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Press release from CNW Group

Ten Peaks Coffee Company Inc. Announces Quarterly Dividend and Reports 2011 First Quarter Results

Thursday, June 09, 2011

Ten Peaks Coffee Company Inc. Announces Quarterly Dividend and Reports 2011 First Quarter Results18:37 EDT Thursday, June 09, 2011TRADING SYMBOL: The Toronto Stock Exchange - TPK Processing Volumes, Revenue, and Gross Profit All Up Over 2010Ten Peaks Coffee Company Inc.will hold a conference call to discuss its financial results for the three months ended March 31, 2011 on Friday, June 10, 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.  A replay will be available through June 24, 2011 at 1-800-642-1687 (toll free) or 416-849-0833 (GTA and international) passcode: 72043704.  In addition, a live and archived webcast can be accessed at or on Ten Peaks' website at www.tenpeakscoffee.caVANCOUVER, June 9, 2011 /CNW/ - Ten Peaks Coffee Company Inc. ("Ten Peaks" or "the company") today reported its financial results for the three months ended March 31, 2011. 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. The results reported here are based on SWDCC's operating performance.Prior to the first quarter of this year, all of the outstanding securities of SWDCC were held by Swiss Water Decaffeinated Coffee Income Fund (the "Fund"). On January 1, 2011, the Fund was wound up into Ten Peaks, a newly formed company which was created to effect the Fund's conversion from an income trust to a corporation. (Please refer to 'Conversion of the Fund to Ten Peaks', below, for more information.)The conversion is being accounted for as a "continuity of interests", or as if Ten Peaks always carried on the business of the Fund.  Accordingly, all references to "the company" contained in this press release refer to the business entity that was previously known as the Swiss Water Decaffeinated Coffee Income Fund, and is now known as Ten Peaks Coffee Company Inc.Operating ResultsIn $000s except per share amounts  3 Months Ended   March 31   2011 2010      Sales   $  13,966 $ 7,776Gross profit  1,953  1,259EBITDA(1)  970  1,645Net (loss) income  (71) 640Normalized net income(1)  341  679      Per share amounts:     EBITDA per share  0.145  0.246Net (loss) income per share  (0.011) 0.096Normalized earnings per share(1)  0.051  0.102 (1)     EBITDA, normalized net income and normalized earnings per share are defined in the company's Management's Discussion and Analysis, to be filed on SEDAR on or before June 10, 2011Ten Peaks reported continued top-line growth for the three months ended March 31, 2011, with processing volumes, sales revenue, and gross profit all up compared to the same period last year. Sales and gross profit rose in tandem with higher processing volumes, elevated coffee commodity prices and increased sales from inventory rather than under toll arrangements. EBITDA, net income and normalized net income were down, due to losses on derivative financial instruments and an increase in the company's quarterly operating expenses."We are encouraged by the steady growth we are seeing in our business," said Frank Dennis, President and CEO of Ten Peaks. "This is the fifth consecutive quarter we have recorded year-over-year increases in our processing volumes, which we believe is the direct result of our ongoing efforts to enhance value for our customers."  During the first quarter of 2011, Ten Peaks' coffee processing volumes rose by 18% over the same period last year. The increase was related to recent investments made in the business, including those directed toward quality and process improvements, and consumer and trade marketing and promotion. 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.The rise in processing volumes also reflects the diversity and strength of Ten Peaks' customer base. During the first quarter of 2011, processing volumes from large national accounts increased, while orders from smaller specialty accounts fell slightly, compared to the same period last year.  The solid growth the company recorded from its Canadian and US customers more than offset declines from international markets.Volume growth was achieved despite a number of market challenges, including the prolonged and dramatic rise of the commodity price of coffee. During the three months ended March 31, 2011, the New York 'C' coffee commodity price averaged US$2.53, which was 78% higher than during the first quarter of 2010. A high coffee price affects Ten Peaks' business in a number of ways, increasing both its revenues and its cost of sales, while also limiting the ability of some smaller customers to fully replenish their coffee inventories due to credit constraints.First quarter sales revenues totaled $14.0 million, an increase of $6.2 million, or 80%, from the same period in 2010. The growth resulted from SWDCC's higher processing volumes, as well as a proportionate rise in its "non-toll" business and the significant increase in the commodity cost of green coffee.SWDCC generates revenue in two ways. First, it decaffeinates customer-owned coffees, including organically certified coffees, for a fee - its "toll" business. Secondly, it purchases high-quality green coffees, decaffeinates them and markets them to the green coffee trade - its "regular" or "non-toll" business.  Revenue from its toll arrangements consists entirely of processing revenue, while revenue from its regular business includes both processing revenue and green coffee cost recovery revenue. Accordingly, growth in SWDCC's non-toll business will drive up the company's revenues, as well as its cost of sales.During the first quarter of 2011, SWDCC's regular business grew 82% by volume, while its toll volumes declined by 38%. This was mainly because two large customers switched from using SWDCC's toll services to purchasing its premium decaffeinated green coffee. Additionally, SWDCC's non-toll business has been growing as a percentage of its total sales for the past few years, as more customers seek to reduce their working capital commitments.In addition to the shift in SWDCC's business mix, the company's first quarter revenues were affected by a decline in foreign exchange.The Canadian dollar continued to gain strength against the US dollar ("US$") in the first three months of 2011, which reduced revenues from US$ sales upon conversion. 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 impact, the company's cost of sales increased significantly, rising by 84% over Q1 2010. The jump was related to the higher coffee commodity prices, as well as the increase in regular volumes, as discussed above.First quarter gross profit was $2.0 million, up by $0.7 million over the same period of 2010. The rise was mainly due to the company's sales growth, partially offset by its higher cost of sales.First quarter operating expenses were higher this year than in 2010, reflecting the incremental sales, marketing and administrative resources added to grow the Ten Peaks business. Certain  investor relations and other administrative expenses were also incurred, due to the conversion of the Fund to a corporation. The higher expenses contributed to a year-over-year reduction in Ten Peaks' net income, normalized net income and EBITDA, which were also negatively affected by recognized losses on derivative financial instruments.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.During the first quarter of 2011, Ten Peaks recorded $0.5 million in unrealized losses on derivative instruments, compared to an unrealized loss on derivatives of $0.1 million for the same period in 2010. It also recorded realized losses on derivative financial instruments of $52 thousand, compared to realized gains on derivatives of $0.5 million in the first quarter of 2010."We believe the investments we have made in our business over the past two years will continue to generate volume growth as we move forward," said Dennis. "We are now working to leverage insights gained from our recent market research and to maximize the sales benefits provided by our new US office. More broadly, we also continue to explore other growth opportunities that will complement our existing business. Our long-term vision is to grow Ten Peaks into a global coffee company, and we believe 2011 will be a foundational year in achieving that goal." Quarterly DividendThe company has also announced a cash dividend of $0.0625 per share for the quarter ended June 30, 2011. The dividend will be an 'eligible dividend' for Canadian income tax purposes. It will be paid on July 15, 2011 to shareholders of record at the close of business on June 30, 2011.Additional InformationA more detailed discussion of Ten Peaks' first quarter 2011 financial results and management's outlook can be found in the company's Management's Discussion and Analysis (MD&A) for the three months ended March 31, 2011. This document, along with Ten Peaks' unaudited Q1 2011 consolidated financial statements, will be posted on SEDAR ( on or before June 10, 2011.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.Conversion of the Fund to Ten PeaksOn January 1, 2011, due to changes in taxation laws which make the income fund form of business enterprise less advantageous, the Fund converted to a corporation by way of a Plan of Arrangement. Pursuant to the Plan of Arrangement, all of the Fund's outstanding units were exchanged, on a one-for-one basis, for common shares of Ten Peaks. Additionally, the Fund was wound up into Ten Peaks, and SWDCC, which continues to conduct the SWISS WATER® Process decaffeination business as before, became a wholly owned subsidiary of Ten Peaks.Ten Peaks is listed on the Toronto Stock Exchange and trades under the symbol 'TPK'. The corporation's new name reflects management's intent to continue enhancing and growing SWDCC's existing business, while exploring related growth opportunities.Company ProfileTen Peaks is a publicly traded company that owns all of the securities 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 StatementsCertain 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: Website: