EX-99.1 2 earningsq407.htm q407 EARNINGS

Contact: Frances G. Rathke, CFO
Tel: (802) 244-5621 x 2300

 

Green Mountain Coffee Roasters, Inc. Reports Strong Growth for
Fiscal 2007 Fourth Quarter and Full Year

-- Fourth Quarter Sales up 39% and Net Income up 133% over prior year --
-- Fiscal 2007 Sales up 52% and Net Income up 52% over prior year --

 

WATERBURY, VT (November 15, 2007) -- Green Mountain Coffee Roasters, Inc., (NASDAQ: GMCR) today announced its fiscal 2007 and fiscal fourth quarter results for the thirteen weeks ended September 29, 2007, reporting strong sales and earnings growth.

Net sales for the fourth quarter of fiscal 2007 totaled $93.0 million as compared to $66.9 million reported in the fourth quarter of fiscal 2006, representing an increase of 39% year over year.

Net income for the fiscal fourth quarter of 2007 was $3.6 million or $0.14 per diluted share, up 133% from $1.5 million or $0.06 per diluted share in the fiscal fourth quarter of 2006.

For the fifty-two weeks ended September 29, 2007, the Company recorded net sales of $341.7 million, up 52 % from $225.3 million for the fifty-three weeks ended September 30, 2006. Net income for fiscal 2007 increased 52% to $12.8 million, or $0.52 per diluted share, as compared to net income of $8.4 million, or $0.36 per diluted share for the prior year. Fiscal 2007 includes a full year of consolidating the financial results of Keurig as a wholly-owned subsidiary as compared to fiscal 2006, which included fifteen weeks of Keurig's financial results as a wholly owned subsidiary following the close of the acquisition on June 15, 2006. Please note that the fiscal year 2006 has an extra week as compared to fiscal year 2007.

Excluding the impact of non-cash expenses described below and illustrated in the financial tables accompanying this press release, non-GAAP net income totaled $15.7 million in the 52-week period ended September 29, 2007, or $0.63 per share, up approximately 54% compared to non-GAAP net income of $10.2 million or $0.43 per share, for the 53-week period ended September 30, 2006. A reconciliation of all GAAP to non-GAAP financial measures is provided in the Company's financial tables accompanying this press release.

The items the Company is excluding from the non-GAAP results are: 1.) the pre-tax non-cash amortization expense related to the Keurig intangibles of approximately $4.8 million or $0.12 per diluted share in fiscal 2007, and $1.4 million or $0.03 per diluted share in fiscal 2006; and 2.) the recognition of an after-tax non-cash loss of $963,000 or $0.04 per share as a result of its equity investment in Keurig in fiscal 2006.

Lawrence J. Blanford, President and CEO, said, "I am very pleased with the financial results we are reporting today and, in particular, the strong top and bottom line growth we delivered to our stockholders. Our Keurig subsidiary has enabled us to even further accelerate the sales and profit growth of the Company due to the leadership position of Keurig in the single-cup brewing industry

for the home and office environments. Also, we grew shipments of our Fair Trade Certified™ and Fair Trade Certified organic lines, including Newman's Own® Organics, by 12% in fiscal 2007. Fair Trade Certified and Fair Trade Certified organic coffees now represent over 28% of our roasted coffee volume. I believe that our balanced approach to social responsibility, combined with our continued focus on building our business to expand the reach of our brands, is contributing meaningfully to our success. Going forward, we will continue to look at the drivers of single-cup brewing, the synergy with our traditional Green Mountain Coffee business, and ways to even further enhance the value creation opportunity of our enterprise."

 

Fiscal 2007 Fourth Quarter Financial Review

Net Sales

  • Net sales for the Green Mountain Coffee segment for the fourth quarter of fiscal 2007 were $61.2 million, prior to the elimination of inter-company sales, up 20% from $51.1 million reported in the fourth quarter of fiscal 2006. Dollar sales growth was strongest in the channels that benefit from sales of the Keurig single-cup brewing system including office coffee service (OCS), reseller, and consumer direct channels. Green Mountain Coffee K-Cup® shipments of coffee, tea and hot cocoa increased 50% over the prior period. Coffee pounds shipped by channel are shown in the table accompanying this press release.
  • Net sales of Keurig, prior to the elimination of inter-company sales, included in the Company's fourth quarter of fiscal 2007 were $42.6 million, up 97% from net sales of $21.6 million in the fourth fiscal quarter of 2006. This increase in sales was primarily due to higher brewer and K-Cup sales and royalty income from the sales of K-Cups. Further detail on shipments of Keurig brewers and K-Cups is provided in the chart accompanying this press release.
  • As part of the consolidation, $6.9 million of inter-company Keurig sales and $3.9 million of inter-company Green Mountain Coffee Roasters segment sales were eliminated.

Costs, Margins and Income

  • Cost of sales increased to 64.7% of total net sales compared to 62.4% for the corresponding quarter last year. The increase over last year is due to the significant increase in sales of Keurig At Home single-cup brewers (which have lower gross margins than our other commercial brewer products), variations in sales mix (mostly related to the higher percentage of sales of K-Cups, which have a lower gross margin than our other coffee products), higher commodity costs and higher manufacturing costs due to the opening of a new K-Cup packaging facility in Essex, Vermont during this quarter.
  • Selling, general and administrative (S,G&A) expenses improved as a percentage of net sales to 27.3% from 31.0% in the prior year quarter. This improvement in S,G&A margin was the result of leveraging selling and organizational resources on a higher sales base, most notably in the Keurig segment.
  • Pre-tax non-cash stock compensation was $1,356,000 in the fourth fiscal quarter of 2007, up from $472,000 in the prior year period. The increase is primarily due to employee stock options assumed by the Company in its acquisition of Keurig.
  • The Company's operating income was $7.5 million in the fourth quarter of fiscal 2007, as compared to $4.4 million reported in the fourth quarter of fiscal 2006, and, as a percentage of net sales, 8.0%, and 6.6%, respectively. Excluding the non-cash amortization expenses related to the identifiable intangibles of approximately $1.2 million in each period, the Company's operating margin was 9.3% in the fourth quarter of fiscal 2007, as compared to 8.4% in the prior period. The improvement in operating income margin this quarter is mostly due to the success of the Keurig single-cup brewing system and the strong sales and earnings growth derived from K-Cups.
  • Interest expense declined by $515,000 this past quarter to $1.3 million from $1.8 million in the prior year fourth quarter due to lower debt balances.
  • Income before taxes for the fourth quarter of fiscal 2007 was $6.1 million as compared to $2.6 million reported in the fourth quarter of fiscal 2006.
  • The tax rate was 41.3% as compared to 40.6% in the prior year quarter.
  • Net income for the fourth quarter of fiscal 2007 was $3.6 million or 3.8% of net sales as compared to $1.5 million or 2.3% of net sales in the corresponding quarter last year.

Business Outlook and Other Forward-Looking Information

Company Estimates for Fiscal Year 2008:

  • Total consolidated net sales growth of 35% to 40% primarily due to anticipated strong sales of Keurig Single-Cup Brewers and K-Cups in the office coffee channel, consumer direct, reseller and supermarket channels.
  • An operating margin in the range of 8.0% to 9.0%, including $4.8 million or $0.11 per diluted share for non-cash amortization expenses related to the identifiable intangibles.
  • Interest expense of $6.5 million to $7.5 million.
  • A tax rate of 42.0% as compared to 40.5% in fiscal 2007.
  • Growth in net income and EPS at a similar rate to slightly higher rate of growth than our guidance for top line growth of 35% to 40%. Fully diluted GAAP earnings per share in the range of $0.70 to $0.75 per share, including the non-cash amortization expenses related to the identifiable intangibles mentioned above. Non-GAAP EPS in the range of $0.81 to $0.86 per share.

Company Estimates Relating to Balance Sheet and Cash Flow:

  • Capital expenditures for fiscal 2008 in the range of $28 to $32 million.
  • Depreciation and amortization expenses in the range of $17.5 to $18.5 million including the $4.8 million for amortization of identifiable intangibles.

Company Estimates for First Quarter Fiscal Year 2008:

  • Total consolidated net sales growth of 40% to 50% primarily due to anticipated strong sales of Keurig Single-Cup Brewers and K-Cups in the office coffee channel, consumer direct and reseller channels.
  • An operating margin in the range of 5.0% to 6.0% including non-cash amortization expenses for identifiable intangibles of approximately $1.2 million or $0.03 per share. The Company anticipates higher selling and marketing expenses as a percentage of net sales during the first quarter of fiscal 2008 as compared to the same quarter last year due to increased marketing programs expected to facilitate increased sales of Keurig single-cup At Home brewers this holiday season.
  • Fully diluted GAAP earnings per share in the range of $0.10 to $0.14 per share, including the non-cash amortization expenses related to the identifiable intangibles that are estimated to reduce EPS by approximately $0.03 per share.

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 and information regarding non-cash related items such as amortization of identifiable intangibles related to the Keurig acquisition completed on June 15, 2006 and non-cash gains or losses from the Company's equity investment in Keurig prior to the acquisition. These amounts are not in accordance with, or an alternative to, GAAP. The Company's management believes that these measures provide investors with greater 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. In this press release, the Company presents its results for the fiscal 2007 fourth quarter and full year and the comparable prior periods on a GAAP and non-GAAP basis with line item reconciliation.

Green Mountain Coffee Roasters, Inc. will be discussing these financial results and future prospects with analysts and investors in a conference call available via the internet. The call will take place today, at 10:30 AM ET and will be available via live webcast on the Company's website at www.GreenMountainCoffee.com and other major portals. The Company archives the latest conference call on the Investor Services section of its website for a period of time. A replay of the conference call also will be available by telephone at 719-457-0820, confirmation code 1415047 from 1:30 PM ET on November 15th through 1:30 PM ET on Monday, November 19, 2007.

Green Mountain Coffee Roasters, Inc. (NASDAQ: GMCR) is recognized as a leader in the specialty coffee industry for its award-winning coffees and successful business practices. The Company sells more than 100 high-quality selections, including Fair Trade Certified™ and organic coffees under the Green Mountain Coffee Roasters® and Newman's Own® Organics brands through its wholesale, direct mail, and e-commerce operations (www.GreenMountainCoffee.com). Keurig, a pioneer and leading manufacturer of gourmet single-cup brewing system, offers its brewers, and K-Cups® from a variety of roasters, through wholesale, resellers and directly to consumers, while Green Mountain Coffee Roasters licenses, manufactures and sells its coffee as well as hot cocoa and tea K-Cups® for use in Keurig brewers. Green Mountain Coffee Roasters has been ranked No. 1 on the list of "100 Best Corporate Citizens," for the past two years, and has been recognized repeatedly by Forbes, FORTUNE Small Business, and the Society of Human Resource Management as an innovative, high-growth, socially responsible company.

Certain statements contained herein are not based on historical fact and are "forward-looking statements" within the meaning of the applicable securities laws and regulations. Owing to the uncertainties inherent in forward-looking statements, actual results could differ materially. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the impact on retail sales of consumer sentiment regarding the health of the economy, business conditions in the coffee industry and food industry in general, fluctuations in availability and cost of high-quality green coffee, the unknown impact of any price increases on net sales, competition, the unknown impact of management changes, Keurig's ability to continue to grow and build profits in the office and at home markets, the impact of the loss of one or more major customers for Green Mountain Coffee or reduction in the volume of purchases by one or more major customers, delays in the timing of adding new locations with existing customers, Green Mountain Coffee's level of success in continuing to attract new customers, the Company's success in efficiently expanding operations and capacity to meet growth, variances from sales mix and growth rate, weather and special or unusual events, as well as other risks described more fully in the Company's filings with the SEC. Forward-looking statements reflect management's analysis as of the date of this press release. The Company does not undertake to revise these statements to reflect subsequent developments, other than in its regular, quarterly earnings releases.

-Tables Follow-

 

GREEN MOUNTAIN COFFEE ROASTERS, INC.
Unaudited Consolidated Statements of Operations
(Dollars in thousands except per share data
 

Thirteen weeks ended 9/29/07

Thirteen weeks ended 9/30/06

Fifty-two weeks ended 9/29/07

Fifty-three weeks ended 9/30/06

Net sales

$        93,015 

$    66,875 

$        341,651 

$   225,323 

Cost of sales

  60,199 

    41,724 

     210,530 

        143,289 

     Gross profit

32,816 

25,151 

131,121 

82,034 

         

Selling and operating expenses

17,186 

14,350 

72,641 

46,808 

General and administrative expenses

    8,165 

      6,380 

       30,781 

         17,112 

     Operating income

7,465 

4,421 

27,699 

18,114 

         

Other income (expense)

(83)

 (24)

54 

202 

Interest expense

   (1,301)

     (1,816)

       (6,176)

             (2,261)

     Income before income taxes

6,081 

2,581 

21,577 

16,055 

         

Income tax expense

   (2,510)

     (1,047)

       (8,734)

        (6,649)

     Income before earnings related to investment in Keurig, Incorporated

3,571 

          1,534 

12,843 

          9,406 

Earnings (loss) related to investment in Keurig, Incorporated, net of tax

          -  

              - 

          -  

       (963)

     Net income

$         3,571 

$     1,534 

$         12,843 

$     8,443 
 

========

========

========

========

     Basic income per share:

        

     Weighted average shares outstanding

23,464,129

22,631,184 

23,250,431

22,516,701

     Net income

$           0.15

$       0.07 

$0.55

$        0.37
         

     Diluted income per share:

        

     Weighted average shares outstanding

25,267,680

23,811,057 

24,773,373

23,727,348

     Net income

$           0.14

$       0.06 

$0.52

$ 0.36

 

        

GREEN MOUNTAIN COFFEE ROASTERS, INC.
Unaudited Consolidated Balance Sheets
(Dollars in thousands)

September 29,
2007     

September 30,
 2006     

Assets

Current assets:

   Cash and cash equivalents

$2,818

$1,066  

Restricted cash and cash equivalents

354

208  

Receivables, less allowances of $1,600 and $1,021 at September 29, 2007, and September 30, 2006, respectively

39,373

30,071 

   Inventories

38,909

31,796 

   Other current assets

2,811

2,816 

Income tax receivable

-

618 

   Deferred income taxes, net

  3,558

    1,384 

 Total current assets

87,823

67,959 

Fixed assets, net

65,692

48,811 

Intangibles, net

34,208

39,019 

Goodwill

73,840

75,305 

Other long-term assets

   2,964

      2,912 

Total assets

$264,527

$234,006 

=======

=======

Liabilities and Stockholders' Equity

Current liabilities:

   Current portion of long-term debt

$63

$ 97 

   Accounts payable

37,778

23,124 

   Accrued compensation costs

7,027

6,736 

   Accrued expenses

9,866

7,978 

Income tax payable

1,443

-  

   Other short-term liabilities

     871

     874 

 Total current liabilities

57,048

38,809 

Long-term revolving line of credit

90,000

102,800 

Long-term debt

        50

         71 

Deferred income taxes

18,330

  17,386 

Commitments and contingencies

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 - 60,000,000 shares; Issued - 24,697,008 at September 29, 2007 and 24,044,407 shares at September 30, 2006, respectively

2,470 

2,404 

Additional paid-in capital

45,704 

34,545 

Retained earnings

58,981 

46,138 

Accumulated other comprehensive (loss)

(512)

(548)

ESOP unallocated shares, at cost - 29,310 shares

(208)

(263)

Treasury shares, at cost - 1,157,554 shares

(7,336)

 (7,336)

Total stockholders' equity

99,099 

 74,940 

Total liabilities and stockholders' equity

$264,527

$234,006 

=======

=======

GREEN MOUNTAIN COFFEE ROASTERS, INC.
Consolidated Statements of Operations- Non-GAAP basis
(in thousands except per share amounts)

Thirteen weeks ended September 29, 2007

GAAP

Amortization
of Identifiable
Intangibles

Loss related to investment in Keurig, Inc.

Non-GAAP

Net Sales

$93,015 

$-

$-

$93,015 

Cost of Sales

60,199 

-

-

60,199 

Gross Profit

32,816 

-

-

32,816 

Selling and operating expenses

17,186 

-

-

17,186 

General and administrative expenses

8,165 

(1,203)

-

6,962 

Operating Income

7,465 

1,203 

-

8,668 

Other income

(83)

-

-

(83)

Interest expense

(1,301)

-

-

(1,301)

Income before income taxes

6,081 

1,203 

-

7,284 

Income tax expense

(2,510)

(496)

-

(3,006)

Income before loss related to investment in Keurig, Inc., net of tax

3,571 

707 

-

4,278 

Loss related to investment in Keurig, Incorporated, net of tax benefit

- 

- 

-

-  

Net Income

$3,571

$707 

$-

$4,278 

Basic income per share:

        

Weighted average shares outstanding

23,464,129

23,464,129

23,464,129

23,464,129

Net Income

$0.15

$0.03

$-

$0.18
         

Diluted income per share:

        

Weighted average shares outstanding

25,267,680

25,267,680

25,267,680

25,267,680

Net income

$0.14

$0.03

$-

$0.17

 

Fifty-two weeks ended September 29, 2007

GAAP

Amortization
of Identifiable
Intangibles

Loss related to investment in Keurig, Inc.

Non-GAAP

Net Sales

$341,651 

$-

$-

$341,651 

Cost of Sales

210,530 

-

-

210,530 

Gross Profit

131,121 

-

-

131,121 

Selling and operating expenses

72,641 

-

-

72,641 

General and administrative expenses

30,781 

(4,812)

-

25,969 

Operating Income

27,699 

4,812 

-

32,511 

Other income

54

-

-

54

Interest expense

(6,176)

-

-

(6,176)

Income before income taxes

21,577 

4,812 

-

26,389 

Income tax expense

(8,734)

(1,947)

-

(10,681)

Income before loss related to investment in Keurig, Inc., net of tax

12,843 

2,865 

-

15,708 

Loss related to investment in Keurig, Incorporated, net of tax benefit

- 

-

-

-  

Net Income

$12,843 

$2,865 

$-

$15,708 

Basic income per share:

        

Weighted average shares outstanding

23,250,431

23,250,431

23,250,431

23,250,431

Net Income

$0.55

$0.12

$-

$0.68
         

Diluted income per share:

        

Weighted average shares outstanding

24,773,373

24,773,373

24,773,373

24,773,373

Net income

$0.52

$0.12

$-

$0.63

 

Thirteen weeks ended September 30, 2006

GAAP

Amortization
of Identifiable
Intangibles

Loss related to investment in Keurig, Inc.

Non-GAAP

Net Sales

$66,875 

$-

$-

$66,875 

Cost of Sales

41,724 

-

-

41,724 

Gross Profit

25,151 

-

-

25,151 

Selling and operating expenses

14,350 

-

-

14,350 

General and administrative expenses

6,380 

(1,203)

-

5,177 

Operating Income

4,421 

1,203 

-

5,624 

Other income

(24)

-

-

(24)

Interest expense

(1,816)

-

-

(1,816)

Income before income taxes

2,581 

1,203 

-

3,784 

Income tax expense

(1,047)

(492)

-

(1,539)

Income before loss related to investment in Keurig, Inc., net of tax

1,534 

711 

-

2,245 

Loss related to investment in Keurig, Incorporated, net of tax benefit

- 

- 

-

-  

Net Income

$1,534 

$711 

$-

$2,245 

Basic income per share:

        

Weighted average shares outstanding

22,631,184

22,631,184

22,631,184

22,631,184

Net Income

$0.07

$0.03

$-

$0.10
         

Diluted income per share:

        

Weighted average shares outstanding

23,811,057

23,811,057

23,811,057

23,811,057

Net income

$0.06

$0.03

$-

$0.09

 

Fifty-three weeks ended September 30, 2006

GAAP

Amortization
of Identifiable
Intangibles

Loss related to investment in Keurig, Inc.

Non-GAAP

Net Sales

$225,323 

$- 

$-

$225,323 

Cost of Sales

143,289 

- 

-

143,289 

Gross Profit

82,034 

- 

-

82,034 

Selling and operating expenses

46,808 

- 

-

46,808 

General and administrative expenses

17,112 

(1,402)

-

15,710 

Operating Income

18,114 

1,402  

-

19,516 

Other income

202 

- 

-

202 

Interest expense

(2,261)

- 

-

(2,261)

Income before income taxes

16,055 

1,402 

-

17,457 

Income tax expense

(6,649)

(581)

-

(7,230)

Income before loss related to investment in Keurig, Inc., net of tax

9,406 

821 

-

10,227 

Loss related to investment in Keurig, Incorporated, net of tax benefit

(963)

-  

963 

-  

Net Income

$8,443 

$821 

$963 

$10,227 

Basic income per share:

        

Weighted average shares outstanding

22,516,701

22,516,701

22,516,701

22,516,701

Net Income

$0.37

$0.04

$0.04

$0.45
         

Diluted income per share:

        

Weighted average shares outstanding

23,727,348

23,727,348

23,727,348

23,727,348

Net income

$0.36

$0.03

$0.04

$0.43

 

 

GREEN MOUNTAIN COFFEE ROASTERS, INC.
Total Coffee Pounds Shipped by Stand-Alone Green Mountain Coffee
(Unaudited Pounds in Thousands)

CHANNEL

Q4 13 wks. ended 9/29/07

Q4 13 wks. ended 9/30/06

Q4 Y/Y lb. Change

Q4% Y/Y lb. Change

Q4YTD 52 wks. ended 9/29/07

Q4YTD 53 wks. ended 9/30/06

Q4YTD Y/Y lb. Change

Q4YTD % Y/Y lb. Change

Supermarkets

1,664

1,480

184 

12.4 %

6,412

6,258

154 

2.5 %

Resellers

317

170

147 

86.5 %

1,043

561

482 

85.9 %

Convenience Stores

1,458

1,599

(141)

(8.8)%

5,640

5,863

(223)

(3.8)%

Office Coffee Srvs

1,772

1,430

342 

23.9 %

7,080

5,947

1,133 

19.1 %

Food Service

1,441

1,358

83 

6.1 %

5,429

4,964

465 

9.4 %

Consumer Direct

303

218

85 

39.0 %

1,214

896

318 

35.5 %

Totals

6,955

6,255

700 

11.2 %

26,818

24,489

2,329 

9.5 %

Note: 2006 was a 53-week fiscal year while 2007 is a 52-week fiscal year.
Note: Certain prior year customer channel classifications were reclassified to conform to current year classifications.
Note:  The Resellers channel includes shipments of Green Mountain Coffee manufactured products to Keurig Inc. and other resellers for sales to either the retail channel such as department stores or sales via internet websites

 

Company-wide Keurig brewer and K-Cup shipments
(Unaudited data and in thousands)
 

Q4 13 wks ended 9/29/07

Q4 13 wks ended 9/30/06

Q4 Y/Y

Increase

Q4 % Y/Y Increase

FY07
52 wks ended 9/29/07

FY06
53
wks(1) ended 9/30/06

FY07 Y/Y Increase

FY07 % Y/Y Increase

At Home Brewers (Consumer)

159

83

76

92%

422

219

203

93%

Away from Home Brewers (Commercial)

20

7

13

186%

57

28

29

104%

Total Keurig brewers shipped (2)

179

90

89

99%

479

247

232

94%

Total K-Cups shipped (system-wide) (3)

168,421

115,473

52,948

46%

638,298

448,880

189,418

42%

Total K-Cups sold by GMCR (4)

95,355

63,431

31,924

50%

359,056

255,412

103,644

41%

(1) 2006 was a 53-week fiscal year while 2007 was a 52-week year.
(2) Total Keurig brewers shipped means brewers shipped by Keurig to customers in the U.S./Canada. Cumulative brewers shipped life to date to customers in the U.S./Canada as of 9/29/07 is 953,000 units with 182,000 for Away from Home brewers and 771,000 for At Home brewers.
(3) Total K-Cups shipped (system-wide) means K-Cup shipments by all Keurig licensed roasters to customers in the U.S./Canada. These shipments form the basis upon which royalties are calculated by licensees for payments to Keurig. Cumulative K-Cups shipped life to date was 2,058 million as of 9/29/07.
(4) Total K-Cups sold by GMCR are under the brands Green Mountain Coffee, Newman's Own Organics coffee and Celestial Seasonings Teas.