Net Sales of $1.4 billion , up 4% vs. Year Ago GAAP Diluted EPS of $0.91 , up 30% vs. Year Ago Non-GAAP Diluted EPS of $0.96 , up 26% vs. Year Ago WATERBURY, Vt .--(BUSINESS WIRE)-- Green Mountain Coffee Roasters, Inc. , (GMCR) (NASDAQ: GMCR), a leader in specialty coffee and coffee makers with its innovative Keurig ® brewing technology, today announced its results for the 13 weeks ended December 28, 2013 . Performance Highlights “We delivered 4% sales growth and experienced our best holiday season ever,” said Brian P. Kelley , GMCR’s President and CEO. “We achieved record brewer volume, revenue and retail sell-through despite a challenging holiday season for many retailers, demonstrating the growing popularity of our Keurig brewing system among North American consumers. We believe these results will drive continued strong Keurig brewer installed base growth and future portion pack consumption. We’re very pleased with our solid gross margin progress, our 26% non-GAAP earnings growth and our $212 million in free cash flow in the quarter.” The Company’s 4% sales growth in the first quarter of fiscal year 2014 compared to the prior year period includes the unfavorable impact of foreign currency exchange rates which reduced net sales by approximately 0.8%. First Quarter Fiscal 2014 Financial Review ($ in millions except earnings per share) Thirteen weeks ended December 28, 2013 December 29, 2012 % Increase Net sales $ 1,386.7 $ 1,339.1 4 % Operating income: GAAP $ 226.6 $ 182.4 24 % Non-GAAP $ 238.2 $ 194.7 22 % Net income attributable to GMCR: GAAP $ 138.2 $ 107.6 28 % Non-GAAP $ 146.1 $ 116.0 26 % Diluted income per share: GAAP $ 0.91 $ 0.70 30 % Non-GAAP $ 0.96 $ 0.76 26 % Cash dividends declared per common share $ 0.25 $ — N/A Note: Complete GAAP to Non-GAAP reconciliation tables provided with this release. Net Sales by Product Net sales (in millions) Thirteen weeks ended December 28, 2013 December 29, 2012 $ Increase (Decrease) % Increase (Decrease) Packs $ 931.4 $ 863.7 $ 67.7 8 % Brewers and accessories 375.1 377.3 (2.2 ) (1 )% Subtotal 1,306.5 1,241.0 65.5 5 % Other products 80.2 98.1 (17.9 ) (18 )% Total net sales $ 1,386.7 $ 1,339.1 $ 47.6 4 % As shown in the table above, approximately 94% of consolidated first quarter fiscal year 2014 net sales were sales of Keurig ® Single Cup Brewers, packs, and Keurig ® -related accessories, with the remainder of net sales consisting primarily of bagged coffee, fractional packs and the Company’s Canadian office coffee services business. Packs The 8% increase in pack-related net sales over the prior year period was driven by a 12 percentage point increase in unit volume offset by a 2 percentage point decrease due to net price realization and a 2 percentage point decrease due to pack product mix. Brewers and Accessories For the quarter, a record 5.1 million Keurig ® system brewers were sold including 4.9 million sold by GMCR with 0.2 million reported sold by GMCR’s licensed brewer partners. The decrease in brewer and accessory net sales was driven by a 4 percentage point increase due to brewer sales volume offset by a 2 percentage point decrease due to brewer net price realization, a 2 percentage point decrease due to brewer product mix and a 1 percentage point decrease due to a decline in accessory net sales. Accessory net sales declined by $5.2 million , or 21%, in the period. Other Products Sales of other products declined $17.9 million , or 18%, in the quarter over the prior year period primarily due to the continuing demand shift from traditional coffee package formats to packs, particularly in Canada . In the first quarter of fiscal year 2014, gross profit increased 11% and gross margin improved 220 basis points to 33.5% from 31.3% in the prior year period. The following table quantifies the changes in gross margin period to period: Change from Q1 2013 to Q1 2014 Favorable green coffee costs +390 bps Price realization and mix primarily associated with brewers -90 bps Price realization and mix primarily associated with packs -50 bps Other Items -30 bps GAAP operating income grew by 24%, representing 16.3% of net sales in the first quarter of fiscal year 2014, up from 13.6% in the prior year period. Non-GAAP operating income grew by 22%, representing 17.2% of net sales in the first quarter of fiscal year 2014, up from 14.5% in the prior year period. The Company’s effective income tax rate was 36.6% for the first quarter of fiscal year 2014 as compared to 38.4% for the prior year period. Diluted weighted average shares outstanding as of the end of the first quarter of fiscal year 2014 decreased 1% to 151.6 million from 152.7 million in the prior year period in part as a result of the Company’s share repurchases under its previously announced share repurchase program. Balance Sheet & Cash Flow Highlights “Our strong earnings growth and business fundamentals are making it possible for us to deliver strong free cash flow and to repurchase shares, all while reinvesting in the growth of our business,” said Frances G. Rathke , GMCR’s Chief Financial Officer. “We ended the first quarter of fiscal year 2014 with a net cash position of $90 million , with cash and cash equivalents exceeding outstanding debt, capital lease and financing obligations.” Balance Sheet & Cash Flow Highlights ($ in millions) December 28, 2013 December 29, 2012 % Change Cash and cash equivalents, including restricted cash $ 349.8 $ 98.5 255 % Accounts receivables, net $ 525.1 $ 432.7 21 % Inventories $ 467.3 $ 587.3 (20 )% Raw materials & supplies $ 148.6 $ 198.6 (25 )% Coffee $ 68.7 $ 124.6 (45 )% Packaging & other raw materials $ 79.9 $ 74.0 8 % Finished goods $ 318.7 $ 388.7 (18 )% Brewers & accessories $ 156.1 $ 239.2 (35 )% Packs $ 140.4 $ 120.1 17 % Other $ 22.2 $ 29.4 (24 )% Debt outstanding and capital lease and financing obligations $ 259.8 $ 414.3 (37 )% Thirteen weeks net cash provided by operating activities $ 272.7 $ 337.1 (19 )% Thirteen weeks free cash flow (1) $ 211.9 $ 253.7 (16 )% (1) Free cash flow is calculated by subtracting capital expenditures for fixed assets from net cash provided by operating activities as reported in the unaudited statement of cash flows. Share Repurchase From the inception of its Board authorized share repurchase program in August of 2012 through today the Company has repurchased a total of 10.5 million shares at a total cost of $387 million and an average price of $36.92 . During the first quarter of fiscal year 2014 the Company repurchased a total of 1.7 million shares at a cost of $122.5 million . Dividend Declaration GMCR’s Board of Directors has declared a quarterly cash dividend of $0.25 per share of the Company’s common stock. The quarterly cash dividend will be paid on May 2, 2014 , to shareholders of record as of the close of business on April 4, 2014 . Business Outlook and Other Forward-Looking Information “We expect sales growth will accelerate as we move through our fiscal year 2014 based on a number of factors including a higher installed base of Keurig brewers as well as the ongoing conversion and on-shelf availability of packs converted from unlicensed to licensed participants in the Keurig system,” said Kelley. “We continue to expect net sales growth in the high single digits for fiscal year 2014 with some variability quarter-to-quarter as we work with our customers to manage the transition to our next generation Keurig 2.0 brewers and packs.” Strategic Relationship with The Coca-Cola Company Announced Separately today, the Company announced that it has signed a 10-year agreement with The Coca-Cola Company to collaborate on the development and introduction of The Coca-Cola Company’s global brand portfolio for use in GMCR’s forthcoming Keurig Cold™ at-home beverage system. Under the global strategic agreement, GMCR and The Coca-Cola Company will cooperate to bring the Keurig Cold™ beverage system to consumers around the world. In an effort to ensure long-term interests are aligned, the Companies also entered into a Common Stock Purchase Agreement whereby The Coca-Cola Company will purchase a 10% minority equity position in GMCR. The Company reaffirmed its outlook on its underlying business for its fiscal year 2014, and revised its outlook to reflect the anticipated impact of The Coca-Cola Company’s equity purchase. It expects: Net sales growth in the high single digits over fiscal year 2013 with stronger sales growth in the second half of the year as a number of currently unlicensed packs are transitioned to licensed partners. An annual effective tax rate of 37.0%. Non-GAAP earnings per diluted share of $3.75 to $3.85 which: Excludes the approximately 5% dilutive impact of The Coca-Cola Company’s purchase of shares and absent any actions the Company may take to offset dilution Includes an $0.11 headwind from foreign currency exchange Excludes the amortization of identifiable intangibles related to the Company’s acquisitions and legal and accounting expenses related to the SEC inquiry and the Company’s pending securities and stockholder derivative class action litigation On a currency-neutral basis and excluding the dilutive impact from The Coca-Cola Company’s purchase of shares and absent any actions the Company may take to offset dilution, underlying earnings growth is projected to increase 14% to 17% over the prior year period. Free cash flow in the range of $200 million to $300 million . Capital investment in the range of $400 million to $450 million primarily to fund new system introductions. The Company also provided its outlook for its second quarter of fiscal year 2014: Net sales growth of low-to-mid single digits over the second quarter of fiscal year 2013 due to year-over-year pack sales comparisons; the impact of unlicensed packs; and, the currency headwind in Canada . Non-GAAP earnings per diluted share in a range of $0.93 to $0.98 which: Excludes the approximately 4% dilutive impact of The Coca-Cola Company’s purchase of shares and absent any actions the Company may take to offset dilution Includes $0.05 headwind from foreign currency exchange Excludes the amortization of identifiable intangibles related to the Company’s acquisitions and legal and accounting expenses related to the SEC inquiry and the Company’s pending securities and stockholder derivative class action litigation On a currency-neutral basis and excluding the dilutive impact from The Coca-Cola Company’s purchase of shares, and absent any actions the Company may take to offset dilution, underlying earnings growth is projected to increase 5% to 11% over the prior year period. Use of Non-GAAP Financial Measures In addition to reporting financial results in accordance with generally accepted accounting principles (GAAP), the Company provides non-GAAP operating results that exclude legal and accounting expenses related to the SEC inquiry and pending securities and stockholder derivative class action litigation; and non-cash acquisition-related items such as amortization of identifiable intangibles, each of which include adjustments to show the tax impact of excluding these items. These amounts are not in accordance with, or an alternative to, GAAP. The Company’s management believes that these measures provide investors with transparency by helping illustrate the underlying financial and business trends relating to the Company’s results of operations and financial condition and comparability between current and prior periods. Management uses the measures to establish and monitor budgets and operational goals and to evaluate the performance of the Company. Please see the “GAAP to Non-GAAP Reconciliation” table that accompanies this document for a full reconciliation of the Company’s GAAP to non-GAAP results. Conference Call and Webcast Green Mountain Coffee Roasters, Inc. will be discussing these financial results with analysts and investors in a conference call and live webcast available via the Internet at 5:00 p.m. ET today, February 5, 2014 . The call is accessible via live webcast from the events section of the Investor Relations portion of the Company’s website at http://investor.gmcr.com/events.cfm . The Company archives the latest conference call for a period of time. A replay of the conference call also will be available by telephone at (719) 325-4835, passcode 9595571 from 9:00 p.m. ET on February 5, 2014 through 9:00 p.m. ET on Monday, February 10, 2014 . About Green Mountain Coffee Roasters, Inc. As a leader in specialty coffee and coffee makers, Green Mountain Coffee Roasters, Inc. (GMCR) (NASDAQ: GMCR), is recognized for its award-winning coffees, innovative Keurig ® Single Cup brewing technology, and socially responsible business practices. GMCR supports local and global communities by investing in sustainably-grown coffee, and donating a portion of its pre-tax profits to social and environmental projects. For more information visit: www.gmcr.com . To purchase Keurig ® and Green Mountain Coffee ® products visit: www.Keurig.com , www.greenmountaincoffee.com or www.keurig.ca . GMCR routinely posts information that may be of importance to investors in the Investor Relations section of its website, www.GMCR.com , including news releases and its complete financial statements, as filed with the SEC . The Company encourages investors to consult this section of its website regularly for important information and news. Additionally, by subscribing to the Company’s automatic email news release delivery, individuals can receive news directly from GMCR as it is released. Forward-Looking Statements Certain information in this filing constitutes "forward-looking statements." Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "seeks" or words of similar meaning, or future or conditional verbs, such as "will," "should," "could," "may," "aims," "intends," or "projects." However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. These statements may relate to: the expected impact of raw material costs and our pricing actions on our results of operations and gross margins, expected trends in net sales and earnings performance and other financial measures, the expected productivity and working capital improvements, the success of introducing and producing new product offerings, the impact of foreign exchange fluctuations, the adequacy of internally generated funds and existing sources of liquidity, such as the availability of bank financing, the expected results of operations of businesses acquired by us, our ability to issue debt or additional equity securities, our expectations regarding purchasing shares of our common stock under the existing authorizations, projections of payment of dividends, and the impact of the inquiry initiated by the SEC and any related litigation or additional governmental inquiry or enforcement proceedings. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company's historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Part I, "Item 1A. Risk Factors," and Part II "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our fiscal 2013 Annual Report filed on Form 10-K, as amended, and elsewhere in this report and those described from time to time in our future reports filed with the Securities and Exchange Commission . Actual results could differ materially from those projected in the forward-looking statements. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. GMCR-C GREEN MOUNTAIN COFFEE ROASTERS, INC. Unaudited Consolidated Balance Sheets (Dollars in thousands, except per share data) December 28 , 2013 September 28 , 2013 Assets Current assets: Cash and cash equivalents $ 348,665 $ 260,092 Restricted cash and cash equivalents 1,097 560 Receivables, less uncollectible accounts and return allowances of $54,240 and $33,640 at December 28, 2013 and September 28, 2013 , respectively 525,148 467,976 Inventories 467,344 676,089 Income taxes receivable 14,986 11,747 Other current assets 55,017 46,891 Deferred income taxes, net 58,343 58,137 Total current assets 1,470,600 1,521,492 Fixed assets, net 996,246 985,563 Intangibles, net 410,877 435,216 Goodwill 772,347 788,184 Deferred income taxes, net 148 149 Other long-term assets 29,890 30,944 Total assets $ 3,680,108 $ 3,761,548 Liabilities and Stockholders’ Equity Current liabilities: Current portion of long-term debt $ 14,552 $ 12,929 Current portion of capital lease and financing obligations 1,802 1,760 Accounts payable 241,806 312,170 Dividends payable 37,188 — Accrued expenses 229,529 242,427 Deferred income taxes, net 262 233 Other current liabilities 20,403 27,544 Total current liabilities 545,542 597,063 Long-term debt, less current portion 155,764 160,221 Capital lease and financing obligations, less current portion 87,705 76,061 Deferred income taxes, net 248,845 252,867 Other long-term liabilities 29,333 28,721 Commitments and contingencies Redeemable noncontrolling interests 9,686 11,045 Stockholders’ equity: Preferred stock, $0.10 par value: Authorized - 1,000,000 shares; No shares issued or outstanding — — Common stock, $0.10 par value: Authorized - 500,000,000 shares; Issued and outstanding - 148,750,531 and 150,265,809 shares at December 28, 2013 and September 28, 2013 , respectively 14,875 15,026 Additional paid-in capital 1,278,288 1,387,322 Retained earnings 1,354,323 1,252,407 Accumulated other comprehensive loss (44,253 ) (19,185 ) Total stockholders’ equity 2,603,233 2,635,570 Total liabilities and stockholders’ equity $ 3,680,108 $ 3,761,548 GREEN MOUNTAIN COFFEE ROASTERS, INC. Unaudited Consolidated Statements of Operations (Dollars in thousands except per share data) Thirteen weeks ended December 28 , 2013 December 29 , 2012 Net sales $ 1,386,670 $ 1,339,059 Cost of sales 922,623 919,896 Gross profit 464,047 419,163 Selling and operating expenses 168,215 171,845 General and administrative expenses 69,206 64,877 Operating income 226,626 182,441 Other income, net 429 188 Gain on financial instruments, net 4,561 1,104 Loss on foreign currency, net (10,550 ) (2,679 ) Interest expense (2,620 ) (5,730 ) Income before income taxes 218,446 175,324 Income tax expense (79,971 ) (67,379 ) Net income 138,475 107,945 Net income attributable to noncontrolling interests 248 362 Net income attributable to GMCR $ 138,227 $ 107,583 Net income attributable to GMCR per common share: Basic $ 0.00 $ 0.00 Diluted $ 0.00 $ 0.00 Cash dividends declared per common share $ 0.25 $ — Weighted-average common shares outstanding: Basic 149,162,600 149,317,597 Diluted 151,581,897 152,708,807 GREEN MOUNTAIN COFFEE ROASTERS, INC. Unaudited Consolidated Statements of Cash Flows (Dollars in thousands) Thirteen Thirteen weeks ended weeks ended December 28, 2013 December 29, 2012 Cash flows from operating activities: Net income $ 138,475 $ 107,945 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of fixed assets 47,996 43,810 Amortization of intangibles 11,152 11,535 Amortization of deferred financing fees 1,413 1,513 Unrealized loss on foreign currency, net 11,932 2,640 (Gain) loss on disposal of fixed assets (983 ) 16 Provision for doubtful accounts 862 668 Provision for sales returns 38,237 44,809 Gain on derivatives, net (6,830 ) (755 ) Excess tax benefits from equity-based compensation plans (4,509 ) (2,975 ) Deferred income taxes (33 ) 2,934 Deferred compensation and stock compensation 7,087 6,165 Other (225 ) 363 Changes in assets and liabilities: Receivables (99,310 ) (115,282 ) Inventories 205,602 179,767 Income tax receivable/payable, net 1,185 11,475 Other current assets (3,443 ) (9,635 ) Other long-term assets, net (86 ) 1,205 Accounts payable and accrued expenses (71,430 ) 53,389 Other current liabilities (5,094 ) 3,514 Other long-term liabilities 678 (5,959 ) Net cash provided by operating activities 272,676 337,142 Cash flows from investing activities: Change in restricted cash (537 ) 3,561 Capital expenditures for fixed assets (60,822 ) (83,458 ) Other investing activities 770 100 Net cash used in investing activities (60,589 ) (79,797 ) Cash flows from financing activities: Net change in revolving line of credit — (120,000 ) Proceeds from issuance of common stock under compensation plans 1,683 1,127 Repurchase of common stock (122,464 ) (98,530 ) Excess tax benefits from equity-based compensation plans 4,509 2,975 Payments on capital lease and financing obligations (462 ) (755 ) Repayment of long-term debt (3,154 ) (1,584 ) Other financing activities 26 (244 ) Net cash used in financing activities (119,862 ) (217,011 ) Effect of exchange rate changes on cash and cash equivalents (3,652 ) (98 ) Net increase in cash and cash equivalents 88,573 40,236 Cash and cash equivalents at beginning of period 260,092 58,289 Cash and cash equivalents at end of period $ 348,665 $ 98,525 Supplemental disclosures of cash flow information: Fixed asset purchases included in accounts payable and not disbursed at the end of each period $ 21,112 $ 36,770 Noncash investing and financing activities: Fixed assets acquired under capital lease and financing obligations $ 12,148 $ 6,607 Settlement of acquisition related liabilities through release of restricted cash $ — $ 9,227 GREEN MOUNTAIN COFFEE ROASTERS, INC. GAAP to Non-GAAP Reconciliation (Dollars in thousands, except per share data) Thirteen weeks ended December 28, 2013 December 29, 2012 Operating income $ 226,626 $ 182,441 Expenses related to SEC inquiry (1) 372 720 Amortization of identifiable intangibles (2) 11,152 11,535 Non-GAAP operating income $ 238,150 $ 194,696 Thirteen weeks ended December 28, 2013 December 29, 2012 Net income attributable to GMCR $ 138,227 $ 107,583 After tax: Expenses related to SEC inquiry (1) 236 444 Amortization of identifiable intangibles (2) 7,642 7,951 Non-GAAP net income attributable to GMCR $ 146,105 $ 115,978 Thirteen weeks ended December 28, 2013 December 29, 2012 Diluted income per share $ 0.91 $ 0.70 After tax: Expenses related to SEC inquiry (1) — — Amortization of identifiable intangibles (2) 0.05 0.05 Non-GAAP net income per share $ 0.96 $ 0.76 * * Does not sum due to rounding. (1) Represents legal and accounting expenses related to the SEC inquiry and pending securities and stockholder derivative class action litigation classified as general and administrative expense. (2) Represents the amortization of intangibles related to the Company’s acquisitions classified as general and administrative expense. Green Mountain Coffee Roasters, Inc. Suzanne DuLong , 802-488-2600 Investor.Services@GMCR.com or Katie Gilroy , 781-205-7345 Investor.Services@GMCR.com Source: Green Mountain Coffee Roasters, Inc.
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