Expects to Restate Historical Financial Statements to Reflect
Non-Cash Stock Option Expense EMERYVILLE, Calif., Nov. 7
/PRNewswire-FirstCall/ -- Peet's Coffee & Tea, Inc.
(NASDAQ:PEET) today announced preliminary results for the third
quarter ended October 1, 2006, which included 13 weeks, and
financial targets for fiscal year 2007. The preliminary third
quarter results and 2006 and 2007 earnings forecasts are subject to
any adjustments that may result from the review of the Company's
past stock option granting practices described in this release. The
Company also announced that it expects to restate historical
financial statements to reflect non-cash stock option expense.
Preliminary Third Quarter Results and Fourth Quarter Outlook For
the quarter ended October 1, 2006, net revenue increased 18.7
percent to $50.9 million from $42.9 million for the corresponding
period of fiscal 2005. Through the first three quarters of fiscal
year 2006, net revenue increased 20.6 percent, to $150.3 million
from $124.6 million a year ago. The Company expects fourth quarter
revenue growth to be in the 20 to 21 percent range, resulting in
full year 2006 revenue growth in this same range. On November 1,
2006, the Company raised prices on some drink and baked good items
in its retail stores in amounts equivalent to about a 1.8
percentage point increase on the Company's total sales, based on
historical sales mix. This increase was taken primarily to offset
increased coffee costs. Preliminary earnings for the quarter were
$1.4 million or $0.10 per share. Year-to-date, preliminary earnings
were $5.5 million or $0.38 per share. These preliminary results
reflect accounting for stock options but are subject to any
adjustments that may result from a review of the Company's past
stock option granting practices. If not for the option review, the
Company would expect fourth quarter earnings from ongoing
operations to be approximately $0.25 per share. However, reported
earnings will be reduced by the costs associated with conducting
the stock option review and any adjustments for past stock option
grants that may result from the review. "Our preliminary results
for the third quarter were right on track with our previous
guidance," said Patrick O'Dea, president and CEO of Peet's Coffee
& Tea. "The fourth quarter is also on track as we launched our
annual holiday program just last week and we are in the midst of
our most productive new store quarter ever with 10-12 new stores
opening before year's end." 2007 Financial Targets The Company
announced its 2007 revenue growth target of 20 to 23 percent and
its expectation of opening between 30 and 35 new stores during the
year. Additionally, the Company provided 2007 preliminary earnings
per share guidance, excluding any effects of the stock option
review, of between $0.70 and $0.73. Mr. O'Dea said, "We're excited
with the momentum we have entering 2007. We expect to get off to a
quick start in our retail business with 6 to 8 new stores in the
first quarter. Additionally, the investments we are making in a new
roasting facility, people and improved operating systems bode well
for our performance in 2008 and beyond." Review of Past Stock
Option Granting Practices; Anticipated Restatement of Previously
Issued Financial Statements The Company also announced today that
on October 20, 2006, the Board of Directors appointed an Option
Review Committee consisting of two independent directors to oversee
a review of the Company's past stock option granting practices.
This voluntary review was initiated in light of the recent media
coverage regarding stock option granting practices of other
publicly traded companies. This review involves examination of past
stock option grants including those prior to the Company's initial
public offering in January 2001. The Committee is conducting this
review with the assistance of independent legal counsel and
accounting advisors. The Committee, on the Company's behalf, has
voluntarily contacted the Securities and Exchange Commission staff
to inform them about the ongoing review. The Option Review
Committee has not completed its factual investigation nor reached
any conclusions, but it has discussed with the Audit Committee in
general terms the information it has obtained through the
interviews and document reviews completed to date. Following these
discussions, Bill Jesse, Chairman of the Audit Committee, said,
"Although we recognize there remains a significant amount of
factual review yet to be done by the Option Review Committee and
new information could be discovered at any time, the preliminary
information that has been shared with us to date does not suggest
to me that there was any purposeful misconduct by persons involved
in the Company's past stock option grants." Although the Option
Review Committee's review is ongoing, the Audit Committee has
concluded the Company will most likely need to restate its
historical financial statements to record additional non-cash
stock-based compensation expense as a result of errors in recording
the measurement date for certain stock option grants. Any
additional stock-based compensation expense recorded will not
affect the Company's cash position or reported revenue for the
third quarter of 2006 or any previous periods. Accordingly, the
Company advises that its financial statements and related
communications for periods commencing on or after January 1, 1996
should not be relied upon until the Option Review Committee
completes its review and any adjustments that may result from the
review of certain stock option grants have been determined and
reflected in restated historical financial statements. The Company
does not expect to be in a position to announce final financial
results for the third quarter until the Option Review Committee has
completed its review. At this time, the Company does not expect to
file its Form 10-Q for the third quarter by the November 13, 2006
due date. 2006 Preliminary Financial and Operating Summary Retail
revenue increased 19.6 percent to $34.4 million for the quarter
ended October 1, 2006 from $28.7 million for the corresponding
period of fiscal 2005. The increase was primarily attributable to
new retail stores opened in the last 12 months and secondarily to
growth in existing stores. The Company opened 6 stores in the
quarter. Specialty sales revenue increased 16.9 percent to $16.5
million, compared to $14.1 million last year. Within specialty
sales, the grocery business grew 24.4 percent over last year, with
existing grocery customers accounting for the majority of the
increase. The home delivery business grew 11.8 percent and the
foodservice and office business grew 8.7 percent during the quarter
compared to the same period last year. During the quarter, the
Company closed six company-operated kiosks in Larry's Markets in
Seattle due to the bankruptcy of Larry's. This resulted in a charge
of $0.2 million, or $0.01 per share, and lowered specialty sales
revenue growth by 1.1 percentage points in the quarter. Cost of
sales and related occupancy costs increased to 47.1 percent of
total net revenue from 45.9 percent for the corresponding quarter
last year. The increase over last year was due to higher green
coffee costs, an increased number of new stores, which have higher
occupancy expenses on a lower sales base, and the expensing of
stock options, partially offset by a grocery pricing increase in
October 2005. Operating expenses as a percentage of net revenue
increased to 36.3 percent from 34.7 percent for the corresponding
quarter last year. The increase was driven by the expensing of
stock options in 2006 (0.7 percentage points), higher retail
operating expenses due to new stores opened in the last 12 months
and higher operating costs to support existing stores. Depreciation
and amortization expenses increased to $2.2 million from $1.9
million for the corresponding quarter last year. The increase was
primarily due to the opening of 22 new retail stores in the last 12
months. General and administrative expenses increased to $3.5
million from $2.1 million for the same period last year primarily
due to costs associated with the growth of the business and $0.6
million of stock option expense in 2006. The Company ended the
quarter with cash and cash equivalents plus investments of $47.4
million. Peet's Coffee & Tea, Inc. Q3 2006 Conference Call The
company will report its third quarter 2006 earnings results via
conference call on Tuesday, November 7, 2006. The teleconference
call will begin at 2 p.m. PST/5 p.m. EST. The teleconference can be
accessed by calling 1-800-565-5442, using access code 1344798. The
call will be simultaneously Webcast on Peet's Web site at
http://investor.peets.com/Medialist.cfm . A replay of the
teleconference will be available two hours after the end of the
call through midnight EST on November 14, 2006, at 1-888-203-1112
or 719-457-0820, using access code 1344798. It will also be
archived at http://investor.peets.com/Medialist.cfm through
November 7, 2007. ABOUT PEET'S COFFEE & TEA, INC. Founded in
Berkeley, Calif., in 1966, Peet's Coffee & Tea, Inc. is a
specialty coffee roaster and marketer of fresh, deep-roasted whole
bean coffee for home and office enjoyment. Peet's fresh-roasted
coffee, hand-selected tea and related items are sold in several
distribution channels including grocery, home delivery, office and
food service accounts and company-owned stores throughout the
United States. For information about Peet's Coffee & Tea, Inc.,
visit http://www.peets.com/ or call 1-800-999-2132. Peet's Coffee
& Tea, Inc. shares are traded under the symbol PEET. 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 2006
fourth quarter and 2006 and 2007 full-year revenue and earnings per
share, new store growth, stock-based compensation expense estimates
and the Company's expectations with respect to the review of its
past stock option granting practices. 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, 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 impact of the Company's stock price volatility on the valuation
of stock-based compensation under SFAS 123R; the outcome of the
stock option review; 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 1, 2006. 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. (Preliminary) CONSOLIDATED
STATEMENTS OF INCOME (Unaudited, in thousands, except per share
amounts) Thirteen weeks Thirty-nine weeks ended ended October 1,
October 2, October 1, October 2, 2006 2005 2006 2005 Retail stores
$34,350 $28,719 $101,331 $84,577 Specialty sales 16,523 14,135
48,938 39,988 Net revenue 50,873 42,854 150,269 124,565 Cost of
sales and related occupancy expenses 23,962 19,671 69,538 56,568
Operating expenses 18,485 14,868 53,811 42,731 Marketing and
advertising expenses 958 1,103 3,145 2,675 Depreciation and
amortization expenses 2,216 1,864 6,295 5,365 General and
administrative expenses 3,549 2,122 10,585 6,432 Total costs and
expenses from operations 49,170 39,628 143,374 113,771 Income from
operations 1,703 3,226 6,895 10,794 Interest income 589 421 1,968
1,176 Income before income taxes 2,292 3,647 8,863 11,970 Income
tax provision 895 1,431 3,377 4,723 Net income $1,397 $2,216 $5,486
$7,247 Net income per share: Basic $0.10 $0.16 $0.40 $0.53 Diluted
$0.10 $0.15 $0.38 $0.50 Shares used in calculation of net income
per share: Basic 13,670 13,949 13,801 13,754 Diluted 14,316 14,658
14,484 14,421 PEET'S COFFEE & TEA, INC. (Preliminary)
CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands, except share
amounts) October 1, January 1, 2006 2006 ASSETS Current assets Cash
and cash equivalents $8,457 $20,623 Short-term marketable
securities 31,913 32,453 Accounts receivable, net 6,036 5,152
Inventories 22,887 16,148 Deferred income taxes 1,633 1,514 Prepaid
expenses and other 6,408 3,372 Total current assets 77,334 79,262
Long-term marketable securities 6,990 16,890 Property and
equipment, net 57,597 46,313 Other assets, net 7,499 5,434 Total
assets $149,420 $147,899 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities Accounts payable and other accrued liabilities
$13,024 $8,553 Accrued compensation and benefits 5,575 5,563
Deferred revenue 2,920 3,415 Total current liabilities 21,519
17,531 Deferred income taxes 1,726 1,759 Deferred lease credits and
other long- term liabilities 3,071 2,537 Total liabilities 26,316
21,827 Shareholders' equity Common stock, no par value; authorized
50,000,000 shares; issued and outstanding: 13,491,000 and
13,902,000 shares 90,757 99,273 Accumulated other comprehensive
loss, net of tax (14) (76) Retained earnings 32,361 26,875 Total
shareholders' equity 123,104 126,072 Total liabilities and
shareholders' equity $149,420 $147,899 Presentation of Preliminary
Non-GAAP Financial Measures The following table illustrates the
effect on net income and net income per share if the Company had
applied the fair value recognition provisions of FAS 123R to all
periods presented. This pro-forma non-GAAP financial information
includes financial measures which the Company reconciles to the
results reported in accordance with GAAP. The Company believes that
pro-forma non-GAAP reporting for prior periods, giving effect to
the adjustments shown in the reconciliation below, is useful to
investors to permit them to compare the Company's results to prior
periods using consistent assumptions regarding stock-based
compensation. In addition, the Company believes that its
competitors report similar non-GAAP financial information and, as a
result, investors, analysts and others in the investment community
expect such information to be reported as it allows them to better
compare the Company's results with those of its competitors. The
Company uses such non-GAAP financial measures to analyze and
compare the performance of its core business. Non-GAAP financial
information is not prepared under a comprehensive set of accounting
rules and should be considered supplemental to, and not a
substitute for or superior to, financial measures calculated in
accordance with GAAP. The following table does not reflect any
change in accounting for stock options that may result from our
review of past stock option granting practices. Thirteen weeks
Thirty-nine weeks ended ended Oct. 1, Oct. 2, Oct. 1, Oct. 2, 2006
2005 2006 2005 (Preliminary) (Pro (Preliminary) (Pro Forma) Forma)
Net income before stock-based compensation $2,078 $2,216 (a) $7,581
$7,247 (a) Stock-based compensation expense, net of tax (681) (766)
(2,095) (3,247) Net income $1,397 $1,450 (b) $5,486 $4,000 (b)
Basic net income per share: Net income before stock-based
compensation $0.15 $0.16 (a) $0.55 $0.53 (a) Stock-based
compensation, net of tax (0.05) (0.06) (0.15) (0.24) Basic net
income per share $0.10 $0.10 (b) $0.40 $0.29 (b) Diluted net income
per share: Net income before stock-based compensation $0.15 $0.15
(a) $0.53 $0.50 (a) Stock-based compensation, net of tax (0.05)
(0.05) (0.15) (0.22) Diluted net income per share $0.10 $0.10 (b)
$0.38 $0.28 (b) (a) Represents net income and basic and diluted net
income per share for the 2005 period under GAAP as reported in the
Company's filings with the Securities and Exchange Commission. (b)
Represents pro-forma non-GAAP net income and basic and diluted net
income per share for the 2005 period as if the Company had applied
the fair value recognition provisions of SFAS 123R to prior
quarters. DATASOURCE: Peet's Coffee & Tea, Inc. CONTACT: media,
Jennifer Strasburg of Weber Shandwick, +1-415-449-0125, or , for
Peet's Coffee & Tea, Inc.; or investors, Susie Phillips of
Peet's Coffee & Tea, Inc., +1-510-594-2196, or Web site:
http://www.peets.com/
Copyright
Peets Coffee & Tea, Inc. (MM) (NASDAQ:PEET)
Historical Stock Chart
From Jun 2024 to Jul 2024
Peets Coffee & Tea, Inc. (MM) (NASDAQ:PEET)
Historical Stock Chart
From Jul 2023 to Jul 2024