Tea and Bottled Water Consumption

1994
1995
1996
1997
1998
1999

Tea:
Gallons
Per capita
2,682,200
10.4
2,630,600
10.0
2,590,200
9.7
2,528,500
9.4
2,548,200
9.4
2,595,500
9.5

Bottled Water
Gallons
Per capita
2,901,900
11.3
3,167,500
12.0
3,449,300
13.0
3,775,800
14.0
4,146,000
15.3
4,646,100
17.0

Drink Consumption in the United States - wholesale

Drink
Beer
Bottled water
Fruit beverages
Ready-to-drink teas
Soft drinks
Spirits
Sport drinks
Wine
Total beverages

1998
28.49
4.33
12.77
1.34
41.79
15.55
1.59
10.32
116.18

1999
28.92
4.94
13.41
1.46
42.2
15.86
1.75
10.63
119.17

Growth
1.5%
14.1%
5.0%
9.0%
1.0%
2.0%
10.1%
3.0%

1998
54.2
5.2
17.5
2.45
54.3
34.05
2.65
17.38
187.73

1999
55.05
5.92
18.57
2.67
54.84
34.8
2.91
17.91
192.67

Growth
1.6%
13.8%
6.1%
9.0%
1.0%
2.2%
9.8%
3.0%

1995
4,023.8
2,447.7
720.0
231.9
347.8
636.8

2000
3,488.8
2,089.2
596.2
283.8
347.4
751.1

Drink Consumption in the United States - retail

Drink
Beer
Bottled water
Fruit beverages
Ready-to-drink teas
Soft drinks
Spirits
Sport drinks
Wine
Total beverages

Tea and Coffee Consumption

Coffee
Ground coffee
Instant coffee
Whole bean coffee
Cocoa mixes
Tea bags/loose tea

Historical Financial Ratios for Honest Tea

1998
18.22%
-134.40%
1.2524
-168.32%
-169.51%

1999
32.00%
-80.51%
0.9686
-77.97%
-96.74%

1.0070
0.70%

1.2406
19.39%

Sales
Sales discounts
other income

1998
273,913
(7,807)
5,862

1999
1,229,882
(149,027)
15,167

Total revenues

271,968

1,096,022

Cost of good sold

Gross profit

222,414
49,554

745,321
350,701

Broker commissions
Consultants
General and administrative
Payroll taxes and benefits
Professional fees
Research and development
Salaries
Sales and marketing
Travel and entertainment

81,464
29,970
13,191
35,467
22,254
125,976
87,016
15,647

38,787
43,659
103,242
41,559
24,307
80,957
390,876
399,649
65,865

Total operating expenses (w/o CGS)

410,985

1,188,901

4,090
-

31,136
11,916
1,107

415,075

1,233,060

Gross Profit Margin

Profit Margin
Total Asset Turnover
ROA
ROE
Equity Multiplier
Debt to assets

Historical Financial Performance for Honest Tea

Income statements for 1998 to 2000

Bad debt expense

Depreciation and amortization
Interest expense
Total expense (w/o CGS)
Net income

(365,521)

(882,359)

Balance Sheets for 1998 to 2000

1998
Assets
Current assets
Cash
Accounts receivable
Inventory
Prepaid expense and other current assets
Total current assets
Investment - Three Rivers Bottling
Secured notes receivable - TRB
Depreciation
Amortization
Deposits
Total Assets

1999

33,578
61,066
98,477
-

450,173
176,039
297,571
36,131

193,121

959,914

22,644
1,389
-

(38,207)
57,742
69,022
25,033
58,095

217,154

1,131,599

Liabilities
Current liabilities
Accounts payable and credit cards

1,518

217,630

Total current liabilities

1,518

217,630

Long term lease obligation

Total liabilities
Shareholder equity
Value; 125 shares
Value; 174 shares
Additional paid in capital
Loss from investment in TRB
Retained earnings

1,518

1
581,153
(365,519)

1,843
219,473

2
2,366,662
(206,657)
(1,247,879)

Total shareholder equity

215,635

912,128

Total liabilities and shareholder equity

217,153

1,131,601

2000
(annualized)
39.17%
-38.63%
0.4415
-17.05%
-19.48%
1.1419
12.43%

2000
(half year)
630,022
(51,756)
14,254
592,520
360,459
232,061
20,649
27,344
56,174
17,847
675
8,055
140,175
131,278
42,519
444,716
2,384
13,288
551
460,939
(228,878)

2000

220,982
272,028
433,979
49,284
976,273
(38,207)
82,538
182,335
24,737
114,336
1,342,012

164,945
164,945
1,833
166,778

2
3,161,309
(206,657)
(1,779,422)
1,175,232
1,342,010

Financing needed to support sales levels

Revenue
Total Assets
Revenue/Total Assets

1998
271,968
217,154
1.2524

1999
1,096,022
1,131,599
0.9686

2000
(annualized)
1,185,040
1,342,012
0.8830

1,518
0.70%

219,473
19.39%

166,778
12.43%

Estimated Sales
Estimated Assets
Total Debt
Debt to Total Assets
Estimated Debt Funds
Estimated Equity Funds

2001

2002

0.88

0.88

9,000,000
10,227,273

16,900,000
19,204,545

40%

40%

4,090,909
6,136,364

7,681,818
11,522,727

Alternative Funding Sources for

Pro

Venture Capital

Angels

Other possible groups

unding Sources for Equity

Con

Conclusion

Honest Tea Multiples Valuation

TRIARC
COS
Equity Value to Revenue Multiple for Industry Group

SARATOGA
BEV
0.28
1.67

HONEST TEA
Honest Tea Revenue - Historical 2000
Assumed Equity Value to Revenue
Implied Value for Equity
Honest Tea Revenue - Estimated
Assumed Equity Value to Revenue
Implied Value for Equity

Honest Tea Weighted Discounted Cash Flow Valuation

Scenario 1:
Probability
20%
Discount Rate
0.1
Equity Cash Flows
Growth Rate in CFs
Terminal Growth Rate
Terminal Value
Equity Value
Scenario 2:
Probability
Discount Rate
Equity Cash Flows
Growth Rate in CFs

2001
(861,500)

2002
1,105,100

2003
1,768,160
0.6

0.03

$105,526,807.63

50%

2001

2002

-861500

1105100

2003

0.1
0.25

Terminal Growth Rate

Terminal Value
Equity Value
Scenario 3:
Probability
Discount Rate
Equity Cash Flows
Growth Rate in CFs
Terminal Growth Rate
Terminal Value
Equity Value

30%
0.1

2001
-767067

2002
276275

2003
0.2

Weighted Equity Value

21,105,362

NATIONAL CLEARLY
BEV
CANADIAN AVG
0.25
31.35

2004

2005

2006

2007

2008

2009

2010

2,829,056
0.6

4,526,490
0.6

5,658,112
0.25

7,072,640
0.25

8,840,800
0.25

11,051,000
0.25

13,813,750
0.25

203,259,464

2004

2005

2006

2007

2008

2009

2010

0.25

0.25

0.25

0.1

0.1

0.1

0.1

2004

2005

2006

2007

2008

2009

2010

0.2

0.2

0.1

0.1

0.1

0.1

0.1