Tully's shareholders pleased company plans to go public

Tully's Coffee, the Seattle chain that keeps promising to go public, seems to have appeased its shareholders for now.

About 500 of them gathered for the company's annual meeting Thursday morning at Seattle's Museum of Flight, and no one publicly pushed the company to divulge more about its plans — announced two weeks ago — to file documents by the end of next month with details of a proposed public offering.

"We can't answer how the proposed stock offering might affect you in particular," Chief Financial Officer Kris Galvin told investors, most of whom have owned the stock for at least eight years.

At past meetings, shareholders demanded to know when they would be able to cash in their stock and finally get a return on investments they never expected to hold so long.

This time, people were slightly more patient.

"I have faith in the company, but I want it to come before my demise," said Jack Tangney, of Tacoma, after the meeting. He has owned Tully's shares for about 12 years. "The fact that they're even talking about it is encouraging."

Although Tully's is not publicly traded, it has more than 500 shareholders so it must disclose financial results.

In fact, it has about 6,000 investors, many of whom paid around $1 a share during the 1990s to grab a piece of a rapidly growing coffee company that they expected to go public and rival Starbucks.

The dot-com bust and Tully's inability to turn a profit has kept those plans shelved.

Now Tully's executives say they're ready to approach the markets for money. The offering's success will depend on the strength of the stock market and the economy, along with Tully's performance.

"You should all be praying for the stock market to stay strong for the next few months," advised Galvin.

Executives reviewed Tully's results, including improvements under John Buller, who became chief executive last summer.

For the last three quarters, Tully's has reported positive sales growth for stores open at least a year. Sales of beans through 4,000 grocery stores are growing. And companywide sales for the third quarter ended Dec. 31 rose 13 percent.

"We seem to be at a wonderful point where all the arrows are pointing in the right direction," Chairman and Founder Tom O'Keefe said during an interview with reporters after the meeting.

Executives hope to raise $50 million through an initial public offering. A portion would fund the addition of 30 to 40 company-owned stores at a cost of roughly $9 million to $12 million over the next year.

It has 128 stores and plans to expand first in the Western U.S.

Executives also want to build a bigger presence in Asia. Two years ago, Tully's sold its successful Japan operation to generate cash for expansion.

Last year, it sued a Japan-based company it had licensed years ago to open Tully's stores in 25 Asian countries.

Tully's says the company breached the agreement, partly by opening just one store in 2003, which closed the next year.

Although legal expenses are a drag on Tully's bottom line, the lawsuit will not hurt its proposed offering, O'Keefe said.

Still, investors worry about Tully's inability to turn a profit since it was founded in 1992, except for the quarter it sold its Japan operation.

"I don't know how you sell shares if you can't make money," said Patrick Kelly, of Mount Vernon, who holds about 2,400 shares that he bought for $1 or $1.25 a share.

Jim Pittman, a stockholder from Redmond, also is skeptical.

"Until you've got the cash in hand, talk is cheap," Pittman said. "There are great people behind it, and it looks like they're going there, but the smallest little thing can shut it down."

Melissa Allison: 206-464-3312 or mallison@seattletimes.com