Posts Tagged ‘Green Mountain Coffee Roasters’

Green Mountain Coffee Roasters: Calling a Bean, a Bean

To Err is Human, To Disclose Divine.

Courtesy of Sam E. Antar with Ilene

Green Mountain Coffee Roasters (NASDAQ: GMCR) is currently under the scrutiny of the Securities and Exchange Commission (SEC) and is facing numerous class action lawsuits alleging securities fraud. In particular, plaintiffs are alleging false and misleading disclosures in violation of federal securities laws.

One troubling issue is that when Green Mountain initially discover accounting errors and disclosed them, concerning its K-Cup margin percentages, it claimed that the error was “immaterial.” Material and immaterial errors are treated differently.  If an accounting error is immaterial, a public company is required to correct it by making a one-time cumulative adjustment to earnings in the latest quarter. If an accounting error is material, a public company is required to notify investors that its previous financial reports cannot be relied on and that it will restate its affected financial reports to correct that error.

Background

On Monday, September 20, 2010, the SEC notified Green Mountain Coffee Roasters that it was conducting an informal inquiry. It requested 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. In that 8-K report, Green Mountain also disclosed that it discovered an "immaterial accounting error" affecting financial reports issued from 2007 to June 26, 2010:

In connection with the preparation of its financial results for its fourth fiscal quarter, the Company’s management discovered an immaterial accounting error relating to the margin percentage it had been using to eliminate the inter-company markup in its K-Cup inventory balance residing at its Keurig business unit. Management discovered that the gross margin percentage used to eliminate the inter-company markup resulted in a lower margin applied to the Keurig ending inventory balance effectively overstating consolidated inventory and understating cost of sales. Management determined that the accounting error arose during fiscal 2007 and analyzed the quantitative impact from that point forward to June 26, 2010.


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Green Mountain Coffee Roasters, Time to Spill the Beans?

Going through the SEC filing and press releases by Green Mountain Coffee Roasters led Sam Antar to ask Green Mountain Coffee Roasters, Time to Spill the Beans? Specific dates would make a good first step. – Ilene 

Courtesy of Sam Antar, White Collar Fraud

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 "immaterial accounting error" affecting financial reports issued from 2007 to 2010: 

In connection with the preparation of its financial results for its fourth fiscal quarter, the Company’s management discovered an immaterial accounting error relating to the margin percentage it had been using to eliminate the inter-company markup in its K-Cup inventory balance residing at its Keurig business unit. Management discovered that the gross margin percentage used to eliminate the inter-company markup resulted in a lower margin applied to the Keurig ending inventory balance effectively overstating consolidated inventory and understating cost of sales. Management determined that the accounting error arose during fiscal 2007 and analyzed the quantitative impact from that point forward to June 26, 2010.

As of June 26, 2010, there is a cumulative $7.6 million overstatement of pre-tax income. Net of tax, the cumulative error resulted in a $4.4 million overstatement of net income or a $0.03 cumulative impact on earnings per share.

After evaluating the quantitative and qualitative aspects of the error in accordance with applicable accounting literature, including Staff Accounting Bulletins published by the SEC, the Company, with the participation of the audit committee of the Board of Directors,


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Interesting Issues in Timing of Green Mountain Insider Stock Sales and Disclosure of SEC Inquiry

Interesting Issues in Timing of Green Mountain Insider Stock Sales and Disclosure of SEC Inquiry

Courtesy of Sam Antar at White Collar Fraud 

Interesting timing

On Monday, September 20, 2010, Green Mountain Coffee Roasters (NASDAQ: GMCR) was notified of a Securities and Exchange Commission informal inquiry and request for voluntary information concerning ìrevenue recognition practices and the Companyís relationship with one of its fulfillment vendors.î

On Tuesday, September 21, 2010, executive officer Michelle Stacy exercised 5,000 options and immediately sold her shares at $37 per share. Of the 5,000 shares bought and sold, options for 4,375 shares did not expire until November 3, 2018 and options for 625 shares did not expire until March 12, 2019. What was the urgency in exercising her options so soon?

After the stock market closed on September 28, 2010, Green Mountain finally disclosed the SEC inquiry to investors in an 8-K filing which included certain other material disclosures.

On September 29, 2010, Green Mountain stock dropped $5.95 per share to close at $31.06 per share, a 16.1% drop in market value that day.

According to the SEC:

Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information.

Michelle Stacy will have to answer questions about the timing of her option exercise and simultaneous sale of stock after Green Mountain received notice of the SEC inquiry, but before the company disclosed it to investors. The SEC might want to find out if Stacy any prior knowledge of  the SEC inquiry when she sold her stock before it was disclosed to investors.

Will Stacy claim that even though she is among the five most highly-paid executive officers of the company and is President of its key Keurig business segment, that she did not know anything about the SEC inquiry and her sale of stock was a mere coincidence?

Green Mountain Coffee Roasters Code of Ethics

According to Green Mountainís Code of Ethics:

As a publicly traded company, GMCR is required to adhere to federal laws and regulations prohibiting the disclosure of "insider


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DARK HORSE HEDGE – One More Cup of Coffee Before You Go, GMCR

DARK HORSE HEDGE – One More Cup of Coffee Before You Go, GMCR

Cup of espresso and cookie

By Scott Brown at Sabrient, and Ilene at Phil’s Stock World

Your sister sees the future
Like your momma and yourself
You’ve never learned to read or write
There’s no books upon your shelf

And your pleasure knows no limits
Your voice is like a meadowlark
But your heart is like an ocean
Mysterious and dark

One more cup of coffee for the road
One more cup of coffee ‘fore I go
To the valley below – Bob Dylan

Green Mountain Coffee Roasters (GMCR) doesn’t at first glance seem like the type of company that would need to be “mysterious and dark” but when “pleasure knows no limits” it can down into a metaphorical valley.  How does GMCR, engaged in the specialty coffee and coffee maker businesses, churning out quarterly profits that meet analyst expectations while growing at 61% per year over the past five years, and expected to grow another 35% over the next five years, end up at #18 on the Sabrient VCU short ranking? 

The fact that Michelle Stacy, President of Keurig (patented single cup brewing technology for GMCR), exercised 30,000 options at $6.20 on August 13, 2010 and  simultaneously sold the shares on the open market at $30.95 for gross proceeds of $928,500, again exercised 5,000 options at $6.20 on September 13, 2010 and simultaneously sold the shares on the open market at $35.40 for gross proceeds of $177,000 and a week later exercised another 5,000 shares from $6.20-$9.14 and simultaneously sold the shares on the open market at $37 for gross proceeds of $185,000 alone isn’t enough to raise any eyebrows or red flags.

There are many reasons that insiders may sell shares which have nothing to do with their perception of the company’s prospects or valuation.   However, when a week after the last insider sale the company discloses that the SEC is inquiring into the company’s methods for accounting for revenues, it starts to look a bit more dark and mysterious.   It is worth noting that Keurig accounted for over half of GMCR revenue last year, so when the President of Keurig is selling, it is worth a further look.  When the SEC discloses an inquiry into the companies accounting it is…
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DARK HORSE HEDGE – One More Cup of Coffee Before You Go, GMCR

Reminder: Sabrient is available to chat with Members, comments are found below each post.

DARK HORSE HEDGE – One More Cup of Coffee Before You Go, GMCR

 

By Scott Brown at Sabrient, and Ilene at Phil’s Stock World

Your sister sees the future
Like your momma and yourself
You’ve never learned to read or write
There’s no books upon your shelf

And your pleasure knows no limits
Your voice is like a meadowlark
But your heart is like an ocean
Mysterious and dark

One more cup of coffee for the road
One more cup of coffee ‘fore I go
To the valley below – Bob Dylan

Green Mountain Coffee Roasters (GMCR) doesn’t at first glance seem like the type of company that would need to be “mysterious and dark” but when “pleasure knows no limits” it can down into a metaphorical valley.  How does GMCR, engaged in the specialty coffee and coffee maker businesses, churning out quarterly profits that meet analyst expectations while growing at 61% per year over the past five years, and expected to grow another 35% over the next five years, end up at #18 on the Sabrient VCU short ranking? 

The fact that Michelle Stacy, President of Keurig (patented single cup brewing technology for GMCR), exercised 30,000 options at $6.20 on August 13, 2010 and  simultaneously sold the shares on the open market at $30.95 for gross proceeds of $928,500, again exercised 5,000 options at $6.20 on September 13, 2010 and simultaneously sold the shares on the open market at $35.40 for gross proceeds of $177,000 and a week later exercised another 5,000 shares from $6.20-$9.14 and simultaneously sold the shares on the open market at $37 for gross proceeds of $185,000 alone isn’t enough to raise any eyebrows or red flags.

There are many reasons that insiders may sell shares which have nothing to do with their perception of the company's prospects or valuation.   However, when a week after the last insider sale the company discloses that the SEC is inquiring into the company's methods for accounting for revenues, it starts to look a bit more dark and mysterious.   It is worth…
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Phil's Favorites

The COVID Comeback

 

The COVID Comeback

Courtesy of Wade Slome, Investing Caffeine

Rocky Balboa (“The Italian Stallion”) the underdog boxer from the movie, Rocky, was down and out until he was given the opportunity to fight World Heavyweight Champion, Apollo Creed. Like the stock market during early 2020, Rocky was up against the ropes and got knocked down, but eventually he picked himself up and rebounded to victory in his rematch with Creed.

The stock market comeback also persisted last month as th...



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Biotech/COVID-19

Antibody injections could fight COVID-19 infections - an infectious disease expert explains the prospects

 

Antibody injections could fight COVID-19 infections – an infectious disease expert explains the prospects

Antibodies (pink) attacking a virus particle (blue). STEVEN MCDOWELL/SCIENCE PHOTO LIBRARY

Courtesy of Dimiter Stanchev Dimitrov, University of Pittsburgh

Antibodies are part of us – literally.

We have billions of them in our bodies with a combined weight of about 100 grams, or about the weight of a bar of soap. If there are so many antibodies inside our b...



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Zero Hedge

Chicago May Delay Reopening Because Of Riots: Virus Updates

Courtesy of ZeroHedge View original post here.

Summary:

  • Chicago may delay reopening
  • Florida reports jump of just 0,.4%
  • India now home to world's 7th biggest outbreak
  • Brazil passes 500k cases
  • Russia reports highest jump in new cases in weeks as easing begins
  • UK begins unwinding lockdown as daily deaths slow
  • Japan mulls plan to let some tourists back in

* * *

Update (1215E...



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ValueWalk

How Can We Address the Cybersecurity Skills Gap?

By Dale Strickland. Originally published at ValueWalk.

A 2019 report from Burning Glass noted a 94% growth in the number of cybersecurity job postings since 2013. Unfortunately, the available pool workers with the cybersecurity skills needed to fulfill these roles has risen in proportion, creating a significant gap. What can be done to increase the available pool of candidates?

Q1 2020 hedg...



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Chart School

Silver volume says something is near boiling point

Courtesy of Read the Ticker

Fundamentals are important, but they must show up in the chart. And when they do and if they may matter, it is a good sign if price and volume waves show a change of character.

The Point and Figure chart below is readtheticker.com version of PnF chart format, it is designed to highlight price and volume waves clearly (notice the Volume Hills chart).

Silver ETF volume is screaming at us! The price volatility along with volume tells us those who have not cared, are starting to, those who are wrong are adjusting, and those who are correct are loading up. Soon the kettle will blow and the price of silver will be over $20. 

Normally silver suffers in a recession, maybe this time with trillions of paper money being creat...

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Kimble Charting Solutions

Tech Indicator Suggesting A Historic Top Could Be Forming?

Courtesy of Chris Kimble

Tech stocks have been the clear leader of the stock market recovery rally, this year and since the lows back in 2007!

But within the ranks of leadership, and an important ratio may be sending a caution message to investors.

In today’s chart, we look at the ratio of large-cap tech stocks (the Nasdaq 100 Index) to the broader tech market (the Nasdaq Composite) on a “monthly” basis.

The large-cap concentrated Nasdaq 100 (only 100 stocks) has been the clear leader for several years versus the ...



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The Technical Traders

M2 Velocity Collapses - Could A Bottom In Capital Velocity Be Setting Up?

Courtesy of Technical Traders

M2 Velocity is the measurement of capital circulating within the economy.  The faster capital circulates within the economy, the more that capital is being deployed within the economy to create output and opportunities for economic growth.  When M2 Velocity contracts, capital is being deployed in investments or assets that prevent that capital from further circulation within the economy – thus preventing further output and opportunity growth features.

The decline in M2 Velocity over the past 10+ years has been dramatic and consistent with the dramatic new zero US Federal Reserve interest rates initiated since just after the 2008 credit crisis market colla...



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Lee's Free Thinking

US Southern States COVID19 Cases - Let's Give Credit Where Due

 

US Southern States COVID19 Cases – Let’s Give Credit Where Due

Courtesy of  

The number of new COVID 19 cases has been falling in the Northeast, but the South is not having the same experience. The number of new cases per day in each Southern state has been rangebound for the past month.

And that’s assuming that the numbers haven’t been manipulated. We know that in Georgia’s case at least, they have been. And there are suspicions about Florida as well, as the State now engages in a smear campaign against the fired employee who built its much praised COVID19 database and dashboar...



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Digital Currencies

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

 

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

App-etising? LDprod

Courtesy of Michael Rogerson, University of Bath and Glenn Parry, University of Surrey

Food supply chains were vulnerable long before the coronavirus pandemic. Recent scandals have ranged from modern slavery ...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

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Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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