SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
For the fiscal year ended September 28, 1996
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.
---------------------------
(Name of small business issuer in its charter)
Delaware 03-0339228
-------------------------------- --------------------------------
(State or other jurisdiction (IRS employer identification no.)
of incorporation ororganization
33 Coffee Lane, Waterbury, Vermont 05676
---------------------------------- --------------------------------
(Address of principal (Zip code)
executive offices)
Issuer's telephone number: (802) 244-5621
--------------
Securities registered pursuant to Section 12(b) of the Exchange Act:
Common Stock, $.10 par value per share Boston Stock Exchange
-------------------------------------- ------------------------------
(Title of class) (Name of each exchange on
which registered)
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.10 par value per share
--------------------------------------
(Title of class)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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 [ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
The issuer's revenues for its most recent fiscal year (year ended September
28, 1996) were $38,347,000.
The aggregate market value of the voting stock of the issuer held by
non-affiliates of the issuer on December 13, 1996 was approximately
$9,378,000 based upon the closing price of such stock on that date.
As of December 13, 1996, 3,417,306 shares of common stock of the issuer were
outstanding. See "Market for Common Equity and Related Stockholder Matters."
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
Item 1. DESCRIPTION OF BUSINESS
The Company
- - - - - - - - - - -----------
Green Mountain Coffee, Inc. ("the Company" or "Green
Mountain") roasts over 25 high quality arabica coffees to produce
over 70 varieties of coffee which it sells through a coordinated
multi-channel distribution network consisting of wholesale,
retail, and direct mail operations. This distribution network is
designed to maximize brand name recognition and product
availability. The Company is one of the leading specialty coffee
companies in its established markets.
The majority of Green Mountain's revenue is derived from its
wholesale operation which services over 4,800 customer accounts
located primarily in the northeast United States. The wholesale
operation services fine dining, supermarket, specialty food
store, convenience store, food service, hotel, university, travel
and office coffee service customers. Wholesale customers resell
the coffee in whole bean or ground form for home consumption
and/or brew and sell coffee beverages at their place of business.
From its northeastern regional base, Green Mountain is now
gaining national brand acceptance through Mobil convenience
stores located in Florida, Illinois and Arizona, through Weight
Watchers International in over 450 North American weight loss
centers, and through FTD[R] as part of its Pick-Me-Up[R] bouquet set.
The Company has increased its geographic sales force from 15
people in February 1996 to 28 in December 1996. In addition, the
Company added a national supermarket sales manager and a national
chain food service/office coffee service sales manager during
fiscal 1996 to help provide more focused category management in
those market segments.
As of September 28, 1996, Green Mountain operated twelve
retail stores that are located in Vermont, Connecticut, Illinois,
Maine, Massachusetts, New Hampshire and New York. The Company's
retail stores provide an opportunity for direct contact with
consumers and help build the credibility of the Green Mountain
Coffee Roasters[R] brand for its specialty wholesale business.
Through coffee donations to local non-profit organizations and
the participation by store employees in community events and
organizations, the Company is able to establish strong community
relationships and a presence which enhances brand recognition and
product loyalty.
Green Mountain's direct mail catalog offers a wide selection
of the Company's coffees as well as specialty gifts, coffee-
related equipment, accessories and food items. Approximately 47%
of the Company's direct mail revenue in fiscal 1996 was derived
from customers in its "Coffee Club", a continuity program with
customized standing orders for automatic reshipment. The
Company's catalog and direct marketing efforts generate revenue,
provide test marketing opportunities, build brand awareness, and
support the entry of the wholesale and retail operations into new
geographic markets.
The Company is a Delaware holding company formed in July
1993, whose only asset is the stock of Green Mountain Coffee
Roasters, Inc., a Vermont corporation ("Roasters") formed in
1981. As used herein, unless the context otherwise requires,
references to "the Company" or "Green Mountain" include the
Company, Roasters and Roasters' inactive subsidiary, Green
Mountain Coffee Roasters Franchising Corporation, a Delaware
corporation formed in 1990.
The Company's corporate offices are located at 33 Coffee
Lane, Waterbury, Vermont 05676. The Company's telephone number
is (802) 244-5621, its fax number is (802) 244-5436, and its Internet
email address for investor information is [email protected].
Corporate Philosophy
- - - - - - - - - - --------------------
Green Mountain's objective is to be the leading specialty
coffee company by providing the highest quality coffee and having
the largest market share in its targeted markets while maximizing
company value. The Company intends to achieve this objective
through a corporate philosophy designed to differentiate and
reinforce the Green Mountain brand and engender a high degree of
customer loyalty. The essential elements of this philosophy
include:
Highest Quality Coffee. Green Mountain buys only the
highest quality arabica beans available from the world's coffee-
producing regions and uses a roasting process that maximizes each
coffee's individual taste and aroma. Green Mountain believes
that its coffees are among the highest quality coffees sold in
the United States.
Customer Service. To ensure a high level of customer
contact, the Company has established regional distribution
centers to supply coffee to its wholesale customers and from
which customer service calls are dispatched. The Company has an
on-line inventory system for its central distribution center's
inventory and uses hand-held computers on its Vermont-originated
delivery routes. Both of these enhancements help to better serve
the Company's customers and to improve the Company's direct-store-
delivery process and capability. In addition, the Company's
wholesale area sales managers are equipped with laptop computers
to speed new customer setup, enhance the Company's telemarketing
efforts and field communications, and help provide customers with
sales history, forecasting and merchandising data.
Green Mountain views the quality of customer interaction by
its employees as critical to its long-term success. Employees
throughout Green Mountain are trained and encouraged to exceed
customer expectations. The Company believes that coffee is a
convenience purchase and utilizes its multi-channel distribution
network to make its coffee widely and easily available to
customers for home or away-from-home consumption.
Customer Coffee Education. The Company educates its
wholesale customers and employees about the origin and
preparation of coffee through a course comprised of a series of
on-site training, tours, manuals, and hands-on learning
experiences known as "Coffee College." The two-day intensive
training covers growing and harvesting; coffee tasting and
cupping; grinding, filtering, and brewing; roasting and
packaging; and preparing coffee beverages. The Company's direct
mail catalog provides an overview of the differences between the
various coffees from around the world, the various degrees of
roast, as well as proper grinding and brewing guidelines. Green
Mountain's retail division offers in-store roasting
demonstrations, and coffee tastings, as well as coffee
preparation demonstrations. The Company believes that activities
such as these help to create advocates for its coffee and thereby
engender a loyal customer base.
Employee Development. Through a variety of educational
workshops, seminars and other programs, the Company provides
employees with educational opportunities that enhance their
ability to offer Green Mountain customers a level of service and
quality that fosters long-term relationships. The Company
believes that its dedication to employee training attracts and
retains highly qualified and motivated employees.
Community Involvement. Green Mountain contributes coffee
and coffee equipment to support non-profit organizations in local
communities. These organizations include the United Way, the
Salvation Army, the Ronald McDonald House, The Hole in the Wall
Gang, as well as libraries, religious organizations, schools,
counseling centers and soup kitchens in markets where the Company
operates. Since 1993, the Company has allowed employees to
volunteer on company time for up to 2.5% of their total hours
worked at Green Mountain per month, to encourage and support
volunteer work for non-profit and community-based organizations.
Through its support of Coffee Kids[R], the Company seeks to improve
the quality of life of children and families in coffee growing
communities around the world. As of September 28, 1996, Green
Mountain's employees supported seven "Coffee Kids" and their
families in Central America. In addition, through customer and
employee contributions, the Company has funded two village banks
located in Guatemala and Mexico which have made low interest rate
loans available for women to start small businesses to broaden
their family's sources of income. Corporate support of these
organizations generates goodwill and furthers the causes which
the Company believes are important.
Environmental Leadership. Green Mountain is
dedicated to both the preservation of the environment and
minimization of its environmental impact, and seeks to achieve
these objectives in various ways. The Company encourages
sustainability through its Stewardship Program, through which a
portion of its coffees is purchased from farms and cooperatives
where herbicide and pesticide use is limited and soil erosion
controls are in place. In fiscal 1996, Green Mountain introduced
its first organic coffee, a farm-direct coffee from Peru, and the
Company's roasting and packaging facility was certified as
organic by Quality Assurance International of San Diego,
California. Since 1990, Green Mountain has sold, under the
licensed name EarthFriendly Coffee Filters, a line of dioxin-
and chlorine-free paper coffee filters. Further, the Company
provides financial support to environmental organizations such as
Conservation International and the Rainforest Alliance, which
work to preserve the world's rain forests.
Green Mountain also seeks to minimize its environmental
impact through responsible operational practices, from purchasing
to waste management. Since 1989, the Company has had a volunteer
Employee Environmental Committee, which investigates a broad
range of issues. In 1994, Green Mountain joined the national
BuyRecycled! Alliance, pledging to document and increase its
purchases of recycled goods annually. Since 1995, the Company
has promoted a ride-share program with local private and
government organizations. The Company's corporate letterhead
consists of 25% post- and 25% pre-consumer recycled content by
sheet weight. Green Mountain uses chemical-free cornstarch-based
foam peanuts, which decompose in water, to protect products
during shipping. It also stores and ships products in either
reusable or recyclable totes and containers. The Company makes
every attempt to divert its manufacturing waste out of the
landfill. For example, the burlap bags which contain green
coffee beans are given away after they are emptied, for use in
gardens, as animal beds, or for craft supplies. Chaff, a highly
compostable coating on the coffee bean which separates during the
roasting process, is made available to local farmers and
gardeners. The Company also has an active on-site recycling
program, established in 1989, which the Company believes has
enabled it to reduce its landfill refuse volumes by approximately 50%.
Green Mountain Coffee
- - - - - - - - - - ---------------------
Green Mountain is committed to providing the highest quality
arabica coffees available from around the world. To achieve this
goal, Green Mountain carefully selects the finest coffees and
then custom roasts the coffees to maximize their taste and flavor
differences.
The Company roasts its coffee in small batches to ensure
consistency. Green Mountain varies both the degree of roast and
the roasting profile (i.e., roast time and temperature) to
maximize a particular coffee's taste characteristics. In fiscal
1996, the Company also installed state-of-the-art roasting
software which enables it to more exactly duplicate specific
roasts, ensuring Green Mountain's ability to offer consistent
taste profiles.
Green Mountain's roasting process is designed to maximize the
flavors inherent in the coffee itself, without letting the flavor
of roasting overshadow a particular coffee's taste subtleties.
Green Mountain believes that its distinctive roasting methods
enable it to provide the same coffees at different roasting
degrees to maximize their flavors and thereby satisfy varying
consumer preferences.
The Company uses convection air roasters, which it believes
offer a higher degree of flexibility than other commercially
available roasters. In addition, the Company has developed
specific roasting programs for each bean type to establish a
Green Mountain "signature" for such bean type, which the Company
calls its "appropriate roast." The Company believes that this
roasting process distinguishes it from other specialty coffee
companies and has resulted in strong customer brand loyalty.
Green Mountain, unlike many of its competitors, also offers
flavored coffees. The Company believes that flavoring its coffee
during the production process, rather than providing flavor
additives after brewing, provides its customers with taste
consistency, convenience and economy.
The Company nitrogen flushes its packaged coffee and employs
one-way valve bag packaging technology which provides a minimum
shelf life of six months for the Company's coffees. This
technology enables the Company to expand its distribution while
maintaining its high standards for quality and freshness.
Wholesale Operations
- - - - - - - - - - --------------------
The majority of Green Mountain's revenue is derived from its
wholesale operation which services over 4,800 customer accounts
located primarily in the northeast United States. The wholesale
operation services fine dining, supermarket, specialty food
store, convenience store, food service, hotel, university, travel
and office coffee service customers. Wholesale customers resell
the coffee in whole bean or ground form for home consumption
and/or brew and sell coffee beverages at their place of business.
The Company's customers include the Culinary Institute of
America in Hyde Park, New York, both the L.L. Bean catalog and
the Freeport, Maine L.L. Bean retail store and over 80 Hoyts
Cinemas in the northeast. Customers also include Aureole
restaurant and the Harvard Club in New York City and many
colleges and universities throughout the northeast, including the
Universities of Vermont, New Hampshire and Rhode Island, and
Amherst College, Bentley College and Babson College.
Supermarket industry customers include over 90 Hannaford
Food and Drug Stores operated throughout northern New England and
New York, Kings Super Market, a subsidiary of Marks & Spencer
that operates 20 stores in northern New Jersey, and Roche
Brothers, a chain of 13 upscale supermarkets in the Boston area.
Travel industry customers include the Delta Shuttle, Delta
Express and Business Express Airlines, as well as northeast
corridor Amtrak trains. The Company's coffee is also available
at over 800 Mobil convenience stores, including over 160 in
Florida, over 20 in Phoenix, and over 40 in the Chicago area.
Through the wholesale operation, Green Mountain has
initiated an international sales effort, principally through
distributors, initially targeting nations where there exists
either a tradition of coffee consumption or a recent trend
indicating the appreciation of specialty coffee.
Wholesale operations are coordinated from the Company's
headquarters in Waterbury, Vermont and regional distribution
centers in Biddeford, Maine; Latham, New York, a suburb of
Albany; Woburn, Massachusetts, a suburb of Boston; and
Southington, Connecticut. Distribution facilities are located
within a two-hour radius of most customers to expedite delivery.
The wholesale operation primarily uses in-house sales people.
However, in certain markets, the Company utilizes the services of
independent distributors who purchase coffee from the Company for
resale to wholesale customers. The Company believes that the use
of such distributors provides access to certain wholesale
customers whose size or geographic location makes it economically
inefficient for the Company to service directly. The Company
generally provides wholesale customers with brewing, grinding and
related equipment and product displays ("loaner equipment") at no
charge, which are installed on the customer's premises by the
Company's service personnel. A customer is also assigned a
service technician who services, repairs and provides preventive
maintenance and emergency service on such equipment.
As of December 1996, the wholesale operation had twenty-
eight area sales managers assigned to geographic territories, an
increase from fifteen area sales managers as of February 1996.
The wholesale territories extend from Maine west to Illinois, and
south to Florida. The Company's sales process includes: the use
of mapping software to identify desirable new expansion
territories and prospects; outbound telemarketing to target and
qualify prospects for the Company's area sales managers; and the
use of laptop computers by area sales managers to speed new
customer setup, enhance the Company's telemarketing efforts and
field communications, and to help provide customers with sales
history, forecasting and merchandising data.
In addition to geographic sales people, the Company added a
national supermarket sales manager and a national chain food
service/office coffee service sales manager during fiscal 1996 to
help provide more focused category management in these market
segments.
Retail Operations
- - - - - - - - - - -----------------
As of September 28, 1996, Green Mountain operated twelve
retail stores that are located in Vermont, Connecticut, Illinois,
Maine, Massachusetts, New Hampshire and New York. The Company's
retail stores provide an opportunity for direct contact with
consumers and help build the credibility of the Green Mountain
Coffee Roastersr brand for its specialty wholesale business.
The stores vary in size from approximately 500 to 2,700
square feet, with an average store size of approximately 1,725
square feet. The objective of the Company's stores is to provide
a "total coffee experience" to customers in a comfortable
setting. The Company's stores differ in configuration and range
in interior design from "traditional Vermont" (such as the
Company's Waitsfield, Vermont store) to an upscale European cafe
(such as the Company's West Hartford, Connecticut store). The
stores offer approximately 30 varieties of high-quality whole
bean arabica coffees, specialty coffee beverages including
cappuccinos and lattes, and a variety of cold coffee drinks. In
addition, the stores offer freshly baked pastries, a selection of
brewing equipment and accessories, coffee-related gifts and
packaged foods.
This "total coffee experience" includes customer educational
opportunities provided by Green Mountain's highly trained staff
of coffee specialists, in-store roasting in eight stores, coffee
tastings, equipment demonstrations and classes which educate
customers on the different taste characteristics of Green
Mountain coffee as well as coffee preparation techniques. The
Company also has a Coffee-of-the-Month program which gives
customers the opportunity to sample new coffees. The Company
believes that such programs promote customer enjoyment of coffee
and play a key role in developing a loyal customer base.
The Company's first store, located in Waitsfield, Vermont,
was acquired in 1981, followed in the same year by its store in
Winooski, Vermont. In 1984, the Company opened a store in
Portland, Maine. In 1985, the Company relocated and expanded its
original store in Waitsfield, Vermont. The Waterbury, Vermont
factory outlet store opened in 1988, adjacent to the Company's
former roasting and packaging plant. In 1988 and 1989, stores
were opened in Plattsburgh, New York and South Portland Maine
respectively. A seventh store was opened in 1990 in West
Hartford, Connecticut. Green Mountain opened five new company-
owned retail stores in fiscal 1994 located in Portsmouth New
Hampshire (opened October 1993), Waterbury Center, Vermont
(opened December 1993), Latham, New York, a suburb of Albany
(opened February 1994), Naperville, Illinois, a suburb of Chicago
(opened August 1994), and Newton Highlands, Massachusetts, a
suburb of Boston (opened September 1994). As of December 15,
1995, the Company no longer operates any espresso carts and
converted three (those previously located at supermarkets) of the
four espresso carts it operated as of the end of fiscal 1994 to
wholesale supermarket accounts with pre-bagged, bulk and/or self-
service coffee beverage displays. Instore roasting is done at
the Winooski, Portland, Plattsburgh, West Hartford, Portsmouth,
Latham, Naperville and Newton Highlands stores.
Direct Mail Operations
- - - - - - - - - - ----------------------
The Company publishes catalogs that market approximately 60
coffees, coffee-related equipment and accessories, as well as
gift assortments and gourmet food items covering a wide range of
price points. In fiscal 1996, the Company's catalogs had a total
circulation rate of over 300,000. Green Mountain guarantees that
direct mail orders for items in stock received by 11:00 a.m. EST
on any weekday will receive same-day shipment. Green Mountain's
telemarketing service representatives fulfill the individual
coffee needs of direct mail customers by educating and consulting
with customers about the various attributes of different coffee
varieties. Representatives also suggest custom blends, handle
special delivery request, offer special products in an "upsell"
program and contact customers via outbound telephone to offer
products and special items targeted to their previous buying
patterns.
For the year ended September 28, 1996, approximately 47% of
the Company's direct mail revenue was derived from the
approximately 5,000 members of its "Coffee Club", a continuity
program with customized standing orders for automatic reshipment.
In addition to its direct mail catalog and continuity program,
Green Mountain also used its direct mail system to target corporate
gift-giving programs and bed-and-breakfast and small office establishments
that it believes are well served via the convenient direct mail channel.
The Company's direct mail operations also support the home
delivery needs, often for gifts, of retail customers by providing
order fulfillment and shipping services for all Green Mountain
company-owned retail stores, and provide special promotional
direct mail offers or product shipments to wholesale "VIP"
customers and prospects. Moreover, the Company's catalog and
direct marketing efforts provide revenue to the business, provide
market penetration testing opportunities, build brand awareness,
and support the entry of the wholesale and retail operations into
new geographic markets through targeted mailings.
Expansion Strategy
- - - - - - - - - - ------------------
The Company's expansion strategy is designed to further
increase its market share in geographic areas in which it
currently operates, and to introduce Green Mountain coffee in
selected markets across the United States and internationally,
principally utilizing the Company's wholesale distribution
channel. The Company will continue to use its multi-channel
distribution approach to sell its whole bean and ground coffees
through any channel (wholesale, retail or direct mail) that facilitates
customer access to the products.
Green Mountain generally enters and begins building market
share in a new territory through its direct mail catalog and
through wholesale customers (i.e., restaurants, convenience
stores, etc.) who promote customer trial by preparing and serving
its coffee by the cup. The Company believes that potential
customers who sample its products are likely to develop a taste
for Green Mountain coffee and seek it out through other available
distribution channels. It has been the Company's experience that
consumer trial of Green Mountain coffee at one level of
distribution often leads to a subsequent purchase at another
level of distribution. The Company's expansion strategy seeks to
capitalize upon the inter-relationship among its wholesale,
retail and direct mail operations.
The Company believes that as brand awareness increases in a
market, demand for whole bean sales of the Company's coffee for
home consumption will increase. The National Coffee Association
of USA, Inc. in its Coffee Consumption Trends and Outlook, 1996
Winter Coffee Study, states that "74% of all coffee is consumed
at home." It is further estimated that 80% of all coffee consumed
at home is purchased at supermarkets. As brand equity is built,
wholesale expansion typically continues through customers such as
supermarkets and specialty food stores, who in turn, sell the
Company's whole bean coffee to consumers.
The Company intends to focus on increasing wholesale sales
of its products to retailers of whole bean coffee to facilitate
its expansion in fiscal 1997. The Company will also continue to
identify other potential wholesale customers in each of its
markets, such as office coffee services, food distributors and
both chain and independent convenience stores and restaurants
which the Company believes not only provide an additional source
of revenues, but also facilitate consumer trial of Green Mountain
Coffee. In addition, the Company will evaluate other potential
marketing channels for both its established and new territories.
The Company does not presently intend to open any new
Company-owned retail stores in fiscal 1997 as it has found that it
has achieved acceptable levels of consumer sampling of Green
Mountain Coffee through its wholesale accounts in the convenience
store, restaurant, hotel and other wholesale categories.
However, the Company will review this position on a case-by-case
basis as retail store opportunities present themselves. In the
short-term, Green Mountain will work with its wholesale customers
to establish a presence in their retail stores, restaurants,
kiosks and espresso carts displaying and promoting the Green
Mountain Coffee Roasters name, logo and other point-of-purchase
materials to build brand equity. The Company is also pursuing
opportunities to align itself with national and regional food
service and convenience store chains, as it has done with Weight
Watcher's International in over 450 North American weight loss
centers, and Mobil convenience stores in seventeen states, in
order to provide an immediate retail presence and consumer trial
of its coffees. The Company believes that its long-term return
on investment will be enhanced through such a strategy.
In the direct mail area, the Company plans to continue to
focus solicitations on catalog customers who more regularly buy
from the Company. Green Mountain also plans to identify
additional customer target groups and explore advertising and
other forms of customer solicitation. Continued focus will be
given to outbound telemarketing and to programs which build the
corporate giftgiving, bed-and-breakfast and small office market
segments. In addition, the direct mail group plans to continue
promotion for membership in its Coffee Club and conduct other
direct marketing and promotional programs nationally, regionally
and on a market-bymarket basis.
Green Coffee Cost and Supply
- - - - - - - - - - ----------------------------
The Company utilizes a combination of outside brokers and
direct relationships with estates for its supply of green
coffees, with outside brokers providing the larger amount.
Coffee is the world's second largest traded commodity and its
supply and price are subject to volatility. Although most coffee
trades in the commodity market, coffee of the quality sought by
the Company tends to trade on a negotiated basis at a substantial
premium or "differential" above commodity coffee pricing,
depending upon the supply and demand at the time of purchase.
Supply and price can be affected by multiple factors, such as
weather, politics and economics in the producing countries.
Cyclical swings in commodity markets, based upon supply and
demand, are not at all uncommon. The "c" price (the price per
pound quoted by the Coffee, Sugar and Cocoa Exchange) of green
coffee reached a cyclical low point in April 1993, selling
slightly above $0.50 per pound, and then reached a cyclical high
point of $2.46 in July 1994, following two frosts in the coffee
producing region of Brazil, the world's largest producer of
coffee. Although Green Mountain does not buy any of its coffee
from Brazil, virtually all coffee prices were adversely affected
by the frosts. As a result, the "c" price remained abnormally
high throughout all of fiscal 1995, from $2.26 at the beginning
of the year to a low of $1.15 near the end of the fiscal year.
In fiscal 1996, the average "c" price was less than in fiscal
1995, and ranged from a high of $1.32 to a low of $0.91.
Prior to the two 1994 frosts in Brazil, the differential
payable by the Company for its coffees could add up to $0.70 per
pound over the published commodity price for high-quality arabica
coffees. The frost, coupled with the overall high market prices,
caused some of these differentials to rise dramatically, adding
further to the overall cost of coffee. The Company can pay as
much as a $17 per pound premium for some of the rarer varieties
of coffee.
The overall downward trend of coffee prices and
differentials in fiscal 1995 and fiscal 1996 was interrupted
slightly in the summer and fall of 1996 as the longer-term impact
of the Brazilian frosts and other regional weather-related crop
shortfalls, among other reasons, adversely impacted supply,
firmed "c" prices and caused differentials to increase. During
this period, worldwide stocks of green coffee were at an all-time
low.
Now that the worldwide 1996/1997 crop of coffee is coming to
market, it appears that, although volatile, the downward trend of
"c" prices will continue, although there can be no assurance that
this trend will continue. Differentials and premiums continue to
remain at high levels. In addition, a number of factors, such as
pest damage and weather-related crop failure could cause coffee
prices to climb. Furthermore, the Company believes that the low
coffee price ranges experienced during the early 1990s are not
high enough to support proper farming and processing practices,
impacting the overall supply of the top grade coffees. With the
growth of the specialty coffee segment, it is important that
prices remain high enough to support the world consumption of the
top grades of coffees.
The Company generally fixes the price of its coffee
contracts two to six months prior to delivery so that it can
adjust its sales prices to the market. Green Mountain believes
that this is the best way to provide its customers with a fair
price for its coffee. The Company believes that there is
significant risk in fixing prices further in the future, since
the true available supply of green coffee from around the world
is not readily known.
Green Mountain intends to increase the percentage of the
coffee it buys directly from farms in fiscal 1997 and beyond, as
it believes this strategy will result in improved product
quality, product differentiation, long-term supply and pricing
stability. In addition, the Company believes that its efforts
will have a positive impact on the living and working environment of farm
workers and their families.
Significant Customer
- - - - - - - - - - --------------------
Hannaford Brothers Company, a supermarket chain, accounted
for over $4.6 million in net sales, or 12.1%, in the year ended
September 28, 1996 and for over $3.5 million in net sales, or
10.4%, in the year ended September 30, 1995. Although the
Company believes that it has a strong mutually-beneficial
business relationship with Hannaford Brothers Company and will
continue to supply its supermarkets in New England and New York,
there can be no assurance that it will continue to do so, and the
loss of such account would likely have a material adverse effect
on the Company's results.
Competition
- - - - - - - - - - -----------
The specialty coffee market is highly competitive, and Green
Mountain competes against all sellers of specialty coffee. A
number of nationwide coffee processors, such as Kraft, General
Foods, Procter & Gamble and Nestle, distribute premium coffee
products in supermarkets and convenience stores, which may serve
as alternatives to Green Mountain's coffees. Specialty coffee
companies, such as Millstone Coffee (purchased by Procter &
Gamble in December 1995) and Brothers Gourmet Coffees, also sell
whole bean coffees in supermarkets.
In the retail area, the Company competes for whole bean and
beverage coffee sales with franchise operators and locally-owned
specialty coffee stores. There are a number of competing
specialty coffee retailers, all of which have significantly more
retail outlets than the Company, such as Starbucks Corporation,
Gloria Jean's Coffee Bean Corp., and Barnie's Coffee and Tea Co.
In the direct mail area, the Company competes with established
suppliers such as Gevalia, a division of General Foods
Corporation, as well as other direct mail companies.
The Company expects intense competition, both within its
primary geographic territory, the northeast United States, and in
other regions of the United States, as it expands from its
current territories. The specialty coffee market is expected to
become even more competitive as regional companies expand and
attempt to build brand awareness in new markets.
The Company competes primarily by providing fresh, high
quality coffee, easy access to its products and superior customer
service. The Company believes that its ability to provide a
convenient network of outlets from which to purchase coffee is an
important factor in its ability to compete. Through its multi
channel distribution network of wholesale, retail and direct mail
operations and its focus on the sale of coffee in all forms, not
only coffee beverages, the Company believes it differentiates
itself from many of its competitors, who specialize in only one
of the wholesale, retail and direct mail channels of
distribution. The Company also believes that one of the
distinctive features of its business is that it is one of the few
coffee companies that roasts its coffees individually, varying
both the degree and timing of the roast to maximize a coffee's
particular taste characteristics. While the Company believes it
currently competes favorably with respect to these factors, there
can be no assurance that it will be able to compete successfully
in the future.
Intellectual Property
- - - - - - - - - - ---------------------
The Company does not own any patents. The Company holds
federal registrations in the United States for the trademarks
Green Mountain Coffee[R], Green Mountain Coffee Roasters[R], Green
Mountain Filters[R], Stewardship[R], Nantucket Blend[R], Rain Forest Nut[R],
and Vermont Country Blend[R], and for the service marks Green
Mountain Coffee Roasters[R] and Stewardship[R], and related design
marks. The Company holds state trademark registrations in
Vermont for the marks Green Mountain Coffee[TM] and Green Mountain
Coffee Roasters[TM]. The Company has an application pending in the
United States to register the trademark Cafe Vermont. The Company
is party to a Trademark License Agreement dated September 16, 1992
with Ahold Retail Services, AG, pursuant to which the Company was
granted a perpetual royalty-free license to use the name Earth-Friendly
Coffee Filters[TM] in connection with coffee filters on the terms set
forth therein.
The Company is party to a Supply Agreement dated June 3, 1993
with Globe Financial & Investment Corp., pursuant to which the
Company was granted an irrevocable, perpetual, royalty-free
license to use the trademark Colombian LaCapilla[TM] in connection
with coffee on the terms set forth therein. The Company is also
party to a Supply Agreement dated April 30, 1995 with Kona
Mountain Coffee, Inc., pursuant to which the Company was granted
an irrevocable, perpetual, royalty-free license to use the
trademarks Kona Mountain Coffee[TM] and Kona Mountain Estate[TM]
worldwide, excluding the state of Hawaii, in connection with
coffee on the terms set forth therein.
The Company is not party to any other license agreement.
Employees
- - - - - - - - - - ---------
As of September 28, 1996, the Company had 263 full-time
employees of which 115 were salaried staff and 148 were hourly
workers. As of this date, the Company also employed an
additional 115 part-time hourly employees. The Company
supplements its workforce with temporary workers in the first
quarter of each fiscal year to service increased customer demand
during the peak November-December holiday season. The Company
believes that it maintains good relations with its employees.
<PAGE>
Item 2. DESCRIPTION OF PROPERTY
The Company leases one principal manufacturing, warehousing
and distribution facility located at Pilgrim Park in Waterbury,
Vermont. The facility has in total approximately 45,000 square
feet of usable space, including an 11,000 square foot mezzanine
area, and its lease expires in 2003. The Company's aggregate
facility rental expense for the year ended September 28, 1996 was
approximately $872,000. The Company's other facilities, all of
which are leased, are as follows:
<TABLE>
Approximate Expiration
Type Location Square Feet of Lease
----------------------------------------------------------------------
<S> <C> <C> <C>
Retail Latham, NY(1) 1,640 month-to-month
Stores Naperville, IL 2,330 2004
Newton Highlands, MA 1,820 2004
Plattsburgh, NY 1,440 1998
Portland, ME 2,300 2002
Portsmouth, NH(2) 2,700 1999
So. Portland, ME(3) 1,200 1997
Waitsfield, VT 2,360 2000
Waterbury, VT
(Factory Outlet) 1,100 month-to-month
Waterbury Center, VT 500 1998
West Hartford, CT 1,820 1997
Winooski, VT 1,500 1998
--------------------------------------------------------------------------
Administrative Waterbury, VT 4,000 month-to-month
Offices Waterbury, VT 8,680 1999
Waterbury, VT 6,200 month-to-month
Waterbury, VT 8,000 2001
--------------------------------------------------------------------------
Warehouse/ Woburn, MA 10,580 2001
Distribution/ Southington, CT 11,200 2001
Service Space Waterbury, VT 3,000 month-to-month
Biddeford, ME 10,000 2001
</TABLE
- - - - - - - - - - ---------------------------------------------------------------------------
(1) Lease also covers warehouse/distribution/service space of
3,160 square feet.
(2) Lease also covers 2,775 square feet of space which
the Company intends to sublease.
(3) Lease also covers 2,800 square feet of space which
the Company has subleased as of December 13, 1996.
The Company believes that its facilities are adequate for
its current needs and that suitable additional production and
administrative space will be available as needed on favorable
terms. There can be no assurance that management will be able to
continue to secure adequate sites at acceptable rent levels if
and when it decides to expand its company-owned retail store
base.
<PAGE>
Item 3. LEGAL PROCEEDINGS
The Company is not currently party to any material pending legal
proceeding.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
quarter ended September 28, 1996.
<PAGE>
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Price Range of Securities
The Company's common stock trades on the NASDAQ SmallCap
Market under the symbol GMCR and on the Boston Stock Exchange
under the symbol GMR. The following table sets forth the high and
low sales prices as reported by NASDAQ for the periods indicated
</TABLE>
<TABLE>
High Low
--------- ---------
<S> <C> <C> <C>
Fiscal 1995 16 weeks ended January 14, 1995..... $ 12 1/4 $ 4 3/4
----------- 12 weeks ended April 8, 1995........ $ 10 1/4 $ 6 1/4
12 weeks ended July 1, 1995......... $ 8 3/4 $ 6 1/4
12 weeks ended September 30, 1995... $ 7 3/4 $ 5 3/4
Fiscal 1996 16 weeks ended January 20, 1996..... $ 8 $ 5 3/4
----------- 12 weeks ended April 13, 1996....... $ 7 7/8 $ 5 7/8
12 weeks ended July 6, 1996......... $ 7 3/4 $ 5 5/8
12 weeks ended September 28, 1996... $ 7 5/8 $ 5 1/2
Fiscal 1997 September 29, 1996 to
----------- December 13, 1996........... $ 7 1/4 $ 6 3/8
</TABLE>
Holders of shares of common stock are entitled to one vote per
share on all matters to be voted on by the stockholders. The
common stock has no preemptive or other subscription rights, and
there are no conversion rights or redemption or sinking fund
provisions with respect to such shares. All outstanding shares of
common stock are fully paid and nonassessable.
(b) Approximate Number of Equity Security Holders
The Company believes that the number of record holders of
common stock as of December 13, 1996 was 668 with approximately
1,600 beneficial stockholders as of this date.
(c) Dividends
The Company has never paid a cash dividend on its common stock
and anticipates that for the foreseeable future any earnings will
be retained for use in its business and, accordingly, does not
anticipate the payment of cash dividends. Subject to the rights of
holders of outstanding shares, if any, of the Company's preferred
stock, $.10 par value, the holders of common stock are entitled to
receive such dividends, if any, as may be declared from time to
time by the Board of Directors in its discretion from funds legally
available therefore, and, upon liquidation or dissolution of the
Company, are entitled to receive all assets available for
distribution to stockholders.
Under current loan agreements the Company has with Fleet Bank -
NH and the Vermont Economic Development Authority, the Company may not
pay any dividends with respect to its capital stock, whether in cash or
in stock, without the prior approval of both Fleet Bank - NH and the
Vermont Economic Development Authority.
<PAGE>
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
- - - - - - - - - - -------
For the year ended September 28, 1996, Green Mountain derived
approximately 79.1% 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 also operated twelve retail stores
and a direct mail operation, which accounted for approximately
13.0% and 7.9% of net sales, respectively, in fiscal 1996.
Cost of sales consists of the cost of raw materials including
green coffee, flavorings and packaging materials, 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, retail or
direct mail distribution channels, including marketing 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 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, into the fiscal year.
Fiscal 1996 and fiscal 1994 represent the years ended September 28,
1996 and September 24, 1994, respectively, and consisted of 52-
weeks. Fiscal 1995 represents the year ended September 30, 1995 and
consisted of 53 weeks with the fiscal fourth quarter having 13
weeks instead of the normal 12 weeks.
This document may include forward-looking statements about
the Company's sales and earnings and future plans and objectives.
Any such statements are subject to risks and uncertainties that
could cause the actual results to vary materially. These risks
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, economic conditions,
competition, variances from budgeted sales mix and growth rates,
weather and special or unusual events.
The following table sets forth certain financial data of the
Company expressed as a percentage of net sales for the periods
denoted below:
<TABLE>
Year Ended
-------------------------------------------
<S> <C> <C> <C>
Statement of September 28, September 30, September 24,
Operations Data: 1996 1995 1994
------------ ------------ ------------
Net sales:
Wholesale 79.1 % 74.9 % 68.7 %
Retail 13.0 % 15.0 % 18.2 %
Catalog Sales 7.9 % 10.1 % 13.1 %
---------- ---------- ----------
Net sales 100.0 % 100.0 % 100.0 %
Cost of sales 59.5 % 63.9 % 61.2 %
---------- ---------- ----------
Gross profit 40.5 % 36.1 % 38.8 %
Selling and operating expenses 27.3 % 28.0 % 39.5 %
General and administrative
expenses 8.2 % 7.6 % 11.8 %
---------- ---------- ----------
Income (loss) from operations 5.0 % 0.5 % (12.5) %
Other income (expense) --- % --- % 0.3 %
Interest expense (1.1) % (1.2) % (1.0) %
---------- ---------- ----------
Income (loss) before
income taxes 3.9 % (0.7) % (13.2) %
Income tax benefit (expense) (0.6) % 0.1 % 2.5 %
---------- ---------- ----------
Net income (loss) 3.3 % (0.6) % (10.7) %
---------- ---------- ----------
</TABLE>
<PAGE>
Fiscal 1996 versus Fiscal 1995
- - - - - - - - - - ------------------------------
Net sales increased by $4,323,000 or 12.7% from $34,024,000 in
fiscal 1995 (a 53-week period) to $38,347,000 in fiscal 1996 (a 52
week period). On a 52-week to 52-week comparative basis, sales are
estimated to have increased by 15.0% in fiscal 1996. Coffee pounds
sold, excluding those sold as beverages through the Company's
retail stores, increased by approximately 864,000 pounds or 19.6%
from 4,408,000 pounds in fiscal 1995 to 5,272,000 pounds in fiscal
1996. On a 52-week to 52-week comparative basis, coffee pounds sold
are estimated to have increased 22.0% in fiscal 1996. The
difference between the percentage increase in net sales and the percentage
increase in coffee pounds sold primarily relates to reductions in
Green Mountain's selling prices for coffee during fiscal 1996 as a
result of lower green coffee costs.
The year-to-year increase in net sales occurred primarily in
the wholesale area in which net sales increased by $4,856,000 or
19.1% from $25,484,000 in fiscal 1995 to $30,340,000 in fiscal
1996. This increase resulted primarily from the year-over-year
growth in the number of wholesale accounts.
Net retail sales decreased by $136,000 or 2.7% from $5,106,000
in fiscal 1995 to $4,970,000 in fiscal 1996, principally due to the
closing of three espresso carts located at supermarkets during the
second quarter of fiscal 1995, and the closing of an espresso cart
located in Albany, New York in the first quarter of fiscal 1996.
The three supermarket espresso cart locations were converted to
wholesale supermarket accounts with pre-bagged, bulk and/or self-
service coffee beverage displays. On a 52-week to 52-week
comparative basis, retail same-store sales are estimated to have
increased 3.3% in fiscal 1996.
Net direct mail sales decreased by $397,000 or 11.6% from
$3,434,000 in fiscal 1995 to $3,037,000 in fiscal 1996. This
decrease resulted primarily from a shift in strategy whereby the
Company focused its mail order solicitations on catalog customers
who more regularly buy from the Company, and decreased the number
of low margin product promotions.
Green Mountain's gross profit increased by $3,244,000 or 26.4%
from $12,286,000 in fiscal 1995 to $15,530,000 in fiscal 1996.
Gross profit increased by 4.4 percentage points as a percentage of
net sales from 36.1% in fiscal 1995 to 40.5% in fiscal 1996. These
increases were primarily attributable to the impact of lower green
coffee costs.
Selling and operating expenses increased by $942,000 or 9.9%
from $9,529,000 in fiscal 1995 to $10,471,000 in fiscal 1996, but
decreased .7 percentage points as a percentage of net sales from
28.0% in fiscal 1995 to 27.3% in fiscal 1996. The increase in
selling and operating expense includes approximately $420,000 in
expenses related to the addition in fiscal 1996 of a national
supermarket sales manager, a national food service and office
coffee services sales manager, and eight people to the Company's
direct sales force in the Boston, Connecticut and Florida markets,
as well as the addition of an advertising manager and designer to
the Company's corporate marketing department.
General and administrative expenses increased by $554,000 or
21.5% from $2,578,000 in fiscal 1995 to $3,132,000 in fiscal 1996
and increased .6 percentage points as a percentage of net sales
from 7.6% in fiscal 1995 to 8.2% in fiscal 1996. Significant
general and administrative expense increases during fiscal 1996
include: increased MIS personnel and other computer-related
expenses of approximately $130,000; increased training and human
resource department costs of approximately $75,000; and increased
investor relations related expenses of approximately $67,000.
As a result of the foregoing, income from operations increased
by $1,748,000 or 975.6% from $179,000 in fiscal 1995 to $1,927,000
in fiscal 1996, and increased 4.5 percentage points as a percentage
of sales from 0.5% in fiscal 1995 to 5.0% in fiscal 1996. The
income tax benefit recognized under SFAS 109 was $26,000 in fiscal
1995 compared to income tax expense of $222,000 in fiscal 1996.
The Company's effective tax rate increased from 11% in fiscal 1995
to 15% in fiscal 1996, primarily as a result of non-deductible
items being a greater percentage of the net loss in fiscal 1995
compared to the percentage of net income in fiscal 1996. Net
income increased by $1,480,000 from a net loss of $218,000 in
fiscal 1995 to net income of $1,262,000 in fiscal 1996.
Fiscal 1995 versus Fiscal 1994
- - - - - - - - - - ------------------------------
Net sales increased by $11,942,000 or 54.1% from $22,082,000
in fiscal 1994 (a 52-week period) to $34,024,000 in fiscal 1995 (a
53-week period). Approximately 22 percentage points of the 54.1% full
year growth rate, or about 41% of the sales growth was due to price
increases. Coffee pounds sold, excluding those sold as beverages
through the Company's retail stores, increased by approximately
874,000 pounds or 24.7% from 3,534,000 pounds in fiscal 1994 to
4,408,000 pounds in fiscal 1995. On a 52-week to 52-week
comparative basis, coffee pounds sold are estimated to have
increased 24.7%.
The year-to-year net sales increase occurred mainly in the
wholesale area in which net sales increased by $10,321,000 or 68.1%
from $15,163,000 in fiscal 1994 to $25,484,000 in fiscal 1995. The
wholesale net sales increase resulted primarily from increases in
coffee prices to customers (approximately 44% of the 68.1%
increase) related to the increased cost of green coffee, and from
growth in the number of wholesale customer accounts (approximately
45% of the 68.1% increase).
Net retail sales increased $1,084,000 or 27.0% from $4,022,000
in fiscal 1994 to $5,106,000 in fiscal 1995, principally due to the
opening of two new stores near the end of fiscal 1994. Net sales
in the direct mail area increased $537,000 or 18.5% from $2,897,000
in fiscal 1994 to $3,434,000 in fiscal 1995. The increase in
direct mail sales resulted primarily from increases in coffee
selling prices to customers, related to the increased cost of green
coffee.
Gross profit increased by $3,717,000 or 43.4% from $8,569,000
in fiscal 1994 to $12,286,000 in fiscal 1995. As a percentage of
net sales, gross profit decreased by 2.7 percentage points from
38.8% in fiscal 1994 to 36.1% in fiscal 1995. This decrease was
due primarily to the increased cost of green coffee as a percentage
of sales (i.e. Green Mountain passed on the dollar increase in
green coffee, not the percentage increase) offset, in part, by
lower production, distribution and delivery costs as a percentage
of sales.
Selling and operating expenses increased by $807,000 or 9.3%
from $8,722,000 in fiscal 1994 to $9,529,000 in fiscal 1995,
primarily due to increased personnel and facility costs in fiscal
1995 related to the opening of new wholesale sales territories and
retail stores during and following fiscal 1994, offset, in part, by
decreased direct mail advertising expenditures. However, selling
and operating expenses as a percentage of sales decreased by 11.5
percentage points from 39.5% in fiscal 1994 to 28.0% in fiscal
1995.
General and administrative expenses decreased by $27,000 or 1.0%
from $2,605,000 in fiscal 1994 to $2,578,000 in fiscal 1995, and
decreased by 4.2 percentage points as a percentage of net sales
from 11.8% in fiscal 1994 to 7.6% in fiscal 1995. This decrease in
general and administrative expenses reflects management's efforts
to redeploy general and administrative personnel to more directly
support the selling effort. However, general and administrative
expenses as a percentage of sales increased by 3.0 percentage
points for the fiscal fourth quarter from 4.5% in fiscal 1994 to
7.5% in fiscal 1995. The fiscal 1994 fourth quarter includes the
impact of several short-term cost containment programs and a
favorable year-end adjustment of $69,000 related to the Company's
self-insured medical plan due to favorable loss experience.
As a result of the foregoing, income from operations for
fiscal 1995 was $179,000 compared to a loss from operations of
$2,758,000 for fiscal 1994, a $2,937,000 or 106.5% improvement.
The income tax benefit recognized under SFAS 109 decreased by
$531,000 or 95.3% from $557,000 in fiscal 1994 to $26,000 in fiscal
1995. The net loss decreased by $2,140,000 or 90.8% from
$2,358,000 in fiscal 1994 to $218,000 in fiscal 1995.
Liquidity and Capital Resources
- - - - - - - - - - -------------------------------
Working capital amounted to $2,433,000 and $745,000 at
September 28, 1996 and September 30, 1995, respectively.
Cash used for capital expenditures aggregated $2,519,000
during fiscal 1996, and included $884,000 for equipment loaned to
wholesale customers, $633,000 for production equipment, and
$499,000 for computer hardware and software. During fiscal 1995,
Green Mountain had capital expenditures of $1,602,000, including
$961,000 for equipment on loan to wholesale customers, $333,000 for
production equipment and $173,000 for computer hardware and software.
Cash used to fund the capital expenditures in fiscal 1996 was
obtained from the $3,134,000 of net cash provided by operating
activities. Net cash provided by operating activities reflects a
$2,839,000 increase as compared to fiscal 1995, which resulted
primarily from the Company's improved profitability together with
the Company's efforts to control growth in accounts receivable.
The Company currently plans to make capital expenditures in
fiscal 1997 of approximately $4,200,000, primarily to fund the
purchase of equipment for loan to wholesale customers
(approximately $2,000,000) and computer hardware and software
(approximately $1,200,000). Assuming a stable mix in packaging
types and sizes, management believes that it will operate at
approximately 60-70% of capacity in fiscal 1997 and does not
foresee significant production equipment expenditures during the
year. However, management continuously reviews capital expenditure
needs and actual amounts expended may differ from these estimates.
On April 12, 1996, the Company amended its credit facility
with Fleet Bank - NH (Fleet). Under the revised facility, the
Company borrowed $1,500,000 under a five-year term promissory note
to be repaid in equal monthly principal installments. The interest
rate on all term debt under the credit facility was reduced,
subject to the election of the Company, to the lesser of the
variable Fleet base rate (8.25% at September 28, 1996) plus 25
basis points or 275 basis points above the LIBOR rate for
maturities of up to one year. The interest rate on this debt
approximated 8.2% at September 28, 1996.
The interest rate of the Company's revolving line of credit
under the amended Fleet credit facility was also reduced, subject
to the election of the Company, to the lesser of the Fleet base
rate or 250 basis points above the LIBOR rate for maturities of up
to one year. The term of the revolving line of credit was also
extended by one year to February 28, 1998. The outstanding balance
on the revolving line of credit at September 28, 1996 was $508,000,
with a total availability under the amended borrowing base formula
capped at $3,000,000.
Management believes that cash flow from operations, existing
cash and available borrowings under its credit facility and other
sources will provide sufficient liquidity to pay all liabilities in
the normal course of business, fund capital expenditures and
service debt requirements for the next twelve months.
The average cost of the high quality arabica coffees the
Company purchases decreased during fiscal 1996 as compared to
fiscal 1995, and the Company's overall gross profit margin has
improved. The Company passed the majority of such savings on to
its customers through price reductions, and such price reductions
had a negative impact on the Company's year-to-year percentage net
sales growth rate.
The Company believes that the cost of green coffee will
continue to be volatile in fiscal 1997, but expects that its
average cost of green coffee in fiscal 1997 will be equivalent to,
or less than, that experienced in fiscal 1996, although there can
be no assurance that this will be the case. The Company believes
that increases in the cost of green coffee can generally be passed
on to customers or absorbed through more efficient operations,
although there can be no assurance that the Company will be
successful in doing so. 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 70 different
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 in a blend
or temporarily remove that particular coffee from its product line.
Deferred Income Taxes
- - - - - - - - - - ---------------------
The Company has net deferred tax assets of $902,000 at
September 28, 1996. These assets are reported net of a deferred
tax asset valuation allowance at that date of $3,503,000 (including
$2,681,000 primarily related to a Vermont investment tax credit
which is fully reserved). The Company had income before taxes of
$1,484,000 in fiscal 1996 and has been profitable in seven of its
last nine fiscal quarters including the last five consecutive
fiscal quarters. 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.
Seasonality
- - - - - - - - - - -----------
Historically, the Company has experienced lower net sales
levels in its second fiscal quarter following high holiday-related
levels in its first fiscal quarter, especially in its retail and
direct mail operations. This has historically resulted in less
favorable operating results during the second fiscal quarter. In
addition, quarterly results may be affected by a variety of other
factors, including, but not limited to, general economic trends,
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 7. FINANCIAL STATEMENTS
See Index to Financial Statements on Page F-1.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS; PROMOTERS AND CONTROL PERSONS;
Compliance With Section 16(a) of the Exchange Act
The Company's directors and executive officers are as follows:
<TABLE>
Year
First
Name Age Elected Positions with the Company
--------------------------------------------------------------------------
<S> <C> <C> <C>
Robert P. Stiller 53 1993 Chairman of Board of Directors,
President and Chief Executive
Officer
Robert D. Britt 41 1993 Chief Financial Officer,
Treasurer, Secretary and
Director
Stephen J. Sabol 35 1993 Vice President and Director
Jonathan C. Wettstein 48 1994 Vice President and Director
Paul Comey 46 1993 Vice President
William D. Davis(1)(2) 47 1993 Director
Jules A. del Vecchio(1)(2) 53 1993 Director
David E. Moran(2) 43 1995 Director
Ian W. Murray(1)(2) 62 1993 Director
</TABLE>
--------------------------------
(1) Member of Audit Committee of Board of Directors
(2) Member of Compensation Committee of the Board of Directors,
which was established on October 17, 1996, subsequent to
the end of fiscal 1996
Certain biographical information regarding each director
and executive officer of the Company is set forth below:
Robert P. Stiller, founder of Roasters, has served as its President
and a director since its inception in July 1981. In September
1971, Mr. Stiller co-founded Robert Burton Associates, a company
engaged in the development and sale of E-Z Wider cigarette papers
and served as its President and director until June 1980.
Robert D. Britt has served as Chief Financial Officer of Roasters
since May 1993. From July 1992 to April 1993, Mr. Britt served as
Chief Financial Officer for Engineered Coatings, Inc., a
manufacturer engaged in the design and application of high
temperature metallic and ceramic coatings to metal parts. From
June 1990 to July 1992, Mr. Britt served in an executive capacity
with FCR, Inc., a recycling and beverage redemption company, having
held the positions of Vice President and Chief Financial Officer
and Director of Business Development. From June 1986 to May 1990,
Mr. Britt was a Senior Manager in the Entrepreneurial Services
Group at Ernst & Young. Mr. Britt holds a Master of Business
Administration from the Wharton School at the University of
Pennsylvania.
Stephen J. Sabol has served as Vice President of Sales of Roasters
since September 1996. Mr. Sabol served as Vice President of
Branded Sales of Roasters from August 1992 to August 1996. From
September 1986 to August 1992, Mr. Sabol was the General Manager of
Roasters and was responsible for overall performance of the
wholesale division in Maine and New Hampshire. Prior thereto, Mr.
Sabol was employed in a managerial capacity by Property Management
Consultants, a real estate management company.
Jonathan C. Wettstein has served as Vice President and Plant
Manager of Roasters since April 1993. From June 1974 to April
1993, Mr. Wettstein was employed by Digital Equipment Corporation
in a variety of positions including Plant Manager, Order
Administration Manager, Marketing Manager, Business and Materials
Manager and Product Line Controller. Mr. Wettstein holds a Master
of Business Administration from the Harvard Business School.
Paul Comey has served as Executive Director of Facilities and
Process Engineering of Roasters since June 1993. From March 1986
to May 1993, Mr. Comey was the owner and principal consultant of
Baseline Solutions, a company engaged in providing consulting
services to the coffee industry, including the Company.
William D. Davis is currently the Chief Executive Officer,
President and Partner at Waterbury Holdings of Vermont, a specialty
foods holding company. Mr. Davis also currently holds the position
of Partner and CEO of affiliates of Waterbury Holdings of Vermont
including McKenzie LLC, All Season's Kitchen LLC, Franklin County
Cheese Corporation, Frank Hahn Incorporated and Rondel, Foods LLC.
From January 1985 to October 1994, Mr. Davis was President and
Chief Executive Officer of Cabot Creamery Cooperative, Inc., a
dairy food manufacturer.
Jules A. del Vecchio is currently a Vice President of New York Life
Insurance Company and is responsible for communications and agent
management and training. Mr. del Vecchio has been affiliated with
New York Life Insurance Company since 1970.
David E. Moran is currently a partner in the Cambridge Group, a
management consulting company focused on marketing. Before joining
the Cambridge Group, he was a partner at Marketing Corporation of
America from July 1984 to June 1992. Earlier in his career Mr.
Moran spent ten years in brand management at General Foods and
International Playtex. While at General Foods, he was Brand
Manager of several of its Maxwell House coffee brands.
Ian W. Murray is currently retired. From April 1983 to January
1992, Mr. Murray was the Chairman of the Board, President and Chief
Executive Officer of Nestle Enterprises Limited, Canada. Prior
thereto, Mr. Murray served as the President and Chief Executive
Officer of Libby, McNeill & Libby, Inc. and Standard Brand Foods.
<PAGE>
Item 10. EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation,
cash and non-cash, awarded to, earned by or paid by the Company to
its President and Chief Executive Officer and to executive officers
whose annual compensation (consisting solely of base salary and
bonus, if any) exceeded $100,000 for the year ended September 28,
1996 (the "Named Executive Officers"):
<TABLE>
Summary Compensation Table
Long Term
Compensa-
tion
Securities
Annual Underlying
Name and Compensation Other Compen- Stock
Principal Position Year Salary($) Bonus($) sation $(1) Options
- - - - - - - - - - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert P. Stiller 1994 157,000(5) - 600 -
Chairman of the Board 1995 189,000 - - -
of Directors, President 1996 190,419 57,300 - -
President and Chief
Executive Officer
Robert D. Britt 1994 96,400(5) - 25,800(2) 165(3)
Chief Financial 1995 108,800 - 2,000 2,449(3)(4)
Officer, Treasurer, 1996 109,126 10,000 2,100 1,000(3)(6)
Secretary and Director
Stephen J. Sabol 1994 116,700(5) - - 99(3)
Vice President of 1995 122,500 - - 1,648(4)
Sales and Director 1996 126,622 5,000 2,000 -
Jonathan C. Wettstein 1994 110,400(5) - - 190(3)
Vice President and 1995 119,700 - - 2,465(3)(4)
Plant Manager and 1996 121,682 6,000 1,400 2,254(3)(6)
Director
Paul Comey 1994 94,500(5) - - -
Executive Director of 1995 104,200 - 1,800 1,524(4) -
Facilities and Process 1996 109,340 5,000 2,700 - (6)
Engineering
</TABLE>
- - - - - - - - - - --------------------------------------
(1) Except as noted, represents matching contributions to the
Company's 401(k) Plan.
(2) Includes $25,700 for reimbursement of relocation expenses.
(3) Represents common stock shares issuable upon exercise of
options granted under the Company's Employee Stock Purchase Plan
(includes 925 shares for Mr. Britt and 849 shares for Mr.
Wettstein in fiscal 1995).
(4) Represents common stock shares issuable upon exercise of
options granted under the Company's 1993 Stock Option Plan
(includes 1,524 shares for Mr. Britt and 1,616 shares for Mr.
Wettstein in fiscal 1995).
(5) Executive agreed to a reduced base salary during a portion of fiscal
1994 as part of the Company's fiscal 1994 cost containment program.
(6) The term of outstanding options to purchase 47,148 shares
held by Mr. Britt, 47,148 shares held by Mr. Wettstein and
23,574 shares held by Mr. Comey were extended in fiscal 1996 for
an additional five years and now expire in 2003. The exercise price of
these options exceeded the fair market value of the common stock at the
date of the extension.
Employment Agreements
- - - - - - - - - - ---------------------
On July 1, 1993, Roasters entered into a four-year employment
agreement with Robert Stiller, its President and Chief Executive
Officer. The employment agreement provides that Mr. Stiller will
receive a minimum base annual salary of $185,000, performance
based bonuses to be determined from time to time by the Board of
Directors of the Company and additional compensation equal to a
maximum of 75% of his then base compensation in consideration for
Mr. Stiller's agreement to remain employed with the Company for a
period of 90 days after the consummation of any sale of all or
substantially all of the stock or assets of the Company or a merger
or consolidation of the Company in which the Company is not the surviving
entity. In addition, Mr. Stiller is entitled to a severance payment
consisting of 100% of his then base compensation in the event that he is
terminated for any reason other than (i) for cause or (ii) his voluntary
resignation. Mr. Stiller is also entitled to certain benefits, including
health insurance coverage, life insurance and long-term disability coverage.
On March 26, 1993, Roasters entered into an employment agreement with
Robert D. Britt, its Chief Financial Officer, Treasurer and Secretary.
The employment agreement provides that Mr. Britt will receive a minimum base
annual salary of $100,000, subject to certain annual cost of living
adjustments, performance based bonuses to be determined from time to time by
the Board of Directors and additional compensation up to a maximum of 200% of
his then base compensation payable over 24 months in the event of a sale of
all or substantially all of the stock or assets of the Company or a merger or
consolidation of the Company in which the Company is not the surviving entity
or any transaction or series of related transactions resulting in Mr.
Stiller owning less than 50% of the Company's issued and outstanding common
stock. In addition, Mr. Britt is entitled to a severance payment equal to
50% of his then base compensation in the event that he is terminated for any
reason other than (i) for cause or (ii) his voluntary resignation. Mr. Britt
is also entitled to reimbursement of certain relocation expenses. The
employment agreement may be terminated at any time by Roasters or Mr. Britt.
On July 1, 1993, Roasters entered into an employment agreement with
Stephen J. Sabol, its Vice President of Sales. The employment agreement
provides that Mr. Sabol will receive a minimum base annual salary of $120,000
and performance based bonuses to be determined from time to time by the Board
of Directors. Mr. Sabol was also reimbursed for certain relocation expenses.
The employment agreement may be terminated at any time by Roasters or Mr.
Sabol.
On July 1, 1993, Roasters entered into an employment agreement with
Jonathan C. Wettstein, its Vice President and Plant Manager. The employment
agreement provides that Mr. Wettstein will receive a minimum base annual
salary of $115,000, performance based bonuses to be determined from time to
time by the Board of Directors and additional compensation up to a maximum of
100% of his then base compensation in the event of a sale of all or
substantially all of the stock or assets of the Company or a merger or
consolidation of the Company in which the Company is not the surviving
entity. In addition, Mr. Wettstein is entitled to a severance payment
consisting of 50% of his then base compensation in the event that he is
terminated for any reason other than (i) for cause or (ii) his voluntary
resignation. The employment agreement may be terminated at any time by
Roasters or Mr. Wettstein.
On July 1, 1993, Roasters entered into an employment agreement with Paul
Comey, its Executive Director of Facilities and Process Engineering. The
employment agreement provides that Mr. Comey will receive a minimum base
annual salary of $100,000 and performance based bonuses to be determined from
time to time by the Board of Directors. The employment agreement may be
terminated at any time by Roasters or Mr. Comey.
Each of the above employment agreements also provides that the officer
shall not (i) disclose or use any confidential information of the Company
during or after the term of his agreement, (ii) compete with the Company or
any of its affiliates during the term of his agreement, or in certain
circumstances, for a period of six months thereafter or (iii) recruit any
employee of the Company for employment in any other business competitive with
the Company for a period of one year after the termination of his agreement.
<PAGE>
Stock Options Granted in Fiscal 1996
- - - - - - - - - - ------------------------------------
The following table sets forth information concerning individual grants
of stock options made by the Company during the fiscal year ended September
28, 1996, to each of the Named Executive Officers.
<TABLE>
OPTION GRANTS
IN THE FISCAL YEAR ENDED SEPTEMBER 28, 1996
Individual Grants
- - - - - - - - - - ----------------------------------------------------------------------------
Percent of
Total Options
Granted to
Employees in Exercise or
Fiscal Year Base Price Expiration
Name Granted 1996(1) (per share) Date(3)
- - - - - - - - - - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert P. Stiller - - - -
Robert D. Britt 1,000(2) 3.3 % $ 5.10 09/28/96
Stephen J. Sabol - - - -
Jonathan C. Wettstein 2,254(2) 7.5 % $ 5.10 09/28/96
Paul Comey - - - -
</TABLE>
- - - - - - - - - - ----------------------------
(1) In fiscal 1996, the Company granted a total of 29,878 options
(21,878 granted under the Company's Employee Stock Purchase Plan
and 8,000 options granted under the Company's 1993 Stock Option Plan)
to employees and such number was used in calculating the percentages
above. Effective July 26, 1996, the term of 141,440 options under
individual non-qualified option agreements including 47,148 held by Mr.
Britt, 47,148 held by Mr. Wettstein and 23,574 held by Mr. Comey,
was extended from five years to ten years and are not stated as
new option grants for purposes of this table.
(2) These options were granted under the Company's Employee Stock
Purchase Plan.
(3) The options granted under the Company's Employee Stock Purchase Plan
expire on the last day of the fiscal year in which such options are
granted.
Aggregated Options Exercises
- - - - - - - - - - ----------------------------
The following table sets forth information (on an aggregated
basis) concerning each exercise of stock options during the fiscal
year ended September 28, 1996 by each of the Named Executive
Officers and the final year-end value of unexercised options.
<TABLE>
AGGREGATED OPTION EXERCISES
IN THE FISCAL YEAR ENDED SEPTEMBER 28, 1996
FISCAL YEAR END OPTION VALUES
Number of Value of Unexercised
Unexercised Options "In-the-Money"
Options at Fiscal Options at Fiscal
Shares Year-End Year End(2)
Acquired Value -------------- -------------------
on Rea- Exer- Unexer- Exer- Unexer-
Name Exercise lized(1) cisable cisable cisable cisable
- - - - - - - - - - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert P. Stiller - - - - - -
Robert D. Britt 1,000(3) $ 900 47,529 1,143 $ 0 $ 0
Stephen J. Sabol - - 47,560 1,236 $ 215,702 $ 0
Jonathan C.
Wettstein 2,254(3) $2,029 47,552 1,212 $ 0 $ 0
Paul Comey - - 47,529 1,143 $ 107,851 $ 0
</TABLE>
- - - - - - - - - - ---------------------------------
(1) The exercise price of the options granted under the
Company's Employee Stock Purchase Plan is the lower of 85%
of the closing price of the Company's common stock (i) on
the first day of the fiscal year on which trading occurred
on NASDAQ or (ii) on the last day of the fiscal year on
which trading occurred on NASDAQ (the lower of the two
closing prices shall be referred to herein as the "Lower
Closing Price"). The value realized upon exercise of these
options has been calculated to equal 15% of the Lower
Closing Price.
(2) Options are "in-the-money" at the fiscal year-end if the fair market
value of the underlying securities on such date exceeds the exercise
or base price of the option. The amounts set forth represent the
difference between the fair market value of the securities underlying
the option on September 28, 1996, assumed by the Company to have been
$7.125 per share, and the exercise price of the applicable options
($2.55 per share), multiplied by the applicable number of options.
(3) Options exercised were those granted under the Employee Stock Purchase
Plan.
Board of Directors Compensation
- - - - - - - - - - -------------------------------
Officers are elected annually and serve at the discretion of the Board
of Directors. Directors are elected annually by the Company's stockholders.
Each of the directors of the Company (other than any of such persons who are
also officers of the Company) is paid a retainer and is reimbursed for
ordinary and necessary travel expenses incurred in connection with attendance
at each Board meeting. The annual retainer in fiscal 1996, fiscal 1995 and
fiscal 1994 was $4,000. In fiscal 1997, the annual retainer will be $8,000.
In addition, Mr. Murray was paid $750 for additional services in fiscal 1996.
The Company has granted five-year, non-statutory options to
purchase 5,000 shares of common stock to each non-employee
director under the Company's 1993 Stock Option Plan. Messrs.
Davis, del Vecchio and Murray's options were granted in fiscal
1994 at an exercise price of $6.00 per share and vest ratably over
a four-year period from the date of grant. Mr. Moran's options
were granted in fiscal 1996 at an option price of $6.25 per share
and vest ratably over a four-year period from the date of grant.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding
the beneficial ownership of the Company's common stock as of
December 13, 1996 for (1) each of the Company's directors, (2) all
directors and executive officers of the Company as a group, (3)
each Named Executive Officer and (4) each person known by the
Company to own beneficially 5% or more of the outstanding shares
of its common stock:
<TABLE>
Number of Shares Percent Ownership
Name and Address of of Common Stock of Common Stock
Beneficial Owner Beneficially Owned Outstanding
- - - - - - - - - - ----------------------------------------------------------------------------
<S> <C> <C>
Robert P. Stiller(1) 2,053,286 60.1%
c/o Green Mountain Coffee, Inc.
33 Coffee Lane
Waterbury, Vermont 05676
Robert D. Britt(2)(3) 50,000 1.4%
c/o Green Mountain Coffee, Inc.
33 Coffee Lane
Waterbury, Vermont 05676
Stephen J. Sabol(4) 48,071 1.4%
c/o Green Mountain Coffee, Inc.
33 Coffee Lane
Waterbury, Vermont 05676
Jonathan C. Wettstein(3)(5) 51,249 1.5%
c/o Green Mountain Coffee, Inc.
33 Coffee Lane
Waterbury, Vermont 05676
Paul Comey(6) 47,910 1.4%
c/o Green Mountain Coffee, Inc.
33 Coffee Lane
Waterbury, Vermont 05676
William D. Davis(7) 4,700 0.1%
RD #2 Box 756
Waterbury, Vermont 05676
Jules A. del Vecchio(7)(8) 26,074 0.8%
c/o New York Life Insurance Co.
51 Madison Avenue
New York, New York 10010
David E. Moran(9) 1,250 (11)
16 Tamarack Place
Greenwich, CT 06831
Ian W. Murray(7)
P.O. Box 23618 2,500 0.1%
Hilton Head, South Carolina 29925-3618
Hathaway & Associates 250,000 7.3%
119 Rowayton Avenue
Rowayton, Connecticut 06853
All directors and officers
as a group 9 persons(10) 2,285,040 63.2%
</TABLE>
- - - - - - - - - - -------------------------------------
(1) Includes an aggregate of 117,870 shares of common stock held by Trusts
for the benefit of Mr. Stiller's wife and children and excludes
shares owned by relatives of Mr. Stiller, if any, as to which
Mr. Stiller disclaims beneficial ownership.
(2) Includes 47,910 shares of common stock for Mr. Britt issuable upon
exercise of outstanding stock options and excludes 762 shares of common
stock issuable upon exercise of stock options under the Company's 1993
Stock Option Plan which are not exercisable within 60 days.
(3) Excludes 500 shares of common stock for Mr. Britt and 2,014 shares
for Mr. Wettstein issuable upon exercise of fiscal 1997 stock options
under the Company's Employee Stock Purchase Plan (which options are not
exercisable until September 27, 1997).
(4) Includes 47,972 shares of common stock for Mr. Sabol issuable upon
exercise of stock options and excludes 824 shares of common stock
issuable upon exercise of stock option under the Company's 1993 Stock
Option Plan which are not exercisable within 60 days.
(5) Includes 47,956 shares of common stock for Mr. Wettstein issuable upon
exercise of outstanding stock options and excludes 808 shares of common
stock issuable upon exercise of stock options under the Company's 1993
Stock Option Plan which are not exercisable within 60 days.
(6) Includes 47,910 shares of common stock for Mr. Comey issuable upon
exercise of outstanding stock options and excludes 762 shares of common
stock issuable upon exercise of stock options under the Company's 1993
Stock Option Plan which are not exercisable within 60 days.
(7) Includes for each person 2,500 shares of common stock issuable upon
exercise of outstanding stock options and excludes for each person 2,500
shares of common stock issuable upon exercise of stock options under the
Company's 1993 Stock Option Plan which are not exercisable within 60 days.
(8) Includes 23,574 shares held of record by Phyllis Grennan Huffman,
Mr. del Vecchio's wife.
(9) Represents shares of common stock for Mr. Moran issuable upon the
exercise of stock options and excludes 3,750 shares of common stock
issuable upon exercise of stock options under the Company's 1993 Stock
Option Plan which are not exercisable within 60 days.
(10) Includes an aggregate of 200,498 shares of common stock issuable
upon exercise of stock options held by certain officers of the Company
that are exercisable within the next 60 days and excludes 2,514 shares
of common stock issuable upon exercise of fiscal 1996 stock options under
the Company's Employee Stock Purchase Plan (which options are not
exercisable until September 27, 1997) and excludes 14,406 shares of common
stock issuable upon exercise of stock options under the Company's 1993
Stock Option Plan which are not exercisable within 60 days.
(11) Less than 0.1%
<PAGE>
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time since the Company's inception and prior to
fiscal 1991, Robert P. Stiller, the Company's President, Chief
Executive Officer and majority stockholder, had advanced funds to the
Company to meet its working capital needs. At September 24, 1994,
the Company had outstanding a note payable to Mr. Stiller, the
Company's majority stockholder, totaling $416,000. The note was
payable in quarterly installments of $25,000 and bore interest at
7.91%, payable monthly. The note was paid in full in April 1995.
Interest paid by the Company to the majority stockholder for the year
ended September 30, 1995 was $15,000.
Mr. Stiller agreed to guarantee the repayment of the
indebtedness incurred by the Company to the Central Vermont Economic
Development Corporation. See Note 8 of "Notes to Consolidated
Financial Statements" for a description of the terms of such
indebtedness.
Any future transactions between the Company and its officers,
directors, principal stockholders or other affiliates will be on
terms no less favorable to the Company than could be obtained from
unaffiliated third parties on an arms-length basis and will be
approved by a majority of the Company's independent and disinterested
directors. Any loans to officers, directors, principal stockholders
or affiliates of any of them will be made for bona fide business
purposes, will be on terms no less favorable than could be obtained
from unaffiliated third parties and will be approved by a majority of
the Company's independent and disinterested directors.
Item 13. EXHIBITS LIST AND REPORTS ON FORM 8-K
(a) Exhibits
See Index to Exhibits on Page E-1. Compensatory plans and arrangements
required to be filed as exhibits are as follows:
1. 1993 Stock Option Plan.
2. Employment Agreement, as of July 1, 1993, between the Company and
Robert P. Stiller.
3. Employment Agreement, as of March 26, 1993, between the Company and
Robert D. Britt.
4. Employment Agreement, as of July 1, 1993, between the Company and
Stephen J. Sabol.
5. Employment Agreement, as of July 1, 1993, between the Company and
Jonathan C. Wettstein.
6. Employment Agreement as of July 1, 1993, between the Company and
Paul Comey.
7. Stock Option Agreement, dated July 21, 1993, between the Company
and Robert D. Britt.
8. Stock Option Agreement, dated July 21, 1993, between the Company and
Stephen J. Sabol.
9. Stock Option Agreement, dated July 21, 1993, between the Company and
Jonathan C. Wettstein.
10. Stock Option Agreement, dated July 21, 1993, between the Company and
Paul Comey.
11. Stock Option Agreement, dated July 21, 1993, between the Company and
Paul Comey.
12. Stock Option Agreement, dated July 22, 1994, between the Company and
William D. Davis.
13. Stock Option Agreement, dated July 22, 1994, between the Company and
Jules A. del Vecchio.
14. Stock Option Agreement, dated July 22, 1994, between the Company and
Ian W. Murray.
15. Stock Option Agreement, dated December 30, 1994, between the Company
and Robert D. Britt
16. Stock Option Agreement, dated December 30, 1994, between the Company
and Stephen J. Sabol
17. Stock Option Agreement, dated December 30, 1994, between the Company
and Jonathan C. Wettstein
18. Stock Option Agreement, dated December 30, 1994, between the Company
and Paul Comey
19. Stock Option Agreement, dated November 27, 1995, between the Company
and David E. Moran
20. First Amendment to the Green Mountain Coffee, Inc. 1993 Stock Option
Plan
21. First Amendment to the Stock Option Agreement, dated July 21, 1993
between the Company and Robert D. Britt
22. First Amendment to the Stock Option Agreement, dated July 21, 1993
between the Company and Jonathan C. Wettstein
23. First Amendment to the Stock Option Agreement, dated July 21, 1993
between the Company and Paul Comey
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September 28, 1996.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act the
Registrant caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GREEN MOUNTAIN COFFEE, INC.
By: /s/ Robert P. Stiller
---------------------
ROBERT P. STILLER
Chairman of the Board of Directors,
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Signature Title Date
- - - - - - - - - - --------------------- ------------------------------------- ----------------
/s/ Robert P. Stiller Chairman of the Board of Directors,
- - - - - - - - - - --------------------- President and Chief Executive Officer
ROBERT P. STILLER (Principal Executive Officer) December 26, 1996
/s/ Robert D. Britt Chief Financial Officer,
- - - - - - - - - - --------------------- Treasurer, Secretary and Director
ROBERT D. BRITT (Principal Financial and
Accounting Officer) December 26, 1996
STEPHEN J. SABOL* Director December 26, 1996
JONATHAN C. WETTSTEIN* Director December 26, 1996
WILLIAM D. DAVIS* Director December 26, 1996
JULES A. DEL VECCHIO* Director December 26, 1996
DAVID E. MORAN* Director December 26, 1996
IAN W. MURRAY* Director December 26, 1996
*By: /s/ Robert P. Stiller
-----------------------------------
Robert P. Stiller, Attorney-in-fact
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
INDEX TO EXHIBITS
3.1 Certificate of Incorporation of the Company1
3.2 Bylaws of the Company1
10.1 Form of Underwriter's Warrant Agreement between Green Mountain
Coffee, Inc. and Gilford Securities Incorporated (with form of
warrant attached)1
10.2 Commercial Loan Agreement, dated 10/22/92, among Green Mountain
Coffee, Inc.*, as borrower, Fleet Bank - NH, as lender, and
Robert Stiller, Green Mountain of Maine, Inc., Green Mountain
of Champlain, Inc., Green Mountain Coffee Roasters Franchising
Corporation, Green Mountain Filters, Inc., and Green Mountain
Coffee Roasters of Connecticut, Inc., as guarantors1
(a) Amendment to Fleet Bank - NH Commercial Loan Agreement and
Loan Documents, dated August 11, 1993, among Green
Mountain Coffee, Inc., as borrower, Fleet Bank - NH, as
lender, and Robert Stiller, Green Mountain of Maine, Inc.,
Green Mountain of Champlain, Inc., Green Mountain Coffee
Roasters Franchising Corporation, Green Mountain Filters,
Inc., and Green Mountain Coffee Roasters of Connecticut,
Inc., as guarantors1
(b) Term Loan Promissory Note, dated August 11, 1993, from
Green Mountain Coffee Roasters, Inc. to Fleet Bank - NH1
(c) Interim Bridge Loan Promissory Note, dated August 11,
1993, from Green Mountain Coffee Roasters, Inc. to Fleet Bank NH1
(d) Note Modification Agreement, dated August 11, 1993, between Green
Mountain Coffee Roasters, Inc. to Fleet Bank NH1
(e) Mortgage and Security Agreement, dated August 11, 1993,
between Green Mountain Coffee Roasters, Inc. and Fleet
Bank NH1
(f) Collateral Assignment of Leasehold Interest, dated
August 11, 1993, between Green Mountain Coffee Roasters,
Inc. and Fleet Bank - NH1
(g) Form of Mortgagee's Consent, Non-Disturbance, and Waiver
between Howard Bank, N.A. and Fleet Bank -NH1
(h) Landlord's Consent and Waiver, dated August 4, 1993,
executed by Pilgrim Partnership1
(i) Consent of Lessor executed by Pilgrim Partnership and Fleet
Bank - NH 1
(j) RSA 399-B Statement of Finance Charges, dated August 11,
19931
(k) Letter, dated August 30, 1992, from Fleet Bank - NH to
Green Mountain Coffee Roasters, Inc.1
(l) Third Amendment to Loan Agreement and Loan Documents,
dated August 31,1993, among Green Mountain Coffee Roasters,
Inc., as borrower, and Fleet Bank - NH, as lender, and Robert
Stiller, Green Mountain of Maine, Inc., Green Mountain of
Champlain, Inc., Green Mountain Coffee Roasters Franchising
Corporation, Green Mountain Filters, Inc. and Green Mountain
Coffee Roasters of Connecticut, Inc., as guarantors1
(m) Term Promissory Notes, dated August 31, 1993, from Green
Mountain Coffee Roasters, Inc. to Fleet Bank - NH1
(n) Fourth Amendment to Loan Agreement and Loan Documents,
dated April 7, 1994, among Green Mountain Coffee Roasters, Inc.,
Fleet Bank - NH, and the Guarantors named therein2
(o) Revolving Line of Credit Promissory Note, dated April 7, 1994,
from Green Mountain Coffee Roasters, Inc. to Fleet Bank NH2
(p) Term Promissory Note, dated April 7, 1994, from Green Mountain
Coffee Roasters, Inc. to Fleet Bank - NH2
(q) Subordination and Standby Agreement, dated April 7, 1994, from
Robert Stiller to Fleet Bank - NH, consented to by each of the
subsidiaries of the Company2
(r) Fifth Amendment to Loan Agreement and Loan Documents,
dated August 15, 1994, among Fleet Bank - NH, Green Mountain
Coffee Roasters, Inc., Green Mountain Coffee Roasters
Franchising Corporation, and Green Mountain Coffee Roasters of
Connecticut, Inc.3
(s) Revolving Line of Credit Promissory Note, dated August
15, 1994, from Green Mountain Coffee Roasters, Inc. to Fleet
Bank - NH3
(t) Commitment Letter to amend loan agreement and loan
documents, dated February 15, 1995 among Green Mountain Coffee
Roasters, Inc., as borrower, and Fleet Bank-NH, as lender6
(u) Sixth Amendment to Commercial Loan Agreement and Loan Documents,
dated March 31, 1995 among Green Mountain Coffee Roasters, Inc.,
as borrower, and Fleet Bank-NH, as lender7
(v) Revolving Line of Credit Promissory Note, dated March 31, 1995,
for Green Mountain Coffee Roasters, Inc., to Fleet BankNH7
(w) Replacement Term Promissory Note, dated March 31, 1995,
from Green Mountain Coffee Roasters, Inc. to Fleet Bank-NH7
(x) Term Promissory Note Tied to Equipment Line of Credit,
dated April 3, 1995, from Green Mountain Coffee Roasters, Inc.,
to Fleet Bank-NH7
(y) Seventh Amendment and First Restatement of Commercial Loan
Agreement, dated April 12, 1996, among Green Mountain Coffee
Roasters, Inc., as borrower, and Fleet Bank - NH as lender10
(z) Term Promissory Note, dated April 12, 1996, From Green Mountain
Coffee Roasters, Inc., to Fleet Bank - NH 10
(aa) Note Modification Agreement, dated April 12, 1996, to
modify Term Promissory Note dated August 11, 1993, from Green
Mountain Coffee Roasters, Inc. to Fleet Bank - NH 10
10.3 Commitment letter, dated 7/15/93 from Fleet Bank - NH to Green
Mountain Coffee, Inc. relating to increase in revolving line of
credit, $623,000 term loan and $742,110 bridge loan and related
matters1
10.4 Revolving Line of Credit Promissory Note, dated 10/22/92, from
Green Mountain Coffee, Inc. to Fleet Bank - NH1
10.5 Term Loan Promissory Note, dated 10/22/92, from Green Mountain
Coffee, Inc. to Fleet Bank - NH1
10.6 Term Promissory Note, dated 2/29/93, from Green Mountain Coffee,
Inc. to Fleet Bank - NH1
10.7 Term Promissory Note, dated 3/5/93, from Green Mountain Coffee,
Inc. to Fleet Bank - NH1
10.8 Term Promissory Note, dated 6/21/93, from Green Mountain Coffee,
Inc. to Fleet Bank - NH1
10.9 Term Promissory Note, dated 6/21/93, from Green Mountain Coffee,
Inc. to Fleet Bank - NH1
10.10 Security Agreements, dated 10/22/92, between Fleet Bank - NH and
each of the following subsidiaries1
(a) Green Mountain Coffee, Inc.1
(b) Green Mountain of Maine, Inc.1
(c) Green Mountain of Champlain, Inc.1
(d) Green Mountain Coffee Roasters Franchising Corporation1
(e) Green Mountain Filters, Inc.1
(f) Green Mountain Coffee Roasters of Connecticut, Inc.1
(g) First Restatement of Security Agreement, dated April 12,
1996, between Green Mountain Coffee Roasters, Inc. and Fleet
Bank - NH 10
10.11 Guaranty Agreement, dated 10/22/92, between Fleet Bank - NH and
Robert Stiller1
10.12 Guaranty Agreements, dated 10/22/92, between Fleet Bank - NH and
each of the following subsidiaries1
(a) Green Mountain of Maine, Inc.1
(b) Green Mountain of Champlain, Inc.1
(c) Green Mountain Coffee Roasters Franchising Corporation1
(d) Green Mountain Filters, Inc.1
(e) Green Mountain Coffee Roasters of Connecticut, Inc.1
10.13 Subordination and Standby Agreement, dated 10/22/92, from
Robert Stiller to Fleet Bank - NH, consented to by each of the
subsidiaries of the Company1
10.14 Collateral Assignment of Leasehold Interests by Green Mountain
Coffee, Inc. to Fleet Bank - NH1
10.15 Assignment of Trademarks from Green Mountain Coffee, Inc. in
connection with the Fleet Bank - NH financing1
10.16 Subordinated Convertible Promissory Note, dated 4/23/93, from Green
Mountain Coffee, Inc. to Lenox Securities, Inc., guaranteed by
Robert Stiller1
10.17 Subordinated Convertible Promissory Note, dated 4/23/93, from Green
Mountain Coffee, Inc. to Cathy Fine, guaranteed by Robert Stiller1
10.18 Promissory Note, dated 10/5/90, from Green Mountain Coffee, Inc. to
Robert Stiller1
10.19 Financing Agreement executed 6/18/93 (Lease Agreement No. 413165254
Master Agreement No. 4131-65254) between Green Mountain Coffee,
Inc., dba Green Mountain Coffee Roasters, and HewlettPackard
Company1
10.20 Financing Agreement executed 6/18/93 (Lease Agreement No. 413165256
Master Agreement No. 4131-65254) between Green Mountain Coffee,
Inc., dba Green Mountain Coffee Roasters, and HewlettPackard
Company1
10.21 Resolution adopted by The Vermont Economic Development Authority
("VEDA") on June 25, 1993 with respect to proposed $300,000 loan to
Green Mountain Coffee, Inc. together with Letter dated 6/29/93 from
VEDA to Green Mountain Coffee, Inc. and Letter dated 7/2/93 from
Green Mountain Coffee, Inc. to VEDA relating thereto1
(a) Loan Agreement, dated August 11, 1993, between VEDA and
Green Mountain Coffee Roasters, Inc.1
(b) Note, dated August 11, 1993, from Green Mountain Coffee
Roasters, Inc. to VEDA1
(c) Security Agreement, dated August 11, 1993, between VEDA
and Green Mountain Coffee Roasters, Inc.1
(d) Guaranty Agreements, dated August 11, 1993, between VEDA
and
(i) Robert Stiller and Christine Stiller,(ii) Green
Mountain Coffee of Maine, Inc., (iii) Green Mountain of
Champlain, Inc., (iv) Green Mountain Coffee Roasters
Franchising Corporation, Inc., (v) Green Mountain Filters, Inc.
and (vi) Green Mountain Coffee Roasters of Connecticut, Inc.1
(e) Subordination Agreement, dated August 11, 1993, between
VEDA and Robert Stiller1
(f) Form of Escrow Agreement among VEDA, Fleet Bank - NH and
Green Mountain Coffee Roasters, Inc.1
(g) Collateral Assignment of Lease, dated August 11, 1993, between
VEDA and Green Mountain Coffee Roasters, Inc.1
(h) Agreement to Assignment, Consent and Disclaimer, dated
August 4, 1993, executed by Pilgrim Partnership1
(i) Mortgage Deed, dated August 11, 1993, executed by Green
Mountain Coffee Roasters, Inc.1
(j) Mortgagee's Consent, Non-Disturbance and Waiver, dated
August 11, 1993, between Howard Bank, N.A. and VEDA1
(k) Form of Intercreditor Agreement between VEDA and Fleet
Bank - NH1
10.22 U.S. Small Business Administration ("SBA") Authorization and
Debenture Guaranty relating to proposed $766,000 loan to Green
Mountain Coffee, Inc. together with Letters dated 7/14/93 and
7/19/93 from SBA to Central Vermont Economic Development Corporation
relating thereto1
(a) Small Business Administration Guaranty dated September 30, 1993
from Robert P. Stiller to Central Vermont Economic Development
Corporation4
(b) Assignment, dated September 30, 1993, by Central Vermont
Economic Development Corporation to Small Business Administra
tion of Small Business Administration Guaranty dated September
30, 1993 from Robert P. Stiller to Central Vermont Economic
Development Corporation4
(c) Mortgage, dated September 30, 1993, between Green Mountain
Coffee Roasters, Inc. and Central Vermont Economic Development
Corporation4
(d) Assignment, dated September 30, 1993, by Central Vermont
Economic Development Corporation to Small Business
Administration of Mortgage, dated September 30, 1993, between
Green Mountain Coffee Roasters, Inc. and Central Vermont
Economic Development Corporation4
(e) "504" Note, dated September 30, 1993, in the amount of
$766,000, from Green Mountain Coffee Roasters, Inc. to Central
Vermont Economic Development Corporation, as amended, including
Servicing Agent Agreement among Green Mountain Coffee Roasters,
Inc. and Colson Services Corp.5
(f) Assignment, dated September 30, 1993, by Central Vermont
Economic Development Corporation to Small Business Administration
of "504" Note, dated September 30, 1993, in the amount
of $766,000, from Green Mountain Coffee Roasters, Inc. to
Central Vermont Economic Development Corporation4
(g) Security Agreement from Green Mountain Coffee Roasters,
Inc. to Central Vermont Economic Development Corporation 4
(h) Assignment, dated September 30, 1993, by Central Vermont
Economic Development Corporation to Small Business
Administration of Security Agreement from Green Mountain Coffee
Roasters, Inc. to Central Vermont Economic Development
Corporation 4
(i) Letter Agreement, dated October 1, 1993, among Central
Vermont Economic Development Corporation, Green Mountain Coffee
Roasters, Inc. and Small Business Administration, amending the
Authorization and Debenture Guaranty among Small Business
Administration, Central Vermont Economic Development
Corporation, and Green Mountain Coffee Roasters, Inc. 4
(j) Development Company 504 Debenture, issued October 14,
1993, for principal amount of $766,000, by Central Vermont
Economic Development Corporation to Harris Trust of New York, as
Trustee4
10.23 Lease Agreement, dated 9/6/89, between Green Mountain Coffee
Roasters of Connecticut, Inc. and Seyburt Associates Limited
Partnership with Addendum thereto1
(a) Guaranty of Lease, dated 9/6/89, by Green Mountain Coffee, Inc.1
(b) First Amendment to Lease, dated as of 1/1/92, between
F.P., Inc. and Green Mountain Coffee Roasters of Connecticut,
Inc., d/b/a Green Mountain Coffee Roasters, with Affirmation of
Guaranty by Green Mountain Coffee Roasters of Connecticut, Inc.1
(c) Promissory Note, dated 1/1/92, for $16,897, from Green Mountain
Coffee Roasters of Connecticut, Inc. to FP, Inc., guaranteed by
Green Mountain Coffee, Inc.1
(d) Lease Addendum, dated 3/13/92, between Green Mountain Coffee
Roasters and Cambridge Realty Partners Limited Partnership, as
agent of F.P., Inc.1
(e) Third Amendment to Retail Lease Agreement, dated as of
10/30/92, between F.P., Inc. and Green Mountain Coffee Roasters
of Connecticut, Inc., d/b/a Green Mountain Coffee Roasters, with
Affirmation of Guaranty of Lease by Green Mountain Coffee, Inc.1
(f) Promissory Note, dated 10/30/92, from Green Mountain
Coffee Roasters of Connecticut, Inc. to FP, Inc., guaranteed by
Green Mountain Coffee, Inc.1
(g) Tenant Estoppel Certificate, dated 10/30/92, to F.P., Inc.1
10.24 Lease Agreement, dated 6/3/83, between Pizzagalli Development
Company and Green Mountain Coffee, Inc.1
(a) First Amendment to Lease Agreement, dated 10/10/83,
between Pizzagalli Development Company and Green Mountain
Coffee, Inc.1
(b) Second Amendment to Lease Agreement, dated 12/17/91,
between Pizzagalli Development Company and Green Mountain
Coffee, Inc.1
(c) Third Amendment to Lease Agreement, dated 5/18/92, between
Pizzagalli Development Company and Green Mountain Coffee, Inc.1
(d) Sublease, dated 12/17/91, between Green Mountain Coffee,
Inc. and Bagelworks1
(e) Letter of Agreement, dated 12/17/91, between Green
Mountain Coffee, Inc. and Bagelworks1
(f) Consent to Sublease and Agreement, dated 12/17/91,
between Pizzagalli Development Company, Green Mountain Coffee,
Inc. and Bagelworks, Inc.1
(g) Attornment Agreement, dated 11/21/91, between Pizzagalli
Development Company and Maine Bagelworks, Inc.1
10.25 Standard Form Lease, dated 10/18/89, between The Carbo Company and
Green Mountain of Maine, Inc.1
(a) First Amendment to Lease Agreement between The Carbo
Company and Green Mountain of Maine, Inc., dated 5/22/931
10.26 Lease, dated 3/11/93, between Douglas M. Potter and Green Mountain
Coffee Roasters1
10.27 Standard Shopping Center Lease, dated 12/2/87, between Pyramid
Champlain Company and Green Mountain of Champlain, Inc., dba Green
Mountain Coffee Roasters1
(a) Stipulation of Term of Lease, dated 1/26/89, between
Pyramid Champlain Company and Green Mountain of Champlain,
Inc.1
10.28 Lease Agreement, dated 9/6/89, between Brothers Building Company,
Inc. and Green Mountain Coffee Roasters, Inc.1
10.29 Champlain Mill Shopping Center Lease, dated 7/17/81, between
Champlain Mill Associates and Green Mountain Coffee Roasters Inc.1
(a) Letters dated 4/21/86, 7/14/86 and 7/18/86, renewing
Lease1
(b) Letters dated 7/17/91 and 7/29/91 renewing Lease1
10.30 Lease Agreement, dated 11/9/84, between Stephen Van Esen and Green
Mountain Coffee Roasters, Inc.1
(a) Amendment to Lease, dated 12/1/881
(b) Letter dated 9/8/89 extending Lease1
(c) Letter dated 10/7/91 extending Lease1
10.31 Lease Agreement, dated 7/26/90, between Stephen Van Esen and Green
Mountain Coffee Roasters1
10.32 Lease Agreement, dated 2/20/92, between Pilgrim Partnership and
Green Mountain Coffee Roasters1
(a) Letter dated 5/19/92 amending Lease1
10.33 Lease Agreement, dated 4/28/93, between Pilgrim Partnership and
Green Mountain Coffee, Inc.1
(a) Addendum to Lease Agreement, dated 4/28/931
(b) Lease Amendment dated August 16, 19934
10.34 Lease Agreement, dated 8/ /87, between Bidwell Street Properties
and Green Mountain Coffee Roasters and Lease Agreement, dated
11/17/87, between Bidwell St. Properties and Green Mountain Coffee
Roasters1
(a) Lease Agreement, dated 11/10/89, between Bidwell Street
Properties and Green Mountain Coffee Roasters1
(b) Lease Agreement, dated 10/29/90, between Bidwell
Properties and Green Mountain Coffee Roasters1
(c) Lease Agreement, dated 10/24/92, between Bidwell
Properties and Green Mountain Coffee Roasters1
(d) Letter dated 7/21/93 from Bidwell Properties to Green
Mountain Coffee Roasters confirming terms of lease1
10.35 Real Estate Lease, dated 1/1/93, between Steele Management
Limited and Green Mountain Coffee Inc.1
10.36 1993 Stock Option Plan of the Company, as revised, with Form of
Incentive Stock Option1
10.37 Employee Stock Purchase Plan with Form of Participation
Agreement1
10.38 Stock Award Plan, as revised, with form of Stock Award Agreement1
10.39 Employment Agreement of Robert P. Stiller dated July 1, 19931
(a) Letter, dated August 1, 1993, amending Employment Agreement1
10.40 Employment Agreement of Robert D. Britt dated March 26, 19931
10.41 Employment Agreement of Stephen J. Sabol dated as of July 1, 19931
10.42 Employment Agreement of Paul Comey dated as of July 1, 19931
10.43 Employment Agreement of Claudette G. Lauren dated as of July 1,
19931
(a) Letter, dated August 1, 1993, amending Employment Agreement1
10.44 Employment Agreement of Jonathan C. Wettstein dated as of July 1,
19931
10.45 Stock Option Agreement, dated July 21, 1993, between the Company
and Robert D. Britt1
10.46 Stock Option Agreement, dated July 21, 1993, between the Company
and Agnes M. Cook1
10.47 Stock Option Agreement, dated July 21, 1993, between the Company
and Paul Comey1
10.48 Stock Option Agreement, dated July 21, 1993, between the Company
and Paul Comey1
10.49 Stock Option Agreement, dated July 21, 1993, between the Company
and Claudette G. Lauren1
10.50 Stock Option Agreement, dated July 21, 1993, between the Company
and James K. Prevo1
10.51 Stock Option Agreement, dated July 21, 1993, between the Company
and Stephen J. Sabol1
10.52 Stock Option Agreement, dated July 21, 1993, between the Company
and Jonathan C. Wettstein1
10.53 Stock Option Agreement, dated July 21, 1993, between the Company
and Susan Bain Williams1
10.54 Lease Agreement, dated 9/27/93, between Green Mountain Coffee
Roasters, Inc. and Dianne S. Hall Preliminary executrix of the
estate of Darrell B. Hall4
10.55 Lease, dated October 9, 1992, between Deer Street Associates and
Green Mountain Coffee of N.H., Inc. (sic)4
(a) 1st Amendment to Lease, dated April 23, 19934
10.56 Lease, dated November 11, 1993, between Julie Kumin-Hachman and
Green Mountain Coffee Roasters, Inc.4
10.57 Lease, dated April 20, 1994, between Harris Bank - Naperville and
Green Mountain Coffee Roasters, Inc.3
10.58 Lease, dated April 20, 1994, between Martin A. Summerfield and
Green Mountain Coffee Roasters, Inc.3
10.59 Stock Option Agreement, dated July 22, 1994, between the Company
and William D. Davis8
10.60 Stock Option Agreement, dated July 22, 1994, between the Company
and Jules A. del Vecchio8
10.61 Stock Option Agreement, dated July 22, 1994, between the Company
and Ian W. Murray8
10.62 Stock Option Agreement, dated December 30, 1994, between the
Company and Robert D. Britt9
10.63 Stock Option Agreement, dated December 30, 1994, between the
Company and Stephen J. Sabol9
10.64 Stock Option Agreement, dated December 30, 1994, between the
Company and Jonathan C. Wettstein9
10.65 Stock Option Agreement, dated December 30, 1994, between the
Company and Paul Comey9
10.66 Stock Option Agreement, dated November 27, 1995, between the
Company and David E. Moran
10.67 First Amendment to the Green Mountain Coffee, Inc. 1993 Stock
Option Plan
10.68 First Amendment to Stock Option Agreement, dated July 21, 1993
between the Company and Robert D. Britt
10.69 First Amendment to Stock Option Agreement, dated July 21, 1993
between the Company and Paul Comey
10.70 First Amendment to Stock Option Agreement, dated July 21, 1993
between the Company and Jonathan C. Wettstein
11 Net Income (Loss) per share calculation
21 List of Subsidiaries of the Company
24 Powers of Attorney
27 Financial Data Schedule
_________________________
* References to Green Mountain Coffee, Inc. are to the Vermont
corporation which, on or about July 26, 1993, is known as Green
Mountain Coffee Roasters, Inc.
- - - - - - - - - - -------------------------
Notes
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
Quarterly Report on Form 10-QSB for the 12 weeks ended April 9, 1994,
filed on May 24, 1994
3. Incorporated by reference to the corresponding exhibit number in the
Annual Report on Form 10-KSB for the fiscal year ended September 24,
1994, filed on December 8, 1994
4. Incorporated by reference to the corresponding
exhibit number in the Annual Report on Form 10-KSB
for the fiscal year ended September 25, 1993, filed
on December 23, 1993
5. Incorporated by reference to the corresponding
exhibit number in the Quarterly Report on Form 10-QSB
for the 16 weeks ended January 15, 1994, filed on
February 25, 1994
6. Incorporated by reference to the corresponding
exhibit number in the Quarterly Report on Form 10-QSB
for the 16 weeks ended January 14, 1995, filed on
February 25, 1995
7. Incorporated by reference to the corresponding
exhibit number in the Quarterly Report on Form 10-QSB
for the 12 weeks ended April 8, 1995, filed on May
23, 1995
8. Incorporated by reference to the corresponding
exhibit number in Amendment No. 1 to the Annual
Report on Form 10-KSB/A for the fiscal year ended
September 24, 1994, filed on December 16, 1994
9. Incorporated by reference to the corresponding
exhibit number in the Annual Report on Form 10-KSB
for the fiscal year ended September 30, 1995, filed
on December 28, 1996
10.Incorporated by reference to the corresponding
exhibit number in the Quarterly Report on Form 10-QSB
for the 12 weeks ended April 13, 1996, filed May 28,
1996.
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent Accountants..................................... F-2
Financial Statements:
Consolidated balance sheet at September 28, 1996 and
September 30, 1995............................................... F-3
Consolidated statement of operations for the three years ended
September 28, 1996............................................... F-4
Consolidated statement of changes in stockholders' equity for
three years ended September 28, 1996............................ F-5
Consolidated statement of cash flows for the three years
years ended September 28, 1996.................................. F-6
Notes to consolidated financial statements........................ F-7
<PAGE>
Report of Independent Accountants
To the Board of Directors and
Stockholders of Green Mountain Coffee, Inc.
In our opinion, the accompanying consolidated balance sheet
and the related consolidated statements of operations, of
changes in stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of
Green Mountain Coffee, Inc. and its subsidiary at September
28, 1996 and September 30, 1995, and the results of their
operations and their cash flows for each of the three years
in the period ended September 28, 1996, in conformity with
generally accepted accounting principles. These financial
statements are the responsibility of the Company's
management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
November 11, 1996
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands except share data)
<TABLE>
September 28, September 30,
1996 1995
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents............... $ 551 $ 310
Receivables, less allowances of $80
at September 28, 1996 and $63 at
September 30, 1995.................... 2,778 2,660
Inventories............................. 3,276 2,766
Other current assets.................... 627 377
Deferred income taxes, net.............. 516 115
---------- ---------
Total current assets................ 7,748 6,228
Fixed assets, net....................... 8,715 8,127
Other long-term assets, net............. 394 235
Deferred income taxes, net.............. 386 975
---------- ---------
$ 17,243 $ 15,565
---------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt....... $ 947 $ 618
Current portion of obligation
under capital lease................... 114 68
Revolving line of credit................ 508 1,720
Accounts payable........................ 3,002 2,751
Accrued payroll......................... 480 170
Accrued expenses........................ 264 156
---------- ---------
Total current liabilities............. 5,315 5,483
---------- ---------
Long-term debt............................ 2,911 2,351
---------- ---------
Obligation under capital lease............ 144 209
Commitments (Notes 8 and 12)
Stockholders' equity:
Common stock, $0.10 par value:
Authorized - 10,000,000 shares;
issued and outstanding -
3,417,306 shares at September 28, 1996 and
3,399,795 shares at September 30, 1995 342 340
Additional paid-in capital .......... 12,508 12,421
Accumulated deficit..................... (3,977) (5,239)
---------- ----------
Total stockholders' equity............ 8,873 7,522
---------- ----------
$ 17,243 $ 15,565
---------- ----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands except share data)
<TABLE>
Year ended
------------------------------------------
September 28, September 30, September 24,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net sales....................... $ 38,347 $ 34,024 $ 22,082
Cost of sales................... 22,817 21,738 13,513
---------- ---------- ----------
Gross profit................. 15,530 12,286 8,569
Selling and operating expenses.. 10,471 9,529 8,722
General and administrative
expenses....................... 3,132 2,578 2,605
---------- ---------- ----------
Income (loss) from operations 1,927 179 (2,758)
Other income (expense).......... (21) (24) 75
Interest expense................ (422) (399) (232)
---------- ---------- ----------
Income (loss) before income taxes 1,484 (244) (2,915)
Income tax benefit (expense).... (222) 26 557
---------- ---------- ----------
Net income (loss)............ $ 1,262 $ (218) $ (2,358)
---------- ---------- ----------
Net income (loss) per share..... $ 0.37 $ (0.06) $ (0.70)
---------- ---------- ----------
Weighted average shares
outstanding................... 3,427,610 3,383,529 3,377,682
---------- ---------- ----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the years ended September 28, 1996,
September 30, 1995 and September 24, 1994
(Dollars in thousands except share data)
<TABLE>
Addit- Total
ional Accumu- stock-
Common paid-in lated holders'
Shares stock capital deficit equity
--------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balance at
September 25, 1993..... 3,376,286 $ 338 $12,353 $(2,663) $10,028
Additional issuance costs
from initial public
offering............... - - (46) - (46)
Issuance of common stock
under stock award plan 2,442 - 22 - 22
Issuance of common stock
under employee stock
purchase plan.......... 4,757 - 21 - 21
Net loss................. - - - (2,358) (2,358)
--------- ----- ----- ------- -------
Balance at
September 24, 1994..... 3,383,485 338 12,350 (5,021) 7,667
Issuance of common stock
under employee stock
purchase plan.......... 16,310 2 71 - 73
Net loss................. - - - (218) (218)
--------- ---- ------ ------ ------
Balance at
September 30, 1995..... 3,399,795 340 12,421 (5,239) 7,522
Issuance of common stock
under employee stock
purchase plan.......... 17,511 2 87 - 89
Net income............... - - - 1,262 1,262
--------- ----- ------- ------ ------
Balance at
September 28, 1996..... 3,417,306 $ 342 $ 12,508 $(3,977) $ 8,873
--------- ------ -------- ------- -------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements
<PAGE>
<TABLE>
GREEN MOUNTAIN COFFEE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Year ended
------------------------------------------
September 28, September 30, September 24,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)............. $ 1,262 $ (218) $ (2,358)
Adjustments to reconcile net
income (loss) to net cash
provided by (used for)
operating activities:
Depreciation and
amortization........... 2,026 1,624 1,239
Loss on disposal of fixed
assets................. 47 15 6
Provision for (recovery
of) doubtful accounts.. 156 157 (9)
Deferred income taxes.... 188 (26) (557)
Changes in assets and
liabilities:
Receivables........... (274) (1,324) (607)
Inventories........... (510) (359) (981)
Other current assets.. (250) (57) (96)
Other long-term
assets, net......... (180) (97) (103)
Accounts payable...... 251 758 (235)
Accrued payroll....... 310 (131) 70
Accrued expenses...... 108 (47) (366)
----------- -------- --------
Net cash provided by
(used for) operating
activities.......... 3,134 295 (3,997)
----------- -------- --------
Cash flows from investing
activities:
Expenditures for fixed assets.. (2,519) (1,602) (4,323)
Proceeds from disposals of
fixed assets................ 59 - 24
----------- -------- --------
Net cash used for
investing activities.... (2,460) (1,602) (4,299)
----------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of
long-term debt.............. 1,509 286 2,482
Repayment of long-term debt... (729) (594) (2,438)
Principal payments under capital
lease obligation............ (90) (5)
Net change in revolving line of
credit...................... (1,212) 1,720 (1,108)
Repayment of note payable to
stockholder................. - (416) (125)
Issuance of common stock, net of
issuance costs................ 89 73 9,760
-------- ------- ------
Net cash provided by (used
for) financing activities (433) 1,064 8,571
------- ------- ------
Net increase (decrease) in cash and
cash equivalents................. 241 (243) 275
Cash and cash equivalents at
beginning of year................ 310 553 278
------- ------- -------
Cash and cash equivalents at end of
year............................. 551 310 553
-------- ------ ------
Supplemental disclosures of cash
flow information:
Cash paid for interest.......... $ 401 $ 382 $ 224
Cash paid for income taxes...... $ 5 $ 8 $ 9
</TABLE>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements
<PAGE>
1. NATURE OF BUSINESS AND ORGANIZATION
The accompanying consolidated financial statements include the
accounts of Green Mountain Coffee, Inc. (the "Company") and its
wholly-owned subsidiary, Green Mountain Coffee Roasters, Inc.
All significant intercompany transactions and balances have been
eliminated.
The Company purchases high-quality arabica coffee beans for
roasting, then packages and distributes the roasted coffee
primarily in the northeastern United States. The majority of the
Company's revenue is derived from its wholesale operation which
services fine dining, supermarket, specialty food store, convenience
store, food service, hotel, university, travel and office coffee
service customers. The Company also has a direct mail operation
servicing customers nationwide and currently operates twelve
company-owned retail stores in Vermont, Connecticut, Illinois,
Maine, Massachusetts, New Hampshire and New York.
The Company's fiscal year ends on the last Saturday in September.
Fiscal 1996 and fiscal 1994 represent the years ended September
28, 1996 and September 24, 1994, respectively, and consist of 52
weeks. Fiscal 1995 represents the year ended September 30, 1995
and consists of 53 weeks.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
- - - - - - - - - - -------------------------
The Company considers all highly liquid investments purchased
with a maturity of three months or less to be cash equivalents.
Cash and cash equivalents include money market funds which are
carried at cost, plus accrued interest, which approximates
market. The Company does not believe that it is subject to any
unusual credit and market risk.
Inventories
- - - - - - - - - - -----------
Inventories are stated at the lower of cost or market with cost
being determined by the first-in, first-out method.
Options on Futures Contracts
- - - - - - - - - - ----------------------------
The Company enters into options contracts on coffee futures to
hedge against potential increases in the price of green coffee
beans. The resulting gain or loss from the sale of an option is
applied to reduce or increase cost of goods sold, as applicable.
For the years ended September 28, 1996, September 30, 1995 and
September 24, 1994, the Company recognized gains (losses) of
$(37,000), $(9,000) and $76,000, respectively, on hedging-related
transactions. There were no open future contracts at September
28, 1996. Cash flows from the option transactions are classified
with the related inventory.
Advertising
- - - - - - - - - - -----------
The Company expenses the costs of advertising the first time the
advertising takes place. Advertising expense totaled $1,427,000,
$1,385,000 and $1,769,000 for the years ended September 28, 1996,
September 30, 1995 and September 24, 1994, respectively.
Fixed Assets
- - - - - - - - - - ------------
Fixed assets are recorded at cost. Expenditures for maintenance,
repairs and renewals of minor items are charged to expense as
incurred. Depreciation of fixed assets is provided using the
straight-line method.
Equipment under capital leases is amortized on the straight-line
method over the shorter of the lease term or the estimated useful
life of the equipment.
In order to facilitate sales, the Company follows an industry-
wide practice of purchasing and loaning coffee brewing and
related equipment to wholesale customers.
Revenue Recognition
- - - - - - - - - - -------------------
Revenue from wholesale and mail order sales is recognized upon
product shipment. Revenue from retail sales is recognized upon
sale to customers.
Income Taxes
- - - - - - - - - - ------------
The Company utilizes the asset and liability method of accounting
for income taxes, as set forth in Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes." SFAS 109 requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of
temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled.
Income (loss) Per Share
- - - - - - - - - - -----------------------
Income (loss) per share is computed based upon the weighted
average number of common and dilutive common equivalent shares
outstanding during the year. Common equivalent shares represent
the net additional shares resulting from the assumed exercise of
outstanding stock options calculated using the "treasury stock"
method.
Statement of Cash Flows
- - - - - - - - - - -----------------------
Following is a summary of noncash investing and financing
activities:
During fiscal 1996, the Company financed approximately $109,000
for the purchase of five service vehicles.
During fiscal years 1996 and 1995, capital lease obligations of
approximately $71,000 and $282,000 respectively, were incurred
when the Company entered into leases for office and loaner
equipment.
During fiscal 1995, approximately $61,000 of accrued use tax on
production machinery, which had been capitalized in fiscal 1994,
was reversed as a result of the State of Vermont determining that
the Company qualified as a manufacturer.
Financial Instruments
- - - - - - - - - - ---------------------
The Company enters into various types of financial instruments in
the normal course of business. Fair values are estimated based on
assumptions concerning the amount and timing of estimated future
cash flows and assumed discount rates reflecting varying degrees
of perceived risk. The fair values of cash, cash equivalents,
accounts receivable, accounts payable, accrued expenses and debt
approximate their carrying value at September 28, 1996.
Use of Estimates
- - - - - - - - - - ----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingencies at
September 28, 1996 and September 30, 1995, and the reported
amounts of revenues and expenses during the three years in the
period ended September 28, 1996. Actual results could differ
from these estimates.
Significant Customer and Supply Risk
- - - - - - - - - - ------------------------------------
The Company has one customer which accounted for 12.1% and 10.4%
of net sales in the years ended September 28, 1996 and September
30, 1995, respectively. During the year ended September 24,
1994, no customer accounted for more than 10% of the Company's
net sales. Concentration of credit risk with respect to accounts
receivable is limited due to the large number of customers in
various industries comprising the Company's customer base.
Ongoing credit evaluations of customers' payment history are
performed, and collateral is not required. The Company maintains
reserves for potential credit losses and such losses, in the
aggregate, have not exceeded management's expectations.
The high-quality arabica coffees the Company purchases as its
primary raw material are subject to supply and cost volatility
caused by natural, political and other factors which typically
affect agricultural products.
New Accounting Pronouncement
- - - - - - - - - - ----------------------------
In October 1995, the Financial Accounting Standards Board issued
SFAS 123 ,"Accounting for Stock-Based Compensation." SFAS 123
establishes financial accounting and reporting standards for
stock-based employee compensation plans. The statement defines a
fair value based method of accounting for stock-based
compensation which requires the recording of compensation expense
in the financial statements. Companies electing not to adopt
this fair value approach are required to disclose the effect on
results of operations and earnings per share had the Company
adopted the fair value approach. SFAS 123 will apply to the
Company for fiscal year 1997, however, the disclosure requirement
will include the effects of all awards granted in fiscal year
1996. The Company expects to retain its current method of
accounting for stock-based compensation plans, and therefore, the
adoption of SFAS 123 will have no impact on the Company's
financial position or results of operations.
Reclassifications
- - - - - - - - - - -----------------
Certain reclassifications of prior year balances have been made
to conform to the current presentation.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
September 28, September 30,
1996 1995
------------ ------------
<S> <C> <C>
Raw materials and supplies................ $ 1,291,000 $ 1,025,000
Finished goods............................ 1,985,000 1,741,000
------------ ------------
$ 3,276,000 $ 2,766,000
------------ ------------
</TABLE>
4. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
Useful Life September 28, September 30,
in Years 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Leasehold improvements........ 5 - 10 $ 2,389,000 $ 2,150,000
Production equipment.......... 5 - 10 4,456,000 4,095,000
Office equipment.............. 4 - 10 3,774,000 3,186,000
Equipment on loan to
wholesale customers 3 - 5 4,503,000 3,808,000
Vehicles...................... 2 - 4 230,000 132,000
Construction-in-progress...................... 499,000 102,000
----------- ----------
Total fixed assets.......................... 15,851,000 13,473,000
Accumulated depreciation.................... (7,136,000) (5,346,000)
------------ ------------
$ 8,715,000 $ 8,127,000
----------- ------------
</TABLE>
Included in office equipment and equipment on loan to wholesale
customers at September 28, 1996 and September 30, 1995 are items
recorded under a capital lease of $353,000 and $282,000
respectively. Amortization of these items is included in
depreciation expense.
Depreciation expense totaled $2,005,000, $1,607,000, and
$1,229,000 for the years ended September 28, 1996, September 30,
1995 and September 24, 1994, respectively.
5. RELATED PARTIES
Note Payable to Stockholder
- - - - - - - - - - ---------------------------
At September 24, 1994, the Company had outstanding a note payable
to the Company's majority stockholder totaling $416,000. The
note was payable in quarterly installments of $25,000 and bore
interest at 7.91%, payable monthly. The note was paid in full in
April 1995. Interest paid by the Company to the majority
stockholder for the years ended September 30, 1995 and September
24, 1994 was $15,000 and $36,000, respectively.
6. INCOME TAXES
The provision (benefit) for income taxes consists of:
<TABLE>
September 28, September 30, September 24,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Current tax expense:
U.S. federal.............. $ 447,000 $ - $ -
State..................... 120,000 10,000 -
Benefit of net operating
loss carryforwards...... (533,000) (10,000) -
------------ ------------ ------------
Total current........... 34,000 - -
------------ ------------ ------------
Deferred tax expense (benefit)
U.S. federal.............. 515,000 (52,000) (1,029,000)
State..................... (2,605,000) (4,000) (217,000)
------------ ------------ -----------
Total deferred.............. (2,090,000) (56,000) (1,246,000)
Tax asset valuation allowance 2,278,000 30,000 689,000
------------ ------------ -----------
Total tax expense (benefit) $ 222,000 $ (26,000) $ (557,000)
------------ ------------ -----------
</TABLE>
SFAS 109 is an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns.
In estimating future tax consequences, SFAS 109 generally
considers all expected future events other than enactments of
changes in the tax law or rates.
Deferred tax assets (liabilities) consist of the following:
<TABLE>
September 28, September 30,
1996 1995
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........... $ 1,744,000 $ 2,101,000
Investment tax credits..................... 54,000 54,000
Vermont manufacturers investment tax credit 2,627,000 -
Section 263A adjustment.................... 91,000 214,000
Other reserves and temporary differences.. 107,000 71,000
------------ ------------
Gross deferred tax assets................. 4,623,000 2,440,000
Deferred tax asset valuation allowance (3,503,000) (1,225,000)
Deferred tax liability:
Depreciation............................... (218,000) (125,000)
------------ ------------
Net deferred tax assets.................... $ 902,000 $ 1,090,000
------------ ------------
</TABLE>
At September 28, 1996, the Company has net operating loss
carryforwards and investment tax credits for federal income tax
reporting purposes of $3,599,000 and $54,000, respectively, which
will expire between 1997 and 2009. In addition, in November
1996, the Company received notification from the State of Vermont
that it had approved a $4,041,000 manufacturers investment tax
credit pertaining to certain fixed assets purchased between July
1, 1993 and June 30, 1996, which will expire in 2005. The
resulting deferred tax asset, which is fully offset by a
valuation allowance, is reflected in the above table net of the
federal tax effect.
Realization of the net deferred tax assets is dependent on
generating sufficient taxable income prior to the expiration of
the loss carryforwards. Although realization is not assured,
management believes that the net deferred tax asset represents
management's best estimate, based upon the weight of available
evidence as prescribed in SFAS 109, of the amount which is more
likely than not to be realized. If such evidence were to change,
based upon near-term operating results and longer-term projections,
the amount of the valuation allowance recorded against the gross deferred
tax asset may be decreased or increased. Also, if certain
substantial changes in the Company's ownership should occur,
there would be an annual limitation on the amount of loss
carryforwards which could be utilized, and restrictions on the
utilization of investment tax credit carryforwards.
A reconciliation between the amount of reported income tax
expense (benefit) and the amount computed using the U.S. Federal
Statutory rate of 35% is as follows:
<TABLE>
September 28, September 30, September 24,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Tax at U.S. Federal
Statutory rate................ $ 519,000 $ (85,000) $ (1,020,000)
Increase (decrease) in rates
resulting from:
Other nondeductible items.. 22,000 33,000 6,000
State taxes, net of
federal benefit........... (2,597,000) (4,000) (232,000)
Deferred tax asset
valuation allowance....... 2,278,000 30,000 689,000
------------ ------------ -----------
Tax at effective rates......... $ 222,000 $ (26,000) $ (557,000)
------------ ------------ ------------
</TABLE>
7. REVOLVING LINE OF CREDIT
The Company maintains a revolving line of credit agreement under
a comprehensive credit facility ("credit facility") with Fleet
Bank - NH ("Fleet"). Borrowings under the agreement are limited
to $3,000,000 under a borrowing base formula and are secured by
substantially all of the Company's assets. In April 1996, the
Company amended the credit facility which extended the
availability of the line of credit through February 28, 1998, and
reduced the interest rate on the revolving line of credit,
subject to the election of the Company, to the lesser of Fleet's
variable base lending rate (8.25% at September 28, 1996) or 250
basis points above the LIBOR rate up to 30 days. The terms of the
credit facility also provide for the maintenance of specified
financial ratios and restrict certain transactions, including a
prohibition from paying any dividends without prior bank
approval. The Company was in compliance with these covenants at
September 28, 1996.
The principal amount outstanding on the revolving line of credit
at September 28, 1996 and September 30, 1995 was $508,000 and
$1,720,000, respectively.
8. LONG-TERM DEBT
<TABLE>
September 28, September 30,
1996 1995
------------ ------------
<S> <C> <C>
Facility and Equipment Term Loan............. $ 2,827,000 $ 1,839,000
Central Vermont Economic Development
Corporation Debenture...................... 600,000 665,000
Vermont Economic Development Authority
Promissory Note............................ 182,000 222,000
Computer Equipment Installment Loans......... 153,000 219,000
Service Vehicle Installment Loans............ 96,000 24,000
------------ ------------
3,858,000 2,969,000
Less - current portion....................... 947,000 618,000
------------ ------------
$ 2,911,000 $ 2,351,000
------------ ------------
</TABLE>
Facility and Equipment Term Loans
- - - - - - - - - - ---------------------------------
As part of the credit facility, the Company has financed fixed
asset purchases under five term loans which are secured by a
senior lien on substantially all of the Company's assets and by a
security interest in the fixed assets for which the borrowings
are made. Under the amended credit facility, the existing
equipment line of credit was eliminated and the Company was able
to borrow an additional $1,500,000 under a new five-year
promissory note to be repaid in equal monthly principal
installments. The interest rate on all term loans under the
credit facility was reduced to the lesser of 25 basis points
above the variable Fleet base rate or 275 basis points above the
LIBOR rate for maturities of up to one year (8.2% at September
28, 1996). The original terms of the loans range from 56 to 84
months and are being repaid in equal monthly payments totalling
approximately $60,600 plus interest.
Central Vermont Economic Development Corporation Debenture
- - - - - - - - - - ----------------------------------------------------------
The debenture from the Central Vermont Economic Development
Corporation (CVEDC) is guaranteed by the U.S. Small Business
Administration. The debenture term is ten years and requires
equal monthly principal and interest payments of approximately
$8,500 and carries a fixed interest rate of 5.812%. The
debenture is secured by a secondary security interest in the
related fixed assets and is guaranteed by the majority
stockholder of the Company. Additional guarantees will be
required of any stockholder obtaining more than 20% ownership of
the Company.
Vermont Economic Development Authority Promissory Note
- - - - - - - - - - ------------------------------------------------------
The Vermont Economic Development Authority promissory note is
payable in monthly principal and interest installments of
approximately $4,300 over seven years, with an interest rate of
5.5%. The note is secured by a secondary security interest in
the related fixed assets and contains covenants related to
restrictions on prepayments of certain portions of the Company's
remaining outstanding debt as defined in the underlying
agreement. The Company was in compliance with these covenants at
September 28, 1996.
Computer Equipment Installment Loans
- - - - - - - - - - ------------------------------------
The computer equipment installment loans notes bear interest at
8.69%, and require monthly installments of principal and interest
totaling approximately $7,600 through September 1998.
Service Vehicle Installment Loans
- - - - - - - - - - ---------------------------------
The service vehicle installment loans represent several loans to
financing institutions for the purchase of service vehicles. The
notes bear interest at rates between 4.8% and 7.4% and require
monthly installments of principal and interest totaling
approximately $3,500 through February 2000.
Maturities
- - - - - - - - - - ----------
Maturities of long-term debt for years subsequent to September
28, 1996 are as follows:
<TABLE>
Fiscal Year
-----------
<S> <C>
1997............................... $ 947,000
1998............................... 943,000
1999............................... 835,000
2000............................... 581,000
2001............................... 314,000
Thereafter......................... 238,000
------------
$ 3,858,000
------------
</TABLE>
9. EMPLOYEE COMPENSATION PLANS
Stock Option Plans
- - - - - - - - - - ------------------
Prior to the establishment on September 21, 1993 of the employee
stock option plan (the "1993 Plan"), the Company granted to
certain key management employees, individual non-qualified stock
option agreements to purchase shares of the Company's common
stock. All such options presently outstanding are fully vested
and had an original expiration date after the fifth anniversary
following the date of grant or earlier if employment terminates.
Effective July 26, 1996, the term of 141,440 of such options was
extended for an additional five years. The exercise price of
these options exceeded the fair market value of the common stock
at the date of the extension. At September 28, 1996, 212,166
options were outstanding under these individual agreements.
The 1993 Plan provides for the granting of both incentive and non-
qualified stock options, with an aggregate number of 75,000
shares of common stock to be made available under the 1993 Plan.
Effective July 26, 1996, and subject to approval by a majority of
stockholders at the next Annual Stockholders' Meeting, the total
number of shares of authorized common stock to be made available
under the 1993 Plan was increased to 275,000. The option price
for each incentive stock option shall not be less than the fair
market value per share of common stock on the date of grant, with
certain provisions which increase the option price to 110% of the
fair market value of the common stock if the grantee owns in
excess of 10% of the Company's common stock at the date of grant.
The option price for each nonqualified stock option shall not be
less than 85% of the fair market value of the common stock at the
date of grant. Options under the Plan become exercisable over
periods determined by the Board of Directors at a rate generally
not to exceed 25% per year beginning with the first anniversary
of the date of grant. At September 28, 1996 and September 30,
1995, options for 196,005 and 9,565 shares of common stock were
available for grant under the plan, respectively.
On April 21, 1994, the Company entered into a marketing
consulting agreement (the "Agreement") and granted 50,000
non-qualified options (separate from the 1993 Plan) to the
consultant. The exercise price of the options is equal to the
market value of the Company's common stock determined on the date
of vesting and has an expiration date of two years following the
earlier of the termination or expiration of the Agreement. Upon
execution of the agreement, 20,000 of the options vested at an
exercise price of $6.88 each, and 5,000 additional options were
to vest at the end of each 6 month period over the term of the
Agreement up to a maximum of 50,000 options in the aggregate. On
October 21, 1994, 5,000 additional options vested under the
Agreement at an exercise price of $6.50. The remaining 25,000
options were cancelled prior to the next scheduled vesting date
as a result of the termination of the Agreement.
Option activity is summarized as follows:
<TABLE>
Number Option price
of shares per share
--------- ------------
<S> <C> <C>
Outstanding at September 25, 1993............ 271,101 $ 2.55 - 8.02
Granted.................................. 65,000 $ 6.00 - 6.88
Exercised................................ - -
Cancelled................................ (47,148) $ 2.55
-------
Outstanding at September 24, 1994............ 288,953 $ 2.55 - 8.02
Granted.................................. 59,684 $ 8.50
Exercised................................ - -
Cancelled................................ (34,248) $ 8.50
-------
Outstanding at September 30, 1995............ 314,389 $ 2.55 - 8.50
Granted.................................. 18,400 $ 6.25 - 8.50
Exercised................................ - -
Cancelled................................ (16,627) $ 8.02 - 8.50
-------
Outstanding at September 28, 1996............ 316,162 $ 2.55 - 8.50
-------
</TABLE>
At September 28, 1996, 60,022 of these options were not
exercisable.
Employee Stock Purchase Plan
- - - - - - - - - - ----------------------------
On September 21, 1993, the Company approved the adoption of an
Employee Stock Purchase Plan (the "Purchase Plan"). Under the
Purchase Plan, the Company reserved 75,000 shares of common stock
for purchase by eligible employees. The Purchase Plan provides
for five annual offerings of 15,000 shares of common stock per
offering, plus any unissued shares from prior fiscal years. Each
participating employee has the option to purchase a maximum
number of shares equal to 10% of the participant's base pay,
divided by 85% of the market value of the common stock at such
time, subject to a pro rata reduction of shares if the annual
aggregate maximum number of shares offered by the Company would
otherwise be exceeded. On September 24, 1994, 4,757 options were
exercised under the fiscal 1994 offering, generating proceeds to
the Company of $21,000. On September 30, 1995, 16,310 options
were exercised under the fiscal 1995 offering, generating
proceeds to the Company of $73,000. On September 28, 1996,
17,511 options were exercised under the fiscal 1996 offering,
generating proceeds to the Company of $89,000.
For the fiscal 1997 offering there are outstanding options to
purchase 20,273 shares under the Purchase Plan at a maximum
exercise price of $6.06. The ultimate purchase price of the
underlying shares of common stock is 85% of the fair market value
of the common stock at the beginning or end of the fiscal year,
whichever is less.
10. DEFINED CONTRIBUTION PLAN
The Company has a defined contribution plan which meets the
requirements of Section 401(k) of the Internal Revenue Code. All
employees of the Company with one year or more of service who are
at least twenty-one years of age are eligible to participate in
the plan. The plan allows employees to defer a portion of their
salary on a pre-tax basis and the Company contributes 50% of
amounts contributed by employees up to 5% of their salary.
Company contributions to the plan amounted to $73,000, $52,000
and $29,000 for the years ended September 28, 1996, September 30,
1995 and September 24, 1994, respectively.
11. WARRANTS
The Company issued warrants for 100,000 shares of the Company's
common stock on September 21, 1993 to its underwriter in
conjunction with the Company's initial public offering. The
warrants carry an exercise price of $12 per share and expire on
September 21, 1998. The Company has reserved 100,000 shares of
common stock in connection with these warrants.
12. COMMITMENTS
Leases
- - - - - - - - - - ------
The Company leases office and retail space, production,
distribution and service facilities and certain equipment under
various noncancelable operating leases, ranging from one to ten
years. Property leases normally require payment of a minimum
annual rental plus a pro-rata share of certain landlord operating
expenses. In addition, a number of the Company's retail space
leases require payment of contingent rentals based upon a
percentage of sales in excess of a specified amount.
The Company has entered into a capital lease, primarily for
loaner and office equipment.
Minimum future lease payments (net of committed sublease rental
receipts of $33,000 for the fiscal years 1997 through 2001, and
$43,000 thereafter) under noncancellable operating leases and
capital leases, for years subsequent to September 28, 1996 are as
follows:
<TABLE>
Fiscal Year Operating Leases Capital Lease
----------- ---------------- -------------
<S> <C> <C>
1997...................... $ 1,053,000 $ 145,000
1998...................... 941,000 145,000
1999...................... 839,000 12,000
2000...................... 729,000 -
2001...................... 665,000 -
Thereafter................ 870,000 -
------------- -------------
Total minimum lease payments.. $ 5,097,000 302,000
-------------
Less - amount represent
interest.................... 44,000
-------------
Present value of obligations
under capital lease
(including current portion
of $114,000)................ $ 258,000
-------------
</TABLE>
Rent expense (net of sublease income of $33,000, $30,000 and
$35,000 for the years ended September 28, 1996, September 30,
1995 and September 24, 1994, respectively), under these operating
leases was $991,000, $887,000 and $753,000 for the years ended
September 28, 1996, September 30, 1995 and September 24, 1994,
respectively.
<PAGE>
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
STOCK OPTION AGREEMENT
UNDER 1993 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION
November 27, 1995
AGREEMENT entered into by and between Green Mountain
Coffee, Inc. a Delaware corporation with its principal place
of business in Waterbury, Vermont (together with its
subsidiaries, the "Company"), and the undersigned director to
the Company (the "Optionee").
1. The Company desires to grant the Optionee a non-
qualified stock option under the Company's 1993 Stock Option
Plan (the "Plan") to acquire shares of the Company's Common
Stock, $.10 per share par value (the "Shares").
2. The Plan provides that each option is to be
evidenced by an option agreement, setting forth the terms
and conditions of the option.
ACCORDINGLY, in consideration of the premises and of
the mutual covenants and agreements contained herein, the
Company and the Optionee hereby agree as follows:
1. Grant of Option.
The Company hereby grants to the Optionee a non-
qualified stock option (the "Option") to purchase all or any
part of an aggregate of the number of Shares shown at the
end of this Agreement on the terms and conditions
hereinafter set forth. This option shall not be treated as
an incentive stock option under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
2. Purchase Price.
The purchase price ("Purchase Price") for the Shares
covered by the Option shall be the dollar amount per Share
shown at the end of this Agreement.
3. Time of Exercise of Option.
The Option shall not be exercisable during the first
twelve (12) months after the date of grant. Thereafter, the
Option shall only be exercisable as to twenty-five percent
(25%) of the Shares covered hereby upon the expiration of
twelve (12) months after the date of grant and as to an
additional twenty-five percent (25%) of the Shares covered
hereby upon the expiration of each of the next three (3)
succeeding twelve (12) month periods; provided that the
Optionee shall be entitled to the exercise of the Option on
a pro rata basis as of the end of the month preceding the
effective date of the Optionee's termination of service with
the Company, in the event that such termination should occur
prior to the expiration of any such twelve-month period. To
the extent the Option is not exercised by the Optionee when
it becomes exercisable, it shall not expire, but shall be
carried forward and shall be exercisable, on a cumulative
basis, until the Expiration Date, as hereinafter defined.
4. Term of Options; Exercisability.
(a) Term.
(i) Each Option shall expire on the date shown at
the end of this Agreement (the "Expiration Date"), as deter
mined by the Board of Directors of the Company (the
"Board"), which shall not be more than ten (10) years from
the date of the granting thereof, subject to earlier
termination as herein provided.
(ii) Except as otherwise provided in this Section
4, if the Optionee's services or employment by the Company
are terminated, the Option granted to the Optionee hereunder
shall terminate on the earlier of (i) ninety days after the
date the Optionee's services or employment by the Company
are terminated, or (ii) the date on which the Option expires
by its terms.
(iii) If the Optionee's services or employment
by the Company are terminated by the Company for cause or
because the Optionee is in breach of any employment,
consulting or similar agreement, such Option will terminate
on the date the Optionee's services or employment are
terminated by the Company.
(iv) If the Optionee's services or employment by
the Company are terminated by the Company because the
Optionee has become permanently disabled (within the meaning
of Section 22(e)(3) of the Code), such Option shall termi
nate on the earlier of (i) one year after the date such
Optionee's services or employment by the Company are
terminated, or (ii) the date on which the Option expires by
its terms.
(v) In the event of the death of the Optionee,
the Option granted to such Optionee shall terminate on the
earlier of (i) one year after the date such Optionee's
services or employment by the Company are terminated, or
(ii) the date on which the Option expires by its terms.
(b) Exercisability.
(i) Except as provided below, if the Optionee's
services or employment by the Company are terminated, the
Option granted to the Optionee hereunder shall be exer
cisable only to the extent that the right to purchase Shares
under such Option has accrued and is in effect on the date
the Optionee's services or employment by the Company are
terminated.
(ii) If the Optionee's services or employment by
the Company are terminated by the Company because he or she
has become permanently disabled, as defined above, the
Option granted to the Optionee hereunder shall be
immediately exercisable as to the full number of Shares
covered by such Option, whether or not under the provisions
of Section 3 hereof such Option was otherwise exercisable as
of the date of disability.
(iii) In the event of the death of the Optionee,
the Option granted to such Optionee may be exercised to the
full number of Shares covered thereby, whether or not under
the provisions of Section 3 hereof the Optionee was entitled
to do so at the date of his or her death, by the executor,
administrator or personal representative of such Optionee,
or by any person or persons who acquired the right to
exercise such Option by bequest or inheritance or by reason
of the death of such Optionee.
5. Manner of Exercise of Option.
(a) To the extent that the right to exercise the
Option has accrued and is in effect, the Option may be
exercised in full or in part by giving written notice to the
Company stating the number of Shares exercised and
accompanied by payment in full for such Shares. No partial
exercise may be made for less than one hundred (100) full
shares of Common Stock. Payment may be either wholly in
cash or in whole or in part in Shares already owned by the
person exercising the Option, valued at fair market value as
of the date of exercise; provided, however, that payment of
the exercise price by delivery of Shares already owned by
the person exercising the Option may be made only if such
payment does not result in a charge to earnings for
financial accounting purposes as determined by the Board.
Upon such exercise, delivery of a certificate for paid-up,
non-assessable Shares shall be made at the principal office
of the Company to the person exercising the Option, not less
than thirty (30) and not more than ninety (90) days from the
date of receipt of the notice by the Company.
(b) The Company shall at all times during the term of the
Option reserve and keep available such number of Shares as
will be sufficient to satisfy the requirements of the
Option.
6. Non-Transferability.
The right of the Optionee to exercise the Option shall
not be assignable or transferable by the Optionee otherwise
than by will or the laws of descent and distribution, and
the Option may be exercised during the lifetime of the
Optionee only by him or her. The Option shall be null and
void and without effect upon the bankruptcy of the Optionee
or upon any attempted assignment or transfer, except as
hereinabove provided, including without limitation any
purported assignment, whether voluntary or by operation of
law, pledge, hypothecation or other disposition contrary to
the provisions hereof, or levy of execution, attachment,
trustee process or similar process, whether legal or
equitable, upon the Option.
7. Representation Letter and Investment Legend.
(a) In the event that for any reason the Shares to be
issued upon exercise of the Option shall not be effectively
registered under the Securities Act of 1933, as amended (the
"1933 Act"), upon any date on which the Option is exercised
in whole or in part, the person exercising the Option shall
give a written representation to the Company in the form at
tached hereto as Exhibit 1 and the Company shall place an
"investment legend", so-called, as described in Exhibit 1,
upon any certificate for the Shares issued by reason of such
exercise.
(b) The Company shall be under no obligation to
qualify Shares or to cause a registration statement or a
post-effective amendment to any registration statement to be
prepared for the purposes of covering the issue of Shares.
8. Adjustments on Changes in Capitalization.
Adjustments on changes in capitalization and the like
shall be made in accordance with the Plan, as in effect on
the date of this Agreement.
9. No Special Employment or Other Rights.
Nothing contained in the Plan or this Agreement shall
be construed or deemed by any person under any circumstances
to bind the Company to continue the services or employment
of the Optionee for the period within which this Option may
be exercised. However, during the period of the Optionee's
services or employment, the Optionee shall render diligently
and faithfully the services which are assigned to the
Optionee from time to time by the Board or by the executive
officers of the Company and shall at no time take any action
which directly or indirectly would be inconsistent with the
best interests of the Company.
10. Rights as a Shareholder.
The Optionee shall have no rights as a shareholder with
respect to any Shares which may be purchased by exercise of
this Option unless and until a certificate or certificates
representing such Shares are duly issued and delivered to
the Optionee. Except as otherwise expressly provided in the
Plan, no adjustment shall be made for dividends or other
rights for which the record date is prior to the date such
stock certificate is issued.
11. Withholding Taxes.
Whenever Shares are to be issued upon exercise of this
Option, the Company shall have the right to require the
Optionee to remit to the Company an amount sufficient to
satisfy all Federal, state and local withholding tax require
ments prior to the delivery of any certificate or
certificates for such Shares. The Company may agree to
permit the Optionee to withhold Shares purchased upon
exercise of this Option to satisfy the above-mentioned
withholding requirement; provided, however, no such
agreement may be made by an Optionee who is an officer or
director within the meaning of Section 16 of the Securities
Exchange Act of 1934, as amended, except pursuant to a
standing election to so withhold Shares purchased upon
exercise of an Option, such election to be made in the form
set forth in Exhibit 2 hereto and to be made not less than
six (6) months prior to the date of such exercise. Such
election may be revoked by the Optionee only upon six (6)
months prior written notice to the Company.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed, and the Optionee has hereunto set
his or her hand and seal, all as of the day and year first
above written.
GREEN MOUNTAIN COFFEE, INC. OPTIONEE
By: /s/ Robert P. Stiller /s/ David E. Moran
--------------------- ------------------
Robert P. Stiller Signature
Title: President
Name: David E. Moran
---------------------
(Printed)
Address: 16 Tamarack Place
Greenwich, CT 06831
###-##-####
----------------------
Social Security Number
5,000
----------------------
Number of Shares
$6.25
----------------------
Purchase Price Per Share
November 27, 2000
-----------------
Expiration Date
<PAGE>
EXHIBIT 1
TO STOCK OPTION AGREEMENT
Gentlemen:
In connection with the exercise by me as to [ ]
shares of Common Stock, $.10 per share par value, of Green
Mountain Coffee, Inc. (the "Company") under the non-quali
fied stock option agreement dated __________________,
granted to me under the 1993 Stock Option Plan, I hereby
acknowledge that I have been informed as follows:
1. The shares of common stock of the Company to be
issued to me pursuant to the exercise of said option have
not been registered under the Securities Act of 1933 (the
"1933 Act"), and accordingly, must be held indefinitely
unless such shares are subsequently registered under the
1933 Act, or an exemption from such registration is
available.
2. Routine sales of securities made in reliance upon
Rule 144 under the 1933 Act can be made only after the
holding period and in limited amounts in accordance with the
terms and conditions provided by that Rule, and in any sale
to which that Rule is not applicable, registration or
compliance with some other exemption under the 1933 Act will
be required.
3. The Company is under no obligation to me to
register the shares or to comply with any such exemptions
under the 1933 Act.
4. The availability of Rule 144 is dependent upon
adequate current public information with respect to the
Company being available and, at the time that I may desire
to make a sale pursuant to the Rule, the Company may neither
wish nor be able to comply with such requirement.
In consideration of the issuance of certificates for
the shares to me, I hereby represent and warrant that I am
acquiring such shares for my own account for investment, and
that I will not sell, pledge or transfer such shares in the
absence of an effective registration statement covering the
same, except as permitted by the provisions of Rule 144, if
applicable, or some other applicable exemption under the
1933 Act. In view of this representation and warranty, I
agree that there may be affixed to the certificates for the
shares to be issued to me, and to all certificates issued
hereafter representing such shares (until in the opinion of
counsel, which opinion must be reasonably satisfactory in
form and substance to counsel for the Company, it is no
longer necessary or required) a legend as follows:
"The shares of common stock represented by this certifi
cate have not been registered under the Securities Act of
1933, as amended (the "Act"), and were acquired by the
registered holder, pursuant to a representation and warranty
that such holder was acquiring such shares for his own
account and for investment, with no intention to transfer or
dispose of the same, in violation of the registration
requirements of the Act. These shares may not be sold,
pledged, or transferred in the absence of an effective
registration statement under the Act, or an opinion of
counsel, which opinion is reasonably satisfactory to counsel
to the Company, to the effect that registration is not
required under the Act."
I further agree that the Company may place a stop order
with its Transfer Agent, prohibiting the transfer of such
shares, so long as the legend remains on the certificates
representing the shares.
Very truly yours,
<PAGE>
EXHIBIT 2
TO STOCK OPTION AGREEMENT
Gentlemen:
The undersigned Optionee hereby elects and agrees that,
whenever the undersigned exercises a stock option (including
any options which now or may hereafter be granted), the
Company shall withhold from the shares issuable upon such
exercise, such number of shares as is equal in value to the
federal and state withholding taxes due upon such exercise.
The undersigned further acknowledges and agrees that this
election may not be revoked without six (6) months prior
written notice to the Company.
OPTIONEE
------------------
Signature
Name: David E. Moran
--------------
(Printed)
###-##-####
----------------------
Social Security Number
October 23, 1995
Gentlemen:
The undersigned Optionee hereby elects and agrees that,
whenever the undersigned exercises a stock option (including
any options which now or may hereafter be granted), the
Company shall withhold from the shares issuable upon such
exercise, such number of shares as is equal in value to the
federal and state withholding taxes due upon such exercise.
The undersigned further acknowledges and agrees that this
election may not be revoked without six (6) months prior
written notice to the Company.
OPTIONEE
/s/ David E. Moran
------------------------------
Signature
Name: David E.Moran
-------------
(Printed)
###-##-####
----------------------
Social Security Number
<PAGE>
FIRST AMENDMENT
TO THE
GREEN MOUNTAIN COFFEE, INC. 1993 STOCK OPTION PLAN
THIS AMENDMENT made this 26th day of July, 1996, by
Green Mountain Coffee, Inc., a Delaware corporation (hereinafter called the
"Company").
WITNESSETH
WHEREAS, the Company established the Green Mountain
Coffee, Inc. 1993 Stock Option Plan (the "Plan"), effective as of July
27, 1993; and
WHEREAS, under Section 21 of the Plan, the Company
reserved the right to amend or terminate the Plan at any time; and
WHEREAS, the Company desires to adopt the First Amendment to the
Plan which provides for the increase in the number of shares of common
stock, $.10 par value per share, of the Company for which options may be
granted under the Plan, from 75,000 shares to 275,000 shares, effective
as of the date of the Board of Directors resolution adopting this First
Amendment;
NOW, THEREFORE, be it resolved, that Section 2(a) of
the Plan is hereby amended, effective as of the date of the Board of
Directors resolution adopting this First Amendment, to read as
follows:
"2. Stock Subject to the Plan.
(a) The total number of shares of the authorized but unissued
or Treasury shares of the common stock, $.10 par value per
share, of the Company (the "Common Stock") for which options
may be granted under the Plan (the "Options") shall be 275,000,
subject to adjustment as provided in Section 13 hereof."
Except as amended herein, the Plan shall continue to
be and shall remain in full force and effect in accordance with its
terms.
GREEN MOUNTAIN COFFEE, Inc.
By: /s/ Robert D. Britt
-------------------
Robert D.Britt
Title: Secretary
FIRST AMENDMENT
TO
THE STOCK OPTION AGREEMENT
BY AND AMONG ROBERT BRITT, ROBERT P. STILLER
AND
GREEN MOUNTAIN COFFEE, INC.
AMENDMENT, made this 26th day of July, 1996, by and
among Robert Britt, (the "Executive"), ROBERT P. STILLER,
("Stiller"), and GREEN MOUNTAIN COFFEE, INC., a Delaware
corporation (the "Corporation").
WHEREAS, GREEN MOUNTAIN COFFEE ROASTERS, INC., a
Vermont corporation formerly known as Green Mountain Coffee,
Inc. (the "Predecessor"), entered into a Stock Option
Agreement (the "Original Agreement") with the Executive on
April 15, 1993 (the "Grant Date"), pursuant to which the
Executive was granted the right to acquire 1,200 shares of
common stock of the Predecessor, par value $.10 per share
("Predecessor Common Stock"); and
WHEREAS, on or about July 21, 1993, the Predecessor
effected a recapitalization pursuant to which all of the
holders of shares of Predecessor Common Stock contributed
such shares to the Corporation in exchange for shares of the
Corporation's common stock, $.10 par value per share (the
"Common Stock"), as a result of which recapitalization the
Predecessor became a wholly owned subsidiary of the
Corporation; and
WHEREAS, the Corporation and the Executive desired to
replace the Original Agreement with the Stock Option
Agreement, effective as of July 21, 1993 (the "Agreement"),
which was intended to contain the same terms and conditions
as the Original Agreement, except that the shares subject to
the Agreement shall be shares of Common Stock rather than
Predecessor Common Stock and the number of such shares and
the price to be paid therefor will be adjusted to reflect
the recapitalization referred to in the second whereas
paragraph of the Agreement thereof, and, as so amended,
shall be interpreted as if it were the Original Agreement
with the Predecessor; and
WHEREAS, the Corporation and the Executive desire to
amend the Agreement in this First Amendment, to extend the
term of exercisability of the options set forth in Section 2
of such Agreement.
NOW THEREFORE, in consideration of the mutual covenants
and obligations herein contained, and other good and
valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Corporation, Stiller, and the
Executive do hereby agree that Section 2 of the Agreement is
amended to read as follows:
"2. Term of Option. The Option, to the extent not
exercised, shall terminate on the earlier of the date on
which the Executive ceases to be a full-time employee of the
Corporation or on the tenth (10th) anniversary of the Grant
Date, except that: (i) in the event the Executive's employ
ment is terminated for any reason other than death or disabi
lity, the Option shall terminate on the thirtieth (30th) day
next following the date on which the Executive's employment
is terminated; (ii) in the event that the Executive's
employment is terminated due to the death of the Executive,
the Option shall terminate on the last day of the third
(3rd) calendar month next following the date on which the
Executive ceases to be an employee; and (iii) in the event
that the Executive's employment is terminated due to the
disability of the Executive, the Option shall terminate on
the last day of the third (3rd) year following the date on
which the Executive ceases to be an employee."
IN WITNESS WHEREOF, each of the parties hereto has
executed this First Amendment for the purposes contained
herein as of the year and day first above written.
GREEN MOUNTAIN COFFEE, INC.
/s/ Robert P. Stiller
- - - - - - - - - - ----------------------------
Robert P. Stiller, President
/s/ Robert P. Stiller
- - - - - - - - - - ----------------------------
Robert P. Stiller
/s/ Robert Britt
- - - - - - - - - - ----------------------------
Robert Britt
<PAGE>
<PAGE>
FIRST AMENDMENT
TO
THE STOCK OPTION AGREEMENT
BY AND AMONG JONATHAN C. WETTSTEIN, ROBERT P. STILLER
AND
GREEN MOUNTAIN COFFEE, INC.
AMENDMENT, made this 26th day of July, 1996, by and
among Jonathan C. Wettstein, (the "Executive"), ROBERT P.
STILLER, ("Stiller"), and GREEN MOUNTAIN COFFEE, INC., a
Delaware corporation (the "Corporation").
WHEREAS, GREEN MOUNTAIN COFFEE ROASTERS, INC., a
Vermont corporation formerly known as Green Mountain Coffee,
Inc. (the "Predecessor"), entered into a Stock Option
Agreement (the "Original Agreement") with the Executive on
April 15, 1993 (the "Grant Date"), pursuant to which the
Executive was granted the right to acquire 1,200 shares of
common stock of the Predecessor, par value $.10 per share
("Predecessor Common Stock"); and
WHEREAS, on or about July 21, 1993, the Predecessor
effected a recapitalization pursuant to which all of the
holders of shares of Predecessor Common Stock contributed
such shares to the Corporation in exchange for shares of the
Corporation's common stock, $.10 par value per share (the
"Common Stock"), as a result of which recapitalization the
Predecessor became a wholly owned subsidiary of the
Corporation; and
WHEREAS, the Corporation and the Executive desired to
replace the Original Agreement with the Stock Option
Agreement, effective as of July 21, 1993 (the "Agreement"),
which was intended to contain the same terms and conditions
as the Original Agreement, except that the shares subject to
the Agreement shall be shares of Common Stock rather than
Predecessor Common Stock and the number of such shares and
the price to be paid therefor will be adjusted to reflect
the recapitalization referred to in the second whereas
paragraph of the Agreement thereof, and, as so amended,
shall be interpreted as if it were the Original Agreement
with the Predecessor; and
WHEREAS, the Corporation and the Executive desire to
amend the Agreement in this First Amendment, to extend the
term of exercisability of the options set forth in Section 2
of such Agreement.
NOW THEREFORE, in consideration of the mutual covenants
and obligations herein contained, and other good and
valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Corporation, Stiller, and the
Executive do hereby agree that Section 2 of the Agreement is
amended to read as follows:
"2. Term of Option. The Option, to the extent not
exercised, shall terminate on the earlier of the date on
which the Executive ceases to be a full-time employee of the
Corporation or on the tenth (10th) anniversary of the Grant
Date, except that: (i) in the event the Executive's employ-
ment is terminated for any reason other than death or disabi-
lity, the Option shall terminate on the thirtieth (30th) day
next following the date on which the Executive's employment
is terminated; (ii) in the event that the Executive's
employment is terminated due to the death of the Executive,
the Option shall terminate on the last day of the third
(3rd) calendar month next following the date on which the
Executive ceases to be an employee; and (iii) in the event
that the Executive's employment is terminated due to the
disability of the Executive, the Option shall terminate on
the last day of the third (3rd) year following the date on
which the Executive ceases to be an employee."
IN WITNESS WHEREOF, each of the parties hereto has
executed this First Amendment for the purposes contained
herein as of the year and day first above written.
GREEN MOUNTAIN COFFEE, INC.
/s/ Robert P. Stiller
- - - - - - - - - - ----------------------------
Robert P. Stiller, President
/s/ Robert P. Stiller
- - - - - - - - - - ----------------------------
Robert P. Stiller
/s/ Jonathan C. Wettstein
- - - - - - - - - - ----------------------------
Jonathan C. Wettstein
<PAGE>
FIRST AMENDMENT
TO
THE STOCK OPTION AGREEMENT
BY AND AMONG PAUL COMEY, ROBERT P. STILLER
AND
GREEN MOUNTAIN COFFEE, INC.
AMENDMENT, made this 26th day of July, 1996, by and
among Paul Comey, (the "Executive"), ROBERT P. STILLER,
("Stiller"), and GREEN MOUNTAIN COFFEE, INC., a Delaware
corporation (the "Corporation").
WHEREAS, GREEN MOUNTAIN COFFEE ROASTERS, INC., a
Vermont corporation formerly known as Green Mountain Coffee,
Inc. (the "Predecessor"), entered into a Stock Option
Agreement (the "Original Agreement") with the Executive on
April 15, 1993 (the "Grant Date"), pursuant to which the
Executive was granted the right to acquire 1,200 shares of
common stock of the Predecessor, par value $.10 per share
("Predecessor Common Stock"); and
WHEREAS, on or about July 21, 1993, the Predecessor
effected a recapitalization pursuant to which all of the
holders of shares of Predecessor Common Stock contributed
such shares to the Corporation in exchange for shares of the
Corporation's common stock, $.10 par value per share (the
"Common Stock"), as a result of which recapitalization the
Predecessor became a wholly owned subsidiary of the
Corporation; and
WHEREAS, the Corporation and the Executive desired to
replace the Original Agreement with the Stock Option
Agreement, effective as of July 21, 1993 (the "Agreement"),
which was intended to contain the same terms and conditions
as the Original Agreement, except that the shares subject to
the Agreement shall be shares of Common Stock rather than
Predecessor Common Stock and the number of such shares and
the price to be paid therefor will be adjusted to reflect
the recapitalization referred to in the second whereas
paragraph of the Agreement thereof, and, as so amended,
shall be interpreted as if it were the Original Agreement
with the Predecessor; and
WHEREAS, the Corporation and the Executive desire to
amend the Agreement in this First Amendment, to extend the
term of exercisability of the options set forth in Section 2
of such Agreement.
NOW THEREFORE, in consideration of the mutual covenants
and obligations herein contained, and other good and
valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Corporation, Stiller, and the
Executive do hereby agree that Section 2 of the Agreement is
amended to read as follows:
"2. Term of Option. The Option, to the extent not
exercised, shall terminate on the earlier of the date on
which the Executive ceases to be a full-time employee of the
Corporation or on the tenth (10th) anniversary of the Grant
Date, except that: (i) in the event the Executive's
employment is terminated for any reason other than death or
disability, the Option shall terminate on the thirtieth
(30th) day next following the date on which the Executive's
employment is terminated; (ii) in the event that the
Executive's employment is terminated due to the death of the
Executive, the Option shall terminate on the last day of the
third (3rd) calendar month next following the date on which
the Executive ceases to be an employee; and (iii) in the
event that the Executive's employment is terminated due to
the disability of the Executive, the Option shall terminate
on the last day of the third (3rd) year following the date
on which the Executive ceases to be an employee."
IN WITNESS WHEREOF, each of the parties hereto has
executed this First Amendment for the purposes contained
herein as of the year and day first above written.
GREEN MOUNTAIN COFFEE, INC.
/s/ Robert P. Stiller
- - - - - - - - - - ----------------------------
Robert P. Stiller, President
/s/ Robert P. Stiller
- - - - - - - - - - ----------------------------
Robert P. Stiller
/s/ Paul Comey
- - - - - - - - - - ----------------------------
Paul Comey
<PAGE>
<TABLE>
GREEN MOUNTAIN COFFEE, INC.
Exhibit 11
Computation of Net Income (Loss) Per Share
Year Ended
------------------------------------------------
September 28, September 30, September 24,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss).......... $ 1,262,000 $ (218,000) $ (2,358,000)
------------ ----------- ------------
Primary weighted common
shares outstanding:
Common stock............ 3,399,843 3,383,529 3,377,682
Stock options........... 27,767 - -
------------ ---------- ------------
Weighted average shares.... 3,427,610 3,383,529 3,377,682
------------ ---------- ------------
Net income (loss) per share 0.37 (0.06) (0.70)
------------ ---------- ------------
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 21
Subsidiaries of
Green Mountain Coffee, Inc.
Name of Subsidiary State of Organization
- - - - - - - - - - ----------------------- ---------------------
Green Mountain Coffee Roasters, Inc. Vermont
Green Mountain Coffee Roasters
Franchising Corporation (subsidiary of
Green Mountain Coffee Roasters, Inc.) Delaware
<PAGE>
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appears below constitutes and appoints Robert P. Stiller and
Robert D. Britt, and each of them, his or her true and lawful
attorney-in-fact and agent, with full power to each of them to act without
the other and with full power of substitution and re-substitution, to
sign, individually, in the name on behalf of the undersigned in any and all
capacities stated below, the Annual Report on Form 10-KSB of Green Mountain
Coffee, Inc. for the fiscal year ended September 28, 1996 and any and all
amendments thereto, which amendments may make such changes in such Form
10-KSB as any such attorney-in-fact may deem appropriate, and to file the
same with all exhibits thereto and other documents in connection therewith
with the Securities and Exchange Commission, granting to such
attorneys-in-fact and agents, and each of them, full power and authority to
do all such other acts and execute all such other documents as they, or any
of them, may deem necessary or desirable in connection with the foregoing,
as fully as the undersigned might or could do in person, hereby ratifying
and confirming all that such attorneys-in-fact and agents, or any of them,
may lawfully do or cause to be done by virtue hereof.
<TABLE>
Signature Title Date
- - - - - - - - - - --------- ----- ----
<S> <C> <C>
/s/ Robert P. Stiller Chairman of the Board of
- - - - - - - - - - ------------------------- Directors, President and
Robert P. Stiller Chief Executive Officer December 26, 1996
(Principal Executive Officer)
/s/ Robert D. Britt Chief Financial Officer,
- - - - - - - - - - ------------------------- Treasurer, Secretary and
Robert D. Britt Director (Principal December 26, 1996
Financial and Accounting Officer
/s/ Stephen J. Sabol
- - - - - - - - - - -------------------------
Stephen J. Sabol Director December 26, 1996
/s/ Jonathan C. Wettstein
- - - - - - - - - - -------------------------
Jonathan C. Wettstein Director December 26, 1996
/s/ William D. Davis
- - - - - - - - - - -------------------------
William D. Davis Director December 26, 1996
/s/ Jules A. del Vecchio
- - - - - - - - - - -------------------------
Jules A. del Vecchio Director December 26, 1996
/s/ David E. Moran
- - - - - - - - - - -------------------------
David E. Moran Director December 26, 1996
/s/ Ian W. Murray
- - - - - - - - - - -------------------------
Ian W. Murray Director December 26, 1996
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet dated 9/28/96 and the Statement of Operations for the fifty-two
weeks ended 9/28/96 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-28-1996
<CASH> 551
<SECURITIES> 0
<RECEIVABLES> 2,858
<ALLOWANCES> 80
<INVENTORY> 3,276
<CURRENT-ASSETS> 7,748
<PP&E> 15,851
<DEPRECIATION> 7,136
<TOTAL-ASSETS> 17,243
<CURRENT-LIABILITIES> 5,315
<BONDS> 3,055
0
0
<COMMON> 342
<OTHER-SE> 8,531
<TOTAL-LIABILITY-AND-EQUITY> 17,243
<SALES> 38,347
<TOTAL-REVENUES> 38,347
<CGS> 22,817
<TOTAL-COSTS> 22,817
<OTHER-EXPENSES> 10,471
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 422
<INCOME-PRETAX> 1,484
<INCOME-TAX> 222
<INCOME-CONTINUING> 1,262
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,262
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
<PAGE>
</TABLE>
