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Final Project Milestone Three: Keurig – Financing & Track Record

Jacob Randlett

MBA 640

5/21/2017
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Introduction

Keurig Green Mountain has had a small presence in Great Britain since 1999, but

they have been limited to exporting their products for retail sales overseas. The focus for

sales have always been in North America, with dedicated divisions to their American and

Canadian operations and marketing, all while remaining headquartered in Vermont

(Investors, 2016). However, leaving Great Britain and the rest of the United Kingdom as

solely a small export sales segment could be leaving a huge amount of money on the table.

With that, Keurig’s expansion to the United Kingdom should be approached with a full

investment in entirely new sales forces, marketing strategies, and production facilities. If

possible, there should be enough infrastructure established in the United Kingdom to where

Keurig can expand to the rest of Europe in the future with the help of its Luxembourg-based

new parent company, JAB Holdings. This project’s intent is to mirror the regional

distribution systems, which Keurig already has throughout the United States and Canada, in

the United Kingdom. This will entail a factory, raw material/ingredient sources, and work

force to create the beverage products; a sales & marketing team for the retail distribution of

the products throughout the United Kingdom; and the overhead costs associated with these

new facilities. Ultimately, the goal is to grow Keurig’s net sales without dropping its current

average profit margin. This will require extensive financial analysis and projection for

various elements of expansion investments or business combinations, which will then need to

be measured for their probable impacts reporting items such as profitability and cash flow. In
 Randlett - 3

addition, there will need to be a review and evaluation of Keurig’s past operational and

financial track record. Together, these pieces of the project will lay out the financial and

organizational viability of the United Kingdom international expansion for Keurig Green

Mountain.

Financial Impact

Cash Flow: Keurig’s cash flow for the three years on record before going private reveal no

inherent defect or abnormality. The operating cash flow remained proportionally

approximate to both the net sales and net income for the company in their respective years.

While neither the investing activities nor financing activities cash flows follow a consistent,

sales-proportional trend, the executive and operational direction of Keurig does justify their

most recent public figures for each cash flow category. Particularly in 2015, Keurig’s

infrastructure took a dramatic shift between the purchase of a new cold beverage facility in

Georgia as well as the restructuring undergone through the acquisition by JAB Holdings that

began in August of 2015. This equated to an increasing outflow in both categories of cash

flow, which creates a trend that should be expected to continue in light of an international

expansion project such as this one to the United Kingdom.

As will be shown in Exhibit A and Exhibit B, this project’s effect on the cash flow for

Keurig’s projected future years of performance will be substantial over the loosely

determined timeframe of five years from 2018 until 2022. When projecting the company’s

cash flow without the United Kingdom expansion taking place, there is still a very consistent
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trend of financing and investing outflows outweighing the operating activity’s inflows. If the

expansion project is disregarding, it is still safe to assume the trend to a lesser degree will

occur since the company still needs to undergo regular restructuring expenses for the

foreseeable future under their new JAB Holdings ownership (Exhibit A). While this trend is

similarly projected if the expansion proceeds starting in early 2018, the outflows still grow

more quickly than the inflows by an even greater degree (Exhibit B). For the purposes of

these projections, the estimated $320 million for the project split into five installments ($64

million each) between 2018, the projects start date, and 2022. These installments of the

expansion project costs continue the downward trend of positive cash flow, however this

project-related outflow allows for the new operations to start recouping the investment of the

cash outflow for more inflow in the operating activities sector, unlike the minimal sales

growth in the base projection to allow operating cash flow to catch up to financing/investing

activities.

Consolidated Financial Statement: The financial impact of the United Kingdom expansion

project for Keurig Green Mountain should be substantial enough to post growing net sales

figures year-after year after the establishment of the operations and facilities. These will play

a major role in recouping on both the investments of outside parties the external capital

funding proposal as well as what has been invested internally from Keurig or JAB Holdings.

In the base projection of financial statements from 2013 through 2022, there is a maintained

profit margin of approximately 10.75% from year-to-year as Keurig Green Mountain settles
 Randlett - 5

into its new JAB Holdings’ ownership structure (Exhibit C). Net sales are projected to

recover steadily year by year after the brief drop in 2015, but the continuing costs of

restructuring under JAB and increasing efficiency in their operations prevents the final profit

figures from accelerating greatly. This will be a safe path for Keurig to follow for itself and

JAB Holdings, but not necessarily a path that will overwhelmingly win back the confidence

of former stockholders and potential future project investors.

The financial projections for Keurig under the same parameters, but with the United

Kingdom expansion included, show a confidently promising return on investment from the

completion of the project for fiscal year 2019 through to 2022 (Exhibit D). Much like with

the aforementioned cash flow projections under the $320 million expansion project, there

have been five $64 million costs installments added to restructuring expenses per year

between 2018 and 2022. To counter-balance these additional project costs, a modest

projection for the net sales of the years 2019 through 2022 are calculated with each year

outperforming the prior year by five percent. This is meant to be reflective of how a minimal

yearly net sales growth should occur once the new facility, new vendors, and new operations

are in place by Q4 of fiscal year 2018. It could be argued that an assumption of five percent

could be too safe considering the United Kingdom’s 65-million-person population that has a

cultural affinity for coffee, tea, and other quick-brew beverages. However, to be considerate

of a competitive environment, projections will remain moderate and assume that by the year
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2022 the Keurig Green Mountain will have a solid grasp of United Kingdom marketing and

operations.

Financing

Global Capital Markets: Aside from investments generated exclusively from this external

capital funding proposal, there are global capital markets that provide open market

investment opportunities overseen by agencies such as the Securities Exchange Commission

in the United States or the Financial Services Authority in the United Kingdom (Capital

Market, 2015). These global capital markets can provide opportunities to trade, buy, or sell

stocks and bonds on the primary market, or on the secondary market where investment

institutions trade/buy/sell equity and debt securities to businesses. This secondary market is

an avenue that Keurig Green Mountain could still take for project fundraising despite now

being privately owned by JAB. However, between still being a very profitable entity on its

own and now having the structural and financial support of JAB Holdings, these global

capital markets will not be the preferred backup plans should this United Kingdom external

capital funding proposal fall short.

Business Combinations: Organizations face a tough decision when it comes to whether to

expand “organically”, such as what this Keurig expansion project will ideally do, or to

expand through some form of business combination. These methods of business combination

include mergers, acquisitions, joint ventures, licensing and/or franchising agreements, and

contractual and/or strategic alliances. In a drastically different situation, Keurig may want to
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consider one of these options if it lacked any retail presence in the United Kingdom before

today. For example, Keurig would be smart to start partnering with multiple small farms

through contractual alliances that allow Keurig to use these native farms’ resources to

increase domestic production and retail presence while allowing the farm to use the Keurig

brand alongside its original products to boost their marketing abilities. While this still may be

a smart option to add to Keurig’s actual current United Kingdom presence, the financial

backing of JAB and the security in its own profitability should make the creation of a Keurig

exclusive facility and distribution network a fairly safe decision. These same potential

farming partner should still be negotiated with throughout the United Kingdom, but they

should be limited to just a supplier/buyer relationship as Keurig tries to maintain control of

its brand in the expansion.

Track Record

Financial Performance: As illustrated previously in this external capital funding proposal,

Keurig Green Mountain had been suffering from a lack of stakeholder confidence in the

summer of 2015 before being acquired by JAB Holdings. To be fair to those that lost faith

and sold stock in Keurig at the time, the company did estimate an approximately five percent

loss in net sales for the first three quarters of their fiscal year, and Keurig’s retail partners

such as Starbucks and Kraft did seem to be benefitting more from their brand than Keurig

was (Levisohn, 2015). However, from all publicly available financial reports, this drop in net

sales seems much less severe relative to the overall prominence of Keurig’s revenue and
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profitability. In addition to this mostly positive and upward trending financial history, it is

worth considering by potential investors that Keurig Green Mountain now has the financial

backing and security that comes with being under the privately held umbrella of JAB

Holdings. It is understandable that this may be alarmable to investors in the short-term,

particularly with the lack of publicly available financial reports going forward. However,

since this plan by Keurig has long-term implications in a mostly untapped market for the

company, these minor issues should be mitigated by this promising opportunity in the United

Kingdom.

Legality & Ethics: Financial performance, past, present, and future, is an incredibly vital

piece to an investment opportunity. On the other hand, it is far from the only element that

matters to a sound investment decision. This includes a company’s legal and ethical practices

which, if poorly managed, can deteriorate any organization regardless of its revenue sources,

international scope, or overall profitability. Fortunately, Keurig Green Mountain, going back

to before the 2006 merger of the two entities, has remained relatively free of extensive

litigation over their operations. Their organic coffee and tea has always been farmed,

processed, and sold under more than adequate ethical standards, which can be linked to their

steady expansion that focuses mostly on North America. By limiting how far their operations

have reached so far, they are limiting the need or opportunities for unethical practices to

drastically increase production capabilities. The greatest legal issue in Keurig’s history is a

rather recent one concerning the patenting of its machine’s newest model, Keurig 2.0
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(Investors, 2016). Focused on the entirety of the North American division of Keurig Green

Mountain, several manufacturers based out of California and Canada have filed lawsuits in

line with anti-trust related legislation, claiming that the new design and the new patents were

meant to limit the capabilities of competitors to design complimentary machines and brewing

“pods” for their beverages. These filings have stalled in their respective court systems, thus

leaving the approximately $600 million in legal cost liabilities up in the air. As an investor

for a $320 million estimated expansion, any significant portion of this hefty legal bill could

endanger the completion status of this project. However, this long delay in conclusion

decisions against Keurig are a great sign that the logistics of the case are too difficult to

interpret and make a definitive verdict. While not a sign of complete legal security, it is still

relatively high compared to other companies and other legally challenging industries.

Conclusion

Keurig Green Mountain does not need this project to occur in order to be a successful

company in subsequent. They could very easily coast on their new private status under the

JAB Holdings umbrella to remain financial and structural secure. However, the opportunity

to be the preeminent in North American, then the United Kingdom, and then all of Europe, is

just too promising for a highly profitable company that can cater to these beverage-friendly

markets. While there are so many options for funding to support this project, Keurig’s and

JAB Holding’s finances and cash flows could potentially support this project on their own.

This should be assuring to potential investors in the external capital funding proposal who
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will expect a proper return on their investment going forward that Keurig can very easily

provide.
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References

Capital Markets. (2015, September 30). Retrieved from

http://www.investopedia.com/terms/c/capitalmarkets.asp
Investors. (2016, January 22). Retrieved from http://investor.keuriggreenmountain.com/sec.cfm?
DocType=Annual&Year=&SortOrder=Date%2BDescending&FormatFilter=
Levisohn, B. (2015, July 06). Why Keurig Green Mountain is Getting Killed. Retrieved from
http://www.barrons.com/articles/why-keurig-green-mountain-is-getting-killed-1436202089
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Appendices
Exhibit A – Cash Flow Base Projections
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Keurig Green Mountain, Inc.

Consolidated Statements of Cash Flows

(Dollars in thousands)

Projected Fiscal years ended

September, 2022 September, 2021 September, 2020 September, 2019 September, 2018 September, 2017 September, 2016 September, 2015 September 27, 2014 September 28, 2013
Cash flows from operating
activities:
Net income $ 5,199,225 $ 5,096,281 $ 4,995,374 $ 4,896,465 $ 4,799,515 $ 4,704,485 $ 4,611,336 $ 4,520,031 $ 4,707,680 $ 4,358,100
Adjustments to reconcile net
income to
net cash provided by operating
activities:
Depreciation and amortization
of fixed
assets $ 250,199.50 $ 245,245.54 $ 240,389.67 $ 235,629.95 $ 230,964.47 $ 226,391.36 $ 221,908.80 217,515 214,607 183,814
Amortization of intangibles $ 55,382.87 $ 54,286.29 $ 53,211.42 $ 52,157.83 $ 51,125.10 $ 50,112.83 $ 49,120.59 48,148 43,032 45,379
Amortization of deferred
financing
fees $ 5,298.11 $ 5,193.21 $ 5,090.38 $ 4,989.59 $ 4,890.80 $ 4,793.96 $ 4,699.04 4,606 5,651 7,125
Loss on impairment of fixed $ - $ - $ - $ - $ - $ - $ - 16,256 - -
assets
Unrealized (gain) loss on
foreign
currency, net $ (3,292.05) $ (3,226.87) $ (3,162.98) $ (3,100.35) $ (3,038.96) $ (2,978.79) $ (2,919.81) (2,862) 15,196 9,159
Provision for doubtful accounts $ 6,271.24 $ 6,147.06 $ 6,025.35 $ 5,906.05 $ 5,789.11 $ 5,674.49 $ 5,562.13 5,452 1,782 689

Provision for sales returns $ 131,580.91 $ 128,975.60 $ 126,421.88 $ 123,918.72 $ 121,465.13 $ 119,060.11 $ 116,702.72 114,392 114,057 79,747
Gain on derivatives, net $ (24,108.37) $ (23,631.02) $ (23,163.13) $ (22,704.49) $ (22,254.94) $ (21,814.30) $ (21,382.37) (20,959) (1,582) (4,507)
Excess tax benefits from equity-
based
compensation plans $ (46,980.20) $ (46,049.99) $ (45,138.20) $ (44,244.46) $ (43,368.42) $ (42,509.72) $ (41,668.03) (40,843) (55,444) (54,699)
Deferred income taxes $ (9,881.91) $ (9,686.25) $ (9,494.46) $ (9,306.47) $ (9,122.20) $ (8,941.58) $ (8,764.54) (8,591) (52,708) (17,701)
Deferred compensation and
stock
compensation $ - $ - $ - $ - $ - $ - $ - 32,471 30,882 26,315
Other $ 12,150.23 $ 11,909.66 $ 11,673.84 $ 11,442.70 $ 11,216.14 $ 10,994.06 $ 10,776.37 10,563 4,224 759
Changes in assets and liabilities,
net
of acquisitions
Receivables $ (27,954.85) $ (27,401.34) $ (26,858.79) $ (26,326.99) $ (25,805.71) $ (25,294.76) $ (24,793.92) (24,303) (274,884) (187,221)
Inventories $ 147,720.25 $ 144,795.39 $ 141,928.43 $ 139,118.24 $ 136,363.70 $ 133,663.69 $ 131,017.14 128,423 (166,473) 87,677
Income tax payable/receivable,
net $ (74,004.48) $ (72,539.19) $ (71,102.91) $ (69,695.07) $ (68,315.11) $ (66,962.47) $ (65,636.61) (64,337) 120,553 46,290
Other current assets $ (27,115.15) $ (26,578.27) $ (26,052.02) $ (25,536.19) $ (25,030.57) $ (24,534.97) $ (24,049.17) (23,573) (838) (12,668)
Other long-term assets, net $ 2,724.97 $ 2,671.02 $ 2,618.13 $ 2,566.29 $ 2,515.48 $ 2,465.67 $ 2,416.85 2,369 3,162 3,915
Accounts payable and accrued
expenses $ (179,351.34) $ (175,800.18) $ (172,319.33) $ (168,907.40) $ (165,563.03) $ (162,284.87) $ (159,071.62) (155,922) 133,818 133,532
Other current liabilities $ (1,369.96) $ (1,342.84) $ (1,316.25) $ (1,290.19) $ (1,264.64) $ (1,239.60) $ (1,215.06) (1,191) (7,521) 3,100
Other long-term liabilities $ 21,417.90 $ 20,993.83 $ 20,578.15 $ 20,170.70 $ 19,771.32 $ 19,379.85 $ 18,996.12 18,620 (5,495) 1,161

Net cash provided

by operating activities $ 868,290.00 $ 851,097.82 $ 834,246.05 $ 817,727.95 $ 801,536.90 $ 785,666.44 $ 770,110.21 754,862 719,433 835,969
Cash flows from investing
activities:
Change in restricted cash $ (6,191.87) $ (6,069.27) $ (5,949.10) $ (5,831.30) $ (5,715.84) $ (5,602.67) $ (5,491.74) (5,383) 182 3,005
Purchase of short-term - (100,000) -
investment
Maturity of short-term $ 115,026.32 $ 112,748.80 $ 110,516.37 $ 108,328.14 $ 106,183.24 $ 104,080.80 $ 102,020.00 100,000 - -
investment
Acquisition, net of cash acquired $ (207,850.26) $ (203,734.82) $ (199,700.86) $ (195,746.78) $ (191,870.98) $ (188,071.93) $ (184,348.10) (180,698) - -

Purchase of long-term $ (1,150.26) $ (1,127.49) $ (1,105.16) $ (1,083.28) $ (1,061.83) $ (1,040.81) $ (1,020.20) (1,000) (35,905) -
investment
Proceeds from the sale of
subsidiary,
net of cash retained $ 879.95 $ 862.53 $ 845.45 $ 828.71 $ 812.30 $ 796.22 $ 780.45 765 - -
Capital expenditures for fixed $ (472,872.06) $ (463,509.18) $ (454,331.68) $ (445,335.89) $ (436,518.22) $ (427,875.14) $ (419,403.20) (411,099) (337,860) (232,780)
assets
Other investing activities $ (1,168.67) $ (1,145.53) $ (1,122.85) $ (1,100.61) $ (1,078.82) $ (1,057.46) $ (1,036.52) (1,016) 1,164 4,208

Net cash used in investing

activities $ (573,326.85) $ (561,974.95) $ (550,847.83) $ (539,941.02) $ (529,250.17) $ (518,770.99) $ (508,499.31) (498,431) (472,419) (225,567)
Cash flows from financing
activities:
Net change in revolving line of $ 379,586.86 $ 372,071.03 $ 364,704.01 $ 357,482.85 $ 350,404.68 $ 343,466.65 $ 336,666.00 330,000 - (226,210)
credit
Proceeds from issuance of
common stock
under compensation plans $ 33,670.51 $ 33,003.83 $ 32,350.35 $ 31,709.81 $ 31,081.96 $ 30,466.53 $ 29,863.29 29,272 40,681 29,777
Proceeds from sale of common $ - $ - $ - $ - $ - $ - $ - - 1,348,414 -
stock
Repurchase of common stock $ (1,188,591.14) $ (1,165,056.99) $ (1,141,988.82) $ (1,119,377.39) $ (1,097,213.68) $ (1,075,488.80) $ (1,054,194.08) (1,033,321) (1,052,430) (188,278)
Excess tax benefits from equity-
based
compensation plans $ 46,980.20 $ 46,049.99 $ 45,138.20 $ 44,244.46 $ 43,368.42 $ 42,509.72 $ 41,668.03 40,843 55,444 54,699
Payments on capital lease and
financing obligations $ (3,247.19) $ (3,182.90) $ (3,119.88) $ (3,058.10) $ (2,997.55) $ (2,938.20) $ (2,880.02) (2,823) (1,931) (8,288)
Deferred financing fees $ (4,742.54) $ (4,648.63) $ (4,556.59) $ (4,466.37) $ (4,377.93) $ (4,291.25) $ (4,206.28) (4,123) - -
Proceeds from borrowings of
long-term
debt $ - $ - $ - $ - $ - $ - $ - - 403 -
Repayment of long-term debt $ (182,581.28) $ (178,966.16) $ (175,422.63) $ (171,949.25) $ (168,544.65) $ (165,207.46) $ (161,936.35) (158,730) (13,361) (71,620)
Dividends paid $ (202,109.30) $ (198,107.53) $ (194,184.99) $ (190,340.12) $ (186,571.38) $ (182,877.26) $ (179,256.28) (175,707) (118,358) -
Purchase of noncontrolling $ - $ - $ - $ - $ - $ - $ - - (4,752) -
interest
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Exhibit B – Cash Flow Projections w/ Project

Keurig Green Mountain, Inc.

Consolidated Statements of Cash Flows

(Dollars in thousands)

Projected Fiscal years ended

September, 2022 September, 2021 September, 2020 September, 2019 September, 2018 September, 2017 September, 2016 September 26, 2015 September 27, 2014 September 28, 2013
Cash flows from operating activities:
Net income $ 6,319,691 $ 5,899,582 $ 5,507,400 $ 5,141,289 $ 4,799,515 $ 4,704,485 $ 4,611,336 $ 4,520,031 $ 4,707,680 $ 4,358,100
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization of fixed
assets $ 304,119 $ 283,902 $ 265,030 $ 247,411 $ 230,964 $ 226,391 $ 221,909 217,515 214,607 183,814
Amortization of intangibles $ 67,318 $ 62,843 $ 58,666 $ 54,766 $ 51,125 $ 50,113 $ 49,121 48,148 43,032 45,379
Amortization of deferred financing
fees $ 6,440 $ 6,012 $ 5,612 $ 5,239 $ 4,891 $ 4,794 $ 4,699 4,606 5,651 7,125
Loss on impairment of fixed assets $ - $ - $ - $ - $ - $ - $ - 16,256 - -
Unrealized (gain) loss on foreign
currency, net $ (4,002) $ (3,736) $ (3,487) $ (3,255) $ (3,039) $ (2,979) $ (2,920) (2,862) 15,196 9,159
Provision for doubtful accounts $ 7,623 $ 7,116 $ 6,643 $ 6,201 $ 5,789 $ 5,674 $ 5,562 5,452 1,782 689
Provision for sales returns $ 159,937 $ 149,305 $ 139,380 $ 130,115 $ 121,465 $ 119,060 $ 116,703 114,392 114,057 79,747
Gain on derivatives, net $ (29,304) $ (27,356) $ (25,537) $ (23,840) $ (22,255) $ (21,814) $ (21,382) (20,959) (1,582) (4,507)
Excess tax benefits from equity-based
compensation plans $ (57,105) $ (53,309) $ (49,765) $ (46,457) $ (43,368) $ (42,510) $ (41,668) (40,843) (55,444) (54,699)
Deferred income taxes $ (12,012) $ (11,213) $ (10,468) $ (9,772) $ (9,122) $ (8,942) $ (8,765) (8,591) (52,708) (17,701)
Deferred compensation and stock
compensation $ - $ - $ - $ - $ - $ - $ - 32,471 30,882 26,315
Other $ 14,769 $ 13,787 $ 12,870 $ 12,015 $ 11,216 $ 10,994 $ 10,776 10,563 4,224 759
Changes in assets and liabilities, net
of acquisitions
Receivables $ (33,979) $ (31,720) $ (29,612) $ (27,643) $ (25,806) $ (25,295) $ (24,794) (24,303) (274,884) (187,221)
Inventories $ 179,555 $ 167,619 $ 156,476 $ 146,074 $ 136,364 $ 133,664 $ 131,017 128,423 (166,473) 87,677
Income tax payable/receivable,
net $ (89,953) $ (83,973) $ (78,391) $ (73,180) $ (68,315) $ (66,962) $ (65,637) (64,337) 120,553 46,290
Other current assets $ (32,959) $ (30,768) $ (28,722) $ (26,813) $ (25,031) $ (24,535) $ (24,049) (23,573) (838) (12,668)
Other long-term assets, net $ 3,312 $ 3,092 $ 2,886 $ 2,695 $ 2,515 $ 2,466 $ 2,417 2,369 3,162 3,915
Accounts payable and accrued
expenses $ (218,003) $ (203,511) $ (189,982) $ (177,353) $ (165,563) $ (162,285) $ (159,072) (155,922) 133,818 133,532
Other current liabilities $ (1,665) $ (1,555) $ (1,451) $ (1,355) $ (1,265) $ (1,240) $ (1,215) (1,191) (7,521) 3,100
Other long-term liabilities $ 26,034 $ 24,303 $ 22,687 $ 21,179 $ 19,771 $ 19,380 $ 18,996 18,620 (5,495) 1,161

Net cash provided

by operating activities $ 1,055,412 $ 985,252 $ 919,756 $ 858,614 $ 801,537 $ 785,666 $ 770,110 754,862 719,433 835,969
Cash flows from investing activities:
Change in restricted cash $ (7,526) $ (7,026) $ (6,559) $ (6,123) $ (5,716) $ (5,603) $ (5,492) (5,383) 182 3,005
Purchase of short-term investment $ - $ - $ - $ - $ - $ - $ - - (100,000) -
Maturity of short-term investment $ 139,815 $ 130,521 $ 121,844 $ 113,745 $ 106,183 $ 104,081 $ 102,020 100,000 - -
Acquisition, net of cash acquired $ (252,643) $ (235,849) $ (220,170) $ (205,534) $ (191,871) $ (188,072) $ (184,348) (180,698) - -
Purchase of long-term investment $ (1,398) $ (1,305) $ (1,218) $ (1,137) $ (1,062) $ (1,041) $ (1,020) (1,000) (35,905) -
Proceeds from the sale of subsidiary,
net of cash retained $ 1,070 $ 998 $ 932 $ 870 $ 812 $ 796 $ 780 765 - -
Capital expenditures for fixed assets $ (943,716) $ (821,236) $ (706,898) $ (600,160) $ (500,518) $ (427,875) $ (419,403) (411,099) (337,860) (232,780)
Other investing activities $ (1,421) $ (1,326) $ (1,238) $ (1,156) $ (1,079) $ (1,057) $ (1,037) (1,016) 1,164 4,208

Net cash used in investing

activities $ (1,065,819) $ (935,222) $ (813,307) $ (699,496) $ (593,250) $ (518,771) $ (508,499) (498,431) (472,419) (225,567)
Cash flows from financing activities:
Net change in revolving line of credit $ 461,390 $ 430,719 $ 402,086 $ 375,357 $ 350,405 $ 343,467 $ 336,666 330,000 - (226,210)
Proceeds from issuance of common stock
under compensation plans $ 40,927 $ 38,206 $ 35,666 $ 33,295 $ 31,082 $ 30,467 $ 29,863 29,272 40,681 29,777
Proceeds from sale of common stock $ - $ - $ - $ - $ - $ - $ - - 1,348,414 -
Repurchase of common stock $ (1,444,740) $ (1,348,699) $ (1,259,043) $ (1,175,346) $ (1,097,214) $ (1,075,489) $ (1,054,194) (1,033,321) (1,052,430) (188,278)
Excess tax benefits from equity-based
compensation plans $ 57,105 $ 53,309 $ 49,765 $ 46,457 $ 43,368 $ 42,510 $ 41,668 40,843 55,444 54,699
Payments on capital lease and
financing obligations $ (3,947) $ (3,685) $ (3,440) $ (3,211) $ (2,998) $ (2,938) $ (2,880) (2,823) (1,931) (8,288)
Deferred financing fees $ (5,765) $ (5,381) $ (5,024) $ (4,690) $ (4,378) $ (4,291) $ (4,206) (4,123) - -
Proceeds from borrowings of long-term
debt $ - $ - $ - $ - $ - $ - $ - - 403 -
Repayment of long-term debt $ (221,929) $ (207,176) $ (193,403) $ (180,547) $ (168,545) $ (165,207) $ (161,936) (158,730) (13,361) (71,620)
Dividends paid $ (245,665) $ (229,334) $ (214,089) $ (199,857) $ (186,571) $ (182,877) $ (179,256) (175,707) (118,358) -
Purchase of noncontrolling interest $ - $ - $ - $ - $ - $ - $ - - (4,752) -
Other financing activities $ 3,789 $ 3,537 $ 3,302 $ 3,082 $ 2,878 $ 2,821 $ 2,765 2,710 (1,124) (1,406)

Net cash (used in) provided by

financing activities $ (1,358,835) $ (1,268,504) $ (1,184,179) $ (1,105,459) $ (1,031,973) $ (1,011,539) $ (991,511) (971,879) 252,986 (411,326)

Net Total Cash Flow $ (1,369,242) $ (1,218,475) $ (1,077,729) $ (946,341) $ (823,686) $ (744,644) $ (729,900) $ (715,448) $ 500,000 $ 199,076
 Randlett - 15

Exhibit C – Financial Statement Base Projections

Keurig Green Mountain, Inc.

Consolidated Statements of Operations

(Dollars in thousands except per share data)
Fiscal years ended

Projection Projection Projection Projection Projection Projection Projection*

September, September, September, September, September, September, September, September 26, September 27, September 28,
2022 2021 2020 2019 2018 2017 2016 2015 2014 2013
Net sales $ 5,199,225 $ 5,096,281 $ 4,995,374 $ 4,896,465 $ 4,799,515 $ 4,704,485 $ 4,611,336 $ 4,520,031 $ 4,707,680 $ 4,358,100
Cost of sales $ 3,350,150 $ 3,283,817 $ 3,218,797 $ 3,155,065 $ 3,092,594 $ 3,031,361 $ 2,971,340 $ 2,912,507 $ 2,891,820 $ 2,738,714

Gross profit $1,849,076 $1,812,464 $1,776,577 $1,741,401 $1,706,921 $1,673,124 $1,639,996 $1,607,524 $1,815,860 $1,619,386
Selling and operating expenses $620,290 $608,008 $595,969 $584,169 $572,603 $561,265 $550,152 $539,259 $561,573 $560,430
General and administrative expenses $330,805 $324,255 $317,835 $311,542 $305,373 $299,327 $293,400 $287,591 $307,046 $293,729
Restructuring expenses $15,250 $15,250 $15,250 $15,250 $15,250 $15,250 $15,250 $15,250 $0 $0

Operating income $ 882,731 $ 864,951 $ 847,523 $ 830,440 $ 813,695 $ 797,282 $ 781,194 $ 765,424 $ 947,241 $ 765,227
Other income, net $ 1,292 $ 1,266 $ 1,241 $ 1,217 $ 1,192 $ 1,169 $ 1,146 $ 1,123 $ 262 $ 960
Gain on financial instruments, net $ 9,291 $ 9,107 $ 8,926 $ 8,750 $ 8,576 $ 8,407 $ 8,240 $ 8,077 $ 8,307 $ 5,513
Loss on foreign currency, net $ (25,497) $ (24,992) $ (24,497) $ (24,012) $ (23,537) $ (23,071) $ (22,614) $ (22,166) $ (19,746) $ (12,649)
Interest expense $ (2,165) $ (2,122) $ (2,080) $ (2,039) $ (1,998) $ (1,959) $ (1,920) $ (1,882) $ (11,691) $ (18,177)

Income before income taxes $ 865,651 $ 848,210 $ 831,113 $ 814,355 $ 797,929 $ 781,828 $ 766,046 $ 750,576 $ 924,373 $ 740,874
Income tax expense $ (306,138) $ (299,969) $ (293,923) $ (287,997) $ (282,188) $ (276,493) $ (270,912) $ (251,948) $ (326,959) $ (256,771)

Net Income $ 559,514 $ 548,240 $ 537,190 $ 526,358 $ 515,741 $ 505,334 $ 495,134 $ 498,628 $ 597,414 $ 484,103
Net income attributable to
noncontrolling interests** $ - $ - $ - $ - $ - $ - $ - $ 353 $ 896 $ 871

Net income attributable to Keurig $ 559,514 $ 548,240 $ 537,190 $ 526,358 $ 515,741 $ 505,334 $ 495,134 $ 498,275 $ 596,518 $ 483,232
Profit Margin 10.76% 10.76% 10.75% 10.75% 10.75% 10.74% 10.74% 11.02% 12.67% 11.09%

Exhibit D – Financial Statement Projections w/ Project

Fiscal years ended

Projection Projection Projection Projection Projection Projection Projection*

September, September, September, September, September, September, September, September 26, September 27, September 28,
2022 2021 2020 2019 2018 2017 2016 2015 2014 2013
Net sales $ 6,319,691 $ 5,899,582 $ 5,507,400 $ 5,141,289 $ 4,799,515 $ 4,704,485 $ 4,611,336 $ 4,520,031 $ 4,707,680 $ 4,358,100
Cost of sales $ 3,350,150 $ 3,283,817 $ 3,218,797 $ 3,155,065 $ 3,092,594 $ 3,031,361 $ 2,971,340 $ 2,912,507 $ 2,891,820 $ 2,738,714

Gross profit $2,969,541 $2,615,765 $2,288,603 $1,986,224 $1,706,921 $1,673,124 $1,639,996 $1,607,524 $1,815,860 $1,619,386
Selling and operating expenses $620,290 $608,008 $595,969 $584,169 $572,603 $561,265 $550,152 $539,259 $561,573 $560,430
General and administrative expenses $330,805 $324,255 $317,835 $311,542 $305,373 $299,327 $293,400 $287,591 $307,046 $293,729
Restructuring expenses $79,250 $79,250 $79,250 $79,250 $79,250 $15,250 $15,250 $15,250 $0 $0

Operating income $ 1,939,196 $ 1,604,252 $ 1,295,548 $ 1,011,263 $ 749,695 $ 797,282 $ 781,194 $ 765,424 $ 947,241 $ 765,227
Other income, net $ 1,292 $ 1,266 $ 1,241 $ 1,217 $ 1,192 $ 1,169 $ 1,146 $ 1,123 $ 262 $ 960
Gain on financial instruments, net $ 9,291 $ 9,107 $ 8,926 $ 8,750 $ 8,576 $ 8,407 $ 8,240 $ 8,077 $ 8,307 $ 5,513
Loss on foreign currency, net $ (32,541) $ (30,378) $ (28,358) $ (26,473) $ (24,713) $ (23,071) $ (22,614) $ (22,166) $ (19,746) $ (12,649)
Interest expense $ (2,165) $ (2,122) $ (2,080) $ (2,039) $ (1,998) $ (1,959) $ (1,920) $ (1,882) $ (11,691) $ (18,177)

Income before income taxes $ 1,915,073 $ 1,582,125 $ 1,275,278 $ 992,717 $ 732,752 $ 781,828 $ 766,046 $ 750,576 $ 924,373 $ 740,874
Income tax expense $ (677,265) $ (559,518) $ (451,002) $ (351,074) $ (259,138) $ (276,493) $ (270,912) $ (251,948) $ (326,959) $ (256,771)

Net Income $ 1,237,807 $ 1,022,606 $ 824,276 $ 641,643 $ 473,614 $ 505,334 $ 495,134 $ 498,628 $ 597,414 $ 484,103
Net income attributable to
noncontrolling interests** $ - $ - $ - $ - $ - $ - $ - $ 353 $ 896 $ 871

Net income attributable to Keurig $ 1,237,807 $ 1,022,606 $ 824,276 $ 641,643 $ 473,614 $ 505,334 $ 495,134 $ 498,275 $ 596,518 $ 483,232
Profit Margin 19.59% 17.33% 14.97% 12.48% 9.87% 10.74% 10.74% 11.02% 12.67% 11.09%