Green Mountain Coffee Earnings Call NUGGETS: Long-Term Growth Projections, EPS Guidance
Long-Term Growth Projections
Akshay Jagdale – KeyBanc Capital Markets: Thank you for all the extra disclosure on your long-term algorithm, it’s very helpful first of all. So, thank you for that. My question is regarding your long-term growth projections. It looks like you’re saying the install base is going to grow at 20% plus for the foreseeable future, you’re saying K-Cup attachment rate per brewer is stable since ’09, your sales growth guidance is somewhat in line with that top line projection, but your EPS growth is lower. So, I know you talked about a lot of risk factors, which you’re incorporating, but can you just – conceptually just elaborate on that, I mean, why shouldn’t EPS growth exceed and maybe even exceed by a wide margin your sales growth given you can leverage the G&A on this growing sales base?
A Closer Look: Green Mountain Coffee Earnings Cheat Sheet>>
Larry Blanford – President and CEO: Yeah. Akshay, that’s an excellent question, particularly given that our history has been in fact to do that. But I would just go back to my comments in the prepared remarks where I tried to deal with a number of the factors. We’ve run a number of scenarios, and have tried to be very realistic and prudent in our assessment of the various factors that I did mention, such as the potential for unlicensed private label or other manufacturers brands and potential margin pressure on the system with the enhanced competition, also the rollout of Vue I would remind you while we’re very excited about the rollout of that product as we’ve indicated on previous calls it’s going to take us 18 to 24 months to kind of come down the manufacturing scale curve and get the economies of scale to improve our margins on that product, and while not material this year, we do see Vue as we introduced additional brewers at lower price points beginning to grab hold as we move into not this holiday season, but next holiday season. So, when we kind of put all of that together and try to sit back here in August of 2012 and take a – what we believe is a realistic and prudent view, we come out with the estimates that we have provided. Clearly, Akshay there’s a lot of leverage in the model, both ways and yes, our feeling is as we’ve looked at various scenarios we’ve identified a number of actions and initiatives that we might take going forward depending on the competitive landscape that we find ourselves in.
Bryan Spillane – Bank of America Merrill Lynch: Just a question about the guidance for 2013. I think if I assume you execute about half the share buybacks for fiscal ’13 it implies that EBIT margins would contract. So I guess when I look at 2013 first our share repurchase is actually incorporated into your EPS outlook for next year. Then also in terms of that implied margin contraction, how much of that is just SG&A spending versus some outlook on gross profit the negative effect of having maybe some margin degradation on K-Cup.
Frances Rathke – CFO: Sure Brian this is Fran. Just to point out when provided the guidance for EPS for next year it does not factor in any anticipated company share repurchases. So that’s not in there. So as we plan to execute that we will provide actual you know repurchase data in our Q and then we will update. What that meant for EPS. So that’s not in there. And then to your point about just overall trends for ’13 I think as Larry said I think we worked very hard to put together a series of scenarios for next year. We believe these are very much realistic and I think overall as I noted on my remarks. We’re going to see the business growing into the capacity and will start improving overall the gross margins as we head into the early part of next year from what we’ve been experiencing in Q2 and Q3 and what we expect for Q4 this year.
Bryan Spillane – Bank of America Merrill Lynch: I suppose in terms of that margin, you’ve got some tailwind on Green Coffee costs which should offset if there is going to be some promotion or price reduction there is going to be some tailwind benefit from green coffee cost coming down?
Frances Rathke – CFO: That’s true, we’ve got – we definitely will begin to see some benefit from lower coffee costs, sequentially each quarter. I mean, we noted we had slightly better or improved – lower coffee cost this year third quarter versus last year’s third quarter, we’re going to continue to see slightly lower in Q4, and especially as we head into the first half of ’13, so that is factored in.