Skip to main content

Is Green Mountain Coffee Roasters Fudging Its Reserve Numbers?

Updated to include links to follow up articles by Seven Days and Forbes at bottom of blog post

Green Mountain Coffee Roasters (NASDAQ: GMCR) finally released additional information about its accounting for reserves to all investors in its website, in response to my letter to the Securities and Exchange Commission detailing what I believe are violations of Regulation FD  and accounting irregularities by the company. The company admitted its reserve numbers were "misinterpreted" because of inconsistent reporting in its Statement of Cash Flows. However, its numbers still don't add up. See below (Click on image to enlarge):



Note: The change is sales returns reserve is rounded to $5.3 million. The 10-Q report for the period ended March 26, 2011 reflects the exact amount of $5.262 million.

Green Mountain Coffee reported separate balances for its sales returns reserve and its allowance for doubtful accounts in the fiscal year ended September 25, 2010 10-K of $12.742 million and $1.314 million, respectively. However, the company combined the balances of its sales returns reserves and allowance for doubtful accounts in its Balance Sheet disclosures in its subsequent 10-Q reports for the periods ended December 25, 2010 and March 26, 2011.

The 10-Q report for the twenty-six week period ended March 26, 2011 shows a combined beginning balance of both reserves totaling $14.056 million and a combined ending balance totaling $20.565 million. See excerpt from Balance Sheet below (Click image to enlarge):


In its March 26, 2011 10-Q , Green Mountain Coffee reported $5.262 million of "sales returns" and $0.400 million as “Bad debts” in its Statement of Cash Flows for the twenty-six week period ended March 26, 2011. Those amounts reflect the change in their respective reserve balances for the twenty-six week period ended March 26, 2011. See excerpt from Statement of Cash Flows below (Click on image to enlarge):


The total increase in both reserves should be $5.662 million ($5.262 million plus $0.400 million). However, according to the Balance Sheet in the March 26, 2011 10-Q report, the combined amount of both reserves increased $6.509 million during the twenty-six week period (ending balance of $20.565 million minus beginning balance of $14.056 million). Therefore, there is a $0.847 million discrepancy in the company’s reserve numbers.

See my calculations below (Click on image to enlarge):


The numbers add up for the previous year's twenty-six week period ended March 27, 2010, but don't add up for the current year's period ended March 26, 2011.

Other discrepancies

The income statement numbers for the thirteen-weeks ended December 25, 2010 and the thirteen-weeks ended March 26, 2011 don't add up to the totals for the twenty-six weeks ended March 26, 2011 in the latest 10-Q report. See my calculations below (Click on image to enlarge):


Is Green Mountain Coffee fudging the numbers? Numbers are supposed to add up, but at this company they apparently don't. Even small discrepancies raise red flags that there may be deeper problems underneath the surface.

Written by:

Sam E. Antar

Update

June 15, 2011: Seven Days - An Ex-Con Turned Accounting Expert Alleges "Irregularities" at Green Mountain Coffee by Andrew Bromage

June 23, 2011: Forbes - Green Mountain Coffee’s Trouble With Bean Counting by Christopher Faille

Recommended Reading

June 6, 2011: The Financial Investigator - GMCR: From Small Beans Big Trouble One Day Brews by Roddy Boyd

Recommended Video

My appearance today on Fox Business channel's Varney & Company to discuss investor fraud in China

Disclosure

I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped my cousin Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes in cold-blood for fun and profit, and simply because I could.

If it weren't for the heroic efforts of the FBI, SEC, Postal Inspector's Office, US Attorney's Office, and class action plaintiff's lawyers who investigated, prosecuted, and sued me, I would still be the criminal CFO of Crazy Eddie today.

There is a saying, "It takes one to know one." Today, I work very closely with the FBI, IRS, SEC, Justice Department, and other federal and state law enforcement agencies in training them to identify and catch white-collar criminals. Often, I refer cases to them as an independent whistleblower. I teach about white-collar crime for government entities, professional organizations, businesses, and colleges and universities.

Recently, I exposed GAAP violations by Overstock.com which caused the company to restate its financial reports for the third time in three years. The SEC is now investigating Overstock.com and its CEO Patrick Byrne for securities law violations (Details here, here, and here).

I do not seek or want forgiveness for my vicious crimes from my victims. I plan on frying in hell with other white-collar criminals for a very long time.

I do not own any Green Mountain Coffee Roasters or Overstock.com securities long or short. My investigations of these companies are a freebie for securities regulators to get me into heaven, though I doubt I will ever get there. My past sins are unforgivable.

Comments

Sellputs said…
This company has smelled of rancid beans for years now...
Econmom said…
I am have been shorting this name through put options, just finishing up an auditing class and, well...thanks for the research, something definitely stinks here.

Popular Posts

Did a Clever SEC Bait Goldman Sachs into Compounding Its Legal Problems With the "Kiss of Death" Message?

Updated: At 3:48 AM ET 04/20/2010 on bottom

The Kiss of Death

In filing its lawsuit against Goldman Sachs (NYSE: GS) on a Friday, the Securities and Exchange Commission sent what I call the "kiss of death" message to the embattled company. In other words, the SEC wanted to stick it to Goldman Sachs and Fabrice Tourre, the Executive Director of Goldman Sachs International, who is also a defendant in the complaint. While the SEC as a practice does inform target companies and individuals of an impending enforcement action, it does not always tell them exactly when such an action will be filed.

Apparently, the SEC filed its lawsuit without giving Goldman Sachs the heads up that it was planning to file it that day. Business Insider observed that Goldman Sachs was clearly unprepared to respond to the complaint as news of the lawsuit dominated the headlines all day. Goldman issued a short denial around noon and issued an extensive denial late in the afternoon, after most people had …

Overstock.com CEO Patrick Byrne Sleeps With a Gun

Suggested Reading: Overstock.com Hatchet Man Judd Bagley's Downward Spiral: Junkie, Confessed Criminal, Admitted Adulterer by Sam Antar (here), and Closing the File on a Criminal and Junkie Named Judd Bagley by Gary Weiss (here)

In numerous blog posts in the past, and in widespread media coverage, evidence has accumulated for years that Overstock.com CEO (NASDAQ: OSTK) Patrick Byrne has shown signs of being mentally unbalanced and paranoid.

Byrne has blamed his company's financial woes on an unnamed "Sith Lord." He hired paid goons to stalk his real and imagined adversaries and to write lengthy conspiracy theories on the Internet. Byrne has close ties with Bo Gritz. The Anti-Defamation League lists Bo Gritz as a far-right extremist with “extensive connections to both white supremacists and anti-government groups and leaders.”

Patrick Byrne's infamous temper tantrums when he doesn’t get want he wants are well documented too. He made obscene and misogynistic commen…

Nature's Sunshine Products, Willbros Group, Cal Dive International, and BSQUARE Violate S.E.C. Rules on Calculating EBITDA

Nature’s Sunshine Products (NASDAQ: NATR), Willbros Group (NYSE: WG), Cal Dive International (NYSE: DVR), and BSQUARE (NASDAQ: BSQR) have recently issued earnings reports which include a calculation of EBITDA (earnings before interest, taxes, depreciation, and amortization) that apparently does not comply with Securities and Exchange Commission interpretations for Regulation G governing such non-GAAP financial measures. In each case, their erroneous EBITDA calculations have enabled them to significantly distort their financial performance by erroneously reporting a positive EBITDA, when they should have reported a negative EBITDA in the latest quarter.

How EBITDA is supposed to be calculated under Regulation G

According to the S.E.C. Compliance & Disclosure Interpretations, EBITDA is defined under Regulation G as net income (not operating income) before net interest, taxes, depreciation, and amortization. See below:

Question 103.01Question: Exchange Act Release No. 47226 describes E…

InterOil, John Thomas Financial, and Clarion Finanz: Anatomy of a Stock Market Manipulation Scheme

In this blog post, I will provide evidence of what I believe is a stock market manipulation scheme involving InterOil (NYSE: IOC), John Thomas Financial, and Clarion Finanz AG. I believe that InterOil with the assistance of Clarion Finanz concealed John Thomas Financial’s involvement in helping it raise $95 million through a private placement of convertible debt securities.

Clarion Finanz acted as a buffer between InterOil and John Thomas Financial to help InterOil hide John Thomas Financial's role in raising funds. Afterwards, InterOil filed false and misleading reports with the Securities and Exchange Commission in an effort to conceal John Thomas Financial’s role in helping the company raise $95 million in convertible debt.

Carl Caserta, who in 1991 was barred by the Securities and Exchange Commission from “association with any broker, dealer, or investment advisor” played a role in helping InterOil use John Thomas Financial to obtain funds from investors. InterOil, John Thoma…

Class Action Complaint against Amedisys uses Sarbanes-Oxley Act Corporate Governance Provisions to Battle Alleged Corporate Malfeasance

Updated at bottom of article

Last week, Pomerantz Haudek Grossman & Gross LLP filed a class action lawsuit against Amedisys (NASDAQ: AMED) charging the company, its CEO William F. Borne and its CFO Dale E. Redman with securities fraud.  In the next few days, Bernstein Liebhard LLP and Finkelstein Thompson LLP filed similar class action lawsuits against the company. The lawsuits allege that Amedisys abused Medicare's reimbursement system for at-home therapy care based on a compelling analysis of company revenues in an April 27 Wall Street Journal article.

In addition, the lawsuits innovatively utilize a provision under Section 406 of the Sarbanes-Oxley Act 2002 which provides a back-door way for investors to force ethical corporate governance and sue public companies for malfeasance. That provision requires Senior Financial Officers, such as the CEO and CFO of public companies, to abide by a strict code of ethics which broadly defines corporate malfeasance and effectively makes…