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A Question for Green Mountain Coffee Roasters

To CFO Francis G. Rathke:

While Green Mountain Coffee Roasters (NASDAQ: GMCR) is handling matters relating to the Securities and Exchange Commission inquiry, can you please clear up some confusion in two financial disclosures from the 10-K report below?

10-K report - page 33
Gross ProfitFiscal 2010 Company gross profit for fiscal 2010 totaled $425.8 million, or 31.4% of net sales, as compared to $245.4 million, or 31.2% of net sales, in fiscal 2009. Gross margin increased over fiscal 2009 due to the additional manufacturing margin resulting from the acquisition of Timothy’s and Diedrich, and realized manufacturing efficiencies within SCBU. These increases in gross margin were offset by higher brewer sales returns and warranty expense. In fiscal 2010, the Company was able to recover approximately $6.0 million as reimbursement from its suppliers related to a quality issue associated with certain brewer models produced primarily in late calendar 2009. The quality issue did not represent a …

Green Mountain Coffee’s financial reporting doesn’t taste as good as its coffee

On Thursday, December 9, 2010 at 5:30 PM Eastern, Green Mountain Coffee Roasters (NASDAQ: GMCR) held its Q4 2010 conference call to review its "financial results for its fiscal 2010 fourth quarter and full year.” About an hour before the call, management issued “prepared remarks” which were made available to investors in an 8-K report filed with the Securities and Exchange Commission. The company also filed its annual 10-K report for fiscal year 2010, after receiving a two week extension.

No quick resolution to SEC inquiry

In its prepared remarks, management continued to express hopes for a quick resolution to the SEC inquiry:
We continue to cooperate fully, timely and voluntarily with the SEC in response to its inquiry as we would like to move the inquiry along as quickly as possible. We are fully responding to all information requests. However, management expressed disappointment that:
Nevertheless, we do not control the timing of the process. Just last week, I told Ilene, Phil’…

To Green Mountain Coffee Roasters: My Questions for Today's Earnings Call (updated)

Update: After publishing the blog post below, I sent another email to Kathleen Shaffer from Green Mountain's investor relations alerting her to my questions. According to my Active Meter, Site Meter, and Google Analytics software, Green Mountain read this blog post 12 times before Thursday's conference call with investors and ignored my requests to participate in the call and for it to answer certain questions about its accounting errors.

Green Mountain Coffee Roasters (NASDAQ: GMCR) is scheduled to hold a conference call with investors and analysts today at 5:30 PM ET to discuss the status of an informal SEC inquiry, its restatement of financial reports from 2007 to 2010 due to certain accounting errors, and its "financial results for its fiscal 2010 fourth quarter and full year."

In a previous blog post, I raised certain issues:
To truly exonerate itself after the discovery of certain material violations of Generally Accepted Accounting Principles (GAAP), Green Mou…

Green Mountain Coffee Roasters, Slow Murky Drip

Below is an article written by Phil's Stock World and Seeking Alpha contributor Ilene with my assistance. She asked me about Herb Greenberg's article on Green Mountain Coffee Roasters.

Yesterday, CNBC Senior Stock Commentator Herb Greenberg wrote a brief article on Green Mountain Coffee (NASDAQ: GMCR), pointing out that the language in its press release on Monday, December 6, 2010, has changed and, it appears, the company may have backed off its previous commitment to release its 10-K report by the December 9, 2010 due date.

Green Mountain’s Monday press release contained new language not found in previous press releases:
In conjunction with this announcement, GMCR will publish management’s prepared remarks on its quarterly and annual results. These prepared remarks will be provided via a Current Report on Form 8-K and also posted under the events link in the Investor Relations section of the Company’s website at www.GMCR.com. [emphasis added.] Herb writes:
Historically, Green…

Green Mountain Coffee Roasters, Time to Spill the Beans?

To truly exonerate itself after the discovery of certain material violations of Generally Accepted Accounting Principles (GAAP), Green Mountain Coffee Roasters (NASDAQ: GMCR) needs to come clean with investors and disclose exactly when it found certain accounting errors. In addition, Green Mountain needs to provide clearer and more transparent disclosures to investors about the Securities and Exchange Commission (SEC) inquiry and the discovery of those errors.

Timing of certain disclosures

On Monday, September 20, 2010, the SEC notified Green Mountain Coffee Roasters that it was conducting an informal inquiry and requested it voluntarily submit information concerning “revenue recognition practices and the Company’s relationship with one of its fulfillment vendors.”
Eight days later, on September 28, 2010, Green Mountain surprised investors by disclosing news of the SEC inquiry in an 8-K filing with the SEC. In that same 8-K report, Green Mountain disclosed that it discovered an "i…

California District Attorneys Sue Overstock.com for Defrauding Consumers While the SEC Finds New Disclosure Problems

Last week, district attorneys from seven California counties sued Overstock.com (NASDAQ: OSTK) alleging that the company has engaged in fraudulent pricing practices after a two year investigation. The lawsuit alleges that:
9. Beginning on a date no later than January 1, 2006, Overstock routinely and systematically made untrue and misleading comparative advertising claims about the prices of its products.

[Snip]

11. …Overstock used various misleading measures to inflate the comparative prices, and thus artificially increase the discounts it claimed to be offering consumers.

[Snip]

22. Often Overstock has not been determining or verifying the price other merchants charge for those identical products. Rather, Overstock has been using various misleading methods to make up its own “straw-man” prices which it claims other merchants are charging for those products, and then claiming that its own prices are significantly lower.

23. Overstock has advertised comparative prices which do not exis…