FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the twelve weeks ended July 3, 1999
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 Identification No.)
incorporation or organization)
33 Coffee Lane, Waterbury, Vermont 05676
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(Address of principal executive offices) (zip code)
(802) 244-5621
----------------------------------------------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant has (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [ X ] NO [ ]
As of July 26, 1999, 3,519,635 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)
<TABLE>
July 3, September 26,
1999 1998
-------- -------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.............................................. $ 958 $ 777
Receivables, less allowances of $180 at July 3, 1999
and $378 at September 26, 1998........................................ 5,450 4,789
Inventories............................................................ 5,342 5,636
Other current assets................................................... 536 489
Loans to officers...................................................... 523 185
Deferred income taxes, net............................................. 695 880
---------- -------------
Total current assets............................................. 13,504 12,756
Fixed assets, net......................................................... 10,264 10,800
Other long-term assets.................................................... 254 270
Deferred income taxes, net................................................ 409 737
---------- -------------
Total assets.............................................................. $ 24,431 $ 24,563
========== =============
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt...................................... $ 233 $ 249
Current portion of obligation under capital lease...................... - 12
Accounts payable....................................................... 3,547 3,131
Accrued payroll........................................................ 878 827
Accrued expenses....................................................... 612 507
Accrued losses and other costs of discontinued operations, net......... 185 178
---------- -------------
Total current liabilities......................................... 5,455 4,904
---------- -------------
Long-term debt............................................................ 3,858 5,041
---------- -------------
Long-term line of credit.................................................. 4,234 5,150
---------- -------------
Commitments and contingencies
Stockholders' equity:
Common stock, $0.10 par value:
Authorized - 10,000,000 shares; issued- 3,594,753 shares and
3,545,841 shares at July 3, 1999 and September 26, 1998, respectively... 359 355
Additional paid-in capital.............................................. 13,287 13,018
Accumulated deficit..................................................... (2,268) (3,868)
Treasury shares, at cost:
80,118 shares and 7,350 shares at July 3, 1999 and September 26,
1998, respectively...................................................... (494) (37)
---------- -------------
Total stockholders' equity.............................................. 10,884 9,468
---------- -------------
Total liabilities and stockholders' equity....................... $ 24,431 $ 24,563
========== =============
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
Consolidated Statement of Operations
(Dollars in thousands except per share data)
<TABLE>
Twelve weeks ended
----------------------------
July 3, 1999 July 4, 1998
------------ ------------
(unaudited)
<S> <C> <C>
Net sales...................................................... $ 14,973 $ 12,675
Cost of sales.................................................. 8,821 8,090
------------ -----------
Gross profit............................................... 6,152 4,585
Selling and operating expenses................................. 3,969 3,209
General and administrative expenses............................ 1,184 1,017
------------ -----------
Operating income........................................... 999 359
Other income (expenses)........................................ (5) 13
Interest expense............................................... (164) (241)
------------ -----------
Income from continuing operations before income taxes...... 830 131
Income tax expense............................................. (315) (52)
------------ -----------
Income from continuing operations.......................... 515 79
Discontinued operations:
Loss from discontinued retail stores operations, net of
income tax benefit of $37 for 1998........................ - (56)
Loss on disposal of retail stores operations, including a
provision of $342 for operating losses during the
phase-out period, net of income tax benefit of $834....... - (1,259)
------------ -----------
Net income (loss)......................................... $ 515 $ (1,236)
============ ===========
Basic income (loss) per share:
Weighted average shares outstanding....................... 3,494,399 3,530,818
Income from continuing operations......................... $ 0.15 $ 0.02
Loss from discontinued operations......................... - $ (0.37)
------------ -----------
Net income (loss)......................................... $ 0.15 $ (0.35)
============ ===========
Diluted income (loss) per share:
Weighted average shares outstanding....................... 3,552,574 3,534,228
Income from continuing operations......................... $ 0.14 $ 0.02
Loss from discontinued operations......................... - $ (0.37)
------------ -----------
Net income (loss)......................................... $ 0.14 $ (0.35)
============ ===========
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
</FN>
</TABLE>
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
Consolidated Statement of Operations
(Dollars in thousands except per share data)
<TABLE>
Forty weeks ended
----------------------------
July 3, 1999 July 4, 1998
------------ ------------
(unaudited)
<S> <C> <C>
Net sales...................................................... $ 49,493 $ 42,479
Cost of sales.................................................. 30,253 28,255
------------ -----------
Gross profit............................................... 19,240 14,224
Selling and operating expenses................................. 12,648 10,404
General and administrative expenses............................ 3,686 3,228
------------ -----------
Operating income........................................... 2,906 592
Other income................................................... 6 53
Interest expense............................................... (639) (647)
------------ -----------
Income (loss) from continuing operations before income
taxes...................................................... 2,273 (2)
Income tax (expense) benefit................................... (859) 39
------------ -----------
Income from continuing operations 1,414 37
Discontinued operations:
Loss from discontinued retail stores operations, net of
income tax benefit of $196 for 1998........................ - (297)
Income (loss) on disposal of retail stores operations
(including a provision of $342 for operating losses during
the phase-out period), net of income tax expense of $114
and income tax benefit of $834 for 1999 and 1998,
respectively............................................... 186 (1,259)
------------ -----------
Net income (loss).......................................... $ 1,600 $ (1,519)
============ ===========
Basic income (loss) per share:
Weighted average shares outstanding........................ 3,499,299 3,530,818
Income from continuing operations.......................... $ 0.40 $ 0.01
Income (loss) from discontinued operations................. $ 0.06 $ (0.44)
------------ -----------
Net income (loss).......................................... $ 0.46 $ (0.43)
============ ===========
Diluted income (loss) per share:
Weighted average shares outstanding........................ 3,532,541 3,541,966
Income from continuing operations.......................... $ 0.40 $ 0.01
Income (loss) from discontinued operations................. $ 0.05 $ (0.44)
============ ===========
Net income (loss).......................................... $ 0.45 $ (0.43)
============ ===========
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
</FN>
</TABLE>
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
Consolidated Statement of Cash Flows
(Dollars in thousands)
<TABLE>
Forty weeks ended
----------------------------
July 3, 1999 July 4, 1998
------------ ------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................... $ 1,600 $ (1,519)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Loss (income) from discontinued operations............. (186) 1,556
Depreciation and amortization.......................... 2,261 1,992
Loss (gain) on disposal of fixed assets................ 16 (42)
Provision for doubtful accounts........................ 207 273
Stock options compensation expense..................... 3 -
Deferred income taxes.................................. 513 (45)
Changes in assets and liabilities:
Receivables...................................... (868) (1,446)
Inventories...................................... 294 (852)
Other current assets............................. (411) (83)
Other long-term assets, net...................... (34) 6
Accounts payable................................. 416 (987)
Accrued payroll.................................. 51 100
Accrued expenses................................. 105 135
------------ -----------
Net cash provided by (used for) continuing
operations...................................... 3,967 (912)
Net cash provided by (used for) discontinued
operations...................................... 111 (440)
------------ -----------
Net cash provided by (used for) operating
activities...................................... 4,078 (1,352)
------------ -----------
Cash flows from investing activities:
Capital expenditures for fixed assets....................... (1,801) (2,902)
Capital expenditures for discontinued operations............ - (208)
Proceeds from disposals of fixed assets..................... 60 119
Proceeds from disposal of discontinued operations........... 158 20
------------ -----------
Net cash used for investing activities........... (1,583) (2,971)
------------ -----------
Cash flows from financing activities:
Purchase of treasury shares................................. (457) -
Proceeds from issuance of common stock...................... 270 -
Proceeds from issuance of long-term debt.................... - 4,500
Repayment of long-term debt................................. (1,199) (2,067)
Principal payments under capital lease obligation........... (12) (97)
Net change in revolving line of credit....................... (916) 1,515
------------ -----------
Net cash provided by (used for) financing
activities....................................... (2,314) 3,851
------------ -----------
Net increase (decrease) in cash and cash equivalents........... 181 (472)
Cash and cash equivalents at beginning of period............... 777 831
------------ -----------
Cash and cash equivalents at end of period..................... $ 958 $ 359
============ ===========
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
</FN>
</TABLE>
<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 considered necessary for
a fair statement of the interim financial data have been included.
Results from operations for the twelve week period ended July 3, 1999
are not necessarily indicative of the results that may be expected for
the fiscal year ending September 25, 1999.
For further information, refer to the consolidated financial statements
and the footnotes included in the annual report on Form 10-K for Green
Mountain Coffee, Inc. for the year ended September 26, 1998.
2. Inventories
Inventories consist of the following:
July 3, September 26,
1999 1998
------------- -------------
Raw materials and supplies.......... $ 3,254,000 $ 2,832,000
Finished goods...................... 2,088,000 2,804,000
------------- -------------
$ 5,342,000 $ 5,636,000
=============== =============
3. Discontinued Company-Owned Retail Store Operations
On May 29, 1998, the Company announced that it had adopted a plan to
discontinue its company-owned retail store operations. The Company had
closed all of its retail stores by the end of the second fiscal quarter
of 1999. Accordingly, the retail stores are reported as discontinued
operations for all periods presented. Under generally accepted
accounting principles, the operating results of such operations are
being segregated from the continuing operations and reported separately
on the statement of operations.
The estimated loss on disposal of the retail store operations of
$1,259,000 (net of a tax benefit of $834,000) was included in the third
quarter of fiscal 1998 results. The pre-tax loss on disposal of
$2,093,000 consisted of an estimated loss on disposal of the business
of $1,692,000 and a provision of $401,000 for anticipated losses from
May 29, 1998 (the measurement date) until disposal. The loss on
disposal includes provisions for estimated lease termination costs,
write-off of leasehold improvements and other fixed assets, severance
and employee benefits. During the second quarter of fiscal 1999, the
Company revised its estimated pre-tax loss on disposal and reversed
$300,000 ($186,000 net of tax) of the original estimate, primarily due
to larger than expected proceeds from the sale of fixed assets and
lower lease termination costs.
Net sales from the retail store operations were $207,000 and $3,033,000
for the forty weeks ended July 3, 1999 and July 4, 1998, respectively.
The loss from operations of the discontinued operations from May 29,
1998 through July 3, 1999 approximated the provision for anticipated
losses recorded in fiscal 1998. Net proceeds from the sale of retail
assets totaled $72,000 in the second quarter of fiscal 1999, $86,000 in
the first quarter of fiscal 1999, and $118,000 in fiscal 1998.
The assets and liabilities of the discontinued retail operations at
July 3, 1999 are reflected as a net current liability in the
accompanying consolidated balance sheet. The net liabilities of the
discontinued operations in the July 3, 1999 accompanying consolidated
balance sheet are summarized as follows:
Current assets, net..................................... $ 25,000
Fixed assets, net....................................... 46,000
Deferred tax assets, net................................ 140,000
Estimated accrued losses and other costs on disposal
of discontinued operations............................. (396,000)
----------
Net accrued losses and other costs of discontinued
operations, net........................................ $ (185,000)
============
4. Earnings per share
The following table illustrates the reconciliation of the numerator and
denominator of basic and diluted income per share from continuing
operations computations as required by SFAS No. 128 (dollars in
thousands, except share and per share data):
<TABLE>
Twelve weeks ended Forty weeks ended
----------------------------- -----------------------------
July 3, 1999 July 4, 1998 July 3, 1999 July 4, 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Numerator - basic and diluted earnings per
share :
Net income from continuing operations........... $ 515 $ 79 $ 1,414 $ 37
============ ============= ============ ============
Denominator:
Basic earnings per share - weighted average
shares outstanding.............................. 3,494,399 3,530,818 3,499,299 3,530,818
Effect of dilutive securities - stock options... 58,175 3,410 33,242 11,148
------------ ------------- ------------ ------------
Diluted earnings per share - weighted average
shares outstanding.............................. 3,552,574 3,534,228 3,532,541 3,541,966
============ ============== ============ ============
Basic earnings per share $ 0.15 $ 0.02 $ 0.40 $ 0.01
Diluted earnings per share $ 0.14 $ 0.02 $ 0.40 $ 0.01
</TABLE>
For the twelve weeks ended July 3, 1999 and July 4, 1998, anti-dilutive
shares of 262,326 and 400,912, and for the forty weeks ended July 3,
1999 and July 4, 1998, anti-dilutive shares of 299,519 and 359,840,
respectively, have been excluded from the calculation of EPS.
5. Derivative instruments and hedging activities
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). This pronouncement
will require the Company to recognize derivatives on its balance sheet
at fair value. Changes in the fair value of derivatives are recorded
each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. The Company
expects that this new standard will not have a significant effect on
its results of operations. SFAS 133 is effective for fiscal years
beginning after June 15, 2000, which is fiscal year 2001 for the
Company.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
OVERVIEW
For the forty weeks ended July 3, 1999, Green Mountain Coffee, Inc.
(the "Company" or "Green Mountain") derived approximately 94.0% 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 office coffee services. The Company's direct
mail operation sells coffee to coffee club, catalog, e-commerce, small
business and corporate gifting customers and accounted for
approximately 6.0% of net sales during the same period.
Cost of sales consists of the cost of raw materials including coffee
beans, flavorings and packaging materials, a portion of the Company's
rental expense, the salaries and related expenses of production and
distribution personnel, depreciation on production equipment and
freight and delivery expenses. Selling and operating expenses consist
of expenses that directly support the sales of the Company's wholesale
or direct mail channels, including media and advertising expenses, a
portion of the Company's rental expense, and the salaries and related
expenses of employees directly supporting sales. General and
administrative expenses consist of expenses incurred for corporate
support and administration, including a portion of the Company's rental
expense and the salaries and related expenses of personnel not
elsewhere categorized.
The Company's fiscal year ends on the last Saturday in September. The
Company's fiscal year normally consists of 13 four-week periods with
the first, second and third "quarters" ending 16 weeks, 28 weeks and 40
weeks, respectively, into the fiscal year.
COFFEE PRICES, AVAILABILITY AND GENERAL RISK FACTORS
Green coffee commodity prices are subject to substantial price
fluctuations, generally caused by multiple factors including weather,
political and economic conditions in certain coffee-producing countries
and other supply-related concerns. Since May 1997, when it reached
historical highs, the "C" price of coffee (the price per pound quoted
by the Coffee, Sugar and Cocoa Exchange) has generally been declining.
In response to this decline, the Company decreased its selling prices
in the first quarter of fiscal 1998, in the fourth quarter of fiscal
1998 and in the first quarter of fiscal 1999. Green coffee costs
generally continued to decline in the three quarters of fiscal 1999.
The Company believes that the "C" price of coffee will remain highly
volatile in future periods. In addition to the "C" price, coffee of the
quality sought by Green Mountain also tends to trade on a negotiated
basis at a substantial premium or "differential" above the "C" price.
These differentials are also subject to significant variations. There
can be no assurance that the Company will be successful in passing any
upward green coffee cost fluctuations on to the customers without
losses in sales volume or gross profit. Similarly, rapid sharp
decreases in the cost of green coffee could also force the Company to
lower sales prices before realizing cost reductions in its green coffee
inventory. Because Green Mountain roasts over 25 different types of
green coffee beans to produce its more than 60 varieties of coffee, if
one type of green coffee bean were to become unavailable or
prohibitively expensive, management believes Green Mountain could
substitute another type of coffee of equal or better quality, meeting a
similar taste profile, in a blend or temporarily remove that particular
coffee from its product line. However, frequent substitutions could
lead to cost increases and fluctuations in gross profit margin.
Furthermore, a worldwide supply shortage of the high-quality arabica
coffees the Company purchases could have an adverse impact on the
Company. The Company enters into fixed coffee purchase commitments in
an attempt to secure an adequate supply of quality coffees. To further
reduce its exposure to rising coffee costs, the Company, from time to
time, enters into futures contracts and buys options to hedge
price-to-be-established coffee purchase commitments.
Certain statements contained herein are not based on historical fact
and are "forward-looking statements" within the meaning of the
applicable securities laws and regulations. In addition, the Company's
representatives may from time to time make oral forward-looking
statements. Forward-looking statements provide current expectations of
future events based on certain assumptions and include any statements
that do not directly relate to any historical or current fact. Words
such as "anticipates", "believes", "expects", "estimates", "intends",
"plans", "projects", and similar expressions, may identify such
forward-looking statements. Owing to the uncertainties inherent in
forward-looking statements, actual results could differ materially from
those set forth in forward-looking statements. Factors that could cause
actual results to differ materially from those in the forward-looking
statements include, but are not limited to, business conditions in the
coffee industry and food industry in general, fluctuations in the
availability and cost of green coffee, the impact of the loss of one or
more major customers, economic conditions, prevailing interest rates,
the management challenges of rapid growth, variances from budgeted
sales mix and growth rate, consumer acceptance of the Company's new
products, the impact of a tighter job market, Year 2000 issues, weather
and special or unusual events, as well as other risk factors described
in the Company's Annual Report on Form 10-K for the year ended
September 26, 1998, and other factors described from time to time in
the Company's other filings with the Securities and Exchange
Commission. Forward-looking statements reflect management's analysis as
of the date of this document. The Company does not undertake to revise
these statements to reflect subsequent developments.
RESULTS OF OPERATIONS
<TABLE>
Twelve weeks ended Forty weeks ended
--------------------------- ----------------------------
July 3, 1999 July 4, 1998 July 3, 1999 July 4, 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales.............................. 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales.......................... 58.9 % 63.9 % 61.1 % 66.5 %
------------ ------------ ------------ ------------
Gross profit...................... 41.1 % 36.1 % 38.9 % 33.5 %
Selling and operating expenses......... 26.5 % 25.3 % 25.6 % 24.5 %
General and administrative expenses.... 7.9 % 8.0 % 7.4 % 7.6 %
------------ ------------ ------------ ------------
Operating income.................. 6.7 % 2.8% 5.9 % 1.4 %
Other income........................... 0.0 % 0.1 % 0.0 % 0.1 %
Interest expense....................... (1.2)% (1.9)% (1.3)% (1.5)%
------------ ------------ ------------ ------------
Income from continuing
operations before taxes........... 5.5 % 1.0 % 4.6 % 0.0 %
Income tax (expense) benefit........... (2.1)% (0.4)% (1.7)% 0.1 %
------------ ------------ ------------ ------------
Income from continuing
operations........................ 3.4 % 0.6 % 2.9 % 0.1 %
------------ ------------ ------------ ------------
Income (loss) from discontinued operations,
net of tax (expense) benefits......... - (0.5)% - (0.7)%
Loss on disposal of retail operations.. - (9.9)% 0.3 % (3.0)%
------------ ------------ ------------ ------------
Net income (loss)................. 3.4 % (9.8)% 3.2 % (3.6)%
============= ============ ============ ============
</TABLE>
TWELVE WEEKS ENDED JULY 3, 1999 VERSUS TWELVE WEEKS ENDED JULY 4, 1998
Net sales from continuing operations increased by $2,298,000, or 18.1%,
from $12,675,000 for the twelve weeks ended July 4, 1998 (the "1998
period") to $14,973,000 for the twelve weeks ended July 3, 1999 (the
"1999 period"). Coffee pounds sold from continuing operations increased
by approximately 307,000 pounds, or 17.1%, from approximately 1,794,000
pounds in the 1998 period to approximately 2,101,000 pounds in the 1999
period. The difference between the percentage increase in net sales and
the percentage increase in coffee pounds sold relates primarily to
increased sales of convenience coffee products with higher sales prices
per pound.
The increase in net sales from continuing operations is attributable to
the wholesale area in which net sales increased by $2,214,000, or
18.4%, from $12,040,000 for the 1998 period to $14,254,000 for the 1999
period. The wholesale net sales increase resulted primarily from the
growth in certain accounts in the office coffee service and convenience
store categories.
Gross profit from continuing operations increased by $1,567,000, or
34.2%, from $4,585,000 for the 1998 period to $6,152 ,000 for the 1999
period. As a percentage of net sales, gross profit from continuing
operations increased 5.0 percentage points from 36.1% for the 1998
period to 41.1% for the 1999 period. The increase in gross profit as a
percentage of sales was due primarily to the lower green coffee costs.
Selling and operating expenses from continuing operations increased by
$760,000, or 23.7%, from $3,209,000 for the 1998 period to $3,969,000
for the 1999 period. Selling and operating expenses from continuing
operations increased 1.2 percentage points as a percentage of sales
from 25.3% in the 1998 period to 26.5% in the 1999 period. The increase
in selling and operating expense as a percentage of sales was primarily
due to increased marketing and promotional expenses.
General and administrative expenses increased by $167,000, or 16.4%,
from $1,017,000 for the 1998 period to $1,184,000 for the 1999 period,
but decreased 0.1 percentage points as a percentage of sales from 8.0%
for the 1998 period to 7.9% for the 1999 period.
As a result of the foregoing, operating income from continuing
operations increased by $640,000, or 178.3%, from $359,000 for the 1998
period to $999,000 for the 1999 period.
Interest expense decreased by $77,000, or 32.0%, from $241,000 for the
1998 period to $164,000 for the 1999 period. The decrease is due to the
reduction in long-term debt, which was made possible by positive cash
flows from operations over the past four fiscal quarters.
Income tax expense from continuing operations increased $263,000, or
505.8%, from $52,000 for the 1998 period to $315,000 for the 1999
period, as a result of the Company's increased income from continuing
operations. It is expected that the Company's effective tax rate will
approximate 38% for the remaining quarter of fiscal 1999, and then rise
to 40% in fiscal 2000.
Income from continuing operations increased by $436,000, or 551.9%,
from $79,000 for the 1998 period to income of $515,000 in the 1999
period.
During the 1998 period, the Company announced that it was discontinuing
its unprofitable company-owned retail store operation and recorded an
estimated charge on disposal of $1,259,000 (net of income tax benefits
of $834,000). The loss from discontinued operations in the 1998 period
was $56,000 (net of income tax benefits of $37,000).
Net income increased $1,751,000, from a net loss of $1,236,000 in the
1998 period to net income of $515,000 in the 1999 period.
FORTY WEEKS ENDED JULY 3, 1999 VERSUS FORTY WEEKS ENDED JULY 4, 1998
Net sales from continuing operations increased by $7,014,000, or 16.5%,
from $42,479,000 for the forty weeks ended July 4, 1998 (the "1998 YTD
period") to $49,493,000 for the forty weeks ended July 3, 1999 (the
"1999 YTD period"). Coffee pounds sold from continuing operations
increased by approximately 1,038,000 pounds, or 17.7%, from
approximately 5,866,000 pounds in the 1998 YTD period to approximately
6,904,000 pounds in the 1999 YTD period. The difference between the
percentage increase in net sales and the percentage increase in coffee
pounds sold relates primarily to decreases in Green Mountain's selling
prices for coffee during fiscal 1998 and the first quarter of fiscal
1999 as a result of lower green coffee costs.
The increase in net sales from continuing operations is attributable to
the wholesale area in which net sales increased by $6,699,000, or
16.7%, from $40,019,000 for the 1998 YTD period to $46,718,000 for the
1999 YTD period. The wholesale net sales increase resulted primarily
from the growth in certain accounts in the office coffee service and,
to a lesser extent, supermarket categories.
Gross profit from continuing operations increased by $5,016,000, or
35.3%, from $14,224,000 for the 1998 YTD period to $19,240,000 for the
1999 YTD period. As a percentage of net sales, gross profit from
continuing operations increased 5.4 percentage points from 33.5% for
the 1998 YTD period to 38.9% for the 1999 YTD period. The increase in
gross profit as a percentage of sales was due primarily to the lower
green coffee costs.
Selling and operating expenses from continuing operations increased by
$2,244,000, or 21.6%, from $10,404,000 for the 1998 YTD period to
$12,648,000 for the 1999 YTD period. Selling and operating expenses
from continuing operations increased by 1.1 percentage points as a
percentage of sales from 24.5% in the 1998 YTD period to 25.6% in the
1999 YTD period. The increase in selling and operating expense was
primarily due to increased marketing and sales personnel expenses.
General and administrative expenses increased by $458,000, or 14.2%,
from $3,228,000 for the 1998 YTD period to $3,686,000 for the 1999 YTD
period, but decreased 0.2 percentage points as a percentage of sales
from 7.6% for the 1998 YTD period to 7.4% for the 1999 YTD period.
As a result of the foregoing, operating income from continuing
operations increased by $2,314,000, or 390.9%, from $592,000 for the
1998 YTD period to $2,906,000 for the 1999 YTD period.
Income tax expense from continuing operations increased $898,000, from
an income tax benefit of $39,000 for the 1998 YTD period to an income
tax expense of $859,000 for the 1999 YTD period.
Income from continuing operations increased by $1,377,000, from $37,000
for the 1998 YTD period to income of $1,414,000 in the 1999 YTD period.
As noted above, the Company recorded a loss on disposal of $1,259,000
during the 1998 YTD period. During the 1999 YTD period, the Company
recorded a partial reversal of its original estimated loss on disposal
of $186,000 (net of income tax of $114,000), due to larger than
expected proceeds from the sale of assets and lower lease termination
costs. During the 1998 YTD period, the loss from discontinued
operations was $297,000 (net of income tax benefits of $196,000).
Net income increased $3,119,000, from a loss of $1,519,000 in the 1998
YTD period to income of $1,600,000 in the 1999 YTD period.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased $197,000 to $8,049,000 at July 3, 1999 from
$7,852,000 at September 26, 1998. This increase is primarily
attributable to higher accounts receivable, partially offset by lower
inventories and higher accounts payable.
During the 1999 YTD period, Green Mountain had capital expenditures of
$1,801,000, including $1,196,000 for equipment on loan to wholesale
customers, $291,000 for computer equipment and $219,000 for production
equipment. Cash used for capital expenditures related to continuing
operations aggregated $2,902,000 during the 1998 YTD period, and
included $1,244,000 for equipment loaned to wholesale customers,
$789,000 for leasehold improvements and fixtures, $318,000 for
production equipment, and $425,000 for computer hardware and software.
Cash used to fund the capital expenditures in the 1999 YTD period was
obtained from net cash provided by operating activities.
The Company currently plans to make capital expenditures in fiscal 1999
of approximately $2,500,000. Management continuously reviews capital
expenditure needs and actual amounts expended may differ from these
estimates.
The Company maintains a $9,000,000 line of credit with Fleet Bank - NH,
the availability of which is subject to the Company's accounts
receivable and inventory levels. At July 3, 1999, the outstanding
balance on the Fleet line of credit was $4,234,000 and the amount
remaining available was $2,884,000. The Fleet credit facility also
provides for $4,500,000 of revolving term debt, of which $3,500,000 was
outstanding at July 3, 1999. The Fleet credit facility is subject to
certain quarterly covenants, which the Company was in compliance with
at July 3, 1999.
Management believes that cash flow from operations, existing cash and
available borrowings under its credit facility will provide sufficient
liquidity to pay all liabilities in the normal course of business, fund
capital expenditures and service debt requirements for the remainder of
calendar 1999.
YEAR 2000
The Year 2000 problem concerns the inability of information systems and
systems with embedded chip technology to properly recognize and process
date-sensitive information beyond December 31, 1999. The Company is in
the continuing process of assessing its Year 2000 readiness and has
identified its Year 2000 risk in three broad categories: internal
business software; manufacturing, facilities and embedded chip
technology; and external noncompliance by customers and suppliers.
Company state of readiness
--------------------------
Internal business software. In early fiscal 1997, the Company began a
Company-wide business systems replacement project with an
enterprise-system from PeopleSoft, Inc. ("PeopleSoft"). The new system,
which is expected to make approximately 90% of the Company's business
computer systems Year 2000 compliant, is over 90% complete and on
schedule. Implementation is scheduled to be completed by the end of
September 1999. The primary motivation to implement PeopleSoft was to
reap the benefits of its enhanced functionality and features to improve
operations and customer service as the Company grows. Besides the
implementation of Peoplesoft, there were no other significant
information technology projects (IT) planned. Therefore, the Year 2000
project has not caused significant delays in other IT projects.
Besides the enterprise-wide information system, software upgrades which
take place in the normal course of business are expected to tend to the
majority of the Year 2000 problems related to internal business
software. The Company migrated its direct mail operation to the
PeopleSoft system on August 2nd, 1999.
Manufacturing, facilities and embedded chip technology. The Company has
completed the inventory of its computer hardware, manufacturing,
security and communication systems which are vital to its daily
operations and could present a Year 2000 risk. All PC hardware
susceptible to fail after the Year 2000 was replaced in the normal
course of business over the past three years. Based on the information
received from major vendors of manufacturing equipment, security
equipment, and communication systems, the Company assessed these
vendors to be Year 2000 compliant or in the process of becoming
compliant before the end of the calendar year.
External noncompliance by customers and suppliers. The Company has
contacted its critical suppliers and service providers to determine the
extent to which the Company is vulnerable to those third parties'
failure to remedy their own Year 2000 issues. As of July 1, 1999, all
key suppliers had given the Company reasonable assurances that they
were Year 2000 compliant or in the process of becoming compliant before
the end of the calendar year. The Company currently does not expect to
have to change vendors because of Year 2000 issues with its existing
vendors.
The Company has also contacted its key customers and is attempting to
assess their Year 2000 readiness. Although it has received indications
that major customers are working on Year 2000 compliance, the Company
expects to receive fewer formal responses from its customers than its
vendors and can give no assurance that a complete assessment of
customers Year 2000 readiness will be possible.
Actual and anticipated costs
----------------------------
The total cost associated with required modifications to become Year
2000 compliant is not expected to be material to the Company's
financial position. The estimated total cost of the Year 2000 Project
is approximately $200,000, excluding internal costs consisting
primarily of payroll and benefits of employees working on Year 2000
issues. This estimate does not include the conversion to PeopleSoft,
since those replacement costs were not due to, or accelerated by, the
Year 2000 Project. Through July 3, 1999, the Company has not incurred
expenses directly related to the Year 2000 Project. The estimated
future costs of the Year 2000 Project is $200,000, of which
approximately (1) $75,000 relates to the replacement costs of
communication equipment; (2) $100,000 relates to the addition of
emergency backup systems such as power generators; and (2) $25,000
relates to replacement costs of non-compliant computer hardware.
Risks
-----
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the
Company's results of operations, liquidity and financial condition. Due
to the general uncertainty inherent in the Year 2000 problem, resulting
in part from the uncertainty of the Year 2000 readiness of third-party
suppliers and customers, the Company is unable to determine at this
time whether the consequences of Year 2000 failures will have a
material impact on the Company's results of operations, liquidity or
financial condition. The Company's efforts are expected to
significantly reduce the Company's level of uncertainty about the Year
2000 problem. The Company believes that, with the completion of the
implementation of PeopleSoft and the completion of the plan identified
above, the possibility of significant interruptions of normal
operations should be reduced.
Contingency plans
-----------------
As of August 1, 1999, the Company had developed a draft contingency
plan related to Year 2000, which is currently being reviewed by
management.
DEFERRED INCOME TAXES
The Company had net deferred tax assets of $1,244,000 at July 3, 1999.
These assets are reported net of a deferred tax asset valuation
allowance at that date of $2,355,000 (including $2,306,000 primarily
related to a Vermont investment tax credit). Presently, the Company
believes that the deferred tax assets, net of deferred tax liabilities
and the valuation allowance, are realizable and represent management's
best estimate, based on the weight of available evidence as prescribed
in SFAS 109, of the amount of deferred tax assets which most likely
will be realized. However, management will continue to evaluate the
amount of the valuation allowance based on near-term operating results
and longer-term projections.
FACTORS AFFECTING QUARTERLY PERFORMANCE
Historically, the Company has experienced significant variations in
sales from quarter to quarter due to the holiday season and a variety
of other factors, including, but not limited to, general economic
trends, the cost of green coffee, competition, marketing programs,
weather and special or unusual events. Because of the seasonality of
the Company's business, results for any quarter are not necessarily
indicative of the results that may be achieved for the full fiscal
year.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in information relating to market
risk since the Company's disclosure included in Item 7A of Form 10-K as
filed with the Securities and Exchange Commission on December 18, 1998.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Certificate of Incorporation(1)
3.2 Bylaws1
10.91 Stock Option Agreement dated April 13, 1999 between the
Company and David E. Moran
10.92 Stock Option Agreement dated April 13, 1999 between the
Company and William D. Davis
10.93 Stock Option Agreement dated April 13, 1999 between the
Company and Jules A. del Vecchio
10.94 Stock Option Agreement dated April 13, 1999 between the
Company and Hinda Miller
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the twelve weeks ended July 3,
1999.
- ----------
(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.
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: 8/9/99 By: /s/ Robert P. Stiller
------------ ------------------------------------------------
Robert P. Stiller,
President and Chief Executive Officer
Date: 8/9/99 By: /s/ Robert D. Britt
------------ ------------------------------------------------
Robert D. Britt,
Chief Financial Officer, Treasurer and Secretary
GREEN MOUNTAIN COFFEE, INC.
STOCK OPTION AGREEMENT
UNDER 1999 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION
April 13, 1999
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 consultant
to the Company (the "Optionee").
The Company desires to grant the Optionee a non-qualified stock option
under the Company's 1999 Stock Option Plan, as amended (the "Plan") to acquire
shares of the Company's Common Stock, par value $.10 per share (the "Shares").
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 non-qualified stock options
(collectively, the "Option") to purchase all or any part of the number of Shares
shown at the end of this Agreement on the terms and conditions hereinafter set
forth. This Option is not intended to 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 set forth at the end of this
Agreement.
3. Time of Exercise of Option.
This Option shall be first exercisable as to 5,000 Shares on the date
of this Agreement, and 25% of the remaining Shares on each of the first four
anniversary dates of this Agreement.
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 determined by the Board of Directors of
the Company (the "Board").
(ii) 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 consultancy to the Company is
terminated; or (ii) the date on which the option
expires by its terms.
(b) Exercisability.
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 attached 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 Consultancy or Employment 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
consulting relationship of, or to employ, the Optionee for the period within
which this Option may be exercised. However, during the period of the Optionee's
consultancy, 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
requirements 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.
IN WITNESS HEREOF, 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 David E. Moran
President
7,500
----------------
Number of Shares
$5.875
------------------------
Purchase Price Per Share
April 13, 2009
---------------
Expiration Date
GREEN MOUNTAIN COFFEE, INC.
STOCK OPTION AGREEMENT
UNDER 1999 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION
April 13, 1999
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 consultant
to the Company (the "Optionee").
The Company desires to grant the Optionee a non-qualified stock option
under the Company's 1999 Stock Option Plan, as amended (the "Plan") to acquire
shares of the Company's Common Stock, par value $.10 per share (the "Shares").
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 non-qualified stock options
(collectively, the "Option") to purchase all or any part of the number of Shares
shown at the end of this Agreement on the terms and conditions hereinafter set
forth. This Option is not intended to 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 set forth at the end of this
Agreement.
3. Time of Exercise of Option.
This Option shall be first exercisable as to 5,000 Shares on the date
of this Agreement, and 25% of the remaining Shares on each of the first four
anniversary dates of this Agreement.
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 determined by the Board of Directors of
the Company (the "Board").
(ii) 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 consultancy to the Company is
terminated; or (ii) the date on which the option
expires by its terms.
(b) Exercisability.
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 attached 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 Consultancy or Employment 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
consulting relationship of, or to employ, the Optionee for the period within
which this Option may be exercised. However, during the period of the Optionee's
consultancy, 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
requirements 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.
IN WITNESS HEREOF, 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/ William D. Davis
--------------------- --------------------
Robert P. Stiller William D. Davis
President
8,000
----------------
Number of Shares
$5.875
------------------------
Purchase Price Per Share
April 13, 2009
---------------
Expiration Date
GREEN MOUNTAIN COFFEE, INC.
STOCK OPTION AGREEMENT
UNDER 1999 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION
April 13, 1999
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 consultant
to the Company (the "Optionee").
The Company desires to grant the Optionee a non-qualified stock option
under the Company's 1999 Stock Option Plan, as amended (the "Plan") to acquire
shares of the Company's Common Stock, par value $.10 per share (the "Shares").
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 non-qualified stock options
(collectively, the "Option") to purchase all or any part of the number of Shares
shown at the end of this Agreement on the terms and conditions hereinafter set
forth. This Option is not intended to 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 set forth at the end of this
Agreement.
3. Time of Exercise of Option.
This Option shall be first exercisable as to 5,000 Shares on the date
of this Agreement, and 25% of the remaining Shares on each of the first four
anniversary dates of this Agreement.
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 determined by the Board of Directors of
the Company (the "Board").
(ii) 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 consultancy to the Company is
terminated; or (ii) the date on which the option
expires by its terms.
(b) Exercisability.
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 attached 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 Consultancy or Employment 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
consulting relationship of, or to employ, the Optionee for the period within
which this Option may be exercised. However, during the period of the Optionee's
consultancy, 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
requirements 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.
IN WITNESS HEREOF, 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/ Jules A. del Vecchio
--------------------- ------------------------
Robert P. Stiller Jules A. del Vecchio
President
8,000
----------------
Number of Shares
$5.875
------------------------
Purchase Price Per Share
April 13, 2009
---------------
Expiration Date
GREEN MOUNTAIN COFFEE, INC.
STOCK OPTION AGREEMENT
UNDER 1999 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION
April 13, 1999
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 consultant
to the Company (the "Optionee").
The Company desires to grant the Optionee a non-qualified stock option
under the Company's 1999 Stock Option Plan, as amended (the "Plan") to acquire
shares of the Company's Common Stock, par value $.10 per share (the "Shares").
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 non-qualified stock options
(collectively, the "Option") to purchase all or any part of the number of Shares
shown at the end of this Agreement on the terms and conditions hereinafter set
forth. This Option is not intended to 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 set forth at the end of this
Agreement.
3. Time of Exercise of Option.
This Option shall be first exercisable as to 25% of the Shares on each
of the first four anniversary dates of this Agreement.
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 determined by the Board of Directors of
the Company (the "Board").
(ii) 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 consultancy to the Company is
terminated; or (ii) the date on which the option
expires by its terms.
(b) Exercisability.
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 attached 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 Consultancy or Employment 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
consulting relationship of, or to employ, the Optionee for the period within
which this Option may be exercised. However, during the period of the Optionee's
consultancy, 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
requirements 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.
IN WITNESS HEREOF, 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/ Hinda Miller
--------------------- ----------------
Robert P. Stiller Hinda Miller
President
5,000
----------------
Number of Shares
$5.875
------------------------
Purchase Price Per Share
April 13, 2009
---------------
Expiration Date
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet dated 7/3/99 and the Statement of Operations for the sixteen weeks ended
7/3/99 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000909954
<NAME> GREEN MOUNTAIN COFFEE, INC.
<MULTIPLIER> 1,000
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<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-25-1999
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0
0
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 515
<EPS-BASIC> 0.15
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</TABLE>
