Keurig Green Mountain, Inc., (Keurig) (NASDAQ: GMCR), a leader in specialty coffee, coffee makers, teas and other beverages with its innovative brewing technology, today announced its results for the 13 weeks ended March 29, 2014.
Performance Highlights
“Double digit sales and earnings growth on the heels of a strong holiday season demonstrates the continued opportunity to grow our Keurig system in North America in a very competitive environment,” said Brian Kelley, Keurig’s President and CEO. “During the quarter, we drove strong brewer and portion pack net sales and accelerated our installed base. In addition, disciplined cost controls drove operating profit and margin growth that translated into solid earnings and a significant increase in free cash flow.
“At the end of the quarter, our balance sheet was very strong, with $1.1 billion in cash, even after we returned nearly $800 million of cash to shareholders in the quarter in the form of dividends and share repurchases, including purchases made through an accelerated stock repurchase agreement,” continued Kelley. “We are very pleased with our performance and continue to be optimistic about the momentum in our business and the opportunities in front of us.”
The Company’s 10% net sales growth includes the unfavorable impact of foreign currency exchange rates which reduced net sales by approximately 1%.
Second Quarter Fiscal 2014 Financial Review
| ($ in millions except per share amounts) | Thirteen weeks ended | % | Twenty-six weeks ended | % | ||||||||||||||||||||||
| March 29, 2014 | March 30, 2013 | Increase | March 29, 2014 | March 30, 2013 | Increase | |||||||||||||||||||||
| Net sales | $ | 1,103.1 | $ | 1,004.8 | 10 | % | $ | 2,489.7 | $ | 2,343.9 | 6 | % | ||||||||||||||
| Operating income: | ||||||||||||||||||||||||||
| GAAP | $ | 260.5 | $ | 212.1 | 23 | % | $ | 487.1 | $ | 394.5 | 23 | % | ||||||||||||||
| Non-GAAP | $ | 271.8 | $ | 224.6 | 21 | % | $ | 510.0 | $ | 419.2 | 22 | % | ||||||||||||||
| Net income attributable to Keurig: | ||||||||||||||||||||||||||
| GAAP | $ | 162.1 | $ | 132.4 | 22 | % | $ | 300.3 | $ | 240.0 | 25 | % | ||||||||||||||
| Non-GAAP | $ | 169.8 | $ | 140.9 | 21 | % | $ | 315.9 | $ | 256.9 | 23 | % | ||||||||||||||
| Diluted income per share: | ||||||||||||||||||||||||||
| GAAP | $ | 1.03 | $ | 0.87 | 18 | % | $ | 1.94 | $ | 1.57 | 24 | % | ||||||||||||||
| Non-GAAP | $ | 1.08 | $ | 0.93 | 16 | % | $ | 2.04 | $ | 1.68 | 21 | % | ||||||||||||||
| Cash dividends declared per common share | $ | 0.25 | $ | — | N/A | $ | 0.50 | $ | — | N/A | ||||||||||||||||
Note: Complete GAAP to Non-GAAP reconciliation tables provided with this release.
Net Sales by Product
| Net sales (in millions) | ||||||||||||||||||
| Thirteen weeks ended | ||||||||||||||||||
| March 29, 2014 | March 30, 2013 | $ Increase | % Increase | |||||||||||||||
| Portion packs | $ | 898.2 | $ | 794.0 | $ | 104.2 | 13 | % | ||||||||||
| Brewers and accessories | 137.6 | 126.8 | 10.8 | 9 | % | |||||||||||||
| Subtotal | 1,035.8 | 920.8 | 115.0 | 12 | % | |||||||||||||
| Other products | 67.3 | 84.0 | (16.7 | ) | (20 | )% | ||||||||||||
| Total net sales | $ | 1,103.1 | $ | 1,004.8 | $ | 98.3 | 10 | % | ||||||||||
- As shown in the table above, approximately 94% of consolidated second quarter fiscal year 2014 net sales were sales of Keurig® Single Cup Brewers, portion packs, and Keurig®-related accessories, with the remainder of net sales consisting primarily of bagged coffee, fractional packs and the Company’s Canadian office coffee services business.
Portion Packs
- The 13% increase in portion pack-related net sales over the prior year period was driven by a 15 percentage point increase due to sales volume and a 2 percentage point increase due to portion pack product mix partially offset by a 4 percentage point decrease due to net price realization and the impact of foreign currency exchange.
Brewers and Accessories
- For the quarter, 1.8 million Keurig® system brewers were sold including 1.7 million sold by Keurig with 0.1 million reported sold by Keurig’s licensed brewer partners. This brewer shipment number does not account for consumer returns.
- The 9% increase in brewer and accessory net sales was driven by a 29 percentage point increase due to brewer sales volume, partially offset by an 18 percentage point decrease due to brewer net price realization and a 2 percentage point decrease due to brewer product mix.
- Additionally, accessory net sales increased by $0.5 million, or 3 percentage points over the prior year period.
Other Products
- Sales of other products declined $16.7 million, or 20%, in the quarter over the prior year period primarily due to the continuing demand shift from traditional coffee package formats to portion packs.
- In the second quarter of fiscal year 2014, gross profit increased 10% and gross margin improved 20 basis points to 41.5% from 41.3% in the prior year period. During the quarter, the Company took a charge associated with portion pack manufacturing lines that were disassembled. Some components from these lines are being used for new product platform manufacturing development. The following table quantifies the changes in gross margin period to period:
Change from | ||||
| Favorable green coffee costs | +440 bps | |||
| Net price realization primarily associated with portion packs | -150 bps | |||
| Charge associated with portion pack manufacturing lines that were disassembled | -80 bps | |||
| Net price realization primarily associated with brewers | -100 bps | |||
| Other Items | -90 bps | |||
- GAAP operating income grew by 23%, representing 23.6% of net sales in the second quarter of fiscal year 2014, up from 21.1% in the prior year period.
- Non-GAAP operating income grew by 21%, representing 24.6% of net sales in the second quarter of fiscal year 2014, up from 22.3% in the prior year period.
- The Company’s effective income tax rate was 35.8% for the second quarter of fiscal year 2014 as compared to 35.6% for the prior year period.
- Diluted weighted average shares outstanding for the second quarter of fiscal year 2014 were 157.5 million, up from 152.3 million in the prior year period as a result of 16.7 million shares issued as part of The Coca-Cola Company transaction which closed February 27, 2014 thus impacting a portion of the quarter. The transaction-related dilution was offset, in part, by the Company’s share repurchases under its previously announced share repurchase authorizations.
Balance Sheet & Cash Flow Highlights
“Strong earnings
growth and a disciplined approach to working capital and capital
investment contributed to a 30% increase of free cash flow in the
quarter,” said Frances G. Rathke, Keurig’s Chief Financial Officer. “In
addition, the strength of our balance sheet allows us to fund continued
innovation and business growth while also returning significant cash to
shareholders through dividends and meaningful share repurchases.”
| Balance Sheet & Cash Flow Highlights ($ in millions) | March 29, 2014 | March 30, 2013 | % Change | ||||||||||||
| Cash and cash equivalents, including restricted cash | $ | 1,112.6 | $ | 221.7 | 402 | % | |||||||||
| Accounts receivables, net | $ | 430.5 | $ | 312.9 | 38 | % | |||||||||
| Inventories | $ | 451.1 | $ | 587.3 | (23 | )% | |||||||||
| Raw materials & supplies | $ | 146.3 | $ | 176.8 | (17 | )% | |||||||||
| Coffee | $ | 62.9 | $ | 105.0 | (40 | )% | |||||||||
| Packaging & other raw materials | $ | 83.4 | $ | 71.8 | 16 | % | |||||||||
| Finished goods | $ | 304.8 | $ | 410.5 | (26 | )% | |||||||||
| Brewers & accessories | $ | 145.3 | $ | 233.9 | (38 | )% | |||||||||
| Portion packs | $ | 135.3 | $ | 146.0 | (7 | )% | |||||||||
| Other | $ | 24.2 | $ | 30.6 | (21 | )% | |||||||||
| Debt outstanding and capital lease and financing obligations | $ | 269.1 | $ | 350.8 | (23 | )% | |||||||||
| Twenty-six weeks net cash provided by operating activities | $ | 593.6 | $ | 604.7 | (2 | )% | |||||||||
| Twenty-six weeks free cash flow (1) | $ | 474.6 | $ | 456.3 | 4 | % | |||||||||
(1) Free cash flow is calculated by subtracting capital expenditures for fixed assets from net cash provided by operating activities as reported in the unaudited statement of cash flows.
Stock Transactions
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 (Coca-Cola), at $74.98 per share for an aggregate
purchase price of $1.25 billion, pursuant to a common stock purchase
agreement dated February 5, 2014. The sale was recorded to stockholders’
equity net of transaction-related expenses of approximately $7.9 million.
In addition, the terms of a prior stock purchase agreement with Luigi Lavazza S.p.A (Lavazza) allow Lavazza to maintain its percentage ownership of the Company’s outstanding common stock. As a result of the February 27, 2014 issuance of common stock to Atlantic Industries, on March 28, 2014 the Company entered into a common stock purchase agreement with Lavazza to sell 1,407,000 shares of newly issued common stock to Lavazza at $74.98 per share for an aggregate purchase price of $105.5 million. The transaction closed on April 17, 2014.
Share Repurchases
On July 30,
2012, the Company’s Board of Directors authorized a share repurchase
program of up to $500 million of the Company’s outstanding common shares
over two years. On November 19, 2013, the Company's Board of Directors
authorized an additional share repurchase program of up to $1.0 billion
of the Company's outstanding common shares. The second share repurchase
program became effective upon completion of the first share repurchase
program in March 2014.
During the second quarter of fiscal year 2014, as part of its Board repurchase authorization, the Company entered into an accelerated share repurchase (ASR) agreement with a major financial institution. 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. Upon settlement of the ASR, the total shares repurchased by the Company will be determined based upon a share price equal to the daily volume weighted average price (“VWAP”) of the Company’s common stock during the term of the program, less a fixed per share discount.
Under the terms of the ASR, Keurig agreed to purchase $700 million of its common stock in total, with an initial delivery to the Company of 4.3 million shares during the quarter. The initial shares represent the number of shares at the current market price equal to 70% of the total fixed purchase price of $700 million. The repurchased shares were retired. Final settlement of the ASR will occur no sooner than November 24, 2014 and no later than February 27, 2015 at the financial institution’s discretion.
In addition, during the second quarter, the Company repurchased a total of 544,100 shares from the open market at a cost of $58.4 million. From the inception of its Board authorized share repurchases through the end of the Company’s second fiscal quarter of 2014, the Company has repurchased a total of 15.4 million shares at a total cost of $936 million and an average price of $60.86 through a combination of the ASR, open market and 10(b)5-1 plans, including $490 million of ASR repurchases subject to final price adjustment. From the end of the second quarter through May 6, 2014 the Company has repurchased an additional 661,900 shares at a total cost of $67 million through its 10(b)5-1 program.
Keurig today announced its Board of Directors has approved a new share repurchase authorization of up to $1 billion over the next two years. The new share repurchase program will take effect upon completion of the Company’s current program, which has $288 million remaining of its previously authorized $1 billion subject to final price adjustment of the ASR. As was the case with the prior authorizations, the new authorization will be implemented at such times and prices as determined appropriate by the Company's management.
Dividend Declaration
Keurig’s
Board of Directors has declared a regular quarterly cash dividend of
$0.25 per share of the Company’s common stock. The quarterly cash
dividend will be paid on August 1, 2014, to shareholders of record as of
the close of business on July 3, 2014.
Business Outlook and Other Forward-Looking
Information
“Short term, we are focused on successfully
introducing our Keurig 2.0 hot system; adding a number of additional
brands as new Keurig partners; and, preparing for the launch of our
Keurig cold system in fiscal year 2015. Longer term, continued
investment in innovation across all facets of our business – from new
product development to merchandising – will power a robust pipeline of
new products, drive financial performance and fuel continued consumer
passion for the Keurig brand,” said Kelley.
The Company’s outlook for fiscal year 2014 is as follows:
- Net sales growth in the high single digits compared to fiscal year 2013
- An annual effective tax rate of approximately 36.5%
- Non-GAAP earnings per diluted share of $3.63 to $3.73 which:
- Includes the approximately $0.20 dilutive impact of the recent Coca-Cola and Lavazza equity transactions and includes share repurchases through May 6, 2014
- Includes an estimated $0.09 headwind from foreign currency exchange
- Excludes any additional actions the Company may take to offset dilution during the second half of fiscal year 2014
- Excludes the amortization of identifiable intangibles related to the Company’s acquisitions and legal and accounting expenses related to the SEC inquiry and the Company’s pending securities and stockholder derivative class action litigation
- On a currency-neutral basis and excluding the dilutive impact from recent equity transactions with Coca-Cola and Lavazza and absent any actions the Company may take to offset dilution, underlying earnings per share growth is projected to increase 16% to 19% over the prior year period.
- Free cash flow in the range of $250 million to $350 million.
- Capital investment in the range of $350 million to $400 million.
The Company also provided its outlook for its third quarter of fiscal year 2014 as follows:
- Net sales growth in the high single digits over the third quarter of fiscal year 2013.
- Non-GAAP earnings per diluted share in a range of $0.83 to $0.88 which:
- Includes the approximately $0.09 dilutive impact of the recent Coca-Cola and Lavazza equity transactions and includes share repurchases through May 6, 2014
- Includes an estimated $0.01 headwind from foreign currency exchange
- Excludes any additional actions the Company may take to offset dilution during the quarter
- Excludes the amortization of identifiable intangibles related to the Company’s acquisitions and legal and accounting expenses related to the SEC inquiry and the Company’s pending securities and stockholder derivative class action litigation
- On a currency-neutral basis and excluding the dilutive impact of the recent equity transactions with Coca-Cola and Lavazza, and absent any actions the Company may take to offset dilution, underlying earnings growth is projected to increase 13% to 20% over the prior year period.
Conference Call and Webcast
Keurig Green Mountain 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, May 7, 2014. The call is accessible via live webcast from the
events section of the Investor Relations portion of the Company’s
website at http://investor.keuriggreenmountain.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 7999693 from 9:00 p.m. ET on May 7, 2014
through 9:00 p.m. ET on Monday, May 12, 2014.
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 legal and accounting expenses related to the SEC inquiry and
pending securities and stockholder derivative class action litigation;
and non-cash acquisition-related items such as amortization of
identifiable intangibles, 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” table that
accompanies this document for a full reconciliation of the Company’s
GAAP to non-GAAP results.
About Keurig Green Mountain, Inc.
As a leader in
specialty coffee, coffee makers, teas and other beverages, Keurig Green
Mountain (Keurig) (NASDAQ: GMCR), is recognized for its award-winning
beverages, innovative brewing technology, and socially responsible
business practices. The Company has inspired consumer passion for its
products by revolutionizing beverage preparation at home and in the
workplace. Keurig supports local and global communities by investing in
sustainably-grown coffee and by its active involvement in a variety of
social and environmental projects. By helping consumers drink for
themselves, we believe we can brew a better world. For more information
visit: www.KeurigGreenMountain.com.
To purchase Keurig® products visit: www.Keurig.com or www.Keurig.ca.
Keurig routinely posts information that may be of importance to investors in the Investor Relations section of its website, www.KeurigGreenMountain.com, 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 Keurig as it is released.
Forward-Looking Statements
Certain information in this
filing constitutes "forward-looking statements." Forward-looking
statements can be identified by the fact that they do not relate
strictly to historical or current facts. They often include words such
as “believes,” “expects,” “anticipates,” “estimates,” “intends,”
“plans,” “seeks” or words of similar meaning, or future or conditional
verbs, such as “will,” “should,” “could,” “may,” “aims,” “intends,” or
“projects.” However, the absence of these words or similar expressions
does not mean that a statement is not forward-looking. These statements
may relate to: the expected impact of raw material costs and our pricing
actions on our results of operations and gross margins, expected trends
in net sales and earnings performance and other financial measures, the
expected productivity and working capital improvements, the success of
introducing and producing new product offerings, the impact of foreign
exchange fluctuations, the adequacy of internally generated funds and
existing sources of liquidity, such as the availability of bank
financing, the expected results of operations of businesses acquired by
us, our ability to issue debt or additional equity securities, our
expectations regarding purchasing shares of our common stock under the
existing authorizations, projection of payment of dividends, and the
impact of the inquiry initiated by the SEC and any related litigation or
additional governmental inquiry or enforcement proceedings, as well as
litigation asserting claims against the Company under the federal
antitrust laws and various state laws. A forward-looking statement is
neither a prediction nor a guarantee of future events or circumstances,
and those future events or circumstances may not occur. Management
believes that these forward-looking statements are reasonable as and
when made. However, caution should be taken not to place undue reliance
on any such forward-looking statements because such statements speak
only as of the date when made. We expressly disclaim any obligation to
update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. In addition,
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
our Company's historical experience and our present expectations or
projections. These risks and uncertainties include, but are not limited
to, those described in the Company’s Form 10-K Part I, "Item 1A. Risk
Factors," and Part II “Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and elsewhere in this
report and those described from time to time in our future reports filed
with the Securities and Exchange Commission.
KGM-G
| KEURIG GREEN MOUNTAIN, INC. | |||||||||||
| Unaudited Consolidated Balance Sheets | |||||||||||
| (Dollars in thousands, except per share data) | |||||||||||
| March 29, 2014 | September 28, 2013 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 1,112,155 | $ | 260,092 | |||||||
| Restricted cash and cash equivalents | 432 | 560 | |||||||||
| Receivables, less uncollectible accounts and return allowances of $44,732 and $33,640 at March 29, 2014 and September 28, 2013, respectively | 430,547 | 467,976 | |||||||||
| Inventories | 451,115 | 676,089 | |||||||||
| Income taxes receivable | 30,302 | 11,747 | |||||||||
| Other current assets | 70,603 | 46,891 | |||||||||
| Deferred income taxes, net | 50,243 | 58,137 | |||||||||
| Total current assets | 2,145,397 | 1,521,492 | |||||||||
| Fixed assets, net | 1,029,551 | 985,563 | |||||||||
| Intangibles, net | 389,542 | 435,216 | |||||||||
| Goodwill | 759,531 | 788,184 | |||||||||
| Deferred income taxes, net | 146 | 149 | |||||||||
| Other long-term assets | 38,562 | 30,944 | |||||||||
| Total assets | $ | 4,362,729 | $ | 3,761,548 | |||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of long-term debt | $ | 16,099 | $ | 12,929 | |||||||
| Current portion of capital lease and financing obligations | 1,833 | 1,760 | |||||||||
| Accounts payable | 260,412 | 312,170 | |||||||||
| Dividends payable | 40,483 | — | |||||||||
| Accrued expenses | 219,744 | 242,427 | |||||||||
| Deferred income taxes, net | 254 | 233 | |||||||||
| Other current liabilities | 15,432 | 27,544 | |||||||||
| Total current liabilities | 554,257 | 597,063 | |||||||||
| Long-term debt, less current portion | 150,766 | 160,221 | |||||||||
| Capital lease and financing obligations, less current portion | 100,424 | 76,061 | |||||||||
| Deferred income taxes, net | 245,571 | 252,867 | |||||||||
| Other long-term liabilities | 25,976 | 28,721 | |||||||||
| Commitments and contingencies | |||||||||||
| Redeemable noncontrolling interests | 10,865 | 11,045 | |||||||||
| Stockholders’ equity: | |||||||||||
| Preferred stock, $0.10 par value: Authorized - 1,000,000 shares; No shares issued or outstanding | — | — | |||||||||
| Common stock, $0.10 par value: Authorized - 500,000,000 shares; Issued and outstanding - 161,933,197 and 150,265,809 shares at March 29, 2014 and September 28, 2013, respectively | 16,193 | 15,026 | |||||||||
| Additional paid-in capital | 1,836,860 | 1,387,322 | |||||||||
| Retained earnings | 1,474,410 | 1,252,407 | |||||||||
| Accumulated other comprehensive loss | (52,593 | ) | (19,185 | ) | |||||||
| Total stockholders’ equity | 3,274,870 | 2,635,570 | |||||||||
| Total liabilities and stockholders’ equity | $ | 4,362,729 | $ | 3,761,548 | |||||||
| KEURIG GREEN MOUNTAIN, INC. | ||||||||||||||||||||||
| Unaudited Consolidated Statements of Operations | ||||||||||||||||||||||
| (Dollars in thousands except per share data) | ||||||||||||||||||||||
| Thirteen weeks ended | Twenty-six weeks ended | |||||||||||||||||||||
| March 29, 2014 | March 30, 2013 | March 29, 2014 | March 30, 2013 | |||||||||||||||||||
| Net sales | $ | 1,103,072 | $ | 1,004,792 | $ | 2,489,742 | $ | 2,343,851 | ||||||||||||||
| Cost of sales | 645,640 | 589,646 | 1,568,263 | 1,509,542 | ||||||||||||||||||
| Gross profit | 457,432 | 415,146 | 921,479 | 834,309 | ||||||||||||||||||
| Selling and operating expenses | 125,005 | 124,781 | 293,220 | 296,626 | ||||||||||||||||||
| General and administrative expenses | 71,941 | 78,261 | 141,147 | 143,138 | ||||||||||||||||||
| Operating income | 260,486 | 212,104 | 487,112 | 394,545 | ||||||||||||||||||
| Other income, net | 1,253 | 227 | 1,682 | 415 | ||||||||||||||||||
| Gain on financial instruments, net | 2,900 | 3,471 | 7,461 | 4,575 | ||||||||||||||||||
| Loss on foreign currency, net | (8,722 | ) | (6,115 | ) | (19,272 | ) | (8,794 | ) | ||||||||||||||
| Interest expense | (2,995 | ) | (3,814 | ) | (5,615 | ) | (9,544 | ) | ||||||||||||||
| Income before income taxes | 252,922 | 205,873 | 471,368 | 381,197 | ||||||||||||||||||
| Income tax expense | (90,609 | ) | (73,302 | ) | (170,580 | ) | (140,681 | ) | ||||||||||||||
| Net income | 162,313 | 132,571 | $ | 300,788 | $ | 240,516 | ||||||||||||||||
| Net income attributable to noncontrolling interests | 229 | 150 | 477 | 512 | ||||||||||||||||||
| Net income attributable to Keurig | $ | 162,084 | $ | 132,421 | $ | 300,311 | $ | 240,004 | ||||||||||||||
| Net income attributable to Keurig per common share: | ||||||||||||||||||||||
| Basic | $ | 1.05 | $ | 0.89 | $ | 1.98 | $ | 1.61 | ||||||||||||||
| Diluted | $ | 1.03 | $ | 0.87 | $ | 1.94 | $ | 1.57 | ||||||||||||||
| Cash dividends declared per common share | $ | 0.25 | $ | — | $ | 0.50 | $ | — | ||||||||||||||
| Weighted-average common shares outstanding: | ||||||||||||||||||||||
| Basic | 153,945,441 | 148,774,443 | 151,552,422 | 149,044,980 | ||||||||||||||||||
| Diluted | 157,463,096 | 152,310,053 | 154,525,749 | 152,550,160 | ||||||||||||||||||
| KEURIG GREEN MOUNTAIN, INC. | |||||||||||
| Unaudited Consolidated Statements of Cash Flows | |||||||||||
| (Dollars in thousands) | |||||||||||
| Twenty-six | Twenty-six | ||||||||||
| weeks ended | weeks ended | ||||||||||
| March 29, 2014 | March 30, 2013 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 300,788 | $ | 240,516 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization of fixed assets | 104,222 | 87,820 | |||||||||
| Amortization of intangibles | 21,942 | 22,939 | |||||||||
| Amortization of deferred financing fees | 2,826 | 3,025 | |||||||||
| Unrealized loss on foreign currency, net | 18,089 | 7,178 | |||||||||
| (Gain) loss on disposal of fixed assets | (842 | ) | 241 | ||||||||
| Provision for doubtful accounts | 1,575 | (15 | ) | ||||||||
| Provision for sales returns | 51,747 | 58,812 | |||||||||
| Gain on derivatives, net | (9,954 | ) | (3,847 | ) | |||||||
| Excess tax benefits from equity-based compensation plans | (46,170 | ) | (9,563 | ) | |||||||
| Deferred income taxes | (80 | ) | 2,901 | ||||||||
| Deferred compensation and stock compensation | 15,882 | 15,214 | |||||||||
| Other | (196 | ) | 449 | ||||||||
| Changes in assets and liabilities: | |||||||||||
| Receivables | (20,697 | ) | (9,827 | ) | |||||||
| Inventories | 219,417 | 177,665 | |||||||||
| Income tax receivable/payable, net | 27,408 | 19,237 | |||||||||
| Other current assets | 3,051 | (7,861 | ) | ||||||||
| Other long-term assets, net | (498 | ) | 3,371 | ||||||||
| Accounts payable and accrued expenses | (83,137 | ) | 3,721 | ||||||||
| Other current liabilities | (9,133 | ) | (137 | ) | |||||||
| Other long-term liabilities | (2,620 | ) | (7,154 | ) | |||||||
| Net cash provided by operating activities | 593,620 | 604,685 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Change in restricted cash | 128 | 3,013 | |||||||||
| Capital expenditures for fixed assets | (118,978 | ) | (148,349 | ) | |||||||
| Purchase of long-term investment | (10,000 | ) | — | ||||||||
| Other investing activities | 1,207 | 231 | |||||||||
| Net cash used in investing activities | (127,643 | ) | (145,105 | ) | |||||||
| Cash flows from financing activities: | |||||||||||
| Net change in revolving line of credit | — | (184,949 | ) | ||||||||
| Proceeds from sale of common stock | 1,243,028 | — | |||||||||
| Proceeds from issuance of common stock under compensation plans | 26,441 | 9,334 | |||||||||
| Repurchase of common stock | (880,816 | ) | (125,681 | ) | |||||||
| Excess tax benefits from equity-based compensation plans | 46,170 | 9,563 | |||||||||
| Payments on capital lease and financing obligations | (954 | ) | (1,547 | ) | |||||||
| Repayment of long-term debt | (6,517 | ) | (3,391 | ) | |||||||
| Dividends paid | (37,220 | ) | — | ||||||||
| Other financing activities | (180 | ) | (549 | ) | |||||||
| Net cash used in financing activities | 389,952 | (297,220 | ) | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | (3,866 | ) | 521 | ||||||||
| Net increase in cash and cash equivalents | 852,063 | 162,881 | |||||||||
| Cash and cash equivalents at beginning of period | 260,092 | 58,289 | |||||||||
| Cash and cash equivalents at end of period | $ | 1,112,155 | $ | 221,170 | |||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Fixed asset purchases included in accounts payable and not disbursed at the end of each period | $ | 43,431 | $ | 21,437 | |||||||
| Dividends declared not paid at the end of each period | $ | 40,483 | $ | — | |||||||
| Noncash investing and financing activities: | |||||||||||
| Fixed assets acquired under capital lease and financing obligations | $ | 25,390 | $ | 11,769 | |||||||
| Settlement of acquisition related liabilities through release of restricted cash | $ | — | $ | 9,227 | |||||||
| KEURIG GREEN MOUNTAIN, INC. | ||||||||
| GAAP to Non-GAAP Reconciliation | ||||||||
| (Dollars in thousands, except per share data) | ||||||||
| Thirteen weeks ended | ||||||||
| March 29, 2014 | March 30, 2013 | |||||||
| Operating income | $ 260,486 | $ 212,104 | ||||||
| Expenses related to SEC inquiry (1) | 546 | 1,043 | ||||||
| Amortization of identifiable intangibles (2) | 10,789 | 11,404 | ||||||
| Non-GAAP operating income | $ 271,821 | $ 224,551 | ||||||
| Thirteen weeks ended | ||||||||
| March 29, 2014 | March 30, 2013 | |||||||
| Net income attributable to Keurig | $ 162,084 | $ 132,421 | ||||||
| After tax: | ||||||||
| Expenses related to SEC inquiry (1) | 348 | 672 | ||||||
| Amortization of identifiable intangibles (2) | 7,334 | 7,826 | ||||||
| Non-GAAP net income attributable to Keurig | $ 169,766 | $ 140,919 | ||||||
| Thirteen weeks ended | ||||||||
| March 29, 2014 | March 30, 2013 | |||||||
| Diluted income per share | $ 1.03 | $ 0.87 | ||||||
| After tax: | ||||||||
| Expenses related to SEC inquiry (1) | 0.00 | 0.00 | ||||||
| Amortization of identifiable intangibles (2) | 0.05 | 0.05 | ||||||
| Non-GAAP net income per share | $ 1.08 | $ 0.93 | * | |||||
| * Does not sum due to rounding. | ||||||||
(1) Represents legal and accounting expenses related to the SEC inquiry
and pending securities and stockholder derivative class action
litigation classified as general and administrative expense.
(2)
Represents the amortization of intangibles related to the Company’s
acquisitions classified as general and administrative expense.
| KEURIG GREEN MOUNTAIN, INC. | |||||||||
| GAAP to Non-GAAP Reconciliation | |||||||||
| (Dollars in thousands, except per share data) | |||||||||
| Twenty-six weeks ended | |||||||||
| March 29, 2014 | March 30, 2013 | ||||||||
| Operating income | $ | 487,112 | $ | 394,545 | |||||
| Expenses related to SEC inquiry (1) | 918 | 1,763 | |||||||
| Amortization of identifiable intangibles (2) | 21,941 | 22,939 | |||||||
| Non-GAAP operating income | $ | 509,971 | $ | 419,247 | |||||
| Twenty-six weeks ended | |||||||||
| March 29, 2014 | March 30, 2013 | ||||||||
| Net income attributable to Keurig | $ | 300,311 | $ | 240,004 | |||||
| After tax: | |||||||||
| Expenses related to SEC inquiry (1) | 584 | 1,116 | |||||||
| Amortization of identifiable intangibles (2) | 14,976 | 15,777 | |||||||
| Non-GAAP net income attributable to Keurig | $ | 315,871 | $ | 256,897 | |||||
| Twenty-six weeks ended | |||||||||
| March 29, 2014 | March 30, 2013 | ||||||||
| Diluted income per share | $ | 1.94 | $ | 1.57 | |||||
| After tax: | |||||||||
| Expenses related to SEC inquiry (1) | 0.00 | 0.01 | |||||||
| Amortization of identifiable intangibles (2) | 0.10 | 0.10 | |||||||
| Non-GAAP net income per share | $ | 2.04 | $ | 1.68 | |||||
(1) Represents legal and accounting expenses related to the SEC inquiry
and pending securities and stockholder derivative class action
litigation classified as general and administrative expense.
(2)
Represents the amortization of intangibles related to the Company’s
acquisitions classified as general and administrative expense.
Contacts:
Suzanne DuLong, 802-488-2600
Investor.Services@keurig.com
or
Katie
Gilroy, 781-205-7345
Investor.Services@keurig.com
