This excerpt taken from the GMCR 10-K filed Dec 11, 2008.
Assuming we close the acquisition of the Tullys wholesale business, our failure to successfully integrate the Tullys wholesale business into our business may cause us to fail to realize the expected synergies and other benefits of the acquisition, which could adversely affect our future results.
The integration of the Tullys wholesale business into our business presents significant challenges and risks to our business, including:
We may fail to successfully complete the integration of Tullys into our business and, as a result, may fail to realize the synergies, cost savings and other benefits expected from the acquisition. We may fail to grow and build profits in the Tullys business line or achieve sufficient cost savings through the integration of customers or administrative and other operational activities. Furthermore, we must achieve these objectives without adversely affecting our revenues. If we are not able to successfully achieve these objectives, the anticipated benefits of the acquisition may not be realized fully or at all, or it may take longer to realize them than expected, and our results of operations could be materially adversely affected.
Tullys has a history of operating losses, and our ability to achieve and maintain profitability of its business lines will depend on our ability to manage and control operating expenses and to generate and sustain increased levels of revenue. Our expectations to increase its profitability may not be realized, and Tullys losses may continue as we integrate its operations into our business. If Tullys revenue grows more slowly than we anticipate, or if its operating expenses are higher than we expect, we may not be able to achieve, sustain or increase its profitability, in which case our financial condition will suffer and our stock price could decline.
GMC leases its principal manufacturing facility located at Pilgrim Park in Waterbury, Vermont. The facility has in total approximately 98,000 square feet of usable space. The lease on this building expires in 2017.
GMC owns a new 72,000 square foot warehousing and distribution facility adjacent to our manufacturing plant in Waterbury, Vermont. The land underneath this facility is leased from Pilgrim Partnership, LLC. The lease for the land expires in 2024.
In 2007, GMC leased a packaging and warehousing facility located in Essex, Vermont. The facility has approximately 99,000 square feet of usable space. The lease expires in 2012.
In 2007, the Company purchased a second manufacturing and warehousing facility located in Knoxville, Tennessee. The facility has in total approximately 334,500 square feet of usable space.
Our other facilities, all of which are leased, are as follows:
In addition to the locations listed above, the Company has inventory at various locations managed by third party warehouses and order fulfillment companies.
We believe our facilities are generally adequate for our current needs and for the remainder of fiscal 2009.
On January 10, 2007, Keurig filed a patent infringement lawsuit against Kraft Foods Inc., Kraft Foods Global, Inc. and Tassimo Corporation (collectively Kraft) in the United States District Court for the District of Delaware (Case No. 07-cv-17 GMS) (the Lawsuit) asserting that Krafts T DISC single-serve beverage cartridges infringe upon Keurigs United States Patent Number 6,607,762.
On October 23, 2008, Keurig entered into a Settlement and License Agreement with Kraft providing for a complete settlement of the Lawsuit. Pursuant to the terms of the Settlement and License Agreement, Kraft agreed to pay to Keurig a lump sum of $17,000,000 and Keurig granted to Kraft and its affiliates a limited, non-exclusive, perpetual, worldwide, fully paid up license of Keurigs United States Patents Numbered 6,607,762 (the 762 Patent), and 7,377,162 (the 162 Patent), and United States and foreign counterpart patents connected to the 762 Patent or 162 Patent, for use in connection with the manufacture, distribution and sale of beverage brewing machines and certain beverage filter cartridges. The Settlement Agreement also provides for the parties to dismiss the Lawsuit and includes a mutual general release of claims between the parties related thereto.
No matters were submitted to a vote of security holders during the fiscal quarter ended September 27, 2008.