Green Mountain Coffee Roasters, Inc. announced its full year and fiscal 2011 fourth quarter results for the thirteen and 52 weeks ended Sept. 24, 2011.
"With 95 percent annual revenue growth over last year the business continues to demonstrate extraordinary momentum as a result of broad consumer adoption of the Keurig® Single Cup Brewing system," said Lawrence J. Blanford, president and CEO of GMCR in a prepared statement. "We are seeing continued evidence of strong consumer demand for both brewers and portion packs from our customers and from third party sources that track consumer purchases such as NPD Group and SymphonyIRI Group, Inc. For instance, NPD reports Keurig® Single Cup Brewer unit sales increased 56 percent in our fiscal 2011 fourth quarter from the same period last year. As an indication of what we believe will be strong holiday consumer demand, for the month of September alone, NPD reports Keurig brewer unit sales are up 73 percent from the same month in 2010."
"Our fiscal fourth quarter revenue growth of 91 percent was strong. This was off of our estimates as a result of a number of factors including changes in wholesale customer ordering patterns in our grocery and club channels despite steady consumer point-of-sale demand in those channels," continued Blanford.
Blanford concluded, "While like most consumer products companies we are watchful of broader consumer sentiment going into the holidays, we remain confident in the company's growth potential and comfortable reiterating our estimate for fiscal year 2012 non-GAAP earnings per diluted share in a range of $2.55 to $2.65."
Approximately 84 percent of consolidated net sales in fiscal 2011 were from the Keurig® single cup 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 the office coffee services business.
The increase in K-Cup® portion pack net sales is driven by a 76 percentage point increase in K-Cup® portion pack sales volume, an 18 percentage point increase in K-Cup® portion pack net price realization due to price increases implemented during fiscal 2011 to offset higher green coffee and other input costs, and a 10 percentage point increase in K-Cup® portion pack net sales due to the acquisition of Van Houtte.
Supporting continued growth in portion pack demand, GMCR sold 5.9 million Keurig® single cup brewers during fiscal 2011. This brewer shipment number does not account for consumer returns to retailers. We estimate that GMCR brewer shipments represented approximately 91 percent of total brewers shipped with Keurig technology in the year.
Royalty revenue declined from 2010 due to the acquisitions of Timothy's, Diedrich and Van Houtte, all of which previously paid royalties to GMCR as third party licensed roasters.
Revenue from the Canadian business unit segment, which includes the acquisition of Van Houtte completed on Dec. 17, 2010, contributed approximately $321.4 million to net sales for the year.
Gross profit for fiscal 2011 was $904.6 million, or 34.1 percent of net sales as compared to $425.8 million, or 31.4 percent of net sales, in fiscal 2010.
The impact of price increases on K-Cup® portion packs during fiscal 2011 improved gross margin by approximately 400 basis points.
The benefit from the K-Cup® portion pack price increases was offset by higher green coffee costs in fiscal 2011 as compared to fiscal 2010, which decreased the company's gross margin by approximately 330 basis points.
Gross margin also increased due to a shift in the company's sales mix.
Net sales from Keurig® single cup brewers and related accessories were lower as a percentage of total company net sales in fiscal 2011 as compared to fiscal 2010.
The company sells the majority of Keurig® single cup brewers approximately at cost, or sometimes at a loss when factoring in the incremental costs related to sales, including fulfillment charges, returns and warranty expense.
In fiscal 2011, the decrease in Keurig® single cup brewer and accessories net sales as a percentage of total net sales improved the company's gross margin by approximately 230 basis points.
The company's effective income tax rate was 33.6 percent for fiscal 2011 compared to a 40.3 percent effective tax rate for fiscal 2010. The difference is primarily attributable to the release of valuation allowances related to a $17.7 million capital loss carryforward and a $5.4 million net operating loss carryforward in the fourth quarter of fiscal 2011. In addition, in fiscal 2011 as compared to fiscal 2010, the company had a larger percentage of foreign-based sales in Canada which has a lower corporate tax rate.
Diluted weighted average shares outstanding increased 10 percent to 152.1 million in fiscal 2011 from 137.8 million in fiscal 2010 primarily due to the issuance of approximately 8.6 million shares of common stock to Luigi Lavazza S.p.A (Lavazza) on Sept. 28, 2010 and approximately 10.1 million shares on May 11, 2011 from a public offering and concurrent private placement to Lavazza pursuant to its preemptive rights. The initial Lavazza sale raised $250.0 million and the May offering raised approximately $688.9 million after deducting underwriting discounts and commissions and offering expenses.
The company allocates at least 5 percent of its pre-tax profits to social and environmental programs. GMCR estimates that total resources allocated to social and environmental programs totaled approximately $15.2 million for fiscal 2011.
Approximately 83 percent of consolidated net sales in the fourth quarter were from the Keurig® single cup 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 the office coffee services business.
The increase in K-Cup® portion pack net sales is driven by a 52 percentage point increase in K-Cup® portion pack sales volume, a 29 percentage point increase in K-Cup® portion pack net price realization due to price increases implemented during fiscal 2011 to offset higher green coffee and other input costs, and a 10 percentage point increase in K-Cup® portion pack net sales due to the acquisition of Van Houtte.
GMCR sold 1.3 million Keurig® single cup brewers during the fourth quarter of fiscal 2011. This brewer shipment number does not account for consumer returns to retailers. We estimate that GMCR brewer shipments represented approximately 92 percent of total brewers shipped with Keurig technology in the period.
Royalty revenue declined from the fourth quarter of 2010 due to the acquisition of Van Houtte, which previously paid royalties to GMCR as a third party licensed roaster.
Revenue from the Canadian business unit segment, which includes the acquisition of Van Houtte completed on Dec. 17, 2010, contributed approximately $100.4 million to net sales in the fourth quarter of fiscal 2011.
Fourth quarter fiscal 2011 gross margin was 35.7 percent of total net sales compared to 30.4 percent for the corresponding quarter in fiscal 2010. The elements of the gross margin improvement are primarily:
The impact of price increases on K-Cup® portion packs during the fourth quarter of fiscal 2011 improved gross margin by approximately 710 basis points.
The benefit from the K-Cup® portion pack price increases was offset by higher green coffee costs in the fourth quarter of fiscal 2011 as compared to the prior year quarter, which decreased the company's gross margin by approximately 860 basis points.
Gross margin also increased due to a shift in the company's sales mix.
Net sales from Keurig® single cup brewers and related accessories were lower as a percentage of total company net sales in the fourth quarter of fiscal 2011 as compared to the fourth quarter of fiscal 2010.
The company sells the majority of Keurig® single cup brewers approximately at cost, or sometimes at a loss when factoring in the incremental costs related to sales, including fulfillment charges, returns and warranty expenses.
In the fourth quarter of fiscal 2011, the decrease in Keurig® single cup brewer and accessories net sales as a percentage of total net sales improved the company's gross margin by approximately 250 basis points over the fourth quarter of fiscal 2010.
