Green Mountain Coffee, Inc. (Nasdaq: GMCR) yesterday reported its financial results for its fiscal third quarter of 2001. The Company delivered strong earnings growth, with a 67.3% year-over-year increase in net income for the quarter.
Total coffee pounds sold for the quarter increased 15.9% year-over-year to 2,935,000 pounds. Net sales increased 9.0% to $21,447,000 for the twelve weeks ended July 7, 2001, compared to $19,668,000 for the twelve weeks ended July 1, 2000.
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The area of the highest volume increase was the Company’s largest sales channel – convenience stores – where coffee pounds sold were up 43.9% in the current quarter. The strong growth in this channel was driven by the continued ramp up in sales to the distributor McLane Company, Inc. under the Company’s previously announced new agreement with Exxon Mobil Corporation. The difference between coffee pound and sales growth during the quarter was due primarily to growth in the Company’s Exxon Mobil business, under the new agreement, whereby both sales prices and costs are lower. Sales in the office coffee service channel grew 4.1%, which was below the growth rate in recent quarters. Management believes this reduced growth rate was due primarily to quality issues with a batch of a part in Keurig® brewers and a batch of foil lids used in manufacturing the single-serve K-Cup(TM) coffee package for the Keurig brewing system, and potentially also the impact of a slower economy. The Keurig quality issues were experienced by all licensed roasters and distributors of the Keurig brewing system and appear to have been resolved.
Green Mountain Coffee’s gross profit for the quarter was 43.9% of sales compared to 39.4% of sales in the year ago period, as the Company continued to benefit from brand strength and low green coffee commodity prices. Operating expenses as a percentage of sales were 33.2%, compared to 32.1% in the prior year quarter. The higher expenses in the current quarter were due primarily to higher compensation, employee benefit, recruiting and relocation costs. Operating margins improved to 10.7% of sales, compared to 7.3% of sales a year ago. The Company achieved a 67.3% year-over-year increase in net income to $1,342,000, and earnings per share rose from $0.11 a year ago, to $0.18 for the twelve weeks ended July 7, 2001.
For the forty weeks ended July 7, 2001, the Company sold 9.6 million pounds of coffee realizing an 18.1% year-over-year increase in coffee pounds sold. Green Mountain Coffee’s sales were up 19.8% for the first three quarters of its fiscal year 2001, to $75,093,000, compared to $62,669,000 for the forty weeks ended July 1, 2000. Net income increased 61.0% to $4,375,000, or $0.61 per share, for the forty weeks ended July 7, 2001, compared to $2,717,000, or $0.38 per share, for the forty weeks ended July 1, 2000.
Robert P. Stiller, Chairman, President, and Chief Executive Officer of Green Mountain Coffee said, “There are tremendous opportunities, as well as challenges, for continued growth in our business. We are excited about our successful expansion under our new agreement with Exxon Mobil Corporation. Throughout the business, we are focused on continuing our solid track record for both top and bottom line growth. In terms of new initiatives, we are pleased with the integration of Frontier(TM) organic coffee into our business. The acquisition has provided us with an entree into the natural foods distribution arena, and added depth to our organic product line for this important market. Last, but not least, we were extremely pleased by the recognition we received from KLD & Co., when they added Green Mountain Coffee to the Domini 400 Social Index last month. With the currently very low cost of green coffee, the opportunities to ‘do good and do well’ have never been more compelling, and we welcome the added visibility the index provides with socially responsible investors.”
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By GlobalDataRobert D. Britt, Chief Financial Officer, said, “It was another solid earnings quarter for Green Mountain Coffee. Our cash flow also was very good, with our year-over-year fiscal third quarter earnings before interest, taxes, depreciation, and amortization increasing over 47%, further strengthening an already strong balance sheet. Our challenge now is to drive higher levels of top line growth with both existing and new customers, taking into account the possible impact of a slower economy on the office coffee services channel. Looking forward, we remain well positioned to leverage our brand strength and infrastructure across our multiple sales channels, including convenience stores and supermarkets.”
Continuing, Britt said, “For fiscal year 2002, in light of the current economic environment, we believe it is reasonable to expect top line growth in the range of 15% to 20%, which is below our longer-term cumulative average annual growth rate target of 20+%. We now anticipate delivering earnings growth above sales growth next year, in the range of 20% to 25%. Looking at the remainder of this fiscal year, we remain concerned about the residual impact of the Keurig issues this past quarter. When combined with the fact that last year’s fiscal fourth quarter contained 13 weeks compared to only 12 weeks this year, we now believe our fourth quarter year-over-year sales dollar and coffee pounds sold growth rate could be 2% to 5%, or 10% to 13% on a 12-week pro-forma basis, with coffee pounds sold growth slightly greater than sales dollar growth. We are now expecting even stronger fourth quarter earnings per share than we previously anticipated, in the range of 17 to 19 cents, for our fiscal fourth quarter. This translates into 78 to 80 cents for the full year, compared to 60 cents per share in fiscal 2000.” Britt indicated there would be further discussion of financial results and the Company’s expectations on its conference call later this morning.
Green Mountain Coffee, Inc. is a leader in the specialty coffee industry and has been recognized by Forbes Magazine as one of the “200 Best Small Companies in America.” The Company roasts high-quality arabica coffees and offers over 60 varieties including single-origin, estate, certified organic, Fair Trade, proprietary blends, and flavored coffees that it sells under the Green Mountain Coffee Roasters® and Frontier(TM) organic coffee brands.
The majority of Green Mountain Coffee’s revenue is derived from its wholesale operation that serves supermarkets, convenience stores, offices, and other locations where fine coffees are sold. Green Mountain Coffee also operates a direct mail operation and e-commerce Web site (http://www.GreenMountainCoffee.com) with secure on-line ordering for customers from its Waterbury, Vermont headquarters. The Company seeks to make the world a better place for present and future generations by operating in an environmentally and socially conscientious manner.
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 from those set forth in forward-looking statements. 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 green coffee, the impact of a weaker economy, competition and other business conditions in the coffee industry and more generally in the food and beverage industry, the impact of the loss of one or more 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, variances from budgeted sales mix and growth rate, weather and special or unusual events, as well as other risk factors as described more fully in the Company’s filings with the Securities and Exchange Commission.
Green Mountain Coffee urges coffee lovers, investors and everyone else who is interested in the Company and its news to sign up for automatic e-mail receipt of its press releases. To take advantage of this free service, go to the investor services section of the Company’s Web site, which can be accessed directly at http://GreenMountainCoffee.com/scripts/investor.asp. Next, click on “News Releases via E-mail” to sign up.
GREEN MOUNTAIN COFFEE, INC.
Consolidated Statement of Operations
(Dollars in thousands except per share data)
Unaudited
Twelve Twelve Forty Forty
weeks weeks weeks weeks
ended ended ended ended
7/7/01 7/1/00 7/7/01 7/1/00
——— ——– ——– ——–
Net sales:
Wholesale $ 20,701 $ 19,039 $ 71,651 $ 59,847
Consumer direct 746 629 3,442 2,822
——— ——– ——– ——–
Net sales 21,447 19,668 75,093 62,669
Cost of sales 12,030 11,909 43,475 37,595
——— ——– ——– ——–
Gross profit 9,417 7,759 31,618 25,074
Selling and operating
expenses 5,404 4,912 18,544 15,603
General and administrative
expenses 1,710 1,403 5,318 4,459
Loss on abandonment of
fixed assets – – – 135
——— ——– ——– ——–
Operating income 2,303 1,444 7,756 4,877
Other income 21 30 36 40
Interest expense (96) (141) (440) (389)
——— ——– ——– ——–
Income before income taxes 2,228 1,333 7,352 4,528
Income tax expense (886) (531) (2,977) (1,811)
——— ——– ——– ——–
Net income $1,342 $ 802 $4,375 $2,717
========= ======== ======== ========
Basic income per share:
Weighted average shares
outstanding 6,469,931 6,452,830 6,352,628 6,723,578
Net income $ 0.21 $0.12 $0.69 $0.40
Diluted income per share:
Weighted average shares
outstanding 7,268,547 7,022,564 7,163,293 7,069,034
Net income $0.18 $0.11 $0.61 $0.38
GREEN MOUNTAIN COFFEE, INC.
Consolidated Balance Sheet
(Dollars in thousands)
July 7, September 30,
2001 2000
———– ———–
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 918 $559
Receivables, less allowances of $463 at
July 7, 2001 and $320 at September 30,
2000 10,555 8,454
Inventories 5,614 5,350
Other current assets 299 481
Income tax receivable 1,726 29
Deferred income taxes, net 98 182
——- ——-
Total current assets 19,210 15,055
Fixed assets, net 13,676 11,274
Goodwill and other intangibles 1,594 –
Other long-term assets 297 348
Deferred income taxes, net 376 497
——- ——-
$ 35,153 $ 27,174
======== ========
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt $ 194 $ 135
Accounts payable 5,538 6,125
Accrued compensation costs 2,072 1,381
Accrued expenses 2,094 614
Accrued losses and other costs of
discontinued operations, net 119 119
——- ——-
Total current liabilities 10,017 8,374
——- ——-
Long-term debt 298 283
——- ——-
Long-term line of credit 7,990 8,500
——- ——-
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.10 par value:
Authorized – 10,000,000 shares; Issued –
7,749,005 and 7,342,010 shares at July 7,
2001 and September 30, 2000, respectively 775 734
Additional paid-in capital 17,893 13,534
Retained earnings 7,153 2,778
Other comprehensive (loss) (77) –
ESOP unallocated shares, at cost –
68,800 shares (1,867) –
Treasury shares, at cost – 1,137,506 shares
at July 7, 2001 and September 30, 2000 (7,029) (7,029)
——- ——-
Total stockholders’ equity 16,848 10,017
——- ——-
$ 35,153 $ 27,174
======== ========
GREEN MOUNTAIN COFFEE, INC.
Total Company Coffee Pounds Sold by Sales Channel – Unaudited
(As a Percent of Total Coffee Pounds Sold)
Channel
Q3 Q3 Q3 Q3
12 wks. 12 wks. Y/Y lb. % Y/Y lb.
ended ended Increase Increase
7/7/01 7/1/00
Convenience Store 33.3% 26.8% 298,000 43.9%
Office Coffee Service 23.1% 25.7% 27,000 4.1%
Supermarket 22.6% 24.6% 42,000 6.8%
Restaurant 9.0% 10.7% (7,000) -2.6%
Other Food Service 8.2% 7.9% 39,000 19.5%
Other Retail 1.7% 2.3% (7,000) -12.1%
Consumer Direct 2.1% 2.0% 11,000 22.0%
Totals 2,935,000 2,532,000 403,000 15.9%
Q3 YTD Q3 YTD Q3 YTD Q3 YTD
40 wks. 40 wks. Y/Y lb. % Y/Y lb.
ended ended
7/7/01 7/1/00 Increase Increase
Convenience Store 29.9% 27.0% 676,000 30.7%
Office Coffee Service 24.6% 23.7% 434,000 22.4%
Supermarket 23.6% 24.4% 284,000 14.3%
Restaurant 9.2% 11.3% (32,000) -3.5%
Other Food Service 8.4% 8.8% 89,000 12.4%
Other Retail 1.9% 2.4% (8,000) -4.1%
Consumer Direct 2.4% 2.4% 33,000 17.0%
Totals 9,632,000 8,156,000 1,476,000 18.1%
Note 1: Certain prior year customer channel classifications were
reclassified to conform to current year classifications.
Note 2: Consumer Direct is comprised of direct mail and e-commerce Web
site sales to consumers.
Wholesale Coffee Pounds Sold, by Geographic Region – Unaudited
(As a Percentage of Total Wholesale Coffee Pounds Sold)
Q3 Q3 Q3 Q3
12 wks 12 wks Y/Y lb. %Y/Y lb.
ended ended
7/7/01 7/7/00 Increase Increase
Northern New England 29.3% 31.4% 62,000 8.0%
Southern New England 22.1% 25.0% 16,000 2.6%
Mid-Atlantic 19.7% 22.1% 18,000 3.3%
South Atlantic 9.4% 7.5% 85,000 45.7%
South Central 6.6% 0.5% 176,000 1353.8%
Midwest 2.3% 2.6% 1,000 1.5%
West 3.5% 1.7% 59,000 140.5%
Multi-Regional 6.2% 7.9% (18,000) -9.2%
International 0.9% 1.3% (7,000) -21.9%
Totals 2,874,000 2,482,000 392,000 15.8%
Q3 YTD Q3 YTD Q3 YTD Q3 YTD
40 wks 40 wks Y/Y lb. % Y/Y lb.
ended ended
7/7/01 7/1/00 Increase Increase
Northern New England 30.3% 32.9% 236,000 9.0%
Southern New England 23.9% 24.5% 302,000 15.5%
Mid-Atlantic 21.3% 21.5% 283,000 16.5%
South Atlantic 8.4% 6.8% 246,000 45.2%
South Central 3.6% 0.5% 296,000 759.0%
Midwest 2.4% 2.5% 29,000 14.6%
West 2.4% 1.7% 90,000 66.7%
Multi-Regional 6.6% 8.5% (53,000) -7.9%
International 1.1% 1.1% 14,000 16.3%
Totals 9,405,000 7,962,000 1,443,000 18.1%
Note 1: Excludes coffee pounds sold in the Consumer Direct channel.
Note 2: The allocation by region of coffee pounds sold to certain
McLane Company, Inc. warehouses for distribution to ExxonMobil
convenience stores has been estimated. This information will be
adjusted in future quarters once the detailed sales data to ExxonMobil
locations is readily available.
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