Peet's Coffee & Tea, Inc. Reports Second Quarter 2012 Results

EMERYVILLE, Calif.--(BUSINESS WIRE)-- Peet's Coffee & Tea, Inc. (NASDAQ: PEET) today announced its second quarter results for the fiscal period ended July 1, 2012, which included 13 weeks.

In this release, the Company:

• Reports diluted earnings per share of $0.30

• Reports net revenue growth of 5%

Consolidated Financial and Operating Summary

For the 13 weeks ended July 1, 2012, net revenue increased 5% to $95.4 million from $90.6 million for the corresponding period of fiscal 2011. Diluted earnings per share was $0.30, compared to $0.38 for the corresponding period of fiscal 2011.

Retail net revenue increased 4% to $55.4 million for the 13 weeks ended July 1, 2012, from $53.4 million for the corresponding period last year. The increase was driven by a higher average transaction and an $874,000 sales tax refund related to resolution of a sales tax computation interpretation with the taxing authorities. The Company did not open any stores in the quarter and ended the quarter with 197 stores.

Specialty net revenue increased 7% to $40.0 million for the 13 weeks ended July 1, 2012, compared to $37.3 million for the corresponding period last year. Within specialty, grocery sales were up 5% compared to the corresponding period last year, foodservice and office sales grew 15%, and home delivery sales grew 3%. Grocery revenue growth was impacted by an increase in competitive pricing pressure during the period.

Cost of sales and related occupancy expenses increased as a percent of total net revenue to 50.4% for the quarter, compared to 49.2% for the corresponding period last year. The increase was caused by higher green coffee costs, which were 16% higher per pound than the same quarter last year. This increase was partially offset by price increases across all channels and lower shipping expenses.

Operating expenses were 31.2% of net revenue, compared to 31.1% for the corresponding period last year. A favorable mix shift towards the specialty business and lower legal fees were substantially offset by higher healthcare costs, payment card processing fees, and investments in overhead expenses.

General and administrative expenses increased as a percent of net revenue to 7.8%, compared to 6.6% for the corresponding period last year. General and administrative expenses increased to $7.4 million from $6.0 million for the corresponding period last year, primarily due to higher payroll and marketing costs.

Depreciation and amortization expenses decreased as a percent of net revenue to 4.1%, 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 $38.9 million at the end of the quarter, compared to $35.4 million at the end of fiscal 2011.

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.

PEET'S COFFEE & TEA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share amounts)
		July 1,			January 1,
		2012			2012
ASSETS
Current assets
Cash and cash equivalents		$	32,428		$	30,755
Short-term marketable securities			5,791			3,800
Accounts receivable, net			19,595			20,522
Inventories			68,417			54,265
Deferred income taxes - current			5,041			5,041
Prepaid expenses and other			10,240			9,368
Total current assets			141,512			123,751
Long-term marketable securities			634			888
Property, plant and equipment, net			85,458			89,304
Other assets, net			2,261			1,328
Total assets		$	229,865		$	215,271
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and other accrued liabilities		$	13,348		$	11,547
Accrued compensation and benefits			9,132			10,283
Deferred revenue			7,524			7,382
Total current liabilities			30,004			29,212
Deferred income taxes - non current			372			367
Deferred lease credits			6,463			6,668
Other long-term liabilities			2,396			1,068
Total liabilities			39,235			37,315
Shareholders' equity
Common stock, no par value; authorized 50,000,000 shares; issued and outstanding: 13,245,000 and 13,136,000 shares			74,940			69,664
Accumulated other comprehensive income			3			2
Retained earnings			115,687			108,290
Total shareholders' equity			190,630			177,956
Total liabilities and shareholders' equity		$	229,865		$	215,271

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 1,			July 3,			July 1,			July 3,
		2012			2011			2012			2011
Retail stores		$	55,424		$	53,351		$	109,539		$	105,440
Specialty sales			39,968			37,265			80,627			73,648
Net revenue			95,392			90,616			190,166			179,088
Cost of sales and related occupancy expenses			48,064			44,558			96,420			85,778
Operating expenses			29,734			28,146			59,560			56,030
Litigation related expenses			-			38			-			79
General and administrative expenses			7,428			6,011			14,810			12,779
Depreciation and amortization expenses			3,930			3,881			7,872			7,800
Total costs and expenses from operations			89,156			82,634			178,662			162,466
Income from operations			6,236			7,982			11,504			16,622
Interest income, net			16			7			22			18
Income before income taxes			6,252			7,989			11,526			16,640
Income tax provision			2,239			2,878			4,129			6,016
Net income		$	4,013		$	5,111		$	7,397		$	10,624
Net income per share:
Basic		$	0.30		$	0.40		$	0.56		$	0.82
Diluted		$	0.30		$	0.38		$	0.55		$	0.79
Shares used in calculation of net income per share:
Basic			13,260			12,892			13,215			13,000
Diluted			13,547			13,309			13,515			13,414

PEET'S COFFEE & TEA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
		Twenty-six weeks ended
		July 1,				July 3,
		2012				2011
Cash flows from operating activities:
Net income		$	7,397			$	10,624
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			8,932				8,956
Amortization of interest purchased			150				197
Stock-based compensation			2,303				2,035
Excess tax benefit from exercise of stock options			(1,696	)			(5,763	)
Tax benefit from exercise of stock options			1,612				5,224
Loss on disposition of assets and asset impairment			140				325
Deferred income taxes			5				67
Changes in other assets and liabilities:
Accounts receivable, net			927				(197	)
Inventories			(14,152	)			(13,946	)
Prepaid expenses and other current assets			(872	)			(1,147	)
Other assets			(1,238	)			(2	)
Accounts payable, accrued liabilities and deferred revenue			593				(3,021	)
Deferred lease credits and other long-term liabilities			1,123				(379	)
Net cash provided by operating activities			5,224				2,973
Cash flows from investing activities:
Purchases of property, plant and equipment			(5,021	)			(4,851	)
Proceeds from sales of property, plant and equipment
Changes in restricted investments			299				798
Proceeds from sales and maturities of marketable securities			4,056				3,013
Purchases of marketable securities			(5,942	)			(8,384	)
Net cash used in investing activities			(6,608	)			(9,424	)
Cash flows from financing activities:
Net proceeds from issuance of common stock			4,060				15,023
Purchase of common stock			(2,699	)			(39,529	)
Excess tax benefit from exercise of stock options			1,696				5,763
Net cash provided by/(used in) financing activities			3,057				(18,743	)
Increase/(decrease) in cash and cash equivalents			1,673				(25,194	)
Cash and cash equivalents, beginning of period			30,755				44,629
Cash and cash equivalents, end of period		$	32,428			$	19,435
Non-cash investing activities:
Capital expenditures incurred, but not yet paid		$	444			$	449
Other cash flow information:
Cash paid for income taxes			2,807				2,896

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 July 1, 2012
Net revenue		$	55,424		100.0	%		$	39,968		100.0	%						$	95,392		100.0	%
Cost of sales and occupancy			24,807		44.8	%			23,257		58.2	%							48,064		50.4	%
Operating expenses			21,663		39.1	%			8,071		20.2	%							29,734		31.2	%
Depreciation and amortization			2,782		5.0	%			354		0.9	%		$	794				3,930		4.1	%
Segment operating income			6,172		11.1	%			8,286		20.7	%			(8,222	)			6,236		6.5	%
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	%
Litigation related expenses			38		0.1	%			-										38		0.0	%
Depreciation and amortization			2,731		5.1	%			433		1.2	%		$	717				3,881		4.3	%
Segment operating income			6,503		12.2	%			8,207		22.0	%			(6,728	)			7,982		8.8	%
For the twenty-six weeks ended July 1, 2012
Net revenue		$	109,539		100.0	%		$	80,627		100.0	%						$	190,166		100.0	%
Cost of sales and occupancy			49,323		45.0	%			47,097		58.4	%							96,420		50.7	%
Operating expenses			42,728		39.0	%			16,832		20.9	%							59,560		31.3	%
Depreciation and amortization			5,571		5.1	%			721		0.9	%		$	1,580				7,872		4.1	%
Segment operating income			11,917		10.9	%			15,977		19.8	%			(16,390	)			11,504		6.0	%
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	%
Litigation related expenses			79		0.1	%			-		0.0	%							79		0.0	%
Depreciation and amortization			5,468		5.2	%			877		1.2	%		$	1,455				7,800		4.4	%
Segment operating income			13,091		12.4	%			17,765		24.1	%			(14,234	)			16,622		9.3	%

Double Forte
Nicole Arena, 415-500-0611 (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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