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Issue Date: Vol. 52, No. 8, August 2012, Posted On: 8/7/2012

Keurig Drives 30% Profit Growth For Green Mountain In Q3

Emily Jed
TAGS: coffee, office coffee service, OCS business, vending, Green Mountain Coffee Roasters Inc., Lawrence J. Blanford, GMCR 2012 third quarter, Keurig single-up brewing system, K-Cup, Keurig Vue, Starbucks, Kroger's

WATERBURY, VT -- Green Mountain Coffee Roasters Inc.'s net income increased 30% in the third quarter of fiscal 2012, pushed by demand for its Keurig single-up brewing system.

Net income in the quarter ended June 23 was $73.3 million, or 47¢ a share, up from $56.35 million, or 38¢ per share, in the same period a year ago. Net sales increased 15% to $303.31 million, from $264.08 million a year earlier.

Green Mountain attributed 89% of net sales during the third quarter to the Keurig brewing system and K-Cup portion packs. Net sales from K-Cups totaled $638 million, up 153% from the same period in fiscal 2011.

The Waterbury, VT, roaster and its licensed partners sold approximately 1.4 million brewers during the third quarter, a decline from about 1.5 million brewers sold during the second quarter.

"Our Keurig single-cup brewing system continues to revolutionize the way North Americans prepare and consume their single-serve beverages and our proven ability to grow consumer awareness and demand for the system has enabled us to deliver extraordinary results over the past five years," said Lawrence J. Blanford, president and chief executive.

Meanwhile, the company cut its fiscal 2012 forecast as the main patents for K-Cups expire in September and competitors, including the Safeway and Kroger's supermarket chains, are readying their own private-label portion packs. | SEE STORY

Green Mountain also faces new competition from rival equipment brands, including Starbucks Corp. The Seattle coffee chain announced in March that it would begin selling its own single-serve beverage maker, the Verismo, in time for the holiday season this year, just months after Green Mountain unveiled its new upscale Keurig Vue brewer. | SEE STORY

Green Mountain reduced its fiscal 2012 sales guidance to a range of $3.79 billion to $3.84 billion from the earlier forecast, between $3.8 billion and $4 billion. The company cut its full-year earnings-per-share forecast to $2.21 to $2.26 per share from between $2.40 to $2.50 per share.

"As we become larger, our sales growth trajectory will understandably moderate from hyper-growth to a level more in line with other successful growth businesses," said Blanford. "Based upon our current analysis of business fundamentals and the single-serve opportunity, we believe we will deliver annual sales growth in the range of 15% to 20%, with annual earnings growth in the mid-teens over the longer term."

Net income in the nine months ended June 23 was $270.74 million, or $1.75 per share, up from $124.13 million, or 86¢ per share, in the same period a year ago. Net sales in the nine months rose 50% to $2.9 billion from $1.94 billion.

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