Contact:Frances G. Rathke, CFO
Tel: (802) 244-5621 x 1300
Green Mountain Coffee Roasters Reports Fiscal 2006
First Quarter Results
-- First quarter sales up 26.8% over prior year --
WATERBURY, VT (February 16, 2006) -- Green Mountain Coffee Roasters, Inc., (NASDAQ: GMCR) today announced its fiscal first quarter results for the sixteen-week period ended January 14, 2006.
Net sales for the first quarter ended January 14, 2006 increased 26.8% to $63.9 million, up from $50.4 million in the first quarter of 2005. Total coffee pounds shipped were up 18.5% to 7.5 million pounds. Net income for the first quarter increased 23.9% to $3.0 million, or $0.38 per diluted share, compared to $2.4 million, or $0.32 per diluted share for the first quarter of 2005. The Company's net income for the first quarter of 2006 includes recognition of a non-cash stock compensation charge of $417,000 or approximately $0.03 per share as a result of the adoption of FAS123(R) related to stock compensation. The Company's net income also includes recognition of a first quarter gain in fiscal 2006 of $2,000 or $0.00 per share as a result of its equity investment in Keurig, Inc. This compares to the Company's recognition of a non-cash loss of $469,000 (or $0.06 per share) as a result of its equity investment in Keurig, Inc. in the first quarter of 2005.
Robert P. Stiller, Chairman, President and Chief Executive Officer, said, "I am pleased with our strong sales growth this quarter which has exceeded our prior expectations and guidance of 20% to 25%. I am particularly happy with themomentum in all of the Company's channels with many exciting developments and opportunities like McDonald's restaurants in New England and New York. We continue to build strength in our office coffee service and consumer direct businesses. As we anticipated, our growth has been fueled largely by people's enthusiasm for our coffee in the Keurig® Single-Cup Brewer, as well as by increasing demand for our Fair Trade CertifiedÔ and organic offerings. This success is gratifying to all of us at the Company as we seek to provide consumers with the ultimate coffee experience and also make a positive difference in the world."
Stiller concluded, "In the competitive specialty coffee market, we are differentiating ourselves with innovative product development and business practices, and socially responsible initiatives. Looking forward, we intend to leverage these advantages into continued strong sales growth while continuing to focus on achieving higher margins."
First Quarter Financial Review
Channel and Other Sales Growth Highlights:
- Dollar sales growth was strongest in the office coffee service (OCS) channel contributing approximately a third of the increase in net sales. OCS coffee pounds were up 26.7% over the prior year. The high growth in this channel was due to strong K-Cup® sales driven by increased penetration of the Keurig® B100 brewers in small offices, by the introduction of 'Extra Bold' K-Cups, and by the continued success of tea in K-Cups.
- The supermarket channel coffee pounds shipped increased 7.1% in the first quarter with strong growth from both existing customers like Price Chopper and Demoulas and from new customer acquisitions such as Target. Growth is being primarily driven by increasing demand for the Company's Fair Trade Certified™ and organic offerings.
- The consumer direct channel grew 45% in dollar sales and 29.6% in coffee pounds shipped. The majority of this growth was related to the sales of Keurig® Single-Cup Brewers for the home and the associated K-Cups® as well as K-Cup sales to Keurig, Inc., for their Keurig Single-Cup brewer sales to the developing retail channel.
- The food service channel was the largest channel contributor to the Company's coffee pounds growth, representing 37% of coffee pound growth for the quarter.The 44.4% increase over the prior year is a result of the November 1st roll-out to over 650 McDonald's restaurants in New England and New York where the Company is selling two Newman's Own® Organics Fair Trade Certified™ coffee products.
- In the convenience store channel, coffee pounds shipped increased 8.1%. This increase was due mainly to increased sales relating to inventory replenishment, which varies quarter-to-quarter, to McLane Company, the distributor to Exxon Mobil Corporation convenience stores, as well as from growth with customers such as Uni-Mart ™ and Tedeschi Food Shops, Inc.
- The Company experienced a 68% gain in sales of certified Fair Trade and organic coffees, including sales of co-branded Newman's Own® Organic coffees. This growth benefited all sales channels with the major growth driver being the new McDonald's opportunity.
- During the second quarter of fiscal 2005, the Company increased prices for certain products because of rising green coffee costs. The net impact on the first quarter of fiscal 2006 was an increase in net sales of approximately 6%over the prior year period.
- Company wide K-Cup® shipments increased 33%over the prior year quarter.
- The difference in growth rates between sales and pounds reflects the Company's price increases during the second quarter of fiscal 2005 and the increase in coffee K-Cups® as a percentage of sales, which sell at a higher price per pound than the Company's other products, as well as sales of Celestial Seasonings® Teas in K-Cups® which do not enter the coffee pounds shipped data.
Margins, Expenses, and Analysis of After-Tax Income:
- Gross profit margin was 34.9% of sales compared to 35.4% in the comparable quarter of fiscal 2005. The decrease was primarily attributable to higher green coffee costs offset by the price increases on a dollar-for-dollar basis (yet not on a gross margin basis) as well as variations in sales mix and a $62,000 non-cash charge for stock option compensation.
- Selling, general and administrative (S,G&A) expenses increased to 26.8% of sales from 25.7% in the comparable quarter of fiscal 2005. The primary reason for the increase is marketing investments to support customer acquisitions that are intended to produce beneficial outcomes later this year and into the future. These marketing investments were anticipated and include funding development initiatives for consumer direct, McDonald's, and customer relationship management software and programs for increased regional penetration and improved long-term profitability. In addition, S,G&A in the first quarter of fiscal 2006 includes a $355,000 non-cash charge for stock option compensation. Including the impact of stock option expensing, the Company's operating margin for the first quarter of fiscal 2006 was 8.1% as compared to 9.7% in the prior year period.
- The tax rate in the first quarter of fiscal 2006 increased to 42.2% primarily related to the impact of the new stock option expense accounting as compared to 40.2% in the first quarter of fiscal 2005.
- After-tax income, before the recognition of the non-cash earnings related to the Company's equity investment in Keurig, Inc., increased 3.6% to $3.0 million. The Company's net income was $3.0 million after recognition of the Keurig-related non-cash gain of $2,000 or $0.00 per share, which includes a $0.01 per share quarterly operating gain for Keurig, Inc. This gain was offset by a net $0.01 per share accretion adjustment for the estimated redemption value of the preferred stock of Keurig, Inc. and the increase in the Company's preferred shares to mark the preferred shares to market based upon a recent valuation change recorded by Keurig, Inc. The redemption value is tied to a valuation of Keurig, Inc. that is performed annually and approved by its Board of Directors. The increase in the accretion of the redemption value of the preferred stock reflects the increase by Keurig, Inc.'s Board of Directors in its annual valuation which more than doubled at December 31, 2005 from the prior year,and also that the redemption date of February 2007 is getting closer.The $0.00 per share gain for the current first quarter compares to a Keurig-related non-cash loss of $469,000 or $0.06 per share in the prior year period, including $0.04 per share which relates to an accretion expense adjustment for the estimated redemption value of the preferred stock of Keurig, Inc.
Business Outlook and Other Forward-Looking Information
Company Estimates for Fiscal Year 2006 Reaffirmed:
- Net sales growth of 22% to 28% primarily due to strong double-digit sales in the Office Coffee Channel and significant growth in the Consumer Direct channel driven by sales of Keurig® Single-Cup Brewers for the home and the associated K-Cups® as well as K-Cup sales to Keurig, Inc., for their Keurig® Single-Cup B50 and new B60 and B40 brewer sales to the retail channel.
- Coffee pounds growth of 14% to 20%.
- Due to the recent accounting pronouncement related to accounting for stock compensation, the Company anticipates that it will incur an annual non-cash charge starting in its fiscal first quarter of approximately $1.5 million or $0.11 per share for stock option compensation.
- An operating margin in the range of 9.0% to 9.7% including the estimated annual stock option expense of $1.5 million.
- Interest expense of $300,000 to $400,000 in fiscal 2006.
- A tax rate for fiscal 2006 of 42.0% as compared to 39.3% in fiscal 2005.
- Recognition of the Company's share of Keurig's loss for fiscal year 2006 to reduce diluted earnings per share by $0.10 to $0.20 primarily related to an estimate of the accretion adjustment for the estimated redemption value of the preferred stock of Keurig, Inc.
- Based on all of these factors, the Company anticipates its fully diluted earnings per share for fiscal year 2006 will be in the range of $1.20 to $1.40 per share with over half of this range due to the uncertainty of Keurig, Inc.'s potential change in the estimated redemption value of its preferred stock.
- Please note that these expectations are based upon 53 weeks for fiscal 2006, as compared to 52 weeks in fiscal 2005. The extra week will occur in the fourth fiscal quarter.
Company Estimates for Second Quarter Fiscal 2006:
- Net sales growth of 20% to 25%.
- Coffee pounds growth of 14% to 17%.
- An operating margin in the range of 8.0% to 8.8% including a non-cash charge of approximately $350,000 or $0.03 per share for stock option compensation.
- Recognition of the Company's share of Keurig's loss to reduce diluted earnings per share by $0.05 to $0.08 including an anticipated $0.00 to $0.03 per share impact from the anticipated quarterly operating gain offset by an estimated non-cash loss of $0.08 to $0.10 per share for the accretion adjustment for the redemption value of the preferred stock of Keurig, Inc.
- Fully diluted earnings per share for the second quarter of fiscal 2006 in the range of $0.19 to $0.25 per share.
Company Estimates Relating to Balance Sheet and Cash Flow:
- Capital expenditures for fiscal 2006 in the range of $12 to $14 million.
- Depreciation expenses between $7.0 and $8.0 million.
There will be further discussion of the financial results released today and these future expectations on the Company's webcast conference call later this morning.
Green Mountain Coffee Roasters, Inc. (NASDAQ: GMCR) is a leader in the specialty coffee industry offering over 100 coffee selections including estate, certified organic, Fair Trade CertifiedÔ , signature blends, and flavored coffees that sell under the Green Mountain Coffee Roastersâ and Newman's Ownâ Organics brands. While the majority of the Company's revenue is derived from its multi-channel wholesale operations, it also manages a growing direct mail and e-commerce business (www.GreenMountainCoffee.com).ForbesMagazine,Business EthicsMagazine, and the Society of Human Resource Management among others, have recognized Green Mountain Coffee Roasters for its successful and socially responsible business practices.
Keurig, Inc. ("Keurig") manufactures brewing equipment that allows users to brew high-quality specialty coffee one cup at a time. Green Mountain Coffee has 42% equity ownership of Keurig. In addition, Green Mountain Coffee is the largest of four roasters licensed to distribute the K-Cups® that are used with Keurig® Single-Cup Brewers. The Company sells K-Cups to businesses through its office coffee service channel, and to home users through its consumer direct channel.
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, fluctuations in availability and cost of high-quality green coffee, the unknown impact of recent price increases on net sales, competition, business conditions in the coffee industry and food industry in general, the impact of the loss of one or more major customers 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 as described more fully in the Company's filings with the Securities and Exchange Commission. In addition, the Company has an equity investment in Keurig, Inc., a small private company. Keurig, Inc. can have significant quarterly operating income/loss fluctuations and its results can differ materially from expectations set forth in forward-looking statements. 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.
Green Mountain Coffee Roasters 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, February 16, 2006, 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 2849168 from 1:30 PM ET on February 16ththrough midnight on Monday, February 20, 2006.
- tables follow -
GREEN MOUNTAIN COFFEE ROASTERS, INC.
Unaudited Consolidated Statements of Operations
(Dollars in thousands except per share data)
| | Sixteen weeks ended |
| | January 14,
2006 | | January 15,
2005 |
| | | |
Net sales | $ 63,867 | | $ 50,357 |
Cost of sales | 41,573 | | 32,534 |
Gross profit | 22,294 | | 17,823 |
| | | | |
Selling and operating expenses | 13,328 | | 10,101 |
General and administrative expenses | 3,803 | | 2,845 |
Operating income | 5,163 | | 4,877 |
| | | | |
Other income | 71 | | 164 |
Interest expense | (84) | | (231) |
Income before income taxes | 5,150 | | 4,810 |
| | | | |
Income tax expense | (2,172) | | (1,935) |
Income before earnings related to investment in Keurig, Inc. | 2,978 | | 2,875 |
Earnings related to investment in Keurig, Inc. | 2 | | (469) |
Net income | $ 2,980 | | $ 2,406 |
| | ===== | | ===== |
Basic income per share: | | | |
Weighted average shares outstanding | 7,475,844 | | 7,101,989 |
Net income | $ 0.40 | | $ 0.34 |
| | | |
Diluted income per share: | | | |
Weighted average shares outstanding | 7,877,622 | | 7,536,706 |
Net income | $ 0.38 | | $ 0.32 |
GREEN MOUNTAIN COFFEE ROASTERS, INC.
Consolidated Balance Sheets
(Dollars in thousands)
| January 14, 2006 | | September 24, 2005 |
| Unaudited | | |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $8,476 | | $6,450 |
Receivables, less allowances of $685 and $544 at January 14, 2006, and September 24, 2005, respectively | 16,694 | | 15,286 |
Inventories | 14,032 | | 14,039 |
Other current assets | 2,347 | | 1,274 |
Deferred income taxes, net | 1,318 | | 1,346 |
Total current assets | 42,867 | | 38,395 |
| | | |
Fixed assets, net | 42,144 | | 39,507 |
Investment in Keurig, Inc. | 9,769 | | 9,765 |
Goodwill and other intangibles | 1,446 | | 1,446 |
Other long-term assets | 724 | | 739 |
| | | |
| $96,950 | | $89,852 |
| ======= | | ======= |
Liabilities and Stockholders' Equity | | | |
Current liabilities: | | | |
Current portion of long-term debt | $ 3,521 | | $3,530 |
Accounts payable | 11,978 | | 10,440 |
Accrued compensation costs | 3,717 | | 1,929 |
Accrued expenses | 5,176 | | 4,547 |
Other short-term liabilities | - | | 60 |
Income tax payable | 1,106 | | 717 |
Total current liabilities | 25,498 | | 21,223 |
| | | |
Long-term debt | 3,490 | | 5,218 |
Deferred income taxes | 3,524 | | 3,019 |
| | | |
Commitments and contingencies | | | |
Stockholders' equity: | | | |
Common stock, $0.10 par value: Authorized - 20,000,000 shares; Issued - 8,653,722 and 8,638,281 shares at January 14, 2006 and September 24, 2005, respectively | 866 | | 864 |
Additional paid-in capital | 30,481 | | 29,651 |
Retained earnings | 40,675 | | 37,695 |
Accumulated other comprehensive (loss) | 162 | | (72) |
ESOP unallocated shares, at cost - 15,205 shares | (410) | | (410) |
Treasury shares, at cost - 1,157,554 shares | (7,336) | | (7,336) |
Total stockholders' equity | 64,438 | | 60,392 |
| | | |
| $96,950 | | $89,852 |
| ======= | | ======= |
GREEN MOUNTAIN COFFEE ROASTERS, INC.
Unaudited Consolidated Statements of Cash Flows
(Dollars in thousands)
| | Sixteen weeks ended |
| | January 14,
2006 | | January 15, 2005 |
| | |
Cash flows from operating activities: | | | |
Net income | $ 2,980 | | $ 2,406 |
Adjustments to reconcile net income to net cash
provided by operating activities: | | | |
Depreciation and amortization | 2,144 | | 1,778 |
(Gain) on disposal of fixed assets | (19) | | (146) |
Provision for doubtful accounts | 215 | | 69 |
Change in fair value of interest rate swap | (25) | | (215) |
Change in fair value of futures derivatives | (264) | | 122 |
Change in accumulated other comprehensive income | 234 | | 134 |
Tax benefit from stock compensation | - | | 189 |
Stock compensation | 417 | | 31 |
Earnings related to investment in Keurig, Inc. | (4) | | 797 |
Deferred income taxes | 533 | | 163 |
Deferred compensation | 27 | | 8 |
Changes in assets and liabilities: | | | |
Receivables | (1,623) | | (751) |
Inventories | 7 | | 200 |
Income tax payable | 389 | | 636 |
Other current assets | (869) | | (652) |
Other long-term assets, net | 40 | | 12 |
Accounts payable | 1,939 | | 1,233 |
Accrued compensation costs | 1,788 | | (156) |
Accrued expenses | 629 | | 620 |
Net cash provided by operating activities | 8,538 | | 6,478 |
| | | | |
Cash flows from investing activities: | | | |
Capital expenditures for fixed assets | (5,356) | | (3,216) |
Proceeds from disposals of fixed assets | 193 | | 428 |
Net cash used for investing activities | (5,163) | | (2,788) |
| | | | |
Cash flows from financing activities: | | | |
Proceeds from issuance of common stock | 192 | | 217 |
Windfall tax benefit | 196 | | - |
Repayment of long-term debt | (1,737) | | (1,887) |
Net cash used for financing activities | (1,349) | | (1,670) |
| | | | |
Net increase in cash and cash equivalents | 2,026 | | 2,020 |
Cash and cash equivalents at beginning of period | 6,450 | | 4,514 |
Cash and cash equivalents at end of period | $ 8,476 | | $ 6,534 |
| ==== | | ==== |
Accounts payable include commitments for fixed asset purchases at the end of period: | $1,055 | | $645 |
| | | |
GREEN MOUNTAIN COFFEE ROASTERS, INC.
Total Company Coffee Pounds Shipped by Sales Channel
(Unaudited Pounds in Thousands)
Channel | Q1 16 wks. ended 1/14/06 | Q1 16 wks. ended 1/15/05 | Q1 Y/Y lb. Increase | Q1 % Y/Y lb. Increase |
Supermarkets | 2,087 | 1,948 | 139 | 7.1% |
Convenience Stores | 1,818 | 1,682 | 136 | 8.1% |
Office Coffee Service Distributors | 1,869 | 1,475 | 394 | 26.7% |
Food Service | 1,402 | 971 | 431 | 44.4% |
Consumer Direct | 289 | 223 | 66 | 29.6% |
Totals | 7,465 | 6,299 | 1,166 | 18.5% |
Note: Certain prior year customer channel classifications were reclassified to conform to current year classifications.
Total Company Coffee Pounds Shipped by Geographic Region
(Unaudited Pounds in Thousands)
Region | Q1 16 wks. ended 1/14/06 | Q1 16 wks. ended 1/15/05 | Q1 Y/Y lb. Increase | Q1 % Y/Y lb. Increase |
New England | 3,310 | 2,589 | 721 | 27.8% |
Mid-Atlantic | 2,068 | 1,912 | 156 | 8.2% |
South | 1,203 | 1,078 | 125 | 11.6% |
Midwest | 410 | 318 | 92 | 28.9% |
West | 422 | 354 | 68 | 19.2% |
International | 52 | 48 | 4 | 8.3% |
Totals | 7,465 | 6,299 | 1,166 | 18.5% |
Note: Certain prior year regional classifications were reclassified to conform to current year classifications.
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