Green Mountain Coffee Roasters, Inc. Reports Sales Gain But Declining Gross Margin In Second Quarter

Green Mountain Coffee Roasters, Inc., a provider of specialty coffee and coffee makers, announced its second quarter fiscal year 2012 results for the 13 and 26 weeks ended March 24, 2012.

• Net sales of $885.1 million, up 37 percent over net sales of $647.7 million in the year-ago quarter.
• GAAP earnings per share (EPS) of $0.58 compared to second quarter fiscal year 2011 GAAP EPS of $0.44; non-GAAP EPS of $0.64 increases 33 percent over $0.48 in the year-ago quarter.
• GAAP operating income of $149.6 million compared to second quarter fiscal year 2011. GAAP operating income of $119.6 million; non-GAAP operating income of $162.3 million improves 22 percent over the year-ago quarter.
• GAAP net income of $93.0 million compared to second quarter fiscal year 2011 GAAP net income of $65.4 million; non-GAAP net income of $101.7 million increases 42 percent over the year-ago quarter.

"Over the past several years we achieved a strong net sales growth rate driven by consumers' rapid acceptance of our innovative Keurig^® single cup brewing system," said Lawrence J. Blanford, GMCR's president and CEO in a prepared statement. "Additionally, during this timeframe we made a number of strategic acquisitions that strengthened our long-term position and contributed to our growth rate. During the second fiscal quarter our 37 percent net sales growth resulted from more consumers adopting the ease and convenience of Keurig's^® Choose. Brew. Enjoy.™ approach to beverages. Despite lower-than-anticipated portion pack sales, and to a lesser degree, brewer sales, in the quarter we were able to control sales, general and administrative expenses enabling us to achieve non-GAAP earnings per share growth of 33 percent."

"Based on the consumer surveys conducted on our behalf, we estimate our U.S. Keurig^® single cup brewer installed base has increased to between 10.8 and 12.2 million brewers in use in households as of March 2012, a substantial increase from where we believe our installed base was just one year ago," continued Blanford. "After several quarters of robust adoption, we now expect a more moderated growth trajectory going forward for both Keurig^® brewer and K-Cup^® pack sales. Based upon our estimate that our installed base represents a relatively small percentage of the total estimated 90 million U.S. households with a coffee maker, we remain enthusiastic about the long-term opportunity for continued Keurig^® brewer adoption as well as initial consumer reaction to our recently introduced Vue™ brewer."

Approximately 90 percent of consolidated second quarter fiscal year 2012 net sales were from sales of Keurig^® single cup brewers, single-serve 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.

The increase in single serve pack sales was driven by a 47 percentage point increase in sales volume and a 12 percentage point increase in K-Cup^® pack net price realization due to price increases implemented during fiscal 2011 to offset higher green coffee and other input costs.

The second fiscal quarter's net sales included nominal initial sales of new Vue™ brewers and Vue™ packs. Net sales of Vue™ brewers and Vue™ packs are not expected to be material in the company's 2012 fiscal year.

GMCR sold 1.4 million Keurig^® Single Cup Brewers during the second 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 1.5 million Keurig^® single cup brewers in the second quarter of fiscal year 2012.

Other products and royalties declined year-over-year primarily as a result of the sale of the Filterfresh business in October 2011.

In the second quarter of fiscal 2012, gross margin declined to 35.4 percent from 37.5 percent in the prior year period.