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

Operating Metrics

  • In the fourth quarter of fiscal year 2012, gross margin declined to 33.4% from 35.7% in the prior year period.
    • The higher gross margin in the fourth quarter of fiscal 2011 compared to the fourth quarter of 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.
    • These adverse impacts were partially offset by a decrease in green coffee costs in the quarter compared to the prior year period.
    • The following table quantifies the changes in gross margin period to period:
       

Change Q4 2011 to Q4 2012

 
Higher manufacturing costs due to ramp up in manufacturing base -280 bps
Favorable green coffee costs +100 bps
Vue®-related impact -50 bps
  • GAAP operating margin of 15.2% of net sales in the fourth quarter of fiscal year 2012 increased from 15.0% in the prior year period.
  • Non-GAAP operating margin, which excludes $1.9 million in expenses associated with the SEC inquiry and pending litigation in the quarter, as well as $11.5 million in amortization of identifiable intangibles related to the Company’s acquisitions, was 16.6% of net sales in the fourth quarter of fiscal year 2012 compared to 16.7% in the prior year period.
  • The Company’s effective income tax rate was 34.6% for the fourth quarter of fiscal year 2012 as compared to 23.7% 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 the end of the fourth quarter of fiscal year 2012 decreased to 158.1 million from 159.2 million in the prior year period in part as a result of 3.1 million shares repurchased in the fourth quarter of fiscal year 2012 as part of the Company’s previously announced share repurchase program.

Business Outlook and Other Forward-Looking Information

Company Estimates for First Quarter and Fiscal Year 2013

The Company provided its outlook for its first quarter of fiscal year 2013:

  • Total net sales growth in the range of 14% to 18% over the first quarter of fiscal year 2012.
  • First quarter fiscal year 2013 non-GAAP earnings per diluted share in a range of $0.62 to $0.67 per diluted share, excluding approximately $0.06 per share due to the amortization of identifiable intangibles related to the Company’s acquisitions; any acquisition-related transaction expenses; and, legal and accounting expenses related to the SEC inquiry and the Company’s pending litigation. The Company’s first quarter of fiscal year 2013 non-GAAP earnings per diluted share estimate includes the impact of shares repurchased prior to November 27, 2012 as part of its previously announced share repurchase program, but excludes any impact from potential future Company share repurchases.

The Company reiterated its net sales growth, capital expenditures and free cash flow estimates and refined its non-GAAP earnings per share outlook for its fiscal year 2013:

  • Total fiscal year 2013 net sales growth in the range of 15% to 20% over fiscal year 2012.
  • Fiscal year 2013 non-GAAP earnings per diluted share in a range of $2.64 to $2.74 per diluted share, excluding approximately $0.23 per share due to the amortization of identifiable intangibles related to the Company’s acquisitions; any acquisition-related transaction expenses; and legal and accounting expenses related to the SEC inquiry and the Company’s pending litigation. The Company’s fiscal year 2013 non-GAAP earnings per diluted share estimate includes the impact of shares repurchased prior to November 27, 2012 as part of its previously announced share repurchase program, but excludes any impact from potential future Company share repurchases.
  • Capital expenditures in the range of $380 million to $430 million.
  • Free cash flow in the range of $100 million to $150 million.

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 certain charges or credits such as transaction expenses related to the Company’s acquisitions including the foreign exchange impact of hedging the risk associated with the Canadian dollar purchase price of the Van Houtte acquisition; any gain from sale of the Filterfresh U.S.-based coffee services business; legal and accounting expenses related to the SEC inquiry and pending litigation; and non-cash related items such as amortization of identifiable intangibles and losses incurred on the extinguishment of debt, 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 of Unaudited Consolidated Statements of Operations” tables that accompany this document for a full reconciliation the Company’s GAAP to non-GAAP results.

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