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Green Mountain Coffee Roasters, Inc. Reports Fourth Quarter And Fiscal Year 2012 Results

Please note that the Company’s fiscal year 2012 included an additional week (53 rd week). This unique calendar shift last occurred in fiscal year 2006 and is not scheduled to occur again until fiscal year 2017. The 53 rd week added approximately $90.0 million in net sales; approximately $11.0 million (net of income taxes of $5.8 million) in net income; and, approximately $0.07 in diluted earnings per share in the fourth quarter and fiscal year 2012.

 

Fiscal Year 2012 Financial Review

Net Sales

        Fifty-three   Fifty-two      
Net Sales by Product weeks ended weeks ended
($ in millions) September 29, September 24, $ Increase % Increase
2012   2011 (Decrease)   (Decrease)
Single Serve Packs $ 2,708.9 $ 1,704.0 $ 1,004.9 59 %
Brewers and Accessories 759.8 524.7 235.1 45 %
Other Products and Royalties   390.5   422.2   (31.7 ) (8 )%
Total Net Sales $ 3,859.2 $ 2,650.9 $ 1,208.3   46 %
 
  • Approximately 90% of consolidated 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 billion dollar increase in single serve pack net sales was driven by a 49 percentage point increase in sales volume; a 9 percentage point increase in K-Cup ® pack net price realization due primarily to price increases implemented during fiscal year 2011 to offset the then higher green coffee and the other input costs; and, a 2 percentage point increase in K-Cup ® pack net sales due to the acquisition of Van Houtte. These increases in single serve pack net sales were offset by a 1 percentage point reduction due to single serve pack product mix.
    • GMCR sold 8.6 million Keurig ® Single Cup Brewers during 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 9.2 million Keurig ® Single Cup Brewers in fiscal year 2012.
    • Other products and royalties declined year-over-year primarily as a result of the sale of the Filterfresh on October 3, 2011.

Operating Metrics

  • In fiscal year 2012, gross margin declined to 32.9% from 34.1% in the prior year period.
    • The higher gross margin in fiscal 2011 compared to fiscal 2012 primarily was due to demand-related investments in fiscal 2012, including the introduction of the Vue ® brewing system. This resulted in higher labor and overhead manufacturing costs associated with the ramp up in the Company’s manufacturing base. Unfavorable green coffee costs and an increase in single serve pack obsolescence also adversely impacted gross margin year over year.
    • These adverse impacts were partially offset by the net price realization from price increases taken on single serve packs in fiscal year 2011 to offset higher green coffee and other input costs experienced in fiscal year 2011 and the first half of fiscal year 2012, as well as lower warranty-related expense compared to the prior year period.
    • The following table quantifies the changes in gross margin period to period:
       

Change FY 2011 to FY 2012

 
Net price realization - single serve packs +260 bps
Higher manufacturing costs due to ramp up in manufacturing base -220 bps
Unfavorable green coffee costs -80 bps
Increase in obsolescence -70 bps
Vue®-related impact -50 bps
Lower warranty expense +40 bps
  • GAAP operating margin of 14.7% of net sales in fiscal year 2012 increased from 13.9% in the prior year period as a result of operating expense leverage.
  • Non-GAAP operating margin, which excludes $6.7 million in expenses associated with the SEC inquiry and pending litigation in the year, as well as $46.0 million in amortization of identifiable intangibles related to the Company’s acquisitions, was 16.1% of net sales in fiscal year 2012 compared to 16.2% in the prior year period.
  • The Company’s effective income tax rate was 36.9% for fiscal year 2012 as compared to a 33.6% effective tax rate for the prior year period. The increase is 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 year 2011 associated with the Company’s sale of Filterfresh.
  • Diluted weighted average shares outstanding as of fiscal year 2012 increased to 159.1 million from 152.1 million in the prior year period.
  • Under its Board-authorized share repurchase program the Company repurchased 3.1 million shares in the fiscal year, with all of the purchases occurring in the fourth quarter of fiscal year 2012.
  • GMCR allocates a portion of its pre-tax profit to social and environmental projects. In fiscal year 2012, as a result of improved profitability, GMCR allocated $28.8 million to these efforts, up from $15.2 million in fiscal year 2011.
    • Included in this total is record volunteerism by the Company’s employees under its Café Time, or "Community Action for Employees" programs. GMCR encourages its employees to volunteer up to 52 hours annually of company-paid service to give back to local organizations and communities.
    • The number of employees participating in volunteer efforts increased 81% in fiscal year 2012 to 3,643 from 2,018 in fiscal year 2011, driving volunteer hours to increase 129% in fiscal year 2012 to 70,181 hours from 30,586 hours in fiscal year 2011.

Balance Sheet & Cash Flow Highlights

“Stronger than expected fourth quarter fiscal year 2012 sales combined with ongoing inventory management efforts and lower-than-forecasted capital investment enabled us to generate free cash flow ahead of plan,” said Frances G. Rathke, GMCR’s Chief Financial Officer. “We expect to continue to strategically invest in the business as demand warrants, and continue to forecast free cash flow in a range of $100 million to $150 million for fiscal year 2013.”

 

Balance Sheet & Cash Flow Highlights

($ in millions)         September 29,   September 24,    

$ Increase

 

% Increase

2012   2011  

(Decrease)

 

(Decrease)

Cash and cash equivalents $ 71.2 $ 40.5 $ 30.7 76 %
Accounts receivable, net $ 363.8 $ 310.3 $ 53.5 17 %
Inventories $ 768.4 $ 672.2 $ 96.2 14 %
Raw materials & supplies $ 229.9 $ 182.8 $ 47.1 26 %
Coffee $ 148.9 $ 115.5 $ 33.4 29 %
Packaging & other raw materials $ 81.0 $ 67.3 $ 13.7 20 %
Finished goods $ 538.5 $ 489.4 $ 49.1 10 %
Brewers & accessories $ 384.3 $ 279.3 $ 105.0 38 %
Single serve packs $ 120.9 $ 173.5 $ (52.6 ) (30 )%
Other $ 33.3 $ 36.6 $ (3.3 ) (9 )%
Debt outstanding and capital lease and financing obligations $ 531.5 $ 582.6 $ (51.1 ) (9 )%
Cash provided by operating activities (1) $ 477.8 $ 0.8 $ 477.0 59625 %
Free cash flow (1) (*) $ 76.7 $ (282.7 ) $ 359.5 N/A

(1) represents 53 weeks for fiscal 2012 and 52 weeks for fiscal 2011.(*) Free cash flow is calculated by subtracting capital expenditures for fixed assets from net cash provided by operating activities as reported in the unaudited consolidated statements of cash flows.

Fourth Quarter Fiscal Year 2012 Financial Review

 

Net Sales

     

 

        Fourteen   Thirteen      

Net Sales by Product

weeks ended weeks ended
($ in millions) September 29, September 24, $ Increase % Increase

2012

 

2011

(Decrease)   (Decrease)

 

 

Single Serve Packs $ 700.2 $ 475.5 $ 224.7 47 %
Brewers and Accessories 150.1 115.1 35.0 30 %
Other Products and Royalties   96.4   121.3   (24.9 ) (21 )%
Total Net Sales $ 946.7 $ 711.9 $ 234.8   33 %
 

  • Approximately 90% of consolidated fourth 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 50 percentage point increase in sales volume. This increase was offset by a 2 percentage point decrease due to the impact of single serve pack product mix and a 1% decrease due to the net price realization on single serve packs.
    • GMCR sold 1.8 million Keurig ® Single Cup Brewers during the fourth 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 2.0 million Keurig ® Single Cup Brewers in the fourth quarter of fiscal year 2012.
    • Fourth quarter fiscal year 2012 net sales included $9.6 million of sales of Vue ® brewers and Vue ® packs.
    • Other products and royalties declined year-over-year primarily as a result of the sale of the Filterfresh on October 3, 2011.




Stock quotes in this article: GMCR 

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