2014 CAGNY CONFERENCE – FEBRUARY 19, 2014 Brian Kelley, Chief Executive Officer
Nov 01, 2014
2014 CAGNY CONFERENCE – FEBRUARY 19, 2014
Brian Kelley, Chief Executive Officer
FORWARD-LOOKING STATEMENTS
Certain information contained herein constitutes "forward-looking statements." Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "seeks" or words of similar meaning, or future or conditional verbs, such as "will," "should," "could," "may," "aims," "intends," or "projects." However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. These statements may relate to: the expected impact of raw material costs and our pricing actions on our results of operations and gross margins, expected trends in net sales and earnings performance and other financial measures, the expected productivity and working capital improvements, the success of introducing and producing new product offerings, the impact of foreign exchange fluctuations, the adequacy of internally generated funds and existing sources of liquidity, such as the availability of bank financing, the expected results of operations of businesses acquired by us, our ability to issue debt or additional equity securities, our expectations regarding purchasing shares of our common stock under the existing authorizations, projections of payment of dividends, and the impact of the inquiry initiated by the SEC and any related litigation or additional governmental inquiry or enforcement proceedings. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company's historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Part I, "Item 1A. Risk Factors," and Part II "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our fiscal 2013 Annual Report filed on Form 10-K, as amended, and elsewhere in this report and those described from time to time in our future reports filed with the Securities and Exchange Commission. Actual results could differ materially from those projected in the forward-looking statements. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
GAAP TO NON-GAAP RECONCILIATIONS
In addition to reporting financial results in accordance with generally accepted accounting principles (GAAP), the Company provides non-GAAP operating results that exclude any gain from sale of the Filterfresh U.S.-based coffee services business; legal and accounting expenses related to the SEC inquiry and pending securities and stockholder derivative class action litigation; and non-cash acquisition-related items such as amortization of identifiable intangibles, each of which include adjustments to show the tax impact of excluding these items. These amounts are not in accordance with, or an alternative to, GAAP. The Company's management believes that these measures provide investors with transparency by helping illustrate the underlying financial and business trends relating to the Company's results of operations and financial condition and comparability between current and prior periods. Management uses the measures to establish and monitor budgets and operational goals and to evaluate the performance of the Company. Please see the "GAAP to Non-GAAP Reconciliation" table that accompanies this document for a full reconciliation the Company's GAAP to non-GAAP results.
Who We Are
Creating a Premium in the Beverage Category
Our Innovation Capabilities
Financial Overview
Who We Are
Creating a Premium in the Beverage Category
Our Innovation Capabilities
Financial Overview
GMCR TODAY
Revenue Growth
Operating Margin
Revenue
Dividend Yield
ROIC
*Excluding 53rd Week
12%*
18%
$4.4B
1%
19%
LTM as of Q1 Fiscal Year 2014 * excluding 53rd week of Fiscal Year 2013
EBITDA $1.0B
Technology Company?
Appliance Company?
WE ARE
Beverage Company?
Coffee Company?
an innovative, technology-driven, values-based,
personal beverage system company
COFFEE TECHNOLOGY &
A UNIQUE MERGER IN 2006 ACCELERATED THE DISRUPTION
Socially Responsible Premium Coffee
Sustainability Focused Enlightened Capitalism Win-Win Partnerships
Advanced Food Science Progressive Blending
& Roasting Brewing A Better World
Engineers Systems Design & Integration
Materials Science Heat Transfer
Injection Dosing Advanced Electronics
Fluid Dynamics Continuous Innovation
SIGNIFICANT VALUE CREATION & OPPORTUNITY FOR CONSUMERS, FOR CUSTOMERS, FOR SHAREHOLDERS
The ultimate at-home coffee experience
Accelerated a category
Creating significant value for consumers, customers &
shareholders
SIGNIFICANT VALUE CREATION & OPPORTUNITY FOR CONSUMERS, FOR CUSTOMERS, FOR SHAREHOLDERS
+20 billion packs sold
+35 million Keurig® brewers sold
83% Keurig® brand awareness
+60% repeat rates
OUR PURPOSE AND MISSION
Our Purpose
Create the ultimate beverage experience in every life we touch, from source to cup – transforming the way the world understands business
A Keurig® brewer on every counter and a beverage for every occasion
Our Mission
OUR VALUES
Our boundaryless approach to collaboration creates benefits for all.
We Partner for Mutual Success
With courage and curiosity, we are shaping the future by redefining the consumer experience.
We Innovate with Passion
Our team sets ambitious goals and meets each challenge with unified purpose and character.
We Play to Win
We use the power of business to make the world a better place.
We Brew a Better World
GMCR LEADERSHIP BACKGROUNDS
WHO ARE WE
9 PRODUCTION FACILITIES
2 R&D FACILITIES
460 ENGINEERS & SCIENTISTS
6250 EMPLOYEES
320 PATENTS ISSUED GLOBALLY
244 PATENT APPLICATIONS
PENDING GLOBALLY
OUR GLOBAL SUPPLY CHAIN FOOTPRINT
BREWER SOURCING GMCR OFFICES & MANUFACTURING BEVERAGE SOURCING
A Keurig® brewer on every counter and a beverage for every occasion
OUR BUSINESS MODEL
INST
ALL
ED B
ASE
OF
BR
EWER
S
DAILY SINGLE USE PACKS PER BREWER
18
FOUNDATION OF THE KEURIG SYSTEM’S SUCCESS
Intuitive simplicity
Less waste
Ultra-convenient
Vast brand selection
Freshest taste… every time
DESIGNED FOR THE FIVE SENSES
A network system effect
KEURIG® IS AN ADVANCED, PERSONAL BEVERAGE SYSTEM
A brand accelerator
A premium experience brought into the home
An enabler to understand the demand signal in home
An in-home beverage creation system
A POWERFUL PORTFOLIO OF BRANDS
A BREWER ON EVERY COUNTER
• HOUSEHOLDS
• OFFICES
• OTHER LOCATIONS
• REGIONS
KEURIG®BREWED® BRANDS
22
BEVERAGE SYSTEM
A NEW GATEWAY FOR
BRANDS
REGENERATING GROWTH CYCLE
NEW BEVERAGE CATEGORIES
MULTI-BRANDED SYSTEM UNIQUE BEVERAGE & APPLIANCE MODEL
VALUABLE, ‘SMART’ COUNTERTOP REAL ESTATE MUTUALLY BENEFICIAL PARTNERSHIP CAPABILITY
OUR COMPETITIVE EDGE
INNOVATION VIA HOLISTIC SYSTEM DESIGN & EXECUTION
DISCIPLINED CAPITAL ALLOCATION STRATEGY
Reinvest in the business to drive revenue growth
Tuck In M&A for specific technologies, market distribution and/or brands
Return cash to shareholders in form of dividends and share repurchases
YTD TOTAL RETURN 5YR TOTAL RETURN 3YR TOTAL RETURN
STOCK PERFORMANCE
Source: Bloomberg *YTD return (12/31/2013-2/14/2014) *3 year return (2/14/2011-2/14/2014) *5 year return (2/13/2009-2/14/2014)
54%
-4%
0%
GMCR Peer Group Russell 1000Index
151%
70%
48%
GMCR Peer Group Russell 1000Index
1165%
252%
154%
GMCR Peer Group Russell 1000Index
Who We Are
Creating a Premium in the Beverage Category
Our Innovation Capabilities
Financial Overview
POWER OF KEURIG® TO PREMIUMIZE
Coffee
Tea
Brewers
80%
20%
% U.S. Households
90%
10%
Consumption Growth* 2009-2012
U.S. CONSUMPTION GROWTH SKEWS HEAVILY TOWARD HIGH-INCOME HOUSEHOLDS
• Source: Institute for New Economic Thinking • Inflation-adjusted consumption between 2009 and 2012
% US HH by Income
Increase in inflation adjusted consumption ’09-’12
SINGLE CUP COFFEE SKEWS TO HIGHER INCOME DEMOGRAPHIC
63% 55% 44%
37% 45% 56%
% of U.S. Households % of Dollars Sales % of Dollars Sales
HH IncomeGreater Than orEqual To $70K
HH Income LessThan $70K
Total coffee Single cup coffee
Source: IRI U.S. All Outlet Panel Data Ending 12.29.13
HOT BEVERAGES LEAD CATEGORY DOLLAR GROWTH
6%
-1%
0%
-1%
0%
1%
2%
3%
4%
5%
6%
Hot Beverages Cold Beverages All Beverages
Source: IRI U.S. Multi-Outlet Data Ending 12.29.13
BEVERAGE CATEGORY DOLLAR GROWTH
Source: IRI, 52 Weeks Ending 12/29/13
7%
5%
-1% -2%
3%
8%
Hot Tea Coffee All OtherBeverages
Source: IRI U.S. Multi-Outlet Data Ending 12.29.13 Note: All Other includes: CSD, Water, Energy Drinks, Sports Drinks, Juices and Milk
THE KEURIG® SYSTEM IS DRIVING COFFEE CATEGORY DOLLAR GROWTH
5%
44%
3%
-6% -9% -20%
-10%
0%
10%
20%
30%
40%
50%
60%
Coffee Single Cup Instant Ground Whole
Source: IRI, 52 Weeks Ending 12/29/13 Source: IRI U.S. Multi-Outlet Data Ending 12.29.13
THE KEURIG® SYSTEM IS DRIVING TEA CATEGORY DOLLAR GROWTH
7%
38%
4%
0%
10%
20%
30%
40%
50%
60%
Hot Tea Single Cup Non- Single CupSource: IRI, 52 Weeks Ending 12/29/13
Source: IRI U.S. Multi-Outlet Data Ending 12.29.13
TOTAL COFFEE EQ SERVINGS GREW 5% SINCE 2009
34
33,473 33,673 33,340 33,897 35,243
2009 2010 2011 2012 2013
+5%
Source: IRI Multi-Outlet Data Ending 12/22/13 Source: IRI U.S. Multi-Outlet Data Ending 12.22.13
PRICE PER COFFEE EQ SERVING IS UP 45% VS. 2009
35
$0.16 $0.17
$0.21 $0.23 $0.24
2009 2010 2011 2012 2013
+45%
Source: IRI Multi-Outlet Data Ending 12/22/13 Source: IRI U.S. Multi-Outlet Data Ending 12.22.13
$5,427 $5,755
$7,013 $7,882 $8,290
$0
$2,000
$4,000
$6,000
$8,000
$10,000
2009 2010 2011 2012 2013
Coffee Dollar Sales (millions)
COFFEE CATEGORY DOLLARS GREW 53% SINCE 2009
36
+53%
Source: IRI Multi-Outlet Data Ending 12/22/13 Source: IRI U.S. Multi-Outlet Data Ending 12.22.13
$5,427 $5,755
$7,013 $7,882 $8,290
2% 5%
11%
21%
29%
0.0
10.0
20.0
30.0
40.0
$0
$2,000
$4,000
$6,000
$8,000
$10,000
2009 2010 2011 2012 2013
Coffee Dollar Sales (millions) Single Cup Share of Total Coffee
COFFEE CATEGORY DOLLARS GREW 53% SINCE 2009
37 Source: IRI Multi-Outlet Data Ending 12/22/13
Source: IRI U.S. Multi-Outlet Data Ending 12.22.13
+53%
TEA EQ SERVINGS HAVE SLIGHTLY DECLINED SINCE 2009
38
13,501 13,574 13,629 13,233 13,260
2009 2010 2011 2012 2013
-2%
Source: IRI Multi-Outlet Data Ending 12/22/13 Source: IRI U.S. Multi-Outlet Data Ending 12.22.13
PRICE PER TEA EQ SERVING GREW BY 24% SINCE 2009
39
$0.08 $0.08 $0.08 $0.09
$0.09
2009 2010 2011 2012 2013
+24%
Source: IRI Multi-Outlet Data Ending 12/22/13 Source: IRI U.S. Multi-Outlet Data Ending 12.22.13
$1,026 $1,046 $1,087 $1,164 $1,245
$0
$2,000
2009 2010 2011 2012 2013
Tea Dollar Sales (millions)
TEA CATEGORY DOLLARS GREW BY 21% SINCE 2009
40
+21%
Source: IRI Multi-Outlet Data Ending 12/22/13 Source: IRI U.S. Multi-Outlet Data Ending 12.22.13
$1,026 $1,046 $1,087 $1,164 $1,245
0.2% 0.9% 3.3%
8.6%
11.0%
0.0
10.0
20.0
$0
$2,000
2009 2010 2011 2012 2013
Tea Dollar Sales (millions) Single Cup Share of Total Tea
TEA CATEGORY DOLLARS GREW BY 21% SINCE 2009
41
+21%
Source: IRI Multi-Outlet Data Ending 12/22/13 Source: IRI U.S. Multi-Outlet Data Ending 12.22.13
15% 14% 10% 10% 7% 7% 5%
-7% -11% -12%
COFFEE #1 IN FOOD & BEVERAGES IN DOLLARS PER BUYER % CHANGE 2009 - 2013
42 Source: IRI All Outlet Panel Data Ending 12/29/13
Coffee is #1 among 170 food/drink categories
Source: IRI Dollars per Buyer % Change – CY 2013 vs. CY 2009 – Total U.S. All Outlet
49% Key beverage categories
TOTAL BEVERAGE CATEGORY
43 Source: IRI All Outlet Panel Data Ending 12/29/13
Carbonated Beverages
24%
Milk 20%
Bottled Water 11%
Shelf-Stable Juice 10%
Rfg Bev 9%
Sports & Energy Drinks
7%
Ground Coffee 6%
Single Cup Coffee 3%
RTD Cold Tea/Coffee
3%
Tea Bags 1%
All Other Cold 4%
All Other Hot 2%
Total Beverage Sales CY 2013: $79,607 million
Source: IRI U.S. Multi-Outlet Data Ending 12.29.13
TOTAL BEVERAGE CATEGORY
44 Source: IRI All Outlet Panel Data Ending 12/29/13
Carbonated Beverages
24%
Milk 20%
Bottled Water 11%
Shelf-Stable Juice 10%
Rfg Bev 9%
Sports & Energy Drinks
7%
Ground Coffee 6%
Single Cup Coffee 3%
RTD Cold Tea/Coffee
3%
Tea Bags 1%
All Other Cold 4%
All Other Hot 2%
Total Beverage Sales CY 2013: $79,607 million
Source: IRI U.S. Multi-Outlet Data Ending 12.29.13
SINGLE CUP BREWERS SKEW TO HIGHER INCOME DEMOGRAPHIC
63% 52% 69%
37% 48% 31%
% of U.S. Households % of Dollars Sales % of Dollars Sales
HH IncomeGreater Than orEqual To $75K
HH Income LessThan $75K
Drip Coffeemakers
Single Cup Brewers
Source: NPD U.S. Consumer Panel Data – 12 Months Ending Nov ‘13
COFFEE MAKER UNITS GROWING SLIGHTLY
46
21M 21M 22M
2011 2012 2013
Coffee Maker Units (millions) Total Keurig Share
+2%
Source: IRI Multi-Outlet Data Ending 12/22/13 Source: NPD U.S.; total Keurig share includes licensed brewer partners
15% 22% 25%
PRICE PER COFFEE MAKER UNIT GREW 26% SINCE 2011
47
$41.00
$49.00 $52.00
2011 2012 2013
+26%
Source: IRI Multi-Outlet Data Ending 12/22/13 Source: NPD U.S. Data
$880 $1,049 $1,130
$0
$2,000
2011 2012 2013
Coffee Maker Sales (millions)
COFFEE MAKER CATEGORY DOLLARS GROWING AT 28%
48
Total Coffee Dollar Sales Trend by Year and Single-Cup Pack Share – Total U.S. Multi-Outlet
+28%
Source: IRI Multi-Outlet Data Ending 12/22/13 Source: NPD U.S. Data
Source: IRI Multi-Outlet Data Ending 12/22/13
$880 $1,049 $1,130
43%
53% 55%
40.0
60.0
80.0
$0
$2,000
2011 2012 2013
Coffee Maker Sales (millions) Single Serve Unit Share of Total Coffee
COFFEE MAKER CATEGORY DOLLARS GROWING AT 28%
49
Total Coffee Dollar Sales Trend by Year and Single-Cup Pack Share – Total U.S. Multi-Outlet
+28%
Source: NPD U.S. Data
Who We Are
Creating a Premium in the Beverage Category
Our Innovation Capabilities
Financial Overview
OUR INNOVATION CAPABILITIES
KEVIN SULLIVAN, CHIEF TECHNOLOGY OFFICER
INNOVATION
OUR INNOVATION CAPABILITIES
52
BEVERAGES TECHNOLOGY
OUR POWERFUL ‘SYSTEM ENGINEERING’ APPROACH
53
Great Beverages, Constant Innovation, At Scale
APPLIANCE PORTION PACK MANUFACTURING
EQUIPMENT BEVERAGE
THE COMBINATION OF OUR SYSTEM APPROACH
54
Appliance
Manufacturing Equipment
Portion Pack
Beverage
A SYSTEM APPROACH IS OUR ADVANTAGE
OUR APPLIANCE R&D LEADERSHIP
FOCUS ON RESEARCH & DEVELOPMENT
57
2011 2013
+226%
* GMCR FY 2011 and 2013 R&D Expenses
OUR BEVERAGE INNOVATION CAPABILITIES
TOM NOVAK, SVP, BEVERAGE R&D AND REGULATORY AFFAIRS
OUR INTEGRATED BEVERAGE SYSTEM
59
THE POD
THE INGREDIENTS
PROCESSING
THE BREWER
4 COMPONENTS:
• 4 Degrees of Freedom • 6 Interactions/Synergies • Multiple Brewer Settings
Capability for Breakthrough Quality
THE BEVERAGE
SYSTEM-INHERENT ADVANTAGES FOR BEVERAGE DELIVERY
60
Taste
Convenience Nutrition
Variety Freshness
Experiential
OUR BEVERAGE DEVELOPMENT ORGANIZATION
61
PRODUCT DEVELOPMENT
PROCESS DEVELOPMENT
PACKAGE DEVELOPMENT
Sensory Testing
Marketing Consumer Insights
Analytical Testing
Manufacturing
Microbiology
Pod
Carton
Display
Distribution Shelf Life
Regulatory Affairs
System Partners
Brewer Platforms Supplier Partners
2007 2013
SPECIALTY BEVERAGES DEVELOPMENT
62
ICED COFFEES
HOT COCOAS - SWEET TREATS
HOT APPLE CIDER ICED FRUIT BREWS LEMONADE
LATTES - CAPPUCCINOS SWEET & CREAMY ICED COFFEES
WELLNESS COFFEES
ICED TEAS WELLNESS TEAS
COFFEE
TEA
BLACK COFFEES
INDULGENT
LEAF TEAS
FRUIT BREWS
KEURIG®COLD BEVERAGE DEVELOPMENT
63
COLA
ICED TEA
Stills
Carbonated
FLAVORED
CLEAR
OLD FASHIONED SODA FOUNTAIN SPARKLING FLAVORED WATERS NATURAL
DIET FLAVORED SELTZERS
ISOTONICS JUICE DRINKS
FLAVORED WATERS
LEMONADE
JUICE SPRITZERS
OUR BEVERAGE R&D LEADERSHIP
INNOVATION UPDATE
BRIAN KELLEY, CHIEF EXECUTIVE OFFICER
INNOVATION PIPELINE
Keurig® 2.0 Keurig® Cold
NEW KEURIG® 2.0
Offers all 50+ Keurig® system beverage brands
Brews all Keurig® K-Cup®, Vue® and K-Carafe™ packs
First ever Keurig® brewer to brew a single cup or carafe of coffee
Uses proprietary technology to identify and perfectly brew only Keurig® packs
Offered at similar price points
Will be available at all current Keurig® retailers and replaces current Keurig® brewer models
KEURIG® SUCCESS – SOLVING CONSUMER TRADE-OFFS
68
Larger volume
Multiple servings
Inexpensive
KEURIG® SUCCESS – SOLVING CONSUMER TRADE-OFFS
69
Convenient
Low mess
Fast
Reduce coffee waste
Brand variety
Consistent taste
Larger volume
Multiple servings
Inexpensive
vs
HIGHLY CONFIDENTIAL – INTERNAL USE ONLY 70
KEURIG®2.0 – STRATEGIC GROWTH OPPORTUNITY
Brings new households into the Keurig®system
Drives increased consumption among Keurig®households
Drives incremental volume, profit and consumer value
KEURIG®2.0 – STRATEGIC GROWTH OPPORTUNITY
Brings new households into the Keurig®system
Drives increased consumption among Keurig®households
Drives incremental volume, profit and consumer value
80% of U.S. households still not using single cup
SINGLE CUP AT EARLY STAGE OF DEVELOPMENT
73
20%
58%
22%
Single Serve
Drip
Other
Source: 2013 NCA Study; method of preparation among past-day drinkers
20%
58%
22%
WHY HAVE YOU NOT YET BOUGHT A KEURIG®?
60% #1 Reason (non-price):
60% Does not brew pot or larger size
Source: GMCR Survey
KEURIG®2.0 – STRATEGIC GROWTH OPPORTUNITY
Brings new households into the Keurig® system
Drives increased consumption among Keurig® households
Drives incremental volume, profit and consumer value
Remaining 25% is for larger volume brewing needs
COFFEE CONSUMPTION WITHIN KEURIG® HOUSEHOLDS
25%
75%
Keurig®gets ~75% of in home coffee consumption
Source: GMCR internal data
WHY CURRENT KEURIG® OWNERS STILL USE A DRIP COFFEE MAKER?
#1 Reason:
72% want larger brew sizes
Source: GMCR Survey
KEURIG®2.0 – STRATEGIC GROWTH OPPORTUNITY
Brings new households into the Keurig®system
Drives increased consumption among Keurig®households
Drives incremental volume, profit and consumer value
KEURIG 2.0 – ADDRESSING MULTIPLE NEEDS AND OCCASIONS
79
K-Cup® pack
K-Mug® pack
K-Carafe® pack
SMART & INTERACTIVE: PORTION PACK INFORMS BREWER
80
Proprietary Technology on Pack
Informs Brewer Perfect Cup
or Carafe
First Keurig® Brewer to brew a single cup + carafe
KEURIG COLD™
KEURIG COLD™ – A TECHNICAL BREAKTHROUGH
Temperature: it needs to be served cold
Dosing: precise flavor blend; precise carbonation every time
Carbonation: without a CO2 tank
Space/$: Keurig® footprint and attractive price range
Brand Variety: multi-brand system
One touch simplicity quality and variety
Ensures a consistently perfect taste and carbonation profile every time
Freshly prepared carbonated, sparkling, and still beverages
KEURIG COLD™
Multi-brand, open architecture platform to optimize convenience and choice
Announced global strategic partner
Launching: fiscal 2015
Who We Are
Creating a Premium in the Beverage Category
Our Innovation Capabilities
Financial Overview
FINANCIAL OVERVIEW
FRAN RATHKE, CHIEF FINANCIAL OFFICER
5-year CAGR of 55%
$ IN MILLIONS
STRONG SALES GROWTH
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
2009 2010 2011 2012 2013 LTM Dec'13
* Excludes the 53rd week of FY2012 which added approximately $90.0 million in net sales; approximately $11.0 million (net of income taxes of $5.8 million) in net income; and, approximately $0.07 in diluted earnings per share in the fourth quarter and fiscal year 2012.
*
STRONG IMPROVEMENTS IN GROSS MARGINS
31.2% 31.4%
34.1% 32.9%*
37.2%
28%
30%
32%
34%
36%
38%
$-
$400
$800
$1,200
$1,600
$2,000
2009 2010 2011 2012* 2013
Gross Profit % of Net Sales
Gross Profit ($ in millions)
Gross Margin
* Excludes the 53rd week of FY2012 which added approximately $90.0 million in net sales; approximately $11.0 million (net of income taxes of $5.8 million) in net income; and, approximately $0.07 in diluted earnings per share in the fourth quarter and fiscal year 2012.
PROCUREMENT LOGISTICS MANUFACTURING
PRODUCTIVITY WILL DELIVER $100M BY END OF FY15
STRONG NON-GAAP OPERATING MARGIN IMPROVEMENT
10.4% 12.7%
16.2% 16.0%
18.7%
5.0%
8.0%
11.0%
14.0%
17.0%
20.0%
$(100)
$100
$300
$500
$700
$900
2009 2010 2011 2012* 2013
Non-GAAP Operating Income % of Net Sales
Non-GAAP Operating
Income ($ in millions)
As % of Net Sales
* Excludes the 53rd week of FY2012 which added approximately $90.0 million in net sales; approximately $11.0 million (net of income taxes of $5.8 million) in net income; and, approximately $0.07 in diluted earnings per share in the fourth quarter and fiscal year 2012.
5-year CAGR of 74%
STRONG NON-GAAP EPS GROWTH
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
2009 2010 2011 2012 2013 LTM Dec'13*
* Excludes the 53rd week of FY2012 which added approximately $90.0 million in net sales; approximately $11.0 million (net of income taxes of $5.8 million) in net income; and, approximately $0.07 in diluted earnings per share in the fourth quarter and fiscal year 2012.
5-year CAGR of 76%
STRONG GAAP EPS GROWTH
$-
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
2009 2010 2011 2012* 2013
* Includes the 53rd week of FY2012 which added approximately $90.0 million in net sales; approximately $11.0 million (net of income taxes of $5.8 million) in net income; and, approximately $0.07 in diluted earnings per share in the fourth quarter and fiscal year 2012.
CAPITAL INVESTMENT TO SUPPORT GROWTH
11% 13%
5%
0%
2%
4%
6%
8%
10%
12%
14%
$-
$100
$200
$300
$400
$500
$600
2011 2012* 2013 2014
Hot Growth Cold Growth IT and Other As a % Net Sales* Excludes the 53rd week of FY2012
($ in millions) As a % of Net Sales
1
1 Guidance provided by the Company on February 5, 2014
~ 9%
$(283)
$77
$200 - 300
$(300)
$(200)
$(100)
$-
$100
$200
$300
$400
$500
$600
2011 2012 2013 Q1'14
FREE CASH FLOW
Free Cash Flow
($ in millions)
* Guidance provided by the Company on February 5, 2013
Free cash flow
$603
2014 Est.*
With improving returns on capital
STRONG RETURNS
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2009 2010 2011 2012 2013
Note: GAAP ROIC is the sum of LTM GAAP Net Income / ((1st quarter of LTM debt + equity plus 4th quarter of LTM debt + equity)/2)
KEY TERMS OF RECENT STRATEGIC RELATIONSHIP
• 10-year strategic global partnership • Collaborate on intro of The Coca-Cola Company brand portfolio in the
Keurig Cold™ beverage system • Work together to introduce Keurig Cold™ to consumers worldwide
Commercial Agreement
• 10% minority investment, representing 16.684 million new GMCR shares • New shares priced at $74.98, for ~$1.25 billion in total proceeds • Option to increase ownership to 16% with open market purchases
Equity Agreement
FY 2014 OUTLOOK & NON-GAAP EPS WALK THROUGH*
* Per guidance provided by GMCR on February 5, 2014.
FY’13 non-GAAP EPS base $3.39
Expected Fx impact ($0.11)
Estimated Coca-Cola/Lavazza-related dilution (absent any actions GMCR may take to offset dilution)
~ ($0.20)
Constant currency non-GAAP EPS growth 14% 17% to
Constant currency non-GAAP EPS $3.86 $3.96 to
FY’14 non-GAAP EPS pre Coca-Cola transaction $3.75 $3.85 to
FY’14 non-GAAP EPS post dilution $3.55 $3.65 to
Revenue growth High single digits
FY 2015 NON-GAAP EPS WALK THROUGH*
* Per guidance provided by GMCR on February 5, 2014. ** includes Company’s assumptions on share repurchases
Underlying business mid-teens growth
Less: Net dilution impact for Coca-Cola transaction**
Non-GAAP EPS guidance Mid-single digit growth (est. 4% to 7%)
FY’15 non-GAAP EPS estimate $3.69 $3.90 to
Less: Incremental growth investment _______________
FY’14 non-GAAP EPS base $3.55 $3.65 to
BALANCE SHEET & CAPITAL DEPLOYMENT
Share Repurchases & Dividend
• In Nov. 2013 announced incremental share repurchase authorization of up to $1 billion and as of Q1’14 $1.1 billion remains.
• Committed to meaningful share repurchase program to reduce dilution from The Coca-Cola Company transaction
• Annual dividend of $1.00 per share, yield of about 1%
• Latest 12 Months Earnings before Interest, Taxes, Depreciation and Amortization • 2014 is estimated mid-point of free cash flow guidance on 2/5/14
Strong Balance Sheet Metrics
Total Debt Q1'14 $ 260M
Total Cash Q1'14 $ 350M
Net Cash $ 90M
LTM EBITDA $ 1,032M
Total Debt/EBITDA 0.3X
Net Debt/EBITDA 0X
THANK YOU!