Feb 14, 2012

Peet's Coffee & Tea, Inc. Reports Fourth Quarter and 2011 Year-End Results

EMERYVILLE, Calif.--(BUSINESS WIRE)-- Peet's Coffee & Tea, Inc. (NASDAQ:PEET) today announced its fourth quarter and full-year results for the period ended January 1, 2012.

In this release, the Company:

  • Reports diluted earnings per share of $0.42 for the fourth quarter and $1.33 for fiscal 2011
  • Reports non-GAAP diluted earnings per share of $1.49 for fiscal 2011, up 12% compared to fiscal 2010 non-GAAP diluted earnings per share
  • Reports net revenue growth of 11% for both the fourth quarter and the year
  • Confirms fiscal 2012 diluted earnings per share guidance of $1.70 to $1.80

Financial Highlights

PEET'S COFFEE & TEA, INC.

Financial Highlights
(Unaudited, in thousands, except per share data)

           
Fourth Quarter % Fiscal Year %

2011

2010

Change

2011

2010

Change

 
Net revenue, as reported $ 101,623 $ 91,628 11 % $ 371,919 $ 333,808 11 %
 
Net income per diluted share, as reported $ 0.42 $ 0.48 -13 % $ 1.33 $ 1.28 4 %
 
Non-GAAP net income per diluted share $ 0.42 $ 0.48 -13 % $ 1.49 $ 1.33 12 %

___________

See "Non-GAAP Financial Information" at the end of this document, including the related reconciliation, for further detail.

For the 13 weeks and 52 weeks ended January 1, 2012, net revenue increased 11% versus the corresponding periods of fiscal 2010.

Diluted earnings per share was $1.33 for fiscal 2011, compared to $1.28 for fiscal 2010. Excluding the litigation- and transaction-related items outlined below, non-GAAP diluted earnings per share increased 12% to $1.49 for fiscal 2011, compared to $1.33 for fiscal 2010.

"Despite record high coffee costs since becoming a public company, we finished fiscal 2011 with diluted earnings per share toward the higher end of our stated range, consistent with previous guidance," said Patrick O'Dea, president and CEO of Peet's Coffee & Tea. "Our sales growth continues to be strong, led by our grocery business, which grew 29% in the quarter and 30% for the year. Our performance in 2011 is a testament to our brand's premium-quality, premium-priced position in the market and the strength of our team. With pricing in place, visibility to our 2012 coffee costs, and already established growth strategies underway, we are well positioned to achieve our goals for this year. I believe this, in combination with the many new growth opportunities in our pipeline, bodes well for our long-term growth prospects."

Non-GAAP Information

Net income and diluted earnings per share for fiscal 2011 include $3.3 million ($0.16 per diluted share) of expenses associated with a class action lawsuit, including anticipated settlement and legal costs. These costs are reflected in the consolidated statements of income as Litigation-related expenses.

Net income and diluted earnings per share for fiscal 2010 include $1.0 million ($0.05 per diluted share) of legal and related expenses incurred by the Company for its response to the subpoena it received from the Federal Trade Commission (FTC) in connection with the FTC's anti-trust review of the acquisition of Diedrich Coffee by Green Mountain Coffee Roasters. These costs are reflected in the consolidated statements of income as Transaction-related expenses.

Fourth Quarter Consolidated Financial and Operating Summary

Retail net revenue increased 3% to $56.5 million for the 13 weeks ended January 1, 2012, from $54.7 million for the corresponding period last year. The increase was driven by a 6% rise in sales of beverages and pastries. The Company opened two stores in the quarter, ending the year with 196 stores versus 192 stores at the end of fiscal 2010.

Specialty net revenue increased 22% to $45.1 million for the 13 weeks ended January 1, 2012, compared to $36.9 million for the corresponding period last year. Within specialty, grocery sales were up 29% over last year, foodservice and office sales grew 20%, and home delivery sales were flat.

Cost of sales and related occupancy expenses increased as a percent of total net revenue to 52.7% for the quarter, compared to 45.7% 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 28.2%, compared to 30.9% for the corresponding period last year. The decrease was due to a favorable mix shift towards the specialty business, the impact of price increases across all channels, leveraging of overhead expenses, and cost efficiencies in both our retail stores and our direct store delivery system.

General and administrative expenses decreased as a percentage of net revenue to 6.7%, compared to 8.0% for the corresponding period last year. General and administrative expenses decreased to $6.8 million from $7.3 million for the corresponding period last year, primarily due to lower payroll costs and outside services.

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

Cash and cash equivalents plus short-term and long-term marketable securities were $35 million at the end of fiscal 2011, compared to $49 million at the end of fiscal 2010.

Fiscal 2012 Outlook

Looking ahead, Peet's confirmed 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. Q4 and 2011 Year-End Conference Call

Peet's will discuss its fourth quarter and fiscal year 2011 results via conference call today, February 14, 2012. The teleconference call will begin at 2:00 p.m. PT/5:00 p.m. ET and can be accessed by calling 866-748-8653. The call will be simultaneously webcast on the Investor Relations portion of Peet's website, under Media Events: http://investor.peets.com/events.cfm.

A replay of the teleconference will be available from 5:00 p.m. PT/8:00 p.m. ET on February 14, 2012, until 8:59 p.m. PT/11:59 p.m. ET on February 21, 2012, at 404-537-3406 or 855-859-2056, using access code 43013095. The replay will also be archived at http://investor.peets.com/events.cfm through February 14, 2013, at 8:59 p.m. PT/11:59 p.m. ET.

The Company has posted on its website at http://investor.peets.com/events.cfm a detailed reconciliation of non-GAAP net income and non-GAAP net income per diluted share as well as non-GAAP operating income and margin on a total company and segment basis.

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 United States. 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.

CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION

This press release and the related conference call contain statements that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "anticipates," "expects," "intends," "plans," "targets," "projects," "guidance" and similar expressions are intended to identify such forward-looking statements, which include statements relating to 2012 forecasted net revenue, 2012 forecasted diluted earnings per share, the Company's ability to achieve its 2012 goals, opportunities for new growth, and long-term prospects. Forward-looking statements are based on management's current beliefs, as well as current assumptions made by and information currently available to management, including financial and operational information, coffee and other commodity price expectations, the Company's stock price volatility, and current competitive conditions.

These forward-looking statements are not guarantees of future performance and are subject to inherent risks and uncertainties, including risks and uncertainties beyond the Company's control or difficult to predict. Therefore, actual results and outcomes may differ materially from what is expressed or forecasted in such forward-looking statements. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company undertakes no obligation, other than as required by law, to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: general economic conditions, including the recent recession and its ongoing negative impact on consumer spending; other factors impacting demand for specialty coffee, including consumers' tastes and preferences; volatility of coffee and other commodity costs; the availability and cost of high-quality Arabica coffee beans; current and 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, obtain and expand its market presence in new geographic regions, and develop and maintain its brand; competition; and disruption of its roasting and distribution facility operations 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 and other unpredictable or unknown factors could also have material adverse effects on forward-looking statements. Additionally, the Company operates in a continually changing business environment, and new risks and uncertainties emerge from time to time.

All forward-looking statements in this press release and the related conference call are qualified by these cautionary statements.

PEET'S COFFEE & TEA, INC.

CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share amounts)

   

January 1,
2012

January 2,
2011

 
ASSETS
 
Current assets
Cash and cash equivalents $ 30,755 $ 44,629
Short-term marketable securities 3,800 4,183
Accounts receivable, net 20,522 14,852
Inventories 54,265 33,534
Deferred income taxes - current 5,041 4,420
Prepaid expenses and other   9,368   7,798
Total current assets 123,751 109,416
 
Long-term marketable securities 888 -
Property, plant and equipment, net 89,304 97,279
Other assets, net   1,328   2,137
 
Total assets $ 215,271 $ 208,832
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities
Accounts payable and other accrued liabilities $ 11,547 $ 9,138
Accrued compensation and benefits 10,283 11,555
Deferred revenue   7,382   7,102
Total current liabilities 29,212 27,795
 
Deferred income taxes - non current 367 46
Deferred lease credits 6,668 7,023
Other long-term liabilities   1,068   1,468
Total liabilities 37,315 36,332
 
Shareholders' equity
Common stock, no par value; authorized 50,000,000 shares;
issued and outstanding: 13,136,000 and 13,063,000 shares 69,664 81,995
Accumulated other comprehensive income 2 2
Retained earnings   108,290   90,503
 
Total shareholders' equity   177,956   172,500
 
Total liabilities and shareholders' equity $ 215,271 $ 208,832
 

PEET'S COFFEE & TEA, INC.

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

       

Thirteen weeks ended

Fifty-two weeks ended

January 1,
2012

January 2,
2011

January 1,
2012

January 2,
2011

 
Retail stores $ 56,547 $ 54,694 $ 214,270 $ 205,116
Specialty sales   45,076     36,934   157,649   128,692  
Net revenue 101,623 91,628 371,919 333,808
 
Cost of sales and related occupancy expenses 53,534 41,838 186,374 154,892
Operating expenses 28,646 28,345 113,229 109,646
Transaction related expenses - - - 970
Litigation related expenses - 15 3,260 (34 )
General and administrative expenses 6,784 7,311 25,871 25,029
Depreciation and amortization expenses   3,913     3,923   15,578   15,767  
Total costs and expenses from operations   92,877     81,432   344,312   306,270  
 
Income from operations 8,746 10,196 27,607 27,538
 
Interest (expense) income, net   (1 )   2   8   8  
 
Income before income taxes 8,745 10,198 27,615 27,546
 
Income tax provision   3,098     3,766   9,828   10,045  
 
Net income $ 5,647   $ 6,432 $ 17,787 $ 17,501  
 
Net income per share:
Basic $ 0.43 $ 0.50 $ 1.37 $ 1.34
Diluted $ 0.42 $ 0.48 $ 1.33 $ 1.28
 
Shares used in calculation of net income per share:
Basic 13,034 12,871 12,982 13,038
Diluted 13,353 13,453 13,366 13,643
 

PEET'S COFFEE & TEA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

   

Fifty-two
weeks ended
January 1,
2012

Fifty-two
weeks ended
January 2,
2011

 
Cash flows from operating activities:
Net income $ 17,787 $ 17,501
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 17,886 17,959
Amortization of interest purchased 346 16
Stock-based compensation 3,844 3,354
Excess tax benefit from exercise of stock options (10,167 ) (5,501 )
Tax benefit from exercise of stock options 9,406 4,936
Loss on disposition of assets and asset impairment 765 129
Deferred income taxes (300 ) (1,103 )
Changes in other assets and liabilities:
Accounts receivable, net (5,670 ) 357
Inventories (20,731 ) (7,598 )
Prepaid expenses and other current assets (1,570 ) (1,935 )
Other assets (4 ) 47
Accounts payable, accrued liabilities and deferred revenue 1,584 (3,809 )
Deferred lease credits and other long-term liabilities   (755 )   411  
Net cash provided by operating activities   12,421     24,764  
 
Cash flows from investing activities:
Purchases of property, plant and equipment (10,833 ) (11,603 )
Proceeds from sales of property, plant and equipment 5 19
Changes in restricted investments 798 558
Proceeds from sales and maturities of marketable securities 9,765 -
Purchases of marketable securities   (10,616 )   (4,195 )
Net cash used in investing activities   (10,881 )   (15,221 )
 
Cash flows from financing activities:
Net proceeds from issuance of common stock 25,699 17,978
Purchase of common stock (51,280 ) (36,327 )
Excess tax benefit from exercise of stock options   10,167     5,501  
Net cash used in financing activities   (15,414 )   (12,848 )
 
Decrease in cash and cash equivalents (13,874 ) (3,305 )
Cash and cash equivalents, beginning of period   44,629     47,934  
 
Cash and cash equivalents, end of period $ 30,755   $ 44,629  
 
Non-cash investing activities:
Capital expenditures incurred, but not yet paid $ 245 $ 412
Other cash flow information:
Cash paid for income taxes 3,044 7,227
 

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 January 1, 2012
Net revenue $ 56,547 100.0 % $ 45,076 100.0 % $ 101,623 100.0 %
Cost of sales and occupancy 26,050 46.1 % 27,484 61.0 % 53,534 52.7 %
Operating expenses 20,652 36.5 % 7,994 17.7 % 28,646 28.2 %
Litigation related expenses - - -
Depreciation and amortization 2,735 4.8 % 408 0.9 % $ 770 3,913 3.9 %
Segment operating income 7,110 12.6 % 9,190 20.4 % (7,554 ) 8,746 8.6 %
 
For the thirteen weeks ended January 2, 2011
Net revenue $ 54,694 100.0 % $ 36,934 100.0 % $ 91,628 100.0 %
Cost of sales and occupancy 22,922 41.9 % 18,916 51.2 % 41,838 45.7 %
Operating expenses 20,824 38.1 % 7,521 20.4 % 28,345 30.9 %
Litigation related expenses 15 0.0 % 15 0.0 %
Depreciation and amortization 2,775 5.1 % 432 1.2 % $ 716 3,923 4.3 %
Segment operating income 8,158 14.9 % 10,065 27.3 % (8,027 ) 10,196 11.1 %
 
For the fifty-two weeks ended January 1, 2012
Net revenue $ 214,270 100.0 % $ 157,649 100.0 % $ 371,919 100.0 %
Cost of sales and occupancy 96,193 44.9 % 90,181 57.2 % 186,374 50.1 %
Operating expenses 82,148 38.3 % 31,081 19.7 % 113,229 30.4 %
Litigation related expenses 3,260 1.5 % 3,260 0.9 %
Depreciation and amortization 10,917 5.1 % 1,698 1.1 %

$

2,963 15,578 4.2 %
Segment operating income 21,752 10.2 % 34,689 22.0 % (28,834 ) 27,607 7.4 %
 
For the fifty-two weeks ended January 2, 2011
Net revenue $ 205,116 100.0 % $ 128,692 100.0 % $ 333,808 100.0 %
Cost of sales and occupancy 88,622 43.2 % 66,270 51.5 % 154,892 46.4 %
Operating expenses 82,762 40.3 % 26,884 20.9 % 109,646 32.8 %
Litigation related expenses (34 ) 0.0 % (34 ) 0.0 %
Depreciation and amortization 11,216 5.5 % 1,746 1.4 %

$

2,805 15,767 4.7 %
Segment operating income 22,550 11.0 % 33,792 26.3 % (28,804 ) 27,538 8.2 %
 

NON-GAAP FINANCIAL INFORMATION

Peet's Coffee & Tea, Inc. reports its financial results in accordance with generally accepted accounting principles in the United States (GAAP). In this press release, the Company is also providing non-GAAP financial measures―specifically, non-GAAP net income and non-GAAP net income per diluted share, which exclude certain litigation- and transaction-related expenses as detailed in the reconciliation below. Because of the nature and magnitude of these expenses, the Company uses the presented non-GAAP financial measures internally to compare its performance period to period and believes this information is also helpful to investors. The Company cautions investors that the non-GAAP financial measures presented are intended to supplement the Company's GAAP results and are not a substitute for such results. Additionally, the non-GAAP financial measures used by Peet's may differ from non-GAAP measures used by other companies.

PEET'S COFFEE & TEA, INC.

Reconciliation of Non-GAAP Financial Information
(Unaudited, in thousands, except per share data)

       

Thirteen
weeks ended
January 1,
2012

Thirteen
weeks ended
January 2,
2011

Fifty-Two
weeks ended
January 1,
2012

Fifty-Two
weeks ended
January 2,
2011

 

Net Income

Net income, as reported $ 5,647 $ 6,432 $ 17,787 $ 17,501
Transaction related expenses, net of tax (1) - - - 616
Litigation related expenses, net of tax (2)   -   10   2,100   (21 )
Non-GAAP net income $ 5,647 $ 6,442 $ 19,887 $ 18,096  
 
 

Net Income Per Diluted Share

Net income per diluted share, as reported $ 0.42 $ 0.48 $ 1.33 $ 1.28
Transaction related expenses, net of tax (1) - - - 0.05
Litigation related expenses, net of tax (2)   -   -   0.16   -  
Non-GAAP net income per diluted share $ 0.42 $ 0.48 $ 1.49 $ 1.33  

___________

1) Transaction-related expenses reflect legal and related expenses incurred in connection with a subpoena received from the Federal Trade Commission (FTC) relating to the FTC's anti-trust review of the acquisition of Diedrich Coffee by Green Mountain Coffee Roasters.
2) Litigation-related expenses reflect a) expenses incurred or accrued in connection with a class action lawsuit filed against the Company in the first quarter of 2010, including in connection with the pending settlement thereof and b) amounts recorded into income in 2010 in connection with a class action lawsuit filed against the Company in the third quarter of 2008, based on the difference between the previously recorded liability and the final settlement payment.

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

Source: Peet's Coffee & Tea, Inc.

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