Green Mountain Coffee Roasters, Inc., (GMCR) (NASDAQ: GMCR), a leader in specialty coffee and coffee makers, today announced its first quarter fiscal year 2013 results for the 13 weeks ended December 29, 2012.
“Our strong first quarter performance underscores the connection consumers have to their Keurig ® brewers; the soundness of our business model; and, the value inherent in our brand portfolio,” said Brian P. Kelley, GMCR’s President and CEO. “While the GAAP earnings comparison was affected by a non-recurring gain on the sale of Filterfresh in the first quarter of fiscal 2012, our non-GAAP earnings per share of $0.76 grew 27%.”
“The Keurig ® Single Cup brewing system is a powerful breakthrough for the beverage business, with significant untapped potential in the U.S. and globally. We are in the early days of a marked evolution in how consumers purchase, prepare and customize hot beverages in their homes,” said Kelley. “With a robust innovation pipeline and a growing awareness and commitment to the Keurig ® brand, GMCR is well positioned to continue to lead this disruptive shift in consumer behavior.”
First Quarter 2013 Performance Highlights
($ in millions except earnings per share)
|weeks ended||weeks ended|
|December 29, 2012||December 24, 2011||% Increase|
|Diluted income per share:|
|Note: Complete GAAP to Non-GAAP reconciliation tables provided with this release.|
(1) GAAP net income and diluted income per share includes $16.7 million in net income and $0.10 per fully diluted share due to the gain on the sale of Filterfresh in the first quarter of fiscal 2012. (2) “EBITDA” is earnings before interest, taxes, depreciation, and amortization. “LTM” is last twelve months. The “LTM” period ended December 29, 2012 includes 53 weeks. The “LTM” period ended December 24, 2011 includes 52 weeks.
First Quarter 2013 Financial Review
|Net Sales by Product|
|($ in millions)||Thirteen weeks ended|
December 29, 2012
December 24, 2011
|$ Increase (Decrease)||% Increase (Decrease)|
|Single Serve Packs||$||863.7||$||715.7||$||148.0||21||%|
|Brewers and Accessories||377.3||330.4||46.9||14||%|
|Other Products and Royalties||98.1||112.1||(14.0||)||(12||)%|
|Total Net Sales||$||1,339.1||$||1,158.2||$||180.9||16||%|
- As shown in the table above, approximately 93% of consolidated first quarter fiscal year 2013 net sales were sales of Keurig ® Single Cup Brewers, single serve packs, and Keurig ®-related accessories, with the remainder of net sales consisting primarily of bagged coffee and the traditional Canadian office coffee services business.
- Net sales of Keurig ® Single Cup Brewers, single serve packs, and Keurig ®-related accessories increased 19% over the prior year period.
- The increase in single serve pack net sales was driven by a 26 percentage point increase in sales volume offset by a 4 percentage point decrease due to single serve pack product mix and a 1 percentage point decrease due to the net price realization of single serve packs.
- There were a total of 4.95 million Keurig ® branded brewers sold during the period, an 18% increase over the prior year period.
- Of the total, GMCR sold 4.6 million Keurig ® Single Cup Brewers during the first quarter. This number does not account for consumer returns.
- GMCR’s licensed brewer partners reported 350,000 brewers sold with Keurig ® Single Cup Brewing technology during GMCR’s first quarter.
- Other products and royalties declined 12% year-over-year primarily due to the demand shift from traditional coffee package formats to single serve packs.
- In the first quarter of fiscal year 2013, gross margin improved to 31.3% from 29.1% in the prior year period.
- The higher gross margin in the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012 primarily was due to a decrease in green coffee costs, and a decrease in warranty expense and lower sales returns, both primarily related to Keurig ® Single Cup Brewers.
- These positive impacts were partially offset by the launch of the Keurig ® Vue ® Brewing system that has a lower gross margin than the Keurig ® K-Cup ® Brewing system; lower gross margin on the K-Cup ® Brewing system primarily due to a brewer rebate program; higher labor and overhead manufacturing costs associated with the ramp-up in the K-Cup ® pack manufacturing base; and, single serve pack net price realization.
- The following table quantifies the changes in gross margin period to period:
Change from Q1 2012 to Q1 2013
|Favorable green coffee costs||+250 bps|
|Lower warranty expense||+130 bps|
|Lower sales returns||+100 bps|
|Vue ®-related impact||-90 bps|
|Lower gross margins on K-Cup ® Brewers||-70 bps|
|Higher manufacturing costs primarily associated with the ramp-up in K-Cup ® pack production||-40 bps|
|Net price realization - single serve packs||-30 bps|
|Other items||-30 bps|
- GAAP operating income of 13.6% of net sales in the first quarter of fiscal year 2013 increased from 12.6% in the prior year period.
- Primarily due to the exclusion of the amortization of identifiable intangibles in both periods, non-GAAP operating income was 14.5% of net sales in the first quarter of fiscal year 2013 compared to 13.6% in the prior year period.
- The Company’s effective income tax rate was 38.4% for the first quarter of fiscal 2013 as compared to 37.7% for the prior year period. The lower effective tax rate in the prior year period was primarily attributable to the release of an $8.8 million capital loss valuation allowance as a result of the gain realized on the sale of Filterfresh, partially offset by a $5.2 million difference between the book and tax basis gains related to the sale.
- Diluted weighted average shares outstanding as of the end of the first quarter of fiscal year 2013 decreased to 152.7 million from 159.4 million in the prior year period in part as a result of shares repurchased under the Company’s previously announced share repurchase program.
- Under its Board-authorized two-year $500 million share repurchase program, the Company repurchased 4.3 million shares in the first quarter of fiscal 2013 and 3.1 million shares in the fourth quarter of fiscal 2012 for a total of 7.4 million shares at a cost of $175 million to date.
|Balance Sheet & Cash Flow Highlights ($ in millions)||
December 29, 2012
December 24, 2011
|Cash and cash equivalents, including restricted cash||$||98.5||$||93.2|
|Accounts receivables, net||$||432.7||$||412.5|
|Raw materials & supplies||$||198.6||$||241.1|
|Packaging & other raw materials||$||74.0||$||85.3|
|Brewers & accessories||$||239.2||$||166.8|
|Single serve packs||$||120.1||$||171.2|
|Debt outstanding and capital lease and financing obligations||$||414.3||$||479.7|
|Thirteen weeks net cash provided by operating activities||$||337.1||$||132.1|
|Thirteen weeks free cash flow (*)||$||253.7||$||30.2|
- Total second quarter fiscal year 2013 net sales growth in the range of 14% to 18% over the second quarter of fiscal year 2012.
- Second quarter fiscal year 2013 non-GAAP earnings per diluted share in a range of $0.70 to $0.75 per diluted share, excluding 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 securities and stockholder derivative class action litigation.
- The Company’s second quarter of fiscal year 2013 non-GAAP earnings per diluted share estimate includes the impact of shares repurchased prior to January 31, 2013 as part of its previously announced share repurchase program, but excludes any impact from potential future Company share repurchases.
- 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 $2.72 to $2.82 per diluted share, revised from prior estimates of $2.64 to $2.74, and excluding 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 securities and stockholder derivative class action litigation.
- The Company’s fiscal year 2013 non-GAAP earnings per diluted share estimate includes the impact of shares repurchased prior to January 31, 2013 as part of its previously announced share repurchase program, but excludes any impact from potential future Company share repurchases.
- Free cash flow in the range of $100 million to $150 million.
- Capital investment in the range of $350 million to $400 million, revised from prior estimates of $380 million to $430 million.
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