Peet’s Coffee & Tea, Inc. (NASDAQ:PEET) today announced its
fourth quarter and annual results for the fiscal year ended January
2, 2011, which included 13 weeks and 52 weeks, respectively. The
fiscal fourth quarter and fiscal year ended January 3, 2010,
included 14 weeks and 53 weeks, respectively.
In this release, the company:
- Achieves annual diluted earnings per
share of $1.28
- Reports non-GAAP annual diluted
earnings per share of $1.33, up 28% versus 2009 non-GAAP diluted
earnings per share
- Reports net revenue growth for the
quarter and the year of 6% and 9% on a comparable 13-week and
52-week basis, respectively
- Confirms 2011 diluted earnings per
share guidance of $1.53 to $1.60
Financial Highlights
(Unaudited, in thousands, except per share amounts)
Fourth Quarter %
Fiscal Year %
2010
2009
Change
2010
2009
Change
Net revenue, as reported $ 91,628 $ 91,695 - $ 333,808 $
311,270 7 % Non-GAAP net revenue, excluding 53rd week $ 91,628 $
86,103 6 % $ 333,808 $ 305,678 9 % Net income per diluted
share, as reported $ 0.48 $ 0.76 -37 % $ 1.28 $ 1.44 -11 %
Non-GAAP net income per diluted share, excluding unusual items and
53rd week $ 0.48 $ 0.36 33 % $ 1.33 $ 1.04 28 %
See the Reconciliation of Non-GAAP Financial Information to Net
Revenue and Net Income at the end of this document for further
detail.
For the 13 weeks ended January 2, 2011, net revenue was
approximately the same as the corresponding 14-week period of
fiscal 2009. For the 52 weeks ended January 2, 2011, net revenue
increased 7% from fiscal 2009, which included 53 weeks. Excluding
the impact of the 53rd week in 2009, the company would have
reported sales growth of 6% and 9% for the quarter and the year on
a comparable 13-week and 52-week basis, respectively.
Diluted earnings per share was $1.28 for fiscal 2010, compared
to $1.44 per share for fiscal 2009. Excluding the items outlined
below, non-GAAP diluted earnings per share increased 28% to $1.33
for 2010, compared to $1.04 per share for fiscal 2009.
“I’m pleased with the results we achieved in 2010, and I’m
excited about the many opportunities ahead of us,” said Patrick
O’Dea, president and chief executive officer of Peet’s Coffee &
Tea, Inc. “This past year we delivered impressive operating margin
improvement, strong earnings per share, and increased sales in line
with our target, led by 24% growth in our consumer packaged grocery
business. We believe the opportunities for continued strong sales
and profit growth over the long term are rich and varied, both on
our existing business and as we expand the Peet’s brand into new
geographies, to new customers, and with new product offerings.”
Non-GAAP Items in 2009 and 2010 Results
Fiscal year net income and diluted earnings per share for 2010
include $1.0 million pre-tax ($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.
In the fourth quarter of fiscal 2009, the company recognized
$5.6 million in net revenue during the 53rd week of the fiscal
year.
Fourth quarter and fiscal year 2009 net income and diluted
earnings per share included a pre-tax benefit of $8.6 million ($5.3
million after tax or $0.40 per diluted share) comprised of unusual
items including:
- Net gain received from the company’s
attempted acquisition of Diedrich Coffee ($7.2 million after
tax)
- Estimated settlement and legal costs of
a class action lawsuit ($1.8 million after tax)
- Costs related to closing 4 stores
during the quarter ($0.7 million after tax)
- Net income from the 53rd week of
operation ($0.7 million after tax)
Fourth Quarter Consolidated Financial and Operating
Summary
Retail net revenue decreased to $54.7 million for the 13 weeks
ended January 2, 2011, from $56.5 million for the corresponding
14-week period of fiscal 2009. Excluding the impact of the extra
week in 2009, retail net revenue increased 4% from $52.8 million.
The increase was solely attributed to sales growth in existing
stores.
Specialty net revenue increased 5% to $36.9 million for the 13
weeks ended January 2, 2011, compared to $35.2 million for the
corresponding 14-week period of fiscal 2009. Excluding the impact
of the extra week in 2009, total specialty net revenue increased
11%. Within specialty, the grocery business was up 4% over last
year (11% on a comparable 13-week basis); foodservice and office
business grew 9% (15% on a comparable 13-week basis); and home
delivery sales were down 1% (up 3% on a comparable 13-week
basis).
Cost of sales and related occupancy expenses were 45.7% of total
net revenue for the 13 weeks ended January 2, 2011, compared to
46.9% for the corresponding 14-week period of fiscal 2009. The
decrease was driven by a favorable pricing impact in retail and
lower operating costs at the roasting facility as a percentage of
sales.
Operating expenses as a percentage of net revenue decreased to
30.9% for the 13 weeks ended January 2, 2011, from 32.6% for the
corresponding period of fiscal 2009, primarily due to the store
closure costs in fiscal 2009 and leverage of retail overhead
costs.
Transaction income in 2009 includes the $8.5 million break-up
fee received for the termination of a definitive agreement for
Peet’s to acquire Diedrich Coffee, net of $4.2 million of costs
incurred related to the transaction.
Litigation related expenses of $2.8 million in 2009 includes
costs incurred related to the settlement of a wage and hour class
action lawsuit that was filed in July 2008 against the company.
General and administrative expenses increased to $7.3 million
for the 13 weeks ended January 2, 2011, compared to $7.0 million
for the corresponding period of fiscal 2009 primarily due to higher
payroll and marketing costs, partially offset by the costs of the
53rd week of operations in 2009.
Depreciation and amortization expenses decreased to $3.9 million
for the 13 weeks ended January 2, 2011, compared to $4.0 million
for the corresponding 14-week period of fiscal 2009.
The company ended 2010 with cash and cash equivalents plus
investments of $49 million, compared to $48 million at year end
2009.
Fiscal 2011 Outlook
Looking ahead, Peet’s confirmed the following fiscal 2011
guidance:
- Total net revenue is expected to grow
8% to 10%
- Diluted earnings per share is expected
to be in the range of $1.53 to $1.60
Peet’s Coffee & Tea, Inc. Q4 and 2010 Year-End Conference
Call
Peet’s will report its fourth quarter and 2010 year-end earnings
via conference call on Wednesday, February 16, 2011. 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 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 February 16, 2011, until 8:59 p.m. PT/11:59 p.m.
ET on February 23, 2011, at 800-642-1687 or 706-645-9291, using
access code 40582091. It will also be archived at
http://investor.peets.com/medialist.cfm through February 16, 2012,
at 8:59 p.m. PT/11:59 p.m. ET.
The company has also posted on its website at
http://investor.peets.com/events.cfm a detailed reconciliation of
all non-GAAP reporting for the year and quarter, including non-GAAP
segment reporting.
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, 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 forecasted net revenue growth, earnings per diluted share, and
opportunities for continued strong sales and profit growth.
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, commodity price expectations, 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; volatility of commodity costs; the outcome of
the current wage and hour litigation involving the company 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, 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; 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.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in
thousands, except share amounts) January 2,
January 3,
2011
2010
ASSETS Current assets Cash and cash equivalents $
44,629 $ 47,934 Short-term marketable securities 4,183 - Accounts
receivable, net 14,852 15,209 Inventories 33,534 25,936 Deferred
income taxes - current 4,420 3,592 Prepaid expenses and other
7,798 5,863 Total current
assets 109,416 98,534 Property, plant and equipment, net
97,279 103,494 Other assets, net
2,137
2,775 Total assets
$
208,832 $ 204,803
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities
Accounts payable and other accrued liabilities $ 9,138 $ 13,669
Accrued compensation and benefits 11,555 10,832 Deferred revenue
7,102 6,845 Total current
liabilities 27,795 31,346 Deferred income taxes - non
current 46 321 Deferred lease credits 7,023 7,059 Other long-term
liabilities
1,468 1,021
Total liabilities 36,332 39,747 Shareholders' equity Common
stock, no par value; authorized 50,000,000 shares;
issued and outstanding:13,063,000 and
13,104,000 shares
81,995 92,054 Accumulated other comprehensive income 2 - Retained
earnings
90,503 73,002
Total shareholders' equity
172,500
165,056 Total liabilities and
shareholders' equity
$ 208,832
$ 204,803 PEET’S COFFEE
& TEA, INC. CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (Unaudited, in thousands,
except per share amounts) Thirteen weeks
Fourteen weeks Fifty-two weeks Fifty-three
weeks ended January 2, ended January 3, ended
January 2, ended January 3,
2011
2010
2011
2010
Retail stores $ 54,694 $ 56,453 $ 205,116 $ 201,139
Specialty sales
36,934
35,242 128,692
110,131 Net revenue 91,628 91,695
333,808 311,270 Cost of sales and related occupancy expenses
41,838 42,964 154,892 142,776 Operating expenses 28,345 29,848
109,646 106,652 Transaction related expenses/(income) - (4,311 )
970 (4,183 ) Litigation related expenses - 2,811 (93 ) 2,957
General and administrative expenses 7,326 7,000 25,088 24,508
Depreciation and amortization expenses
3,923
3,967 15,767
15,167 Total costs and expenses from
operations
81,432 82,279
306,270
287,877 Income from operations 10,196
9,416 27,538 23,393 Gain on sale of marketable securities -
7,305 - 7,305 Interest income, net
2
1 8
112 Income before income taxes 10,198
16,722 27,546 30,810 Income tax provision
3,766 6,400
10,045 11,558
Net income
$ 6,432 $
10,322 $ 17,501
$ 19,252 Net income
per share: Basic $ 0.50 $ 0.79 $ 1.34 $ 1.48 Diluted $ 0.48 $ 0.76
$ 1.28 $ 1.44 Shares used in calculation of net income per
share: Basic 12,871 13,055 13,038 12,997 Diluted 13,453 13,591
13,643 13,349
PEET’S COFFEE & TEA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands) Fifty-two
Fifty-three weeks ended weeks ended January
2, January 3,
2011
2010
Cash flows from operating activities: Net income $ 17,501 $
19,252 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 17,959 17,279
Amortization of interest purchased 16 36 Stock-based compensation
3,354 3,018 Excess tax benefit from exercise of stock options
(5,501 ) (892 ) Tax benefit from exercise of stock options 4,936
695 Gain on sale of marketable securities
-
(7,305 ) Loss on disposition of assets and asset impairment 129
1,141 Deferred income taxes (1,103 ) 2,710 Changes in other assets
and liabilities: Accounts receivable, net 357 (3,285 ) Inventories
(7,598 ) 188 Prepaid expenses and other current assets (1,935 )
1,330 Other assets 47 161 Accounts payable, accrued liabilities and
deferred revenue (3,809 ) 6,887 Deferred lease credits and other
long-term liabilities
411
695 Net cash provided by operating activities
24,764 41,910
Cash flows from investing activities: Purchases of property,
plant and equipment (11,603 ) (14,505 ) Proceeds from sales of
property, plant and equipment 19 11 Changes in restricted
investments 558 877 Proceeds from sales and maturities of
marketable securities
-
16,183 Purchases of marketable securities
(4,195 ) (371
) Net cash (used in)/provided by investing activities
(15,221 )
2,195 Cash flows from financing
activities: Net proceeds from issuance of common stock 17,978 4,782
Purchase of common stock (36,327 ) (6,564 ) Excess tax benefit from
exercise of stock options
5,501
892 Net cash used in financing activities
(12,848 ) (890
) (Decrease) increase in cash and cash
equivalents (3,305 ) 43,215 Cash and cash equivalents, beginning of
period
47,934 4,719
Cash and cash equivalents, end of period
$ 44,629 $
47,934 Non-cash investing activities:
Capital expenditures incurred, but not yet paid $ 412 $ 156 Other
cash flow information: Cash paid for income taxes 7,227 7,213
PEET’S COFFEE & TEA, INC.
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 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 %
Depreciation and amortization 2,775 5.1 % 432 1.2 % $ 716 3,923 4.3
% Segment operating income 8,173 14.9 % 10,065 27.3 % (8,042 )
10,196 11.1 %
For the fourteen weeks ended January 3,
2010 Net revenue $ 56,453 100.0 % $ 35,242 100.0 % $ 91,695
100.0 % Cost of sales and occupancy 24,913 44.1 % 18,051 51.2 %
42,964 46.9 % Operating expenses 23,198 41.1 % 6,650 18.9 % 29,848
32.6 % Litigation related expenses 2,811 5.0 % 2,811 3.1 %
Depreciation and amortization 2,817 5.0 % 433 1.2 % $ 717 3,967 4.3
% Segment operating income 2,714 4.8 % 10,108 28.7 % (3,406 ) 9,416
10.3 %
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 (93 )
-
(93 ) 0.0 % Depreciation and amortization 11,216 5.5 % 1,746 1.4 %
2,805 15,767 4.7 % Segment operating income 22,609 11.0 % 33,792
26.3 % (28,863 ) 27,538 8.2 %
For the fifty-three weeks
ended January 3, 2010 Net revenue $ 201,139 100.0 % $ 110,131
100.0 % $ 311,270 100.0 % Cost of sales and occupancy 87,843 43.7 %
54,933 49.9 % 142,776 45.9 % Operating expenses 83,616 41.6 %
23,036 20.9 % 106,652 34.3 % Litigation related expenses 2,957 1.5
% 2,957 0.9 % Depreciation and amortization 11,267 5.6 % 1,758 1.6
% $ 2,142 15,167 4.9 % Segment operating income 15,456 7.7 % 30,404
27.6 % (22,467 ) 23,393 7.5 %
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.
PEET'S COFFEE & TEA, INC.
Reconciliation of Non-GAAP Financial Information to Net
Revenue and Net Income (Unaudited, in thousands, except per
share data) Thirteen Fourteen
Fifty-two Fifty-three weeks ended weeks
ended weeks ended weeks ended January 2,
January 3, January 2, January 3,
2011
2010
2011
2010
Net
Revenue
Net revenue, as reported $ 91,628 $ 91,695 $ 333,808 $ 311,270 53rd
week sales - (5,592 ) -
(5,592 ) Non-GAAP net revenue, excluding 53rd week $ 91,628
$ 86,103 $ 333,808 $ 305,678 Net
revenue growth, as reported -0.1 % 7.2 % Net revenue growth,
excluding 53rd week 6.4 % 9.2 %
Net
Income
Net income, as reported $ 6,432 $ 10,322 $ 17,501 $ 19,252
Transaction (income)/expense, net of tax - (7,170 ) 616 (7,178 )
Litigation related expenses, net of tax - 1,735 (59 ) 1,848 Store
closures, net of tax 19 664 88
672 Non-GAAP net income 6,451 5,551 18,147
14,594 Non-GAAP 53rd week net income - (677 )
- (686 ) Non-GAAP net income, excluding 53rd
week $ 6,451 $ 4,874 $ 18,147 $ 13,908
Net Income Per
Diluted Share
Net income per diluted share, as reported $ 0.48 $ 0.76 $ 1.28 $
1.44 Transaction (income)/expense, net of tax - (0.53 ) 0.05 (0.54
) Litigation related expenses, net of tax - 0.13 - 0.14 Store
closures, net of tax - 0.05 0.01
0.05 Non-GAAP net income per diluted share
0.48 0.41 1.33 1.09 Non-GAAP 53rd week - (0.05
) - (0.05 ) Non-GAAP, excluding 53rd week $
0.48 $ 0.36 $ 1.33 $ 1.04
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