U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | ----------------------------------------------------------------------------------------

For the thirteen weeks ended December 27, 2008

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | -----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number 1-12340

GREEN MOUNTAIN COFFEE ROASTERS, INC.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 03-0339228                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

33 Coffee Lane, Waterbury, Vermont 05676

(Address of principal executive offices) (zip code)

(802) 244-5621

(Registrants telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     YES  x    NO   ̈

Indicate by check mark whether the registrant is
a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule
12b-2 of the Exchange Act.



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  | x
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller Reporting Company |  |  ̈

Indicate by check mark whether the Registrant is a shell company (as defined in rule 12b-2 of the Exchange
Act)    YES   ̈    NO  x

As of February 2, 2009, 24,712,387 shares of common stock of the registrant were outstanding.









---

Part I. Financial Information

Item 1. Financial Statements

GREEN MOUNTAIN COFFEE ROASTERS, INC.

Unaudited Consolidated Balance Sheets

(Dollars in thousands)

|                                                                                                                                                                   |  |                  |         |   |                   |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                                                                                                   |  | December 27,2008 |         |   | September 27,2008 |  
|Assets                                                                                                                                                             |  |                  |         |   |                   |   |         |  
|Current assets:                                                                                                                                                    |  |                  |         |   |                   |   |         |  
|Cash and cash equivalents                                                                                                                                          |  | $                | 2,475   |   |                   | $ | 804     |  
|Restricted cash and cash equivalents                                                                                                                               |  |                  | 575     |   |                   |   | 161     |  
|Receivables, less uncollectible accounts and return allowances of $5,357 and $3,002 at December 27, 2008 and September 27, 2008, respectively                      |  |                  | 70,328  |   |                   |   | 54,782  |  
|Inventories                                                                                                                                                        |  |                  | 66,839  |   |                   |   | 85,311  |  
|Other current assets                                                                                                                                               |  |                  | 5,632   |   |                   |   | 4,886   |  
|Deferred income taxes, net                                                                                                                                         |  |                  | 10,043  |   |                   |   | 6,146   |  
|                                                                                                                                                                   |  |                  |         |   |                   |   |         |  
|Total current assets                                                                                                                                               |  |                  | 155,892 |   |                   |   | 152,090 |  
|                                                                                                                                                                   |  |                 
|Fixed assets, net                                                                                                                                                  |  |                  | 98,818  |   |                   |   | 97,678  |  
|Intangibles, net                                                                                                                                                   |  |                  | 28,193  |   |                   |   | 29,396  |  
|Goodwill                                                                                                                                                           |  |                  | 73,953  |   |                   |   | 73,953  |  
|Other long-term assets                                                                                                                                             |  |                  | 4,913   |   |                   |   | 4,531   |  
|                                                                                                                                                                   |  |                  |         |   |                   |   |         |  
|Total assets                                                                                                                                                       |  | $                | 361,769 |   |                   | $ | 357,648 |  
|                                                                                                                                                                   |  |                  |         |   |                   |   |         |  
|                                                                                                                                                                   |  |                 
|Liabilities and Stockholders Equity                                                                                                                               |  |                  |         |   |                   |   |         |  
|Current liabilities:                                                                                                                                               |  |                  |         |   |                   |   |         |  
|Current portion of long-term debt                                                                                                                                  |  | $                | 29      |   |                   | $ | 33      |  
|Accounts payable                                                                                                                                                   |  |                  | 50,477  |   |                   |   | 43,821  |  
|Accrued compensation costs                                                                                                                                         |  |                  | 8,218   |   |                   |   | 11,669  |  
|Accrued expenses                                                                                                                                                   |  |                  | 20,484  |   |                   |   | 14,645  |  
|Income tax payable                                                                                                                                                 |  |                  | 8,748   |   |                   |   | 2,079   |  
|Other short-term liabilities                                                                                                                                       |  |                  | 4,609   |   |                   |   | 673     |  
|                                                                                                                                                                   |  |                  |         |   |                   |   |         |  
|Total current liabilities                                                                                                                                          |  |                  | 92,565  |   |                   |   | 72,920  |  
|Long-term debt                                                                                                                                                     |  |                  | 90,013  |   |                   |   | 123,517 |  
|Deferred income taxes, net                                                                                                                                         |  |                  | 21,485  |   |                   |   | 21,691  |  
|Commitments and contingencies                                                                                                                                      |  |                  |         |   |                   |   |         |  
|                                                                                                                                                                   |  |                 
|Stockholders equity:                                                                                                                                              |  |                  |         |   |                   |   |         |  
|Preferred stock, $0.10 par value: Authorized - 1,000,000 shares; No shares issued or outstanding                                                                   |  |                  |        |   |                   |   |        |  
|Common stock, $0.10 par value: Authorized - 60,000,000 shares; Issued - 25,815,045 and 25,478,536 shares at December 27, 2008 and September
27, 2008, respectively |  |                  | 2,583   |   |                   |   | 2,549   |  
|Additional paid-in capital                                                                                                                                         |  |                  | 69,774  |   |                   |   | 63,607  |  
|Retained earnings                                                                                                                                                  |  |                  | 95,664  |   |                   |   | 81,280  |  
|Accumulated other comprehensive loss                                                                                                                               |  |                  | (2,818  | ) |                   |   | (419    | )
|ESOP unallocated shares, at cost - 18,129 shares                                                                                                                   |  |                  | (161    | ) |                   |   | (161    | )
|Treasury shares, at cost - 1,157,554 shares                                                                                                                        |  |                  | (7,336  | ) |                   |   | (7,336  | )
|                                                                                                                                                                   |  |                  |         |   |                   |   |         |  
|Total stockholders equity                                                                                                                                         |  |                  | 157,706 |   |                   |   | 139,520 |  
|                                                                                                                                                                   |  |                  |         |   |                   |   |         |  
|Total liabilities and stockholders equity                                                                                                                         |  | $                | 361,769 |   |                   | $ | 357,648 |  
|                                                                                                                                                                   |  |                  |         |   |                   |   |         |  

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.



---

GREEN MOUNTAIN COFFEE ROASTERS, INC.

Unaudited Consolidated Statements of Operations

(Dollars in thousands except
per share data)



|                                       |  |                                     |            |   |                                     |   |            |  
|-------------------------------------- |  | ----------------------------------- | ---------- | - | ----------------------------------- | - | ---------- | -
|                                       |  | Thirteenweeks endedDecember 27,2008 |            |   | Thirteenweeks endedDecember 29,2007 |  
|Net sales                              |  | $                                   | 196,980    |   |                                     | $ | 126,445    |  
|Cost of sales                          |  |                                     | 143,630    |   |                                     |   | 83,156     |  
|Gross profit                           |  |                                     | 53,350     |   |                                     |   | 43,289     |  
|                                       |  |                                    
|Selling and operating expenses         |  |                                     | 36,181     |   |                                     |   | 27,034     |  
|General and administrative expenses    |  |                                     | 9,211      |   |                                     |   | 9,259      |  
|Patent litigation (settlement) expense |  |                                     | (17,000    | ) |                                     |   | 465        |  
|                                       |  |                                     |            |   |                                     |   |            |  
|Operating income                       |  |                                     | 24,958     |   |                                     |   | 6,531      |  
|                                       |  |                                    
|Other expense                          |  |                                     | (43        | ) |                                     |   | (114       | )
|Interest expense                       |  |                                     | (1,382     | ) |                                     |   | (1,544     | )
|                                       |  |                                     |            |   |                                     |   |            |  
|Income before income taxes             |  |                                     | 23,533     |   |                                     |   | 4,873      |  
|Income tax expense                     |  |                                     | (9,149     | ) |                                     |   | (1,948     | )
|                                       |  |                                     |            |   |                                     |   |            |  
|Net income                             |  | $                                   | 14,384     |   |                                     | $ | 2,925      |  
|                                       |  |                                     |            |   |                                     |   |            |  
|Basic income per share:                |  |                                     |            |   |                                     |   |            |  
|Weighted average shares outstanding    |  |                                     | 24,452,905 |   |                                     |   | 23,617,625 |  
|Net income                             |  | $                                   | 0.59       |   |                                     | $ | 0.12       |  
|Diluted income per share:              |  |                                     |            |   |                                     |   |            |  
|Weighted average shares outstanding    |  |                                     | 25,752,103 |   |                                     |   | 25,424,541 |  
|Net income                             |  | $                                   | 0.56       |   |                                     | $ | 0.12       |  

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.



---

GREEN MOUNTAIN COFFEE ROASTERS, INC.

Unaudited Condensed Consolidated Statements of Comprehensive Income

(Dollars
in thousands)

|                                                                            |  |                                     |        |   |                                     |   |       |  
|--------------------------------------------------------------------------- |  | ----------------------------------- | ------ | - | ----------------------------------- | - | ----- | -
|                                                                            |  | Thirteenweeks endedDecember 27,2008 |        |   | Thirteenweeks endedDecember 29,2007 |  
|Net income                                                                  |  | $                                   | 14,384 |   |                                     | $ | 2,925 |  
|Other comprehensive loss, net of tax:                                       |  |                                     |        |   |                                     |   |       |  
|Deferred losses on derivatives designated as cash flow hedges               |  |                                     | (2,409 | ) |                                     |   | (340  | )
|Losses on derivatives designated as cash flow hedges included in net income |  |                                     | 10     |   |                                     |   |      |  
|                                                                            |  |                                     |        |   |                                     |   |       |  
|Other comprehensive loss                                                    |  |                                     | (2,399 | ) |                                     |   | (340  | )
|                                                                            |  |                                     |        |   |                                     |   |       |  
|Comprehensive income                                                        |  | $                                   | 11,985 |   |                                     | $ | 2,585 |  
|                                                                            |  |                                     |        |   |                                     |   |       |  

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

.



---

GREEN MOUNTAIN COFFEE ROASTERS, INC.

Unaudited Consolidated Statement Of Changes In Stockholders Equity

For
the Period Ended December 27, 2008 (Dollars in thousands)



|                                     |  |              |  |                          |       |                  |   |                                     |        |   |                |        |   |                       |        |  |                     |        |  |   |        |   |  |         |   |  |   |      |   |  |   |         |  
|------------------------------------ |  | ------------ |  | ------------------------ | ----- | ---------------- | - | ----------------------------------- | ------ | - | -------------- | ------ | - | --------------------- | ------ |  | ------------------- | ------ |  | - | ------ | - |  | ------- | - |  | - | ---- | - |  | - | ------- | -
|                                     |  | Common stock |  | Additionalpaid-incapital |       | Retainedearnings |   | Accumulatedothercomprehensive(loss) |        |   | Treasury stock |        |   | ESOPunallocatedshares |        |  | StockholdersEquity |       
|                                     |  | Shares       |  | Amount                   |       |                  |   |                                     | Shares |   |                | Amount |   |                       | Shares |  |                     | Amount |  |  
|Balance at September 27, 2008        |  | 25,478,536   |  | $                        | 2,549 |                  | $ | 63,607                              |        | $ | 81,280         |        | $ | (419                  | )      |  | (1,157,554          | )      |  | $ | (7,336 | ) |  | (18,129 | ) |  | $ | (161 | ) |  | $ | 139,520 |  
|Options exercised                    |  | 336,509      |  |                          | 34    |                  |   | 1,842                               |        |   |               |        |   |                      |        |  |                    |        |  |   |       |   |  |        |   |  |   |     |   |  |   | 1,876   |  
|Stock compensation expense           |  |             |  |                          |      |                  |   | 1,430                               |        |   |               |        |   |                      |        |  |                    |        |  |   |       |   |  |        |   |  |   |     |   |  |   | 1,430   |  
|Tax benefit from exercise of options |  |             |  |                          |      |                  |   | 2,849                               |        |   |               |        |   |                      |        |  |                    |        |  |   |       |   |  |        |   |  |   |     |   |  |   | 2,849   |  
|Deferred compensation                |  |             |  |                          |      |                  |   | 46                                  |        |   |               |        |   |                      |        |  |                    |        |  |   |       |   |  |        |   |  |   |     |   |  |   | 46      |  
|Other comprehensive loss, net of tax |  |             |  |                          |      |                  |   |                                    |        |   |               |        |   | (2,399                | )      |  |                    |        |  |   |       |   |  |        |   |  |   |     |   |  |   | (2,399  | )
|Net income                           |  |             |  |                          |      |                  |   |                                    |        |   | 14,384         |        |   |                      |        |  |                    |        |  |   |       |   |  |        |   |  |   |     |   |  |   | 14,384  |  
|                                     |  |              |  |                          |       |                  |   |                                     |        |   |                |        |   |                       |        |  |                     |        |  |   |        |   |  |         |   |  |   |      |   |  |   |         |  
|Balance at December 27, 2008         |  | 25,815,045   |  | $                        | 2,583 |                  | $ | 69,774                              |        | $ | 95,664         |        | $ | (2,818                | )      |  | (1,157,554          | )      |  | $ | (7,336 | ) |  | (18,129 | ) |  | $ | (161 | ) |  | $ | 157,706 |  
|                                     |  |              |  |                          |       |                  |   |                                     |        |   |                |        |   |                       |        |  |                     |        |  |   |        |   |  |         |   |  |   |      |   |  |   |         |  

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.



---

GREEN MOUNTAIN COFFEE ROASTERS, INC.

Unaudited Consolidated Statements of Cash Flows

(Dollars in thousands)

|                                                                                                            |  |                                     |         |   |                                     |   |         |  
|----------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | ------- | - | ----------------------------------- | - | ------- | -
|                                                                                                            |  | Thirteenweeks endedDecember 27,2008 |         |   | Thirteenweeks endedDecember 29,2007 |  
|Cash flows from operating activities:                                                                       |  |                                     |         |   |                                     |   |         |  
|Net income                                                                                                  |  | $                                   | 14,384  |   |                                     | $ | 2,925   |  
|Adjustments to reconcile net income to net cash provided by operating activities:                           |  |                                     |         |   |                                     |   |         |  
|Depreciation and amortization                                                                               |  |                                     | 4,158   |   |                                     |   | 3,136   |  
|Amortization of intangibles                                                                                 |  |                                     | 1,203   |   |                                     |   | 1,203   |  
|Loss on disposal of fixed assets                                                                            |  |                                     | 23      |   |                                     |   | 19      |  
|Provision for doubtful accounts                                                                             |  |                                     | 211     |   |                                     |   | 247     |  
|Loss on futures derivatives                                                                                 |  |                                     | 10      |   |                                     |   |        |  
|Tax benefit from exercise of non-qualified options and disqualified dispositions of incentive stock options |  |                                     | (25     | ) |                                     |   | (41     | )
|Deferred income taxes                                                                                       |  |                                     | (2,576  | ) |                                     |   | 309     |  
|Deferred compensation and stock compensation                                                                |  |                                     | 1,476   |   |                                     |   | 1,388   |  
|Changes in assets and liabilities:                                                                          |  |                                     |         |   |                                     |   |         |  
|Receivables                                                                                                 |  |                                     | (15,757 | ) |                                     |   | (20,689 | )
|Inventories                                                                                                 |  |                                     | 18,472  |   |                                     |   | (8,913  | )
|Income tax payable (receivable)                                                                             |  |                                     | 6,669   |   |                                     |   | (1,323  | )
|Other current assets                                                                                        |  |                                     | (1,160  | ) |                                     |   | (1,093  | )
|Other long-term assets, net                                                                                 |  |                                     | (382    | ) |                                     |   | 95      |  
|Accounts payable                                                                                            |  |                                     | 11,442  |   |                                     |   | 7,209   |  
|Accrued compensation costs                                                                                  |  |                                     | (3,451  | ) |                                     |   | (438    | )
|Accrued expenses                                                                                            |  |                                     | 5,839   |   |                                     |   | 5,757   |  
|                                                                                                            |  |                                     |         |   |                                     |   |         |  
|Net cash provided by (used for) operating activities                                                        |  |                                     | 40,536  |   |                                     |   | (10,209 | )
|Cash flows from investing activities:                                                                       |  |                                     |         |   |                                     |   |         |  
|Capital expenditures for fixed assets                                                                       |  |                                     | (10,124 | ) |                                     |   | (11,770 | )
|Proceeds from disposal of fixed assets                                                                      |  |                                     | 17      |   |                                     |   | 134     |  
|                                                                                                            |  |                                     |         |   |                                     |   |         |  
|Net cash used for investing activities                                                                      |  |                                     | (10,107 | ) |                                     |   | (11,636 | )
|Cash flows from financing activities:                                                                       |  |                                     |         |   |                                     |   |         |  
|Net change in revolving line of credit                                                                      |  |                                     | (33,500 | ) |                                     |   | 17,300  |  
|Proceeds from issuance of common stock                                                                      |  |                                     | 1,876   |   |                                     |   | 1,189   |  
|Windfall tax benefit                                                                                        |  |                                     | 2,874   |   |                                     |   | 1,731   |  
|Deferred financing fees                                                                                     |  |                                     |        |   |                                     |   | (794    | )
|Repayment of long-term debt                                                                                 |  |                                     | (8      | ) |                                     |   | (21     | )
|                                                                                                            |  |                                     |         |   |                                     |   |         |  
|Net cash provided by (used for) financing activities                                                        |  |                                     | (28,758 | ) |                                     |   | 19,405  |  
|Net increase (decrease) in cash and cash equivalents                                                        |  |                                     | 1,671   |   |                                     |   | (2,440  | )
|Cash and cash equivalents at beginning of period                                                            |  |                                     | 804     |   |                                     |   | 2,818   |  
|                                                                                                            |  |                                     |         |   |                                     |   |         |  
|Cash and cash equivalents at end of period                                                                  |  | $                                   | 2,475   |   |                                     | $ | 378     |  
|                                                                                                            |  |                                     |         |   |                                     |   |         |  
|Fixed asset purchases included in accounts payable and not disbursed at the end of each period:             |  | $                                   | 417     |   |                                     | $ | 3,665   |  

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.



---

Green Mountain Coffee Roasters, Inc.

Notes to Consolidated Financial Statements



|1. | Basis of Presentation
|-- | ---------------------

The accompanying unaudited
consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q, and Rule 10-01 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements.

In
the opinion of management, all adjustments considered necessary for a fair presentation of the interim financial data have been included. Results from operations for the thirteen week period ended December 27, 2008 are not necessarily
indicative of the results that may be expected for the fiscal year ending September 26, 2009.

The September 27, 2008 balance
sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. For further information, refer to the consolidated financial
statements and the footnotes included in the annual report on Form 10-K for Green Mountain Coffee Roasters, Inc. for the fiscal year ended September 27, 2008. Throughout this presentation, we refer to the consolidated company as the
Company.

The Company has revised the classification of certain information presented in its fiscal 2008 Consolidated Statement
of Operations to conform to fiscal 2009 presentation.



|2. | Segment Reporting
|-- | -----------------

The Company manages its
operations through two operating segments: Green Mountain Coffee (GMC) and Keurig (Keurig). GMC sells whole bean and ground coffee, coffee, hot cocoa and tea in K-Cups, Keurig single-cup brewers and other accessories mainly
in domestic wholesale and retail markets. Keurig sells their single-cup brewers, coffee, hot cocoa and tea in K-Cups produced by a variety of licensed roasters and related accessories mainly in domestic wholesale and retail markets. Throughout this
report, unless otherwise noted, the information provided is on a consolidated basis.

The Company evaluates performance based on several
factors, including business segment income before taxes. The operating segments do not share manufacturing or distribution facilities, except for brewer fulfillment at our Knoxville facility, and most administrative functions such as accounting and
information services are decentralized. In the event any materials and/or services are provided to one segment by the other, the transaction is valued at market price and eliminated through consolidation. The costs of the Companys
manufacturing operations are captured within the GMC segment while the Keurig segment does not have manufacturing facilities and purchases their saleable products from third parties. The Companys property, plant and equipment, inventory and
accounts receivable are captured and reported discretely within each operating segment.

Expenses not specifically related to either
operating segment are shown separately as Corporate. Corporate expenses are comprised mainly of the compensation and other related expenses of our CEO, CFO, CIO, Vice President Human Resources and Vice President of Corporate Social
Responsibility and other selected employees who perform duties related to our entire enterprise. Corporate expenses also include interest expense, amortization of the identifiable intangibles acquired when Keurig was purchased, as well as certain
corporate legal expenses and compensation of the board of directors. All of the Companys goodwill and intangible assets are included in Corporate assets.



---

Selected financial data for segment disclosures for the thirteen weeks ended December 27, 2008 and December 29,
2007 are as follows:



|                                                              |  |     |         |        |   |           |  |              |         |  |              |          |   |  |   |        
|------------------------------------------------------------- |  | --- | ------- | ------ | - | --------- |  | ------------ | ------- |  | ------------ | -------- | - |  | - | -------
|Thirteen weeks ended December 27, 2008 (Dollars in thousands) |  | GMC |         | Keurig |   | Corporate |  | Eliminations |         |  | Consolidated
|Sales to unaffiliated customers                               |  | $   | 91,625  |        | $ | 105,355   |  | $            |        |  | $            |         |   |  | $ | 196,980
|Intersegment sales                                            |  | $   | 14,183  |        | $ | 15,581    |  | $            |        |  | $            | (29,764  | ) |  | $ |       
|Net sales                                                     |  | $   | 105,808 |        | $ | 120,936   |  | $            |        |  | $            | (29,764  | ) |  | $ | 196,980
|                                                              |  |     |         |        |  
|Income before taxes                                           |  | $   | 9,530   |        | $ | 2,704     |  | $            | 12,107  |  | $            | (808     | ) |  | $ | 23,533 
|                                                              |  |     |         |        |  
|Total assets                                                  |  | $   | 296,395 |        | $ | 85,286    |  | $            | 102,146 |  | $            | (122,058 | ) |  | $ | 361,769
|                                                              |  |     |         |        |  
|Stock compensation                                            |  | $   | 533     |        | $ | 425       |  | $            | 472     |  | $            |         |   |  | $ | 1,430  
|                                                              |  |     |         |        |  
|Interest expense                                              |  | $   |        |        | $ |          |  | $            | 1,382   |  | $            |         |   |  | $ | 1,382  
|                                                              |  |     |         |        |  
|Property additions                                            |  | $   | 4,593   |        | $ | 745       |  | $            |        |  | $            |         |   |  | $ | 5,338  
|                                                              |  |     |         |        |  
|Depreciation and amortization                                 |  | $   | 3,668   |        | $ | 490       |  | $            | 1,203   |  | $            |         |   |  | $ | 5,361  



|                                                              |  |     |         |        |   |           |  |   |              |   |  |              |         |   |  |   |        
|------------------------------------------------------------- |  | --- | ------- | ------ | - | --------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | -------
|Thirteen weeks ended December 29, 2007 (Dollars in thousands) |  | GMC |         | Keurig |   | Corporate |  |   | Eliminations |   |  | Consolidated
|Sales to unaffiliated customers                               |  | $   | 72,215  |        | $ | 54,230    |  | $ |             |   |  | $            |        |   |  | $ | 126,445
|Intersegment sales                                            |  | $   | 5,619   |        | $ | 9,617     |  | $ |             |   |  | $            | (15,236 | ) |  | $ |       
|Net sales                                                     |  | $   | 77,834  |        | $ | 63,847    |  | $ |             |   |  | $            | (15,236 | ) |  | $ | 126,445
|                                                              |  |     |         |        |  
|Income before taxes                                           |  | $   | 6,186   |        | $ | 3,733     |  | $ | (4,886       | ) |  | $            | (160    | ) |  | $ | 4,873  
|                                                              |  |     |         |        |  
|Total assets                                                  |  | $   | 169,170 |        | $ | 65,440    |  | $ | 106,845      |   |  | $            | (43,735 | ) |  | $ | 297,720
|                                                              |  |     |         |        |  
|Stock compensation                                            |  | $   | 479     |        | $ | 544       |  | $ | 330          |   |  | $            |        |   |  | $ | 1,353  
|                                                              |  |     |         |        |  
|Interest expense                                              |  | $   |        |        | $ |          |  | $ | 1,544        |   |  | $            |        |   |  | $ | 1,544  
|                                                              |  |     |         |        |  
|Property additions                                            |  | $   | 6,343   |        | $ | 1,265     |  | $ |             |   |  | $            |        |   |  | $ | 7,608  
|                                                              |  |     |         |        |  
|Depreciation and amortization                                 |  | $   | 2,732   |        | $ | 404       |  | $ | 1,203        |   |  | $            |        |   |  | $ | 4,339  



---

|3. | Warranty Reserve
|-- | ----------------

The Company offers a one-year
warranty on all Keurig brewers it sells. Keurig provides for the estimated cost of product warranties, primarily using historical information and repair or replacement costs, at the time product revenue is recognized.

The changes in the carrying amount of product warranties for the thirteen weeks ended December 27, 2008 and December 29, 2007 are as follows:



|                                       |  |   |           |  
|-------------------------------------- |  | - | --------- | -
|Thirteen weeks ended December 27, 2008 | 
|Balance at September 27, 2008          |  | $ | 648,000   |  
|Provision charged to income            |  |   | 1,147,000 |  
|Usage                                  |  |   | (777,000  | )
|                                       |  |   |           |  
|Balance at December 27, 2008           |  | $ | 1,018,000 |  
|                                       |  |   |           |  



|                                       |  |   |          |  
|-------------------------------------- |  | - | -------- | -
|Thirteen weeks ended December 29, 2007 | 
|Balance at September 29, 2007          |  | $ | 815,000  |  
|Provision charged to income            |  |   | 325,000  |  
|Usage                                  |  |   | (459,000 | )
|                                       |  |   |          |  
|Balance at December 29, 2007           |  | $ | 681,000  |  
|                                       |  |   |          |  



|4. | Inventories
|-- | -----------

Inventories consisted of the following
at:



|                           |  |                  |            |                   |   |           
|-------------------------- |  | ---------------- | ---------- | ----------------- | - | ----------
|                           |  | December 27,2008 |            | September 27,2008
|Raw materials and supplies |  | $                | 19,667,000 |                   | $ | 19,494,000
|Finished goods             |  |                  | 47,172,000 |                   |   | 65,817,000
|                           |  |                  |            |                   |   |           
|                           |  | $                | 66,839,000 |                   | $ | 85,311,000
|                           |  |                  |            |                   |   |           

Inventory values above are presented net of $462,000 and $440,000 of obsolescence reserves at
December 27, 2008 and September 27, 2008, respectively.

At December 27, 2008, the Company had approximately $61.7 million in
green coffee purchase commitments, of which approximately 55% had a fixed price. These commitments extend through 2011. The value of the variable portion of these commitments was calculated using an average C price of coffee of $1.15 per
pound. In addition to its green coffee commitments, the Company had approximately $40.6 million in fixed price brewer inventory purchase commitments and $85.7 million in production raw materials commitments at December 27, 2008. The Company
believes based on relationships established with its suppliers that the risk of non-delivery on such purchase commitments is remote.



---

|5. | Earnings Per Share
|-- | ------------------

The following table illustrates
the reconciliation of the numerator and denominator of basic and diluted earnings per share computations as required by Statement of Financial Accounting Standards No. 128 Earnings per Share(dollars in thousands, except per share data):



|                                                                 |  |                                    |            |                                    |   |           
|---------------------------------------------------------------- |  | ---------------------------------- | ---------- | ---------------------------------- | - | ----------
|                                                                 |  | ThirteenweeksendedDecember 27,2008 |            | ThirteenweeksendedDecember
29,2007
|Numerator - basic and diluted earnings per share:                |  |                                    |            |                                    |   |           
|Net income                                                       |  | $                                  | 14,384     |                                    | $ | 2,925     
|                                                                 |  |                                    |            |                                    |   |           
|Denominator:                                                     |  |                                    |            |                                    |   |           
|Basic earnings per share - weighted average shares outstanding   |  |                                    | 24,452,905 |                                    |   | 23,617,625
|Effect of dilutive securities - stock options                    |  |                                    | 1,299,198  |                                    |   | 1,806,916 
|                                                                 |  |                                    |            |                                    |   |           
|Diluted earnings per share - weighted average shares outstanding |  |                                    | 25,752,103 |                                    |   | 25,424,541
|                                                                 |  |                                    |            |                                    |   |           
|Basic earnings per share                                         |  | $                                  | 0.59       |                                    | $ | 0.12      
|Diluted earnings per share                                       |  | $                                  | 0.56       |                                    | $ | 0.12      

For the thirteen weeks ended December 27, 2008 and December 29, 2007, options to purchase
587,947 and 14,880 shares of common stock, respectively, were excluded in the calculation of diluted earnings per share because they were antidilutive.



|6. | Fair Value Measurements
|-- | -----------------------

On September 28,
2008, the Company adopted Financial Accounting Standards No. 157 Fair Value Measurement (SFAS 157) for financial assets and liabilities. This standard defines fair value and establishes a hierarchy for reporting the
reliability of input measurements used to access fair value for all assets and liabilities. SFAS 157 defines fair value as the selling price that would be received for an asset, or paid to transfer a liability, in the principal or most advantageous
market on the measurement date. The hierarchy established prioritizes fair value measurements based on the types of inputs used in the valuation technique. The inputs are categorized into the following levels:

Level 1  Observable inputs such as quoted prices in active markets for identical assets or liabilities

Level 2  Directly or indirectly observable inputs for quoted and other than quoted prices for identical or similar assets and liabilities in active
or non-active markets

Level 3  Unobservable inputs not corroborated by market data, therefore requiring the entity to use the best
available information, including managements assumptions

The following table presents information about the Companys financial
assets and liabilities reported using fair value and the applicable hierarchy of the measurement inputs at December 27, 2008:



|            |  |                               |   |                              |   |            |         |  |   |   |  |                             
|----------- |  | ----------------------------- | - | ---------------------------- | - | ---------- | ------- |  | - | - |  | ----------------------------
|            |  | Fair Value Measurements Using |   | Balance Sheet Classification
|            |  | Level 1                       |   | Level 2                      |   |            | Level 3 | 
|Derivatives |  | $                             |  |                              | $ | (4,609,000 | )       |  | $ |  |  | Other short-term liabilities
|Total       |  | $                             |  |                              | $ | (4,609,000 | )       |  | $ |  |  |                             

Derivative financial instruments include coffee futures contracts and interest rate swap
agreements. To determine fair value, the Company utilizes the market approach valuation technique for the coffee futures contracts and the income approach for the interest rate swap agreements. The Company uses Level 2 inputs that are based on
market data of identical (or similar) instruments that are in observable markets. All derivatives on the balance sheet are recorded at fair value with changes in fair value recorded in accumulated other comprehensive income for temporary valuation
adjustments and in the statement of operations for settlement of contracts.





---

|7. | Derivative Instruments and Hedging Activities
|-- | ---------------------------------------------

The
Company regularly enters into coffee futures contracts to hedge price-to-be-established purchase commitments of green coffee and therefore designates these contracts as cash flow hedges. In the thirteen weeks ended December 27, 2008, total
losses on futures contracts (gross of tax) included in cost of sales amounted to $18,000. The Company did not recognize any gains or losses on coffee futures contracts in the thirteen weeks ended December 29, 2007.

The Company has interest rate swap agreements with Bank of America N.A. (Bank of America) and Sovereign Bank. The total notional amount of the
swap agreements at December 27, 2008 and September 27, 2008 was $78,466,667. The swap agreements terminate between June 2010 and December 2012.

On December 27, 2008, the combined effect of the swap agreements was to limit the interest rate exposure to an average fixed rate of 3.86% versus the 30-day LIBOR rate on $78,466,667 of the Companys debt.

At December 27, 2008 and September 27, 2008, the Company estimates it would have paid $4,219,000 and $634,000 (gross of tax),
respectively, had it terminated its swap agreements. The Company designates the swap agreements as cash flow hedges and the changes in the fair value of the swaps are classified in accumulated other comprehensive income.

For the thirteen weeks ended December 27, 2008 and December 29, 2007, the Company paid $226,000 and $58,000, respectively, pursuant to the swap
agreements, which increased interest expense. The Company is exposed to credit loss in the event of nonperformance by the other party to the swap agreement, however, nonperformance is not anticipated.



---

|8. | Compensation Plans
|-- | ------------------

The Company accounts for stock
compensation under Statement of Financial Accounting Standards No. 123 (revised 2004) Share-Based Payments (FAS123(R)). The grant-date fair value of employee share options and similar instruments is estimated using the Black-Scholes
option-pricing model with the following assumptions for grants issued in the first quarter of fiscal 2009: an expected life averaging 6 years; an average volatility of 49%; no dividend yield; and a risk-free interest rate averaging 2.6%. The
weighted-average fair value of options granted during the thirteen weeks ended December 27, 2008 was $13.66 per share.

The grant-date
fair value of employee share options and similar instruments is estimated using the Black-Scholes option-pricing model with the following assumptions for grants issued in the first quarter of fiscal 2008: an expected life averaging 6 years; an
average volatility of 43%; no dividend yield; and a risk-free interest rate averaging 4%. The weighted-average fair value of options granted during the thirteen weeks ended December 29, 2007 was $13.16 per share.

The grant-date fair value of employees purchase rights under the Companys Employee Stock Purchase Plan is estimated using the Black-Scholes
option-pricing model with the following assumptions for the purchase rights granted in the first quarter of fiscal 2009: an expected life averaging 6 months; an average volatility of 59%; no dividend yield; and a risk-free interest rate averaging
1.6%. The weighted-average fair values of purchase rights granted during the thirteen weeks ended December 27, 2008 was $12.06 per share.

For the purchase rights granted in the first quarter of fiscal 2008, the following assumptions were used: an expected life averaging 6 months; an average volatility of 60%; no dividend yield; and a risk-free interest rate averaging 4.2%.
The weighted-average fair values of purchase rights granted during the thirteen weeks ended December 29, 2007 was $10.71 per share.

For the thirteen weeks ended December 27, 2008 and December 29, 2007, income before income taxes was reduced by a stock compensation expense of $1,430,000 and $1,353,000 (gross of tax), respectively.

The Company maintains an Employee Stock Ownership Plan (the ESOP). The ESOP is qualified under sections 401(a) and 4975(e)(7) of the Internal
Revenue Code. In the thirteen week periods ended December 27, 2008 and December 29, 2007, the Company recorded compensation costs of $58,000 and $50,000 to accrue for anticipated stock distributions under the ESOP, respectively. On
December 27, 2008, the ESOP held 18,129 unearned shares at an average cost of $9.03.

The Company also maintains a Deferred
Compensation Plan, which is not subject to the qualification requirements of Section 401(a) of the Internal Revenue Code and which allows participants to defer compensation until a future date. Only non-employee directors and certain highly
compensated employees of the Company selected by the Companys board of directors are eligible to participate in the Plan. In the thirteen week periods ended December 27, 2008 and December 29, 2007, $46,000 and $35,000 of compensation
expense was recorded under this Plan, respectively.



|9. | Income Taxes
|-- | ------------

In July, 2006, the Financial
Accounting Standards Board (FASB) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement 109 (FIN 48). This statement clarifies the criteria that an individual tax
position must satisfy for some or all of the benefits of that position to be recognized in a companys financial statements. FIN 48 prescribes a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions
taken or expected to be taken on a tax return in order for those tax positions to be recognized in the financial statements. Generally the Companys tax years prior to fiscal 2005 are no longer subject to income tax audit.

The Company adopted the provisions of FIN 48 effective for the first quarter of fiscal year 2008. The total amount of unrecognized tax benefits at
December 27, 2008 and September 27, 2008 was $565,000 and $554,000, respectively. The unrecognized tax benefits relate to research and development credits at the federal and state level. The amount of unrecognized tax benefits at
December 27, 2008 that would impact the effective tax rate if resolved in favor of the Company is $288,000. Any



---

release of the reserve related to R&D credits earned prior to the Companys acquisition of Keurig (currently $277,000) will be an adjustment to
goodwill. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes.

The federal
research and development tax credit expired on December 31, 2007. On October 2, 2008, the credit was extended for the 2008 and 2009 calendar years. Accordingly, the Company has claimed a tax credit through December 31, 2007 for its
fiscal year ended September 27, 2008. The Company recorded $86,000 of federal tax credit as a discrete item in the first quarter of fiscal 2009 to recognize this retroactive extension from January 1, 2008 through September 27, 2008.
With this exception, the Company does not expect a significant increase or decrease to the total amount of unrecognized tax benefits within the next 12 months.



|10. | Fixed Assets
|--- | ------------

Fixed assets consist of the
following:



|                                         |  |                                                    |  |                  |             |   |                   |   |             |  
|---------------------------------------- |  | -------------------------------------------------- |  | ---------------- | ----------- | - | ----------------- | - | ----------- | -
|                                         |  | Useful Life in Years                               |  | December 27,2008 |             |   | September 27,2008 |  
|Production equipment                     |  | 115                                               |  | $                | 75,460,000  |   |                   | $ | 68,783,000  |  
|Equipment on loan to wholesale customers |  | 37                                                |  |                  | 12,374,000  |   |                   |   | 12,269,000  |  
|Computer equipment and software          |  | 110                                               |  |                  | 26,273,000  |   |                   |   | 24,020,000  |  
|Land                                     |  | Indefinite                                         |  |                  | 1,391,000   |   |                   |   | 1,391,000   |  
|Building and building improvements       |  | 430                                               |  |                  | 15,055,000  |   |                   |   | 14,744,000  |  
|Furniture and fixtures                   |  | 115                                               |  |                  | 6,889,000   |   |                   |   | 6,598,000   |  
|Vehicles                                 |  | 45                                                |  |                  | 1,108,000   |   |                   |   | 1,070,000   |  
|Leasehold improvements                   |  | 120 or remaining life of lease, whichever is less |  |                  | 7,424,000   |   |                   |   | 7,135,000   |  
|Construction-in-progress                 |  |                                                    |  |                  | 6,946,000   |   |                   |   | 11,843,000  |  
|                                         |  |                                                    |  |                  |             |   |                   |   |             |  
|Total fixed assets                       |  |                                                    |  |                  | 152,920,000 |   |                   |   | 147,853,000 |  
|                                         |  |                                                    | 
|Accumulated depreciation                 |  |                                                    |  |                  | (54,102,000 | ) |                   |   | (50,175,000 | )
|                                         |  |                                                    |  |                  |             |   |                   |   |             |  
|                                         |  |                                                    |  | $                | 98,818,000  |   |                   | $ | 97,678,000  |  
|                                         |  |                                                    |  |                  |             |   |                   |   |             |  

Total depreciation expense relating to all fixed assets was $4,158,000 and $3,136,000 for the
thirteen weeks ended December 27, 2008 and December 29, 2007, respectively.

Assets classified as construction-in-progress are not
depreciated, as they are not ready for production use. All assets classified as construction-in-progress on December 27, 2008 are expected to be in production use in the next twelve months.

In the thirteen weeks ended December 27, 2008 and December 29, 2007, the Company capitalized $73,000 and $95,000 of interest expense,
respectively.



|11. | Patent Litigation Settlement
|--- | ----------------------------

On October 23,
2008, Keurig entered into a Settlement and License Agreement with Kraft Foods, Inc., Kraft Foods Global, Inc., and Tassimo Corporation (collectively Kraft) providing for a complete settlement of Keurigs previously filed lawsuit
against Kraft. Pursuant to the terms of the Settlement and License Agreement, Kraft paid to Keurig a lump sum of $17,000,000 and Keurig grants to Kraft and its affiliates a limited, non-exclusive, perpetual, worldwide, fully paid up license of
certain Keurig patents. The settlement is recorded as a non-recurring item in operating income in the first quarter of fiscal 2009.



|12. | Related Party Transactions
|--- | --------------------------

The Company uses travel
services provided by Heritage Flight, a charter air services company owned by Mr. Stiller, the Companys former CEO and current Chairman of the Board. During the thirteen weeks ended December 27, 2008 and December 29, 2007,
Heritage Flight billed the Company the amount of $47,000 and $51,000, respectively, for travel services to various employees of the Company.



---

|13. | Recent pronouncements
|--- | ---------------------

In December 2007, the FASB
issued SFAS No. 141 (Revised 2007), Business Combinations (SFAS 141R). This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method)
be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at
the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the Statement. That replaces Statement 141s cost-allocation process, which required the cost of an acquisition to be allocated to the
individual assets acquired and liabilities assumed based on their estimated fair values. The Statement retains the guidance in Statement 141 for identifying and recognizing intangible assets separately from goodwill. SFAS 141R will now require
acquisition costs to be expensed as incurred, restructuring costs associated with a business combination must generally be expensed prior to the acquisition date and changes in deferred tax asset valuation allowances and income tax uncertainties
after the acquisition date generally will affect income tax expense. Statement 141 applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after
December 15, 2008, which is fiscal year 2010 for the Company. We are not able to predict the impact this guidance will have on the accounting for acquisitions we may complete in future periods. For acquisitions completed prior to
September 27, 2009, the new standard requires that changes in deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period must be recognized in earnings rather than as an adjustment to the cost of
the acquisition. We do not expect this new guidance to have a significant impact on our consolidated financial statements.

In February
2008, the FASB issued FASB Staff Position No. FAS 157-2 (FSP 157-2). FSP 157-2 delays the implementation of Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157) for
nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. This statement defers the effective date to fiscal years beginning after
November 15, 2008 and interim periods within those fiscal years, which is fiscal year 2010 for the Company. The Company adopted SFAS 157 for financial assets and liabilities for the first quarter of fiscal 2009. The Company is currently
reviewing this new accounting standard but does not expect it to have a material impact on its financial statements.

In December 2007, the
FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements  An amendment of ARB No. 51. SFAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. The
amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. Statement 160 clarifies that changes in a parents ownership interest in a subsidiary that do not
result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, this Statement requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. SFAS 160 is
effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, which is fiscal 2010 for this Company. The effect of adoption on the Companys financial statements will depend primarily
on the materiality of non-controlling interests arising in future transactions.

In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activities  an Amendment of FASB 133. This statement is intended to enhance the current disclosure framework in Statement 133. The Statement requires that objectives for using
derivative instruments be disclosed in terms of underlying risks and accounting designation. This disclosure better conveys the purpose of derivative use in terms of the risk that the entity is intending to manage and amends and expands the
disclosure requirements of Statement 133 with the intent to provide users of financial statements with an enhanced understanding of: a) How and why an entity uses financial instruments; b) How derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations; and, c) How derivative instruments and related hedged items affect an entitys financial position, financial performance, and cash flows. This



---

Statement requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains
and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008, which is Fiscal 2010 for
this Company. The Company is currently reviewing this new accounting standard but does not expect it to have a material impact on its financial statements.



---

| | Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
| | ------- | -------------------------------------------------------------------------------------

The following discussion and analysis is intended to help you understand the results of operations and financial condition of Green Mountain Coffee
Roasters, Inc. (together with its subsidiary, the Company). You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes included elsewhere in this report.

Overview

We are a leader in the specialty coffee industry. We roast high-quality Arabica coffees and offer over 100 coffee selections, including single-origins, estates, certified organics, Fair Trade CertifiedTM, proprietary blends, and flavored coffees that sell under the Green Mountain Coffee Roasters®
and Newmans Own® Organics brands. We also sell hot cocoa, teas and coffees in K-Cup® portion packs, Keurig® single-cup brewers and other accessories. In recent years, a significant driver of the Companys growth has been the sale of K-Cups and Keurig brewing systems.

Business Segments

The Company
manages its operations through two operating segments, Green Mountain Coffee (GMC) and Keurig, Incorporated (Keurig). We evaluate performance primarily based on segment operating income. Expenses not specifically related to
either operating segment are recorded as Corporate.

GMC sells whole bean and ground coffee, hot cocoa, teas and coffees in
K-Cups, and to a lesser extent, Keurig single-cup brewers and other accessories mainly in domestic wholesale and retail markets, and directly to consumers. The majority of GMCs revenue is derived from its North American wholesale markets.

Keurig is a pioneer and leading manufacturer of gourmet single-cup brewing systems and markets its premium patented single-cup brewing
systems for consumers at home (AH) or away-from-home (AFH) mainly in North America. Keurig sells its AFH single-cup brewers to distributors for offices and hotels and its AH single-cup brewers to select retailers such as
department stores and club stores. Keurig sells coffee, tea and hot cocoa in K-Cups produced by a variety of roasters, including GMC, and related accessories to select retailers such as department stores and club stores and also directly to
consumers. Keurig earns royalty income from the sale of K-Cups from all licensed vendors to sell K-Cups.

Cost of sales for the Company
consists of the cost of raw materials including coffee beans, flavorings and packaging materials; a portion of our rental expense; the salaries and related expenses of production; distribution and merchandising personnel; depreciation on production
equipment; the cost of brewers manufactured by suppliers, and freight, duties and delivery expenses. Selling and operating expenses consist of expenses that directly support sales, including media and advertising expenses; a portion of the rental
expense; and the salaries and related expenses of employees directly supporting sales and marketing as well as research and development. General and administrative expenses consist of expenses incurred for corporate support and administration,
including a portion of the rental expense and the salaries and related expenses of personnel not elsewhere categorized.

Historically, the
GMC and Keurig operating segments have not shared manufacturing or distribution facilities, and administrative functions such as accounting and information services have been decentralized. Throughout this presentation, we refer to the consolidated
company as the Company and we refer to our operating segments as GMC and Keurig. Expenses not specifically related to either operating segment are shown separately as Corporate. Corporate expenses are
comprised mainly of the compensation and other related expenses of our CEO, CFO, CIO, Vice President Human Resources and Vice President of Corporate Social Responsibility and other selected employees who perform duties related to our entire
enterprise. Corporate expenses also include interest expense, amortization of the identifiable intangibles acquired when Keurig was purchased, as well as certain corporate legal expenses and compensation of the board of directors. All of the
Companys goodwill and intangible assets are included in Corporate assets.



---

Basis of Presentation

Included in this presentation are discussions and reconciliations of net income in accordance with generally accepted accounting principles
(GAAP) to net income excluding certain expenses and losses, which we refer to as non-GAAP net income. These non-GAAP measures exclude amortization of identifiable intangibles and one time operating income related to the Companys
patent litigation settlement and the related legal expenses. Non-GAAP net income is not in accordance with, or an alternative to, GAAP. The Companys management uses these non-GAAP measures in discussing and analyzing its results of operations
because it believes the non-GAAP measures provide investors with greater transparency by helping to illustrate the underlying financial and business trends relating to the Companys results of operations and financial condition and
comparability between current and prior periods. Management uses the non-GAAP measures to establish and monitor budgets and operational goals and to evaluate the performance of the Company.

These non-GAAP financial measures should be considered in addition to, and not as a substitute or superior to, the other measures of financial performance
prepared in accordance with GAAP. Using only the non-GAAP financial measures to analyze our performance would have material limitations because their calculation is based on the subjective determination of management regarding the nature and
classification of events and circumstances that investors may find significant. Management compensates for these limitations by presenting both the GAAP and non-GAAP measures of its results.

Results of Operations

Summary
financial data of the Company

The following table presents certain financial data of the Company expressed as a percentage of net
sales for the periods denoted below:



|                                       |  |                                    |    |  |                                    |   
|-------------------------------------- |  | ---------------------------------- | -- |  | ---------------------------------- | --
|                                       |  | ThirteenweeksendedDecember 27,2008 |    |  | ThirteenweeksendedDecember 29,2007 |   
|Net sales                              |  | 100.0                              | %  |  | 100.0                              | % 
|Cost of sales                          |  | 72.9                               | %  |  | 65.8                               | % 
|                                       |  |                                    |    |  |                                    |   
|Gross profit                           |  | 27.1                               | %  |  | 34.2                               | % 
|Selling and operating expenses         |  | 18.4                               | %  |  | 21.4                               | % 
|General and administrative expenses    |  | 4.7                                | %  |  | 7.3                                | % 
|Patent litigation (settlement) expense |  | (8.6                               | )% |  | 0.3                                | % 
|                                       |  |                                    |    |  |                                    |   
|Operating income                       |  | 12.6                               | %  |  | 5.2                                | % 
|Other expense                          |  | 0.0                                | %  |  | (0.1                               | )%
|Interest expense                       |  | (0.7                               | )% |  | (1.2                               | )%
|                                       |  |                                    |    |  |                                    |   
|Income before income taxes             |  | 11.9                               | %  |  | 3.9                                | % 
|Income tax expense                     |  | (4.6                               | )% |  | (1.6                               | )%
|                                       |  |                                    |    |  |                                    |   
|Net income                             |  | 7.3                                | %  |  | 2.3                                | % 
|                                       |  |                                    |    |  |                                    |   



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Segment Summary

Net sales and income before taxes for each of our operating segments are summarized in the tables below:



|                           |  |                                     |       |   |                                     |   |       |  
|-------------------------- |  | ----------------------------------- | ----- | - | ----------------------------------- | - | ----- | -
|                           |  | Net sales (in millions)             |      
|                           |  | Thirteenweeks endedDecember 27,2008 |       |   | Thirteenweeks endedDecember 29,2007 |  
|GMC                        |  | $                                   | 105.8 |   |                                     | $ | 77.8  |  
|Keurig                     |  | $                                   | 120.9 |   |                                     | $ | 63.8  |  
|Corporate                  |  | $                                   |      |   |                                     | $ |      |  
|Inter-company eliminations |  | $                                   | (29.8 | ) |                                     | $ | (15.2 | )
|                           |  |                                     |       |   |                                     |   |       |  
|Total Company              |  | $                                   | 197.0 |   |                                     | $ | 126.4 |  
|                           |  |                                     |       |   |                                     |   |       |  
|                           | 
|                           |  | Income before taxes (in millions)   |      
|                           |  | Thirteenweeks endedDecember 27,2008 |       |   | Thirteenweeks endedDecember 29,2007 |  
|GMC                        |  | $                                   | 9.5   |   |                                     | $ | 6.2   |  
|Keurig                     |  |                                     | 2.7   |   |                                     |   | 3.7   |  
|Corporate                  |  |                                     | 12.1  |   |                                     |   | (4.9  | )
|Inter-company eliminations |  |                                     | (0.8  | ) |                                     |   | (0.1  | )
|                           |  |                                     |       |   |                                     |   |       |  
|Total Company              |  | $                                   | 23.5  |   |                                     | $ | 4.9   |  
|                           |  |                                     |       |   |                                     |   |       |  
|                           |  |                                     |       |   |                                     |   |       |  

Revenue

Company Summary

Net sales for
the first quarter of fiscal 2009 increased 56% to $197.0 million, up from $126.4 million reported in the prior fiscal years first quarter. Total K-Cup shipments of coffee, hot cocoa and tea increased 55% in the first quarter of fiscal 2009 as
compared to the first quarter of fiscal 2008 (the prior year period).

GMC

GMC segment net sales increased by $28.0 million or 36%, to $105.8 million in the first quarter of fiscal 2009 (including $14.2 million of inter-company
K-Cup sales) as compared to $77.8 million reported in the first quarter of fiscal 2008 (including $5.6 million of inter-company K-Cup sales). The primary driver for the increase in sales is the continued growth in K-Cup sales. Coffee, tea and hot
cocoa pounds shipped by the GMC segment increased 14% over the prior year period.

As previously announced, the Company increased prices in
May 2008 by 8% to 12% on average across business channels and package types for coffee products sold by the GMC segment. The net impact of the price increase in the first quarter of fiscal 2009 was an increase in net sales of approximately 11% over
the prior year period.

Keurig

Keurig segment net sales increased by $57.1 million, or 89%, to $120.9 million in the first quarter of fiscal 2009 (including $15.6 million of inter-company brewer sales and royalty revenue) as compared to $63.8
million reported in the prior year period (including $9.6 million of inter-company brewer sales and royalty revenue). The increase in Keurig segment net sales was primarily due to higher AH single-cup brewer and K-Cup sales, and royalty income from
the sale of K-Cups. Keurig announced a royalty rate increase of a penny on all system-wide K-Cup portion packs that went into effect on August 1, 2008. This increase contributed to an approximate 4% increase in Keurig segments first
quarter of fiscal 2009 net sales over the prior year period. Shipments of AFH single-cup brewers declined from the prior year period due to the downturn in the economy.



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Company-wide Keurig brewer and K-Cup portion pack shipments

(Data and in thousands)



|                                      |  |                            |  |                            |  |                |  |                  |  
|------------------------------------- |  | -------------------------- |  | -------------------------- |  | -------------- |  | ---------------- | -
|                                      |  | Q1 FY0913 wksended12/27/08 |  | Q1 FY0813 wksended12/29/07 |  | Q1 Y/YIncrease |  | Q1 % Y/YIncrease |  
|Total Keurig brewers shipped(1)       |  | 711                        |  | 322                        |  | 389            |  | 121              | %
|Total K-Cups shipped (system-wide)(2) |  | 356,575                    |  | 230,192                    |  | 126,383        |  | 55               | %

| | 
| | 

| | (1) | Total Keurig brewers shipped means brewers shipped by Keurig to customers in the U.S./Canada.
| | --- | ---------------------------------------------------------------------------------------------

| | (2) | Total K-Cups shipped (system-wide) means K-Cup shipments by all Keurig licensed roasters to customers in the
U.S./Canada. These shipments form the basis upon which royalties are calculated by licensees for payments to Keurig.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Gross Profit

Company gross profit for the first quarter of fiscal 2009 totaled $53.4 million, or 27.1% of net sales,
as compared to $43.3 million, or 34.2% of net sales, in the prior year period. The margin decline is due primarily to the increase in sales of AH single-cup brewers, which are sold approximately at cost as part of the Companys strategy to
increase the installed base of Keurig brewers. In addition, higher green coffee and other commodity costs contributed to the increase in cost of sales as compared to the prior year period.

Selling, General and Administrative Expenses

Company selling, general and administrative expenses (S,G&A) increased 25% to $45.4 million in the first quarter of fiscal 2009 from $36.3 million in the prior-year period. As a percentage of sales, S,G&A
improved to 23.1% in the first quarter of fiscal 2009 from 28.7% in the prior year period. This improvement in S,G&A margin was mainly due to leveraging selling and organizational resources on a higher sales base.

Patent Litigation Settlement

On October 23, 2008, Keurig entered into a Settlement and License Agreement with Kraft Foods, Inc., Kraft Foods Global, Inc., and Tassimo Corporation (collectively Kraft) providing for a complete settlement of Keurigs
previously filed lawsuit against Kraft during the first quarter of fiscal 2009. Accordingly, the Company recognized the receipt of a patent litigation settlement of $17.0 million as a non-recurring item included in operating income for the
Companys first quarter of fiscal 2009. The Company incurred $0.5 million in litigation expenses during the comparable prior year period.

Interest Expense

Company interest expense decreased to $1.4 million in the first quarter of fiscal 2009, down from
$1.5 million in the prior year period, primarily due to lower interest rates.

Income before taxes

Company income before taxes increased to $23.5 million in the first quarter of fiscal 2009, up from $4.9 million in the prior year period, and, as a
percentage of net sales, 11.9% and 3.9%, respectively. This increase is mainly attributable to the $17.0 million (pretax) patent litigation settlement as described above. Excluding the patent litigation income, income before taxes increased to $6.5
million in the first quarter of fiscal 2009, up from $5.3 million in the prior year period.



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Excluding the non-cash amortization expenses related to the identifiable intangibles of $1.2 million in
each period and patent litigation settlement receipt and expense, the Companys income before taxes was $7.7 million, or 3.9% of net sales as compared to $6.5 million, or 5.2% of net sales in the prior year period.

The GMC segment contributed $9.6 million in income before taxes in the first quarter of fiscal 2009, up from $6.2 million in the prior year period.

The Keurig segment contributed $2.7 million in income before taxes in the first quarter of fiscal 2009, down from $3.7 million in the prior
year period.

The Corporate segment contributed $12.1 million in income before taxes in the first quarter of fiscal 2009, as compared to
($4.9) million in the prior year period, due to the settlement of the patent litigation in the first quarter of fiscal 2009.

Taxes

The effective income tax rate for the Company was 38.9% in the first quarter of fiscal 2009, as compared to 40.0% in the prior year
period. The difference was primarily due to higher research and development tax credits.

Net Income and Diluted EPS

Company net income in the first quarter of fiscal 2009 was $14.4 million, up 392% from $2.9 million in the prior year period.

Company diluted EPS increased $0.44 to $0.56 per share in the first quarter of fiscal 2009, as compared to $0.12 per share in the prior
year period. The $17.0 million patent litigation settlement represented $0.40 per share of current period EPS.

Liquidity and Capital
Resources

Our working capital decreased to $63.3 million at December 27, 2008, down from $79.2 million at September 27, 2008.
The decrease was primarily due to lower inventory levels following strong holiday sales, and an increase in payables, partially offset by an increase in receivables.

Net cash provided by operating activities was $40.5 million in the first quarter of fiscal 2009 as compared to net cash used by operating activities of $10.2 million in the first quarter of fiscal 2008. The increase
in operating cash flow was primarily due to the receipt of our Kraft patent litigation settlement, as well as the factors mentioned above.

During the first quarter of fiscal 2009 we had capital expenditures of $10.1 million, as compared to $11.7 million in the prior year period.

In the first quarter of fiscal 2009, cash flows from financing activities included $1.9 million generated from the exercise of employee stock options and the issuance of shares under the employee stock purchase plan,
up from $1.2 million in the first quarter of fiscal 2008. In addition, cash flows from operating and financing activities included a $2.8 million tax benefit from the exercise of non-qualified options and disqualifying dispositions of incentive
stock options, up from $1.7 million in the comparable fiscal quarter. As options we have granted are exercised, we will continue to receive proceeds and a tax deduction where applicable; however, we cannot predict either the amounts or the timing of
any such proceeds or tax benefits.



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Long-term debt decreased to $90.0 million at December 27, 2008 from $123.5 million at
September 27, 2008 reflecting our decision to use the majority of the patent litigation settlement payment to reduce debt outstanding under our existing credit facility.

We are party to interest rate swap agreements with Bank of America N.A. (Bank of America) and Sovereign Bank. The total notional amount of the
swap agreements at December 27, 2008 and September 27, 2008 was $78.5 million. The swap agreements terminate between June 2010 and December 2012.

At December 27, 2008 and September 27, 2008, we estimate that we would have paid $4.2 million and $0.6 million (gross of tax), respectively, had we terminated our swap agreements. We designate the swap
agreements as a cash flow hedges and the changes in the fair value of the swaps are classified in accumulated other comprehensive income.

The credit facility is subject to the following financial covenants: a funded debt to adjusted EBITDA ratio, a fixed charge coverage ratio, and a capital expenditures covenant. We were in compliance with these covenants at December 27,
2008.

As previously announced on September 15, 2008, we entered into an Asset Purchase Agreement with Tullys Coffee Corporation
(Tullys) and Tullys Bellaccino, LLC, their wholly-owned subsidiary, pursuant to which we agreed to acquire Tullys coffee brand and certain assets related to the Tullys wholesale business for a total purchase price
of $40.3 million, payable in cash and subject to adjustment at closing. We intend to finance the consideration paid through our existing $225.0 million senior revolving credit facility. This transaction is expected to close in March or April of this
fiscal year. On October 24, 2008, we received consent from our lenders to waive the provision of the credit agreement which prohibits borrowings in excess of $25.0 million for acquisitions in a fiscal year for the limited purpose of allowing us
to consummate the Tullys acquisition.

We expect to spend between $50.0 million and $57.0 million in capital expenditures in fiscal
2009. Capital expenditures are anticipated to be funded from operating cash flows and availability under our credit facility.

We believe
that our cash flows from operating activities, existing cash and our credit facility will provide sufficient liquidity to pay all liabilities in the normal course of business, and fund anticipated capital expenditures, finance the Tullys
transaction and service debt requirements through the next 12 months. However, several risks and uncertainties could cause us to need to raise additional capital through equity and/or debt financing. From time to time we consider acquisition
opportunities which, if pursued, could also result in the need for additional financing. We also may consider from time to time engaging in stock buyback plans or programs. The availability and terms of any such financing would be subject to
prevailing market conditions and other factors at that time.

A summary of cash requirements related to our outstanding long-term debt,
future minimum lease payments and inventory purchase commitments is as follows:



|            |  |                   |            |                           |   |                     |  |       |             |  |   |            
|----------- |  | ----------------- | ---------- | ------------------------- | - | ------------------- |  | ----- | ----------- |  | - | -----------
|Fiscal Year |  | Long-TermDebt (1) |            | OperatingLeaseObligations |   | PurchaseObligations |  | Total
|2009        |  | $                 | 25,000     |                           | $ | 3,674,000           |  | $     | 106,201,000 |  | $ | 109,900,000
|2010        |  |                   | 17,000     |                           |   | 4,552,000           |  |       | 43,954,000  |  | $ | 48,523,000 
|2011        |  |                   |           |                           |   | 4,128,000           |  |       | 37,844,000  |  | $ | 41,972,000 
|2012        |  |                   |           |                           |   | 3,438,000           |  |       |            |  | $ | 3,438,000  
|2013        |  |                   | 90,000,000 |                           |   | 2,611,000           |  |       |            |  | $ | 92,611,000 
|Thereafter  |  |                   |           |                           |   | 7,583,000           |  |       |            |  | $ | 7,583,000  
|Total       |  | $                 | 90,042,000 |                           | $ | 25,986,000          |  | $     | 187,999,000 |  | $ | 304,027,000

| | 
| | 

| | (1) | Fiscal 2009 and fiscal 2010 long-term debt obligations are comprised of capital lease obligations.
| | --- | --------------------------------------------------------------------------------------------------



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Critical Accounting Policies

This discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which we prepare in
accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period (see Note 2 to our Consolidated Financial Statements included in our Annual Report
on Form 10-K for the period ended September 27, 2008). Actual results could differ from those estimates. We believe the following accounting policies and estimates require us to make the most difficult judgments in the preparation of our
consolidated financial statements and accordingly are critical.

We have identified the following as critical accounting policies based on
the significant judgment and estimates used in determining the amounts reported in our consolidated financial statements:

Cash and cash
equivalents

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash
equivalents. Cash and cash equivalents include overnight repurchase agreements which are carried at cost and approximate market value. The Company does not believe that it is subject to any unusual credit or market risk.

Inventories

Inventories are stated
at the lower of cost or market. Cost is being measured using an adjusted standard cost method which approximates FIFO (first-in first-out). We regularly review whether the realizable value of our inventory is lower than its book value. If our
valuation shows that the realizable value is lower than book value, we take a charge to expense and directly reduce the value of the inventory.

The Company estimates its reserves for inventory obsolescence by examining its inventories on a quarterly basis to determine if there are indicators that the carrying values exceed net realizable value. Indicators that could result in
additional inventory write downs include age of inventory, damaged inventory, slow moving products and products at the end of their life cycles. While management believes that the reserve for obsolete inventory is adequate, significant judgment is
involved in determining the adequacy of this reserve.

Inventories consist primarily of green and roasted coffee, including coffee in
portion packs, purchased finished goods such as coffee brewers and packaging materials.

Fair Value of Financial Instruments

The Company adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157)
during the first quarter of fiscal 2009. This standard provides guidance for using fair value to measure all assets and liabilities. SFAS 157 applies where other standards require, or permit, assets or liabilities to be measured at fair value but
does not expand the use of fair value in any new circumstances. Under SFAS 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the
principal or most advantageous market. In accordance with Financial Accounting Standards Board (FASB) Staff Position FAS 157-2 (FSP 157-2), the effective date for fair value measurement of nonfinancial assets and liabilities,
except for items recognized at fair value on a recurring basis, was deferred until the Companys 2010 fiscal year. The Company is currently reviewing this accounting standard for nonfinancial assets and liabilities, however does not expect it
to have a material impact on its financial statements.

During the first quarter of fiscal 2009, the Company also adopted Statement of
Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits entities to choose to measure
certain financial instruments and certain other items at fair value. As of December 27, 2008, the Company has not elected the fair value option for any additional assets and liabilities.



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Hedging

We enter into coffee futures contracts to hedge against price increases in price-to-be-fixed coffee purchase commitments and anticipated coffee purchases. The Company also enters into interest rate swaps to hedge
against unfavorable changes in interest rates. These derivative instruments qualify for hedge accounting under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. Hedge accounting is permitted if the hedging
relationship is expected to be highly effective. Effectiveness is determined by how closely the changes in the fair value of the derivative instrument offset the changes in the fair value of the hedged item. If the derivative is determined to
qualify for hedge accounting, the effective portion of the change in the fair value of the derivative instrument is recorded in other comprehensive income and recognized in earnings when the related hedged item is sold. The ineffective portion of
the change in the fair value of the derivative instrument is recorded directly to earnings. If these derivative instruments do not qualify for hedge accounting, we would record the changes in the fair value of the derivative instruments directly to
earnings. See Item 3. Quantitative and Qualitative Disclosures about Market Risk and Note 6 in the Notes to Consolidated Financial Statements, included elsewhere in this report.

The Company formally documents hedging instruments and hedged items, and measures at each balance sheet date the effectiveness of its hedges. When it is
determined that a derivative is not highly effective, the derivative expires, or is sold or terminated, or the derivative is discontinued because it is unlikely that a forecasted transaction will occur, the Company discontinues hedge accounting
prospectively for that specific hedge instrument.

The Company does not engage in speculative transactions, nor does it hold derivative
instruments for trading purposes.

Other long-term assets

Other long-term assets consist of deposits and debt issuance costs. Debt issuance costs are being amortized over the respective life of the applicable
debt.

Goodwill and intangibles

In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142), goodwill and indefinite-lived intangibles are tested for impairment annually using a market
capitalization approach, and more frequently if indication of impairment arises. Based on the impairment tests performed, there was no impairment of goodwill in fiscal 2008, 2007 and 2006. All intangible assets are being amortized using the
straight-line method over their useful lives.

Impairment of Long-Lived Assets

When facts and circumstances indicate that the carrying values of long-lived assets, including fixed assets, may be impaired, an evaluation of
recoverability is performed by comparing the carrying value of the assets to projected future cash flows in addition to other quantitative and qualitative analyses. Upon indication that the carrying value of such assets may not be recoverable, the
Company recognizes an impairment loss as a charge against current operations. Long-lived assets to be disposed of are reported at the lower of the carrying amount or fair value, less estimated costs to sell. The Company makes judgments related to
the expected useful lives of long-lived assets and its ability to realize undiscounted cash flows in excess of the carrying amounts of such assets which are affected by factors such as the ongoing maintenance and improvements of the assets, changes
in economic conditions and changes in operating performance. As the Company assesses the ongoing expected cash flows and carrying amounts of its long-lived assets, these factors could cause the Company to realize a material impairment charge.

Provision for Doubtful Accounts

Periodically, management reviews the adequacy of its provision for doubtful accounts based on historical bad debt expense results and current economic conditions using factors based on the aging of its accounts
receivable. The Company does not require collateral from customers as ongoing credit evaluations of customers payment histories are performed. Additionally, the



---

Company may identify additional allowance requirements based on indications that a specific customer may be experiencing financial difficulties. Bad debt
expense and changes in the provision for doubtful accounts are reported as a component of selling and operating expenses. Actual bad debts could differ materially from the recorded estimates.

Advertising costs

The Company
expenses the costs of advertising the first time the advertising takes place, except for direct mail campaigns targeted directly at consumers, which are expensed over the period during which they are expected to generate sales.

Fixed assets

Fixed assets are
carried at cost, net of accumulated depreciation. Expenditures for maintenance, repairs and renewals of minor items are expensed as incurred. Depreciation is calculated using the straight-line method over the assets estimated useful lives. The
cost and accumulated depreciation for fixed assets sold, retired, or otherwise disposed of are relieved from the accounts, and the resultant gains and losses are reflected in income.

The Company follows an industry-wide practice of purchasing and loaning coffee brewing and related equipment to wholesale customers. These assets are also
carried at cost, net of accumulated depreciation.

Depreciation costs of manufacturing and distribution assets are included in cost of
sales. Depreciation costs of other assets, including equipment on loan to customers, are included in selling and operating expenses.

Revenue recognition

Revenue from wholesale and consumer direct sales is recognized upon product delivery, and in some cases
upon product shipment. The Company has no contractual obligation to accept returns for damaged product nor does it guarantee product sales. Title, risk of loss, damage and insurance responsibility for the products pass from the Company to the buyer
upon accepted delivery of the products from the Companys contracted carrier. The Company will at times agree to accept returns or issue credits for products that are clearly damaged in transit.

Sales of single-cup coffee brewers are recognized net of an estimated allowance for returns. Royalty revenue is recognized upon shipment of K-Cups by
roasters as set forth under the terms and conditions of various licensing agreements.

In addition, the Companys customers can earn
certain incentives, which are netted against sales in the consolidated income statements. These incentives include, but are not limited to, cash discounts, funds for promotional and marketing activities, and performance based incentive programs.

Warranty

We provide
for the estimated cost of product warranties, primarily using historical information and repair or replacement costs, at the time product revenue is recognized.

Cost of Sales

The Company records external shipping and handling expenses in cost of sales.

Income taxes

The
Company utilizes the asset and liability method of accounting for income taxes, as set forth in Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109). SFAS 109 requires the
recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.



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In July, 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48,
Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement 109 (FIN 48). This statement clarifies the criteria that an individual tax position must satisfy for some or all of the benefits of that position
to be recognized in a companys financial statements. FIN 48 prescribes a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken or expected to be taken on a tax return in order for those tax
positions to be recognized in the financial statements. The Company adopted the provisions of FIN 48 in its first quarter of fiscal 2008.

Financial instruments

The Company enters into various types of financial instruments in the normal course of business. Fair
values are estimated based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of perceived risk. The fair values of cash, cash equivalents, accounts receivable,
accounts payable, accrued expenses and debt approximate their carrying value at December 27, 2008 and September 27, 2008.

Stock-based compensation

The Company accounts for transactions in which it exchanges its equity instruments for goods or
services in accordance with Statement of Financial Accounting Standards No. 123 (revised 2004) Share-Based Payments (FAS123(R)). FAS123(R) requires us to measure the cost of employee services received in exchange for an award of
equity instruments (usually stock options) based on the grant-date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award.

The Company measures the fair value of stock options using the Black-Scholes model and certain assumptions, including the expected life of the stock
options, an expected forfeiture rate and the expected volatility of its common stock. The expected life of options is estimated based on options vesting periods, contractual lives and an analysis of the Companys historical experience. The
expected forfeiture rate is based on the Companys historical experience. The Company uses a blended historical volatility to estimate expected volatility at the measurement date.

Research & Development

Research and development expenses are charged to income as incurred. These costs primarily consist of salary and consulting expenses and are recorded in selling and operating expenses in the Keurig segment of the Company.

Recent Accounting Pronouncements

In
December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 141 (Revised 2007), Business Combinations (SFAS 141R). This Statement retains the fundamental requirements in Statement 141 that the
acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R requires an acquirer to recognize the assets
acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the Statement. That replaces Statement 141s
cost-allocation process, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values. The Statement retains the guidance in Statement 141 for identifying
and recognizing intangible assets separately from goodwill. SFAS 141R will now require acquisition costs to be expensed as incurred, restructuring costs associated with a business combination must generally be expensed prior to the acquisition date
and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. Statement 141 applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, which is fiscal year 2010 for the Company. We are not able to predict the impact this guidance will have on the accounting for acquisitions
we may complete in future periods. For acquisitions completed prior to September 27, 2009, the new standard requires that changes in deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period must
be recognized in earnings rather than as an adjustment to the cost of the acquisition. We do not expect this new guidance to have a significant impact on our consolidated financial statements.



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In February 2008, the FASB issued FASB Staff Position No. FAS 157-2 (FSP 157-2). FSP 157-2
delays the implementation of Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157) for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed
at fair value in the financial statements on a recurring basis. This statement defers the effective date to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years, which is fiscal year 2010 for the Company.
The Company adopted SFAS 157 for financial assets and liabilities for the first quarter of fiscal 2009. The Company is currently reviewing this new accounting standard but does not expect it to have a material impact on its financial statements.

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements  An amendment of ARB
No. 51. SFAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of
the income statement. Statement 160 clarifies that changes in a parents ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition,
this Statement requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008,
which is fiscal 2010 for this Company. The effect of adoption on the Companys financial statements will depend primarily on the materiality of non-controlling interests arising in future transactions.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities  an Amendment of FASB
133. This statement is intended to enhance the current disclosure framework in Statement 133. The Statement requires that objectives for using derivative instruments be disclosed in terms of underlying risks and accounting designation. This
disclosure better conveys the purpose of derivative use in terms of the risk that the entity is intending to manage and amends and expands the disclosure requirements of Statement 133 with the intent to provide users of financial statements with an
enhanced understanding of: a) How and why an entity uses financial instruments; b) How derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and, c) How derivative instruments and
related hedged items affect an entitys financial position, financial performance, and cash flows. This Statement requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value
amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008, which
is Fiscal 2010 for this Company. The Company is currently reviewing this new accounting standard but does not expect it to have a material impact on its financial statements.

Factors Affecting Quarterly Performance

Historically, the Company has experienced variations in sales and earnings from quarter to quarter due to the holiday season and a variety of other factors, including, but not limited to, general economic trends, the cost of green coffee,
competition, marketing programs, weather and special or unusual events. Because of the seasonality our business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

Forward-Looking Statements

Except
for historical information, the discussion in this Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Words such as anticipate, believe,
expect, will, feel, estimate,



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intend, plan, project, forecast, and similar expressions, may identify such forward-looking statements.
Forward-looking statements are inherently uncertain and actual results could differ materially from those set forth in forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking
statements include, but are not limited to, the impact on sales and profitability of consumer sentiment in this difficult economic environment, the Companys success in efficiently expanding operations and capacity to meet growth, the
Companys success in receiving required approvals for the acquisition of Tullys wholesale business and then in efficiently and effectively integrating Tullys wholesale operations and capacity into its Green Mountain Coffee segment,
the ability of our lenders to honor their commitments under our credit facility, competition and other business conditions in the coffee industry and food industry in general, fluctuations in availability and cost of high-quality green coffee, any
other increases in costs including fuel, the unknown impact of management changes, Keurigs ability to continue to grow and build profits with its roaster partners in the office and at home markets, the impact of the loss of one or more major
customers for Green Mountain Coffee or reduction in the volume of purchases by one or more major customers, delays in the timing of adding new locations with existing customers, Green Mountain Coffees level of success in continuing to attract
new customers, sales mix variances, weather and special or unusual events, as well as other risks described in this report and other factors described from time to time in the Companys filings with the Securities and Exchange Commission.
Forward-looking statements reflect managements analysis as of the date of this filing and we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.



| | Item 3. | Quantitative and Qualitative Disclosures About Market Risk
| | ------- | ----------------------------------------------------------

Market risks relating to our operations result primarily from changes in interest rates and the commodity c price of coffee (the price per pound quoted by the Coffee, Sugar and Cocoa Exchange). To address these risks, we enter
into hedging transactions as described below. We do not use financial instruments for trading purposes.

For purposes of specific risk
analysis, we use sensitivity analysis to determine the impacts that market risk exposures may have on our financial position or earnings.

Interest rate risks

The table below provides information about our debt obligations that are sensitive to changes in
interest rates. The table presents principal cash flows and related weighted average interest rates by expected maturity dates.



|                             |  |      |     |   |      |   |     |      |  |      |   |      |   |   |       |   |        |   |  |   |        |  
|---------------------------- |  | ---- | --- | - | ---- | - | --- | ---- |  | ---- | - | ---- | - | - | ----- | - | ------ | - |  | - | ------ | -
|Expected maturity date       |  | 2009 |     |   | 2010 |   |     | 2011 |  | 2012 |   | 2013 |   |   | Total |  
|Long-term debt:              |  |      |     |   |      |   |     |      |  |      |   |      |   |   |       |   |        |   |  |   |        |  
|Variable rate (in thousands) |  | $    |    |   |      | $ |    |      |  | $    |  |      | $ |  |       | $ | 11,533 |   |  | $ | 11,533 |  
|Average interest rate        |  |      |    |   |      |   |    |      |  |      |  |      |   |  |       |   | 1.8    | % |  |   | 1.8    | %
|Fixed rate (in thousands)    |  | $    | 29  |   |      | $ | 13  |      |  | $    |  |      | $ |  |       | $ | 78,467 |   |  | $ | 78,509 |  
|Average interest rate        |  |      | 5.4 | % |      |   | 5.4 | %    |  |      |  |      |   |  |       |   | 5.1    | % |  |   | 5.1    | %

At December 27, 2008, we had $90.0 million outstanding under our Credit Facility subject to
variable interest rates. However, the interest rate on $78.5 million of this debt was fixed through interest rate swap agreements, as discussed further below. Therefore, $11.5 million outstanding under our Credit Facility remains subject to variable
interest rates. Should interest rates (LIBOR and Prime rates) increase by 100 basis points, we would incur additional interest expense of $115,000 annually. At September 27, 2008 we had $45.0 million subject to variable interest rates.

On December 27, 2008, the effect of our interest rate swap agreements was to limit the interest rate exposure on the outstanding
balance of the Credit Facility to a fixed rate versus the 30-day Libor rate as follows: 5.4% on $28.5 million; 2.4% on $30 million; and 3.9% on $20 million. The total notional amount covered by these swaps will decrease progressively in future
periods and terminates on various dates from June 2010 through December 2012.



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Commodity price risks

The c price of coffee is subject to substantial price fluctuations caused by multiple factors, including weather and political and economic
conditions in coffee-producing countries. Our gross profit margins can be significantly impacted by changes in the c price of coffee. We enter into fixed coffee purchase commitments in an attempt to secure an adequate supply of coffee.
These agreements are tied to specific market prices (defined by both the origin of the coffee and the time of delivery) but we have significant flexibility in selecting the date of the market price to be used in each contract. We generally fix the
price of our coffee contracts three to nine months prior to delivery, so that we can adjust our sales prices to the market. At December 27, 2008, the Company had approximately $61.7 million in green coffee purchase commitments, of which
approximately 55% had a fixed price. At September 27, 2008, the Company had approximately $73.2 million in green coffee purchase commitments, of which approximately 59% had a fixed price.

In addition, we regularly use commodity-based financial instruments to hedge price-to-be-established coffee purchase commitments with the objective of
minimizing cost risk due to market fluctuations. These hedges generally qualify as cash flow hedges. Gains and losses are deferred in other comprehensive income until the hedged inventory sale is recognized in earnings, at which point they are added
to cost of sales. At December 27, 2008 we held outstanding futures contracts covering 1,762,500 pounds of coffee with a fair market value of ($390,000), gross of tax. At September 27, 2008, we held outstanding futures contracts covering
1,162,500 pounds of coffee with a fair market value of $(39,000), gross of tax.



| | Item 4. | Controls and Procedures
| | ------- | -----------------------

As of December 27,
2008, the Companys management with the participation of its Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of the Companys disclosure controls and procedures
pursuant to Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and
procedures (as defined in Rules 13a-15 and 15d-15 of the Exchange Act) are effective to make known to them in a timely fashion material information related to the Company required to be filed in this report.

There has been no changes in our internal controls that occurred during the Companys most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Companys internal control over financial reporting.



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Part II. Other Information



| | Item 1A. | Risk Factors.
| | -------- | -------------

There have been no material changes
from the risk factors disclosed in our fiscal 2008 Form 10-K.



| | Item 6. | Exhibits
| | ------- | --------

(a) Exhibits:



|     |  |                                                                                                                                                                                
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|10.1 |  | Offer Letter between Green Mountain Coffee Roasters, Inc. and Kathy Brooks dated as March 18, 2001. *                                                                          
|     | 
|10.2 |  | Offer Letter between Green Mountain Coffee Roasters, Inc. and Scott McCreary dated as September 10, 2004. *                                                                    
|     | 
|31.1 |  | Principal Executive Officer Certification Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to the Section 302 of the Sarbanes-Oxley Act of 2002.
|     | 
|31.2 |  | Principal Financial Officer Certification Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to the Section 302 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.1 |  | Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                             
|     | 
|32.2 |  | Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                             

| | 
| | 

| | * | Management contract or compensatory plan.
| | - | -----------------------------------------



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|      |  |            |  |                                      |  |     |  |                                                            
|----- |  | ---------- |  | ------------------------------------ |  | --- |  | -----------------------------------------------------------
|      |  |            |  | GREEN MOUNTAIN COFFEE ROASTERS, INC.
|      |  |            |  |                                     
|Date: |  | 02/05/2009 |  |                                      |  | By: |  | /s/ Lawrence J. Blanford                                   
|      |  |            |  |                                      |  |     |  | Lawrence J. Blanford, President and Chief Executive
Officer



|      |  |            |  |  |  |    |  |                                           
|----- |  | ---------- |  |  |  | -- |  | ------------------------------------------
|      |  |            |  | 
|      |  |            |  | 
|Date: |  | 02/05/2009 |  |  |  | By |  | /s/ Frances G. Rathke                     
|      |  |            |  |  |  |    |  | Frances G. Rathke, Chief Financial
Officer