Keurig Green Mountain, Inc.
Aug 7, 2013
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Green Mountain Coffee Roasters Reports Third Quarter Fiscal Year 2013 Results

Delivers GAAP EPS of $0.76 and Non-GAAP EPS of $0.82 Representing Growth of 65% and 58%, Respectively, Over the Prior Year Period; Raises Fiscal Year 2013 Earnings Outlook to Reflect Growth of 37% to 39% Over Prior Year

WATERBURY, Vt.--(BUSINESS WIRE)-- Green Mountain Coffee Roasters, Inc., (GMCR) (NASDAQ: GMCR), a leader in specialty coffee and coffee makers with its innovative Keurig® brewing technology, today announced its third quarter fiscal year 2013 results for the 13 weeks and 39 weeks ended June 29, 2013.

Third Quarter 2013 Performance Highlights

"We continue to drive leverage in our business and were very pleased to deliver earnings per share growth in the quarter that exceeded our revenue growth by more than five-fold," said Brian P. Kelley, GMCR's President and CEO. "Free cash flow generation was also strong, bringing our fiscal year-to-date total to $582 million."

"Our total revenue growth of 11% was at the low end of our expectations, driven primarily by a sales decline in Canada. Importantly, our U.S. business is very healthy, growing 14% in the period," continued Kelley. "Ongoing consumer adoption and continued use of installed Keurig® brewers drove 21% unit growth of our Keurig Brewed® portion pack business during our third fiscal quarter."

 
($ in millions except earnings per share)     Thirteen weeks ended       Thirty-nine weeks ended  
June 29, 2013   June 23, 2012   % Increase

 

June 29, 2013   June 23, 2012   % Increase
Net sales $ 967.1   $ 869.2 11 % $ 3,310.9   $ 2,912.5 14 %
Operating income:
GAAP $ 193.3 $ 129.7 49 % $ 587.9 $ 425.2 38 %
Non-GAAP $ 205.7 $ 144.2 43 % $ 624.9 $ 464.5 35 %
Net income:
GAAP $ 116.3 $ 73.3 59 % $ 356.3 $ 270.7 32 %
Non-GAAP $ 124.7 $ 82.9 50 % $ 381.6 $ 280.6 36 %
Diluted income per share:
GAAP $ 0.76 $ 0.46 65 % $ 2.33 $ 1.70 37 %
Non-GAAP $ 0.82 $ 0.52 58 % $ 2.50 $ 1.76 42 %
 
Note: Complete GAAP to Non-GAAP reconciliation tables provided with this release.
 

Third Quarter 2013 Financial Review

 
Net Sales by Product          
($ in millions) Thirteen weeks ended
June 29, 2013   June 23, 2012  

$ Increase
(Decrease)

 

% Increase
(Decrease)

Single serve packs $ 751.7 $ 638.0 $ 113.7 18 %
Brewers and accessories   133.1     139.1     (6.0 ) (4 )%
Subtotal 884.8 777.1 107.7 14 %
Other products and royalties   82.3     92.1     (9.8 ) (11 )%
Total net sales $ 967.1   $ 869.2   $ 97.9   11 %
 

Single Serve Packs

Brewers and Accessories

Other Products and Royalties

Regionally

   

Change from
Q3 2012 to
Q3 2013

Favorable green coffee costs +370 bps
Lower labor and overhead manufacturing costs +130 bps
Net price realization primarily associated with single serve packs -120 bps
Lower sales returns primarily related to Keurig® Single Cup Brewers +100 bps
Shift in sales mix between Keurig® Single Cup Brewers and single serve packs +90 bps
Change in estimate for a charge related to a non-coffee purchase commitment +80 bps
Other items +70 bps
 

Balance Sheet & Cash Flow Highlights

       
($ in millions) June 29, 2013 June 23, 2012 % Change
Cash and cash equivalents, including restricted cash $ 352.9 $ 149.1 137 %
Accounts receivables, net $ 333.6 $ 265.9 25 %
Inventories $ 586.3 $ 667.0 (12 )%
Raw materials & supplies $ 177.9 $ 243.0 (27 )%
Coffee $ 101.7 $ 153.0 (34 )%
Packaging & other raw materials $ 76.2 $ 90.0 (15 )%
Finished goods $ 408.4 $ 424.0 (4 )%
Brewers & accessories $ 251.1 $ 301.5 (17 )%
Single serve packs $ 128.5 $ 95.6 34 %
Other $ 28.8 $ 26.9 7 %
Debt outstanding and capital lease and financing obligations $ 317.3 $ 409.1 (22 )%
Thirty-nine weeks net cash provided by operating activities $ 772.2 $ 488.2 58 %
Thirty-nine weeks free cash flow (1) $ 581.8 $ 182.7 218 %
 

(1) 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 2013

Please note that the Company's fourth quarter and fiscal year 2012 included an additional week (53rd week). This unique calendar shift last occurred in fiscal year 2006 and is not scheduled to occur again until fiscal year 2017. The 53rd week added approximately $90.0 million in net sales; approximately $11.0 million (net of income taxes of $5.8 million) in net income; and, approximately $0.07 in diluted earnings per share in the fourth quarter and fiscal year 2012.

The Company provided its outlook for its fourth quarter of fiscal year 2013, which excludes the impact of the 53rd week, as follows:

The Company revised its outlook for its fiscal year 2013, which excludes the impact of the 53rd week, as follows:

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 any gain from sale of the Filterfresh U.S.-based coffee services business; legal and accounting expenses related to the SEC inquiry and pending securities and stockholder derivative class action litigation; and non-cash acquisition-related items such as amortization of identifiable intangibles, 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" table that accompanies 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, August 7, 2013. The call, along with accompanying slides, is accessible via live webcast from the events section of 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 8261198 from 9:00 p.m. ET on August 7, 2013 through 9:00 p.m. ET on Monday, August 12, 2013.

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 investing in sustainably-grown coffee, and donating a portion 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, www.GMCR.com, 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 information contained in this filing, including statements concerning expected performance such as those relating to net sales, earnings, cost savings, acquisitions and brand marketing support, are "forward-looking statements". Generally, these statements may be identified by the use of words such as "may," "will," "would," "expect," "should," "anticipate," "estimate," "believe," "forecast," "intend," "plan" and similar expressions intended to identify forward-looking statements. These statements may relate to: the expected impact of raw material costs and our pricing actions on our results of operations and gross margins, expected trends in net sales and earnings performance and other financial measures, the expected productivity and working capital improvements, the ability to maximize or successfully assert our intellectual property rights, the success of introducing and producing new product offerings, ability to attract and retain senior management, the impact of foreign exchange fluctuations, the adequacy of internally generated funds and existing sources of liquidity, such as the availability of bank financing, the expected results of operations of businesses acquired by us, our ability to issue debt or additional equity securities, our expectations regarding purchasing shares of our common stock under the existing authorizations, organizational efficiencies, and the impact of the inquiry initiated by the SEC and any related litigation or additional governmental inquiry or enforcement proceedings.

These and other forward-looking statements are based on management's current views and assumptions and involve risks and uncertainties that could significantly affect expected results. Results may be materially affected by external factors such as damage to our reputation or brand name, business interruptions due to natural disasters or similar unexpected events, actions of competitors, customer relationships and financial condition, the ability to achieve expected cost savings and margin improvements, the acquisition and integration of new businesses, fluctuations in the cost and availability of raw and packaging materials, successful execution of internal changes to the organizational and leadership structures, changes in regulatory requirements, and global economic conditions generally which would include the availability of financing, interest, inflation rates and investment return on retirement plan assets, as well as foreign currency fluctuations, risks associated with our information technology systems, the threat of data breaches or cyber-attacks, and other risks described in our filings with the SEC.

Actual results could differ materially from those projected in the forward-looking statements. We undertake no obligation to update or revise publicly, any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.

GMCR-C

 

GREEN MOUNTAIN COFFEE ROASTERS, INC.

Unaudited Consolidated Balance Sheets
(Dollars in thousands, except per share data)
       

June 29,
2013

September 29,
2012

Assets
Current assets:
Cash and cash equivalents $ 352,205 $ 58,289
Restricted cash and cash equivalents 713 12,884
Receivables, less uncollectible accounts and return allowances of $27,649 and $34,517 at June 29, 2013 and September 29, 2012, respectively 333,593 363,771
Inventories 586,263 768,437
Income taxes receivable 2,157 32,943
Other current assets 70,410 35,019
Deferred income taxes, net   51,628     51,613
Total current assets 1,396,969 1,322,956
 
Fixed assets, net 973,246 944,296
Intangibles, net 439,035 498,352
Goodwill 779,639 808,076
Deferred income taxes, net 272
Other long-term assets   34,222     42,109
 
Total assets $ 3,623,383   $ 3,615,789
 
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 9,789 $ 6,691
Current portion of capital lease and financing obligations 3,380 3,057
Accounts payable 227,036 279,577
Accrued compensation costs 73,431 38,458
Accrued expenses 145,999 132,992
Income tax payable 29,322
Deferred income taxes, net 229 245
Other current liabilities   12,960     29,645
Total current liabilities 472,824 519,987
 
Long-term debt, less current portion 228,296 466,984
Capital lease and financing obligations, less current portion 75,801 54,794
Deferred income taxes, net 271,765 270,348
Other long-term liabilities 23,858 32,544
 
Commitments and contingencies
 
Redeemable noncontrolling interests 10,238 9,904
 
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 - 150,526,269 and 152,680,855 shares at June 29, 2013 and September 29, 2012, respectively 15,053 15,268
Additional paid-in capital 1,430,104 1,464,560
Retained earnings 1,126,164 771,200
Accumulated other comprehensive (loss) income   (30,720 )   10,200
Total stockholders' equity   2,540,601     2,261,228
 
Total liabilities and stockholders' equity $ 3,623,383   $ 3,615,789
 

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

Thirteen weeks ended

Thirty-nine weeks ended

June 29,
2013

June 23,
2012

June 29,
2013

June 23,
2012

Net sales $ 967,072 $ 869,194 $ 3,310,923 $ 2,912,462
Cost of sales   559,454     565,883     2,068,996     1,959,509  
Gross profit 407,618 303,311 1,241,927 952,953
 
 
Selling and operating expenses 136,742 117,982 433,368 370,445
General and administrative expenses   77,532     55,601     220,670     157,349  
Operating income 193,344 129,728 587,889 425,159
 
Other income, net 237 229 652 1,589
Gain (loss) on financial instruments, net 4,419 3,032 8,994 (214 )
(Loss) gain on foreign currency, net (10,391 ) (5,068 ) (19,185 ) 1,231
Gain on sale of subsidiary 26,311
Interest expense   (3,937 )   (6,157 )   (13,481 )   (18,662 )
Income before income taxes 183,672 121,764 564,869 435,414
 
Income tax expense   (67,226 )   (48,244 )   (207,907 )   (163,949 )
Net income 116,446 73,520 $ 356,962 $ 271,465
 
Net income attributable to noncontrolling interests   174     224     686     724  
 
Net income attributable to GMCR $ 116,272   $ 73,296   $ 356,276   $ 270,741  
 
Basic income per share:
Basic weighted average shares outstanding 149,825,581 155,459,690 149,307,144 155,071,117
Net income per common share - basic $ 0.78 $ 0.47 $ 2.39 $ 1.75
 
Diluted income per share:
Diluted weighted average shares outstanding 152,869,392 159,299,578 152,647,767 159,364,440
Net income per common share - diluted $ 0.76 $ 0.46 $ 2.33 $ 1.70
 

 
GREEN MOUNTAIN COFFEE ROASTERS, INC.
Unaudited Consolidated Statements of Cash Flows
(Dollars in thousands)
 
    Thirty-nine   Thirty-nine
weeks ended weeks ended
June 29, 2013 June 23, 2012
Cash flows from operating activities:
Net income $ 356,962 $ 271,465
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of fixed assets 137,734 89,221
Amortization of intangibles 34,234 34,496
Amortization of deferred financing fees 4,538 4,538
Unrealized loss (gain) on foreign currency, net 15,555 (535 )
Loss on disposal of fixed assets 222 2,103
Gain on sale of subsidiary, excluding transaction costs (28,914 )
Provision for doubtful accounts 68 2,084
Provision for sales returns 59,209 83,170
(Gain) loss on derivatives, net (7,872 ) 112
Excess tax benefits from equity-based compensation plans (47,845 ) (12,449 )
Deferred income taxes 8,794 13,198
Deferred compensation and stock compensation 21,393 13,811
Other 881 4
Changes in assets and liabilities:
Receivables (32,732 ) (37,895 )
Inventories 175,532 6,464
Income tax receivable/payable, net 48,905 91,032
Other current assets (34,634 ) 4,014
Other long-term assets, net 3,311 (608 )
Accounts payable, accrued expenses and accrued compensation costs 39,082 (48,813 )
Other current liabilities (2,469 ) (3,909 )
Other long-term liabilities   (8,633 )   5,593  
Net cash provided by operating activities 772,235 488,182
 
Cash flows from investing activities:
Change in restricted cash 2,852 (461 )
Proceeds from sale of subsidiary, net of cash transferred 137,733
Capital expenditures for fixed assets (190,388 ) (305,532 )
Other investing activities   501     580  
Net cash used in investing activities (187,035 ) (167,680 )
 
Cash flows from financing activities:
Net change in revolving line of credit (226,210 ) (208,678 )
Proceeds from issuance of common stock under compensation plans 21,764 8,392
Repurchase of common stock (125,681 )
Excess tax benefits from equity-based compensation plans 47,845 12,449
Payments on capital lease and financing obligations (2,596 ) (4,255 )
Repayment of long-term debt (6,640 ) (6,231 )
Other financing activities   (1,006 )   (513 )
Net cash used in financing activities (292,524 ) (198,836 )
 
Change in cash balances included in current assets held for sale 5,160
 
Effect of exchange rate changes on cash and cash equivalents 1,240 (827 )
 
Net increase in cash and cash equivalents 293,916 125,999
Cash and cash equivalents at beginning of period   58,289     12,989  
Cash and cash equivalents at end of period $ 352,205   $ 138,988  
 
Supplemental disclosures of cash flow information:
Fixed asset purchases included in accounts payable and not disbursed at the end of each period $ 17,998 $ 34,293
Noncash investing and financing activities:
Fixed assets acquired under capital lease and financing obligations $ 23,461 $ 44,174
Settlement of acquisition related liabilities through release of restricted cash $ 9,227 $ 18,788
 

 
GREEN MOUNTAIN COFFEE ROASTERS, INC.
GAAP to Non-GAAP Reconciliation
(Dollars in thousands, except per share data)
       
Thirteen weeks ended
June 29, 2013 June 23, 2012
Operating income $ 193,344 $ 129,728
Expenses related to SEC inquiry (1) 1,036 2,996
Amortization of identifiable intangibles (2)   11,295   11,475  
Non-GAAP operating income $ 205,675 $ 144,199  
 
Thirteen weeks ended
June 29, 2013 June 23, 2012
Net income attributable to GMCR $ 116,272 $ 73,296
After tax:
Expenses related to SEC inquiry (1) 657 1,759
Amortization of identifiable intangibles (2)   7,746   7,876  
Non-GAAP net income attributable to GMCR $ 124,675 $ 82,931  
 
Thirteen weeks ended
June 29, 2013 June 23, 2012
Diluted income per share $ 0.76 $ 0.46
After tax:
Expenses related to SEC inquiry (1) 0.01
Amortization of identifiable intangibles (2)   0.05   0.05  
Non-GAAP net income per share $ 0.82 * $ 0.52  
 
* Does not sum due to rounding.
(1) Represents legal and accounting expenses related to the SEC inquiry and pending securities and stockholder derivative class action litigation classified as general and administrative expense.
(2) Represents the amortization of intangibles related to the Company's acquisitions classified as general and administrative expense.
 
       
Thirty-nine weeks ended
June 29, 2013 June 23, 2012
Operating income $ 587,889 $ 425,159
Expenses related to SEC inquiry (1) 2,799 4,811
Amortization of identifiable intangibles (2)   34,234   34,496  
Non-GAAP operating income $ 624,922 $ 464,466  
 
 
 
Thirty-nine weeks ended
June 29, 2013 June 23, 2012
Net income attributable to GMCR $ 356,276 $ 270,741
After tax:
Expenses related to SEC inquiry (1) 1,773 2,889
Amortization of identifiable intangibles (2) 23,523 23,658
Gain on sale of subsidiary (3)     (16,685 )
Non-GAAP net income attributable to GMCR $ 381,572 $ 280,603  
 
 
 
Thirty-nine weeks ended
June 29, 2013 June 23, 2012
Diluted income per share $ 2.33 $ 1.70
After tax:
Expenses related to SEC inquiry (1) 0.01 0.02
Amortization of identifiable intangibles (2) 0.15 0.15
Gain on sale of subsidiary (3)     (0.10 )
Non-GAAP net income per share $ 2.50 * $ 1.76   *
 
* Does not sum due to rounding.
(1) Represents legal and accounting expenses related to the SEC inquiry and pending securities and stockholder derivative class action litigation classified as general and administrative expense.
(2) Represents the amortization of intangibles related to the Company's acquisitions classified as general and administrative expense.
(3) Represents the gain on the sale of Filterfresh, net of income taxes of $9.6 million.

Green Mountain Coffee Roasters, Inc.
Suzanne DuLong, 802-488-2600
Investor.Services@GMCR.com
or
Katie Gilroy, 781-205-7345
Investor.Services@GMCR.com

Source: Green Mountain Coffee Roasters, Inc.

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