UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): February 1, 2012
1-12340
(Commission
File Number)
GREEN
MOUNTAIN COFFEE ROASTERS, INC.
(Exact
name of registrant as specified in its charter)
Delaware |
03-0339228 |
|
(Jurisdiction of Incorporation) |
(IRS Employer Identification Number) |
33 Coffee Lane, Waterbury, Vermont 05676 |
(Address of registrant's principal executive office) |
(802) 244-5621
(Registrant's telephone number)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On February 1, 2012, Green Mountain Coffee Roasters, Inc. (the "Company") issued a press release announcing its first quarter results for the period ending December 24, 2011, together with accompanying prepared remarks, and will hold a live audio webcast to discuss its first quarter results. Copies of the press release and prepared remarks are attached hereto as Exhibit 99.1 and 99.2, respectively, and are incorporated herein by reference.
The information furnished in Item 2.02, including the Exhibits attached hereto, shall not be deemed "filed" for any purpose, and shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, regardless of any general incorporation language in any such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Press Release dated February 1, 2012 regarding First Quarter 2012 Results.
99.2 Prepared remarks dated February 1, 2012 regarding First Quarter 2012 Results.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
GREEN MOUNTAIN COFFEE ROASTERS, INC. |
By: /s/ Frances G. Rathke |
Frances G. Rathke |
Chief Financial Officer |
Date: February 1, 2012
|
Index to Exhibits
Exhibit No. |
Description |
99.1 |
Press Release dated February 1, 2012 regarding First Quarter 2012 Results. |
99.2 |
Prepared remarks dated February 1, 2012 regarding First Quarter 2012 Results. |
Exhibit 99.1
Green Mountain Coffee Roasters, Inc. Reports Fiscal Year 2012 First Quarter Results
Strong Keurig® Single Cup Brewer and Beverage Holiday Sales Drive 102% Net Sales Growth
WATERBURY, Vt.--(BUSINESS WIRE)--February 1, 2012--Green Mountain Coffee Roasters, Inc., (GMCR) (NASDAQ: GMCR), a leader in specialty coffee and coffee makers, today announced its fiscal year 2012 first quarter results for the thirteen weeks ended December 24, 2011.
Performance Highlights
First Quarter Fiscal Year 2012
“North American consumers continue to embrace the convenience, choice and consistent experience provided by the Keurig® Single Cup Brewing system and, as evidenced by our strong holiday sales, are encouraging friends and family to do the same,” said Lawrence J. Blanford, GMCR's president and CEO. “We believe our sales in the period were, in part, the result of our efforts to ensure strong in-stock positions on store shelves as well as due to growing awareness of the Keurig® brand which was aided by our nationwide advertising and strong in-store merchandising.”
With increasing consumer adoption, the Keurig® Single Cup Brewing system, supported by GMCR’s growing family of owned and non-owned beverage brands in K-Cup® packs, is changing the way North America brews its coffee and other beverages.
“The value of single-serve, at-home brewing seems to be resonating with consumers,” added Blanford. “According to NPD Group, in calendar 2011, sales of single-serve coffee makers accounted for 50% of the total dollars consumers spent overall in the coffee maker category. The Keurig® Single Cup Brewing system has set the bar for consumers’ single-cup experience, and drove an estimated 35% unit share of all coffee makers during the October through December 2011 period according to NPD.”
First Quarter Fiscal Year 2012 Financial Review
Net Sales (in millions)
Thirteen weeks ended | ||||||||||||||||
December 24, 2011 |
December 25, 2010 |
$ Increase |
% Increase |
|||||||||||||
K-Cup® Packs | $ | 715.7 | $ | 332.9 | $ | 382.8 | 115 | % | ||||||||
Brewers and Accessories | 330.4 | 188.0 | 142.4 | 76 | % | |||||||||||
Other Products and Royalties | 112.1 | 53.2 | 58.9 | 111 | % | |||||||||||
Total Net Sales | $ | 1,158.2 | $ | 574.1 | $ | 584.1 | 102 | % | ||||||||
Balance Sheet Highlights
Business Outlook and Other Forward-Looking Information
Company Estimates for Fiscal Year 2012*
“Our brewer sales in the first quarter of fiscal year 2012 were above our expectations, with approximately 4.2 million brewers sold by the combination of GMCR and our licensed partners. That total is more than half of the 6.5 million brewers sold in all of our fiscal year 2011,” said Blanford. “As these brewers come into use, we expect them to have a positive impact on future portion pack demand. Given the challenge of estimating sales in such a dynamic environment, in the coming months we will be working to ensure we apply appropriate rigor and analyses to confirm and refine our modeling assumptions and estimates of forward demand. In the meantime however, we are reaffirming our prior revenue and earnings estimates for fiscal year 2012.”The Company reaffirmed its prior estimates for its fiscal year 2012, including:
* Referenced brewer shipments do not account for returns.
Company Estimates for Second Quarter Fiscal Year 2012
The Company is providing initial estimates for the second quarter of fiscal year 2012:
Of note when comparing growth rates for fiscal years 2011 and 2012: second quarter fiscal year 2011 results reflect the impact of the acquisition of Van Houtte completed during first quarter of fiscal 2011; a price increase on K-Cup® packs announced in the first quarter of fiscal year 2011 and completed in the second quarter of fiscal year 2011 across all channels was a meaningful contributor to the second quarter fiscal year 2011’s growth; and, year-over-year comparisons will need to consider GMCR’s sale of its Filterfresh business in October 2011 which contributed approximately $91 million in revenue during fiscal year 2011.
The Company’s estimates for its second quarter fiscal year 2012 reflect lower portion pack and brewer growth rates compared to its first quarter fiscal year 2012 following the extraordinary growth driven by holiday purchases during first quarter fiscal year 2012 and the established seasonality of the business.
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 Fitlerfresh U.S.-based coffee services business; legal and accounting expenses related to the SEC inquiry and pending litigation; non-cash related items such as amortization of identifiable intangibles and losses incurred on the extinguishment of debt; and the effect of net operating and capital loss carryforwards, 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.
Conference Call and Webcast
Green Mountain Coffee Roasters, Inc. will be discussing these financial results with analysts and investors in a conference call and live webcast available via the Internet at 5:00 p.m. ET today, February 1, 2012. Management’s prepared remarks on its quarterly results will be provided via a Current Report on Form 8-K and also posted under the events link in the Investor Relations section of the Company’s website at www.GMCR.com. As a result, the conference call will include only brief remarks by management followed by a question and answer session. The call along with accompanying slides is accessible via live webcast from the events link in the Investor Relations portion of the Company’s website at http://investor.gmcr.com/events.cfm. The Company archives the latest conference call for a period of time. A replay of the conference call also will be available by telephone at (719) 457-0820, Passcode 9427808 from 9:00 p.m. ET on February 1, 2012 through 9:00 p.m. ET on Sunday, February 5, 2012.
About Green Mountain Coffee Roasters, Inc.
As a leader in specialty coffee and coffee makers, Green Mountain Coffee Roasters, Inc. (GMCR) (NASDAQ: GMCR), is recognized for its award-winning coffees, innovative Keurig® Single Cup brewing technology, and socially responsible business practices. GMCR supports local and global communities by offsetting 100% of its direct greenhouse gas emissions, investing in sustainably-grown coffee, and donating at least five percent of its pre-tax profits to social and environmental projects.
GMCR routinely posts information that may be of importance to investors in the Investor Relations section of its website, including news releases and its complete financial statements, as filed with the SEC. The Company encourages investors to consult this section of its website regularly for important information and news. Additionally, by subscribing to the Company’s automatic email news release delivery, individuals can receive news directly from GMCR as it is released.
Forward-Looking Statements
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. Generally, these statements can be identified by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “feel,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “would,” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Owing to the uncertainties inherent in forward-looking statements, actual results could differ materially from those stated here. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the difficulty in forecasting sales and production levels, the degree to which there are changes in consumer sentiment in this difficult economic environment, the Company’s success in efficiently expanding operations and capacity to meet growth, the Company’s success in efficiently and effectively integrating the Company’s acquisitions, the ability to maximize or successfully assert our intellectual property rights, the Company’s success in introducing and producing new product offerings, the Company’s dependence on external capital, including the Company’s credit facility, competition and other business conditions in the coffee industry and food industry in general, fluctuations in availability and cost of high-quality green coffee, any other increases in costs including fuel, the Company’s ability to continue to grow and build profits in the At Home and Away from Home businesses, the Company’s ability to attract and retain senior management, the continued availability of a consistent supply of parts for our brewers, and the brewers themselves, the Company experiencing product liability, product recall and higher than anticipated rates of warranty expense or sales returns associated with a product quality or safety issue, the extent to which the data security of the Company’s websites may be compromised, the impact of the loss of major customers for the Company or reduction in the volume of purchases by major customers, delays in the timing of adding new locations with existing customers, the Company’s level of success in continuing to attract new customers, sales mix variances, weather and special or unusual events, the impact of the inquiry initiated by the SEC and any related litigation or additional governmental investigative or enforcement proceedings, as well as other risks described more fully in the Company’s Annual Report on Form 10-K for fiscal year 2011 and other filings with the SEC. Forward-looking statements reflect management’s analysis as of the date of this release. The Company does not undertake to revise these statements to reflect subsequent developments, other than in its regular, quarterly earnings releases.
GMCR-C
GREEN MOUNTAIN COFFEE ROASTERS, INC. | ||||||||
Unaudited Consolidated Statements of Operations | ||||||||
(Dollars in thousands except per share data) | ||||||||
Thirteen | Thirteen | |||||||
weeks ended | weeks ended | |||||||
December 24, | December 25, | |||||||
2011 | 2010 | |||||||
Net sales | $ | 1,158,216 | $ | 574,148 | ||||
Cost of sales | 821,612 | 430,548 | ||||||
Gross profit | 336,604 | 143,600 | ||||||
Selling and operating expenses | 141,358 | 78,289 | ||||||
General and administrative expenses | 49,408 | 42,031 | ||||||
Operating income | 145,838 | 23,280 | ||||||
Other income (expense), net | 691 | 88 | ||||||
Loss on financial instruments, net | (1,134 | ) | (6,342 | ) | ||||
Gain on foreign currency, net | 2,686 | 1,579 | ||||||
Gain on sale of subsidiary | 26,311 | - | ||||||
Interest expense | (6,463 | ) | (6,058 | ) | ||||
Income before income taxes | 167,929 | 12,547 | ||||||
Income tax expense | (63,247 | ) | (10,098 | ) | ||||
Net Income | $ | 104,682 | $ | 2,449 | ||||
Net income attributable to noncontrolling interests | 268 | 37 | ||||||
Net income attributable to GMCR | $ | 104,414 | $ | 2,412 | ||||
Basic income per share: | ||||||||
Basic weighted average shares outstanding | 154,704,471 | 141,374,327 | ||||||
Net income per common share - basic | $ | 0.67 | $ | 0.02 | ||||
Diluted income per share: | ||||||||
Diluted weighted average shares outstanding | 159,367,829 | 147,036,072 | ||||||
Net income per common share - diluted | $ | 0.66 | $ | 0.02 | ||||
GREEN MOUNTAIN COFFEE ROASTERS, INC. | ||||||||
Unaudited Consolidated Balance Sheets | ||||||||
(Dollars in thousands) | ||||||||
December 24, | September 24, | |||||||
2011 | 2011 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 84,111 | $ | 12,989 | ||||
Restricted cash and cash equivalents | 9,087 | 27,523 | ||||||
Receivables, less uncollectible accounts and return allowances |
412,464 | 310,321 | ||||||
Inventories | 606,679 | 672,248 | ||||||
Income taxes receivable | 1,645 | 18,258 | ||||||
Other current assets | 33,848 | 28,072 | ||||||
Deferred income taxes, net | 35,675 | 36,231 | ||||||
Current assets held for sale | - | 25,885 | ||||||
Total current assets | 1,183,509 | 1,131,527 | ||||||
Fixed assets, net | 674,764 | 579,219 | ||||||
Intangibles, net | 520,820 | 529,494 | ||||||
Goodwill | 792,700 | 789,305 | ||||||
Other long-term assets | 46,464 | 47,759 | ||||||
Long-term assets held for sale | - | 120,583 | ||||||
Total assets | $ | 3,218,257 | $ | 3,197,887 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 8,343 | $ | 6,669 | ||||
Accounts payable | 247,505 | 265,511 | ||||||
Accrued compensation costs | 29,744 | 43,260 | ||||||
Accrued expenses | 133,710 | 92,120 | ||||||
Income tax payable | 39,081 | 9,617 | ||||||
Deferred income taxes, net | 245 | 243 | ||||||
Other current liabilities | 33,064 | 34,613 | ||||||
Current liabilities related to assets held for sale |
- | 19,341 | ||||||
Total current liabilities | 491,692 | 471,374 | ||||||
Long-term debt | 471,344 | 575,969 | ||||||
Deferred income taxes, net | 196,049 | 189,637 | ||||||
Other long-term liabilities | 18,082 | 27,184 | ||||||
Long-term liabilities related to assets held for sale | - | 474 | ||||||
Commitments and contingencies | ||||||||
Redeemable noncontrolling interests | 10,908 | 21,034 | ||||||
Stockholders' equity: | ||||||||
Preferred stock, $0.10 par value: Authorized - 1,000,000 shares; |
- | - | ||||||
Common stock, $0.10 par value: Authorized - 200,000,000 shares; |
15,477 | 15,447 | ||||||
Additional paid-in capital | 1,507,912 | 1,499,616 | ||||||
Retained earnings | 516,247 | 411,727 | ||||||
Accumulated other comprehensive loss | (9,454 | ) | (14,575 | ) | ||||
Total stockholders' equity | $ | 2,030,182 | $ | 1,912,215 | ||||
Total liabilities and stockholders' equity | $ | 3,218,257 | $ | 3,197,887 | ||||
GREEN MOUNTAIN COFFEE ROASTERS, INC. | ||||||||
Unaudited Consolidated Statements of Cash Flows | ||||||||
(Dollars in thousands) | ||||||||
Thirteen | Thirteen | |||||||
weeks ended | weeks ended | |||||||
December 24, | December 25, | |||||||
2011 | 2010 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 104,682 | $ | 2,449 | ||||
Adjustments to reconcile net income to net cash (used in) |
||||||||
Depreciation | 25,611 | 11,995 | ||||||
Amortization of intangibles | 11,453 | 6,136 | ||||||
Amortization deferred financing fees | 1,513 | 409 | ||||||
Loss on extinguishment of debt | - | 2,555 | ||||||
Unrealized gain of foreign currency | (2,050 | ) | (1,473 | ) | ||||
Loss on disposal of fixed assets | 232 | 34 | ||||||
Gain on sale of subsidiary | (26,311 | ) | - | |||||
Provision for doubtful accounts | 1,422 | 384 | ||||||
Provision for sales returns | 54,630 | 27,521 | ||||||
Unrealized loss on financial instruments, net | 1,383 | 3,148 | ||||||
Excess tax benefits from equity-based compensation plans | (3,908 | ) | (914 | ) | ||||
Deferred income taxes | 5,636 | 2,487 | ||||||
Deferred compensation and stock compensation | 3,606 | 2,261 | ||||||
Changes in assets and liabilities, net of effects of acquisition: | ||||||||
Receivables | (155,553 | ) | (52,099 | ) | ||||
Inventories | 67,048 | 30,030 | ||||||
Income tax receivable/payable, net | 49,953 | 6,637 | ||||||
Other current assets | (5,952 | ) | 2,183 | |||||
Other long-term assets, net | (365 | ) | (16,615 | ) | ||||
Accounts payable | (25,535 | ) | 2,335 | |||||
Accrued compensation costs | (13,295 | ) | (15,257 | ) | ||||
Accrued expenses | 40,868 | 20,937 | ||||||
Other current liabilities | (144 | ) | (2,045 | ) | ||||
Other long-term liabilities | (225 | ) | 16,631 | |||||
Net cash provided by operating activities | 134,699 | 49,729 | ||||||
Cash flows from investing activities: | ||||||||
Change in restricted cash | 581 | 117 | ||||||
Proceeds from notes receivable | 202 | 42 | ||||||
Acquisition of LJVH Holdings, Inc. (Van Houtte), net of cash acquired | - | (907,835 | ) | |||||
Proceeds from sale of subsidiary, net of cash transferred | 142,566 | - | ||||||
Capital expenditures for fixed assets | (101,848 | ) | (47,506 | ) | ||||
Proceeds from disposal of fixed assets | 166 | 21 | ||||||
Net cash provided by (used in) investing activities | 41,667 | (955,161 | ) | |||||
Cash flows from financing activities: | ||||||||
Net change in revolving line of credit | (113,074 | ) | 288,095 | |||||
Proceeds from issuance of common stock under compensation plans | 811 | 411 | ||||||
Proceeds from issuance of common stock for private placement | - | 249,524 | ||||||
Cash distributions to redeemable noncontrolling interests shareholders | (49 | ) | - | |||||
Excess tax benefits from equity-based compensation plans | 3,908 | 914 | ||||||
Principal payments under capital lease obligations | (622 | ) | (2 | ) | ||||
Proceeds from borrowings of long-term debt | - | 794,500 | ||||||
Deferred financing fees | - | (41,438 | ) | |||||
Repayment of long-term debt | (1,616 | ) | (354,544 | ) | ||||
Net cash (used in) provided by financing activities | (110,642 | ) | 937,460 | |||||
Change in cash balances included in current assets held for sale | 5,160 | (3,638 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | 238 | 162 | ||||||
Net increase in cash and cash equivalents | 71,122 | 28,552 | ||||||
Cash and cash equivalents at beginning of period | 12,989 | 4,401 | ||||||
Cash and cash equivalents at end of period | $ | 84,111 | $ | 32,953 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Fixed asset purchases included in accounts payable |
$ | 33,463 | $ | 11,676 | ||||
Non cash financing and investing activities: | ||||||||
Equipment acquired under capital lease obligations/vendor notes | $ | 10,974 | $ | - | ||||
GREEN MOUNTAIN COFFEE ROASTERS, INC. | ||||||||||
GAAP to Non-GAAP Reconciliation of Unaudited Consolidated Statements of Operations | ||||||||||
(Dollars in thousands, except per share data) | ||||||||||
Thirteen weeks |
Thirteen weeks December 25, 2010 |
|||||||||
Operating income | $ | 145,838 | $ | 23,280 | ||||||
Acquisition-related expenses (1) | - | 8,668 | ||||||||
Expenses related to SEC inquiry (2) | 669 | 5,989 | ||||||||
Amortization of identifiable intangibles (3) | 11,453 | 6,136 | ||||||||
Non-GAAP operating income | $ | 157,960 | $ | 44,073 | ||||||
Thirteen weeks |
Thirteen weeks |
|||||||||
Net income attributable to GMCR | $ | 104,414 | $ | 2,412 | ||||||
After tax: | ||||||||||
Acquisition-related expenses (1) | - | 16,382 | ||||||||
Expenses related to SEC inquiry (2) | 417 | 3,680 | ||||||||
Amortization of identifiable intangibles (3) | 7,849 | 3,893 | ||||||||
Gain on sale of subsidiary (4) | (16,685 | ) | - | |||||||
Non-GAAP net income | $ | 95,995 | $ | 26,367 | ||||||
Thirteen weeks |
Thirteen weeks |
|||||||||
Diluted income per share | $ | 0.66 | $ | 0.02 | ||||||
After tax: | ||||||||||
Acquisition-related expenses (1) | $ | - | $ | 0.11 | ||||||
Expenses related to SEC inquiry (2) | $ | 0.00 | $ | 0.03 | ||||||
Amortization of identifiable intangibles (3) | $ | 0.05 | $ | 0.03 | ||||||
Gain on sale of subsidiary (4) | $ | (0.10 | ) | $ | - | |||||
Non-GAAP net income per share | $ | 0.60 | * | $ | 0.18 | * | ||||
* Does not add due to rounding. | ||||||||||
(1) |
Reflects direct acquisition-related expenses of $10.8 million (net of income tax benefit of $2.1 million); the write-off of deferred financing expenses of $1.6 million (net of income tax provision of $1.0 million) on our former credit facility in conjunction with the new financing secured for the Van Houtte acquisition; and the foreign exchange impact of hedging the risk associated with the Canadian dollar purchase price of the Van Houtte acquisition of $4.0 million (net of income tax provision of $1.3 million). Direct acquisition-related expenses incurred prior to the closing of the acquisition are tax affected. Upon the close of the Van Houtte acquisition in the first quarter of fiscal 2011, the direct acquisition related expenses are nondeductible. As a result, during the first quarter of fiscal 2011, the Company recognized a $2.1 million tax expense related to the reversal of nondeductible acquisition-related expenses incurred during the Company’s fourth quarter of fiscal 2010. This tax affect was reversed for purposes of this non-GAAP table. | |||||||||
(2) |
Represents legal and accounting expenses related to the SEC inquiry and pending litigation classified as general and administrative expense. | |||||||||
(3) |
Represents the amortization of intangibles related to the Company’s acquisitions classified as general and administrative expense. | |||||||||
(4) |
Represents the gain recognized on the sale of Filterfresh, net of income taxes of $9.6 million. |
CONTACT:
Green Mountain Coffee Roasters, Inc.
Suzanne DuLong,
802-882-2100
VP IR & Corporate Comm
Investor.Services@GMCR.com
Exhibit 99.2
Prepared Remarks for First Quarter Fiscal Year 2012 Results
Issued
February 1, 2012
Introduction
About These Remarks
As previously announced Green Mountain Coffee Roasters, Inc. (GMCR) will be discussing its first quarter fiscal year 2012 financial results with analysts and investors in a conference call and live webcast available via the Internet beginning at 5:00 p.m. ET today, February 1, 2012. The following commentary is provided by management in conjunction with GMCR’s first quarter fiscal year 2012 results press release and conference call. These remarks represent management’s current views on the Company’s financial and operational performance as of the date of these remarks. These remarks are provided in advance of the conference call to make efficient use of investors and analysts’ time but will not be read on the live conference call. Management’s prepared remarks on its quarterly results will be provided via a Current Report on Form 8-K and also posted under the events link in the Investor Relations section of the Company’s website at www.GMCR.com.
Conference Call and Live Webcast
The conference call webcast is accessible via live webcast from the events link in the Investor Relations portion of the Company’s website at http://investor.gmcr.com/events.cfm as are accompanying supplemental slides. The Company archives the latest conference call for a period of time on its website. A replay of the conference call also will be available by telephone at (719) 457-0820, Passcode 9427808 from 9:00 p.m. ET on February 1, 2012 through 9:00 p.m. ET on Sunday, February 5, 2012.
First Quarter Fiscal Year 2012 Business Overview
(Supplemental
to the first quarter fiscal year 2012 earnings press release issued
February 1, 2012)
GMCR remains focused on its value drivers and its enabling initiatives, which we believe will allow the Company to continue to build the value of our enterprise. The Company believes its value drivers include:
1. Supporting brewer adoption both at home and away from home;
2. Increasing the opportunities for portion pack consumption;
3. Leveraging our multi-channel distribution;
4. Scaling our business to meet demand ; and,
5. Enhancing our geographic presence.
Supporting Brewer Adoption
We estimate that the combination of brewer shipments from GMCR and its licensed partners resulted in shipments of 4.2 million Keurig® Single Cup Brewers in the first quarter of fiscal year 2012. This brewer shipment number does not account for consumer returns to retailers. We estimate that GMCR brewer shipments represented approximately 94% of total brewers shipped with Keurig® technology in the period. The remaining 6% is comprised of shipments of third-party brewers, marketed and sold by our licensed partners, Breville Group Limited (Breville® brand), Conair (Cuisinart® brand) and Jarden (Mr. Coffee® brand).
GMCR Q1 2012 Prepared Remarks |
P. 2 of 5 |
Starbucks
In early November 2011, Starbucks K-Cup®
packs became available for purchase through food, drug, mass
merchandisers, club, specialty and department store retailers throughout
the U.S. In late December 2011, Starbucks K-Cup® packs also became
available for sale on one of GMCR's consumer-direct websites:
www.keurig.com, and Starbucks’ consumer-direct website:
starbucksstore.com. Starbucks K-Cup® packs will be available at major
food, drug, mass, club, specialty, and department store retailers
throughout Canada beginning March 2012. The companies expect to further
expand Starbucks K-Cup® pack and Keurig® Single Cup Brewing system
distribution to Starbucks stores in the latter part of 2012.
Increasing Portion Pack Consumption
The goal of our beverage
new product development group is “a beverage for every occasion.” We’re
pleased with the success we’ve had thus far with new beverages including
our Brew Over Ice™ varieties and our Green Mountain Naturals™ Hot Apple
Cider. Our goal is to continue to drive consumer interest and
satisfaction by providing an even broader range of beverage options to
surprise and delight consumers.
Leveraging our Multi-Channel Distribution
The goal of our
multi-channel distribution strategy is to ensure consumers can purchase
portion packs wherever they shop. We estimate consumers can purchase the
Keurig® Brewing System in more than 36,000 points of distribution.
Following is a summary of some of the progress made during our fiscal
first quarter.
Grocery
Our objective in grocery is not only expanding
distribution but also increasing the variety and shelf space within
existing stores, and we’ve been pleased to see an increasing number of
accounts accepting our dedicated merchandising sets.
According to SymphonyIRI Group, Inc. (IRI) data, 12-count portion packs sold by GMCR achieved an ACV (all commodity volume) of 90% nationwide with an average of 18 items per store in U.S. grocery stores for the 12-weeks ended December 25, 2011. ACV and item count was higher in the Northeast, with 100% ACV and an average of 33 items per store, compared to the West, where ACV was 84%, with an average of 15 items per store.
Department, Specialty, Mass Retailers and Wholesale Clubs
We
saw continued strong growth of Keurig® Single Cup Brewing system
adoption through the first quarter of fiscal year 2012 as evidenced by
data from NPD Group. In addition, Keurig® remains the number one selling
coffee maker brand. In the same period, the Keurig Single Cup Brewing
system’s unit share (excluding licensed partners) grew to 35% over
fiscal year 2011. Finally, Keurig® Single Cup Brewers were the top four
bestselling coffee makers during the Company’s fiscal first quarter, in
both dollar and unit sales. Including licensed brewers, brewers with
Keurig® technology held the top six selling brewers by dollar share.
(Note: NPD data does not include all retailers, and is estimated to
represent 35%-40% of the total coffee maker opportunity.)
GMCR Q1 2012 Prepared Remarks |
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These impressive results continue to support the growing trend of Keurig® Single Cup technology adoption as the way to brew coffee at home or in the office in North America.
Awareness of the Keurig® Single Cup system continues to grow, driven by the combined advertising and promotion of our own Keurig® Branded and owned coffee branded programs, as well as programs from the non-owned coffee brands in the system including Dunkin’ Donuts®, Folgers® (J.M. Smucker Co. brand) and Starbucks® as well as those of our licensed brewer partners, Breville Group Limited (Breville® brand), Conair (Cuisinart® brand) and Jarden (Mr. Coffee® brand).
Away From Home
The Away From Home segment of our
business is both a significant profit contributor and a “trial
generator” helping us build At Home penetration and success. The Away
From Home business is more mature than our At Home retail business as it
commenced in 1998 compared to 2004 for At Home. However, this segment
is experiencing continued growth as we focus on bringing Keurig® to
workplaces throughout North America. During our first quarter of fiscal
year 2012 the Away From Home business experienced 41% growth in brewer
placements versus a year ago. Keurig® Away From Home brewers are sold
by Keurig® Authorized Distributors, direct to end users on our consumer
direct websites and in retail locations such as Staples and Office Depot.
Hospitality
Trial of Keurig® products is also generated in our
hospitality channel where our in-room brewer can be found in up-market
hotel properties. Approximately 200,000 hotel rooms in North America
have Keurig® B130 Single Cup Brewers and K-Cup® packs available to
guests. We estimate that these brewer placements generate over 25
million annual “trials” of the Keurig® system which benefits both our At
Home and Away From Home businesses.
Consumer Direct
Our consumer-facing websites are often the
initial gateway consumers use to learn about the Keurig®
system. Additionally, our websites are leading e-commerce platforms
with many of our consumers purchasing their ongoing Keurig® pack needs
conveniently. For instance, www.keurig.com had 6.3 million unique
visitors in the first quarter of fiscal year 2012 and a 64% increase in
site-generated revenue.
Scaling our Business to Meet Demand
GMCR currently operates
production/distribution facilities in Castroville, California;
Knoxville, Tennessee; Essex, Waterbury and Williston, Vermont; Sumner,
Washington; Toronto, Ontario; and, Montreal, Quebec. The Company also
conducts research and development activities in facilities in Reading,
Wakefield and Woburn, Massachusetts; and in Waterbury, Vermont.
GMCR Q1 2012 Prepared Remarks |
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Given our expectation of continued demand growth for K-Cup® packs, including the new addition of well-recognized brands to the Keurig® Single Cup Brewing system, we continue to work to deploy necessary portion pack production capacity. We continue to add capacity across virtually all of our production locations and intend to add significant manufacturing floor space in fiscal year 2012 including significant expansion of our Essex, Vermont location, and the addition of a new facility in Isle of Wight County, Virginia.
Enhancing Our Geographic Presence
We continue to make
excellent progress with brewer adoption in Canada. According to
sell-through data from retailers reporting to NPD Group, for the period
October through December 2011, Keurig® Single Cup Brewers were the
top-ranked coffee maker brand in Canada based on dollar sales, with
Keurig®’s dollar share of all coffee makers increasing to 35.4% compared
to 20.2% in the same period in the prior year. Keurig® was the second-
ranked brewer in the region based on unit sales, with unit sales
increasing to 24.0% share from 11.9% share in the same period in the
prior year. With our success in Canada, we continue to evaluate the
potential of opportunities outside North America.
Effective at the beginning of our fiscal year 2012, we changed our organizational structure to align certain portions of our business by geography. Prior to fiscal year 2012, sales and operations associated with the Timothy’s brand were included in our Specialty Coffee business unit segment and a portion of the At Home single-cup business with retailers in Canada was included in the Keurig® business unit segment. Under the new structure, Timothy’s and all of the At Home single-cup business with retailers in Canada are included in the Canadian business unit segment. This change results in a segmentation of our business by geography with all of our U.S. business in the Specialty Coffee business unit and Keurig® business unit and all of our Canadian business included in the Canadian business unit. We did not change our operating or reporting segments and our management structure remains the same with the President of each business unit reporting directly to our Chief Executive Officer.
Separately today, we will file a Form 8-K in which we will provide a summary of the effects of the above changes on our historical segment results. The information contained in this Form 8-K is being furnished pursuant to Regulation FD in order to provide historical data that is on a basis consistent with our new structure. Beginning with our Quarterly Report on Form 10-Q for the quarter ended December 24, 2011, our financial statements will reflect the structure with prior periods adjusted accordingly.
The recasting of previously issued financial information does not represent a restatement of previously-issued financial statements and does not affect our consolidated reported net income, earnings per share, total assets or stockholders’ equity for any of the previously reported periods.
GMCR Q1 2012 Prepared Remarks |
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Forward-Looking Statements
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. Generally, these statements can be identified by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “feel,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “would,” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Owing to the uncertainties inherent in forward-looking statements, actual results could differ materially from those stated here. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the difficulty in forecasting sales and production levels, the degree to which there are changes in consumer sentiment in this difficult economic environment, the Company’s success in efficiently expanding operations and capacity to meet growth, the Company’s success in efficiently and effectively integrating the Company’s acquisitions, the ability to maximize or successfully assert our intellectual property rights, the Company’s success in introducing and producing new product offerings, the Company’s dependence on external capital, including the Company’s credit facility, competition and other business conditions in the coffee industry and food industry in general, fluctuations in availability and cost of high-quality green coffee, any other increases in costs including fuel, the Company’s ability to continue to grow and build profits in the At Home and Away from Home businesses, the Company’s ability to attract and retain senior management, the continued availability of a consistent supply of parts for our brewers, and the brewers themselves, the Company experiencing product liability, product recall and higher than anticipated rates of warranty expense or sales returns associated with a product quality or safety issue, the extent to which the data security of the Company’s websites may be compromised, the impact of the loss of major customers for the Company or reduction in the volume of purchases by major customers, delays in the timing of adding new locations with existing customers, the Company’s level of success in continuing to attract new customers, sales mix variances, weather and special or unusual events, the impact of the inquiry initiated by the SEC and any related litigation or additional governmental investigative or enforcement proceedings, as well as other risks described more fully in the Company’s Annual Report on Form 10-K for fiscal year 2011 and other filings with the SEC. Forward-looking statements reflect management’s analysis as of the date of this release. The Company does not undertake to revise these statements to reflect subsequent developments, other than in its regular, quarterly earnings releases.
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