Green Mountain Coffee Roasters, Inc.

April 30, 2013

Hada Jang Shicheng Tang Yijin (Iris) Zhang

Agenda

 Introduction

 Company Overview

 Industry Overview

 Stock Performance

 Financial Analysis

 Valuation

 Recommendation

2
Company Profile

 Headquartered in Waterbury, Vermont

 One of the leading companies in the specialty coffee and

coffee maker businesses.

 Employed about 5,800 people as of Sep 29, 2012

 Top four best-selling coffeemakers by dollar volume in the

United States

Source: GMRC Inc. 2012 Annual Report

3
 Company History

2011: GMCR sold the

"Filterfresh" US coffee service
portion of Van Houtte's
2006: GMCR acquired business to Aramark
1981: Green Mountain Coffee KEURIG, Incorporated, a
Roaster was established as a manufacturer of single-cup
small café in Vermont brewing systems.

1981 1993 2006 2010 2011

1993: GMCR started 2010: Green Mountain Coffee

publicly trading on the acquired Diedrich Coffee for $305.3
NASDAQ national market million and bought coffee services
company Van Houtte for $907.8M

Source: GMRC Inc. 2012 Annual Report

4
Product Segments

 The Company manages its operations through three operating segments,

the Specialty Coffee business unit (“SCBU”), the KEURIG business unit
(“KBU”) and the Canadian business unit (“CBU”).

 SCBU sources, produces and sells coffee, hot cocoa, teas and other
beverages, in a variety of packaging formats, to consumers in the United
States.

 KBU targets its premium patented single cup brewing systems for use both
at-home (“AH”) and away-from-home (“AFH”), in the United States.

 CBU sources, produces and sells coffees and teas and other beverages to
Canadian consumers.

Source: GMRC Inc. 2012 Annual Report

5
Sales Breakdown

 Net sales for fiscal 2012 increased 46% to $3,859.2 million, up from
$2,650.9 million reported in fiscal 2011. The primary drivers of the
increase in the Company’s net sales were a 59%, or $1,004.9 million,
increase in single serve pack net sales, and a 45%, or $235.1 million,
increase in KEURIG Single Cup Brewer and accessories sales.

Source: GMRC Inc. 2012 Annual Report

6
Historical Financials

Source: Bloomberg Source: Bloomberg

Source: Bloomberg Source: Bloomberg

7
Competitive Strength – SWOT Analysis

Strengths Weaknesses
• Leading market position built on strong • Reliance on a single manufacturer in China
product portfolio for single cup brewers
• KEURIG unit contributes to strong revenue • Dependence on certain retailer for a
growth substantial portion of revenues
• Corporate image built on sustainability
initiatives
• Customer loyalty

Opportunities
• Strategic agreements to bolster revenues
• Entry into functional drinks market in the
US
Threats
• Competition in specialty coffee is intense
• Increased demand for high-quality Arabica
coffee beans coupled with possible supply
shortages

Source: Marketline
8
Porter’s Five Forces

9
Macroeconomic Indicators

10
 Stock Performance

Equity Snapshot

• Price: $ 56.47 (April 29, 2013)

• Beta: 0.31 (0.94 on 5yr avg.)
• Trailing P/E: 24.39
• Forward P/E: 17.54
• PEG Ratio (5 yr. expected):
1.04
• P/B Ratio: 3.63
• No divined

Source: Finance.yahoo.com

11
Stock Performance

12
 Key Financial Ratios
GMCR SBUX DNKN JVA
For the Fiscal Period Ending 2008 2009 2010 2011 2012 2012 2012 2012
Profitability
Return on As s ets % 9.0% 8.2% 9.0% 10.4% 10.4% 14.5% 4.9% 7.1%
Return on Equi ty % 18.2% 15.0% 12.4% 15.3% 17.3% 21.2% 7.1% 11.4%
Gros s Ma rgi n % 35.3% 31.2% 31.4% 34.1% 32.9% 56.3% 78.8% 6.9%
EBIT Ma rgi n % 9.1% 9.7% 11.6% 14.3% 14.7% 13.5% 38.4% 2.5%
Net Income Ma rgi n % 4.4% 6.9% 5.9% 7.5% 9.4% 10.4% 16.5% 1.4%

Activity
Fi xed As s et Turnover 6.0x 6.7x 6.9x 6.3x 5.1x 5.3x 3.6x 88.6x
Inventory Turnover 5.1x 5.0x 4.7x 3.7x 3.6x 5.3x NA 12.3x

Liquidity
Current Ra ti o 2.1x 4.2x 2.1x 2.4x 2.5x 1.9x 1.2x 3.7x
Qui ck Ra tio 0.8x 3.0x 0.8x 0.7x 0.9x 1.1x 0.8x 2.3x
Avg. Ca s h Convers i on Cycl e 65.1 68.8 75.0 96.4 97.9 53.0 NA 35.5

Solvency
Tota l Debt/Equi ty 89.0% 13.8% 51.1% 30.7% 23.8% 10.7% 531.6% 3.9%

DuPont Analysis
2008 2009 2010 2011 2012
Net Income Margin % 4.4% 6.9% 5.9% 7.5% 9.4%
Total Asset Turnover 1.6x 1.3x 1.2x 1.2x 1.1x
Financial Leverage 2.61 1.61 1.70 1.75 1.62
Return on Equity % 18.2% 15.0% 12.4% 15.3% 17.3%

Source: Capital IQ 13
 Valuation – Trading Comparables
Company Comp Set
4/23/2013 Peers in Processed & Packaged Goods Industry
Enterprise Value / Price NTM Enterprise Value
Forward Total
Company Name EBITDA EBIT EPS Revenue Forward EBITDA NTM Forward P/E

Green Mountain Coffee Roasters, Inc. (NasdaqGS:GMCR) 10.6x 14.1x 23.8x 1.84x 9.0x 18.85x

Flowers Foods, Inc. (NYSE:FLO) 15.6x 22.5x 33.0x 1.41x 12.0x 23.95x
General Mills, Inc. (NYSE:GIS) 11.5x 13.7x 18.5x 2.26x 11.4x 17.91x
Hillshire Brands Company (NYSE:HSH) 8.9x 12.4x 60.5x 1.22x 10.0x 21.62x
McCormick & Company, Incorporated (NYSE:MKC) 15.1x 17.7x 23.4x 2.50x 14.3x 22.05x
The Hain Celestial Group, Inc. (NasdaqGS:HAIN) 18.0x 21.5x 26.6x 1.90x 13.9x 23.94x
The Hershey Company (NYSE:HSY) 15.3x 17.7x 31.3x 3.02x 13.7x 24.72x
The J. M. Smucker Company (NYSE:SJM) 10.5x 13.1x 21.9x 2.13x 10.1x 18.51x
The WhiteWave Foods Company (NYSE:WWAV) 14.6x 20.7x 23.5x 1.48x 13.2x 24.31x
Treehouse Foods, Inc. (NYSE:THS) 10.7x 16.1x 27.1x 1.38x 9.8x 20.92x

High 18.0x 22.5x 60.5x 3.0x 14.3x 24.7x

Low 8.9x 12.4x 18.5x 1.2x 9.8x 17.9x
Mean 13.4x 17.3x 29.5x 1.9x 12.0x 22.0x
Median 14.6x 17.7x 26.6x 1.9x 12.0x 22.1x
NTM Revenue
LTM EBITDA LTM EBIT LTM EPS /Share NTM EBITDA NTM EPS
Green Mountain Coffee Roasters, Inc. (NasdaqGS:GMCR) 750,543 568,896 2.44 31.0 772,821 2.72

Implied Price_Mean $67.36 $66.01 $71.97 $59.61 $62.55 $59.83

Implied Price_Median $73.64 $67.67 $64.82 $58.92 $62.32 $59.98

4/23/2013 Shares Market

Equally Weighted Average Price
Close Price Outstanding Capitalizatio
Green Mountain Coffee Roasters, Inc. (NasdaqGS:GMCR) 56.55 148,809 8,888,799 $64.56

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 Valuation – Trading Comparables (Cont’d)
Company Comp Set
4/23/2013 Competitive Coffee Stocks
Enterprise Value / Price NTM Enterprise Value
Forward Total
Company Name EBITDA EBIT EPS Revenue Forward EBITDA NTM Forward P/E

Green Mountain Coffee Roasters, Inc. (NasdaqGS:GMCR) 10.6x 14.1x 23.8x 1.84x 9.0x 18.85x

Coffee Holding Co.Inc. (NasdaqCM:JVA) 9.4x 10.7x 24.6x 0.22x - 9.05x

Dunkin' Brands Group, Inc. (NasdaqGS:DNKN) 17.2x 20.3x 41.0x 8.04x 15.2x 24.53x
Farmer Brothers Co. (NasdaqGM:FARM) 10.7x NM NM 0.48x 5.3x 27.80x
Starbucks Corporation (NasdaqGS:SBUX) 15.3x 19.6x 30.5x 2.72x 13.0x 25.17x

High 17.2x 20.3x 41.0x s 15.2x 27.8x

Low 9.4x 10.7x 24.6x 0.2x 5.3x 9.1x
Mean 13.2x 16.9x 32.0x 2.9x 11.2x 21.6x
Median 13.0x 19.6x 30.5x 1.6x 13.0x 24.9x

NTM Revenue
LTM EBITDA LTM EBIT LTM EPS /Share NTM EBITDA NTM EPS
Green Mountain Coffee Roasters, Inc. (NasdaqGS:GMCR) 750,543 568,896 2.44 31.0 772,821 2.72

Implied Price_Mean $66.32 $64.48 $78.06 $88.84 $57.99 $58.86

Implied Price_Median $65.57 $74.93 $74.32 $49.62 $67.51 $67.60

4/23/2013 Shares Market Equally Weighted Average Price

Close Price Outstanding Capitalization
Green Mountain Coffee Roasters, Inc. (NasdaqGS:GMCR) 56.55 148,809 8,888,799 $67.84

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Valuation – WACC Analysis
WACC Calculation Realized Annual Return
Year GMCR
Capital Structure 2008 -22.28%
Total Market Value of Equity 8,415,124 2009 129.56%
Total Debt 473,675 2010 -50.43%
Total Capitalization 8,888,799 2011 97.09%
2012 -53.88%
Debt-to-Total Capitalization 5.33%
Equity-to-Total Capitalization 94.67% 5-Year Total Return 75.62%

Beta 0.31 Annual Compounded Return 11.92%

Risk-Free Rate 1.67%
Market Risk Premium 7.00%
Cost of Equity (CAPM) 3.84%
Cost of Equity 11.92%
Weighted Cost of Equity 7.88%

Cost of Debt 5.50%

Tax Rate 37%
After-tax Cost of Debt 3.47%

WACC (only CAPM) 3.82%

WACC 7.65%

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 Valuation – Revenue Projection

($ in thousands) 2010 2011 2012 Average 2013E 2014E 2015E 2016E 2017E

Net sales 1,356,775 2,650,899 3,859,198 4,614,469 5,214,998 5,740,006 6,144,868 6,390,663
% growth 73% 95% 46% 71% 20% 13% 10% 7% 4%

KBU 865,861 1,354,001 1,696,553 2,001,353 2,291,036 2,542,659 2,733,141 2,842,466

% growth 83% 56% 25% 55% 18% 14% 11% 7% 4%
SCBU 826,376 1,406,701 1,560,132 1,730,298 1,889,146 2,029,954 2,146,206 2,232,054
% growth 74% 70% 11% 52% 11% 9% 7% 6% 4%
CBU 120,173 596,814 725,864 882,819 1,034,817 1,167,393 1,265,522 1,316,143
% growth 397% 22% 209% 22% 17% 13% 8% 4%
Corporate - - - - - - - -
Inter-company eliminations (455,635) (706,617) (123,351) - - - - -
% growth 34% 27% 3% 21% 0% 0% 0% 0% 0%

FY 2009: acquired the wholesale business and certain assets of Tully’s Coffee Corporation
FY 2010: acquired Timothy’s Coffee of the World Inc. (Nov 13, 2009); Diedrich Coffee, Inc. (May 11, 2010)
FY 2011: acquired LJVH Holdings, Inc. and Subsidiaries (“Van Houtte”) on December 17, 2010

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Valuation – DCF
Discounted Cash Flow
Fiscal Year Ended on September 29,
($ in thousands) 2013E 2014E 2015E 2016E 2017E
Revenues 4,614,469 5,214,998 5,740,006 6,144,868 6,390,663
COGS (3,100,951) (3,504,511) (3,857,319) (4,129,389) (4,294,564)
Gross Profit 1,513,518 1,710,488 1,882,687 2,015,480 2,096,099

EBIT 675,922 763,887 840,789 900,093 936,096

Less: Income Taxes @ 37% (238,210) (270,845) (299,417) (324,378) (340,782)
EBIAT 437,712 493,041 541,372 575,714 595,314
Add: Depreciation & Amortization 96,899 87,112 80,358 71,376 59,024
Less: Capital Expenditures (237,117) (188,536) (164,826) (127,106) (77,167)
Less: Increase In NWC (154,111) (114,749) (110,214) 53,459 (51,599)

Unlevered Free Cash Flow 143,383 276,869 346,690 573,443 525,572

Terminal Growth Rate 3.00%
Terminal Value 11,652,128
Discount Rate 7.65%
PV of Free Cash Flow 133,199 238,935 277,939 427,072 8,425,176
Implied Enterprise Value 9,502,321

Tax rate 37% GMCRFair Value Sensitivity

Enterprise Value 9,502,321 Terminal Growth Rate
Less: Debt (473,675) $61.06 2.0% 2.5% 3.0% 3.5% 4.0%
Add: Cash 58,289 5.65% $82.62 $94.98 $112.02 $136.99 $177.13
Implied Equity Value 9,086,935 6.65% $63.42 $70.51 $79.54 $91.44 $107.84
WACC

Shares Outstanding (thousands) 148,809 7.65% $51.04 $55.56 $61.06 $67.89 $76.59
Fair Value of GMCR $61.06 8.65% $42.40 $45.50 $49.15 $53.51 $58.82
Current Stock Price $56.55 9.65% $36.03 $38.27 $40.84 $43.83 $47.35

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Risks & Drivers

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Recommendation

Watch List

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Questions?
Thank you

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