With a goal of bringing focus and expertise to what the company believes is a strong Canadian opportunity, the former Van Houtte business becomes GMCR's third business unit, GMCR Canada, or the Canadian business unit (CBU), led by former Van Houtte president and CEO, Gérard Geoffrion as its president.
"Since closing the Van Houtte acquisition, we have been working collaboratively with the Van Houtte management team to explore how best to structure and integrate the business into the GMCR family," said Blanford. "We are still in the early stages of integration assessment and planning, but we believe we are building momentum quickly."
Approximately 91 percent of consolidated net sales in the first quarter were from the Keurig brewing system and its recurring K-Cup® portion pack revenue, including Keurig-related accessory sales and royalties from third party licensed roasters.
Net sales from K-Cup portion packs totaled $332.9 million in the quarter, up 89 percent, or $156.7 million, over the same period in 2010.
In September 2010, the company announced a price increase on all K-Cup portion packs beginning on Oct. 11, 2010. The company expects the price increase will be fully implemented by the end of February 2011. In the first quarter of fiscal 2011, the price increase resulted in increased consolidated net sales dollars of approximately 4 percent over the prior year period.
Net sales from Keurig brewers and accessories totaled $188.0 million in the quarter, up 58 percent, or $68.6 million, from the prior year period.
Supporting continued growth in K-Cup demand, GMCR shipped 2.2 million Keurig brewers during the first quarter of fiscal 2011. This brewer shipment number does not account for consumer returns to retailers and compares to 1.5 million brewers shipped by GMCR during the first quarter of fiscal 2010. The company estimates that GMCR brewer shipments represented approximately 89 percent of total Keurig Brewed brewers shipped system wide in the period.
First quarter 2011 gross margin was 25.1 percent of total net sales compared to 27.7 percent for the corresponding quarter in fiscal 2010. First quarter 2011 gross margin was adversely affected primarily by higher brewer warranty expenses, to a lesser degree, brewer sales returns in the quarter, and higher coffee costs. These adverse effects were partially offset by the price increase on K-Cup portion packs effected beginning Oct. 11, 2010. The increase in warranty expense reduced the fiscal 2011 first quarter's gross margin by approximately 230 basis points as compared to last year's first quarter gross margin.
The company increased its GAAP operating income by 21 percent, to $23.1 million, in the first quarter of fiscal 2011 as compared to $19.0 million in the year ago quarter.
GMCR's first quarter fiscal 2011 non-GAAP operating income of $43.9 million increased 67 percent over non-GAAP operating income in the first quarter of fiscal 2010 of $26.2 million, representing 7.6 percent of net sales in both first quarters.
The company's tax rate for the fiscal first quarter was 81.9 percent as compared to 43.7 percent in the prior year quarter reflecting the tax effect of the recognition of the non-deductible acquisition-related expenses incurred during the company's fourth quarter of fiscal 2010 and first quarter of fiscal 2011 for the Van Houtte acquisition which closed during the company's first quarter of fiscal 2011. The company's fiscal 2011 effective tax rate excluding the non-deductible acquisition-related expenses is estimated to be approximately 38.6v percent.
Diluted weighted average shares outstanding increased 6.9 percent to 147.0 million in the fiscal first quarter 2011 from 137.5 million in the fiscal first quarter 2010 primarily due to the issuance of 8.6 million shares of common stock to Luigi Lavazza S.p.A on Sept. 28, 2010.
Cash and short-term cash investments were $62.9 million at Dec. 25, 2010, up from $4.8 million at Sept. 25, 2010.
Accounts receivable increased 69 percent year-over-year to $238.1 million at Dec. 25, 2010, from $140.9 million at Dec. 26, 2009, as a result of continuing strong sales during the first quarter of fiscal 2011, particularly within the retail channel where days sales outstanding is higher than other channels.