-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NBQ4ttTi9fOCgzBRQkKBAqVS+hFlwXMr6ZOiOEjaltJjv4wIeAnRxCBEO4DbmSSE WOXmu9laSdeKz0yIQgUiJw== 0000909954-00-000007.txt : 20000524 0000909954-00-000007.hdr.sgml : 20000524 ACCESSION NUMBER: 0000909954-00-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000408 FILED AS OF DATE: 20000523 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREEN MOUNTAIN COFFEE INC CENTRAL INDEX KEY: 0000909954 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090] IRS NUMBER: 030339228 STATE OF INCORPORATION: DE FISCAL YEAR END: 0928 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12340 FILM NUMBER: 642230 BUSINESS ADDRESS: STREET 1: 33 COFFEE LANE CITY: WATERBURY STATE: VT ZIP: 05676 BUSINESS PHONE: 8022445621 MAIL ADDRESS: STREET 1: 33 COFFEE LANE CITY: WATERBURY STATE: VT ZIP: 05676 10-Q 1 10-Q FORM 10-Q U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the twelve weeks ended April 8, 2000 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from __________ to ____________ Commission file number 1-12340 GREEN MOUNTAIN COFFEE, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 03-0339228 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 33 Coffee Lane, Waterbury, Vermont 05676 --------------------------------------------------- (Address of principal executive offices) (zip code) (802) 244-5621 ---------------------------------------------------- (Registrant's telephone number, including area code) ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ X ] NO [ ] As of May 18, 2000, 3,358,822 shares of common stock of the registrant were outstanding. Part I. Financial Information Item I. Financial Statements GREEN MOUNTAIN COFFEE, INC. Consolidated Balance Sheets (Dollars in thousands) April 8, September 25, 2000 1999 ---------- ------------- (unaudited) Assets Current assets: Cash and cash equivalents......................................... $ 819 $ 415 Receivables, less allowances of $225 at April 8, 2000 and $190 at September 25, 1999.............................. 7,794 6,223 Inventories....................................................... 5,379 5,409 Income tax receivable............................................. - 233 Other current assets.............................................. 555 264 Loans to officers................................................. 214 250 Deferred income taxes, net........................................ 220 490 ---------- ------------- Total current assets........................................ 14,981 13,284 Fixed assets, net.................................................... 10,208 10,183 Other long-term assets............................................... 238 250 Deferred income taxes, net........................................... 298 161 ---------- ------------- Total assets......................................................... $ 25,725 $ 23,878 ========== ============= Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt................................. $ 169 $ 1,127 Accounts payable.................................................. 5,110 4,551 Accrued payroll................................................... 1,301 1,005 Accrued expenses.................................................. 942 357 Income tax payable................................................ 233 - Accrued losses and other costs of discontinued operations, net.... 180 192 ---------- ------------- Total current liabilities.................................... 7,935 7,232 ---------- ------------- Long-term debt....................................................... 276 1,908 ---------- ------------- Long-term line of credit............................................. 5,475 3,056 ---------- ------------- Commitments and contingencies Stockholders' equity: Common stock, $0.10 par value: authorized - 10,000,000 shares; issued- 3,635,167 shares at April 8, 2000 and 3,615,404 shares at September 25, 1999............................ 364 362 Additional paid-in capital........................................ 13,543 13,409 Accumulated earnings (deficit).................................... 480 (1,435) Treasury shares, at cost: 280,195 shares at April 8, 2000 and 100,609 shares at September 25, 1999, respectively........... (2,348) (654) ---------- ------------- Total stockholders' equity........................................ 12,039 11,682 ---------- ------------- Total liabilities and stockholders' equity.................. $ 25,725 $ 23,878 ========== ============= The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
GREEN MOUNTAIN COFFEE, INC. Consolidated Statements of Operations (Dollars in thousands except per share data) Twelve weeks ended -------------------------------- April 8, 2000 April 10, 1999 ------------- -------------- (unaudited) Net sales....................................................... $ 18,259 $ 14,452 Cost of sales................................................... 10,990 8,892 ------------- -------------- Gross profit.................................................. 7,269 5,560 Selling and operating expenses.................................. 4,642 3,686 General and administrative expenses............................. 1,372 1,103 Loss on abandonment of fixed assets............................. 135 25 ------------- -------------- Operating income.............................................. 1,120 746 Other income.................................................... 14 7 Interest expense................................................ (107) (175) ------------- -------------- Income from continuing operations before income taxes......... 1,027 578 Income tax expense.............................................. (412) (220) ------------- -------------- Income from continuing operations............................. 615 358 Discontinued operations: Income from discontinued retail stores operations, net of income tax expense of $114................................... - 186 ------------- -------------- Net income.................................................... $ 615 $ 544 ============= ============== Basic income per share: Weighted average shares outstanding......................... 3,359,978 3,483,044 Income from continuing operations........................... $ 0.18 $ 0.10 Income from discontinued operations......................... - $ 0.06 ------------- -------------- Net income.................................................. $ 0.18 $ 0.16 ============= ============== Diluted income per share: Weighted average shares outstanding......................... 3,546,884 3,537,410 Income from continuing operations........................... $ 0.17 $ 0.10 Income from discontinued operations......................... - $ 0.05 ------------- -------------- Net income.................................................. $ 0.17 $ 0.15 ============= ============== The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
GREEN MOUNTAIN COFFEE, INC. Consolidated Statement of Operations (Dollars in thousands except per share data) Twenty-eight weeks ended -------------------------------- April 8, 2000 April 10, 1999 ------------- -------------- (unaudited) Net sales....................................................... $ 43,001 $ 34,520 Cost of sales................................................... 25,686 21,432 ------------- -------------- Gross profit.................................................. 17,315 13,088 Selling and operating expenses.................................. 10,691 8,654 General and administrative expenses............................. 3,056 2,502 Loss on abandonment of fixed assets............................. 135 25 ------------- -------------- Operating income............................................. 3,433 1,907 Other income.................................................... 10 11 Interest expense................................................ (248) (475) ------------- -------------- Income from continuing operations before income taxes........ 3,195 1,443 Income tax expense.............................................. (1,280) (544) ------------- -------------- Income from continuing operations............................. 1,915 899 Discontinued operations: Income from discontinued retail stores operations, net of income tax expense of $114.................................... - 186 ------------- -------------- Net income.................................................... $ 1,915 $ 1,085 ============= ============== Basic income per share: Weighted average shares outstanding......................... 3,419,445 3,501,446 Income from continuing operations........................... $ 0.56 $ 0.25 Income from discontinued operations......................... - $ 0.06 ------------- -------------- Net income.................................................. $ 0.56 $ 0.31 ============= ============== Diluted income per share: Weighted average shares outstanding......................... 3,544,475 3,523,955 Income from continuing operations........................... $ 0.54 $ 0.25 Income from discontinued operations......................... - $ 0.06 ------------- -------------- Net income.................................................. $ 0.54 $ 0.31 ============= ============== The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
GREEN MOUNTAIN COFFEE, INC. Consolidated Statements of Cash Flows (Dollars in thousands) Twenty-eight weeks ended -------------------------------- April 8, 2000 April 10, 1999 ------------- -------------- (unaudited) Cash flows from operating activities: Net income.................................................... $ 1,915 $ 1,085 Adjustments to reconcile net income to net cash provided by operating activities: Income from discontinued operations......................... - (186) Depreciation and amortization............................... 1,596 1,587 Loss on disposal and abandonment of fixed assets............ 194 - Provision for doubtful accounts............................. 138 157 Deferred income taxes....................................... 133 228 Changes in assets and liabilities: Receivables............................................... (1,709) (636) Inventories............................................... 30 150 Other current assets...................................... (22) (283) Other long-term assets, net............................... 12 (45) Accounts payable.......................................... 559 1,025 Accrued payroll........................................... 296 (78) Accrued expenses.......................................... 818 (55) ------------- -------------- Net cash provided by continuing operations...... 3,960 2,949 Net cash (used for) provided by discontinued operations... (12) 70 ------------- -------------- Net cash provided by operating activities................. 3,948 3,019 Cash flows from investing activities: Capital expenditures for fixed assets......................... (2,070) (1,262) Proceeds from disposals of fixed assets....................... 255 57 Proceeds from disposal of discontinued operations............. - 158 ------------- -------------- Net cash used for investing activities.................... (1,815) (1,047) ------------- -------------- Cash flows from financing activities: Purchase of treasury shares................................... (1,694) (457) Proceeds from issuance of common stock........................ 136 98 Proceeds from issuance of long-term debt...................... 43 - Repayment of long-term debt................................... (2,633) (135) Principal payments under capital lease obligation............. - (12) Net change in revolving line of credit........................ 2,419 (1,674) ------------- -------------- Net cash used for financing activities............. (1,729) (2,180) ------------- -------------- Net increase (decrease) in cash and cash equivalents............. 404 (208) Cash and cash equivalents at beginning of period................. 415 777 ------------- -------------- Cash and cash equivalents at end of period....................... $ 819 $ 569 ============= ============== The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Green Mountain Coffee, Inc. Notes to Consolidated Financial Statements 1. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q, and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair statement of the interim financial data have been included. Results from operations for the twelve and twenty-eight week periods ended April 8, 2000 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2000. For further information, refer to the consolidated financial statements and the footnotes included in the annual report on Form 10-K for Green Mountain Coffee, Inc. (the "Company") for the fiscal year ended September 25, 1999. Certain reclassifications of prior year balances have been made to conform to the current presentation. 2. Inventories Inventories consist of the following: April 8, September 25, 2000 1999 ------------- ------------- Raw materials and supplies....... $ 2,816,000 $ 2,809,000 Finished goods................... 2,563,000 2,600,000 ------------- ------------- $ 5,379,000 $ 5,409,000 ============= ============= 3. Earnings per share The following table illustrates the reconciliation of the numerator and denominator of basic and diluted income per share from continuing operations computations as required by SFAS No. 128 (dollars in thousands, except share and per share data): Twelve weeks ended Twenty-eight weeks ended ------------------------ ------------------------ April 8, April 10, April 8, April 10, 2000 1999 2000 1999 ---------- ----------- ----------- ---------- Numerator - basic and diluted earnings per share : Net income from continuing operations... $ 615 $ 358 $ 1,915 $ 899 ========== =========== =========== ========== Denominator: Basic earnings per share - weighted average shares outstanding.............. 3,359,978 3,483,044 3,419,445 3,501,446 Effect of dilutive securities - stock options................................. 186,906 54,366 125,030 22,509 ---------- ----------- ----------- ---------- Diluted earnings per share - weighted average shares outstanding.............. 3,546,884 3,537,410 3,544,475 3,523,955 ========== =========== =========== ========== Basic earnings per share................ $ 0.18 $ 0.10 $ 0.56 $ 0.25 Diluted earnings per share............. $ 0.17 $ 0.10 $ 0.54 $ 0.25
For the twelve weeks ended April 10, 1999, options to purchase 291,083 shares of common stock at exercise prices ranging from $7.00 to $10.00 per share were outstanding but were not included in the computation of diluted income per share because the options' exercise price was greater than the market price of the common shares. For the twelve weeks ended April 8, 2000, options to purchase 2,300 shares of common stock at an exercise price of $12.75 per share were outstanding but were not included in the computation of diluted income per share because the options' exercise price was greater than the market price of the common shares. 4. Segment reporting Business conducted by the Company can be segmented into two distinct areas determined by the distribution channel. The direct mail segment is comprised of all consumer-direct sales and sales to small businesses which are solicited via catalogs and the Company's online store - www.GreenMountainCoffee.com. The wholesale segment is comprised of all sales to customers who resell Green Mountain coffee either as coffee beans or brewed coffee by the cup, such as supermarkets, office coffee distributors, convenience stores, restaurants, and others. Wholesale sales are generated through the Company's direct sales force and a limited number of distributors. Both segments of the Company sell similar products, although the entire Company product range is not fully available to both segments, and direct mail customers do not have access to the same range of equipment service, delivery and merchandising support as wholesale customers. Selling and operating costs directly attributable to the direct mail segment are charged accordingly while all remaining selling, operating, general and administrative expenses (including depreciation and amortization) are charged to the wholesale segment. The Company's management does not review assets by segment. The table below discloses segment net sales and pre-tax income for the twelve and twenty-eight weeks ended April 8, 2000 and April 10, 1999 (in thousands): Twelve weeks ended Twenty-eight weeks ended ------------------------ ------------------------ April 8, April 10, April 8, April 10, 2000 1999 2000 1999 ---------- ----------- ----------- ---------- Net sales Reportable segments: Wholesale $ 17,481 $ 13,723 $ 40,508 $ 32,464 Direct mail 778 729 2,493 2,056 ---------- ----------- ----------- ---------- Total net sales $ 18,259 $ 14,452 $ 43,001 $ 34,520 ========== =========== =========== ========== Pre-tax income Reportable segments: Wholesale $ 1,033 $ 647 $ 3,191 $ 1,776 Direct mail 87 99 242 131 ---------- ----------- ----------- ---------- Operating income 1,120 746 3,433 1,907 Reconciling items: Other income 14 7 10 11 Interest expense (107) (175) (248) (475) ---------- ----------- ----------- ---------- Pre-tax income $ 1,027 $ 578 $ 3,195 $ 1,443 ========== =========== =========== ==========
5. New Debt Agreement On April 7, 2000, the Company consolidated its credit facilities with Fleet Bank -NH ("Fleet"). The amended debt agreement provides for a revolving line of credit of $15,000,000, which matures on March 31, 2003 and is not subject to a borrowing base formula. The purpose of this new facility is to fund the Company's ordinary working capital requirements, planned repurchases of shares of stock and other general corporate purposes. The interest paid on the line of credit varies with the prime, LIBOR and Bankers Acceptance rates, plus a margin based on a performance price structure. At April 8, 2000, a total of $5,475,000 was outstanding under the new line of credit. At April 8, 2000 interest rate charged on 5,050,000 equaled one-month LIBOR plus 125 basis points (7.63% on $1,000,000 and 7.55% on $4,050,000) and the remaining $425,000 was charged interest at the prime rate or 9%. The new Fleet credit facility is subject to certain quarterly covenants, and the Company was in compliance with these covenants at April 8, 2000. The Fleet term debt facility, which had an outstanding balance of $2,050,000 on April 7, 2000, was extinguished using new borrowings under the line of credit. 6. Discontinued Company-Owned Retail Store Operations During the third fiscal quarter of 1998, the Company announced that it was discontinuing its company-owned retail store operations and estimated its loss on disposal at $1,259,000 (net of a tax benefit of $834,000). The pre-tax loss on disposal of $2,093,000 consisted of an estimated loss on disposal of the business of $1,692,000 and a provision of $401,000 for anticipated losses from May 29, 1998 (the measurement date) until disposal. The loss on disposal included provisions for estimated lease termination costs, write-off of leasehold improvements and other fixed assets, severance and employee benefits. During the second quarter of fiscal 1999, the Company revised its estimated pre-tax loss on disposal and reversed $300,000 ($186,000 net of tax) of the original estimate, primarily due to larger than expected proceeds from the sale of fixed assets and lower lease termination costs. 7. ChefExpress.net, Inc. Promissory Note On March 21, 2000, ChefExpress.net, Inc. delivered a promissory note to the Company in the principal amount of $100,000 and bearing an annual interest rate of 8%. The Company has the option to convert this loan into an equity investment at the time of ChefExpress.net's initial private placement offering. This investment in the ChefExpress.net venture represents an opportunity for the Company to be prominently featured in an e-procurement website that targets chefs in restaurants and the high-end sector of the food service channel. William D. Davis, a board member of Green Mountain Coffee, is the Chief Executive Officer and President of ChefExpress.net. 8. Dutch Auction Self-Tender Offer On April 17, 2000, the Company commenced a Dutch Auction self-tender offer for up to 300,000 shares of the Company's Common Stock at a price range of $14.50 to $16 per share. Effective May 22, 2000, the Company accepted for purchase all 278,658 shares tendered at a purchase price of $16 per share. 9. Derivative instruments and hedging activities In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). This pronouncement will require the Company to recognize derivatives on its balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The Company expects that this new standard will not have a significant effect on its results of operations. SFAS 137 deferred the effective date of SFAS 133 to fiscal years beginning after June 15, 2000, which is fiscal year 2001 for the Company. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW For the twenty-eight weeks ended April 8, 2000, Green Mountain Coffee, Inc. (the "Company" or "Green Mountain") derived approximately 94.2% of its net sales from its wholesale operation. Green Mountain's wholesale operation sells coffee to retailers and food service concerns including supermarkets, restaurants, convenience stores, specialty food stores, hotels, universities and business offices. The Company's direct mail operation accounted for approximately 5.8% of net sales during the same period. Cost of sales consists of the cost of raw materials including coffee beans, flavorings and packaging materials, a portion of the Company's rental expense, the salaries and related expenses of production and distribution personnel, depreciation on production equipment and freight and delivery expenses. Selling and operating expenses consist of expenses that directly support the sales of the Company's wholesale or direct mail channels, including media and advertising expenses, a portion of the Company's rental expense, and the salaries and related expenses of employees directly supporting sales. General and administrative expenses consist of expenses incurred for corporate support and administration, including a portion of the Company's rental expense and the salaries and related expenses of personnel not elsewhere categorized. The Company's fiscal year ends on the last Saturday in September. The Company's fiscal year normally consists of 13 four-week periods with the first, second and third "quarters" ending 16 weeks, 28 weeks and 40 weeks, respectively, after the commencement of the fiscal year. Fiscal 2000, which began on September 26, 1999 and ends on September 30, 2000, will consist of 53 weeks with the thirteenth fiscal period having 5 weeks. COFFEE PRICES, AVAILABILITY AND GENERAL RISK FACTORS Green coffee commodity prices are subject to substantial price fluctuations, generally caused by multiple factors including weather, political and economic conditions in certain coffee-producing countries and other supply-related concerns. The Company believes that the "C" price of coffee (the price per pound quoted by the Coffee, Sugar and Cocoa Exchange) will remain highly volatile in Fiscal 2000 and beyond. In addition to the "C" price, coffee of the quality sought by Green Mountain also tends to trade on a negotiated basis at a substantial premium or "differential" above the "C" price. These differentials are also subject to significant variations. In the past, the Company has generally been able to pass increases in green coffee costs to its customers. However, there can be no assurance that the Company will be successful in passing such fluctuations on to the customers without losses in sales volume or gross margin in the future. Similarly, rapid sharp decreases in the cost of green coffee could also force the Company to lower sales prices before realizing cost reductions in its green coffee inventory. Because Green Mountain roasts over 25 different types of green coffee beans to produce its more than 60 varieties of coffee, if one type of green coffee bean were to become unavailable or prohibitively expensive, management believes Green Mountain could substitute another type of coffee of equal or better quality, meeting a similar taste profile, in a blend or temporarily remove that particular coffee from its product line. However, frequent substitutions could lead to cost increases and fluctuations in gross margins. Furthermore, a worldwide supply shortage of the high-quality arabica coffees the Company purchases could have an adverse impact on the Company. The Company enters into fixed coffee purchase commitments in an attempt to secure an adequate supply of quality coffees. To further reduce its exposure to rising coffee costs, the Company, from time to time, enters into futures contracts and buys options to hedge price-to-be-established coffee purchase commitments. The Company expects to face increasing competition in all its markets, as competitors improve the quality of their coffees to make them more comparable to Green Mountain's. In addition, specialty coffee is now more widely available and a number of competitors benefit from substantially larger promotional budgets following, among other factors, the acquisition of specialty coffee companies by large, consumer goods multinationals. The Company expects that the continued high quality and wide availability of its coffee across a large array of distribution channels and the added-value of its customer service processes will enable Green Mountain to successfully compete in this environment, although there can be no assurance that it will be able to do so. Certain statements contained herein are not based on historical fact and are "forward-looking statements" within the meaning of the applicable securities laws and regulations. In addition, the Company's representatives may from time to time make oral forward-looking statements. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statements that do not directly relate to any historical or current fact. Words such as "anticipates", "believes", "expects", "estimates", "intends", "plans", "projects", "may", and similar expressions, may identify such forward-looking statements. Owing to the uncertainties inherent in forward-looking statements, actual results could differ materially from those set forth in forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, business conditions in the coffee industry and food industry in general, fluctuations in availability and cost of green coffee, the impact of the loss of a major customer, economic conditions, prevailing interest rates, the management challenges of rapid growth, variances from budgeted sales mix and growth rate, consumer acceptance of the Company's new products, the impact of a tighter job market, Year 2000 issues, weather and special or unusual events, as well as other risk factors described in the Company's Annual Report on Form 10-K for the fiscal year ended September 25, 1999 and other factors described from time to time in the Company's filings with the Securities and Exchange Commission. Forward-looking statements reflect management's analysis as of the date of this document. The Company does not undertake to revise these statements to reflect subsequent developments. RESULTS OF OPERATIONS Twelve weeks ended Twenty-eight weeks ended ------------------------ ------------------------ April 8, April 10, April 8, April 10, 2000 1999 2000 1999 ---------- ----------- ---------- ----------- Net sales................................ 100.0 % 100.0 % 100.0 % 100.0 % Cost of sales............................ 60.2 % 61.5 % 59.7 % 62.1 % ---------- ----------- ---------- ----------- Gross profit........................ 39.8 % 38.5 % 40.3 % 37.9 % Selling and operating expenses........... 25.4 % 25.5 % 24.9 % 25.1 % General and administrative expenses...... 7.5 % 7.6 % 7.1 % 7.2 % Loss on abandonment of fixed assets...... 0.8 % 0.2 % 0.3 % 0.1 % ---------- ----------- ---------- ----------- Operating income.................... 6.1 % 5.2 % 8.0 % 5.5 % Other income............................. 0.1 % 0.0 % 0.0 % 0.0 % Interest expense......................... (0.6)% (1.2)% (0.6)% (1.3)% ---------- ----------- ---------- ----------- Income from continuing operations before taxes........................ 5.6 % 4.0 % 7.4 % 4.2 % Income tax expense....................... (2.2)% (1.5)% (2.9)% (1.6)% ---------- ----------- ---------- ----------- Income from continuing operations... 3.4 % 2.5 % 4.5 % 2.6 % ---------- ----------- ---------- ----------- Income from discontinued operations, net of tax expense........................... - 1.3 % - 0.5 % ---------- ----------- ---------- ----------- Net income......................... 3.4 % 3.8 % 4.5 % 3.1 % ========== =========== ========== ===========
TWELVE WEEKS ENDED APRIL 8, 2000 VERSUS TWELVE WEEKS ENDED APRIL 10, 1999 Net sales increased by $3,807,000, or 26.3%, from $14,452,000 for the twelve weeks ended April 10, 1999 (the "1999 period") to $18,259,000 for the twelve weeks ended April 8, 2000 (the "2000 period"). Coffee pounds sold increased by approximately 351,000 pounds, or 17.3%, from approximately 2,031,000 pounds in the 1999 period to approximately 2,382,000 pounds in the 2000 period. The difference between the percentage increase in net sales and the percentage increase in coffee pounds sold is primarily due to the increased sales of single-cup Keurig-Brewed TM line of coffees, whose sales price per coffee pound is greater than the Company's traditional product line. The increase in net sales is primarily attributable to the wholesale segment in which net sales increased by $3,758,000, or 27.4%, from $13,723,000 for the 1999 period to $17,481,000 for the 2000 period. The wholesale net sales increase resulted primarily from the growth in the office coffee service and, to a lesser extent, convenience store channels. Gross profit increased by $1,709,000, or 30.7%, from $5,560,000 for the 1999 period to $7,269,000 for the 2000 period. As a percentage of net sales, gross profit increased 1.3 percentage points from 38.5% for the 1999 period to 39.8% for the 2000 period. The increase in gross profit as a percentage of sales was due primarily to certain efficiencies and economies of scale in distribution costs. Selling and operating expenses increased by $956,000, or 25.9%, from $3,686,000 for the 1999 period to $4,642,000 for the 2000 period. Selling and operating expenses decreased 0.1 percentage points as a percentage of sales from 25.5% for the 1999 period to 25.4% for the 2000 period. The dollar increase in selling and operating expense was primarily due to increased sales and marketing personnel expenses, as well as increased promotional expenses. General and administrative expenses increased by $269,000, or 24.4%, from $1,103,000 for the 1999 period to $1,372,000 for the 2000 period, but decreased 0.1 percentage points as a percentage of sales from 7.6% for the 1999 period to 7.5% for the 2000 period. The dollar increase in general and administrative expenses was primarily due to higher personnel and consulting expenses. During the 1999 period, the Company recorded a $25,000 loss on abandonment of loaner equipment. Throughout fiscal 1999, the Company reviewed its inventory of brewing and other equipment on loan to wholesale customers. In the course of this review, a small portion of old equipment was identified which would never be retrieved from customers sites and was in effect given away to customers. During the 2000 period, following a thorough review of its production fixed assets, the Company recorded a $135,000 loss on abandonment of production equipment and software. A large portion of the equipment and software writen-off was the coffee roasters control system, which, following a series of upgrades and modifications, had been substantially replaced over time. As a result of the foregoing, operating income increased by $374,000, or 50.1%, from $746,000 for the 1999 period to $1,120,000 for the 2000 period. Interest expense decreased by $68,000, or 38.9%, from $175,000 for the 1999 period to $107,000 for the 2000 period. The decrease is due to the reduction in the Company's long-term debt year over year. Due to recent successive increases in interest rates and repurchases of outstanding shares of the Company's common stock (through the Dutch Auction and other open market transactions - see "Liquidity and Other Resources" below), interest expense is not expected to continue decreasing year over year in the last two quarters of fiscal 2000. Income tax expense increased $192,000, or 87.3%, from $220,000 for the 1999 period to $412,000 for the 2000 period. It is expected that the Company's effective tax rate will continue to approximate 40% throughout fiscal 2000. Income from continuing operations increased by $257,000, or 71.8%, from $358,000 for the 1999 period to $615,000 in the 2000 period. During the third quarter of fiscal 1998, the Company recorded a loss of $1,259,000 (net of a tax benefit of $834,000) on disposal of its company-owned retail stores operation. During the 1999 period, after having sold or closed all of its stores, the Company revised its estimated pre-tax loss on disposal and reversed $300,000 ($186,000 net of tax) of the original estimate, primarily due to larger than expected proceeds from the sale of fixed assets and lower lease termination costs. Net income increased by $71,000, or 13.1%, from $544,000 for the 1999 period to $615,000 in the 2000 period. TWENTY-EIGHT WEEKS ENDED APRIL 8, 2000 VERSUS TWENTY-EIGHT WEEKS ENDED APRIL 10, 1999 Net sales increased by $8,481,000, or 24.6%, from $34,520,000 for the twenty-eight weeks ended April 10, 1999 (the "1999 YTD period") to $43,001,000 for the twenty-eight weeks ended April 8, 2000 (the "2000 YTD period"). Coffee pounds sold increased by approximately 821,000 pounds, or 17.1%, from approximately 4,803,000 pounds in the 1999 YTD period to approximately 5,624,000 pounds in the 2000 YTD period. The difference between the percentage increase in net sales and the percentage increase in coffee pounds sold relates primarily to changes in Green Mountain's product sales mix. Sales are increasing fastest with products whose sales price per coffee pound is greater than the Company's traditional product line, such as single-cup Keurig-Brewed TM line of coffees and the Company's new Monte Verde TM powdered hot cappuccino and frozen granita products. The increase in net sales is attributable to the wholesale segment in which net sales increased by $8,044,000, or 24.8%, from $32,464,000 for the 1999 YTD period to $40,508,000 for the 2000 YTD period. The wholesale net sales increase resulted primarily from the growth in the office coffee service and, to a lesser extent, convenience store channels. Gross profit increased by $4,228,000, or 32.3%, from $13,088,000 for the 1999 YTD period to $17,315,000 for the 2000 YTD period. As a percentage of net sales, gross profit from continuing operations increased 2.4 percentage points from 37.9% for the 1999 YTD period to 40.3% for the 2000 YTD period. The increase in gross profit as a percentage of sales was due primarily to lower distribution costs and lower green coffee costs, offset in part by increased sales of products with lower margins such as the Keurig line of coffees. Selling and operating expenses increased by $2,037,000, or 23.5%, from $8,654,000 for the 1999 YTD period to $10,691,000 for the 1999 YTD period, but decreased by 0.2 percentage point as a percentage of sales from 25.1% in the 1999 YTD period to 24.9% in the 2000 YTD period. The dollar increase in selling and operating expense was primarily due to increased sales personnel expenses, as well as increased marketing and promotional expenses. General and administrative expenses increased by $554,000, or 22.1%, from $2,502,000 for the 1999 YTD period to $3,056,000 for the 2000 YTD period, but decreased 0.1 percentage points as a percentage of sales from 7.2% for the 1999 YTD period to 7.1% for the 2000 YTD period. After the loss on abandonment of fixed assets referenced to above, operating income increased by $1,526,000, or 80.1%, from $1,907,000 for the 1999 YTD period to $3,433,000 for the 2000 YTD period. Interest expense decreased by $227,000, or 47.8%, from $475,000 for the 1999 YTD period to $248,000 for the 2000 YTD period. The decrease is due to the drop in long-term debt made possible by strong operating cash flows. Income tax expense increased $736,000, or 135.3%, from $544,000 for the 1999 YTD period to $1,280,000 for the 2000 YTD period. Income from continuing operations increased by $1,016,000, or 113.0%, from $899,000 for the 1999 YTD period to $1,915,000 in the 2000 YTD period. As explained above, during the 1999 YTD period, the Company adjusted its original estimate of the loss on disposal of the retail stores operation, thereby resulting in income from discontinued operation of $186,000 (net of income tax expense of $114,000). Net income increased $830,000, or 76.5%, from $1,085,000 in the 1999 YTD period to $1,915,000 in the 2000 YTD period. LIQUIDITY AND CAPITAL RESOURCES Working capital increased $994,000 to $7,046,000 at April 8, 2000 from $6,052,000 at September 25, 1999. This increase is primarily due to higher accounts receivable, and was partially offset by higher accounts payable and accrued expenses. During the 2000 YTD period, Green Mountain had capital expenditures of $2,070,000, including $929,000 for equipment on loan to wholesale customers, $823,000 for production equipment and $447,000 for computer equipment and software. During the 1999 YTD period, Green Mountain had capital expenditures of $1,262,000, including $903,000 for equipment on loan to wholesale customers, $148,000 for computer equipment and $118,000 for production equipment. Cash used to fund the capital expenditures in the 2000 YTD period was obtained from net cash provided by operating activities. The Company currently plans to make capital expenditures in fiscal 2000 of approximately $4,500,000. Management continuously reviews capital expenditure needs and actual amounts expended may differ from these estimates. On April 7, 2000, the Company amended its credit facility with Fleet Bank -NH ("Fleet"). The amendment provides for an expanded revolving line of credit of $15,000,000, which matures on March 31, 2003 and is not subject to a borrowing base formula. The purpose of this new facility is to fund the Company's ordinary working capital requirements, planned repurchases of shares of stock and other general corporate purposes. The interest paid on the line of credit varies with the prime, LIBOR and Bankers Acceptance rates, plus a margin based on a performance price structure. At April 8, 2000, a total of $5,475,000 was outstanding under the new line of credit. At April 8, 2000 interest rate charged on 5,050,000 equaled one-month LIBOR plus 125 basis points (7.63% on $1,000,000 and 7.55% on $4,050,000) and the remaining $425,000 was charged interest at the prime rate or 9%. The new Fleet credit facility is subject to certain quarterly covenants, and the Company was in compliance with these covenants at April 8,2000. The Fleet term debt facility, which had an outstanding balance of $2,050,000 on April 7, 2000, was extinguished using new borrowings under the line of credit. In the 2000 YTD period, the Company also used $1,694,000 of its cash flow from operations to repurchase approximately 180,000 of its outstanding shares in the open market. In addition, on April 17, 2000, the Company commenced a Dutch Auction self-tender offer for up to 300,000 shares of the Company's Common Stock at a price range of $14.50 to $16 per share. Effective May 22, 2000, Green Mountain Coffee accepted for purchase all 278,658 shares tendered at a purchase price of $16 per share. As Management believes the market is still undervaluing the Company's stock, Green Mountain intends to repurchase additional shares in fiscal 2000. Management believes that cash flow from operating activities, existing cash, the currently available credit facility and additional borrowings will provide sufficient liquidity to pay all liabilities in the normal course of business, fund capital expenditures and service debt requirements in fiscal 2000. DEFERRED INCOME TAXES The Company had net deferred tax assets of $638,000 at April 8, 2000. These assets are reported net of a deferred tax asset valuation allowance at that date of $2,355,000 (including $2,306,000 primarily related to a Vermont investment tax credit). Presently, the Company believes that the deferred tax assets, net of deferred tax liabilities and the valuation allowance, are realizable and represent management's best estimate, based on the weight of available evidence as prescribed in SFAS 109, of the amount of deferred tax assets which most likely will be realized. However, management will continue to evaluate the amount of the valuation allowance based on near-term operating results and longer-term projections. YEAR 2000 In anticipation of the January 1, 2000 date change, Green Mountain developed and implemented a Year 2000 plan to address possible Year 2000 disruptions. The Company had assessed its Year 2000 readiness and identified its Year 2000 risk in three broad categories: internal business software; manufacturing, facilities and embedded chip technology; and external noncompliance by customers and suppliers. During the December 31, 1999 to January 1, 2000 date change, Green Mountain monitored its operations and computer systems and has experienced no apparent problems to date. Since January 1, 2000, the Company has also noted no significant Year 2000 problems with its customers and suppliers. The total cost associated with required modifications to become Year 2000 compliant did not have a material effect on Green Mountain's results of operations or financial condition. The Company spent approximately $100,000 on a telephone switching and voice mail system replacement project that was accelerated because of the Year 2000 project and approximately $250,000 on a co-generation project which was partly motivated by Year 2000 concerns related to possible power supply problems. Although Green Mountain believes that its Year 2000 plan successfully eliminated potential problems associated with the Year 2000 date change, it cannot guarantee that the plans, work and funds expended corrected all Year 2000 errors or that the information systems will not generate Year 2000 errors in the future, particularly when operating with third party computer systems or data. In addition, the Company cannot reliably predict the effect future third party disruptions may have on Green Mountain, its operations or financial condition. FACTORS AFFECTING QUARTERLY PERFORMANCE Historically, the Company has experienced significant variations in sales from quarter to quarter due to the holiday season and a variety of other factors, including, but not limited to, general economic trends, the cost of green coffee, competition, marketing programs, weather and special or unusual events. Because of the seasonality of the Company's business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in information relating to commodity price risks since the Company's disclosure included in Item 7A of Form 10-K as filed with the Securities and Exchange Commission on December 22, 1999. During the first quarter of fiscal 2000, the Company received $34,000 from Fleet National Bank for the termination of its interest rate swap agreement with a $6,000,000 notional amount. This payment was netted against interest expense for the first fiscal quarter. Due to the termination of this agreement, at April 8, 2000, the Company had $5,530,000 of debt subject to variable interest rates (the lower of Fleet bank's prime rate or LIBOR rates for maturities up to one year). A hypothetical 100 basis points increase in the LIBOR rate and prime rate would result in additional interest expense of $55,000 on an annualized basis. Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders (a) The Registrant held its 2000 Annual Meeting of Stockholders on March 9, 2000 at its offices in Waterbury, Vermont. The Board of Directors of the Registrant solicited proxies for this meeting pursuant to a proxy statement filed under regulation 14A. (b-c) At the Annual Meeting the stockholders voted as follows on the following matter: Election of Directors VOTES Nominee For Withheld ------------------------------------------------------------- Robert P. Stiller 3,160,691 13,133 Robert D. Britt 3,161,049 12,775 Stephen J. Sabol 3,160,849 12,975 Jonathan C. Wettstein 3,161,049 12,775 William D. Davis 3,160,749 13,075 Jules A. del Vecchio 3,161,049 12,775 Hinda Miller 3,160,949 12,875 David E. Moran 3,161,049 12,775 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 3.1 Certificate of Incorporation(1) 3.2 Bylaws(1) 10.2 (jj) Twelfth Amendment to Fleet Bank -NH Commercial Loan Agreement and Loan Documents dated April 7, 2000(2) 10.100 ChefExpress.net, Inc. Promissory Note dated March 21, 2000 27 Financial Data Schedule. (b) No reports on Form 8-K were filed during the twelve weeks ended April 8, 2000. - ---------- (1) Incorporated by reference to the corresponding exhibit number in the Registration Statement on Form SB-2 (Registration No. 33-66646) filed on July 28, 1993, and declared effective on September 21, 1993. (2) Incorporated by reference to the corresponding exhibit number in the Schedule TO filed on April 17, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GREEN MOUNTAIN COFFEE, INC. Date: 5/23/2000 By: /s/ Robert P. Stiller --------- ------------------------------------------------ Robert P. Stiller, President and Chief Executive Officer Date: 5/23/2000 By: /s/ Robert D. Britt --------- ------------------------------------------------ Robert D. Britt, Chief Financial Officer, Treasurer and Secretary EX-10.100 2 CHEFEXPRESS.NET, INC. PROMISSORY NOTE PROMISORY NOTE $100,000 Waterbury Vermont March 21, 2000 1. ChefExpress.net, Inc., a corporation organized and existing under the laws of the State of Delaware (hereinafter Borrower"), for value received, hereby promises to pay to Green Mountain Coffee Roasters, Inc. (hereinafter "Holder") on or before May 31, 2000, the principal sum of One Hundred Thousand Dollars ($100,000), and to pay such interest on the principal sum from the date hereof at the rate of eight percent (8%) per annum (based on a 365 day year) until payment in full of principal. 2. Principal and interest under this Note shall be in lawful money of the United States. Borrower waives diligence, presentment, protest, demand and notice of protest, demand, dishonor, and nonpayment of this Note. 3. Borrower may extend this Note one time only for a period not exceeding ninety (90) days without cost or penalty. To extend this Note, Borrower must notify Holder in writing at least ten (10) days prior to the payment date specified herein of its exercise of this right. The notice must specify the new day for payment of principal and interest. 4. a. Borrower agrees that at least thirty (30) days prior to the maturity date of this Note (as may be extended pursuant to Paragraph 3 above), it shall offer to Holder the opportunity to purchase fully paid, non-assessable common stock of Borrower ("the Shares") at the same price per share and on the same other terms and conditions as those provided to all other potential investors in Borrower's initial private placement offering, and subject to the following additional terms and conditions: b. No fractional Shares shall be issuable on any purchase in consideration for the cancellation of principal owing on this Note. In lieu of issuing fractional Shares, Borrower shall pay Holder the cash portion of the indebtedness not so cancelled. c. Upon such surrender of the Note, interest owing on this Note shall cease. All accrued interest shall be paid in cash at the time the Shares are issued to Holder. d. Nothing herein shall obligate Holder to accept Borrower's offer of Shares, in which case all of the terms and conditions of this Note shall remain in full force and effect. 5. Holder shall not transfer, sell, or assign Holder's interest in this Note, or any portion thereof, without the express written consent of Borrower. 6. All notices or other communications required or permitted by this Note or by law to be served on or given either party by the other party shall be in writing and shall be deemed duly served and given when personally delivered to the party to whom it is directed or in lieu of personal service when mailed by first class mail, postage prepaid, addressed to the parties as follows: a. Borrower: ChefExpress.net, Inc. Attn: Stephen G. Schimoler 92 Stowe Street Waterbury, VT 05676 b. Holder Green Mountain Coffee Roasters, Inc. Attn: Bob Stiller, Chairman/CEO 33 Coffee Lane Waterbury, VT 05676 Telephone: (802) 244-5621 Either party may change that party's address by giving written notice of the change to the other party in the manner provided in this section. 7. Whether or not suit is filed, Borrower agrees to pay all reasonable attorney's fees, cost of collection, costs, and expenses incurred by Holder in connection with the enforcement or collection of this Note. Borrower further agrees to pay all costs of suit and the sum adjudged as attorneys' fees in any action to enforce payment of this Note or any part of it. 8. This Note shall be governed by and construed in accordance with the laws of the State of Vermont without regard to the laws as to choice of or conflict of laws. ChefExpress.net, Inc. By: /s/ Stephen G. Schimoler ---------------------------- Chairman of the Board EX-27 3 FDS --
5 This schedule contains summary financial information extracted from the Balance Sheet dated 4/8/00 and the Statement of Operations for the twenty-eight weeks ended 4/8/00 and is qualified in its entirety by reference to such financial statements. 0000909954 GREEN MOUNTAIN COFFEE, INC. 1,000 U.S. Dollars OTHER SEP-30-2000 JAN-16-2000 APR-08-2000 1.00 819 0 8,019 225 5,379 14,981 19,110 8,902 25,725 7,935 5,751 0 0 364 11,675 25,725 18,259 18,259 10,990 10,990 4,777 0 107 1,027 412 615 0 0 0 615 0.18 0.17
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