Peet’s Coffee & Tea, Inc. (NASDAQ: PEET) today announced its
third quarter 2011 results for the period ended October 2, 2011,
which included 13 weeks.
In this release, the company:
- Reports net revenue growth of 14% for
the quarter
- Reports third quarter diluted earnings
per share of $0.11 and non-GAAP diluted earnings per share of
$0.28
- Expects 2011 full-year GAAP diluted
earnings per share to be toward the higher end of the $1.27 to
$1.34 range, which includes litigation-related expenses equating to
$0.16 diluted earnings per share
- Confirms 2011 full-year non-GAAP
diluted earnings per share expected to be toward the higher end of
the previous guidance range of $1.43 to $1.50
- Provides 2012 guidance including net
revenue growth of around 10% and diluted earnings per share of
$1.70 to $1.80
Financial Highlights
Third Quarter % Year to Date %
2011
2010
Change
2011
2010
Change
Net revenue, as reported $ 91,208 $ 80,208 14 % $ 270,296 $
242,180 12 % Net income per diluted share, as reported $
0.11 $ 0.28 -61 % $ 0.91 $ 0.81 12 %
Non-GAAP net income per diluted share
$ 0.28 $ 0.28 0 % $ 1.07 $ 0.85 26 %
For the 13 weeks ended October 2, 2011, net revenue increased
14% to $91.2 million from $80.2 million for the corresponding
period of 2010.
Net income for the quarter was $1.5 million, or $0.11 per
diluted share, compared to $3.8 million, or $0.28 per diluted
share, for the corresponding period last year. Net income for the
quarter includes the anticipated settlement and legal costs of a
class action lawsuit ($2.2 million after tax). Excluding this item,
non-GAAP diluted earnings per share would have been $0.28, equal to
the third quarter of 2010.
“Our third quarter business performance was right on track with
our plan for the year,” said Patrick O’Dea, CEO and president of
Peet’s Coffee & Tea. “Our sales growth accelerated to 14%
driven by strong grocery growth of 38%, and we weathered
significantly higher coffee costs. We’re on target to finish the
full year consistent with our previous non-GAAP guidance. Looking
forward to 2012, we have existing plans in place to deliver strong
sales and earnings growth, while continuing to invest in and
explore additional growth initiatives.”
Consolidated Financial and Operating Summary
Retail net revenue increased 5% to $52.3 million for the 13
weeks ended October 2, 2011, from $49.8 million for the
corresponding period last year. The increase was driven by a 7%
increase in sales of beverages and pastries. The company opened one
store in the quarter, ending the quarter with 194 stores versus 193
stores at the end of the third quarter 2010.
Specialty net revenue increased 28% to $38.9 million compared to
$30.4 million for the corresponding period last year. Within the
specialty business, grocery sales grew 38%, the foodservice and
office business was up 18%, and home delivery sales were up 3%
compared to the same period last year.
Cost of sales and related occupancy costs increased as a
percentage of net revenue to 51.6%, compared to 47.5% for the
corresponding period last year. The increase resulted primarily
from higher coffee costs and to a lesser extent higher milk costs
and a mix shift towards the specialty business, which has a higher
cost of sales. Price increases across the channels and lower
shipping expenses partially offset the impact of these higher
costs.
Operating expenses decreased as a percentage of net revenue to
31.3%, compared to 33.1% for the corresponding period last year.
The decrease was due primarily to a favorable mix shift to the
specialty business, the impact of price increases across all
channels, leveraging of overhead costs, and continued effective
cost management in retail stores.
Litigation related expenses of $3.2 million include all costs
incurred related to the pending settlement of a class action
lawsuit that was filed in February 2010 against the company.
General and administrative expenses as a percentage of net
revenue were 6.9%, compared to 7.2% for the corresponding period
last year. General and administrative expenses increased to $6.3
million from $5.8 million for the corresponding period last year,
primarily due to higher marketing spend.
Depreciation and amortization expenses as a percentage of net
revenue decreased to 4.2%, compared to 4.9% for the corresponding
period last year. Depreciation and amortization expenses were $3.9
million, consistent with last year.
The company ended the quarter with cash and cash equivalents
plus investments of $12 million, compared to $49 million at year
end 2010.
Fiscal 2011 Full-Year Outlook
The company provided the following full-year guidance for
2011:
- Confirms full-year net revenue growth
expected to be in the 10% to 12% range
- Expects full-year GAAP diluted earnings
per share to be toward the higher end of the $1.27 to $1.34 range.
This guidance includes the anticipated settlement and legal costs
of a class action lawsuit equating to $0.16 diluted earnings per
share
- Confirms full-year non-GAAP diluted
earnings per share expected to be toward the higher end of the
previous guidance range of $1.43 to $1.50
Fiscal 2012 Outlook
Looking ahead, Peet’s provided the following fiscal 2012
guidance:
- Total net revenue growth of around
10%
- Diluted earnings per share in the range
of $1.70 to $1.80
Peet’s Coffee & Tea, Inc. Q3 2011 Conference Call
Peet’s will discuss its third quarter 2011 earnings via
conference call today, November 1, 2011. The teleconference call
will begin at 2:00 p.m. PT/5:00 p.m. ET and can be accessed by
calling 1-866-748-8653. The call will be simultaneously webcast on
Peet’s website at www.peets.com.
A replay of the teleconference will be available from 5:00 p.m.
PT/8:00 p.m. ET on November 1, 2011 through 8:59 p.m. PT/11:59 p.m.
ET on November 8, 2011, at 1-855-859-2056 or 1-404-537-3406 using
access code 15966123. It will also be archived at http://investor.peets.com/events.cfm through
November 1, 2012, at 8:59 p.m. PT/11:59 p.m. ET.
About Peet’s Coffee & Tea, Inc.
Peet’s Coffee & Tea, Inc. (NASDAQ: PEET) is the premier
specialty coffee and tea company in the United States. The company
was founded in 1966 in Berkeley, Calif. by Alfred Peet. Peet was an
early tea authority who later became widely recognized as the
grandfather of specialty coffee in the U.S. Today, Peet’s Coffee
& Tea offers superior quality coffees and teas in multiple
forms, by sourcing the best quality coffee beans and tea leaves in
the world, adhering to strict high-quality and taste standards, and
controlling product quality through its unique direct store
delivery selling and merchandising system. Peet’s is committed to
strategically growing its business through many channels while
maintaining the extraordinary quality of its coffees and teas. For
more information about Peet’s Coffee & Tea, Inc., visit
www.peets.com.
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
forecasted net revenue and earnings per diluted share for both 2011
and 2012. 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, commodity price
expectations, 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,
general economic conditions, including the recent recession and its
ongoing negative impact on consumer spending; volatility of
commodity costs; court approval of the class action lawsuit
settlement; potential future claims and litigation involving the
company, and the company’s ability to manage its expenses related
to such claims and litigation; 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
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 January 2, 2011.
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.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in
thousands, except share amounts) October 2,
January 2,
2011
2011
ASSETS Current assets Cash and cash equivalents $
5,890 $ 44,629 Short-term marketable securities 5,957 4,183
Accounts receivable, net 17,465 14,852 Inventories 60,486 33,534
Deferred income taxes - current 3,949 4,420 Prepaid expenses and
other
12,629 7,798 Total
current assets 106,376 109,416 Property, plant and
equipment, net 90,919 97,279 Other assets, net
1,331 2,137 Total assets
$ 198,626 $
208,832 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities Accounts payable and other accrued
liabilities $ 13,628 $ 9,138 Accrued compensation and benefits
7,686 11,555 Deferred revenue
5,778
7,102 Total current liabilities 27,092 27,795
Deferred income taxes - non current 596 46 Deferred lease credits
6,783 7,023 Other long-term liabilities
1,040
1,468 Total liabilities 35,511 36,332
Shareholders' equity Common stock, no par value; authorized
50,000,000 shares; issued and outstanding: 12,903,000 and
13,063,000 shares 60,470 81,995 Accumulated other comprehensive
income 2 2 Retained earnings
102,643
90,503 Total shareholders' equity
163,115 172,500 Total
liabilities and shareholders' equity
$
198,626 $ 208,832
PEET’S COFFEE & TEA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited,
in thousands, except per share amounts) Thirteen
weeks ended Thirty-nine weeks ended October 2,
October 3, October 2, October 3,
2011
2010
2011
2010
Retail stores $ 52,283 $ 49,791 $ 157,723 $ 150,422
Specialty sales
38,926
30,417 112,573
91,758 Net revenue 91,209 80,208 270,296
242,180 Cost of sales and related occupancy expenses 47,062
38,138 132,840 113,054 Operating expenses 28,554 26,526 84,583
81,301 Transaction related expenses - - - 970 Litigation related
expenses 3,181 (66 ) 3,260 (49 ) General and administrative
expenses 6,308 5,811 19,087 17,718 Depreciation and amortization
expenses
3,865 3,947
11,665 11,844
Total costs and expenses from operations
88,970
74,356
251,435 224,838
Income from operations 2,239 5,852 18,861 17,342 Interest
income, net
(9 )
2 9 6
Income before income taxes 2,230 5,854 18,870 17,348
Income tax provision
714
2,091 6,730
6,279 Net income
$
1,516 $ 3,763
$ 12,140 $
11,069 Net income per share: Basic $
0.12 $ 0.29 $ 0.94 $ 0.85 Diluted $ 0.11 $ 0.28 $ 0.91 $ 0.81
Shares used in calculation of net income per share: Basic
12,889 12,847 12,951 13,094 Diluted 13,278 13,425 13,357 13,706
PEET’S COFFEE & TEA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands) Thirty-nine weeks
ended October 2, October 3,
2011
2010
Cash flows from operating activities: Net income $ 12,140 $
11,069 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 13,397 13,456
Amortization of interest purchased 287 - Stock-based compensation
3,024 2,457 Excess tax benefit from exercise of stock options
(7,892 ) (1,579 ) Tax benefit from exercise of stock options 7,142
1,311 Loss on disposition of assets and asset impairment 709 110
Deferred income taxes 1,021 - Changes in other assets and
liabilities: Accounts receivable, net (2,613 ) 1,541 Inventories
(26,952 ) (14,424 ) Prepaid expenses and other current assets
(4,831 ) (2,332 ) Other assets (4 ) 26 Accounts payable, accrued
liabilities and deferred revenue (741 ) (6,249 ) Deferred lease
credits and other long-term liabilities
(668
) 389 Net cash (used
in)/provided by operating activities
(5,981
) 5,775 Cash flows
from investing activities: Purchases of property, plant and
equipment (7,696 ) (8,396 ) Proceeds from sales of property, plant
and equipment - 17 Changes in restricted investments 798 558
Proceeds from sales and maturities of marketable securities 6,323 -
Purchases of marketable securities
(8,384
) - Net cash used in
investing activities
(8,959 )
(7,821 ) Cash flows from
financing activities: Net proceeds from issuance of common stock
19,588 9,315 Purchase of common stock (51,279 ) (28,231 ) Excess
tax benefit from exercise of stock options
7,892 1,579 Net cash
used in financing activities
(23,799
) (17,337 )
Decrease in cash and cash equivalents (38,739 ) (19,383 ) Cash and
cash equivalents, beginning of period
44,629
47,934 Cash and cash
equivalents, end of period
$ 5,890
$ 28,551 Non-cash investing
activities: Capital expenditures incurred, but not yet paid $ 450 $
641 Other cash flow information: Cash paid for income taxes 3,042
5,402
PEET’S COFFEE & TEA, INC.
SEGMENT REPORTING
(Unaudited, in thousands)
Retail
Specialty
Unallocated
Total
Percent Percent Percent of Net of
Net of Net
Amount
Revenue
Amount
Revenue
Amount
Revenue
For the thirteen weeks ended October 2, 2011 Net
revenue $ 52,283 100.0 % $ 38,926 100.0 % $ 91,209 100.0 % Cost of
sales and occupancy 24,207 46.3 % 22,854 58.7 % 47,061 51.6 %
Operating expenses 20,630 39.5 % 7,924 20.4 % 28,554 31.3 %
Litigation related expenses 3,181 6.1 % 3,181 3.5 % Depreciation
and amortization 2,714 5.2 % 412 1.1 % $ 739 3,865 4.2 % Segment
operating income 1,551 3.0 % 7,736 19.9 % (7,048 ) 2,239 2.5 %
For the thirteen weeks ended October 3, 2010 Net
revenue $ 49,791 100.0 % $ 30,417 100.0 % $ 80,208 100.0 % Cost of
sales and occupancy 22,082 44.3 % 16,056 52.8 % 38,138 47.5 %
Operating expenses 20,457 41.1 % 6,069 20.0 % 26,526 33.1 %
Litigation related expenses (66 ) -0.1 % (66 ) -0.1 % Depreciation
and amortization 2,825 5.7 % 426 1.4 % $ 696 3,947 4.9 % Segment
operating income 4,493 9.0 % 7,866 25.9 % (6,507 ) 5,852 7.3 %
For the thirty-nine weeks ended October 2, 2011 Net
revenue $ 157,723 100.0 % $ 112,573 100.0 % $ 270,296 100.0 % Cost
of sales and occupancy 70,143 44.5 % 62,697 55.7 % 132,840 49.1 %
Operating expenses 61,497 39.0 % 23,086 20.5 % 84,583 31.3 %
Litigation related expenses 3,260 2.1 % 3,260 1.2 % Depreciation
and amortization 8,182 5.2 % 1,289 1.1 % $ 2,194 11,665 4.3 %
Segment operating income 14,641 9.3 % 25,501 22.7 % (21,281 )
18,861 7.0 %
For the thirty-nine weeks ended October 3,
2010 Net revenue $ 150,422 100.0 % $ 91,758 100.0 % $ 242,180
100.0 % Cost of sales and occupancy 65,700 43.7 % 47,354 51.6 %
113,054 46.7 % Operating expenses 61,938 41.2 % 19,363 21.1 %
81,301 33.6 % Litigation related expenses (49 ) 0.0 % (49 ) 0.0 %
Depreciation and amortization 8,441 5.6 % 1,315 1.4 % $ 2,088
11,844 4.9 % Segment operating income 14,392 9.6 % 23,726 25.9 %
(20,776 ) 17,342 7.2 %
NON-GAAP FINANCIAL INFORMATION
The following reconciliation and non-GAAP financial information
are provided to assist the reader with understanding the financial
impact of certain transaction- and litigation-related expenses.
Management believes this information is relevant because the nature
and magnitude of these expenses do not reflect our on-going
operating performance.
PEET'S COFFEE & TEA, INC.
Reconciliation of Non-GAAP Financial Information to Net
Income (Unaudited, in thousands, except per share data)
Thirteen Thirteen Thirty-Nine
Thirty-Nine weeks ended weeks ended weeks
ended weeks ended October 2, October 3,
October 2, October 3,
2011
2010
2011
2010
Net
Income
Net income, as reported $ 1,516 $ 3,763 $ 12,140 $ 11,069
Transaction expense, net of tax - - - 619
Litigation-related expenses, net of
tax
2,163 (42 ) 2,097 (31 ) Non-GAAP net
income $ 3,679 $ 3,721 $ 14,237 $ 11,657
Net Income Per
Diluted Share *
Net income per diluted share, as reported $ 0.11 $ 0.28 $ 0.91 $
0.81 Transaction expense, net of tax - - - 0.05
Litigation-related expenses, net of
tax
0.16 - 0.16 - Non-GAAP
net income per diluted share $ 0.28 $ 0.28 $ 1.07 $ 0.85
* per share data may not sum due to rounding
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