Keurig Green Mountain, Inc.
Aug 1, 2012
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Green Mountain Coffee Roasters, Inc. Reports Third Quarter Fiscal Year 2012 Results

Reports Q3 In-Line with Guidance; Refines 2012 Outlook; Announces Board Authorization of $500 Million Share Repurchase; Provides Outlook Including Expectation of Positive Free Cash Flow

WATERBURY, Vt.--(BUSINESS WIRE)-- Green Mountain Coffee Roasters, Inc., (GMCR) (NASDAQ: GMCR), a leader in specialty coffee and coffee makers, today announced its third quarter fiscal year 2012 results for the thirteen and thirty-nine weeks ended June 23, 2012.

 

Third Quarter Fiscal Year 2012 Performance Highlights

     
($ in millions except earnings per share) June 23, 2012   June 25, 2011

% Increase
(Decrease)

Net Sales $ 869.2 $ 717.2 21%
Operating Income:
GAAP $ 129.7 $ 119.3 9%
Non-GAAP $ 144.2 $ 131.9 9%
Net Income:
GAAP $ 73.3 $ 56.3 30%
Non-GAAP $ 82.9 $ 75.7 9%
Diluted Income Per Share:
GAAP $ 0.46 $ 0.37 25%
Non-GAAP $ 0.52 $ 0.49 6%
EBITDA - LTM(*) $ 714.9 $ 390.8 83%
Note: Complete GAAP to Non-GAAP reconciliation tables provided with this release.
(*) EBITDA is earnings before interest, taxes, depreciation, and amortization. LTM is last twelve months.
 

"Our third quarter results demonstrate continued business strength and solid fundamentals, particularly in light of the robust comparable quarter we reported in the year ago period," said Lawrence J. Blanford, GMCR's President and CEO. "Our Keurig® Single Cup Brewing system continues to revolutionize the way North Americans prepare and consume their single-serve beverages and our proven ability to grow consumer awareness and demand for the system has enabled us to deliver extraordinary results over the past five years."

"As we become larger, however, our sales growth trajectory will understandably moderate from hyper-growth to a level more in-line with other successful growth businesses," continued Blanford. "Based upon our current analysis of business fundamentals and the single-serve opportunity, we believe we will deliver annual sales growth in the range of 15% to 20% with annual earnings growth in the mid-teens over the longer term."

Board Authorized Share Repurchase

GMCR's Board of Directors has authorized the Company to repurchase up to $500.0 million of its common shares over the next two years, at such times and prices as determined appropriate by the Company's management in collaboration with the Board of Directors. The shares will be purchased with cash on hand, cash from operations, and funds available through our existing credit facility.

"Based on expectations for future growth and the Company's ability to generate meaningful free cash flow in 2013 and 2014, the Board of Directors has decided to strategically deploy its capital by authorizing the repurchase of common shares from time to time depending on market conditions," said Michael J. Mardy, Interim Chairman of GMCR's Board of Directors.

 

Third Quarter Fiscal Year 2012 Financial Review

Net Sales

       
Net Sales by Product Thirteen weeks ended
($ in millions) June 23, June 25,

$ Increase

% Increase

2012   2011

(Decrease)

 

(Decrease)

Single-Serve Packs $ 638.0 $ 485.4 $ 152.6 31%
Brewers and Accessories 139.1 105.4 33.7 32%
Other Products and Royalties   92.1   126.4   (34.3 ) (27)%
Total Net Sales $ 869.2 $ 717.2 $ 152.0   21%
 

Operating Metrics

   

Change Q3
2011 to Q3
2012

Manufacturing base under-utilization -320 bps
Net price realization +250 bps
Increase in obsolescence -120 bps
Favorable green coffee costs +110 bps
Vue®-related impact -110 bps
Lower warranty expense +60 bps
Other - 60 bps

Balance Sheet & Cash Flow Highlights

"We are pleased with the strength of our balance sheet including our low debt ratio," said Frances G. Rathke, GMCR's Chief Financial Officer. "As part of our ongoing efforts to drive efficiencies in our single-serve pack inventory management and distribution, we have reduced our forward-weeks coverage on hand from our fiscal second quarter."

"Our higher overall inventory dollar balance in the third quarter of fiscal 2012 compared to the same period in fiscal 2011 is largely driven by increases in Keurig® brewer finished goods resulting from expected first quarter fiscal 2013 holiday demand," continued Rathke. "In order to ensure brewer availability on retail shelves for the holiday season, all of our anticipated holiday brewer units must be on hand in North America by early October, leading to brewer and accessories inventory build beginning in our fiscal third quarter and continuing into our fiscal fourth quarter."

       
Balance Sheet & Cash Flow Highlights
($ in millions) June 23, June 25,

$ Increase

% Increase

2012   2011  

(Decrease)

 

(Decrease)

Cash and cash equivalents $ 149.1 $ 106.8 $ 42.3 40%
Accounts receivable, net $ 265.9 $ 229.4 $ 36.5 16%
Inventories $ 667.0 $ 417.5 $ 249.5 60%
Raw materials & supplies $ 243.0 $ 116.9 $ 126.1 108%
Coffee $ 153.0 $ 70.8 $ 82.2 116%
Packaging & other raw materials $ 90.0 $ 46.1 $ 43.9 95%
Finished goods $ 424.0 $ 300.6 $ 123.4 41%
Brewers & accessories $ 301.5 $ 174.2 $ 127.3 73%
Single-serve packs $ 95.6 $ 103.0 $ (7.4 ) (7)%
Other $ 26.9 $ 23.4 $ 3.5 15%
Debt outstanding and capital lease obligations $ 409.1 $ 421.9 $ (12.8 ) (3)%
Thirty-nine weeks cash provided by operating activities $ 488.2 $ 174.7 $ 313.5 179%
Thirty-nine weeks free cash flow (*) $ 182.7 $ (0.8 ) $ 183.5 N/A

(*)Free cash flow is calculated by subtracting capital expenditures for fixed assets from net cash provided by operating activities as reported in the unaudited statement of cash flows.

 

Business Outlook and Other Forward-Looking Information

Company Estimates for Fourth Quarter and Fiscal Year 2012

In its guidance for its fourth quarter (which contains 14 weeks), the Company refined estimates for its fiscal year 2012.

For the fourth quarter of fiscal year 2012, the Company anticipates:

For its fiscal year 2012, the Company anticipates:

Company Outlook for Fiscal Year 2013

The Company provided its outlook for its fiscal year 2013:

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 cer