FOR IMMEDIATE RELEASE
Media Contact: Patsy Barich Double-Forte 415.848.8104 pbarich@double-forte.com | Investor Contact: Susie Phillips Peet’s Coffee & Tea, Inc. 510.594.2196 investorrelations@peets.com |
PEET’S COFFEE & TEA, INC. REPORTS THIRD QUARTER 2007 RESULTS
EMERYVILLE, Calif. - November 1, 2007 - Peet’s Coffee & Tea, Inc. (NASDAQ: PEET) today announced results for its third quarter 2007 ended September 30, 2007.
In this release, the Company:
| · | Reports net revenue of $60.9 million, an increase of 19.6% versus last year; |
| · | Reports diluted earnings per share of $0.13, an increase of 30% versus last year; |
| · | Announces that it has exceeded its goal of 1,000 new grocery outlets this year, with more than 1,300 stores added through October; and |
| · | Reaffirms diluted earnings per share expectations for the full year of $0.65 to $0.67, excluding expenses related to the stock option review and related lawsuits. |
For the 13 weeks ended September 30, 2007, net revenue increased 19.6% to $60.9 million from $50.9 million for the corresponding period of fiscal 2006.
Reported net income for the quarter was $1.8 million or $0.13 per diluted share, compared to $1.5 million or $0.10 per diluted share last year.
“Despite a more challenging retail environment this year that continued in the quarter, we made great progress,” said Patrick O’Dea, president and chief executive officer of Peet's Coffee & Tea, Inc. “I am particularly encouraged by the results of our grocery expansion, as well as efforts throughout the Company to reduce unnecessary costs that have enabled us to offset some commodity-related cost increases.”
Financial and Operating Summary
Retail net revenue increased 20.7% to $41.5 million for the 13 weeks ended September 30, 2007, from $34.4 million for the corresponding period of fiscal 2006. The increase was primarily attributable to new retail stores opened in the last 12 months and growth in existing stores. The Company opened seven new retail locations in the quarter.
Specialty net revenue increased 17.5% to $19.4 million, compared to $16.5 million for the corresponding quarter last year. Within the specialty business, grocery grew 23.3%, food service and office sales were up 17.6% and the home delivery business registered 5.0% growth compared to the same period last year.
Cost of sales and related occupancy costs increased to 47.9% of total net revenue compared to 47.3% for the corresponding quarter last year. The increase over last year is due to higher milk and green coffee costs and higher manufacturing costs due to the opening of the new roasting plant earlier this year, partially offset by a retail price increase in November 2006.
Operating expenses as a percent of net revenue decreased slightly to 35.5% of total net revenue compared to 35.7% for the corresponding quarter last year. The favorable impact of retail pricing increases and lapping the closure cost of company operated kiosks in Larry’s Markets last year was partially offset by higher retail operating expenses due to new stores.
General and administrative expenses increased to $4.9 million compared to $4.6 million for the same period last year primarily due to additional headcount and other investments to support Peet’s growth.
Depreciation and amortization expenses increased to $2.6 million compared to $2.2 million for the corresponding quarter last year. The increase was primarily due to the opening of 33 new retail stores in the last 12 months.
The Company ended the quarter with cash and cash equivalents plus marketable securities of $23.0 million.
Fiscal 2008 Outlook
Looking ahead, Peet’s introduced the following fiscal 2008 guidance:
| · | Total net revenue is expected to grow 17 to 20%; |
| · | Diluted earnings per share is expected to be in the $0.77 to $0.82 range; |
| · | The Company is planning to increase grocery distribution by expanding its direct store delivery system into 15-20 new markets; and |
| · | The Company is planning to open about 30 new retail locations. |
Peet’s Coffee & Tea, Inc. Q3 2007 Conference Call
The Company will report its third quarter 2007 earnings results via conference call on Thursday, November 1, 2007. The teleconference call will begin at 2:00 p.m. PT/5:00 p.m. ET.
The teleconference can be accessed by calling 1-800-581-5838, using access code 7954069. The call will be simultaneously webcast on Peet’s website at www.peets.com. A replay of the teleconference will be available at 5:00 p.m. PT/8:00 p.m. ET through 8:59 p.m. PT/11:59 p.m. ET on Sunday, Nov. 11, 2007, at 1-888-203-1112 or 1-719-457-0820, using access code 7954069. It will also be archived at http://investor.peets.com/medialist.cfm
through Nov. 1, 2008, at 8:59 p.m. PT/11:59 ET.
ABOUT PEET’S COFFEE & TEA, INC.
Peet’s Coffee & Tea, Inc. (PEET), the premier specialty coffee and tea company in the U.S., is dedicated to artisan roasting, distributing and marketing the highest quality coffee available to coffee lovers throughout the United States. Founded in 1966 in Berkeley, Calif., Peet’s is committed to strategically growing its business while maintaining its unique culture and focus on quality and customer satisfaction. For more information about Peet’s Coffee & Tea, Inc. visit www.peets.com.
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This press release contains statements that are not based on historical fact and are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements include statements relating to 2007 earnings per share expectations and 2008 sales growth, earnings per share, grocery distribution and new retail store opening expectations. Forward-looking statements are based on management’s beliefs as well as assumptions made by and information currently available to management, including financial and operational information, the Company’s stock price volatility, and current competitive conditions. As a result, these statements are subject to various risks and uncertainties. The Company’s actual results could differ materially from those set forth in forward-looking statements depending on a variety of factors including, but not limited to, the Company’s ability to implement its business strategy, attract and retain customers, and obtain and expand its market presence in new geographic regions; the impact of the Company’s stock price volatility on the valuation of stock-based compensation under SFAS 123(R); the availability and cost of high quality Arabica coffee beans; consumers’ tastes and preferences; and competition in its market as well as other risk factors as described more fully in the Company’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2006. These factors may not be exhaustive. The Company operates in a continually changing business environment, and new risks emerge from time to time. Any forward-looking statements speak only as of the date of this press release.
PEET’S COFFEE & TEA, INC. |
| | | | | | | | | | |
CONSOLIDATED STATEMENTS OF INCOME |
(Unaudited, in thousands, except per share amounts) |
| | | | | | | | | | |
| | | Thirteen weeks ended | | Thirty-nine weeks ended | |
| | | September 30, | | October 1, | | September 30, | | October 1, | |
| | | 2007 | | 2006 | | 2007 | | 2006 | |
| | | | | | | | | | |
| | | | | | | | | | |
| Retail stores | | $ | 41,450 | | $ | 34,350 | | $ | 121,436 | | $ | 101,331 | |
| Specialty sales | | | 19,410 | | | 16,523 | | | 57,040 | | | 48,938 | |
| Net revenue | | | 60,860 | | | 50,873 | | | 178,476 | | | 150,269 | |
| | | | | | | | | | | | | | |
| Cost of sales and related occupancy expenses | | | 29,142 | | | 24,081 | | | 84,706 | | | 69,988 | |
| Operating expenses | | | 21,593 | | | 18,142 | | | 62,772 | | | 52,829 | |
| General and administrative expenses | | | 4,928 | | | 4,594 | | | 16,228 | | | 14,006 | |
| Depreciation and amortization expenses | | | 2,619 | | | 2,215 | | | 7,935 | | | 6,292 | |
| Total costs and expenses from operations | | | 58,282 | | | 49,032 | | | 171,641 | | | 143,115 | |
| | | | | | | | | | | | | | |
| Income from operations | | | 2,578 | | | 1,841 | | | 6,835 | | | 7,154 | |
| | | | | | | | | | | | | | |
| Interest income | | | 284 | | | 589 | | | 1,172 | | | 1,968 | |
| | | | | | | | | | | | | | |
| Income before income taxes | | | 2,862 | | | 2,430 | | | 8,007 | | | 9,122 | |
| | | | | | | | | | | | | | |
| Income tax provision | | | 1,026 | | | 951 | | | 2,953 | | | 3,483 | |
| | | | | | | | | | | | | | |
| Net income | | $ | 1,836 | | $ | 1,479 | | $ | 5,054 | | $ | 5,639 | |
| | | | | | | | | | | | | | |
| Net income per share: | | | | | | | | | | | | | |
| Basic | | $ | 0.13 | | $ | 0.11 | | $ | 0.37 | | $ | 0.41 | |
| Diluted | | $ | 0.13 | | $ | 0.10 | | $ | 0.36 | | $ | 0.39 | |
| | | | | | | | | | | | | | |
| Shares used in calculation of net income per share: | | | | | | | | | | | | | |
| Basic | | | 13,816 | | | 13,670 | | | 13,664 | | | 13,801 | |
| Diluted | | | 14,168 | | | 14,316 | | | 14,057 | | | 14,484 | |
| | | | | | | | | | | | | | |
| See notes to consolidated financial statements. | | | | | | | | | | | | | |
PEET’S COFFEE & TEA, INC. |
| | | | | | |
CONSOLIDATED BALANCE SHEETS |
(Unaudited, in thousands, except share amounts) |
| | | | | | |
| | | September 30, | | December 31, | |
| | | 2007 | | 2006 | |
| | | | | | |
| ASSETS | | | | | |
| | | | | | |
| Current assets | | | | | |
| Cash and cash equivalents | | $ | 2,061 | | $ | 7,692 | |
| Short-term marketable securities | | | 10,809 | | | 19,511 | |
| Accounts receivable, net | | | 7,488 | | | 6,838 | |
| Inventories | | | 28,356 | | | 19,533 | |
| Deferred income taxes - current | | | 2,078 | | | 1,888 | |
| Prepaid expenses and other | | | 7,849 | | | 3,852 | |
| Total current assets | | | 58,641 | | | 59,314 | |
| | | | | | | | |
| Long-term marketable securities | | | 10,127 | | | 5,989 | |
| Property and equipment, net | | | 97,792 | | | 82,447 | |
| Deferred income taxes - non current | | | 1,311 | | | 1,315 | |
| Other assets, net | | | 3,827 | | | 3,940 | |
| | | | | | | | |
| Total assets | | $ | 171,698 | | $ | 153,005 | |
| | | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | |
| | | | | | | | |
| Current liabilities | | | | | | | |
| Accounts payable and other accrued liabilities | | $ | 14,174 | | $ | 11,046 | |
| Accrued compensation and benefits | | | 7,206 | | | 6,389 | |
| Deferred revenue | | | 3,697 | | | 4,625 | |
| Total current liabilities | | | 25,077 | | | 22,060 | |
| | | | | | | | |
| Deferred lease credits and other long-term liabilities | | | 4,900 | | | 3,506 | |
| Total liabilities | | | 29,977 | | | 25,566 | |
| | | | | | | | |
| Shareholders' equity | | | | | | | |
| Common stock, no par value; authorized 50,000,000 shares; | | | | | | | |
| issued and outstanding:13,870,000 and 13,516,000 shares | | | 102,413 | | | 93,246 | |
| Accumulated other comprehensive loss, net of tax | | | 46 | | | (15 | ) |
| Retained earnings | | | 39,262 | | | 34,208 | |
| | | | | | | | |
| Total shareholders' equity | | | 141,721 | | | 127,439 | |
| | | | | | | | |
| Total liabilities and shareholders' equity | | $ | 171,698 | | $ | 153,005 | |
Stock-based Compensation Expense
The following table illustrates the details of stock-based compensation recognized under SFAS 123R reported in the consolidated statements of income (unaudited, in thousands, except per share amounts).
| | | 13 weeks ended | | 39 weeks ended | |
| | | September 30, | | October 1, | | September 30, | | October 1, | |
| | | 2007 | | 2006 | | 2007 | | 2006 | |
| Cost of sales and related occupancy expenses | | $ | 60 | | $ | 122 | | $ | 174 | | $ | 419 | |
| Operating expenses | | | 246 | | | 381 | | | 725 | | | 1,130 | |
| General and administrative expenses | | | 365 | | | 603 | | | 1,217 | | | 1,808 | |
| Total | | | 671 | | | 1,106 | | | 2,116 | | | 3,357 | |
| Tax impact | | | (273 | ) | | (451 | ) | | (862 | ) | | (1,370 | ) |
| Stock-based compensation, net of tax | | $ | 398 | | $ | 655 | | $ | 1,254 | | $ | 1,987 | |
| | | | | | | | | | | | | | |
| Impact on diluted net income per share | | $ | 0.03 | | $ | 0.05 | | $ | 0.09 | | $ | 0.14 | |
Presentation and Reconciliation of Non-GAAP Financial Measures
The following table reconciles non-GAAP net income per share and net income, excluding the after tax costs associated with the Company’s stock option review and restatement, to GAAP net income per share and net income. The Company is presenting these non-GAAP financial measures to illustrate the effect on net income and net income per share if the Company had not incurred the costs of the review of its stock option granting practices. The Company uses such non-GAAP financial measures to analyze and compare the performance of its core business. Non-GAAP financial information is not prepared under a comprehensive set of accounting rules and should be considered supplemental to, and not a substitute for or superior to, financial measures calculated in accordance with GAAP (unaudited, in thousands, except per share amounts).
| Peet's Coffee & Tea, Inc. |
| Reconciliation of Net Income excluding Investigation Fees |
| (Unaudited, in thousands, except per share data) |
| | | | | | | | | | |
| | | | | | | | | | |
| | | 13 weeks ended | | 39 weeks ended | |
| | | September 30, | | October 1, | | September 30, | | October 1, | |
| | | 2007 | | 2006 | | 2007 | | 2006 | |
| | | | | | | | | | |
| Net income, as reported | | $ | 1,836 | | $ | 1,479 | | $ | 5,054 | | $ | 5,639 | |
| Stock option review professional fees | | | 188 | | | - | | | 1,228 | | | - | |
| Income tax benefit | | | (67 | ) | | - | | | (453 | ) | | - | |
| Net income, excluding fees | | $ | 1,957 | | $ | 1,479 | | $ | 5,829 | | $ | 5,639 | |
| | | | | | | | | | | | | | |
| After tax impact of review professional fees | | $ | 121 | | | - | | $ | 775 | | | - | |
| | | | | | | | | | | | | | |
| Diluted net income per share: | | | | | | | | | | | | | |
| Net income, as reported | | $ | 0.13 | | $ | 0.10 | | $ | 0.36 | | $ | 0.39 | |
| Stock option review professional fees | | | 0.01 | | | - | | | 0.09 | | | - | |
| Income tax benefit | | | - | | | - | | | (0.03 | ) | | - | |
| Diluted net income, excluding fees* | | $ | 0.14 | | $ | 0.10 | | $ | 0.41 | | $ | 0.39 | |
| | | | | | | | | | | | | | |
| After tax impact of review professional fees* | | $ | 0.01 | | | - | | $ | 0.06 | | | - | |
| | | | | | | | | | | | | | |
| * per share data may not sum due to rounding | | | | | | | | | | | | | |
