Green Mountain to raise coffee prices; shares up on strong results

* Q2 adj EPS $0.48 vs est $0.38

* Q2 sales $647.7 mln vs est $629.4 mln

* Sees FY adj EPS $1.43-$1.50 vs prior $1.19-$1.29

* Shares up 21 pct after the bell (Adds details on proposed price increase, background, updates share movement)

By Mihir Dalal

BANGALORE, May 3 (Reuters) - Green Mountain Coffee Roasters Inc's gross margins got a boost as it effectively passed on higher coffee costs to buyers, and the company said it would raise its prices again to deal with record high coffee costs.

Shares of the company, which is the leader in the U.S. single-cup coffee market with its popular Keurig machines, jumped 21 percent after the bell as it reported market-topping quarterly results and raised its outlook for the year.

Coffee costs have continued to rise sharply over the past year, with Arabica coffee futures trading at their highest levels in 34 years.

Second-quarter gross margins rose to 37.5 percent from 33.5 percent in the year-ago quarter after the company raised the price of its coffee, Green Mountain said in a statement.

The Vermont-based company -- which increased its prices by 10-15 percent in September -- said it would again raise the prices of its coffee by 10 percent and realize the full benefits of the raise during its July-September quarter.

Green Mountain also said it would offer 7.1 million common shares -- less than 5 percent of its current outstanding shares -- and look to sell its Filterfresh U.S.-based coffee services business to reduce debt.

As of March 26, the company's long-term debt was $1.05 billion.

Green Mountain got Filterfresh -- which sells a variety of one-cup coffee machines and refills primarily to offices -- as a part of its $890 million acquisition of Canada's Van Houtte last year. It raised about $1.35 billion of debt to fund the deal.

Shares of the company, which had nearly doubled this year after the company's licensing deals with Starbucks and Dunkin' Donuts, were up 21 percent at $77.4 on Tuesday after the bell.

The stock has attracted the attention of several prominent hedge funds, including Steve Cohen's SAC Capital, which have bought a stake in the company over the past few months.

STRONG Q2, OUTLOOK RAISE

The company posted a second-quarter net income of $65.4 million, or 44 cents a share, compared with $24.1 million, or 17 cents a share, a year ago.

Excluding items, it earned 48 cents a share, beating analysts' average estimate of 38 cents a share, according to Thomson Reuters I/B/E/S. [ID:nASA021W3]

The company said it now expects adjusted earnings of $1.43-$1.50 a share for the year ending September, up from its previous view of $1.19-$1.29 a share.

(Source: http://www.reuters.com/article/2011/05/03/greenmountaincoffeeroasters-idUSL3E7G34HR20110503)