 2,555
Unrealized gain of foreign currency (4,547 ) (5,207 )
Loss (gain) on disposal of fixed assets 1,265 (75 )
Gain on sale of subsidiary, excluding transaction costs (28,914 ) -
Provision for doubtful accounts 1,656 872
Provision for sales returns 67,402 39,316
Unrealized loss on financial instruments, net 3,580 9,087
Tax benefit from exercise of non-qualified options and disqualified dispositions of incentive stock options 5 6
Excess tax benefits from equity-based compensation plans (11,172 ) (5,838 )
Deferred income taxes 8,325 2,862
Deferred compensation and stock compensation 9,336 4,633
Changes in assets and liabilities, net of effects of acquisition:
Receivables (55,546 ) (45,723 )
Inventories 72,671 (889 )
Income tax receivable/payable, net 65,050 2,562
Other current assets (17,871 ) (4,700 )
Other long-term assets, net (436 ) (11,300 )
Accounts payable (38,424 ) 8,690
Accrued compensation costs (6,402 ) (8,487 )
Accrued expenses 27,352 8,128
Other current liabilities (2,878 ) (2,173 )
Other long-term liabilities   (109 )   11,401  
Net cash provided by operating activities 370,156 125,381
 
Cash flows from investing activities:
Change in restricted cash 665 150
Proceeds from notes receivable 229 103
Acquisition of LJVH Holdings, Inc. (Van Houtte), net of cash acquired - (907,835 )
Proceeds from sale of subsidiary, net of cash transferred 137,733 -
Capital expenditures for fixed assets (204,556 ) (99,040 )
Proceeds from disposal of fixed assets 215 280
Other investing activities   -     (158 )
Net cash used in investing activities (65,714 ) (1,006,500 )
 
Cash flows from financing activities:
Net change in revolving line of credit (182,814 ) 257,923
Proceeds from issuance of common stock under compensation plans 2,228 4,784
Proceeds from issuance of common stock for private placement - 249,524
Cash distributions to redeemable noncontrolling interests shareholders (149 ) (386 )
Excess tax benefits from equity-based compensation plans 11,172 5,838
Principal payments under capital lease obligations (3,148 ) (5 )
Proceeds from borrowings of long-term debt - 794,500
Deferred financing fees - (41,628 )
Repayment of long-term debt   (4,552 )   (354,773 )
Net cash (used in) provided by financing activities (177,263 ) 915,777
 
Change in cash balances included in current assets held for sale 5,160 (6,510 )
 
Effect of exchange rate changes on cash and cash equivalents 675 1,188
 
Net increase in cash and cash equivalents 133,014 29,336
Cash and cash equivalents at beginning of period   12,989     4,401  
Cash and cash equivalents at end of period $ 146,003   $ 33,737  
 
 
Supplemental disclosures of cash flow information:

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

$ 44,672 $ 11,051
 
Non cash financing and investing activities:
Fixed Assets acquired under capital lease obligations/vendor notes $ 44,174 $ -
 

 
GREEN MOUNTAIN COFFEE ROASTERS, INC.
GAAP to Non-GAAP Reconciliation
(Dollars in thousands, except per share data)
     

Thirteen weeks
ended
March 24, 2012

Thirteen weeks
ended
March 26, 2011

Operating income $ 149,593 $ 119,611
Acquisition-related expenses (1) - 1,905
Expenses related to SEC inquiry (2) 1,146 405
Amortization of identifiable intangibles (3)   11,568   11,658  
Non-GAAP operating income $ 162,307 $ 133,579  
 
 

Thirteen weeks
ended
March 24, 2012

Thirteen weeks
ended
March 26, 2011

Net income attributable to GMCR $ 93,031 $ 65,372
After tax:
Acquisition-related expenses (1) - (1,858 )
Expenses related to SEC inquiry (2) 713 249
Amortization of identifiable intangibles (3)   7,933   7,763  
 
Non-GAAP net income $ 101,677 $ 71,526  
 
 

Thirteen weeks
ended
March 24, 2012

Thirteen weeks
ended
March 26, 2011

Diluted income per share $ 0.58 $ 0.44
After tax:
Acquisition-related expenses (1) $ - $ (0.01 )
Expenses related to SEC inquiry (2) $ 0.00 $ 0.00
Amortization of identifiable intangibles (3) $ 0.05 $ 0.05  
 
Non-GAAP net income per share $ 0.64 * $ 0.48  
 
* Does not sum due to rounding.
 
 
(1) Represents direct acquisition-related expenses of $1.9 million ($1.2 million after-tax). In addition, the Company recognized a tax benefit of $3.0 million related to the reversal of certain nondeductible acquisition-related expenses incurred during the Company's fourth quarter of fiscal 2010 and the first quarter of fiscal 2011 that were deemed deductible in accordance with tax regulations enacted in the second quarter of fiscal 2011. This tax benefit was reversed for purposes of this non-GAAP table.
(2) Represents legal and accounting expenses related to the SEC inquiry and pending litigation classified as general and administrative expense.
(3) Represents the amortization of intangibles related to the Company's acquisitions classified as general and administrative expense.
 

 
GREEN MOUNTAIN COFFEE ROASTERS, INC.
GAAP to Non-GAAP Reconciliation
(Dollars in thousands, except per share data)
     

Twenty-six weeks
ended
March 24, 2012

Twenty-six weeks
ended
March 26, 2011

Operating income $ 295,431 $ 142,891
Acquisition-related expenses (1) - 10,573
Expenses related to SEC inquiry (2) 1,815 6,394
Amortization of identifiable intangibles (3)   23,021     17,793
Non-GAAP operating income $ 320,267   $ 177,651
 
 

Twenty-six weeks
ended
March 24, 2012

Twenty-six weeks
ended
March 26, 2011

Net income attributable to GMCR $ 197,445 $ 67,784
After tax:
Acquisition-related expenses (1) - 14,524
Expenses related to SEC inquiry (2) 1,130 3,929
Amortization of identifiable intangibles (3) 15,782 11,655
Gain on sale of subsidiary (4)   (16,685 )   -
Non-GAAP net income $ 197,672   $ 97,892
 
 

Twenty-six weeks
ended
March 24, 2012

Twenty-six weeks
ended
March 26, 2011

Diluted income per share $ 1.24 $ 0.46
After tax:
Acquisition-related expenses (1) $ - $ 0.10
Expenses related to SEC inquiry (2) $ 0.01 $ 0.03
Amortization of identifiable intangibles (3) $ 0.10 $ 0.08
Gain on sale of subsidiary (4) $ (0.10 ) $ -
Non-GAAP net income per share $ 1.24   * $ 0.66 *
 
* Does not sum due to rounding.
 
 
(1) Represents direct acquisition-related expenses of $10.6 million ($9.8 million after-tax); the write-off of deferred financing expenses as part of 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). In addition, the Company recognized a $2.1 million tax expense related to the reversal of nondeductible acquisition-related expenses incurred during the Company's fourth quarter of fiscal 2010 and a $3.0 million tax benefit related to the reversal of certain nondeductible acquisition-related expenses incurred during the Company's fourth quarter of fiscal 2010 and the first quarter of fiscal 2011 that were deemed deductible in accordance with tax regulations enacted in the second quarter of fiscal 2011. This combined tax affect was reversed for purposes of this non-GAAP table.
(2) Represents legal and accounting expenses related to the SEC inquiry and pending litigation classified as general and administrative expense.
(3) Represents the amortization of intangibles related to the Company's acquisitions classified as general and administrative expense.
(4) Represents the gain recognized on the sale of Filterfresh, net of income taxes of $9.6 million.

Green Mountain Coffee Roasters, Inc.
Suzanne DuLong, 802-488-2600
VP IR & Corporate Comm
Investor.Services@GMCR.com

Source: Green Mountain Coffee Roasters, Inc.

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