FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the sixteen weeks ended January 18, 1997
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.
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(Exact name of registrant as specified in its charter)
Delaware 03-0339228
------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
33 Coffee Lane, Waterbury, Vermont 05676
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Address of principal executive offices) (zip code)
(802) 244-5621
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant has (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES [ X ] NO [ ]
As of February 24, 1997, 3,417,306 shares of common stock of the registrant
were outstanding.
<PAGE>
Part I. Financial Information
Item I. Financial Statements
GREEN MOUNTAIN COFFEE, INC.
Consolidated Balance Sheet
(Dollars in thousands except share data)
<TABLE>
January 18, September 28,
1997 1996
----------- ------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents..................... $ 320 $ 551
Receivables, less allowances of $80 at January
18, 1997 and $80 at September 28, 1996...... 2,617 2,778
Inventories................................... 3,404 3,276
Other current assets.......................... 455 627
Deferred income taxes, net.................... 196 516
---------- ----------
Total current assets........................ 6,992 7,748
Fixed assets, net............................... 9,258 8,715
Other long-term assets, net..................... 465 394
Deferred income taxes, net...................... 613 386
---------- ---------
Total assets.................................... $ 17,328 $ 17,243
---------- ---------
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt............. $ 951 $ 947
Current portion of obligation under capital lease 120 114
Accounts payable.............................. 2,514 3,002
Accrued payroll............................... 479 480
Accrued expenses.............................. 150 264
---------- ---------
Total current liabilities................... 4,214 4,807
---------- ---------
Long-term debt.................................. 2,592 2,911
---------- ---------
Obligation under capital lease.................. 102 144
---------- ---------
Long-term line of credit........................ 825 508
---------- ---------
Commitments
Stockholders' equity:
Common stock, $0.10 par value:
Authorized - 10,000,000 shares; issued and
outstanding -3,417,306 shares at
January 18, 1997 and September 28, 1996....... 342 342
Additional paid-in capital.................... 12,508 12,508
Accumulated deficit........................... (3,255) (3,977)
--------- ---------
Total stockholders' equity...................... 9,595 8,873
--------- ---------
Total liabilities and stockholders' equity...... $ 17,328 $ 17,243
--------- ---------
</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>
Sixteen weeks ended
---------------------------
January 18, January 20,
1997 1996
------------ ----------
(unaudited)
<S> <C> <C>
Net sales........................................ $ 14,412 $ 12,144
Cost of sales.................................... 8,645 7,234
---------- ----------
Gross profit.................................. 5,767 4,910
Selling & operating expenses..................... 3,783 3,044
General and administrative expenses.............. 973 926
---------- ----------
Income from operations........................ 1,011 940
Other expense.................................... - (1)
Interest expense................................. (144) (140)
---------- ----------
Income before taxes........................... 867 799
Income tax expense............................... (145) (120)
---------- ----------
Net income.................................... $ 722 $ 679
---------- ----------
Net income per share............................. $ 0.21 $ 0.20
---------- ----------
Weighted average shares.......................... 3,444,218 3,426,778
---------- ----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
Consolidated Statement of Cash Flows
(Dollars in thousands)
<TABLE>
Sixteen weeks ended
-------------------------
January 18, January 20,
1997 1996
(unaudited)
-------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................$ 722 $ 679
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 729 584
Loss on disposal of fixed assets............... 15 15
Provision for doubtful accounts................ 30 37
Deferred income taxes.......................... 93 119
Changes in assets and liabilities:
Receivables.................................. 131 387
Inventories.................................. (128) 98
Other current assets......................... 172 (33)
Other long-term assets, net.................. (78) 4
Accounts payable............................. (488) (882)
Accrued payroll.............................. (1) 133
Accrued expenses............................. (114) 19
--------- ---------
Net cash used for operating activities....... 1,083 1,160
--------- ---------
Cash flows from investing activities:
Expenditures for fixed assets..................... (1,308) (551)
Proceeds from disposals of fixed assets........... 28 21
--------- ---------
Net cash used for investing activities....... (1,280) (530)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.......... - 9
Repayment of long-term debt....................... (315) (210)
Principal payments under capital lease obligation. (36) (15)
Net change in revolving line of credit............ 317 (220)
--------- ---------
Net cash provided by financing activities.... (34) (436)
--------- ---------
Net increase (decrease) in cash and cash equivalents (231) 194
Cash and cash equivalents at beginning of period..... 551 310
--------- ---------
Cash and cash equivalents at end of period...........$ 320 $ 504
--------- ---------
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
<PAGE>
Green Mountain Coffee, Inc.
Notes to Consolidated Financial Statements
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information, the
instructions to Form 10-Q, and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete consolidated financial statements.
In the opinion of management, all adjustments (consisting
solely of normal recurring adjustments) considered necessary
for a fair statement of the interim financial data have been
included. Results from operations for the sixteen week
period ended January 18, 1997 are not necessarily indicative
of the results that may be expected for the fiscal year
ending September 27, 1997.
For further information, refer to the consolidated financial
statements and the footnotes included in the annual report on
Form 10-KSB for Green Mountain Coffee, Inc. for the year
ended September 28, 1996.
Net income per share is computed based upon the weighted
average number of common and dilutive common equivalent
shares outstanding during the period.
2. Inventories
-----------
Inventories consist of the following:
<TABLE>
January 18, September 28,
1997 1996
----------- ------------
<S> <C> C<>
Raw materials and supplies.............. $ 1,375,000 $ 1,291,000
Finished goods.......................... 2,029,000 1,985,000
----------- -----------
$ 3,404,000 $ 3,276,000
----------- -----------
</TABLE>
3. Income Taxes
------------
The Company recognized 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. The Company had net deferred tax assets of $809,000
and $902,000 at January 18, 1997 and September 28, 1996,
respectively. These assets are reported net of a deferred
tax asset valuation allowance of $3,111,000 (including
$2,482,000 primarily related to a Vermont investment tax
credit) and $3,503,000 (including $2,681,000 primarily related
to a Vermont investment tax credit) at January 18, 1997 and
September 28, 1996, respectively.
4. Reclassification
----------------
On February 19, 1997, the Company amended its credit
facility with Fleet Bank - NH, thereby extending the term
of its line of credit to February 28, 1999. Accordingly, the
Company has reclassified and renamed its revolving line of
credit on the face of the balance sheet as a long-term
liability under the name "Long-term line of credit."
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
General
- -------
For the sixteen weeks ended January 18, 1997, Green Mountain
Coffee, Inc. (the "Company" or "Green Mountain") derived
approximately 79.6% 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 12.6% and 7.8% of net sales, respectively, during
the same period.
Cost of sales consists of the cost of raw materials including
coffee beans, flavorings and packaging materials, a portion of the
Company's rental expense, the salaries and related expenses of
production and distribution personnel, depreciation on production
equipment and freight and delivery expenses. Selling and
operating expenses consist of expenses that directly support the
sales of the Company's wholesale, retail or direct mail channels,
including media and advertising expenses, a portion of the
Company's rental expense, and the salaries and related expenses of
employees directly supporting sales. General and administrative
expenses consist of expenses incurred for corporate support and
administration, including a portion of the Company's rental
expense and the salaries and related expenses of personnel not
elsewhere categorized.
The Company's fiscal year ends on the last Saturday in September.
The Company's fiscal year normally consists of 13 four-week
periods with the first, second and third "quarters" ending 16
weeks, 28 weeks and 40 weeks, respectively, into the fiscal year.
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 rate, weather and special or
unusual events.
Sixteen weeks ended January 18, 1997 versus sixteen weeks ended
January 20, 1996
- ------------------------------------------------------------------
Net sales increased by $2,268,000, or 18.7%, from $12,144,000 for
the sixteen weeks ended January 20, 1996 (the "1996 period") to
$14,412,000 for the sixteen weeks ended January 18, 1997 (the
"1997 period"). Coffee pounds sold, excluding coffee pounds sold
as beverages through the Company's 12 company-owned retail stores,
increased by approximately 410,000 pounds, or 25.8%, from
approximately 1,590,000 pounds in the 1996 period to approximately
2,000,000 pounds in the 1997 period.
The net sales increase is attributable to the wholesale area in
which net sales increased by $2,297,000, or 25.0%, from $9,170,000
for the 1996 period to $11,467,000 for the 1997 period. The
wholesale net sales increase resulted primarily from growth in the
number of wholesale accounts.
Retail net sales increased $24,000 or 1.3% from $1,794,000 for the
1996 period to $1,818,000 for the 1997 period despite an average
reduction in wholebean coffee sales prices of $1.00 per pound and
the closing during the 1996 period of an espresso cart located in
Albany, New York.
Net sales in the direct mail area decreased $53,000 or 4.5% from
$1,180,000 for the 1996 period to $1,127,000 for the 1997 period.
The decrease in direct mail sales resulted primarily from an
average reduction in coffee sales prices of $1.00 per pound.
Gross profit increased by $857,000, or 17.5%, from $4,910,000 for
the 1996 period to $5,767,000 for the 1997 period. As a
percentage of net sales, gross profit decreased 0.4 percentage
points from 40.4% for the 1996 period to 40.0% for the 1997
period. The decrease in gross profit as a percentage of sales was
due primarily to an increase in delivery costs related to the
expansion and start-up during the 1997 period of regional
warehouses in Massachusetts and Connecticut and higher costs of
delivery to customers outside the northeast United States.
Selling and operating expenses increased by $739,000, or 24.3%,
from $3,044,000 for the 1996 period to $3,783,000 for the 1997
period. Selling and operating expenses increased 1.1 percentage
points as a percentage of sales from 25.1% for the 1996 period to
26.2% for the 1997 period. The increase in selling and operating
expense includes approximately $360,000 in expenses related to the
addition since the 1996 period of a national supermarket sales
manager, a national office coffee service and food service sales
manager, and 14 people to the Company's direct sales force in the
greater Boston, Connecticut, Florida, New York and Greater
Philadelphia markets.
General and administrative expenses increased by $47,000 or 5.1%
from $926,000 for the 1996 period to $973,000 for the 1997 period,
and decreased 0.8 percentage points as a percentage of sales from
7.6% for the 1996 period to 6.8% for the 1997 period.
As a result of the foregoing, income from operations increased by
$71,000 or 7.6% from $940,000 for the 1996 period to $1,011,000
for the 1997 period. Net income increased by $43,000 or 6.3% from
$679,000 for the 1996 period to $722,000 in the 1997 period.
Liquidity and Capital Resources
- -------------------------------
Working capital decreased $163,000 to $2,778,000 at January 18,
1997 from $2,941,000 at September 28, 1996. The working capital
balance now reflects a decrease in current liabilities due to the
reclassification of the Company's line of credit.
Cash used for capital expenditures aggregated $1,308,000 during
the 1997 period, and included $311,000 for equipment loaned to
wholesale customers, $326,000 for production equipment and
$399,000 for computer hardware and software. During the 1996
period, Green Mountain had capital expenditures of $551,000,
including $243,000 for equipment on loan to wholesale customers,
$55,000 for production equipment and $96,000 for computer hardware
and software. Cash used to fund the capital expenditures in the
1997 period was obtained primarily from the $1,083,000 of net cash
provided by operating activities.
The Company currently plans to make capital expenditures in fiscal
1997 of approximately $4,500,000, primarily to fund the purchase
of equipment for loan to wholesale customers (approximately
$1,700,000) and computer hardware and software (approximately
$1,700,000). Assuming a stable mix in packaging types and sizes,
management believes that it will operate at approximately 60-70%
of production capacity in fiscal 1997 and does not foresee
significant production equipment expenditures during the year.
Management is presently planning to add to production and
distribution capacity in fiscal 1998, which will result in some
temporary relocation expenses and write-offs of certain fixtures
and leasehold improvements later in fiscal 1997. This planned
increase in fiscal 1998 capital expenditures to increase
production and distribution capacity is expected to be offset by
reductions in fiscal 1998 in computer hardware and software
capital expenditures. Management continuously reviews capital
expenditure needs and actual amounts expended may differ from
these estimates.
On February 19, 1997, the Company amended its credit facility with
Fleet Bank - NH. Under the revised facility, the Company
increased the limit of the revolving line of credit from
$3,000,000 to $5,000,000 and extended its term by one year to
February 28, 1999. The outstanding balance on the line of credit
at January 18, 1997 was $825,000, with a total availability of
$3,254,000 under the borrowing base formula.
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 in fiscal 1997.
The average cost of the high quality arabica coffees the Company
purchases decreased slightly during the 1997 period as compared to
the 1996 period. However, since December 1996, when the closing
March "c" price (the price per pound quoted by the Coffee, Sugar
and Cocoa Exchange) was as low as $1.036, the March "c" price has
risen dramatically, closing on February 13, 1997 at $1.79, a 72.8%
increase from the low. In addition to the "c" price, coffee of
the quality sought by Green Mountain also tends to trade on a
negotiated basis at a substantial premium or "differential" above
the "c" price. Since December 1996, differentials have also been
rising.
The Company believes that the cost of green coffee will continue
to be volatile in fiscal 1997. 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 of equal
or better quality meeting a similar taste profile, in a blend
or temporarily remove that particular coffee from its product
line.
Deferred Income Taxes
- ---------------------
The Company had net deferred tax assets of $809,000 at January 18,
1997. These assets are reported net of a deferred tax asset
valuation allowance at that date of $3,111,000 (including
$2,482,000 primarily related to a Vermont investment tax credit).
The Company had income before taxes of $867,000 and $1,484,000 in
the 1997 period and for all of fiscal 1996, respectively, and has
has been profitable in eight of its last ten fiscal quarters,
including the last six 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, resulting 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, the cost of green coffee,
competition, marketing programs, weather and special or unusual
events. Because of the seasonality of the Company's business,
results for any quarter are not necessarily indicative of the
results that may be achieved for the full fiscal year.
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Certificate of Incorporation(1)
3.2 Bylaws(1)
10.2 (bb) Eighth Amendment to Commercial Loan
Agreement, dated February 19, 1997, among
Green Mountain Coffee Roasters, Inc., as
borrower, and Fleet Bank - NH as lender.
10.2 (cc) Replacement Revolving Line of Credit
Promissory Note, dated February 19, 1997,
from Green Mountain Coffee Roasters, Inc.,
to Fleet Bank - NH.
11 Computation of net income per share of
Common Stock
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the sixteen
weeks ended January 18, 1997.
----------------------------------------------------
(1) Incorporated by reference to the corresponding exhibit
number on the Registration Statement on Form SB-2 (Registration
No. 33-66646) filed on July 28, 1993 and declared effective on
September 21, 1993.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
GREEN MOUNTAIN COFFEE, INC.
Date: 2/27/97 By: /s/ Robert P. Stiller
------------- -----------------------------
Robert P. Stiller
President and Chief Executive
Officer
Date: 2/27/97 By: /s/ Robert D. Britt
-------------- -----------------------------
Robert D. Britt,
Chief Financial Officer,
Treasurer and Secretary
<PAGE>
EIGHTH AMENDMENT TO FLEET BANK - NH
COMMERCIAL LOAN AGREEMENT AND LOAN DOCUMENTS
THIS EIGHTH AMENDMENT TO COMMERCIAL LOAN AGREEMENT AND LOAN
DOCUMENTS (the "Amendment") is made effective February 19, 1997,
by and among FLEET BANK - NH, a bank organized under the laws of
the State of New Hampshire with an address of Mail Stop NHNA
E02A, 1155 Elm Street, Manchester, New Hampshire 03101 (the
"Bank"), GREEN MOUNTAIN COFFEE ROASTERS, INC. (f/k/a Green
Mountain Coffee, Inc.), a Vermont corporation with a principal
place of business at 33 Coffee Lane, Waterbury, Vermont 05676
(the "Borrower"), and GREEN MOUNTAIN COFFEE ROASTERS FRANCHISING
CORPORATION, a Delaware corporation (the "Subsidiary".
W I T N E S S E T H:
WHEREAS, the Bank, the Borrower, and the Subsidiary are
parties to a certain Fleet Bank - NH Seventh Amendment and First
Restatement of Commercial Loan Agreement dated April 12, 1996
(the "Loan Agreement") and certain Loan Documents of various
dates (as defined in the Loan Agreement and as amended through
the date hereof), including, but not limited to a certain
Guaranty Agreement dated October 22, 1992, as amended to date, of
the Subsidiary (the "Guaranty"), and certain Security Agreements
of the Borrower dated April 12, 1996 and of the Subsidiary dated
October 22, 1992, as amended to date (collectively, the "Security
Agreements");
WHEREAS, pursuant to the Loan Agreement, the Bank has
extended to the Borrower certain credit facilities including a
revolving line of credit loan up to the maximum principal amount
of Three Million Dollars ($3,000,000.00) (the "Revolving Line of
Credit Loan"); and
WHEREAS, the Borrower has requested, and the Bank has agreed,
to increase the maximum principal amount available under the
Revolving Line of Credit Loan from Three Million Dollars
($3,000,000.00) to Five Million Dollars ($5,000,000.00), and, in
connection therewith, to make certain amendments to the terms and
conditions affecting all of the credit facilities provided under
the Loan Agreement and the Loan Documents. All capitalized terms
not otherwise defined herein shall have the meanings ascribed to
them in the Loan Agreement and/or the Loan Documents, as the case
may be.
NOW, THEREFORE, in consideration of the Bank increasing the
Revolving Line of Credit Loan as described above and amending the
Loan Agreement in other respects as provided below, the Bank, the
Borrower, and the Subsidiary hereby agree to amend the Loan
Agreement and the Loan Documents as follows:
I. AMENDMENT OF LOAN AGREEMENT.
A. Increase of Revolving Line of Credit. The maximum
available amount to the Borrower under the Revolving Line of
Credit Loan as set forth in Section I. A. of the Loan Agreement
shall be and hereby is increased from Three Million Dollars
($3,000,000.00) to Five Million Dollars ($5,000,000.00), subject
to and limited by the provisions regarding availability under
clause (2) of Section I. A. of the Loan Agreement, and the terms
and conditions of the Revolving Line of Credit Loan promissory
note. The Borrower shall execute and deliver to Bank a
replacement Revolving Line of Credit Loan promissory note in form
and substance satisfactory to the Bank to reflect the increase of
the maximum principal amount thereunder.
B. Amendment of Review Date for Revolving Line of Credit
Loan. The Review Date as set forth in Section C of Article I of
the Loan Agreement with respect to the Revolving Line of Credit
Loan shall be and hereby is changed to February 28, 1999.
C. Amendment of Fees. The Unused Revolving Line of Credit
Commitment Fee set forth in Section I of Schedule B of the Loan
Agreement shall be and hereby are replaced with the following:
"Annual Revolving Line of Credit Facility Fee: $3,000.00
per annum, payable in quarterly installments of $750.00 on
January 1st, April 1, July 1st, and October 1st."
D. Amendment of Financial Covenants. The Financial
Covenants of the Borrower set forth in Section IV of Schedule B
of the Loan Agreement shall be and hereby are replaced with the
following:
"IV. Description of Additional Financial and other
Covenants:
A. BORROWER and the Subsidiary shall have a
Tangible Capital Base (as hereinafter defined) on a
consolidated basis equal to at least Eight Million Five
Hundred Thousand Dollars ($8,500,000.00) as of the last
day of the first quarter of BORROWER's 1997 fiscal year
and at all times thereafter. "Tangible Capital Base"
means total shareholders' equity , plus Permitted
Subordinated Debt (as hereinafter defined), plus
deferred tax liabilities, and less intangible assets
(unamortized product development costs, goodwill, and
unamortized debt issuance costs), all as determined from
BORROWER's and the Subsidiary' financial statements
delivered to the BANK in accordance with the covenants
of the BORROWER hereinabove (the "Financial
Statements").
B. BORROWER and the Subsidiary on a consolidated
basis shall have a ratio of Senior Debt (as hereinafter
defined) to Tangible Capital Base of not greater than
1.15:1 as of the last day of the first quarter of
BORROWER's 1997 fiscal year and at all times thereafter.
"Senior Debt" means all indebtedness with the exception
of indebtedness of the BORROWER or the Subsidiary that
is subordinated to the BANK on terms of subordination
acceptable to the BANK ("Permitted Subordinated Debt"),
all as determined from the Financial Statements.
C. BORROWER and the Subsidiary shall maintain on a
consolidated basis Available Cash (as hereinafter
defined) of at least One Million Dollars ($1,000,000.00)
at all times. "Available Cash" means the sum of (a)
cash balances in investment and depository accounts and
(b) the amount equal to the then Borrowing Base as
determined in accordance with Section I. A. of the Loan
Agreement less the then outstanding principal balance of
advanced funds under the Revolving Line of Credit Loan.
In the event that the BORROWER and the Subsidiary at any
time fail to maintain Available Cash in the amount
required above, such failure shall not constitute an
Event of Default under the Loan Agreement and the Loan
Documents but the interest rate applicable to each of
the Loans shall, at the option of the BANK, be
immediately increased by one-quarter of one percent
(0.25%) per annum. Such increased rates shall remain
in effect until such time as the BORROWER certifies in
writing to the BANK that it is in compliance with the
financial covenant hereunder and under Paragraph D
below. Upon BANK's receipt of such certification the
interest rates under each of the Loans shall immediately
and automatically be reduced to the rates stated in the
Loan Documents for such Loans.
D. BORROWER and the Subsidiary shall have on a
consolidated basis Net Profit (as hereinafter defined)
for each fiscal quarter, other than the second quarter
of fiscal year 1997, of at least One Thousand Dollars
($1,000.00). "Net Profit" means net profits as
determined in accordance with generally accepted
accounting principles from BORROWER's Financial
Statements. In the event that the BORROWER and the
Subsidiary at any time fail to achieve Net Profits in
the amount required above for any quarter, such failure
shall not constitute an Event of Default under the Loan
Agreement and the Loan Documents but the interest rate
applicable to each of the Loans shall, at the BANK's
option, be immediately increased by one quarter of one
percent (0.25%) per annum. Such increased rates shall
remain in effect until such time as the BORROWER
certifies in writing to the BANK that it is in
compliance with the financial covenants hereunder and
under Paragraph C above. Upon BANK's receipt of such
certification the interest rates under each of the Loans
shall immediately and automatically be reduced to the
rates stated in the Loan Documents for such Loans.
E. BORROWER shall not make expenditures for capital
assets or capital improvements (as determined in
accordance with generally accepted accounting
principals) in any fiscal year in excess of Five Million
Dollars ($5,000,000.00).
F. BORROWER shall report and certify to BANK its
compliance with the financial covenants hereinabove
within forty-five (45) days after each fiscal quarter
end on such form or forms as may from time to time be
specified by the BANK."
E. Commitment Fee. For and in consideration of the Bank
entering into this Amendment, the Borrower shall pay the Bank a
commitment fee in the amount of $2,000.00 on the date of
execution hereof.
II. AMENDMENT OF SECURITY AGREEMENTS. The Revolving Line of
Credit Loan, as increased hereby, is and shall be secured in
accordance with the terms, conditions, and priorities under the
Loan Agreement and Loan Documents for the Revolving Line of
Credit Loan prior to increase hereunder. The Security Agreements
of each of the Borrower and the Subsidiary included among the
Loan Documents shall be and hereby are amended by including the
Revolving Line of Credit Loan, as increased hereby, as Secured
Obligations under each of the Security Agreements secured by the
security interests in the Collateral granted to the Bank by the
Borrower and the Subsidiary thereunder.
III. AMENDMENT OF SUBSIDIARY'S GUARANTY AGREEMENT.
The Guaranty shall be and hereby is amended such that the
Revolving Line of Credit Loan, as increased hereby shall be
included as a Guaranteed Obligations thereunder.
IV. REPRESENTATIONS AND WARRANTIES.
Except as set forth in Schedule I hereto, and except to the
extent affected by the amendments hereunder or by previous
amendments, or otherwise consented to or acknowledged by the Bank
in writing, each of the Borrower and the Subsidiary, jointly and
severally, confirm, reassert, and restate all of the
representations and warranties under the Loan Agreement and the
Loan Documents as of the date hereof.
V. AFFIRMATIVE COVENANTS.
Except as set forth in Schedule II hereto and except to the
extent affected by the amendments hereunder or by previous
amendments, or otherwise consented to or acknowledged by the Bank
in writing, each of the Borrower and the Subsidiary, jointly and
severally, hereby confirm, reassert, and restate their respective
affirmative covenants as set forth in the Loan Agreement and Loan
Documents as of the date hereof.
VI. AFFIRMATION OF NEGATIVE COVENANTS.
Except as set forth on Schedule III hereto and except to the
extent affected by the amendments hereunder or by previous
amendments, or otherwise consented to or acknowledged by the Bank
in writing, each of the Borrower and the Subsidiary, jointly and
severally, hereby confirm, reassert, and restate their respective
negative covenants as set forth in the Loan Agreement and the
Loan Documents as of the date hereof.
VII. FURTHER REPRESENTATION AND WARRANTY.
Each of the Borrower and the Subsidiary represent and
warrant to the Bank that no consent, authorization or approval is
required of any third party, including, but not limited to, the
Vermont Economic Development Authority and the United States
Small Business Administration, for any of the Borrower or the
Subsidiary to enter into this Agreement and to consummate the
transactions contemplated hereunder.
VIII. NO FURTHER EFFECT.
Except as specifically amended hereby, the terms and
conditions of the Loan Agreement and the Loan Documents as set
forth therein and as amended through the date hereof shall remain
in full force and effect.
IN WITNESS WHEREOF, the Bank, the Borrower and the Subsidiary
have executed this agreement effective as of the date and year first
above written.
FLEET BANK-NH
/s/ Catherine A. Consentino By: /s/ Andre P. Pelletier
- --------------------------- ---------------------------------
Witness Andre P. Pelletier, Vice President
GREEN MOUNTAIN COFFEE ROASTERS, INC.
/s/ Robert P. Stiller By: /s/ Robert D. Britt
- ------------------------- ----------------------------------------
Witness Robert D. Britt, Chief Financial Officer
GREEN MOUNTAIN COFFEE ROASTERS
FRANCHISING CORPORATION
/s/ Robert P. Stiller By: /s/ Robert D. Britt
- ------------------------- ----------------------------------------
Witness Robert D. Britt, Chief Financial Officer
STATE OF New Hampshire
COUNTY OF Hillsborough
On this, the 19th day of February, 1997, before me, the
undersigned officer, personally appeared Andre P. Pelletier, who
acknowledged himself to be a Vice President of Fleet Bank - NH, a
bank and that he, as such Vice President, being authorized so to
do, executed the foregoing instrument for the purposes therein
contained on behalf of said bank.
Before me,
/s/ Catherine A. Consentino
----------------------------------
Justice of the Peace
STATE OF Vermont
COUNTY OF Washington
On this, the 19th day of February, 1997, before me, the
undersigned officer, personally appeared Robert D. Britt, who
acknowledged himself to be the Chief Financial Officer of Green
Mountain Coffee Roasters, Inc., a corporation and that he, as
such officer, being authorized so to do, executed the foregoing
instrument for the purposes therein contained on behalf of said
corporation.
Before me,
/s/ Betty Omansky
----------------------------------
Notary Public
STATE OF Vermont
COUNTY OF Washington
On this, the 19th day of February, 1997, before me, the
undersigned officer, personally appeared Robert D. Britt, who
acknowledged himself to be the Chief Financial Officer of Green
Mountain Coffee Roasters Franchising Corporation, a corporation
and that he, as such officer, being authorized so to do, executed
the foregoing instrument for the purposes therein contained on
behalf of said corporation.
Before me,
/s/ Betty Omansky
-------------------------------
Notary Public
<PAGE>
EIGHTH AMENDMENT TO FLEET BANK - NH
COMMERCIAL LOAN AGREEMENT AND LOAN DOCUMENTS
Schedule I
None
EIGHTH AMENDMENT TO FLEET BANK - NH
COMMERCIAL LOAN AGREEMENT AND LOAN DOCUMENTS
Schedule II
None
EIGHTH AMENDMENT TO FLEET BANK - NH
COMMERCIAL LOAN AGREEMENT AND LOAN DOCUMENTS
Schedule III
None
<PAGE>
REPLACEMENT REVOLVING LINE OF CREDIT PROMISSORY NOTE
$5,000,000.00 Manchester, NH February 19, 1997
FOR VALUE RECEIVED, GREEN MOUNTAIN COFFEE ROASTERS, INC., a
Vermont corporation with a principal place of business at 33
Coffee Lane, Waterbury, Vermont 05676 (the "Borrower"), promises
to pay to the order of FLEET BANK - NH, a bank organized under the
laws of the State of New Hampshire with a principal place of
business at One Indian Head Plaza, Nashua, New Hampshire 03060
(the "Bank"), at such address, or such other place or places as
the holder hereof may designate in writing from time to time
hereafter, the maximum principal sum of FIVE MILLION DOLLARS
($5,000,000.00), or so much thereof as may be advanced or
readvanced by the Bank to the Borrower from time to time hereafter
(such amounts defined as the "Debit Balance" below), together with
interest as provided for hereinbelow, in lawful money of the
United States of America.
The Borrower's "Debit Balance" shall mean the debit balance in
an account on the books of the Bank, maintained in the form of a
ledger card, computer records or otherwise in accordance with the
Bank's customary practice and appropriate accounting procedures
wherein there shall be recorded the principal amount of all
advances made by the Bank to the Borrower, all principal payments
made by the Borrower to the Bank hereunder, and all other
appropriate debits and credits.
Under the Revolving Line of Credit Loan evidenced by this Note
(the "Line of Credit"), the Bank agrees to lend to the Borrower,
and the Borrower may borrow, up to the lesser of (a) the maximum
principal sum provided for in this Note or (b) the Borrower's
Borrowing Base, all in accordance with and subject to the terms,
conditions, and limitations of this Note and the Seventh Amendment
and First Restatement of Commercial Loan Agreement dated April 12,
1996, as amended by Eighth Amendment to Commercial Loan Agreement
and Loan Documents of even date herewith, entered into by and
between the Borrower and the Bank, and as said agreement may be
further amended from time to time (collectively, as amended, the
"Loan Agreement"). The holder of this Note is entitled to all of
the benefits and rights of the Bank under the Loan Agreement.
However, neither this reference to the Loan Agreement nor any
provision thereof shall impair the absolute and unconditional
obligation of the Borrower to pay the principal and interest of
this Note as herein provided. Terms not otherwise defined herein
shall have the meanings ascribed to them in the Loan Agreement.
The Borrower shall make requests for advances under this Note
as provided in the Loan Agreement. The Borrower agrees that the
Bank may make all advances under this Note by direct deposit to
any demand account of the Borrower with the Bank or in such other
manner as may be provided in the Loan Agreement, and that all such
advances shall represent binding obligations of the Borrower.
The Borrower acknowledges that this Note is to evidence the
Borrower's obligation to pay its Debit Balance, plus interest and
any other applicable charges as determined from time to time, and
that it shall continue to do so despite the occurrence of
intervals when no Debit Balance exists because the Borrower has
paid the previously existing Debit Balance in full.
Interest shall be calculated and charged daily, based on the
actual days elapsed over a three hundred sixty (360) day banking
year, on the unpaid principal balance outstanding from time to
time. Except as provided hereinbelow, the unpaid principal
balance outstanding hereunder from time to time shall bear
interest at a variable annual rate equal to the Bank's Base Rate,
so called. The Base Rate shall be the Base Rate of the Bank as
established and changed by the Bank from time to time whether or
not such rate shall be otherwise published or Borrower is provided
with notice thereof. Each time the Base Rate changes, the
interest rate hereunder shall change contemporaneously with such
change in the Base Rate effective as of the opening of business on
the date of change. The Borrower acknowledges that the Base Rate
is used for reference purposes only as an index and is not
necessarily the lowest interest rate charged by the Bank on
commercial loans. Notwithstanding the foregoing, the Borrower may
elect from time to time the Revolving LIBOR-based Rate to apply to
some or all of the outstanding principal hereunder in accordance
with, and subject to the limitations of, the Loan Agreement. The
Borrower further acknowledges and agrees that the interest rate
hereunder is subject to increase upon the occurrence of certain
events as provided in the Loan Agreement.
Pending an Event of Default as provided in the Loan Agreement
and herein below, the Bank shall extend the Line of Credit through
and until February 28, 1999 (the "Review Date"), and, if the Line
of Credit is renewed and extended by the Bank pursuant to the Loan
Agreement, through and until each anniversary of such date with
respect to which the Line of Credit is renewed and extended. The
Borrower shall (i) make payments of principal from time to time as
provided in the Loan Agreement and (ii) make payments of interest
monthly in arrears commencing thirty (30) days from the date
hereof (or on any day within 30 days of the date hereof agreed to
by the Borrower and the Bank to provide for a convenient payment
date) and continuing on the same date of each month thereafter
through and until the earlier of the acceleration of this Note
upon an Event of Default as provided herein below or the Review
Date or any anniversary thereof with respect to which the Line of
Credit is not renewed by the Bank, whereupon all principal,
accrued and unpaid interest, and any other charges provided for
hereunder, shall be due and payable in full. In the event that
the Line of Credit is renewed pursuant to the Loan Agreement as of
the Review Date or any anniversary thereof, this Note shall
thereafter continue to evidence amounts advanced and due under the
Line of Credit as renewed.
This Note is being executed and delivered in accordance with the
terms of the Loan Agreement and the documents defined therein as the
"Loan Documents". The payment and performance of the obligations
contained in the Loan Documents are secured by the collateral granted
to the Bank therein (the "Collateral") and the security granted to the
Bank in the Loan Documents.
At the option of the Bank, this Note shall become immediately due
and payable in full, without further demand or notice, if any payment
of interest or principal is not made when due hereunder or upon the
occurrance and during the continuance of any other Event of Default under
the terms hereof, under the Loan Agreement, or under any of the other Loan
Document.
The holder may impose upon the Borrower a delinquency charge
of five percent (5%) of the amount of interest not paid on or
before the tenth (10th) day after such installment is due. The
entire principal balance hereof, together with accrued interest,
shall after the occurrence and during the continuance of an Event
of Default under the Loan Agreement or maturity, whether by
demand, acceleration or otherwise, bear interest at the then
contract rate of this Note plus an additional five percent (5%)
per annum.
The Borrower agrees that any other property upon or in which
the Borrower has granted or hereafter grants the holder a mortgage
or security interest, securing the payment and performance of any
other liability of the Borrower to the holder, shall also
constitute Collateral. As additional Collateral, the Borrower
grants (1) a security interest in, or pledges, assigns and
delivers to the holder, as appropriate, all deposits, credits and
other property now or hereafter due from the holder to the
Borrower; and (2) the right to set off and apply (and a security
interest in said right), from time to time hereafter and without
demand or notice of any nature, all, or any portion, of such
deposits, credits and other property, against the indebtedness
evidenced by this Note whether the other Collateral, if any, is
deemed adequate or not.
The Borrower, and every maker, endorser, or guarantor of this
Note, jointly and severally, agree to pay on demand all reasonable
out-of-pocket costs of collection hereof, including reasonable
attorneys' fees, whether or not any foreclosure or other action is
instituted by the holder in its discretion.
No delay or omission on the part of the holder in exercising
any right, privilege or remedy shall impair such right, privilege
or remedy or be construed as a waiver thereof or of any other
right, privilege or remedy. No waiver of any right, privilege or
remedy or any amendment to this Note shall be effective unless
made in writing and signed by the holder. Under no circumstances
shall an effective waiver of any right, privilege or remedy on any
one occasion constitute or be construed as a bar to the exercise
of or a waiver of such right, privilege or remedy on any future
occasion.
The acceptance by the holder hereof of any payment after any
default hereunder shall not operate to extend the time of payment
of any amount then remaining unpaid hereunder or constitute a
waiver of any rights of the holder hereof under this Note.
All rights and remedies of the holder, whether granted herein
or otherwise, shall be cumulative and may be exercised singularly
or concurrently, and the holder shall have, in addition to all
other rights and remedies, the rights and remedies of a secured
party under the Uniform Commercial Code of New Hampshire. The
holder shall have no duty as to the collection or protection of
the Collateral or of any income thereon, or as to the preservation
of any rights pertaining thereto beyond the safe custody thereof.
Surrender of this Note, upon payment or otherwise, shall not
affect the right of the holder to retain the Collateral as
security for the payment and performance of any other liability of
the Borrower to the holder in accordance with the provisions of
the Loan Documents.
The Borrower, and every maker, endorser, or guarantor of this
Note, hereby jointly waive, to the fullest extent permitted by
law, presentment, notice, protest and all other demands and
notices and assents (1) to any extension of the time of payment or
any other indulgence, (2) to any substitution, exchange or release
of Collateral, and (3) to the release of any other person
primarily or secondarily liable for the obligations evidenced
hereby.
This Note and the provisions hereof shall be binding upon the
Borrower and the Borrower's heirs, administrators, executors,
successors, legal representatives and assigns and shall inure to
the benefit of the holder, the holder's heirs, administrators,
executors, successors, legal representatives and assigns.
The word "holder" as used herein shall mean the payee or
endorsee of this Note who is in possession of it, or the bearer,
if this Note is at the time payable to the bearer.
This Note may not be amended, changed or modified in any
respect except by a written document which has been executed by
each party. This Note constitutes a New Hampshire contract to be
governed by the laws of such state and to be paid and performed
therein.
The provisions of this Note are expressly subject to the
condition that in no event shall the amount paid or agreed to be
paid to the holder hereunder and deemed interest under applicable
law exceed the maximum rate of interest on the unpaid principal
balance hereunder allowed by applicable law, if any, (the "Maximum
Allowable Rate"), which shall mean the law in effect on the date
hereof, except that if there is a change in such law which results
in a higher Maximum Allowable Rate being applicable to this Note,
then this Note shall be governed by such amended law from and
after its effective date. In the event that fulfillment of any
provisions of this Note results in the interest rate hereunder
being in excess of the Maximum Allowable Rate, the obligation to
be fulfilled shall automatically be reduced to eliminate such
excess. If notwithstanding the foregoing, the holder receives an
amount which under applicable law would cause the interest rate
hereunder to exceed the Maximum Allowable Rate, the portion
thereof which would be excessive shall automatically be applied to
and deemed a prepayment of the unpaid principal balance hereunder
and not a payment of interest.
This Note is executed and delivered in replacement of, but not
in novation or discharge of, the Revolving Line of Credit
Promissory Note of the undersigned payable to the order of the
Bank in the principal amount of Three Million Dollars
($3,000,000.00) dated March 31, 1995 (the "Old Note"). All
references to the Old Note in the Loan Agreement or any other Loan
Document shall be deemed to refer to this Note.
Executed and delivered this 19th day of February, 1997.
GREEN MOUNTAIN COFFEE ROASTERS, INC.
/s/ Robert P. Stiller By: /s/ Robert D. Britt
- ---------------------- -----------------------------------------
Witness Robert D. Britt, Chief Financial Officer
STATE OF Vermont
COUNTY OF Washington
On this the 19th day of February, 1997, before me, the
undersigned notary or justice, personally appeared Robert D.
Britt, who acknowledged himself to be the Chief Financial Officer
of Green Mountain Coffee Roasters, Inc., a corporation, and that
he, as such authorized officer, being authorized so to do,
executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by himself as
such authorized officer.
/s/ Betty Omansky
----------------------------------
Notary Public
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
Computation of Net Income Per Share
<TABLE>
Sixteen weeks ended
-------------------------
January 18, January 20,
1997 1996
(unaudited)
---------- -----------
<S> <C> <C>
Net income................................... $ 722,000 $ 679,000
Primary weighted common shares outstanding:
Common stock............................... 3,417,306 3,399,795
Stock options.............................. 26,912 26,983
Weighted average shares...................... 3,444,218 3,426,778
Net income per share......................... $ .21 $ .20
- ------------------------------------------------
<FN>
This Exhibit should be read in conjunction with the accompanying unaudited
interim consolidated financial statements and the notes thereto.
</FN>
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet dated 1/18/97 and the Statement of Operations for the sixteen
weeks ended 1/18/97 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-START> SEP-29-1996
<PERIOD-END> JAN-18-1997
<CASH> 320
<SECURITIES> 0
<RECEIVABLES> 2,697
<ALLOWANCES> 80
<INVENTORY> 3,404
<CURRENT-ASSETS> 6,992
<PP&E> 17,062
<DEPRECIATION> 7,804
<TOTAL-ASSETS> 17,328
<CURRENT-LIABILITIES> 4,214
<BONDS> 3,519
0
0
<COMMON> 342
<OTHER-SE> 9,253
<TOTAL-LIABILITY-AND-EQUITY> 17,328
<SALES> 14,412
<TOTAL-REVENUES> 14,412
<CGS> 8,645
<TOTAL-COSTS> 8,645
<OTHER-EXPENSES> 3,783
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 144
<INCOME-PRETAX> 867
<INCOME-TAX> 145
<INCOME-CONTINUING> 722
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 722
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
