Stock Name: TPK
Amount: CAD 0.0625
Announcement Date: 03/11/2011
Record Date: 28/09/2011
Dividend Detail:
Nine-Month Processing Volumes, Revenue, Gross Profit and Net Income All Up Over 2010
TRADING SYMBOL: The Toronto Stock Exchange - TPK
Ten Peaks Coffee Company Inc. will hold a conference call to discuss its financial results for the
three and nine months ended September 30, 2011 on Friday, November 4, 2011
at 8:00 am Pacific Time (11:00 am Eastern Time). To participate, please
dial 1-888-231-8191 (toll free) or 647-427-7450 (GTA and international)
approximately five minutes before the call and provide the company name
or Conference ID: 21948500. A replay will be available through Friday,
November 18, 2011 at 1-855-859-2056 (toll free), 416-849-0833 or
778-371-8506, passcode: 21948500. In addition, a live and archived
webcast can be accessed at http://www.investorcalendar.com/IC/CEPage.asp?ID=166390 or on Ten Peaks' website at www.tenpeakscoffee.ca
VANCOUVER, Nov. 3, 2011 /CNW/ - Ten Peaks Coffee Company Inc. ("Ten
Peaks" or "the company") today reported its financial results for the
three and nine months ended September 30, 2011. Overall, the company
posted a solid performance, with nine-month sales, processing volumes,
gross profit and net income all up over the same period last year.
EBITDA for the first three quarters of 2011 was down, due to higher
operating expenses and a weaker US dollar, which reduced the company's
processing revenue when converted to Canadian dollars.
Ten Peaks holds all of the outstanding securities of Swiss Water
Decaffeinated Coffee Company, Inc. ("SWDCC"), a premium green coffee
decaffeinator located in Burnaby, BC. Accordingly, the results reported
here are based on SWDCC's operating performance.
Operating Results
In $000s except per share amounts | | | 3 Months Ended | | 9 Months Ended | ||||
(Unaudited) | | | September 30 | | September 30 | ||||
| | | 2011 | | 2010 | | 2011 | | 2010 |
| | | | | | | | | |
Sales | | | $ 14,083 | | $ 8,487 | | $ 42,767 | | $ 24,267 |
Gross profit | | | 1,321 | | 1,349 | | 5,159 | | 3,936 |
EBITDA(1) | | | 584 | | 875 | | 2,576 | | 3,122 |
Net income (loss) | | | (5) | | 224 | | 343 | | 123 |
Per share amounts: | | | | | | | | | |
EBITDA per share | | | 0.087 | | 0.131 | | 0.386 | | 0.468 |
Net income (loss) per share | | | (0.001) | | 0.034 | | 0.051 | | 0.018 |
(1)EBITDA is defined in the company's Management's Discussion and
Analysis, which will be posted on SEDAR on or before November 4, 2011.
"We are satisfied with the results achieved during the first three
quarters of 2011," said Frank Dennis, President and CEO of Ten Peaks.
"Ten Peaks continued to record modest growth in our processing volumes,
despite a number of ongoing macro-economic and industry-related
challenges. We believe the positive performance is a direct outcome of
our solid growth strategy, which has seen us invest more time and money
in several key areas of our organization."
Over the past two years, management has been working to strengthen Ten
Peaks' market position by directing more resources toward quality and
process improvements and enhanced inventory practices. Additionally, in
the second half of 2010, Ten Peaks augmented its sales and marketing
resources, which better positioned the company to win new accounts and
grow its business with existing customers. These efforts have enabled
Ten Peaks to gain especially good traction with its specialty regional
customers, who collectively recorded year-over-year volume growth of
27% during the first three quarters of 2011. These gains were partially
offset by reduced orders from certain large national accounts, as well
as a change in delivery timing which shifted some processing volumes
into the fourth quarter. As a result, Ten Peaks' nine-month processing
volumes rose by 2% over 2010.
The company's volume increases were recorded despite extremely
challenging market conditions. For the past three years, the specialty
coffee industry has been hampered by a shortfall in the availability of
premium green coffee due to climatic issues in key coffee-producing
regions. This coincided with rising global demand, driving rapid
increases and extreme volatility in coffee commodity prices since June
2010. This trend continued during the first three quarters of 2011,
with the New York 'C' coffee commodity price averaging US$2.61,
compared to US$1.52 for the same period in 2010. A high coffee price
affects Ten Peaks' business in a number of ways, increasing both its
revenues and its cost of goods sold, while also limiting the ability of
some smaller customers to fully replenish their coffee inventories due
to credit constraints. Additionally, the increased commodity costs have
gradually been passed on to consumers, with recent grocery data
suggesting that higher coffee retail prices are dampening demand.
Sales revenue for the three and nine months ended September 30, 2011 was
up significantly year-over-year, increasing by 66% and 76%,
respectively. In both periods, the growth was mainly due to the
significant increases in the commodity price for green coffee, together
with a proportionate rise in SWDCC's "non-toll" business.
SWDCC generates revenue in two ways. First, it decaffeinates
customer-owned coffees, including organically certified coffees, for a
fee - its "toll" business. Secondly, it purchases high-quality green
coffees, decaffeinates them and markets them to the green coffee trade
- its "regular" or "non-toll" business. Revenue from its toll
arrangements consists entirely of processing revenue, while revenue
from its non-toll business includes both processing revenue and green
coffee cost recovery revenue. Accordingly, growth in SWDCC's non-toll
business will drive up the company's revenues, as well as its cost of
sales.
During the first nine months of 2011, SWDCC's regular business grew 69%
by volume, while its toll volumes declined by 51%. This was mainly
because, at the end of 2010, two large customers transitioned from
using SWDCC's toll services to purchasing the company's premium
decaffeinated green coffee. Additionally, SWDCC's non-toll business has
been growing as a percentage of its total sales for the past few years,
as more customers seek to reduce their working capital commitments.
During the three and nine months ended September 30, 2011, Ten Peaks
generated 56% and 59% of its sales in US dollars, respectively. This
was down from 78% and 77% for the same periods last year, due mainly to
increased revenue from Canadian customers.
While the US dollar appreciated by nearly eight cents during the third
quarter of 2011, it still remained weaker than in 2010, averaging $0.98
for the three and nine months ended September 30, 2011 compared to
$1.04 for the same periods last year. As a result, Ten Peaks' sales
revenue was negatively affected by a decline in foreign exchange. On
the cost side, the stronger Canadian dollar helped to partially offset
an increase in green coffee costs, as coffee commodity prices are
quoted in US dollars.
Despite the positive foreign exchange impact on input costs, the
company's cost of sales for the third quarter and first nine months of
2011 increased significantly on a year-over-year basis, rising by 80%
and 85%, respectively. In both periods, the jump was related to higher
coffee commodity prices, as well as the increase in regular volumes.
This was partially offset by reduced depreciation on production-related
equipment and leasehold improvements, due to changes in their estimated
useful lives.
Gross profit for the three months ended September 30, 2011 totaled $1.3
million. This was down slightly from $1.4 million for the third quarter
of 2010, when a sharp rise in coffee commodity prices pushed up margins
on Ten Peaks' regular sales. Nine-month gross profit rose by 33%, with
lower depreciation costs more than offsetting higher production-related
labour costs.
Operating expenses for the third quarter of 2011 were lower than in the
same period of 2010, as lower market research costs more than offset
higher administration expenses. Nine-month operating expenses were up
over 2010, reflecting incremental sales and marketing resources, as
well as higher production-related labour costs, increased logistics and
accounting staff and incremental professional fees.
EBITDA fell by $0.3 million to $0.6 million in the third quarter of 2011
compared to the same period in 2010, due to the increased green coffee
costs. During the first three quarters of 2011, EBITDA fell by 18% on a
year-over-year basis, due to higher operating expenses and a weaker US
dollar, which reduced processing revenue upon conversion to Canadian
funds.
During the nine months ended September 30, 2011, Ten Peaks paid out $1.0
million to shareholders, compared to $1.8 million during the first
three quarters of last year. Of the 2011 payments, $0.8 million
represents the quarterly dividends paid in April and July 2011, and
$0.2 million represents the last monthly distribution to unitholders of
the former Fund, paid in January 2011. The payout ratio of dividends to
EBITDA was 40% this year, compared to 58% in the first three quarters
of 2010. The decreased payout ratio reflects a reduction in the total
amount the company pays to shareholders each quarter, which took effect
when the Fund converted to a corporation.
In order to offset the impact of changing commodity prices and exchange
rates on its cash flows, Ten Peaks enters into coffee futures and
foreign exchange forward contracts. However, as it does not use hedge
accounting, the current market value of its hedge position must be
recognized at each balance sheet date, even though the underlying value
of these derivative instruments may change before the contracts mature.
For the nine months ended September 30, 2011, Ten Peaks realized $2.7
million in losses on derivative financial instruments, compared to
realized gains on derivatives of $0.9 million for the same period last
year. The company also recorded $2.4 million in unrealized gains on
derivatives, compared to unrealized losses of $1.8 million in the first
three quarters of 2010. Overall, the company recorded net losses on
derivative instruments of $0.3 million in the first nine months of
2011, compared to net losses of $1.0 million for the same period last
year.
Net income for the first nine months of 2011 was $0.3 million, compared
to $0.1 million in 2010. The improvement reflects Ten Peaks' higher
gross profit and reduced losses on derivative financial instruments,
partially offset by higher operating expenses, increased finance costs
and losses on foreign exchange.
Outlook
Looking ahead, it is expected that a number of external market factors,
such as tight coffee supplies, ongoing volatility in the NY'C' and
widespread economic uncertainty, will continue to create challenging
market conditions into at least 2012. Nevertheless, management remains
cautiously optimistic about Ten Peaks' future prospects.
"We are encouraged by the year-over-year increases recorded in our
nine-month processing volumes," said Dennis. "Our commitment to
continuous improvement has generated substantial gains in the quality
of our decaffeinated coffees, which is allowing us to win and retain
more business - especially with our specialty regional accounts.
Accordingly, we are confident that our business strategy is sound and
that we will continue to make steady progress against our corporate
objectives in the coming periods."
Payment of Quarterly Dividend
In September 2011, Ten Peaks' board of directors declared a cash
dividend of $0.0625 per share for the quarter ended September 30, 2011.
It was paid on October 14, 2011 to shareholders of record at the close
of business on September 30, 2011.
Additional Information
A more detailed discussion of Ten Peaks' third quarter and nine-month
2011 financial results and management's outlook can be found in the
company's Management's Discussion and Analysis ("MD&A") for the three
and nine months ended September 30, 2011. This document, along with Ten
Peaks' condensed consolidated interim financial statements for the
periods, will be posted on SEDAR (www.sedar.com) on or before November 4, 2011. The MD&A and financial statements
should be read in conjunction with the audited consolidated financial
statements and accompanying notes of the former Swiss Water
Decaffeinated Coffee Income Fund for the year ended December 31, 2010,
which are also posted on SEDAR.
Readers are cautioned that the summary information contained in this
press release is not a suitable source of information for readers who
are unfamiliar with Ten Peaks or the former Fund. This press release
should be considered a precursor to, and not a substitute for, reading
the financial statements and MD&A, which provide more detailed
information related to the company's performance and future prospects.
Company Profile
Ten Peaks is a publicly traded company that owns all of the interests of
the Swiss Water Decaffeinated Coffee Company Inc. (SWDCC), a premium
green coffee decaffeinator located in Burnaby, BC. Currently, Ten
Peaks' business and financial results are wholly based on the business
and financial results of SWDCC.
Established in 2000, SWDCC is one of the few chemical free coffee
decaffeinators in the world. It employs the SWISS WATER Process, a
proprietary, chemical free decaffeination method. Accordingly, SWISS
WATER Process decaffeinated green coffees are distinct from the
majority of the world's decaffeinated coffees, which are exposed to
chemical solvents such as methylene chloride and ethyl acetate during
decaffeination.
Certified organic by the Organic Crop Improvement Association, the SWISS
WATER Process is the world's only branded decaffeination process and
enjoys substantial recognition in the specialty coffee trade and with
consumers.
SWISS WATER Process decaffeinated green coffees are sold to many of
North America's leading specialty roaster retailers, specialty coffee
importers and commercial coffee roasters. SWDCC also sells coffees
internationally through regional distributors.
Forward-Looking Statements
Certain statements in this press release may constitute
"forward-looking" statements which involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements.
When used in this press release, such statements may include such words
as "may", "will", "expect", "believe", "plan" and other similar
terminology. These statements reflect management's current expectations
regarding future events and operating performance, as well as
management's current estimates, but which are based on numerous
assumptions and may prove to be incorrect. These statements are neither
promises nor guarantees, but involve known and unknown risks and
uncertainties, including, but not limited to, risks related to
processing volumes and sales growth, operating results, supply of
coffee, general industry conditions, commodity price risks, technology,
competition, foreign exchange rates and general economic conditions.
The forward-looking statements and financial outlook information
contained herein are made as of the date of this press release and are
expressly qualified in their entirety by this cautionary statement.
Except to the extent required by applicable securities law, Ten Peaks
Coffee Company Inc. undertakes no obligation to publicly update or
revise any such statements to reflect any change in management's
expectations or in events, conditions, or circumstances on which any
such statements may be based, or that may affect the likelihood that
actual results will differ from those described herein.
For further information:
Sherry Tryssenaar, Chief Financial Officer
Ten Peaks Coffee Company Inc.
Phone: 604.444.8780 Fax: 604.420.8711
Email:sherry.tryssenaar@tenpeakscoffee.ca
Website:www.tenpeakscoffee.ca
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