Peet's Coffee & Tea's Q4 net income down 37.5% to US$6.4M on flat year-over-year net revenue of US$91.6M; results impacted by one less week in the quarter
February 16, 2011
– Peet’s Coffee & Tea, Inc. (NASDAQ:PEET - News) 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
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.
Industry Intelligence Editor's Note: In an omitted table, the company reported Q4 net income of US$6.4 million. For the same quarter a year ago, the company reported net income of US$10.3 million
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