Green Mountain Coffee Roasters, Inc., (NASDAQ: GMCR), a leader in specialty coffee and coffeemakers, today announced its fiscal 2011 second quarter results for the thirteen weeks ended March 26, 2011. Revenues doubled over the second quarter of 2010 and net income nearly tripled. GMCR also announced that it was initiating a new stock offering (see related story).
Second Quarter Fiscal 2011 Performance Highlights*
Net sales up 101% over the same period in fiscal 2010
GAAP EPS of $0.44; Non-GAAP EPS of $0.48
GAAP operating income increases 198% over Q2’10; Non-GAAP operating income improves 178% over the year ago quarter
GAAP net income increases 172% over Q2’10; Non-GAAP net income up 147% over Q2’10
Second Quarter Fiscal 2011 Results*
Net sales for the second quarter of fiscal 2011 increased 101% to $647.7 million as compared to $322.0 million for the second quarter of fiscal 2010. Under Generally Accepted Accounting Principles (GAAP), net income for the second quarter of fiscal 2011 totaled $65.4 million, or $0.44 per diluted share, representing an increase of 172% as compared to GAAP net income of $24.1 million, or $0.17 per diluted share, for the second quarter of fiscal 2010.
The Company’s non-GAAP net income for the second quarter of fiscal 2011 increased 147% to $71.5 million, from non-GAAP net income of $28.9 million in the second quarter of fiscal 2010. Second quarter fiscal 2011 non-GAAP net income excludes pre-tax items of: $1.9 million in Van Houtte transaction-related expenses, $11.7 million in amortization of identifiable intangibles related to the Company’s acquisitions, $0.4 million in legal and accounting expenses related to the SEC inquiry and pending litigation, and a $3.0 million tax benefit related to the reversal of certain non-deductible acquisition-related expenses incurred in prior quarters which are now deemed deductible in accordance with recently enacted tax regulations. Second quarter fiscal 2010 non-GAAP net income excludes pre-tax items of: $4.8 million in transaction-related expenses for the Diedrich acquisition and $3.1 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 131% to $0.48 in the second quarter of fiscal 2011 from $0.21 in the second quarter of fiscal 2010.
‘We believe healthy post-holiday in-store brewer inventory levels and positive word of mouth from enthusiastic Keurig owners combined to help drive a very strong fiscal second quarter for GMCR,’ 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.
‘We believe we are in the early stages of potential Keurig system adoption in North America and continue to work to scale our operations, processes and workforce to meet both the current and expected demands of the business,’ said Blanford. ‘The addition of leading, nationally recognized brands like Dunkin’ Donuts, Starbucks and Swiss Miss to the Keurig Single-Cup Brewing system expands customer choice within the system, fuels new excitement by current Keurig owners and users, raises system awareness, and has the potential to attract new consumers to the system.’
Fiscal 2011 Second Quarter Financial Review*
Approximately 82% of consolidated net sales in the second quarter were from the Keurig brewing system and its recurring K-Cup® portion pack sales, including Keurig-related accessory sales.
Net sales from K-Cup® portion packs totaled $411.8 million in the quarter, up 94%, or $199.1 million, over the same period in 2010.
In response to rising green coffee costs and increases in other input costs, in September 2010 the Company announced a price increase on all K-Cup® portion packs beginning on October 11, 2010. The price increase was fully implemented across all channels as of February 2011. In the second quarter of fiscal 2011, the price increase improved net sales by approximately 10.3% over what net sales would have been if calculated based on the pricing for K-Cup® portion packs in effect during the prior year period.
Net sales from Keurig brewers and accessories totaled $116.2 million in the quarter, up 86%, or $53.8 million, from the prior year period.
Supporting continued growth in K-Cup® demand, GMCR sold 1.2 million Keurig brewers during the second quarter of fiscal 2011. This brewer shipment number does not account for consumer returns to retailers. We estimate that GMCR brewer shipments represented approximately 91% of total brewers shipped with Keurig technology in the period.
The acquisition of Van Houtte completed on December 17, 2010 contributed $100.5 million to consolidated net sales, after eliminating the effect on consolidated net sales of K-Cup® portion pack sales to Keurig by Van Houtte and royalties recorded by Keurig from Van Houtte.
Second quarter fiscal 2011 gross margin was 37.5% of total net sales compared to 33.5% for the corresponding quarter in fiscal 2010.
The Company increased its GAAP operating income by 198%, to $119.6 million, in the second quarter of fiscal 2011 as compared to $40.1 million in the year ago quarter.
GMCR’s second quarter fiscal 2011 non-GAAP operating income of $133.6 million increased 178% over non-GAAP operating income of $48.0 million in the second quarter of fiscal 2010. Non-GAAP operating income represented 20.6% of net sales in the second quarter of fiscal 2011 and 14.9% of net sales in the second quarter of fiscal 2010.
The Company’s tax rate for the second quarter of fiscal 2011 was 35.5% as compared to 38.6% in the prior year quarter reflecting a lower corporate income tax rate in Canada from the Van Houtte acquisition and due to the recent Internal Revenue Service Revenue Procedure 2011-29 which allows taxpayers to deduct 70% of the previously non-deductible success-based fees incurred in connection with certain acquisitions.
Diluted weighted average shares outstanding increased 7% to 147.6 million in the second quarter of fiscal 2011 from 137.8 million in the second quarter of fiscal 2010 primarily due to the issuance of 8.6 million shares of common stock to Luigi Lavazza S.p.A in a private placement on September 28, 2010.
Balance Sheet Highlights
Cash and short-term cash investments were $64.5 million at March 26, 2011, up from $62.9 million at December 25, 2010.
Accounts receivable increased 77% year-over-year to $226.8 million at March 26, 2011, from $128.2 million at March 27, 2010, reflecting continuing sales growth.
Inventories were $300.8 million at March 26, 2011 including $29.5 million of Van Houtte-related inventories. This compares to $262.5 million at September 25, 2010.
Debt outstanding increased to $1.060 billion at March 26, 2011 from $354.5 million at September 25, 2010 primarily as a result of the Company’s acquisition of Van Houtte on December 17, 2010.
The Company is pursuing a sale of the Filterfresh U.S.-based coffee services business portion of its Van Houtte acquisition, which is classified as ‘assets available for sale’ in the Company’s financial statements, and expects to use any proceeds from an ultimate sale to reduce debt.
Business Outlook and Other Forward-Looking Information*
Company Estimates for Fiscal Year 2011
The Company provided the following revised estimates for its fiscal year 2011.
Total consolidated net sales growth of 82% to 87%, up from previous net sales growth guidance of 75% to 80%.
The Company increased its 2011 non-GAAP earnings per diluted share range to $1.43 to $1.50 per diluted share from $1.19 to $1.29 per share, excluding any acquisition-related transaction expenses; legal and accounting expenses related to the SEC inquiry, the Company’s internal investigation and pending litigation; amortization of identifiable intangibles related to the Company’s acquisitions; deferred financing costs; and, foreign exchange impact of hedging the risk associated with the Canadian dollar purchase price of the Van Houtte acquisition.
Capital expenditures for fiscal 2011 in the range of $275 million to $305 million, up from previous capital expenditure guidance of $245 million to $290 million.
Company Estimates for Third Quarter Fiscal Year 2011
The Company also provided its first estimates for its third quarter of fiscal 2011:
Total consolidated net sales growth of 90% to 95%.
Non-GAAP earnings per share in the range of $0.34 to $0.38 per diluted share excluding any acquisition-related transaction expenses; legal and accounting expenses related to the SEC inquiry, the Company’s internal investigation and pending litigation; deferred financing costs; and, amortization of identifiable intangibles related to the Company’s acquisitions.
*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, 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, May 3, 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 6217671 from 9:00 p.m. ET on May 3, 2011 through 9:00 PM ET on Sunday, May 8, 2011.
About Green Mountain Coffee Roasters, Inc.
As a leader in specialty coffee and coffee makers, Green Mountain Coffee Roasters, Inc. (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, Keurig’s ability to continue to grow and build profits with its roaster partners 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
March 26,
March 27,
2011
2010
(As Restated)
Net sales
$
647,658
$
321,953
Cost of sales
404,803
214,103
Gross profit
242,855
107,850
Selling and operating expenses
79,745
43,251
General and administrative expenses
43,499
24,464
Operating income
119,611
40,135
Other income (expense)
1,078
(133
)
Loss on financial instruments, net
(5,959
)
-
Gain on foreign currency, net
4,045
-
Interest expense
(16,672
)
(833
)
Income before income taxes
102,103
39,169
Income tax expense
(36,295
)
(15,114
)
Net Income
65,808
24,055
Less: Net income attributable to noncontrolling interests
436
-
Net income attributable to GMCR
$
65,372
$
24,055
Basic income per share:
Basic weighted average shares outstanding
141,784,994
131,263,638
Net income
$
0.46
$
0.18
Diluted income per share:
Diluted weighted average shares outstanding
147,558,595
137,831,574
Net income
$
0.44
$
0.17
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 26,
March 27,
2011
2010
(As Restated)
Net sales
$
1,221,806
$
667,105
Cost of sales
835,351
463,678
Gross profit
386,455
203,427
Selling and operating expenses
158,034
96,626
General and administrative expenses
85,530
47,636
Operating income
142,891
59,165
Other income (expense)
1,166
110
Loss on financial instruments, net
(12,301
)
(354
)
Gain on foreign currency, net
5,624
-
Interest expense
(22,730
)
(1,881
)
Income before income taxes
114,650
57,040
Income tax expense
(46,393
)
(22,925
)
Net Income
68,257
34,115
Less: Net income attributable to noncontrolling interests
473
-
Net income attributable to GMCR
$
67,784
$
34,115
Basic income per share:
Basic weighted average shares outstanding
141,579,543
131,116,251
Net income
$
0.48
$
0.26
Diluted income per share:
Diluted weighted average shares outstanding
147,310,364
137,628,396
Net income
$
0.46
$
0.25