Stockholders' Equity

9 Months Ended

Jun. 28, 2014

Stockholders' Equity

Stockholders' Equity

12.Stockholders’ Equity

Stock Repurchase Program

Throughout various times during fiscal 2012, 2013, and 2014, Keurig’s Board of Directors authorized the Company to repurchase a total of $2.5 billion of the Company’s common stock.

Under its existing repurchase programs, on February 28, 2014, the Company entered into an accelerated share repurchase (“ASR”) agreement with a major financial institution (“Bank”).  The ASR allows the Company to buy a large number of shares immediately at a purchase price determined by an average market price over a period of time.  Under the ASR, the Company agreed to purchase $700.0 million of its common stock, in total, with an initial delivery to the Company of 4,340,508 shares (“Initial Shares”) of the Company’s common stock by the Bank.  The Initial Shares represent the number of shares at the current market price equal to 70% of the total fixed purchase price of $700.0 million.  The repurchased shares were retired and returned to an unissued status.  The par value of the repurchased shares of $0.4 million was deducted from common stock and the excess repurchase price over the par value of $489.6 million was deducted from additional paid-in capital.  The remainder of the total purchase price of $210.0 million reflects the value of the stock held by the Bank pending final settlement and, accordingly, was recorded as a reduction to additional paid-in capital.  Final settlement of the ASR will occur no sooner than November 24, 2014 and no later than February 27, 2015 at the Bank’s discretion.  Upon settlement of the ASR, the total shares repurchased by the Company will be determined based on a share price equal to the daily volume weighted-average price (“VWAP”) of the Company’s common stock during the term of the ASR program, less a fixed per share discount amount.  At settlement, the Bank will deliver additional shares to the Company in the event total shares are greater than the 4,340,508 shares initially delivered, and the Company will issue additional shares to the Bank in the event total shares are less than the shares initially delivered.  The receipt or issuance of additional shares will result in a reclassification between additional paid-in capital and common stock equal to the par value of the additional shares received or issued.  The number of shares that may be required to be issued by the Company to the Bank is limited to 10.0 million shares under the ASR.

The Company reflected the unsettled portion of the ASR ($210.0 million) as a repurchase of common stock for purposes of calculating earnings per share and as a forward contract indexed to its own common stock.  The forward contract met all of the applicable criteria for equity classification, and, therefore, was not accounted for as a derivative instrument.

As of June 28, 2014, based on the VWAP of the Company’s common stock for the period February 28, 2014 through June 28, 2014, settlement of the ASR would have resulted in 2.3 million additional shares delivered by the Bank to the Company.

An aggregate amount of $1,237.9 million remained authorized for common stock repurchase as of June 28, 2014.

Summary of share repurchase activity:

	Thirty-nine weeks ended
	June 28, 2014(1)		Fiscal 2013
Number of shares acquired	7,699,076		5,642,793
Average price per share of acquired shares	$	102.27	$	33.37
Total cost of acquired shares (in thousands)	$	997,386	$	188,278

(1)Number of shares acquired and average price per share reflect Initial Shares at then current market price, subject to change pending final settlement, and total cost of acquired shares includes total purchase price of $700.0 million under the ASR.

Accumulated Other Comprehensive Income (Loss)

The following table provides the changes in the components of accumulated other comprehensive income (loss), net of tax (in thousands) for the thirty-nine weeks ended June 28, 2014:

	Cash Flow Hedges			Translation			Accumulated Other  Comprehensive Income (Loss)
Balance at September 28, 2013	$	(7,150	)	$	(12,035	)	$	(19,185	)
Other comprehensive loss, before reclassifications	10,513			(21,667		)	(11,154		)
Amounts reclassified from accumulated other comprehensive income (loss)	2,329			—			2,329
Foreign currency exchange impact on cash flow hedges	(2		)	—			(2		)
Net current period other comprehensive loss	12,840			(21,667		)	(8,827		)
Balance at June 28, 2014	$	5,690		$	(33,702	)	$	(28,012	)

The unfavorable translation adjustment change during the thirty-nine weeks ended June 28, 2014 was primarily due to the weakening of the Canadian dollar against the U.S. dollar.  The favorable cash flow hedges during the thirty-nine weeks ended June 28, 2014 was primarily due to increases in “C” price of coffee.  See also Note 9, Derivative Financial Instruments.

Common Stock Sales

On February 27, 2014, the Company sold 16,684,139 shares of its common stock to Atlantic Industries, an indirect wholly owned subsidiary of The Coca-Cola Company, at $74.98 per share for an aggregate purchase price of $1,251.0 million, pursuant to a common stock purchase agreement dated February 5, 2014.  In addition, pursuant to pre-emptive rights set forth in the common stock purchase agreement (“CSPA”) between the Company and Luigi Lavazza S.p.A (“Lavazza) dated August 10, 2010, on March 28, 2014, the Company entered into another common stock purchase agreement with Lavazza to sell 1,407,000 shares of its common stock to Lavazza at $74.98 per share for an aggregate purchase price of $105.5 million.  Pursuant to the CSPA, in connection with the proposed offering of common stock to Atlantic Industries, Lavazza is entitled to maintain its current percentage ownership of the Company’s outstanding common stock on terms (including price) not less favorable than those proposed for the Atlantic Industries offering.  The Lavazza transaction closed on April 17, 2014.  Both common stock sales were recorded to stockholders’ equity during the thirty-nine weeks ended June 28, 2014, net of transaction-related expenses of approximately $8.0 million.

Common Stock Dividends

During the third quarter of fiscal 2014, the Company declared a quarterly dividend of $0.25 per common share, or $40.7 million in the aggregate, payable on August 1, 2014 to shareholders of record on July 3, 2014.  During the thirty-nine weeks ended June 28, 2014, the Company paid dividends of approximately $77.7 million.

On August 4, 2014, the Company’s Board of Directors declared the Company’s next regular quarterly cash dividend of $0.25 per common share, payable on October 31, 2014, to shareholders of record as of the close of business on October 3, 2014.

No cash dividends were declared or paid in fiscal 2013.