Green Mountain Coffee Roasters, Inc., a provider of specialty coffee and coffee makers, announced its fiscal year 2012 first quarter results for the thirteen weeks ended Dec. 24, 2011.
First quarter net sales of $1,158.2 million, up 102 percent over net sales of $574.1 million in the year-ago quarter.
Generally Accepted Accounting Principles (GAAP) earnings per share (EPS) was $0.66 compared to first quarter fiscal year 2011. GAAP EPS was $0.02; non-GAAP EPS was $0.60, increasing 233 percent over $0.18 in the year-ago quarter.
GAAP operating income was $145.8 million compared to first quarter fiscal year 2011. GAAP operating income was $23.3 million; non-GAAP operating income was $158.0 million, improving 258 over the year-ago quarter.
GAAP net income of $104.4 million compared to first quarter fiscal year 2011 GAAP net income of $2.4 million; non-GAAP net income of $96.0 million increased 264 percent over the year-ago quarter.
"North American consumers continue to embrace the convenience, choice and consistent experience provided by the Keurig® single cup brewing system and, as evidenced by our strong holiday sales, are encouraging friends and family to do the same," said Lawrence J. Blanford, GMCR's president and CEO in a prepared statement. "We believe our sales in the period were, in part, the result of our efforts to ensure strong in-stock positions on store shelves as well as due to growing awareness of the Keurig® brand which was aided by our nationwide advertising and strong in-store merchandising."
With increasing consumer adoption, the Keurig® single Cup brewing system, supported by GMCR's growing family of owned and non-owned beverage brands in K-Cup® packs, is changing the way North America brews its coffee and other beverages.
"The value of single-serve, at-home brewing seems to be resonating with consumers," added Blanford. "According to NPD Group, in calendar 2011, sales of single-serve coffee makers accounted for 50 percent of the total dollars consumers spent overall in the coffee maker category. The Keurig® single cup brewing system has set the bar for consumers' single-cup experience, and drove an estimated 35 percent unit share of all coffee makers during the October through December 2011 period according to NPD."
Approximately 90 percent of consolidated first quarter fiscal year 2012 net sales were from sales of Keurig® single cup brewers, K-Cup® packs, and Keurig®-related accessories, with the remainder of net sales consisting primarily of sales of bagged coffee and sales from the office coffee services business.
GMCR sold 4.0 million Keurig® single cup brewers during the first quarter of fiscal year 2012. This brewer shipment number does not account for consumer returns.
The company estimates that the combination of brewer shipments from GMCR and its licensed partners resulted in shipments of 4.2 million Keurig® single cup brewers in the first quarter of fiscal year 2012.
The year-over-year increase in K-Cup® pack sales was driven by an 81 percentage point increase in K-Cup® pack sales volume, a 21 percentage point increase in K-Cup® pack net price realization due to price increases implemented during fiscal year 2011 to offset higher green coffee and other input costs, and a 13 percentage point increase in K-Cup® pack net sales due to the acquisition of Van Houtte.
Net sales from Van Houtte, acquired in December 2010 and part of the Canadian business unit, contributed approximately $111.9 million to consolidated net sales in the first quarter of fiscal year 2012, an increase of $103.1 million compared to the prior year period.
First quarter of fiscal year 2012 gross profit of $336.6 million represented gross margin of 29.1 percent of net sales compared to 25.0 percent for the corresponding quarter in fiscal year 2011.
The improvement is due to the net price realization from price increases on K-Cup® packs implemented during fiscal year 2011 to offset higher green coffee and other input costs, a shift in the company's sales mix due to K-Cup® packs increasing as a percentage of overall sales and the net price realization from price increases on Keurig® single cup brewers implemented to offset higher input costs. These benefits offset higher green coffee costs in the first quarter of fiscal year 2012, and higher sales return expenses associated with Keurig® single cup brewers.
GAAP operating margin improved to 12.6 percent of net sales in the first quarter of fiscal year 2012 from 4.1 percent in the prior year period as a result of selling, operating, and general and administrative expense leverage. During the first quarter of fiscal year 2011, general and administrative expense included approximately $8.7 million in transaction-related expenses due to the Van Houtte acquisition and $6.0 million in legal and accounting expenses associated with the SEC inquiry, the company's internal investigation and pending litigation.
Non-GAAP operating margin, which excludes $0.7 million in expenses associated with the SEC inquiry and pending litigation, as well as $11.5 million in amortization of identifiable intangibles related to the company's acquisitions, improved to 13.6 percent of net sales in the first quarter of fiscal year 2012 from 7.7 percent in the prior year period.
On Oct. 3, 2011, the company sold all the outstanding shares of Van Houtte USA Holdings, Inc., also known as the Van Houtte U.S. coffee service business or Filterfresh business resulting in a gain of $26.3 million.
On Oct. 3, 2011, the sale of the Filterfresh business to Aramark Refreshment Services, LLC was completed in exchange for $149.6 million in cash. Approximately $4.4 million of cash was transferred to Aramark as part of the sale of Filterfresh, resulting in a net cash inflow related to the Filterfresh sale of $142.6 million, net of transaction costs of $2.6 million. The purchase agreement with Aramark contained a covenant whereby the company was required to re-pay a portion of the proceeds received from Aramark in the event of certain conditions. Subsequent to Dec. 24, 2011, the covenant was settled under which the company paid Aramark $7.4 million.
Debt outstanding decreased to $479.7 million at Dec. 24, 2011 from $1,085.0 million at Dec. 25, 2010 as a result of paying down our long-term revolver. Proceeds from the public offering and concurrent private placement to Luigi Lavazza S.p.A. on May 11, 2011 and from the sale of Filterfresh on Oct. 3, 2011 were used to reduce outstanding debt obligations.
"Our brewer sales in the first quarter of fiscal year 2012 were above our expectations, with approximately 4.2 million brewers sold by the combination of GMCR and our licensed partners. That total is more than half of the 6.5 million brewers sold in all of our fiscal year 2011," said Blanford. "As these brewers come into use, we expect them to have a positive impact on future portion pack demand. Given the challenge of estimating sales in such a dynamic environment, in the coming months we will be working to ensure we apply appropriate rigor and analyses to confirm and refine our modeling assumptions and estimates of forward demand. In the meantime, however, we are reaffirming our prior revenue and earnings estimates for fiscal year 2012." The company reaffirmed its prior estimates for its fiscal year 2012, including:
Total consolidated net sales growth of 60 percent to 65 percent from fiscal year 2011.
Fiscal year 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 and the company's pending litigation; amortization of identifiable intangibles related to the company's acquisitions; and any gain from the sale of the Filterfresh business.
Capital expenditures in the range of $630.0 million to $700.0 million for fiscal year 2012.
The company is providing initial estimates for the second quarter of fiscal year 2012:
• Net sales growth of 45 percent to 50 percent.
• Fully diluted non-GAAP earnings per share in the range of $0.60 to $0.65 per share excluding any acquisition-related transaction expenses; legal and accounting expenses related to the SEC inquiry and the company's pending litigation; and amortization of identifiable intangibles related to the company's acquisitions.