27
2014 ANNUAL BUSINESS REPORT

GMCR 2014 Annual Business Report Design

Embed Size (px)

DESCRIPTION

Designed by Marly Moultrie @ himynameismarly.com

Citation preview

  • 2 0 1 4 A N N U A L B U S I N E S S R E P O R T

  • COMMITTEDTO MAKE A GREAT CUP OF COFFEE.

  • TABLE OF CONTENTS

    1.......... Our History3......... Letter from the CEO5......... 2013 Plan9......... Our Products

    13......... Financials20......... Competition21.......... The Next Big Idea23......... Awards

    COMMITTEDTO MAKE A GREAT CUP OF COFFEE.

  • OUR HISTORY

    1 GMCRBUSINESS REPORT

  • 2GMCR

    BUSINESS REPORT

  • BRIAN KELLEYCEO OF GMCR

    Green Mountain Coffee Roasters, Inc. (GMC R) is leading a powerful revolution in how consumers prepare and enjoy beverages at home. Our disruptive Keurig brewing technology changed the coffee category, propelling new growth as consumers across the U.S. and Canada embraced the convenience, quality and vast beverage choice of the Keurig Brewing System. We estimate we have more than 16 million Keurig Brewing Systems active in U.S. households to date and while thats a great start, Our mission is to have a Keurig System on every counter and a beverage for every occasion. Every one of our employees is focused on this

    mission every day, and its why were confident we can continue to raise awareness and drive adoption of our Keurig System, both in North America and across the globe.

    Our results illustrate the strength of our innovative Keurig System; our multibrand approach including our valued partner brands; the loyalty and passion of our customers and consumers; our strong operational execution; and the fact that our business model is capable of generating long-term sustainable growth. And while we are pleased with our overall results, we know there is much we can do to improve our company.

    3GMCRBUSINESS REPORT

    LETTER FROM THE CEO.

  • OUR PURPOSE is why we are here. We create the ultimate beverage experience

    in every life we touch from source to cup, transforming the way we understand business. OUR MISSION drives our

    work - a Keurig brewer on every counter and a beverage for every occasion. OUR VALUES define who we are. We Partner

    for Mutual Success Our boundaryless approach to collaboration creates benefits

    for all. We Innovate with Passion With curiosity, we are shaping the future by

    redefining the consumer experience. We Play to Win Our team sets ambitious

    goals and meets each challenge with purpose and character. WE BREW A

    BETTER WORLD We use the power of business to make the world better.

    OUR PURPOSE, VALUES, & OUR MISSION.

    4GMCR

    BUSINESS REPORT

  • 5GMCRBUSINESS REPORT

    OUR 2014

    PLAN

    Our Strengths. We believe our system approach provides us with a unique competitive advantage in the market, as we design all aspects of the system, including the beverage, the portion pack, the portion pack manufacturing lines, the appliance and its components. We believe that the consumer benefits delivered by our Keurig beverage system will preserve our leadership position in the marketplace and give us significant opportunity to continue to grow our coffee business and do for other beverage categories what we have done for coffee We believe the primary consumer benefits delivered by our Keurig Single Cup Brewing system are as follows: Qualityexpectations of the quality of coffee consumers drink have increased over the last several years and, we believe, with the Keurig system, consumers can be certain they will get a high-quality, consistently produced beverage every single time they brew coffee.Conveniencethe Keurig system prepares beverages generally in less than a minute at the touch of a

    button with no mess, no fuss.Choicewith many beverage brands across multiple beverage categories, GMCR offers more than 290 individual varieties, allowing consumers to enjoy and explore a wide range of beverages. In addition to a variety of brands of coffee and tea, we also produce and sell iced teas, iced coffees, hot and iced fruit brews, hot cocoa and other dairy-based beverages, in portion packs.

    We see these benefits as being our competitive advantage and believe its the combination of these attributes that make the Keurig Single Cup Brewing system appealing to consumers.

    Our Strategy. We are focused on building our brands and profitably growing our business. We believe we can continue to grow sales by increasing consumer awareness in the U.S. and Canada, expanding into new geographic regions, expanding consumer choice of coffee, tea and other beverages in our existing brewing systems or through the introduction of new brewing platforms, expanding

  • 6GMCR

    BUSINESS REPORT

    sales in adjacent beverage industry segments and selectively pursuing other opportunities. The elements of our strategy are as follows:

    Growing the current Keurig Hot system in the U.S. and Canada;

    Expanding our brand offerings, in ....both owned and partner brands;

    Expanding in current channels; Launching a new coffee brewing

    technologies and innovations;

    Growing the current Keurig Hot system in the United States and Canada. While we are positioned as a leader in the single serve hot beverage marketplace, we estimate our current Keurig Hot system is only approximately 13% of U.S. households. In order to increase household penetration, we are executing a segmentation strategy to effectively showcase our extensive variety of beverage options. We are also implementing measures to improve the shopping experience at retail to further distinguish the Keurig brand and enhance brand recognition. Additionally, we are launching targeted marketing campaigns

    to increase regional household penetration in certain geographic areas through increased awareness.

    Expanding our brand offering. In fiscal 2013, we have continued to expand consumer choice in the Keurig Single Cup Brewing system by entering into or extending a number of business relationships which enable us to offer strong national and regional coffee and tea brands, and store brands such as Dunkin DonutsTM, Seattles Best Coffee , Starbucks , The Coffee Bean & Tea Leaf , Cinnabon , Tazo , Eight OClock , Tetley , Good Earth , Snapple , Kirkland SignatureTM and METROs Irresistibles K-Cup packs for use with Keurig Single Cup brewers. We also continue to examine opportunities for business relationships with other strong national/regional brands including the potential for adding premium store-brand or co-branded portion packs to create additional single serve products. Furthermore, we are expanding the use of our Keurig Single Cup Brewing system beyond beverages through innovative partnerships, the first of which is

    with the Campbell Soup Company to produce Campbells Fresh-Brewed Soup K-Cup packs which we expect to be available in fiscal 2014. We expect to continue to enter into these relationships in our efforts to expand choice and diversify our portfolio of brands with the expectation that they will lead to increased Keurig Single Cup Brewing system awareness and household adoption, in part through the participating brands advertising and merchandising activities. In addition to entering into business relationships with brands that are new to the Keurig Single Cup Brewing system, we expect to be able to convert a number of unlicensed brands to the Keurig system on a licensed basis.

  • 7GMCRBUSINESS REPORT

  • BREW A BETTER WORLD

    8GMCR

    BUSINESS REPORT

    Sustainability is a cornerstone of our culture and business performance. In the fiscal year 2013, GMCR continued to evolve our sustainability program, increasing focus on stakeholder engagement, long-term impact, and operational sustainability. Our sustainability resources are organized to create a resilient supply chain, sustainable products, and thriving communities.

    We have consistently been recognized as a leader in creating positive social impact and will focus, improve upon, and continue our leadership in this area. In the last year, we received the Corp. Award from the Millennium Challenge Corporation, a U.S. foreign aid agency that works to reduce global poverty through economic growth and ranked among the 100 Best Corporate Citizens by Corp. Responsibility Magazine. Fair Trade remains an important component of our sustainable coffee sourcing

    strategy. We were recognized for the third consecutive year by Fair Trade USA as the worlds largest purchaser of Fair Trade Certified coffee, and since the debut of GMC Rs first Fair Trade Certified coffee in 2000, our purchases have delivered more than $22 million in community development funds to worldwide coffee farmers.

    We believe that when our people thrive, our business thrives and so do our communities. In addition to investments in local nonprofits and product donations, our employees engage within their communities through our Community Action for Employees, or CAFE, program. This program enables employees to volunteer up to 52 paid hours per fiscal year during normal work hours to participate and work with non-profit and community-based organizations. In fiscal year 2013, employees spent over 64,000.

    Sustainability is a cornerstone of our culture and business performance. In fiscal year 2013, we continued to evolve our existing Sustainability program, increasing focus on stakeholder engagement, operational sustainability and long-term impact. Our sustainability resources are organized to create a resilient supply chain, sustainableproducts, and thriving people and local communities. We have consistently been recognized as a leader in creating positive social impact and will focus, improve upon, and continue our leadership in this area. In the last year, we received the Corporate Award from the Millennium Challenge Corporation, a U.S. foreign aid agency that works to reduce overall global poverty through economic growth and ranked among the top 100 Best Corporate Citizens by Corporate Magazine.

  • 9GMCRBUSINESS REPORT

    OUR PRODUCTS

    Offering new brands at the same time, we will continue to invite current unlicensed players to join the Keurig Beverage System as partners so that they and their consumers can participate in the innovations ahead and consumers can realize the full benefits that our system delivers for their brands.

    COFFEE The Company offers high-quality Arabica bean coffee including single-origin, Fair Trade Certified, Rain Forest Alliance Certified, organic, flavored, limited edition and proprietary blends. We carefully select our coffee beans and appropriately roast the coffees to optimize their taste and flavor differences. Our coffee comes in a variety of package types including portion packs, bagged (whole bean and ground), fractional packages (for food service and office environments) and cans.

    TEA The Company (GMCR) does not own a tea brand, but has licensing agreements with Unilever North America (Lipton ), Celestial

    Seasonings, Inc. (Celestial Seasonings branded teas and Perfect Iced Tea ), Good Earth Corporation and Tetley USA, Inc. (Good Earth and Tetley branded teas), R. C. Bigelow, Inc. (Bigelow branded teas), Snapple Beverage Corp. (Snapple branded teas), Starbucks Corporation (Tazo and Teavana ) and Associated British Foods plc (Twinings of London ) for manufacturing, distribution, and sale of portion packs.

    OTHER DRINKS In addition to coffee and tea, we also produce and sell lemonade and hot apple cider under our Green Mountain Naturals brand, iced fruit brews under our Vitamin Burst brand, cocoa and other dairy-based beverages under our Cafe Escapes brand, and cocoa under the Swiss Miss brand inportion packs.

  • OUR PRODUCTS

    CURRENTBRANDS

    10GMCR

    BUSINESS REPORT

    Arbuckle Emerils Red CarpetBarista Prima Coffeehouse Folgers Gourmet Selections Bigelow Gloria Jeans Seattles Best Coffee Brulerie Mont-Royal Good Earth Snapple Brulerie St. Denis Green Mountain Coffee Starbucks Cafe Adagio Coffee Green Mountain Naturals Swiss Miss Cafe Escapes Kahlua Tazo Caribou Coffee Kirkland Signature Tetley Celestial Seasonings Lavazza The Original Donut ShopCinnabon Lipton Timothys Coffee People Market Basket TKDiedrich Coffee McQuarry Tullys Distinction Millstone Twinings of London Donut House Collection Newmans Own Organics Van Houtte Dunkin Donuts Orient Express Vitamin Burst Eight OClock Promenade Wolfgang Puck

  • 11GMCRBUSINESS REPORT

    The new Keurig Brewing System is a powerful product platform, brand equity, and brand builder. We have successfully fostered the extraordinary growth of a multi-brand system by building a portfolio of our own brands and successfully partnering with other worldclass brands. Today, we have more than 35 owned, licensed, partner and private label brands in our System here at GMCR.

    In 2013, we made significant progress in strengthening our long-term partnerships and we created some new ones. We signed an extended and expanded agreement with Starbucks Coffee Company and renewed our agreement with Dunkin Donuts. We also struck new partnerships that brought great beverage brands like The Coffee Bean & The Tea Leaf brand, Cinnabon, Lipton, and, of course Snapple to our Keurig Brewing System while strengthening already great relationships with our beverage partners such as the J.M. Smucker Company and its Folgers Gourmet Selections and Millstone brands, Luigi Lavazza SpA, Newmans Own Organics, and Celestial Seasonings as well as with appliance partners such as Jarden Consumer Solutions and its Mr. Coffee brand and Conair Co. and its Cuisinart brand.

    Together with Campbell Soup Company, were working to take Keurig brewing beyond beverages & into the food industry. These accomplishments have given us rewards we never could have imagined. Among the external recognition we garnered in fiscal year 2013, we received the prestigious Edison Award for Innovation in the Consumer Packaged Goods Beverage Preparation Category for our Keurig Vue Brewer. Keurig also was named Brand of the Year in the 2013 Harris Poll EquiTrend Equity Study, which is an annual brand health assessment that surveys thousands of U.S. consumers online about their brand perceptions. These external recognitions highlight the success of our strategy and reflect the passion consumers continue to feel for their Keurig brewers and our family of beverage brands.

    OUR MOSTSUCCESSFUL

    PRODUCT YET

  • 12GMCR

    BUSINESS REPORT

  • 13GMCRBUSINESS REPORT

    Net sales $4,358,100 13% $3,859,198 46% $2,650,899

    Gross Profit $1,619,386 28% $1,269,399 40% $904,625

    Net income $483,232 33% $362,628 82% $199,501

    Net income per diluted share $3.16 39% $2.28 74% $1.31

    Diluted weighted average shares outstanding 152,801,493 -4% 159,075,646 5% $152,142,434

    Working capital $924,429 15% $802,969 22% $660,153

    Total assets $3,761,548 4% $3,615,789 13% $3,197,887

    Long-term debt, capital lease and financing obligations3 $236,282 -55% $521,778 -9% $575,969

    Stockholders equity2 $2,635,570 17% $2,261,228 18% $1,912,215

    Long-term debt/equity, capital lease and financing obligations3 9.0% -1,410bps* 23.1% -700bps* 30.1%

    Return on equity 19.7% 230bps* 17.4% 210bps* 15.3%

    SEPT. 2820131

    SEPT. 2920121

    SEPT. 24 20111

    YEAR-OVER-YEAR

    YEAR-OVER-YEAR

    SELECTED STATEMENT OF OPERATIONS DATA

    SELECTED BALANCE SHEET DATA

    1Fiscal 2012 contains 53 weeks. Fiscal years 2013 and 2011 each contain 52 weeks.2The fiscal 2013 and 2012 stockholders equity balances reflects common shares acquired under a purchase program authorized by the Board of Directors. The fiscal 2011 stockholders equity balance reflects the impact of the May 11, 2011 equity offering3Long-term debt including capital lease and financing obligations excludes the current portion of long-term debt and the current portion of capital lease and financing obligations.*bps represents basis points

  • 14GMCR

    BUSINESS REPORT

    Working capital $924,429 15% $802,969 22% $660,153

    Total assets $3,761,548 4% $3,615,789 13% $3,197,887

    Long-term debt, capital lease and financing obligations3 $236,282 -55% $521,778 -9% $575,969

    Stockholders equity2 $2,635,570 17% $2,261,228 18% $1,912,215

    Long-term debt/equity, capital lease and financing obligations3 9.0% -1,410bps* 23.1% -700bps* 30.1%

    Return on equity 19.7% 230bps* 17.4% 210bps* 15.3%

    COMPARSION OF 5 YEAR CUMULATIVE TOTAL RETURN

    1Fiscal 2012 contains 53 weeks. Fiscal years 2013 and 2011 each contain 52 weeks.

    2The fiscal 2013 and 2012 stockholders equity balances reflects common shares acquired under a purchase program authorized by the Board of

    Directors. The fiscal 2011 stockholders equity balance reflects the impact of the May 11, 2011 equity offering and concurrent private placement

    and the September 28, 2010 sale of common stock to Luigi Lavazza S.p.A. (Lavazza).

    3Long-term debt including capital lease and financing obligations excludes the current portion of long-term debt and the current portion of capital lease and financing obligations.

    *bps represents basis points

    $1,500

    $1,200

    $900

    $600

    $300

    $0

    9/27

    /08

    9/26

    /09

    9/25

    /10

    9/24

    /11

    9/29

    /12

    9/28

    /13

    Amoung Green Mountain Coffee Roasters, Inc. and S&P 600 pack-aged foods and meats.

    $100 Invest on 9/29/07 in stock or index, including reinvestment of dividends. Indexes calculated on month-end basis.

    GREEN MOUNTAIN COFFEE ROASTERS, INC.

    NASDAQ COMPOSITE INDEX

    S&P 600 PACKAGED FOODS & MEATS

  • 15GMCRBUSINESS REPORT

    NET INCOME IN THOUSANDS*Fiscal 2012 contains 53 weeks. Fiscal years 2013, 2011, 2012 and 2009

    each contain 52 weeks.

    *Includes 57 million pre-tax income from Kraft patent litigation settlement in Oct. 2009

    NET INCOME PER SHARE

    FINANCIALS

    *Fiscal 2012 contains 53 weeks. Fiscal years 2013, 2011, 2012 and 2009 each contain 52 weeks.

    *Adjusted to reflect the three for one split for shareholders of record at the close of business May 10,2010.

  • 16GMCR

    BUSINESS REPORT

    NET SALES IN THOUSANDS

    RETURNING CAPITAL TO INVESTORS

    *Fiscal 2012 contains 53 weeks. Fiscal years 2013, 2011, 2012 and 2009

    each contain 52 weeks.

    Directors demonstrated confidence in our longterm growth prospects, financial outlook, and cash flow generation by approving a share repurchase authorization of up to $1 billion and by approving an indicated annual dividend to shareholders of $1.00 per share, payable $0.25 per quarter. The new share repurchase program will take effect upon completion of our current $500 million, as of November 20, 2013, had approximately $138 million remaining. We believe that these positive developments represent a balanced approach to delivering an increasing value to our shareholders while preserving our liquidity and excellent flexibility to reinvest in the numerous growth opportunities in front of us.

  • 17GMCRBUSINESS REPORT

    2013 FY 2012 FYCash and cash equivalents $ 260,092 $ 58,289Restricted cash and cash equivalents 560 12,884Receivables, less uncollectible accounts and return allowances 467,976 363,771Inventories 676,089 768,437Income taxes receivable 11,747 32,943Other current assets 46,891 35,019Deferred income taxes, net 58,137 51,613Total current assets 1,521,492 1,322,956Fixed assets, net 985,563 944,296Intangibles, net 435,216 498,352Goodwill 788,184 808,076Deferred income taxes, net 149 Other long-term assets 30,944 42,109Total assets $3,761,548 $3,615,789

    CURRENT ASSETS

    LIABILITY AND STOCKHOLDER EQUITY

    Current portion of long-term debt $ 12,929 $ 6,691Current portion of capital lease and financing obligations 1,760 3,057Accounts payable 312,170 279,577Accrued expenses 242,427 171,450Income tax payable 29,322Deferred income taxes, net 233 245Other current liabilities 27,544 29,645Total current liabilities 597,063 519,987Long-term debt, less current portion 160,221 466,984

    Stockholders equity:

    Issued and outstanding150,265,809 and 152,680,855 shares at September 28, 2013 and September 29, 2012, respectively 15,026 15,268Additional paid-in capital 1,387,322 1,464,560Retained earnings 1,252,407 771,200Accumulated other comprehensive (loss) income (19,185) 10,200Total stockholders equity $2,635,570 $2,261,228

    Total liabilities and stockholders equity $3,761,548 $3,615,789

  • 18GMCR

    BUSINESS REPORT

    2013 FY 2012 FYCash and cash equivalents $ 260,092 $ 58,289Restricted cash and cash equivalents 560 12,884Receivables, less uncollectible accounts and return allowances 467,976 363,771Inventories 676,089 768,437Income taxes receivable 11,747 32,943Other current assets 46,891 35,019Deferred income taxes, net 58,137 51,613Total current assets 1,521,492 1,322,956Fixed assets, net 985,563 944,296Intangibles, net 435,216 498,352Goodwill 788,184 808,076Deferred income taxes, net 149 Other long-term assets 30,944 42,109Total assets $3,761,548 $3,615,789

    Current portion of long-term debt $ 12,929 $ 6,691Current portion of capital lease and financing obligations 1,760 3,057Accounts payable 312,170 279,577Accrued expenses 242,427 171,450Income tax payable 29,322Deferred income taxes, net 233 245Other current liabilities 27,544 29,645Total current liabilities 597,063 519,987Long-term debt, less current portion 160,221 466,984

    Stockholders equity:

    Issued and outstanding150,265,809 and 152,680,855 shares at September 28, 2013 and September 29, 2012, respectively 15,026 15,268Additional paid-in capital 1,387,322 1,464,560Retained earnings 1,252,407 771,200Accumulated other comprehensive (loss) income (19,185) 10,200Total stockholders equity $2,635,570 $2,261,228

    Total liabilities and stockholders equity $3,761,548 $3,615,789

    2013 2012 2011Net sales $ 4,358,100 $ 3,859,198 $ 2,650,899Cost of sales 2,738,714 2,589,799 1,746,274Gross profit 1,619,386 1,269,399 904,625Selling and operating expenses 560,430 481,493 348,696General and administrative expenses 293,729 219,010 187,016Operating income 765,227 568,896 368,913Other income, net 960 1,819 648Gain (loss) on financial instruments, net 5,513 (4,945) (6,245)(Loss) gain on foreign currency, net (12,649) 7,043 (2,912)Gain on sale of subsidiary 26,311 Interest expense (18,177) (22,983) (57,657)Income before income taxes 740,874 576,141 302,747Income tax expense (256,771) (212,641) (101,699)Net Income $ 484,103 $ 363,500 $ 201,048Net income attributable to noncontrolling interests 871 872 1,547Net income attributable to GMCR $ 483,232 $362,628 $ 199,501

    Basic income per share:Basic weighted average shares outstanding 149,638,636 154,933,948 146,214,860Net income per common sharebasic $ 3.23 $ 2.34 $ 1.36

    Diluted income per share:Diluted weighted average shares outstanding 152,801,493 159,075,646 152,142,434Net income per common sharediluted $ 3.16 $ 2.28 $ 1.31

    CONSOLIDATED STATEMENT OF OPERATION

  • 19GMCRBUSINESS REPORT

    CASH FLOWS FROM OPERATING ACTIVITIES

    Net income $ 484,103 $ 363,500 $ 201,048Depreciation and amortization of fixed assets 183,814 135,656 72,297Amortization of intangibles 45,379 45,991 41,339Amortization deferred financing fees 7,125 6,050 6,158Loss on extinguishment of debt 19,732Unrealized loss (gain) on foreign currency, net 9,159 (6,557) 1,041(Gain) loss on disposal of fixed assets (85) 2,517 884Gain on sale of subsidiary, excluding transaction costs (28,914) Provision for doubtful accounts 689 3,197 2,584Provision for sales returns 79,747 107,436 64,457(Gain) loss on derivatives, net (4,507) 6,310 3,292Excess tax benefits from equity-based compensation plans (54,699) (12,070) (67,813)Deferred income taxes (17,701) 60,856 (8,828)Deferred compensation and stock compensation 26,315 18,079 10,575Other 844 (672) (6,142)

    Changes in assets and liabilities, net of effects ofacquisition:Receivables (187,221) (159,317) (157,329)Inventories 87,677 (92,862) (375,709)Income tax payable/receivable, net 46,290 16,457 63,487Other long-term assets, net 3,915 (469) (11,454)Accounts payable and accrued expenses 133,532 17,125 134,035Other current liabilities 3,100 (2,718) (3,118)Other long-term liabilities 1,161 5,090 10,964Net cash provided by operating activities 835,969 477,785 785Cash flows from investing activities:Change in restricted cash 3,005 (2,875) 2,074Acquisition of LJVH Holdings, Inc. (Van Houtte),net of cash acquired (907,835)Proceeds from the sale of subsidiary, net of cashCapital expenditures for fixed assets (232,780) (401,121) (283,444)Other investing activities 4,208 618 1,533Net cash used in investing activities (225,567) (265,645) (1,187,672)

    OUR COMPETITION

    IS NO MATCH

  • 20GMCR

    BUSINESS REPORT

    Net income $ 484,103 $ 363,500 $ 201,048Depreciation and amortization of fixed assets 183,814 135,656 72,297Amortization of intangibles 45,379 45,991 41,339Amortization deferred financing fees 7,125 6,050 6,158Loss on extinguishment of debt 19,732Unrealized loss (gain) on foreign currency, net 9,159 (6,557) 1,041(Gain) loss on disposal of fixed assets (85) 2,517 884Gain on sale of subsidiary, excluding transaction costs (28,914) Provision for doubtful accounts 689 3,197 2,584Provision for sales returns 79,747 107,436 64,457(Gain) loss on derivatives, net (4,507) 6,310 3,292Excess tax benefits from equity-based compensation plans (54,699) (12,070) (67,813)Deferred income taxes (17,701) 60,856 (8,828)Deferred compensation and stock compensation 26,315 18,079 10,575Other 844 (672) (6,142)

    Changes in assets and liabilities, net of effects ofacquisition:Receivables (187,221) (159,317) (157,329)Inventories 87,677 (92,862) (375,709)Income tax payable/receivable, net 46,290 16,457 63,487Other long-term assets, net 3,915 (469) (11,454)Accounts payable and accrued expenses 133,532 17,125 134,035Other current liabilities 3,100 (2,718) (3,118)Other long-term liabilities 1,161 5,090 10,964Net cash provided by operating activities 835,969 477,785 785Cash flows from investing activities:Change in restricted cash 3,005 (2,875) 2,074Acquisition of LJVH Holdings, Inc. (Van Houtte),net of cash acquired (907,835)Proceeds from the sale of subsidiary, net of cashCapital expenditures for fixed assets (232,780) (401,121) (283,444)Other investing activities 4,208 618 1,533Net cash used in investing activities (225,567) (265,645) (1,187,672)

    We expect competition in coffee and coffeemakers to remain intense, both within our existing customer base and as we expand into new regions. In both coffee and coffeemakers, we compete primarily by providing a wide variety of high-quality coffee including flavored, Fair Trade Certified and organic coffees as well as other beverages, single cup coffeemakers, easy access to our products, superior customer service and a comprehensive approach to customer relationship management. We believe that our ability to provide a convenient and broad network of outlets from which to purchase our products is an important factor in our ability to compete. Through our multi-channel distribution network of wholesale, retail and consumer direct operations we believe we differentiate ourselves from many of our larger competitors, who specialize in only one primary channel of distribution. We believe our constant innovation and focus on quality, all directed to delivering a consistently superior cup of coffee, differentiate us among competitors in the coffeemaker industry. We also seek to differentiate ourselves through our socially and environmentally responsible business practices.

    While we believe we currently compete favorably with respect to all of these factors, there can be no assurance that we will be able to compete successfully in the future. We compete not only with other widely advertised branded products, but also with private label or generic products that generally are sold at lower prices. In September 2012, two patents associated with our K-Cup packs expired, and certain third-parties have launched competing products in the form of established unlicensed national unlicensed private label packs.

    OUR COMPETITION

    IS NO MATCH

  • 21GMCRBUSINESS REPORT

    BECOME APART OF OUR NEXT

    BIG IDEA

    KEURIG COLD

    In fiscal year 2015, we are planning to launch a KeurigTM Cold System that will offer carbonated beverages, juice drinks, energy drinks, sports drinks, and teas. Today we are able to meet the needs of coffee, tea, and cocoa drinkers, but there are also strong prospects to pursue adjacencies to our current business.

    The U.S. cold beverage category, for instance, is roughly four to five times larger than the hot beverage category and therefore affords a large opportunity to provide Keurig consumers with convenient choice, a wide range of brands, simplicity, and unparalleled product quality in cold beverages.

  • 22GMCR

    BUSINESS REPORT

    We are excited to share with you, our shareholders, the next generation of Keurig. With your support and dedication, we can take the next step into the Keurig line and reach even farther from where we are now.

  • 23GMCRBUSINESS REPORT

    01.

    02.

    03.

    04.

    05.

    06.

    07.

    08.

    09.

    10.

    11.

    12.

    #1 COFFEE MAKER BRAND OF THE YEAR 2013Harris Poll EquiTrend Brands of the Year

    #2 COFFEE BRAND OF THE YEAR 2013

    Harris Poll EquiTrend Brands of the Year

    BEST ALL AROUND IN BEST SINGLE-SERVE COFFEEMAKERS

    Good Housekeeping Research Institute

    2013 GOLD WINNER

    Edison Awards

    100 BEST CORPORATE CITIZENS LIST

    CR Magazine

    NEW PRODUCT OF THE YEARAutomatic Merchandiser Magazine 2013 Readers Choice Awards

    SUPERIOR TASTE AWARDS 2013 - VAN HOUTTE COFFEE & BARISTA PRIMA COFFEEHOUSEThe International Taste & Quality Institute (iTQi)

    TOP e-RETAILER IN ONLINE CUSTOMER SATISFACTION 2013 - TOP 100 INTERNET RETAILERForesee

    LARGEST PURCHASER OF FAIR TRADE CERTIFIED COFFEE IN THE WORLD FOR 2012FAIR TRADE USA

    FASTEST GROWING COMPANIES IN 2013Fortune Magazine

    TOP MIDSIZE COMPANY PER-FORMER RECOGNIZING WINNING COMPANIES IN THE U.S. CPG INDUSTRYThe Boston Consulting Group (BCG)

    2013 CORPORATE AWARDMillennium Challenge Corporation

  • 24GMCR

    BUSINESS REPORT

    AWARDS FROM 2012 TO 2014

    13.

    14.

    15.

    16.

    17.

    18.

    19.

    20.

    21.

    #1 IN THE VERMONT 100+ (LARGEST VERMONT BASED BUSINESSES) Vermont Business Magazine

    100% GREEN POWER USERSEPA Green Power Partnership

    FASTEST GROWING BUSINESS IN THE MANUFACTURING CATEGORYVermont Business Magazines 5x5x5 Award

    IMPORTER OF THE YEAR 2013 THE GLOBE AWARDSWorld Trade Center Tacoma

    KNOXVILLE AREA URBAN LEAGUES 2013 CORPORATE LEADERSHIP AWARDKnoxville Area Urban League

    MOST TRUSTED BRAND, COFFEE MAKERReaders Disgust Canada

    NORTHEAST BUSINESS LEADER FOR ENERGY EFFICIENCY 2013Northeast Energy Efficiency Partnerships (NEEP)

    2013 AMERICAN PACKAGE DESIGN AWARDSGraphic Design USA Magazine

    THE ASSOCIATION OF ENERGY ENGINEERS (AEE) NEW ENGLANDOutstanding Energy Project for New Costruction 2012