This explains the dump today. GAAP-uccino Page 91, Field Interviews - It was difficult to understand how GMCR sold the extra $100 million of K-cups in the June 2011 Quarter It was alleged in a class action lawsuit filed earlier this year (1): âCW1 [Confidential Witness One] indicated that GMCR improperly recognized revenue on 150 truck loads of product that was shipped to MBlock during the quarter ended December 26, 2009. This former GMCR manager stated that he/she and other Company employees, including the Company's global transportation manager, were unable to locate the requisite paperwork, including purchase orders, material requisition orders, or product shipment authorizations, traditionally used by GMCR to validate the sale. Specifically, CW1 indicated that because there was no order for those products, no payment was ever made on the 150-truckload shipment. In addition, the order was not listed on the Company's production forecast schedule and employees who worked under CW1 not only saw the trucks go out, but visited MBlock and saw its warehouses filled to the rafters with K-cups. CW1, who estimated that the value the revenue recognized on the foregoing improperly recorded transaction to be between $7.5 and $15 million dollarsâ¦â In an effort to determine whether the recent strong results were driven by similar behavior, we interviewed several former GMCR and MBlock workers ⢠The workers tell consistent stories and paint an unflattering picture of the companies ⢠The research shows that Green Mountain and MBlock are potentially engaged in a variety of shenanigans that appear designed to mislead auditors and to inflate financial results Both GMCR and MBlock use sub-standard IT systems. Important functions including inventory management are performed in Excel spreadsheets which are easy to change, provide non-standardized analysis, and are prone to material error. ⢠Suggestions to improve operations through the use of technology are met with resistance inside both organizations ⢠The Accounting Department at GMCR uses many temporary workers and makes extensive use of college âco-opâ students instead of hiring full time accountants ⢠Former workers believe that though no reason was given, they were fired for asking too many questions Bonuses were based on overall K-cup production, rather than on total revenue/sales This has led to excess production and related inventory and spoilage problems ⢠There is a lot of cross-shipping. Product is transferred from one facility to another, often multiple times PeopleSoft function to fulfill orders from multiple locations was never implemented Deliberate overproduction of K-cups and refusal to ship from multiple locations gave cover for a âshell game that Green Mountain was playing across all its facilities.â âWe would do more transferring of inventory than we physically did shipping⦠Keurig would ship stuff to themselves, I mean truckloads of stuff theyâd ship [from MBlock] to themselves.â Peculiar relationship between GMCR and its distributors âIt was clear that Keurig and Green Mountain control MBlock.â âNobody in that warehouse can tell you what is MBlockâs, what is Keurig, what is Green Mountainâs, nobody can tell you that. I honestly donât think the owner of MBlock can tell you that.â ⢠Odd material movements at distributors Kenco trucker allegedly reported delivering merchandise to Kenco, picking it up later on, sealing the truck, and delivering it 10 bay doors down at the same warehouse Excess production⦠â⦠he was the manager of demand planning. And consistently, his e-mails would talk about how far over the demand forecast actual production was.â ⢠Led to a significant problem with expired coffee MBlock received truckloads of expired coffee directly from Green Mountain Channel checks have identified significant amounts of retail product with short shelf-life, and at times even expired product âThese plant managers just kept on saying they have space taken up by the inordinate amount of expired coffee.â âI would have to say at least one third of their warehouse is more than likely expired coffee in all the warehouses.â Irregularities during external inventory audits at MBlock Prior to the inventory audit, âWe would remove product and preload trailer trucks to ship to retailers because we didnât have room on the floor. Then weâd load more product on trailer trucks to nowhere to move it off the floor.â The warehouse was partially cleared prior to an audit, leaving a skeleton inventory of ~50%. Inventory was loaded onto trucks, which sat in the docks and was never counted. Sometimes after the audit, the product would simply be moved back into the warehouse. Immediately prior to an audit, 500,000 brewers were inventoried and processed as an order for QVC. The brewers were never shipped, and after the audit, the inventory was restocked.
there is an article somewhere on clusterstock about this gives Einhorns 100 page presentation too lazy to look it up. This was public information a month ago. I like the part about moving the coffee from storage building a to storage building b to avert the auditor, good times!
"Prior to the inventory audit, âWe would remove product and preload trailer trucks to ship to retailers because we didnât have room on the floor. Then weâd load more product on trailer trucks to nowhere to move it off the floor.â The warehouse was partially cleared prior to an audit, leaving a skeleton inventory of ~50%. Inventory was loaded onto trucks, which sat in the docks and was never counted. Sometimes after the audit, the product would simply be moved back into the warehouse. Immediately prior to an audit, 500,000 brewers were inventoried and processed as an order for QVC. The brewers were never shipped, and after the audit, the inventory was restocked." You can't make this shit up. God bless the field auditors, what a thankless job these poor bastards have.
been saying for years that the kcup biz was a scam imprisoning $5 a lb coffee in plastic and charging $35 a lb for it is not a biz model wtf were you thinking?
No different from imprisoning a fraction of a cent worth of carbonated sugar water in a .05 aluminum can and charging .50 for it. Been a rock solid business model for years. What was with that 120+ P/E ratio they had going not long ago? I figured the K-Cups were a cure for both cancer and erectile dysfunction the way that stock price was running after the split. HANS has a P/E of 20; KO just 12 and they pay a dividend. I guess those K-Cups were the tulip craze of our decade :eek: