Aug 2, 2011

Peet's Coffee & Tea, Inc. Reports Second Quarter 2011 Results

EMERYVILLE, Calif.--(BUSINESS WIRE)-- Peet's Coffee & Tea, Inc. (NASDAQ:PEET) today announced its second quarter results for the fiscal period ended July 3, 2011, which included 13 weeks.

In this release, the company:

  • Reports net revenue growth of 12% for the quarter
  • Reports diluted earnings per share of $0.38, up 23% versus 2010 diluted earnings per share of $0.31
  • Raises guidance for 2011 full-year net revenue growth to the 10% to 12% range, up from 8% to 10%
  • Expects 2011 full-year diluted earnings per share to be toward the higher end of the previous guidance range of $1.43 to $1.50

Financial Highlights

  Second Quarter   %   Year to Date   %

2011

 

2010

Change

2011

 

2010

Change

 
Net revenue, as reported $ 90,616 $ 80,776 12 % $ 179,088 $ 161,972 11 %
 
Net income per diluted share, as reported $ 0.38 $ 0.31 23 % $ 0.79 $ 0.53 49 %
 
Non-GAAP net income per diluted share,
excluding unusual items $ 0.38 $ 0.31 23 % $ 0.79 $ 0.57 39 %

For the 13 weeks ended July 3, 2011, net revenue increased 12% to $90.6 million from $80.8 million for the corresponding period of fiscal 2010.

Net income for the 13 weeks ended July 3, 2011, was $5.1 million compared to $4.3 million for the corresponding 13-week period of fiscal 2010. Diluted earnings per share was $0.38 for the 13-week period of fiscal 2011 compared to $0.31 per share for the corresponding period of fiscal 2010, an increase of 23%.

"Our business performance continued to be very strong in the second quarter," said Patrick O'Dea, president and CEO of Peet's Coffee & Tea. "Sales were healthy across all of our channels, particularly in our grocery business, which grew 30%. Looking ahead to the balance of the year, we expect our sales momentum to continue, especially as we enter the sizeable medium-roast coffee segment. With our raised sales outlook, we now expect to be at the higher end of our 2011 full-year diluted earnings per share guidance of $1.43 to $1.50."

Consolidated Financial and Operating Summary

Retail net revenue increased 6% to $53.4 million for the 13 weeks ended July 3, 2011, from $50.6 million for the corresponding period of fiscal 2010.

Specialty net revenue increased 23% to $37.3 million for the 13 weeks ended July 3, 2011, from $30.2 million for the corresponding period of fiscal 2010. Within specialty, grocery net revenue grew 30% over last year; foodservice and office grew 19%; and home delivery grew 2%.

Cost of sales and related occupancy expenses were 49.2% of total net revenue, compared to 46.3% 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 as a percentage of net revenue decreased to 31.1% from 33.3% for the corresponding period last year due to a favorable mix shift to the specialty business, the impact of price increases across all channels, leveraging of overhead costs, and lower payroll expenses in retail stores.

General and administrative expenses as a percentage of net revenue were 6.7%, compared to 7.0% for the corresponding period last year. General and administrative expenses increased to $6.0 million from $5.6 million for the corresponding period last year, primarily due to higher payroll-related costs and marketing expenses.

Depreciation and amortization expenses as a percentage of net revenue decreased to 4.3%, compared to 5.0% for the corresponding period last year. Depreciation and amortization expenses were $3.9 million, compared to $4.0 million in the corresponding period last year.

The company ended the second quarter of 2011 with cash and cash equivalents plus investments of $29 million, compared to $49 million at year end 2010.

Fiscal 2011 Full-Year Outlook

The company has updated its full-year guidance as follows:

  • Raises guidance for 2011 full-year net revenue growth to the 10% to 12% range, up from 8% to 10%
  • Expects 2011 full-year diluted earnings per share to be toward the higher end of the previous guidance range of $1.43 to $1.50

Peet's Coffee & Tea, Inc. Q2 2011 Conference Call

Peet's will discuss its second quarter 2011 earnings via conference call today, August 2, 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 August 2, 2011, through 8:59 p.m. PT/11:59 p.m. ET on August 9, 2011, at 1-800-642-1687 or 1-706-645-9291, using access code 82103413. It will also be archived at http://investor.peets.com/events.cfm through August 2, 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 2011 net revenue growth and 2011 forecasted earnings per diluted share. 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, general economic conditions, including the recent recession and its ongoing negative impact on consumer spending; 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; complaints or claims by current, former or prospective employees or government agencies or other litigation; 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)

 

July 3,
2011

January 2,
2011

 
ASSETS
 
Current assets
Cash and cash equivalents $ 19,435 $ 44,629
Short-term marketable securities 9,149 4,183
Accounts receivable, net 15,049 14,852
Inventories 47,480 33,534
Deferred income taxes - current 4,379 4,420
Prepaid expenses and other   8,945   7,798
Total current assets 104,437 109,416
 
Long-term marketable securities 211 -
Property, plant and equipment, net 92,894 97,279
Other assets, net   1,333   2,137
 
Total assets $ 198,875 $ 208,832
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities
Accounts payable and other accrued liabilities $ 9,772 $ 9,138
Accrued compensation and benefits 9,055 11,555
Deferred revenue   5,984   7,102
Total current liabilities 24,811 27,795
 
Deferred income taxes - non current 72 46
Deferred lease credits 6,873 7,023
Other long-term liabilities   1,239   1,468
Total liabilities 32,995 36,332
 
Shareholders' equity
Common stock, no par value; authorized 50,000,000 shares;
issued and outstanding: 12,913,000 and 13,063,000 shares 64,748 81,995
Accumulated other comprehensive income 5 2
Retained earnings   101,127   90,503
 
Total shareholders' equity   165,880   172,500
 
Total liabilities and shareholders' equity $ 198,875 $ 208,832
 

PEET'S COFFEE & TEA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share amounts)

       
Thirteen weeks ended Twenty-six weeks ended

July 3,
2011

July 4,
2010

July 3,
2011

July 4,
2010

 
Retail stores $ 53,351 $ 50,560 $ 105,440 $ 100,631
Specialty sales   37,265   30,216   73,648   61,341
Net revenue 90,616 80,776 179,088 161,972
 
Cost of sales and related occupancy expenses 44,558 37,377 85,778 74,916
Operating expenses 28,146 26,937 56,030 54,774
Transaction related expenses - 146 - 970
General and administrative expenses 6,049 5,622 12,858 11,924
Depreciation and amortization expenses   3,881   4,020   7,800   7,897
Total costs and expenses from operations   82,634   74,102   162,466   150,481
 
Income from operations 7,982 6,674 16,622 11,491
 
Interest income, net   7   5   18   4
 
Income before income taxes 7,989 6,679 16,640 11,495
 
Income tax provision   2,878   2,424   6,016   4,189
 
Net income $ 5,111 $ 4,255 $ 10,624 $ 7,306
 
Net income per share:
Basic $ 0.40 $ 0.32 $ 0.82 $ 0.55
Diluted $ 0.38 $ 0.31 $ 0.79 $ 0.53
 
Shares used in calculation of net income per share:
Basic 12,892 13,248 13,000 13,218
Diluted 13,309 13,885 13,414 13,847
 

PEET'S COFFEE & TEA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

   
Twenty-six weeks ended

July 3,
2011

July 4,
2010

 
Cash flows from operating activities:
Net income $ 10,624 $ 7,306
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 8,956 8,981
Amortization of interest purchased 197 -
Stock-based compensation 2,035 1,623
Excess tax benefit from exercise of stock options (5,763 ) (1,481 )
Tax benefit from exercise of stock options 5,224 1,228
Loss on disposition of assets and asset impairment 325 63
Deferred income taxes 67 (6 )
Changes in other assets and liabilities:
Accounts receivable, net (197 ) 2,993
Inventories (13,946 ) (11,456 )
Prepaid expenses and other current assets (1,147 ) 278
Other assets (2 ) 31
Accounts payable, accrued liabilities and deferred revenue (3,021 ) (4,893 )
Deferred lease credits and other long-term liabilities   (379 )   260  
Net cash provided by operating activities   2,973     4,927  
 
Cash flows from investing activities:
Purchases of property, plant and equipment (4,851 ) (5,455 )
Proceeds from sales of property, plant and equipment - 17
Changes in restricted investments 798 559
Proceeds from sales and maturities of marketable securities 3,013 -
Purchases of marketable securities   (8,384 )   -  
Net cash used in investing activities   (9,424 )   (4,879 )
 
Cash flows from financing activities:
Net proceeds from issuance of common stock 15,023 8,122
Purchase of common stock (39,529 ) (14,730 )
Excess tax benefit from exercise of stock options   5,763     1,481  
Net cash used in financing activities   (18,743 )   (5,127 )
 
Decrease in cash and cash equivalents (25,194 ) (5,079 )
Cash and cash equivalents, beginning of period   44,629     47,934  
 
Cash and cash equivalents, end of period $ 19,435   $ 42,855  
 
Non-cash investing activities:
Capital expenditures incurred, but not yet paid $ 449 $ 330
Other cash flow information:
Cash paid for income taxes 2,896 2,721
 

PEET'S COFFEE & TEA, INC.

SEGMENT REPORTING
(Unaudited, in thousands)

             

Retail

Specialty

Unallocated

Total

Amount

Percent
of Net
Revenue

Amount

Percent
of Net
Revenue

Amount

Percent
of Net
Revenue

 
For the thirteen weeks ended July 3, 2011
Net revenue $ 53,351 100.0 % $ 37,265 100.0 % $ 90,616 100.0 %
Cost of sales and occupancy 23,692 44.4 % 20,866 56.0 % 44,558 49.2 %
Operating expenses 20,387 38.2 % 7,759 20.8 % 28,146 31.1 %
Depreciation and amortization 2,731 5.1 % 433 1.2 % $ 717 3,881 4.3 %
Segment operating income 6,541 12.3 % 8,207 22.0 % (6,766 ) 7,982 8.8 %
 
For the thirteen weeks ended July 4, 2010
Net revenue $ 50,560 100.0 % $ 30,216 100.0 % $ 80,776 100.0 %
Cost of sales and occupancy 21,964 43.4 % 15,413 51.0 % 37,377 46.3 %
Operating expenses 20,350 40.2 % 6,587 21.8 % 26,937 33.3 %
Depreciation and amortization 2,867 5.7 % 457 1.5 % $ 696 4,020 5.0 %
Segment operating income 5,379 10.6 % 7,759 25.7 % (6,464 ) 6,674 8.3 %
 
For the twenty-six weeks ended July 3, 2011
Net revenue $ 105,440 100.0 % $ 73,648 100.0 % $ 179,088 100.0 %
Cost of sales and occupancy 45,936 43.6 % 39,842 54.1 % 85,778 47.9 %
Operating expenses 40,866 38.8 % 15,164 20.6 % 56,030 31.3 %
Depreciation and amortization 5,468 5.2 % 877 1.2 % $ 1,455 7,800 4.4 %
Segment operating income 13,170 12.5 % 17,765 24.1 % (14,313 ) 16,622 9.3 %
 
For the twenty-six weeks ended July 4, 2010
Net revenue $ 100,631 100.0 % $ 61,341 100.0 % $ 161,972 100.0 %
Cost of sales and occupancy 43,618 43.3 % 31,298 51.0 % 74,916 46.3 %
Operating expenses 41,480 41.2 % 13,294 21.7 % 54,774 33.8 %
Depreciation and amortization 5,616 5.6 % 889 1.4 % $ 1,392 7,897 4.9 %
Segment operating income 9,917 9.9 % 15,860 25.9 % (14,286 ) 11,491 7.1 %
 

NON-GAAP FINANCIAL INFORMATION

The following reconciliation and non-GAAP financial information are provided to assist the reader with understanding the financial impact of a prior-year unusual item. Management believes this information is relevant because the nature and magnitude of the charges 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
weeks ended
July 3,
2011

Thirteen
weeks ended
July 4,
2010

Twenty-Six
weeks ended
July 3,
2011

Twenty-Six
weeks ended
July 4,
2010

 

Net Income

Net income, as reported $ 5,111 $ 4,255 $ 10,624 $ 7,306
Transaction expense, net of tax   -   93   -   617
Non-GAAP net income $ 5,111 $ 4,348 $ 10,624 $ 7,923
 

 

Net Income Per Diluted Share *

Net income per diluted share, as reported $ 0.38 $ 0.31 $ 0.79 $ 0.53
Transaction expense, net of tax   -   0.01   -   0.04
Non-GAAP net income per diluted share $ 0.38 $ 0.31 $ 0.79 $ 0.57
 
* per share data may not sum due to rounding

Double Forte
Nicole Arena, 415-848-8103 (Media)
narena@double-forte.com
or
Peet's Coffee & Tea, Inc.
Seanna Allen, 510-594-2196 (Investors)
investorrelations@peets.com

Source: Peet's Coffee & Tea, Inc.

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