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Green Mountain Slims Laborforce

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The leading coffee maker Green Mountain Coffee Roasters Inc. will shed almost 2% of its workforce by May 11, 2013 across nine North American K-Cup pack and Vue pack production locations. K-Cups and Vue-Cups are portion packs used with Keurig and Keurig Vue single-serve brewing systems to brew a cup of coffee, tea or hot chocolate.

Green Mountain will cut down on personnel in an effort to improve its manufacturing and logistic efficiency.

The owner of Keurig single-serve brewers will dismiss up to 74 full time workers in two production facilities: Castroville, California and Toronto, Ontario. Apart from this, it will also carry out some seasonal layoffs of workers that are recruited to supplement regular workers during peak periods, in its Montreal, Quebec and Toronto facilities.

Green Mountain revealed that it aims to increase the ratio of flexible to full time workforce. Outplacement services and severance for the workers retrenched from the company were also arranged by Green Mountain.

Green Mountain will take a one-time pre-tax charge during its second quarter fiscal 2013 in the range of $6.0 to $6.5 million due to the layoff process. However, the company reiterated its guidance for the second quarter, as it feels that the charge will not affect its earnings during the period.

First Quarter Earnings Results

Green Mountain delivered robust first quarter 2013 adjusted earnings of 76 cents per share that surpassed the year-ago quarter earnings of 60 cents by 27%. It also beat the Zacks Consensus Estimate of 65 cents by 17% on the back of solid top-line growth and lower interest expense. Net sales surged 16% to $1.3 billion, driven by the success of Keurig Single Cup Brewers, single serve packs (K-cups) and Keurig-related accessories.

Future Outlook

For fiscal 2013, Green Mountain expects its adjusted earnings in the range of $2.72 to $2.82 per share, up from the prior guidance range of $2.64 to $2.74 per share.

For the second quarter, the company expects adjusted earnings per share in the range of 70 cents to 75 cents and sales growth in the range of 14% to 18%. The guidance reflects the company’s continuous efforts to increase brand investments and product innovations.

The Zacks Consensus Estimates for the second quarter of fiscal 2013 and fiscal 2013 are 72 cents and $2.81 respectively.

Green Mountain Coffee aims at popularizing the single-cup brewing system in America and has entered into several strategic distribution agreements to rope in more and more popular brands like Dunkin’ Brands Group Inc. (DNKN - Free Report) and Starbucks Corporation (SBUX - Free Report) into its portion pack systems.

Green Mountain is also focusing on competing with private labels, as it has entered into an agreement with Costco Wholesale Corp. (COST - Free Report) under which it will produce private-label Costco Kirkland and Signature brand K-Cup packs for the Keurig single-cup brewing system. Green Mountain currently carries a Zacks Rank #1 (Strong Buy).

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