Green Mountain Coffee Roasters Inc. Reports 167 Percent Net Income Gain In Third Quarter

Green Mountain Coffee Roasters, Inc. (GMCR), a leader in specialty coffee and coffeemakers, announced its fiscal 2011 third quarter results for the thirteen weeks ended June 25, 2011.

Net sales for the third quarter of fiscal 2011 increased 127 percent to $717.2 million as compared to $316.6 million for the third quarter of fiscal 2010. Under Generally Accepted Accounting Principles (GAAP), net income for the third quarter of fiscal 2011 totaled $56.3 million, or $0.37 per diluted share, representing an increase of 206 percent as compared to GAAP net income of $18.4 million, or $0.13 per diluted share, for the third quarter of fiscal 2010.

The company's non-GAAP net income for the third quarter of fiscal 2011 increased 167 percent to $75.7 million, from non-GAAP net income of $28.3 million in the third quarter of fiscal 2010. Third quarter fiscal 2011 non-GAAP net income excludes pre-tax items of $11.8 million in amortization of identifiable intangibles related to the company's acquisitions, $17.1 million in loss on extinguishment of debt, and $0.8 million in legal and accounting expenses related to the SEC inquiry and pending litigation. Third quarter fiscal 2010 non-GAAP net income excludes pre-tax items of $4.0 million in non-deductible acquisition-related expenses for the Diedrich acquisition and $4.3 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 140 percent to $0.49 in the third quarter of fiscal 2011 from $0.21 in the third quarter of fiscal 2010.

"In addition to continued strong consumer adoption of the Keurig® Single-Cup Brewing system, we believe our third quarter benefitted from our first-ever significant spring advertising and brand support programs, designed to raise awareness of the Keurig single-cup brewing system and of our Brew Over Ice™ teas and coffees, perfect for the summer months," said Lawrence J. Blanford, GMCR's president and CEO in a prepared statement.

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.

"Keurig brewing is truly changing the way North America brews and enjoys coffee at home and in the workplace," said Blanford. "We have seen awareness of the Keurig single-cup brewing system grow faster and more broadly than we could have imagined just a few years ago. As we head into preparation for Holiday 2011 and planning for our 2012 fiscal year, we are both excited and humbled by the opportunity we see ahead for our company, our employees and our valued business partners."

Blanford concluded, "It is particularly rewarding to think that with our growth, the resources we're able to allocate to socially and environmentally focused initiatives grows as well, amplifying the positive change GMCR and its employees continue to bring about in our local communities and in communities around the world."

Approximately 82 percent of consolidated net sales in the third quarter were from the Keurig brewing system and its recurring portion pack sales, including Keurig-related accessory sales with the remainder of total sales consisting primarily of sales of bagged coffee and revenue from our office coffee services business.

Net sales from portion packs totaled $485.4 million in the quarter, up 136 percent, or $279.7 million, over the same period in 2010.

Net sales from Keurig brewers and accessories totaled $105.4 million in the quarter, up 66 percent, or $42.0 million, from the prior year period.

Supporting continued growth in portion pack demand, GMCR sold 1.1 million Keurig brewers during the third quarter of fiscal 2011. This brewer shipment number does not account for consumer returns to retailers. The company estimates that GMCR brewer shipments represented approximately 92 percent of total brewers shipped with Keurig technology in the period.

The company announced a price increase in September 2010 that was implemented in the first and second quarters of fiscal 2011, and announced a price increase in May 2011 that was implemented late in the third quarter of fiscal 2011. If calculated based on pricing in effect during the prior year quarter, we believe the price increases improved net sales by approximately 13 percent compared to net sales for the third quarter of fiscal 2010.

The acquisition of Van Houtte completed on Dec. 17, 2010 contributed $111.7 million to consolidated net sales.

Third quarter fiscal 2011 gross margin was 36.8 percent of total net sales compared to 34.4 percent for the corresponding quarter in fiscal 2010. The improvement of gross margin is due primarily to a shift in the company's sales mix.

The company increased its GAAP operating income by 215 percent, to $119.3 million, in the third quarter of fiscal 2011 as compared to $37.9 million in the year ago quarter.

GMCR's third quarter fiscal 2011 non-GAAP operating income of $131.9 million increased 185 percent over non-GAAP operating income of $46.2 million in the third quarter of fiscal 2010. Non-GAAP operating income represented 18.4 percent of net sales in the third quarter of fiscal 2011 and 14.6 percent of net sales in the third quarter of fiscal 2010.

The company's tax rate for the third quarter of fiscal 2011 was 35.8 percent as compared to 49.5 percent in the prior year quarter. The 49.5 percent prior year rate included the tax effect of the recognition of the estimated total $12 million non-deductible acquisition-related expenses incurred during the company's first, second and third quarters of fiscal 2010 for the Diedrich acquisition which closed during the company's fiscal third quarter of fiscal 2010.

Diluted weighted average shares outstanding increased 11 percent to 153.3 million in the third quarter of fiscal 2011 from 137.9 million in the third quarter of fiscal 2010 largely as a result of the addition of approximately 9.5 million shares issued as part of the company's common stock offering completed in May 2011 as well as 608,342 shares of common stock sold to Luigi Lavazza S.p.A in a private placement pursuant to preemptive rights under existing agreements, completed on May 11, 2011. The offering raised approximately $688.9 million after deducting underwriting discounts and commissions and estimated offering expenses.

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 held for sale" in the company's financial statements, and expects to use any proceeds from an ultimate sale to reduce debt.

With one quarter remaining, the company has refined its outlook for its fiscal year 2011 and is providing its estimates for its fourth quarter of fiscal 2011. It expects:

  • Fiscal fourth quarter consolidated net sales growth of 100 percent to 105 percent resulting in total fiscal 2011 consolidated net sales growth of 98 percent to 100 percent, compared to the prior estimate of 82 percent to 87 percent.
  • Fiscal fourth quarter fully diluted non-GAAP earnings per share in the range of $0.44 to $0.48 per share, resulting in total fiscal 2011 fully diluted non-GAAP earnings per share in the range of $1.63 to $1.67 per share. This excludes 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; losses incurred on the extinguishment of debt; foreign exchange impact of hedging the risk associated with the Canadian dollar purchase price of the Van Houtte acquisition; and any gain or loss from sale of the Filterfresh U.S.-based coffee services business.
  • The company's estimate of non-GAAP earnings per share for fiscal 2011 is greater than the sum of the actual year-to-date third quarter of fiscal 2011 non-GAAP earnings per share and company's estimate of the non-GAAP earnings per share for the fourth quarter of fiscal 2011 due to the weighted impact of the increase in outstanding shares resulting from the May 2011 equity offering on the fourth quarter as compared to the fiscal year.
  • Capital expenditures for fiscal 2011 in the range of $325 million to $350 million, up from previous capital expenditure guidance of $275 million to $305 million.

The company provided the following first estimates for its fiscal year 2012.

  • Total consolidated net sales growth of 60 percent to 65 percent from fiscal 2011.
  • Fiscal 2012 non-GAAP earnings per diluted share in a range of $2.55 to $2.65 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; amortization of identifiable intangibles related to the company's acquisitions; and any gain or loss from sale of the Filterfresh U.S.-based coffee services business.

Capital expenditures for fiscal 2012 in the range of $650 million to $720 million. In addition, as the Company secures new production facilities for future growth it may incur additional capital expenditures in the range of $50 million to $60 million in fiscal 2012. 

 

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