Keurig Green Mountain, Inc.
May 7, 2014
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Keurig Green Mountain Reports Second Quarter Fiscal Year 2014 Results; Updates 2014 Outlook; Board Authorizes Additional $1 Billion Share Repurchase

WATERBURY, Vt.--(BUSINESS WIRE)-- Keurig Green Mountain, Inc., (Keurig) (NASDAQ: GMCR), a leader in specialty coffee, coffee makers, teas and other beverages with its innovative brewing technology, today announced its results for the 13 weeks ended March 29, 2014.

Performance Highlights

"Double digit sales and earnings growth on the heels of a strong holiday season demonstrates the continued opportunity to grow our Keurig system in North America in a very competitive environment," said Brian Kelley, Keurig's President and CEO. "During the quarter, we drove strong brewer and portion pack net sales and accelerated our installed base. In addition, disciplined cost controls drove operating profit and margin growth that translated into solid earnings and a significant increase in free cash flow.

"At the end of the quarter, our balance sheet was very strong, with $1.1 billion in cash, even after we returned nearly $800 million of cash to shareholders in the quarter in the form of dividends and share repurchases, including purchases made through an accelerated stock repurchase agreement," continued Kelley. "We are very pleased with our performance and continue to be optimistic about the momentum in our business and the opportunities in front of us."

The Company's 10% net sales growth includes the unfavorable impact of foreign currency exchange rates which reduced net sales by approximately 1%.

Second Quarter Fiscal 2014 Financial Review

($ in millions except per share amounts)       Thirteen weeks ended     %       Twenty-six weeks ended     %
March 29, 2014     March 30, 2013 Increase March 29, 2014     March 30, 2013 Increase
Net sales $ 1,103.1 $ 1,004.8 10 % $ 2,489.7 $ 2,343.9 6 %
Operating income:
GAAP $ 260.5 $ 212.1 23 % $ 487.1 $ 394.5 23 %
Non-GAAP $ 271.8 $ 224.6 21 % $ 510.0 $ 419.2 22 %
Net income attributable to Keurig:
GAAP $ 162.1 $ 132.4 22 % $ 300.3 $ 240.0 25 %
Non-GAAP $ 169.8 $ 140.9 21 % $ 315.9 $ 256.9 23 %
Diluted income per share:
GAAP $ 1.03 $ 0.87 18 % $ 1.94 $ 1.57 24 %
Non-GAAP $ 1.08 $ 0.93 16 % $ 2.04 $ 1.68 21 %
Cash dividends declared per common share $ 0.25 $ N/A $ 0.50 $ N/A
 

Note: Complete GAAP to Non-GAAP reconciliation tables provided with this release.

Net Sales by Product

 

      Net sales (in millions)        
Thirteen weeks ended
March 29, 2014     March 30, 2013

$ Increase
(Decrease)

% Increase
(Decrease)

Portion packs $ 898.2 $ 794.0 $ 104.2 13 %
Brewers and accessories   137.6   126.8   10.8   9 %
Subtotal 1,035.8 920.8 115.0 12 %
Other products   67.3   84.0   (16.7 ) (20 )%
Total net sales $ 1,103.1 $ 1,004.8 $ 98.3   10 %
 

Portion Packs

Brewers and Accessories

Other Products

     

Change from
Q2 2013 to
Q2 2014

Favorable green coffee costs +440 bps
Net price realization primarily associated with portion packs -150 bps
Charge associated with portion pack manufacturing lines that were disassembled

-80 bps

Net price realization primarily associated with brewers -100 bps
Other Items

-90 bps

 

Balance Sheet & Cash Flow Highlights
"Strong earnings growth and a disciplined approach to working capital and capital investment contributed to a 30% increase of free cash flow in the quarter," said Frances G. Rathke, Keurig's Chief Financial Officer. "In addition, the strength of our balance sheet allows us to fund continued innovation and business growth while also returning significant cash to shareholders through dividends and meaningful share repurchases."

                 
Balance Sheet & Cash Flow Highlights ($ in millions) March 29, 2014 March 30, 2013 % Change  
Cash and cash equivalents, including restricted cash $ 1,112.6 $ 221.7 402 %
Accounts receivables, net $ 430.5 $ 312.9 38 %
Inventories $ 451.1 $ 587.3 (23 )%
Raw materials & supplies $ 146.3 $ 176.8 (17 )%
Coffee $ 62.9 $ 105.0 (40 )%
Packaging & other raw materials $ 83.4 $ 71.8 16 %
Finished goods $ 304.8 $ 410.5 (26 )%
Brewers & accessories