Green Mountain Coffee Roasters, Inc. Reports 28 Percent Sales Gain For Single-Serve Packs In Third Quarter

Green Mountain Coffee Roasters, Inc., a provider in specialty coffee and coffee makers, today announced its third quarter fiscal year 2012 results for the 13 and 39 weeks ended June 23, 2012.

“Our third quarter results demonstrate continued business strength and solid fundamentals, particularly in light of the robust comparable quarter we reported in the year ago period,” said Lawrence J. Blanford, GMCR’s president and CEO in a prepared statement. “Our Keurig^® Single Cup Brewing system continues to revolutionize the way North Americans prepare and consume their single-serve beverages and our proven ability to grow consumer awareness and demand for the system has enabled us to deliver extraordinary results over the past five years.”

“As we become larger, however, our sales growth trajectory will understandably moderate from hyper-growth to a level more in-line with other successful growth businesses,” continued Blanford. “Based upon our current analysis of business fundamentals and the single-serve opportunity, we believe we will deliver annual sales growth in the range of 15 percent to 20 percent with annual earnings growth in the mid-teens over the longer term.”

GMCR’s board of directors has authorized the company to repurchase up to $500 million of its common shares over the next two years, at such times and prices as determined appropriate by the company's management in collaboration with the board of directors. The shares will be purchased with cash on hand, cash from operations, and funds available through our existing credit facility.

“Based on expectations for future growth and the company’s ability to generate meaningful free cash flow in 2013 and 2014, the board of directors has decided to strategically deploy its capital by authorizing the repurchase of common shares from time to time depending on market conditions,” said Michael J. Mardy, interim chairman of GMCR’s board of directors.

Approximately 89 percent of consolidated third 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 28 percentage point increase in sales volume and a 3 percentage point increase in K-Cup^® pack net price realization due primarily to price increases implemented during fiscal 2011 to offset higher green coffee and other input costs.

GMCR sold 1.4 million Keurig^® single cup brewers during the third 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 third quarter of fiscal year 2012.

The third fiscal quarter’s net sales included $20 million of sales of new Vue^® brewers and Vue^® packs. According to data from The NPD Group, Vue^® brewer sales were more than two times that of other coffee and espresso makers in its price category in the quarter ending June 2012.

Other products and royalties declined year-over-year primarily as a result of the sale of the Filterfresh on Oct. 3, 2011.

In the third quarter of fiscal 2012, gross margin declined to 34.9 percent from 36.8 percent in the prior year period.

The decline compared to the prior year period was due in part to under-utilization of the company’s manufacturing base as a result of lower than expected manufacturing through-put primarily due to lower K-Cup® pack demand and lower-than-planned production levels. An increase in single-serve pack obsolescence also adversely impacted gross margin in the quarter.

These adverse impacts were partially offset by the single-serve pack net price realization from price increases taken in fiscal 2011 to offset higher green coffee and other input costs experienced in fiscal 2011 and the first half of fiscal 2012, as well as by a decrease in green coffee costs in the third quarter of fiscal 2012 compared to the prior year period.