EMERYVILLE, Calif., Feb. 22 /PRNewswire-FirstCall/ -- Peet's Coffee
& Tea, Inc. (NASDAQ:PEET) today announced preliminary results
for the fourth quarter ended December 31, 2006, which included 13
weeks. The preliminary 2006 fourth quarter and full year results
and 2007 earnings forecast are subject to adjustments that may
result from the previously announced voluntary review of the
Company's past stock option granting practices. As announced
earlier today, the review has been completed and the Company
expects to restate previously issued consolidated financial
statements to record a non-cash, pre-tax compensation expense
totaling approximately $1.7 million to correct option-related
accounting errors. Preliminary Fourth Quarter Results For the
quarter ended December 31, 2006, net revenue increased 18.9 percent
to $60.2 million from $50.6 million in the corresponding period of
fiscal 2005. For the fiscal year 2006, net revenue increased 20.1
percent to $210.5 million from $175.2 million in the prior year.
Preliminary net income for the quarter was $2.4 million, or $0.17
per diluted share, which includes an expense of $1.8 million before
tax ($0.08 per diluted share after tax) for professional fees
incurred in connection with the review of stock option granting
practices. On a non-GAAP basis, excluding the after-tax effect of
this 2006 cost of the stock option review, the Company's fourth
quarter net income would have been $.25 per diluted share, equal to
its previous guidance. Preliminary net income for the 52 weeks
ended December 31, 2006 was $7.8 million, or $0.55 per diluted
share. On a non-GAAP basis, excluding the after-tax effect of the
2006 cost of professional fees incurred in connection with the
stock option review, the Company's earnings would have been $0.63
per diluted share, equal to its prior guidance. In addition to
reflecting the expense of $1.8 million before tax ($0.08 per
diluted share after tax) related to the option review, full-year
earnings per share for 2006 reflect stock-based compensation
expense recognized under SFAS 123R, Share-Based Payment, of $4.0
million before tax ($0.18 per diluted share after tax.) This
stock-based compensation expense is subject to adjustment in
connection with the restatement resulting from the stock option
review. "Our preliminary results for the fourth quarter and full
year were in line with our previous earnings guidance of $0.63 per
share, before the 2006 cost of our stock option review," said
Patrick O'Dea, president and CEO of Peet's Coffee & Tea. "We
remain very encouraged by the long term growth opportunity ahead of
us and the experiences we gained in 2006 that will help us realize
it." 2006 Preliminary Financial and Operating Summary Retail
revenue increased 19.7 percent to $40.0 million for the quarter
ended December 31, 2006 from $33.4 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 10 stores in the
quarter and ended the year with 136 retail locations. Specialty
sales revenue increased 17.5 percent to $20.2 million, compared to
$17.2 million last year. Within specialty sales, the grocery
business grew 22.6 percent over last year, with existing grocery
customers accounting for the majority of the increase. The home
delivery business grew 12.5 percent and the foodservice and office
business grew 13.5 percent during the quarter compared to the same
period last year. Preliminary cost of sales and related occupancy
costs remained consistent with last year at 47.0 percent of total
net revenue. Cost of sales was negatively impacted by 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 in accordance with SFAS 123R. This was fully offset
by a retail pricing increase in November of 2006 and lower cost per
pound to roast coffee due to increased volume on a fixed asset
base. Cost of sales is subject to adjustment in connection with the
restatement resulting from the stock option review. Preliminary
operating expenses as a percentage of net revenue increased to 32.9
percent from 32.2 percent for the corresponding quarter last year.
The increase was driven by the expensing of stock options in 2006
(0.3 percentage points), higher retail operating expenses due to
new stores opened in the last 12 months and higher operating costs
to support existing stores. Operating expense is subject to
adjustment in connection with the restatement resulting from the
stock option review. Depreciation and amortization expenses
increased to $2.3 million from $1.9 million for the corresponding
quarter last year. The increase was primarily due to the opening of
25 new retail stores in the last 12 months. Preliminary general and
administrative expenses increased to $5.0 million from $2.3 million
for the same period last year. The $2.7 million increase was driven
by $1.8 million in expense for the review of stock option
practices, $0.4 million in the expensing of stock options and $0.5
million in expense to support the growth of the business. General
and administrative expense is subject to adjustment in connection
with the restatement resulting from the stock option review. The
Company ended the quarter with cash and cash equivalents plus
investments of $33.2 million. Fiscal 2007 Targets The Company has
confirmed its 2007 revenue growth target of 20 to 23 percent growth
and preliminary earnings per share guidance, on a non-GAAP basis
excluding effects of the stock option review, of between $0.70 and
$0.73. The Company added that it expects to be on the lower end of
both ranges. The Company also refined its previous guidance of
opening 30 to 35 new stores in 2007 to open 30 stores. The Company
had previously announced that it is expecting to incur an
additional $0.6 million in costs for professional fees in
connection with its stock option review in the first quarter, which
would lower its GAAP earnings per share guidance to $0.67 to $0.70
per share. The Company's guidance does not include any cost that
may be incurred in defense of the lawsuits that have been filed
regarding the Company's stock option granting practices.
Restatement of Previously Issued Financial Statements These results
do not include the restatement of previously issued financial
statements. The Company announced earlier today that it will be
restating its financial statements to correct the accounting errors
that resulted from the misapplication of stock option measurement
dates and other stock option-related corrections. The cumulative
pre-tax effect of the stock option restatement is estimated to be
$1.7 million for the fiscal years 1998 through 2005 and $33,000 in
2006. The amounts of the restatement are subject to adjustment
pending finalization by the Company. In addition, the Company
determined that its methodology for allocating production and
procurement cost to inventory was incorrect and resulted in
understating net income and inventory balances since the Company's
public offering in 2001. As a result, the Company will also be
restating previously issued financial statements to correct for
these inventory accounting errors. The Company's restated
consolidated balance sheet for the year ended January 1, 2006 will
include an increase to inventory balances and retained earnings of
$0.9 million. The impact on the consolidated statement of income
for 2006 will be an increase to pre-tax net income of $80,000.
Peet's Coffee & Tea, Inc. Q4 2006 Conference Call The Company
will discuss its preliminary fourth quarter and full year 2006
financial results via conference call on Thursday, February 22,
2007 beginning at 2 p.m. PST/5 p.m. EST, which can be accessed by
calling 1-800-238-9007, using access code 9056142. The call will be
simultaneously Webcast on Peet's Web site at http://www.peets.com/.
A replay of the teleconference will be available at 5 p.m. PST/8
p.m. EST through 11:55 p.m. EST on March 1, 2007, at 1-888-203-1112
or 1-719-457-0820, using access code 9056142. It will also be
archived at http://investor.peets.com/medialist.cfm through
February 22, 2008. 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 the
amount of the restatement, the estimated expenses associated with
the review of past stock option granting practices, 2007 full-year
revenue and new store growth and earnings per 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,
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 and restatement
process; 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 - Prior to Restatement CONSOLIDATED STATEMENTS OF
INCOME (Unaudited, in thousands, except per share amounts) Thirteen
weeks ended Fifty-two weeks ended December December 31, January 1,
31, January 1, 2006 2006 2006 2006 Retail stores $40,046 $33,453
$141,377 $118,030 Specialty sales 20,178 17,179 69,116 57,168 Net
revenue 60,224 50,632 210,493 175,198 Cost of sales and related
occupancy expenses 28,310 23,805 97,848 80,374 Operating expenses
19,802 16,329 73,613 59,060 Marketing and advertising expenses
1,611 1,333 4,756 4,008 Depreciation and amortization expenses
2,319 1,934 8,614 7,299 General and administrative expenses 4,985
2,324 15,570 8,757 Total costs and expenses from operations 57,027
45,725 200,401 159,498 Income from operations 3,197 4,907 10,092
15,700 Interest income 488 592 2,456 1,769 Income before income
taxes 3,685 5,499 12,548 17,469 Income tax provision 1,326 2,059
4,703 6,782 Net income $2,359 $3,440 $7,845 $10,687 Net income per
share: Basic $0.17 $0.25 $0.57 $0.77 Diluted $0.17 $0.24 $0.55
$0.74 Shares used in calculation of net income per share: Basic
13,494 13,944 13,733 13,801 Diluted 13,931 14,601 14,202 14,469
PEET'S COFFEE & TEA, INC. Preliminary - Prior to Restatement
CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands, except share
amounts) December 31, January 1, 2006 2006 ASSETS Current assets
Cash and cash equivalents $7,692 $20,623 Short-term marketable
securities 19,511 32,453 Accounts receivable, net 6,838 5,152
Inventories 18,600 16,148 Deferred income taxes - current 1,889
1,514 Prepaid expenses and other 3,852 3,372 Total current assets
58,382 79,262 Long-term marketable securities 5,989 16,890 Property
and equipment, net 82,447 46,313 Deferred income taxes -
non-current 1,383 - Other assets, net 3,939 5,434 Total assets
$152,140 $147,899 LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities Accounts payable and other accrued liabilities $10,996
$8,553 Accrued compensation and benefits 6,389 5,563 Deferred
revenue 4,625 3,415 Total current liabilities 22,010 17,531
Deferred income taxes - non-current - 1,759 Deferred lease credits
and other long-term liabilities 3,505 2,537 Total liabilities
25,515 21,827 Shareholders' equity Common stock, no par value;
authorized 50,000,000 shares; issued and outstanding: 13,516,000
and 13,902,000 shares 91,920 99,273 Accumulated other comprehensive
loss, net of tax (15) (76) Retained earnings 34,720 26,875 Total
shareholders' equity 126,625 126,072 Total liabilities and
shareholders' equity $152,140 $147,899 Stock-based Compensation
Expense The following table illustrates the details of stock-based
compensation recognized under SFAS 123R reported in the
consolidated statements of income. This expense is subject to
adjustment in connection with the restatement resulting from the
stock option review. 13 weeks ended 52 weeks ended Dec 31, 2006 Dec
31, 2006 Cost of sales and related occupancy expenses $48 $467
Operating expenses 188 1,283 General and administrative expenses
428 2,231 Total 664 3,981 Tax impact (239) (1,493) Stock-based
compensation, net of tax $425 $2,488 Impact on diluted net income
per share $0.03 $0.18 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 not incurred
the costs of the review of its stock option granting practices.
This pro-forma non-GAAP financial information includes financial
measures which the Company reconciles to the results reported in
accordance with GAAP. 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.
13 weeks ended 52 weeks ended Dec 31, Jan 1, Dec 31, Jan 1, 2006
2006 2006 2006 Net income as reported $2,359 $3,440 $7,845 $10,687
Stock option review professional fees 1,762 - 1,762 - Income tax
benefit (634) - (661) - Net income, excluding fees $3,487 $3,440
$8,946 $10,687 After tax impact of review professional fees $1,128
- $1,101 - Basic net income per share: Net income, as reported
$0.17 $0.25 $0.57 $0.77 Stock option review professional fees 0.13
- 0.13 - Income tax benefit (0.05) - (0.05) - Basic net income,
excluding fees $0.26 $0.25 $0.65 $0.77 Diluted net income per
share: Net income, as reported $0.17 $0.24 $0.55 $0.74 Stock option
review professional fees 0.13 - 0.12 - Income tax benefit (0.05) -
(0.05) - Diluted net income, excluding fees* $0.25 $0.24 $0.63
$0.74 After tax impact of review professional fees $0.08 - $0.08 -
* per share data may not sum due to rounding 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/
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