Something's Brewing at Green Mountain

• Report this Comment On October 13, 2010, at 1:45 PM, stealthnetx wrote:

  Don't forget about Coca Cola. Declining soda sales, known as a M&A powerhouse... Acquired Glaceau (Vitamin Water) 5 years ago for 11.7 times revenue. Coke is getting dominated in Coffee market in the U.S.

  Also, Coke's former CEO (Douglas Daft) was at Coke for 35 years, retired as CEO, made millions over his career at Coke.... He retired in 2004 from them, and in December 2009 he joined GMCR's board. GMCR is a growing competitor, and has already started to target the cold beverage market. What is also interesting, was that when he joined GMCR's board, he still used Coke as his contact address even though he left there 5 years earlier?

  http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?F...

• Report this Comment On October 13, 2010, at 2:26 PM, plange01 wrote:

  green mountain is selling far to cheap and is starting to look like a takeover target! either way this stock will go up!!

• Report this Comment On October 13, 2010, at 2:28 PM, sandysanmina wrote:

  How much do you think an acquiring company would be willing to pay for a company with a tangible book value of 35¢,a paltry $8MM of cash after swapping all their cash for GOODWILL & INTANGIBLES?

  Not to mentio accounting irregularities and SEC investigations. Seems to me the ingredients are there for a true bidding war,ROFLMAO

• Report this Comment On October 13, 2010, at 2:37 PM, stealthnetx wrote:

  Sandy - You are actually suggesting GMCR is worth about $0.35 per share? Seriously?! That's about $50 million for a company that does $1+ billion in sales with 50% annual growth.

  Also, GMCR had $55 million in net income (profit) last year. So you are suggesting that GMCR should sell for less than a 1 P/E? Are you serious? Even companies with little growth sell for many multiples. GMCR has 50%+ growth which is HUGE, 70%+ market share, new partners, going international.

  As for the $8 million cash on hand are you forgetting what they used the cash for? Oh yes, to acquire Diedrich Coffee which Peet's Coffee wanted very badly and fought to the bitter end.

  Take a look at this balance sheet:

  http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?F...

  That was before they coughed up money for Diedrich, which was key for the future.... In the last couple years they bought out Tully's Coffee, Timothy's Coffee, and Diedrich Coffee for the FUTURE of the business. That tends to affect cash on hand when they don't finance all of it. Oh, and now they just acquired Van Houtte.

  Perhaps you need to review the facts.

• Report this Comment On October 13, 2010, at 2:42 PM, refriedbean wrote:

  Green Mountain has garnered valuable space on the shelves of a lot of major retail chains including Walmart. Their Keurig machines and their K-Cups are everywhere and selling everywhere.

• Report this Comment On October 13, 2010, at 3:53 PM, sandysanmina wrote:

  Stealth, Where did i say they were worth 35¢share? They're worth what someone is willing to pay.I pointed out the TANGIBLE BOOK value is 35¢ share and I doubt anyone will pay 100 times book value to acquire a firm selling coffee. As for the acquisitions, I'm familiar with them. I note they swapped more than $400MM of CASH for $500mm of GOODWILL and INTANGIBLES leaving themselves with a whopping $8MM cash and a total of $50MM TANGIBLE ASSETS.

  You're suggesting someone will buy these guys for a price north of $30 when all they have is VAPOR on the balance sheet. I submit NOBODY is going to pony up several billion to acquire $50MM worth of warehouse space.

  As for growth , you seem to suggest they will grow 50% a year in perpetuity. Do you honestly think they will be booking revenue of $8b in 5 years selling COFFEE?

  For $1b sales they netted $55M or slightly more than 50¢/share, they are already at a PE of 60X. Their revenue has been the result of buying their customers and booking the inventory sales twice. Once when sold to their customer and once after acquiring the customer. Its a great game, sell inventory to Joe, buy Joe by giving him your cash and taking his goodwill and then book Joe's sales as your also. Smacks of a variation on the ole PONZI scheme. As long as there is always someone else to buy its fine but when the music stops you had better have a chair or you're out of the game. In my opinion of course

• Report this Comment On October 13, 2010, at 6:13 PM, LQM2 wrote:

  Sandy...that's a good point about their accounting for revenue. Do you think that's what the SEC is after? Because what you describe sounds a little sneaky, but it also sounds like proper accounting. And it wouldn't impact the bottom line because GMCRs original revenue would become the cost of goods sold the second time through. Have you tried to quantify impact?

• Report this Comment On October 13, 2010, at 7:19 PM, sandysanmina wrote:

  Mark, I haven't attempted to sort thru the revenue consolidations and how much they've skewed the true growth rate. Additionally I haven't questioned the legality of the accounting but simply question the true growth rate without the acquisitions. It appears the model relies on continuous acquisition to sustain the growth rate.

  Simply put, there is no way the growth rate is 50% if you remove the Timmy sales since the revenue figure doesn't represent sales but acquisition of revenues in exchange for assets. Using the prior example the $2.25 revenue figure reported by GMCR in reality represents the aggregate total sales in the entire producer to retail consumer supply chain but the product is one product not two as one might be led to believe. The Timmy sales aren't unique goods sold by Timmy they are the same goods bought from GMCR and sold to retail. GMCR counted the good once when they sold it to Tim and again when they bought Tim. The Tim revenue in effect isn't a sale at all but a swap of assets for Tim's revenue. Sneaky indeed as an investor would be led to believe sales are soaring but in reality they may well be ½ of what is being reported. Certainly we know there was one bean (the same bean) not two sold. I notice you've done well with GMCR sorry to bring this up and potentially spoil the party.

• Report this Comment On October 13, 2010, at 11:16 PM, Mstinterestinman wrote:

  I made a small profit on my shares before I sold but the investigation will probably keep me on the sidelines. Plenty of other good companies not worth the risk imo.

• Report this Comment On October 16, 2010, at 3:43 PM, brianwindsor wrote:

  I am plowing in. Rev recognition is not a issue in my eyes. It is a supplier issue. A human issue and will be fixed going forward. They control the single serve coffee market and their patents are strong. Their CEO has dropped expensive people in VT by finding a company silly enough to buy em. Their exposure to health care is limited and their exposure to taxes can be corrected with a move back north of the boarder to their offices in Toronto.

  A move to T town would help too since OBama wants to penalize any revenue generated from over seas markets. If there was a nimble company on the planet this is the one. They can simply add bean supply if the price skyrockets.

  You are foolish to compare revenues when you buy competitors, yes the number is squewed a bit because of the buys but you forget that they are selling out of their coffeee systems each c mas and that they are moving to chilled technology as well. My channel checks always show sell outs and huge volumes of the brewing system to support the beans.

  This is a game changer technology in a business that has expensive humans doing the serving... NOW. As O pushes the cost of human employees higher and higher all of that plays right into GMCR's game plan.

  The potential is limitless and sales are NOT impacted by any economic blight. People will not give up coffee but they will stop going to places where the cost of the underlying human and the commodity of the bean has pushed the price per cup too high.

  GMCR is a winner and is the winner in the retail coffee business far term. The road to get there is bumpy as they crush competitors and the competitors use their funds to buy out politicians to sick the SEC on them. B

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