Clifford Burrows - President of Starbucks Coffee US
Howard Schultz - Founder, Chairman, Chief Executive Officer and President
Troy Alstead - Chief Financial Officer and Chief Administrative Officer
Jeff Hansberry -
JoAnn DeGrande - Director of Investor Relations
John Culver - President of Starbucks Coffee International
Keith Siegner - Crédit Suisse AG
Sharon Zackfia - William Blair & Company L.L.C.
Matthew DiFrisco - Oppenheimer & Co. Inc.
Michael Kelter - Goldman Sachs Group Inc.
John Glass - Morgan Stanley
Phillip Juhan - BMO Capital Markets U.S.
Sara Senatore - Bernstein Research
John Ivankoe - JP Morgan Chase & Co
Jeffrey Bernstein - Barclays Capital
David Palmer - UBS Investment Bank
Starbucks (SBUX) Q1 2011 Earnings Call January 26, 2011 5:00 PM ET
Good afternoon. My name is Steve, and I will be your conference Operator today. At this time, I would like to welcome everyone to Starbucks Coffee Company's First Quarter 2011 Earnings Call. [Operator Instructions] Ms. DeGrande, you may begin your conference.
Thank you, Steve. Good afternoon, ladies and gentlemen. This is JoAnn DeGrande, Director of Investor Relations at Starbucks Coffee Company. Joining me on the call today are Howard Schultz, Chairman, President and CEO; John Culver, President of our International business; and Troy Alstead, CFO.
Before we get started, I'd like to remind you that this conference call will contain forward-looking statements. Forward-looking statements are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements and should be considered in conjunction with our cautionary statements in our earnings release and the risk factors discussions in our filings with the SEC, including our last annual report on Form 10-K. Starbucks assumes no obligation to update any of these forward-looking statements or information.
Please refer to the Investor Relations section of Starbucks' website at starbucks.com and the financial statements accompanying the earnings release, where you'll find disclosures and reconciliations of non-GAAP financial measures mentioned on today's call along with their corresponding GAAP measures. Note that the non-GAAP amounts reported relate only to prior fiscal 2010 amounts for costs related to the now-completed restructuring work.
Before I turn the call over to Howard, let me highlight two upcoming events. First, we expect to file the company's proxy statements within the next week. And second, please note that Starbucks' 2011 Annual Meeting of Shareholders will be held in Seattle at 10:00 a. m. Pacific time on Wednesday, March 23. The meeting will be available via webcast.
With that, I'd now like to turn the call over to Howard Schultz. Howard?
Thank you, JoAnn, and welcome to everyone on the call. I am very pleased to announce the record quarterly results that Starbucks reported today. Solid increases in global traffic and the strongest holiday season in Starbucks' 40-year history drove our fifth consecutive quarter of positive comp store sales growth and enabled us to generate record revenues in Q1. Increased revenues, combined with the success of our ongoing efforts to improve our operations and efficiency and maintain tight control over operating expenses across the company enabled us to deliver both record operating income and record operating margins.
Our performance in Q1 reflects the power of our new business model and the continuation, and in several areas an acceleration, of the positive momentum and trends we began to see take hold in 2009. Notably in Q1, we saw a record operating performance from our U.S. retail store business, solid expansion of our Consumer Packaged Goods business, particularly around VIA, meaningful payoff on prior-period investments in our International business and a further deepening of our connection with millions of customers around the world. Each of these factors speaks to the relevancy and the health of the Starbucks brand and the strength of our global business.
Solid operating performance in Q1 also enabled us to offset some of the impact of both historically high coffee and other commodity costs and the new investments we're making in CPG to support our future growth. And this performance, in conjunction with the positive momentum we saw across all of our channels in Q1 and the financial discipline and rigor we continued to apply to all aspects of our global operations, positions us to perform well despite the continuing soft global economy, the fragile consumer environment and increasing commodity costs, all of which we are prepared to address in the year ahead.
I will begin today's call by sharing financial and performance highlights of the quarter, discuss a number of important accomplishments and developments that may not be evident from the figures alone, and then turn the call over to John Culver, President of Starbucks International, who will provide you with deeper insight into Starbucks' record performance in markets outside the U.S. Then we'll turn the call over to Troy, who will take you through the quarterly financials in greater detail.
Starbucks global revenues reached a record $3 billion in Q1, up 8% over the same period last year. Our comparable store sales for the quarter rose 7%, and our operating margin grew to 17%, reflecting the strength of our brand, the power of our business model, increasing operating leverage and our continued laser focus on controlling costs. Together, these factors enabled us to deliver record earnings of $0.45 per share, up from the $0.32 per share we reported last year.
Starbucks continues to execute throughout the company, and our Q1 results reflect very solid performance in both U.S. and international markets. I will share highlights from each of our business units, starting with our International business, where I'll simply make note of a few items and leave the more detailed presentation to John. As we have reported on prior calls, among Starbucks' top priorities over the last 18 months, as we've been transforming the business, has been applying the learnings and operational excellence gleaned from the work we did in the U.S. to our International business.
The International segment results we reported today demonstrate, without question, the unequivocal success of those continuing efforts and the growing relevancy of the Starbucks brand around the world. And while there is much more work to do, a streamlined management organization and increased operating efficiencies throughout our international operations provide us with the solid foundation we know we need to fully pursue opportunities in new and existing international markets in the future.
Just a few weeks ago, John and I were in India together to sign and announce the entry into a Memorandum of Understanding with Tata Coffee, India's leading grower and roaster of coffee. The importance of this strategic relationship with a reputable, values-based organization like Tata will become clear over time as we begin our journey in India. The Tata partnership will provide us with local sourcing and roasting capabilities and a partner with common values and a keen understanding and appreciation for the very high standards we maintain around delivering the Starbucks experience. We expect India to become an important market for us, and we will leverage the learning and experience from our more than 10 years in China to execute a profitable, disciplined growth plan in that country.
As with our International business, our U.S. business also performed at record levels in Q1, with sales increasing to $2.1 billion and operating margins reaching 21.9%. As I noted earlier, Starbucks experienced the most successful holiday season in our 40-year history, demonstrating the power of our model and the positive impact of our many customer-facing initiatives and cross-channel marketing programs. Driving our performance was innovative, very cost-effective marketing and promotional programs, exciting new packaging designs, in-store merchandising and the implementation of new technologies and the leveraging of all of our retail, digital, social media and partner assets to connect with customers around the world as never before.
By way of one example, we used targeted investments in online advertising, social media, television and in-store promotions to increase sales of Christmas Blend, which we sold in whole bean and, for the first time, in VIA. The importance of social and digital media channels and investments in technology to our overall strategy is increasing and becoming a significant competitive advantage as we create rich, emotional engagement with consumers and enhance their Starbucks experience, while at the same time benefiting from a lower cost of customer acquisition.
We used social media to launch the holiday season and maintain its momentum, as evidenced by the almost 250,000 consumers who signed up to receive a daily text message announcing the specials during our 12 Days of Sharing promotion. After the quarter ended, we launched a breakthrough technology of a mobile payment application, allowing customers to pay for in-store purchases in the U.S. with select Smart phones. These are just two examples of how we will leverage innovation and digital media assets to deepen our connection with customers and drive store traffic.
Our successful Starbucks loyalty card program contributed significantly to our performance in Q1, and I think this is really important. In the one year since My Starbucks Rewards program launched, we've added nearly 2.5 million new accounts, increasing the breadth and depth of customers engaging with us and driving loyalty and repeat business. At peak volume in Q1, we were selling, believe it or not, 42 cards per second across the country, with customers loading, on average, 39% more on the Starbucks cards in Q1 of 2011 than they did in 2010 during the same quarter, facts that I think bode extremely well for the programs and our revenues in coming quarters. Noteworthy is that much of the performance is attributed to substantial growth in card sales outside our company-owned stores, demonstrating that Starbucks' expanding and deepening connection with its customers is extending beyond our stores and into complementary retail channels.
In Q1, we also continued our advance of our U.S. operational excellence initiative, with additional investment in barista training, the final rollout of our new inventory management and point-of-sale systems.
Finally, I'm particularly pleased to report that despite the challenges created by substantial increases in holiday traffic, our customer satisfaction scores remained near record levels, reflective of the focused effort and passion of our partners who've brought the spirit of the season to life by making each Starbucks store a warm, welcoming environment for our customers. And to each and every one of our partners, I extend my deep level of appreciation, respect and thank you.
Turning to CPG. At the December Investor Conference, we shared with you our bold plans for our CPG segment. And I'm pleased to report that in Q1, we made solid progress against those plans in terms of product lineup, the building of our internal team and our impending transition from Kraft. CPG performance in the quarter was driven by several factors, including the continued expansion of Starbucks' 20-ounce bag and the introduction of Starbucks' Natural Fusions line, already the second-best-selling premium-flavored coffee brand based on velocity, or the levels of sales per point of distribution, only six months after launch.
And then of course, there's VIA. VIA's system-wide sales grew in Q1 on the heels of strong merchandising support from key retailers across the United States. Starbucks VIA now enjoys a 39% dollar share of the premium single-cup category. VIA's volume in CPG channels in Q1 also increased by 16% versus the fourth quarter of 2010, while our authorized points of distribution in the U.S. CPG channel grew over 10% to over 32,000 points of distribution at the end of the quarter from 29,000 in November. We expect to see the impact of the added distribution in Nielsen as early as this month.
We continue to view VIA not as a singular product, but as a platform for which we are creating an innovative exciting portfolio of a number of products. Q1 marked the U.S. and Canada's launch of VIA flavors in vanilla, mocha, caramel and cinnamon, and our research is showing that sales of flavored VIA are largely incremental to sales of core VIA, indicating that the VIA platform is meeting additional need states and acquiring new, younger consumers. VIA's growth in the future will come from all of our expanding distribution points, both within the U.S. and in international markets, including China. The launch of new products, such as iced VIA and VIA flavors, can increase consumer adoption.
Let me once again remind you that this is a $24 billion category, most of which is outside of North America, and it is ripe for innovation. And we believe strongly we've got the formula and we've cracked the code. In Q1 alone, VIA's repeat rate grew by more than 20% to 37%, providing the VIA brand with one of the highest adoption rates among recent coffee category launches. In our retail stores, we continue to see consumers embracing VIA in such numbers that we, in fact, sold out of Christmas VIA, unfortunately, two weeks before Christmas Day. And beginning in February, we will kick off our next major national VIA ad campaign that will include TV, print, digital and in-store sampling designed to further increase awareness trial and repeat.
As noted at the investor conference in December, we continue to see very strong returns on every marketing dollar we spend against VIA; in fact, twice the industry average. We continue to make very good progress on our transition of Starbucks-branded coffee, Seattle's Best Coffee and Tazo tea businesses from Kraft. In Q1, we successfully transitioned Tazo tea business and began selling and distributing the brand ourselves on January 1, 2011.
Now we have much work to do, still, in 2011. It will be a transitional year with some added costs for us. But Jeff Hansberry has added experienced, professional muscle to his team, has the resources he needs in place, and we are fully prepared for the upcoming transition of the Starbucks and Seattle's Best Coffee brand on March 1 of 2011. With regards to CPG going forward, we are deeply committed to materially expanding our Consumer Products Group into a major business that will leverage and rival the capabilities of our retail organization.
We are also confident that the full benefit of the investment we are making in CPG will become self-evident once we begin to fully leverage this new capability and capture the full revenue and profit potential of the integration of our CPG packaged coffee and tea businesses in the quarters ahead, just as we have done with VIA. Seattle's Best Coffee raised the bar with a fresh brand identity, added points of distribution and new store concepts, including testing a new coffee bar concept format inside Wal-Mart Supercenter in Canada, and scored double-digit year-over-year sales gains in Q1.
The brand also announced its entry into the $1.4 billion U.S. ready-to-drink category with a new line of iced canned lattes. In Q1, SBC also introduced a vivid, innovative level system on its packaged coffee products, designed to both energize and simplify the coffee selection experience. The level system allows consumers to choose their preferred level of coffee boldness, from one to the least bold to five for the most bold, by number and color. Consumers' response to SBC's new system has been very strong, illustrating once again the excitement and innovation that Starbucks brands can bring down the grocery aisle. SBC products offering the level system are rolling out now and will soon be available in approximately 30,000 grocery and mass outlets nationwide. Calendar year 2011 marks Starbucks' 40th anniversary. And in mid-March, we will be kicking off a major promotional campaign featuring innovative new products and merchandise as a tribute to our customers and our Starbucks partners, all of whom are responsible for the evolution and the ongoing success of our company.
On a personal note, I am very much looking forward to the publication of my second book, Onward, which addresses the lessons we have learned as an organization in the three years since I returned as CEO. The book was written with our partners in mind, and all of my proceeds from the book sales will be shared between The Starbucks Foundation and the Starbucks partner CUP Fund, which was established to aid partners who may have fallen on hard times.
To promote the book, we plan to visit numerous cities and spend time with our partners in the field at this significant time in our company history. The book and many of the initiatives we have planned around the 40th anniversary provide us with a very unique and timely opportunity to engage with our partners and customers by honoring Starbucks' rich heritage and creating excitement about our future. Needless to say, we expect all of this energy and excitement to resonate loudly and create significant brand and emotional value for the company and, over time, for our shareholders.
Earlier this month, Starbucks unveiled the next evolution of our brand, representing only the fourth time in four decades that we have altered our logo's original design. With simplicity and foresight, the elegant new design frees Starbucks' signature siren from the circle, symbolizing how we plan to grow from our 40th year forward by connecting with customers through multiple channels and formats, with coffee and the coffee experience always at our core.2011 is the absolute right time for such a change. And while our siren will always represent Starbucks' reputation for coffee, quality and innovation, after 40 years, she has the strength to stand on her own and show our customers, and us, the way forward.
Finally, a few weeks ago, Barbara Bass, a member of the Starbucks board since 1996, notified the company and me of her intention not to stand for re-election when her current term expires in March of 2011. Throughout her tenure, Barbara has been a close friend of Starbucks and an adviser to the leadership team and me, and her wisdom, judgment and extraordinary business acumen will certainly be missed. Starbucks is a better and stronger company because of Barbara's engagement and involvement with us. On behalf of the Starbucks board and our leadership team, I'd like to personally thank Barbara for her service and wish her the very best in the future. Thank you, Barbara.
Now I'll turn it over to John Culver, President of International Starbucks, who will take you through more of the highlights of the exceptional quarter we had in the International business during Q1.
Thank you, Howard. Q1 was an historic and, in many ways, the seminal quarter for Starbucks Coffee International. Besides marking our fifth consecutive quarter of traffic growth and our third consecutive quarter of double-digit operating margins, Q1 demonstrated the increased momentum, increasing operating leverage and steady progress we are making against our plan to fundamentally transform our International business, just as the U.S. team has done over the last several years. Our progress to date includes streamlining operations and decision making, continuing the adoption of lean techniques and introducing our new POS and inventory management systems to increase operating efficiencies.
The investments we have made around the world and the resources and operating disciplines we have put in place throughout the International organization are designed to enable us to fully leverage our accelerating top line and to profitably and sustainably scale our global business. In Q1, International segment net revenues increased 9%, driven by a 5% increase in comparable store sales in the quarter and the opening of 267 net new stores over the prior 12 months. Higher revenues, in conjunction with our disciplined approach around our operation, were key contributors to our record-high operating profits and margins for the quarter. In the quarter, our operating margin expanded to 16.3% while our operating profit increased 144% to $104 million. Yet while Starbucks Coffee International may never have been healthier nor delivered better results, we are not remotely yet finished with our work. International performed well across all our markets, particularly well in Asia Pacific and Western Europe. But nowhere in the world was our progress more evident than in China, where we had another stellar quarter of double-digit comp increases.
In China, we currently have a presence in 33 cities on the mainland. And with virtually every store opening, we are witnessing long lines of customers, positive media coverage and sales performance way in excess of our expectations. In the past several months, we opened four new cities, including what is now our largest store on the mainland and a four-story Starbucks in Xiamen. We remain extremely optimistic about our opportunity in China and are continuing to fund the local investments needed to realize the full potential of the China market over the long term.
Howard mentioned our trip to India two weeks ago, a trip that culminated in our entry into a Memorandum of Understanding with Tata Coffee Limited. I want to reiterate the fantastic emerging opportunity that we see India representing for Starbucks. Converting the enormous potential that India presents into long-term success will require a thorough understanding and appreciation of local customs and tastes, a strong local foundation and the ability to locally source and roast coffee, meeting the high standards that our Starbucks customers expect and deserve. Our MoU with Tata Coffee positions us to explore and understand all aspects of the India opportunity, and we're looking forward to rolling up our sleeves and working closely with our colleagues at Tata Coffee.
Looking ahead, Starbucks International will continue to strengthen and expand its business through a disciplined and focused approach in three principal areas. First, we will continue to grow transactions and frequency through meaningful innovation and an increased emotional connection with our international customers around the Starbucks Experience. Noteworthy are our April launch of VIA in our retail stores in China following its runaway success in Canada, the U.K., Japan and the Philippines; our late spring introduction of customizable Frappuccino and the future expansion of the Starbucks Card and our loyalty program into our international markets.
Second, as I told you in December, we plan to accelerate profitable new-store growth. Currently, only one in 100 cups of coffee served around the world today is Starbucks, and we remain convinced that we have a tremendous runway to profitably expand our store footprint in our 53 existing markets and to thoughtfully enter new markets. As we grow, we will remain disciplined in new site selection and focus on being locally relevant while we continue to elevate our brand and drive the long-term profitability of the International business.
And third, we will continue to drive more operational consistency across our entire international store portfolio. This will allow us to profitably deliver an enhanced experience to our international customers around the world.
In closing, I spent a great deal of time visiting our Starbucks stores around the world, and it's always confirming to see firsthand the degree to which our customers are embracing us regardless of culture. At the heart of our success are our partners, and it is our partners' hard work and passion that brings our brand to life in every country in which we operate. Our performance is a direct reflection of their efforts, and I want to thank them for making Starbucks a welcome presence in the communities around the world. Let me now turn it over to Troy for a deeper dive into the financials.
Thanks, John, and good afternoon, everyone. Our fiscal first quarter performance was exceptional by almost any measure across the business. We set records on many key metrics at the consolidated level, including earnings per share, revenue, operating income and operating margin. All three reporting segments, the U.S., international and CPG, contributed to both top-line and operating income growth compared to last year. And our holiday lineup delivered the strongest performance on record, both in the U.S. and in key international markets. These results underscore the strength of our core retail business and come on the heels of a record-setting fiscal 2010, a year that redefined Starbucks in many ways and established a strong foundation from which to pursue multiple avenues of future profitable growth.
Today, I will take you through some of the details of our fiscal first quarter performance, and then I'll provide a brief update on our expectations for the balance of fiscal 2011. First quarter revenues were $3 billion, up 8% from $2.7 billion a year ago. The revenue increase was primarily driven by a 7% increase in comparable store sales, attributable to a 5% increase in traffic and a 2% increase in average ticket. We reported consolidated operating income of $502 million in the first quarter, a 42% increase compared to first quarter of fiscal 2010 operating income of $353 million and a 35% increase compared to last year's non-GAAP operating income.
Consolidated operating margin was 17.0%, which represented a 400-basis-point improvement from the 13% GAAP operating margin reported a year ago and a 340-basis-point improvement from last year's 13.6% non-GAAP operating margin. Sales leverage in our global retail business and lower impairments this year primarily drove the improvement, partially offset by increased commodity costs.
Earnings per share was $0.45 for the first quarter compared to $0.32 per share on a GAAP basis and $0.33 per share on a non-GAAP basis in last year's fiscal first quarter. This is exceptional year-over-year growth, especially considering that we're comping over a very strong holiday period last year. Reflected in these numbers is the fact that we continue to become better global operators, providing customers a consistently satisfying experience while at the same time driving efficiency and investing for future growth.
I will now move to the results of our operating segments, which will be compared to the non-GAAP results last year. Total U.S. net revenues for the quarter were $2.1 billion, a 7% increase from a year ago. Company-operated U.S. retail revenues increased 7% to $1.9 billion for the quarter due to an 8% increase in comp sales, slightly offset by reduction in the number of stores compared to last year. The comp increase was driven by a 6% increase in traffic and a 2% increase in average ticket. The 6% increase in transactions marks the fourth consecutive quarter with positive year-over-year traffic and continues the strong momentum created in the back half of 2010, where we also experienced 6% transaction growth. Q1 also marked the highest two-year total end transaction comp we've seen in almost four years.
In line with recent quarters, the strength was broad-based across geography and product category. Our holiday platform once again resonated with customers, strongly contributing to the total comp growth. Recent pricing initiatives taken to help offset climbing commodity costs contributed less than half of the ticket increase, while the expansion of our warming program also contributed to ticket growth. My Starbucks Rewards, our loyalty program that was relaunched late in December last year, also continued to gain traction with customers, with almost $700 million loaded on cards in the quarter, an all-time record.
Despite the clear success of My Starbucks Rewards, we believe there's still substantial opportunity to grow the program, as customer awareness is still relatively low. We expect to drive more awareness and usage through enhanced communication of the program and its benefits in the future. I would also like to point out the strength of our licensor business in the U.S., as revenue grew by 14% versus last year. Comp trends have been very similar to those in our company-operated business, driven by many of the same factors. This continues to be a very healthy and profitable portion of the business for us. U.S. cost of sales including occupancy was 37.4% of total revenues in the first quarter, an improvement of 150 basis points compared to the year-ago period.
Similar to last quarter, most of the improvement was the result of sales leverage and supply-chain efficiencies, partially offset by higher coffee and dairy costs. U.S. store operating expenses were 34.8% of total revenues, a 220-basis-point improvement over last year. Lower impairment charges in the current year and increased sales leverage contributed to the improvement. The combination of top-line growth and lean principles has driven store labor productivity to the highest level in seven years.
As planned and communicated previously, we have completed the rollout of new point-of-sale and inventory management systems in our U.S. stores. While the full positive impact of these solutions is not yet fully evident as we work up the learning curve, we expect that these investments will enable our store teams to work more efficiently and provide our customers with an even higher level of service. U.S. operating income was $453 million for the quarter, a 32% increase compared to last year. The operating margin improved 410 basis points to 21.9% of related revenues from 17.8% a year ago.
This is the highest level of U.S. operating margin in the company's history, significantly surpassing the previous record set almost a decade ago. Increased sales leverage, lower impairment charges compared to last year and some pricing efficiencies all contributed to the improvement, slightly offset by higher commodity costs. The U.S. business is clearly healthy, with broad-based strength and relative stability throughout.
While this is certainly satisfying given where the business was just two years ago, we aspire to do more, and it's our belief that we have not yet tapped the full potential of this business. At last month's investor conference, Cliff articulated our key strategies and focus areas to go after that potential.
Moving forward, we will pursue those opportunities with the same disciplined focus that helped us transform the U.S. business. Moving now to the results of our International segment. International total net revenues increased 9% to $640 million in the first quarter of fiscal 2011, primarily driven by comparable store sales growth of 5% in our company-operated markets and strong revenue growth from our licensed markets. The comp growth was driven by a 2% increase in traffic and a 2% increase in average ticket.
Exceptionally strong performance in China contributed a significant portion of the overall comp growth, while severe weather in the U.K. and Canada pressured transaction trends in those key markets in December. International operating income was $105 million in the first quarter of fiscal 2011, nearly double last year's $53 million and the third straight quarter in which we've set an all-time record for profitability in this segment. Operating margin improved by 720 basis points to 16.3%, another all-time high and a reflection of the potential for this business as we progress on scaling the business and executing more efficiently. Increased sales leverage and lower impairment charges compared to last year contributed to the margin improvement.
As mentioned earlier, China performed exceptionally well this quarter, with comps in the mid-20s and profit contribution higher than that. The momentum in China is exciting, and that market is in the very early stages of delivering on the vision we've long had there. We will continue to pursue rapid growth in the form of new stores on the way to our stated goal of 1,500 stores on the mainland by 2015 as well as other channels, such as CPG and Foodservice. Equally exciting is the balanced contribution we're starting to see across the portfolio of international markets, including very strong performance in the balance of the Asia-Pacific region and improving profitability in Western Europe.
Collectively, the International business has never been healthier, yet we intend to do much more long term, building on our current success in core markets and tapping into sizable, still-emerging markets such as India and Brazil. I will now move on to the results from the Global Consumer Products Group. CPG total net revenues increased 12% compared to last year to $195 million in the first quarter of fiscal 2011. This increase was partly related to higher sales in our packaged coffee business, with strong performance from new products, such as the Starbucks 20-ounce packaged coffee and at Natural Fusions.
VIA also contributed to the revenue growth as we continue to expand distribution and add SKUs, including flavors. Several key metrics continue to point to the enormous potential for VIA in the CPG channel. As Howard mentioned, volume increased by more than 16% in the first quarter compared to the fourth quarter of 2010. Repeat rates also continue to increase, with the current rate in the high 30% range, which is among the best adoption rates in the market.
In addition to growth in both packaged coffee and VIA, our Foodservice business also contributed significantly to the segment's revenue growth, driven primarily by an improved hospitality industry. Operating income for the segment increased 6% compared to last year to $68 million for the quarter, and operating margin decreased 200 basis points compared to last year to 34.6%. The margin decrease was primarily due to higher coffee costs and marketing expenses for VIA, partially offset by supply-chain efficiencies.
Regarding our transition of the packaged coffee and Tazo key businesses from Kraft, as Howard shared, we continue to make good progress, and we now have the resources in place to effectively support that business. Given the strong performance in the first quarter and now more visibility to key variables, such as coffee inputs and the transition of our packaged coffee business in-house, we're updating our outlook in a few key targets for the balance of fiscal 2011. In particular, this updated outlook, for the first time, reflects our plans to have the packaged coffee business fully transitioned in-house on March 1, 2011.
We continue to expect mid- to high-single-digit revenue growth for the year on a 52-week basis, driven by low- to mid-single-digit comp growth. Our outlook for store growth is unchanged. We plan to add approximately 500 net new stores globally, with roughly 100 in the U.S. and roughly 400 in international markets. The majority of the new additions in both segments are expected to be licensed stores.
We continue to expect capital expenditures to be approximately $550 million to $600 million for fiscal 2011, with roughly half of that going toward renovations and the remainder spread between new stores and other investments, such as technology upgrades. We now expect to absorb approximately $0.20 in additional commodity costs for fiscal 2011 compared to last year, mostly related to higher coffee prices, although other commodities that we use, such as cocoa and sugar, have also increased. Of this amount, roughly $0.03 impacted the first quarter, leaving approximately $0.17 for the balance of the year.
Coffee prices have continued to increase and currently sit near a historically high level. While we still believe these prices are not sustainable long term, given the underlying fundamentals, in order to mitigate the risk to the balance of this year, we have locked in essentially all of our coffee costs for fiscal 2011.
With respect to operating margins, we now expect full-year improvement of 150 to 200 basis points compared to 2010 non-GAAP results in both the U.S. and International segments. In CPG, we now expect operating margins to be in the range of 25% to 30%, as increased coffee costs and transition costs related to the packaged coffee move in-house are pressuring margins in this segment. However, we continue to expect consolidated operating margin to improve by 50 to 100 basis points over 2010.
We expect our tax rate for the year to be in the range of 32% to 33%. The lower tax rate compared to fiscal 2010 is due to the expected increase in income from international markets that have lower tax rates than the U.S. We now expect fiscal 2011 earnings per share to be $1.44 to $1.47, still within 15% to 20% growth on fiscal 2010 non-GAAP earnings per share, excluding the benefit in 2010 from the 53rd week.
Earnings per share for each of the second and third quarters is expected to be in the range of $0.32 to $0.33. We expect Q4 to be approximately $0.35 to $0.36 per share. Embedded in this outlook is a roughly $0.02 negative impact related to the packaged coffee transition in-house. This $0.02 reflects investments in resources and systems to support the transition and is net of the additional income we will pick up once the business is fully transitioned. Most of that negative $0.02 impact materializes in the second quarter. As the business becomes fully integrated and we move into 2012, we expect it to become a progressively more meaningful contributor to revenue and earnings. Also embedded in the EPS outlook is the $0.17 over the balance of the year related to increased commodity costs that I noted earlier.
In closing, the first quarter's record results largely speak for themselves and continue the progression we started several quarters ago. Over the past two years, we've made structural changes, introduced new disciplines and deepened capabilities throughout the business, which allowed us to not only recover from the deep recession but to move the company to record levels of revenue and profitability. Those changes include new pricing capabilities, which have allowed us to selectively adjust prices to manage margin and average ticket while increasing value to customers; increased cost focus and discipline, which enables significant cost reduction throughout the company and more efficient supply-chain and store operations; and renewed and more focused innovation, which resulted in successful new products such as VIA. Over the balance of fiscal 2011, those same structural changes, new disciplines and deepened capabilities allow us to maintain our previous guidance of 15% to 20% earnings growth despite coffee costs that are, on average, 40% to 50% higher than last year and despite additional infrastructure investments to bring the packaged coffee business in-house.
As we move into 2012 and beyond, we expect these same new disciplines and capabilities will position the company for long-term healthy growth and profitability. I will just add here how personally proud I am of the company and our partners for facing this unprecedented $0.20 per share of commodity headwinds and still delivering an expected 15% to 20% earnings growth.
Given the fact that coffee prices have spiked to these levels in the past, but never for very long, and have always returned to normalized levels, these headwinds we face over the balance of 2011 may well become tailwinds in the future.
We are now on the path to creating a company unlike any other, building on the unique relationship we have with our customers to develop a ubiquitous presence in multiple channels and product categories across the globe. Our business is healthy, we have momentum and we generate a significant amount of cash flow, from which we can invest to pursue these opportunities while still delivering cash back to shareholders. These are exciting times for our company, not only in the results we see today as a result of past work, but also in the energy that is being created to pursue this next stage of diversified growth.
With that, now let me turn the call back over to the Operator to begin Q&A. Steve?
[Operator Instructions] And your first question comes from the line of John Glass with Morgan Stanley.
John Glass - Morgan Stanley
Troy, can you talk about the revenue impact, specifically, that you're going to gain from -- as you put Kraft into your P&L? And also the 25% to 30% margin in the CPG, can you talk about -- is that fully, sort of the fully loaded cost of that? Is that where it stays going forward? Or do you expect that to accrete over time as once you get some of these the efficiencies in place in Kraft, then you can begin to expand that margin again?
John, on the first question, the transition of the packaged coffee business won't have a large revenue impact this year, because it really is that transitional year where we'll pick up the business probably through the year. As we move into 2012, we fully expect to have the full revenue of that business brought onto our P&L, as well as the full earnings, and then be able to drive that business going forward. Now I will point out that we pick up revenue out of that relationship today, so the benefit that we'll pick up going forward will be a net of an increased customer revenue that we'll see hit our P&L, net of some of the revenues that's already there. Once we get a little bit further into this transition and have the business in-house and have the full business ready to go for 2012, we'll talk a little bit more about what those ongoing targets look like, but not a dramatic change to anything in 2011. Now on the margin side, the long-term margin expectation we have for our CPG business subsequent to this transition is 30% to 35%, which is what we talked about at the investor conference in December. This year, we expect that margin to be in that 25% to 30% range, as I mentioned, driven and impacted much more by this transitional impact of this year. So some one-time and unusual impacts in fiscal '11. On an ongoing basis, we would expect that, that margin to be north of 30% again.
Your next question comes from the line of Sharon Zackfia with William Blair.
Sharon Zackfia - William Blair & Company L.L.C.
Troy, just kind of curious, I mean coffee, obviously, has continued to go up, but it hasn't doubled again in the past three months. So can you help reconcile the kind of 15% rise we've seen in coffee with the increase that you're expecting in commodity costs? Is that because you had expected it to come back down, and now you've locked it all in? And then just juxtapose that with your pricing power, what you're thinking there.
With respect to coffee costs, Sharon, at the time we had laid out our previous expectations of that $0.08 to $0.10 impact, as you will remember, we didn't have very much of the 2011 coffee needs locked at that point in time. So it was very much based on what we did have committed, and then projections based on our own experts and experts in the industry of what was going to happen over the balance of this year. As the coffee prices began to escalate as we moved through December, we took the decision to remove that risk from this year, we think the responsible decision, and lock our pricing and commit to that throughout 2011. The result of that is that the movement in the "C" price between, say November or December and now, is not reflective of that increase and what we expect our underlying coffee costs to be over that span of time. So hopefully, that helps reconcile that difference for you. In terms of pricing, what I would say there, and we've spoken about this a tremendous amount lately, one of the big capabilities, important capabilities that we invested in and developed and continue to perfect as we came through the last 18 months or so, was our work around pricing architecture. That's been extremely valuable to us, and we continue to utilize that on an ongoing basis. We believe that there is opportunity to continue to provide significant value to customers through the loyalty card, through very competitive and value-oriented pricing on the things that matter most to them. And then, selectively, periodically, in various markets, adjust other prices as appropriate. So that is what we intend to do. And I would just point out that we don't expect to use pricing as a full measure of offsetting these commodity costs by any means. It's one tool we have. We also have a number of initiatives in the business around costs, around efficiency, that we are, wherever we can, accelerating, to ensure that we execute those in 2011 and help us offset what is a very unusual spike in coffee prices currently.
Your next question comes from the line of David Palmer with UBS.
David Palmer - UBS Investment Bank
What sort of growth rate are you projecting for your consolidated CPG division as things settle out going into fiscal 2012 and beyond in your 10%-plus revenue growth target? I ask because that 10% revenue growth looks aggressive, at least as I model it, unless I make some more aggressive assumptions in that division's growth. And then separately, the bagged coffee in Grocery, what's your pricing philosophy when it comes to inflation in that? And who's making the decisions on that in the interim? You or Kraft?
David, let me speak to part of that, and then we might introduce Jeff Hansberry to address some of the pricing questions that you referred to last. Actually, Jeff, he's here now, why don't you address pricing, if you would, in David's question?
With regard to coffee pricing, relative to where we are today, Kraft is still in control of the contract. Therefore, pricing is at their discretion. When the contract ends on March 1 and we bring the business back, pricing will be at the discretion of Starbucks.
And then, David, on your second question around revenue growth, what I would say to that is we believe our existing portfolio of businesses and the things we are doing to drive growth internationally, to continue to drive unit growth and same-store sales growth in the U.S. and our core lineup of products, can drive us to that 10%-plus revenue growth. We're committed to that. We're putting the plans in place to achieve that over time. We don't have specific targets for you yet around an expanded CPG Business, but suffice to say that we believe that as we transition that business in-house, as we drive more effectiveness, do a better job down the aisle, and as we add to that platform over time in ways that we think nobody can do except for us, given our ability to move customers back and forth between our stores and the CPG channel, all those things will be additive over time to that 10% revenue growth expectation.
Your next question comes from the line of Michael Kelter from Goldman Sachs.
Michael Kelter - Goldman Sachs Group Inc.
I want to ask about the $0.20 commodities forecast. Two parts to the question. The first, are you simply embedding spot rates for key commodities like dairy, cocoa and sugar? Or do you have some sort of forward assumption built into that? And what might that be? And then, secondly, have you hedged or locked in any of your dairy, cocoa or sugar? Or is it all going to float, and this $0.20 number could move at some point again?
What I'd say -- let me answer the last part first, Michael, and that is we expect that the $0.20 is a very solid number. While we do have pressures in other commodities, coffee is the vast majority of that, and we've locked that pricing this year. So no, I don't expect the $0.20 to move, and if it does, it would be just tiny movements and probably would still round to roughly that $0.20 impact. Now to the first part of your question, we don't have spot rates embedded. What we have is forward rates and our expectation of what we see happening in those markets combined with some hedging in places. So for example, with respect to dairy, we have about 30% of our expected use of dairy over the balance of this year hedged. So the combination of hedged and committed prices with what we see in the forward markets leads to that assumption. Similarly, with some of the other commodities that are less impactful to us but are still out there, sugar and some other things, we've got some hedging in place modestly to help mitigate some of those cost increases. And then we've got our expectations for the future that round out the rest of it. But again, what I would say is our efforts in December of 2010 to lock coffee prices is to remove that risk this year, and it's positioned us to make it a known quantity that we now are prepared to address as we go through the balance of the year.
Your next question comes from the line of Matt DiFrisco from Oppenheimer.
Matthew DiFrisco - Oppenheimer & Co. Inc.
Just clarity with your response to Sharon's question. Did you say, then, that you locked in -- it appears as though you've locked in slightly below, then, the current spot price in your response. And then also, your commentary seems like you're pretty certain about that deadline of March, yet we haven't seen, really, any sort of release or any detail. Aside from asking for the numbers of the transaction and everything, are we to assume then there is very low probability that, that date will not be met then? And do you feel near 100% certain that the business model going beyond March you will be in control of the Kraft business?
Let me, Matt, first speak to the first question. We have locked our coffee prices for fiscal 2011. And yes, we locked those prices at lower than today's spot rates. And again, that was some efforts we did as we saw the market moving up. It turns out to be in a very favorable move for us at the time, as we have our coffee needs met for the year at prices higher than last year but at a manageable level. With respect to our transition of our packaged coffee business, we have, as we said before, terminated our relationship with Kraft, effective March 1. We are building the infrastructure, putting our plans in place to transition the business as of that date. Now with that said, as you're aware, there are proceedings in place that I won't go into detail on, but I think you're well aware that there are some legal proceedings and there's an arbitration process, both of which we expect could impact a number of things. And we'll leave the details of that to the arbitrator, but I would just speak in general to the fact that we're prepared, we're ready and we're putting our plans in place to take it over on March 1.
And, Troy, if I could add to your point, we are well positioned to take the business back on March 1. We have already taken the Tazo tea business back, as Howard mentioned, on January 1 and are now selling and shipping that business to our customers in the United States. And again, we are well positioned and ready for the March 1 date and look forward to it.
Your next question comes from the line of Jeffrey Bernstein from Barclays Capital.
Jeffrey Bernstein - Barclays Capital
From a broader-question perspective, if you look back to the start of the year, the first time you offered, perhaps some fiscal '11 guidance, it looks like you were talking about a coffee impact of less than $0.05. Now it looks like it's pushing $0.20, when, in fact, the EPS guidance has actually been increased, and yet the comp guidance has not changed. So I'm just -- I mean, I know you've raised the margin a little bit, but it would seem like coffee being up meaningfully from where you were and most of the other drivers unchanged, I was wondering whether you can kind of connect the dots in terms of what has it been incremental working in your favor to offset these things? And then, just separately, can you give us any clarity on VIA International? I know you mentioned four markets. Just wondering if you can help us size up that success, because it seems like VIA's success is really all about international, and I know it's oftentimes difficult to break into a new market. So just to get some comfort around the ultimate success of VIA internationally.
Let me take the first one, then I'll hand it off for the second question about VIA internationally. What has happened as we have watched what's happening in the coffee market and ultimately moved to a place where we've locked and committed our pricing at this point in time, is we've concurrently seen a couple of things happen. First of all, the results of our first quarter were outstanding. It surpassed our own expectations. We're very confident about what we expected to see coming into the holiday period. And then we're dramatically surprised on the positive side by transaction growth, by how our holiday lineup resonated with consumers and, importantly, our business unit's ability to deliver that strong top line growth into dramatic margin improvement at the bottom line, all of which you see laid out as you look at our Q1 result. The strength of that business momentum, some of that margin improvement in International and the U.S. happening more aggressively, more dramatically and, certainly, earlier than we would have predicted, that's part of the offset. That's much of what gives us confidence as we look at the coming few quarters. And then I'd also say everywhere we can, we are looking very closely at how to manage our business more efficiently. And as you know, much of the last two years has been a series of initiatives we've had internally to improve the efficiency of our store operations, of our supply chain, of our back office. And we continue to have initiatives underway, routinely, consistently and constantly, to drive more efficiently in the back end to allow us to deliver results and to allow us at the same time to invest in the future. Where we can, we've accelerated those initiatives, we've doubled down on those kinds of things. And those go a long way toward helping us offset the coffee costs initiative, combined with just the improving business performance that we saw in the first quarter.
Now let me try and answer the question about VIA in a number of ways. Let's take a step back from what we've accomplished thus far and just kind of set the stage for the opportunity. The size of the global opportunity, in terms of instant soluble coffee, as I said in my comments, is north of $20 billion. And that does not include the growing segment of single-serve. And what we've been able to accomplish, I think, is something that we think we can replicate around the world. And I would also say that when you look at the overall soluble market, the majority of it, more than, probably, 95% or so, is outside of the U.S. And I would also say that the degree of difficulty in getting success in the U.S., in my view, is much greater than it's going to be in markets where the soluble market is 80%, 90% in terms of usage. But the benefits that we have is the ability to introduce VIA inside our own retail stores, use the relationship and the trust that we have with our customers and our partners and use our stores as a sampling vehicle, which most consumer products do not have. So if you take that model and you replicate it in terms of other countries, the success we've now had in Japan, Canada, the U.K. and the Philippines all sits on our ability to kind of alter and change behavior in our stores and then, over time, bring it to the grocery channel. In addition to that, I think, over time, we will use VIA in a way that is a little bit different than we've used it today. And there's no reason in our mind that VIA can't lead into a market where we don't have scale on our retail stores. As an example, I'm not saying we're doing this tomorrow, but if you look at Russia, which is 90% soluble coffee, we now know, through our own research, the opportunity we have with VIA. Now we don't have economies of scale in that market in terms of hundreds of stores. But we've got a fantastic brand position in the market and a lot of unaided awareness about Starbucks. So all it's going to take for us to go into a market like that, or, for that matter, India, another market that is 80% soluble, and with a partner like Tata who's deeply entrenched in terms of distribution. So we're looking at VIA now across multiple channels distribution, our own stores. In addition to that, we also recognize that we've got local relevancy for VIA in terms of its flavor profile and its dairy component. And specifically, in many markets, VIA will be introduced not only as a black coffee, but also with sugar and/or with dairy. So these are the early stages of building a significant global business in an untapped $24 billion category that is not only ripe for innovation but hasn't had any innovation for over 50 years. So I think the highlight is we're just getting started. And we can check every box in terms of what we've been able to accomplish. And I think the success, the metrics in terms of what we've done, it just speaks for itself.
Your next question comes from the line of Sara Senatore from Sanford Bernstein.
Sara Senatore - Bernstein Research
I just wanted to check on the China comps. If I look at the sort of new-store maturity curve, can you talk about how much of that comp, maybe, just came from maturation versus how much was really like incremental demand, where you actually like a demonstrable amount of new customers and that kind of thing? Just the natural maturity curve and the difference between a mature store and a new store.
Sara, this is John. I think that what we're seeing in China is that the brand continues to attract new customers into the stores as well as continuing to increase the level of frequency of our existing customers. As we've gone into new markets, we've seen that the stores and the way they are performing are really outperforming the whole portfolio in total as we enter a new market. So for us, in terms of breaking it out in terms of the incremental customers versus the existing customers, I won't go into details other than to say that the comps that we're seeing in the mid-20s are sustaining. We continue to see heavy transaction growth, and we continue to see a level of frequency of increasing numbers into our stores with the Chinese consumers.
Your next question comes from the line of Keith Siegner from Crédit Suisse.
Keith Siegner - Crédit Suisse AG
This is a question maybe for John and Troy. I just wanted to ask about international margins.1Q is very impressive, clearly a record.500-basis-points-plus better than last year, substantially better than fourth quarter, which was the previous peak. You've got increasing benefit from cost programs coming as the year progresses. But the guidance is still only for 150 to 200 basis points of full year-over-year increase. Is this really -- like, where's the disconnect? Is this just the commodity cost piece? Is it expenses related to expansion in India? Help me get a sense of the full-year guidance in perspective of the first quarter performance.
Sure, Keith. Let me try to speak to that. The first thing I'd mention is the first quarter was an exceptional quarter in International. There's no question about that. That business has been, clearly, taking the lessons from the U.S. as we've worked harder to increase [ph] partnership, to bring to bear outside of the U.S. all the things that helped us transform the business here and drive increased profitability. Much of that came together, in a very powerful way, in the first quarter. And some of that improvement is similar to what we've seen in the U.S., a seasonally driven high-margin rate in the first quarter. Similarly, in the U.S., where we saw that 21.9%, I wouldn't expect 21.9% margins in the U.S. every quarter. We definitely have some seasonality, as you're aware of. And there's some element to that internationally as well. With that said, we're very much bringing to bear the further improvements internationally. We're also cognizant of, as John mentioned earlier, all the heavy lifting that we still have to do, some of which will involve more investments in the quarters ahead around people, around infrastructure, around systems and processes. And so our journey to permanently landing the International business in that mid- to upper teens will also involve some investments in the quarters ahead. But with that said, I guess the underlying message here is, there's no question, International exceeded our expectations in the quarter. It's moving up the ramp even faster than we thought, and that gives us a tremendous amount of confidence in the guidance we have this year, but much more significant than this year, in where we think that business can go in 2012 and in 2013.
Your next question comes from the line of John Ivankoe from JP Morgan.
John Ivankoe - JP Morgan Chase & Co
Actually, a fairly similar question on the U.S. as well, if I may. Troy, you mentioned that inventory management point-of-sale system was not in your exceptional margin performance in the first quarter. So I was hoping if you could possibly quantify the potential benefits from those systems as they mature into the second half of 2011, and now that the point-of-sale system is fully rolled out, what you're seeing from a capacity perspective in terms of that system's ability to process more customer transactions.
Yes, let me speak to part of that. Then I'm going to ask Cliff Burrows, our U.S. president, to address it in even more depth. You heard correct in my prepared comments, which is that those systems are fully in place now. But as we've been saying for quite some time, there is a transitional period of time, a learning curve, where we expect to really use this year, all of fiscal '11, to learn the various additional capabilities that we have at the store level. We very much expect as we move through this year, but more impactfully as we move into 2012, that those new tools will help improve the customer experience in our stores, the partner experience in our stores and will yield us efficiencies over time, all very important parts of why we chose to make those investments. With that said, how I view things like our new point-of-sale and our inventory management system are additional tools for us over time to help drive margin improvement, but importantly, to give us tools and ways to offset all the natural cost pressures that are there in any given year. Those might be commodity pressures that we face this year, they maybe occupancy pressures in different markets at different times. This is just one more tool that, while we will see some of those inflationary pressures, we believe we can sustain U.S. margins and even build them further based on tools such as this.
John, it's Cliff. One of the most exciting things is we finished this rollout, and we did it at a time when our stores were very busy. We managed to cope with the increased level of transactions that we experience normally November and December, and our customer satisfaction scores, particularly in our most intense markets, continued to remain at the highest levels ever. And that really gives us encouragement going forward. And like Troy said, this is not going to be one thing that delivers. This helps us grow our capability and our efficiency and growth capacity, because we know, as I said at the analyst conference in December, creating capacity at peak is one of our priorities. And for me, this underpins the realization of that opportunity and as we learn more effectively how to work with the new inventory management system, our in-stock position, particularly around food items, and the opportunity it gives us to increase attachment to food. And those are some of the small ways that will add to us continuing to refine and improve our margin.
Your last question comes from the line of Phillip Juhan from BMO Capital Markets.
Phillip Juhan - BMO Capital Markets U.S.
This is for Troy and John. Based on your public filings, it looks like last year, in 2010, you guys generated about $113 million of VIA sales in the Starbucks stores and about $22 million in the CPG channel. Of course, that was primarily in the fourth quarter. Assuming you annualize those numbers, would you see any sort of change in that ratio in the first quarter?
Let me speak at a high level, but I'd invite others here to jump in. I would expect -- here's what we saw in the first quarter. We saw increased VIA sales through both of those channels. As you know, VIA was rolled out in our Starbucks stores much earlier in the year and so had more time to get up that sales curve. And we are very pleased with the level and the rate of VIA growth in our Starbucks stores in the first quarter, part of which was driven by existing SKUs, part of which was driven by new SKUs, such as Flavors and such as Christmas Blend VIA. I'll also point out that our CPG business is accelerating rapidly, and we would expect that business, with respect to VIA sales, to accelerate more rapidly as we move through the balance of this year, as that business adds distribution, as we increasingly drive frequency and repeat purchases. With that, let me ask, perhaps, Jeff Hansberry to comment a little bit more on the CPG channel.
Yes. What we're seeing on VIA, if we look at Q1, we saw growth, as Troy said, on both sides of the equation, both in our retail stores and in CPG. What we expect as we go forward, as the brand grows, awareness grows and repeat grows, that we will see a migration of volume towards CPG channels, as people become aware of the brand and try it. One of the drivers of growth on the retail side in Q1 was the launch of flavors. We'll start to see the benefit of Flavors in Q2 in CPG as we launch flavors. In fact, we're picking up significant distribution behind the Flavors and Ice launches that will start to show up at retail as early as this month.
And this is John, just for a quick fill-up. On the International side, through our retail stores, we had a very strong first quarter on VIA with the introduction of Christmas Blend. And Howard spoke about the success overall, but internationally, we're very pleased with the performance in the U.K. and in Japan and in Canada. We also have China, which is coming up, which we will roll out VIA in April as part of our 40th anniversary celebration. And we're very excited about the opportunity that that's going to present as well.
Thank you, John. So that concludes today's earnings call. Thank you all for joining us. And we'll speak with you again in April for the Q2 call. Thank you.
This concludes today's Starbucks Coffee Company's Fourth Quarter Earnings Call. You may now disconnect.
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: firstname.lastname@example.org. Thank you!