PEET Peets Coffee & Tea, Inc. (MM)

Peet’s Coffee & Tea, Inc. (NASDAQ:PEET) today announced its first quarter results for the fiscal quarter ended April 4, 2010, which included 13 weeks.

In this release, the company:

• Reports net revenue growth for the quarter of 13%
• Reports non-GAAP diluted earnings per share of $0.26 and GAAP diluted earnings per share of $0.22
• Confirms 2010 non-GAAP diluted earnings per share guidance of $1.27 to $1.30, excluding legal and related expenses the company incurs to comply with a subpoena it received from the Federal Trade Commission in connection with its anti-trust review of the proposed Green Mountain Coffee Roasters acquisition of Diedrich Coffee.

 

Financial Highlights

                First Quarter %

2010

2009

Change

  Net revenue, as reported $ 81,196 $ 72,104 13 %   Net income per diluted share, as reported $ 0.22 $ 0.23 -4 %  

Non-GAAP diluted net income per share,

excluding unusual items

$ 0.26 $ 0.23 13 %  

For the 13 weeks ended April 4, 2010, net revenue increased 13% to $81.2 million from $72.1 million for the corresponding period of fiscal 2009.

Net income for the 13 weeks ended April 4, 2010, was $3.1 million which was equal to the net income for the corresponding 13-week period of fiscal 2009. Diluted earnings per share were $0.22 for the 13-week period of fiscal 2010 compared to $0.23 per share for the corresponding period of fiscal 2009. Net income for the quarter includes pre-tax expense of $0.8 million of legal and related expenses the company incurred to comply with a subpoena it received from the Federal Trade Commission in connection with its anti-trust review of the proposed Green Mountain Coffee Roasters acquisition of Diedrich Coffee. Excluding this unusual item, non-GAAP diluted earnings per share would have been $0.26.

“Overall, we’re off to a good start in the first quarter driven by strong grocery growth and improving retail sales trends,” said Patrick O’Dea, president and CEO of Peet's Coffee & Tea. “Sales were a bit stronger than expected across all channels, particularly grocery where we grew 39%, and our key growth initiatives are on track.”

Consolidated Financial and Operating Summary

Retail net revenue increased 4% to $50.1 million for the 13 weeks ended April 4, 2010, from $48.0 million for the corresponding period of fiscal 2009. The increase was primarily attributable to growth in existing stores. The company ended the quarter with 193 stores versus 190 stores at the end of the first quarter in 2009.

Specialty net revenue increased 29% to $31.1 million for the 13 weeks ended April 4, 2010 compared to $24.1 million for the corresponding period of fiscal 2009. Within specialty sales, the grocery business continues to grow the most rapidly, up 39% over last year; the foodservice and office business grew 27%; and home delivery sales were down 1%.

Cost of sales and related occupancy expenses were 46.2% of total net revenue, compared to 45.2% for the corresponding period last year. The increase resulted from a mix shift towards the specialty channels which have a higher cost of sales, and, secondarily, higher milk costs in retail.

Operating expenses as a percentage of net revenue decreased to 34.3% from 34.9% for the corresponding period last year due to a favorable mix shift to the specialty business and lower operating expenses in specialty driven by sales leverage of the direct-store-delivery selling system, partially offset by higher retail costs in maintenance and healthcare benefits.

In the quarter the company incurred $0.8 million in legal and related fees to comply with a subpoena the company received from the Federal Trade Commission in connection with its anti-trust review of the proposed Green Mountain Coffee Roasters acquisition of Diedrich Coffee.

General and administrative expenses as a percentage of net revenue decreased to 7.8% of net sales compared to 8.2% for the corresponding period last year. General and administrative expenses increased to $6.3 million, compared to $5.9 million for the corresponding period last year primarily due to higher payroll related costs and legal expenses.

Depreciation and amortization expenses as a percentage of net revenue decreased to 4.8% of net sales compared to 5.0% for the corresponding period last year. Depreciation and amortization expenses increased to $3.9 million, compared to $3.6 million for the corresponding period last year primarily due to depreciation from our new Enterprise Resource Planning (ERP) system.

The company ended the first quarter of 2010 with cash and cash equivalents plus investments of $55.8 million, compared to $47.9 million at year end 2009.

Fiscal 2010 Full Year Outlook

Looking ahead, the company reaffirmed its full year fiscal 2010 targets:

• The company is targeting total net revenue growth of approximately 8% to 12%, excluding the impact of the 53rd week in fiscal 2009, resulting in 2010 net revenue of approximately $330 to $340 million
• The company is targeting non-GAAP diluted earnings per share of $1.27 to $1.30 for fiscal 2010, which represents diluted earnings per share growth of 22% to 25% off of non-GAAP comparable 52-week earnings per share of $1.04 in 2009. This earnings forecast excludes legal and related expenses the company incurs to comply with the subpoena it received from the Federal Trade Commission in connection with its anti-trust review of the proposed Green Mountain Coffee Roasters acquisition of Diedrich.

Peet’s Coffee & Tea, Inc. Q1 2010 Conference Call

Peet’s will report its first quarter 2010 earnings via conference call on Tuesday, May 4, 2010. The teleconference call will begin at 2:00 p.m. PT/5:00 p.m. ET, which can be accessed by calling 1-866-748-8653. The call will be simultaneously webcast on Peet’s Web site at www.peets.com.

A replay of the teleconference will be available from 5:00 p.m. PT/8:00 p.m. ET on May 4, 2010 through 8:59 p.m. PT/11:59 p.m. ET on May 11, 2010, at 1-800-642-1687 or 1-706-645-9291, using access code 68051276. It will also be archived at http://investor.peets.com/medialist.cfm through May 4, 2011, at 8:59 p.m. PT/11:59 ET.

ABOUT PEET’S COFFEE & TEA, INC.

Peet's Coffee & Tea, Inc., (PEET), is the premier specialty coffee and tea company in the United States. The company was founded in 1966 in Berkeley, California 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 though 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 2010 forecasted net revenue and 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 manage its expense relating to the inquiry by the Federal Trade Commission into the proposed acquisition of Diedrich by Green Mountain Coffee Roasters; 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 3, 2010. 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.   CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)   April 4, January 3,

2010

2010

 

ASSETS   Current assets Cash and cash equivalents $ 55,824 $ 47,934 Accounts receivable, net 12,539 15,209 Inventories 24,239 25,936 Deferred income taxes - current 3,592 3,592 Prepaid expenses and other   6,481   5,863 Total current assets 102,675 98,534   Property, plant and equipment, net 101,623 103,494 Other assets, net   2,176   2,775   Total assets $ 206,474 $ 204,803   LIABILITIES AND SHAREHOLDERS' EQUITY   Current liabilities Accounts payable and other accrued liabilities $ 11,840 $ 13,669 Accrued compensation and benefits 6,601 10,832 Deferred revenue   5,513   6,845 Total current liabilities 23,954 31,346   Deferred income taxes - non current 316 321 Deferred lease credits 7,070 7,059 Other long-term liabilities   1,135   1,021 Total liabilities 32,475 39,747   Shareholders' equity

Common stock, no par value; authorized 50,000,000 shares;

issued and outstanding:13,309,000 and 13,104,000 shares

97,946 92,054 Retained earnings   76,053   73,002   Total shareholders' equity   173,999   165,056   Total liabilities and shareholders' equity $ 206,474 $ 204,803   PEET’S COFFEE & TEA, INC.     CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts)   Thirteen weeks ended April 4, March 29,

2010

2009

  Retail stores $ 50,071 $ 47,982 Specialty sales   31,125     24,122 Net revenue 81,196 72,104   Cost of sales and related occupancy expenses 37,539 32,568 Operating expenses 27,837 25,171 Transaction related expenses 824 - General and administrative expenses 6,302 5,938 Depreciation and amortization expenses   3,877     3,607 Total costs and expenses from operations   76,379     67,284   Income from operations 4,817 4,820     Interest (expense) income, net   (1 )   78   Income before income taxes 4,816 4,898   Income tax provision   1,765     1,845   Net income $ 3,051   $ 3,053   Net income per share: Basic $ 0.23 $ 0.23 Diluted $ 0.22 $ 0.23   Shares used in calculation of net income per share: Basic 13,188 13,039 Diluted 13,809 13,241     PEET’S COFFEE & TEA, INC.   CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)   Thirteen weeks ended April 4, March 29,

2010

2009

  Cash flows from operating activities: Net income $ 3,051 $ 3,053

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization 4,422 4,141 Amortization of interest purchased - 27 Stock-based compensation 742 643 Excess tax benefit from exercise of stock options (1,113 ) (28 ) Tax benefit from exercise of stock options 946 17 Loss on disposition of assets and asset impairment 31 7 Deferred income taxes (5 ) (9 ) Changes in other assets and liabilities: Accounts receivable, net 2,670 1,809 Inventories 1,697 3,552 Prepaid expenses and other current assets (618 ) 1,694 Other assets 29 177 Accounts payable, accrued liabilities and deferred revenue (7,354 ) (3,235 ) Deferred lease credits and other long-term liabilities   125     453   Net cash provided by operating activities   4,623     12,301     Cash flows from investing activities: Purchases of property, plant and equipment (2,623 ) (3,787 ) Proceeds from sales of property, plant and equipment 13 - Changes in restricted investments 560 884 Proceeds from sales and maturities of marketable securities   -     3,972   Net cash (used in) provided by investing activities   (2,050 )   1,069     Cash flows from financing activities: Net proceeds from issuance of common stock 4,732 450 Purchase of common stock (528 ) (6,564 ) Excess tax benefit from exercise of stock options   1,113     28   Net cash provided by (used in) financing activities   5,317     (6,086 )   Increase in cash and cash equivalents 7,890 7,284 Cash and cash equivalents, beginning of year   47,934     4,719     Cash and cash equivalents, end of year $ 55,824   $ 12,003     Non-cash investing activities: Capital expenditures incurred, but not yet paid $ 118 $ 1,548 Other cash flow information: Cash paid for income taxes 91 21     SEGMENT REPORTING (Dollars 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 April 4, 2010 Net revenue $ 50,071 100.0 % $ 31,125 100.0 % $ 81,196 100.0 % Cost of sales and occupancy 21,654 43.2 % 15,885 51.0 % 37,539 46.2 % Operating expenses 21,130 42.2 % 6,707 21.5 % 27,837 34.3 % Depreciation and amortization 2,749 5.5 % 432 1.4 % $ 696 3,877 4.8 % Segment operating income 4,538 9.1 % 8,101 26.0 % (7,822 ) 4,817 5.9 %   For the thirteen weeks ended March 29, 2009 Net revenue $ 47,982 100.0 % $ 24,122 100.0 % $ 72,104 100.0 % Cost of sales and occupancy 20,525 42.8 % 12,043 49.9 % 32,568 45.2 % Operating expenses 19,756 41.2 % 5,415 22.4 % 25,171 34.9 % Depreciation and amortization 2,762 5.8 % 427 1.8 % $ 418 3,607 5.0 % Segment operating income 4,939 10.3 % 6,237 25.9 % (6,356 ) 4,820 6.7 %  

NON-GAAP FINANCIAL INFORMATION

The following reconciliation and non-GAAP financial information are provided to assist the reader with understanding the financial impact of the previously discussed unusual items and the extra week during the year. Management believes this information is relevant because the nature and magnitude of the charges do not reflect our on-going operating performance.

 

Reconciliation of Non-GAAP Financial Information to Net Income

(Unaudited, in thousands, except per share data)

    Thirteen Thirteen weeks ended weeks ended April 4, March 29,

2010

2009

   

Net Income

Net income, as reported $ 3,051 $ 3,053 Transaction related expenses, net of tax   522   Non-GAAP net income $ 3,573 $ 3,053  

Diluted Net Income Per Share

Net income per diluted share, as reported $ 0.22 $ 0.23 Transaction related expenses   0.04   Non-GAAP diluted net income per share $ 0.26 $ 0.23   Non-GAAP Financial Information (Unaudited, in thousands, except per share data)     Quarter ended April 4, 2010 Transaction As related Non-GAAP

Reported

expenses

Adjusted

    Retail stores $ 50,071 $ 50,071 Specialty sales   31,125       31,125   Net revenue 81,196 81,196

Cost of sales and related

37,539 37,539

occupancy expenses

Operating expenses 27,837 27,837 Transaction related expenses 824 $ (824 ) - General and administrative 6,302 6,302 Depreciation and amortization   3,877       3,877  

Total costs and expenses

76,379 (824 ) 75,555 Income from operations 4,817 824 5,641 Interest expense, net   (1 )     (1 ) Income before income taxes 4,816 824 5,640 Income tax provision   1,765     302     2,067   Net income $ 3,051   $ 522   $ 3,573   Net income per diluted share $ 0.22   $ 0.04   $ 0.26