Tuesday, 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.
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.]
Historically, Green Mountain has simply said that “management will review” results “and discuss future prospects” during a call that will last “about an hour."
Now it says that it 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. As a result of publishing prepared remarks in advance of the live call, the conference call will include only brief remarks by management followed by a question and answer session.”
Did I mention they said “prepared remarks?” The significance is this: the wording sounds very legal...
More significant, perhaps: Whither the 10-K? While the company mentions an 8-K, which is used to disseminate important information, there is no mention of the release of an annual 10-K.
Green Mountain’s 10-K report was due on November 24, 2010. On that same day, the company filed a Form 12b-25 with the SEC notifying it that Green Mountain will file its 10-K report 15 days late on December 9, 2010:
As described in the current report on Form 8-K dated November 19, 2010, the board of directors of Green Mountain Coffee Roasters, Inc. (the “Company”), based on the recommendation of the audit committee and in consultation with management, has concluded that, because of errors identified in the Company’s previously issued financial statements for the fiscal years ended September 29, 2007, September 27, 2008 and September 26, 2009 and the first three fiscal quarters of 2010, the Company will restate its previously issued financial statements, including the quarterly data for fiscal years 2009 and 2010 and its selected financial data for the relevant periods.
The restatement process has resulted in delays in obtaining and compiling the business and financial data necessary to complete the restatement and prepare the Company’s financial statements for the fiscal year ended September 25, 2010. However, the Company continues to expect to file its annual report on Form 10-K for the fiscal year ended September 25, 2010, including all restated financial statements, by no later than the fifteenth calendar day following the prescribed due date of November 24, 2010, or December 9, 2010. [emphasis added]
So Green Mountain, which previously stated it was going to file the 10-K by December 9, 2010, may be backing out of that with some legalistic language that makes it unclear to the average reader. Company press releases are usually checked and re-checked by attorneys before issuance, and changes in language are often done on purpose. The 8-K that it is preparing to file is not the same as the annual report, the 10-K, which is required. Does this mean that the 10-K will be delayed again?
Is the company buying time with its press release rather than filing its 10-K? The market doesn't seem to care as the stock rallied 7% Tuesday. Maybe, it’s because investors think that Green Mountain's problems with an SEC inquiry are over.
For example, Tuesday, Michael Baron from the Street.com reported that:
Green Mountain shares jumped following the announcement of the restatement as the market fears of problems related to M.Block & Sons, the fulfillment vendor for most of the at-home orders of Green Mountain's Keurig business unit's single-cup business, proved unfounded. [emphasis added.]
On November 19, 2010, Green Mountain claimed that its internal investigation found no wrongdoing in connection with recent restatements:
The internal investigation is nearly complete, and the Company continues to cooperate fully with the SEC. None of the financial statement errors implicate misconduct with respect to the Company or its management or employees. In addition, none of the financial statement errors are related to the Company’s relationship with M.Block & Sons, the fulfillment vendor through which the Company makes a majority of the at-home orders for the Keurig business unit’s single-cup business sold to retailers. [emphasis added.]
It is premature for Green Mountain to proclaim the absence of any wrongdoing while the SEC inquiry is still ongoing and it admits that its own internal investigation is not fully completed. The SEC inquiry began on September 20 and has not been concluded. That statement will come back to haunt Green Mountain if the SEC decides to conduct a formal investigation.
In any case, I am naturally suspicious of self-proclaimed absences of wrongdoing without thorough outside independent examination. Back in the old days at Crazy Eddie, we conducted a similar internal inquiry with help from our auditors into certain allegations of wrongdoing involving a supplier and proclaimed ourselves clean... Management and auditors have little incentive to report their own foul-ups.
I asked Sam Antar about Green Mountain's earnings call announcement and Herb Greenberg's recent comments. Antar replied:
It appears that Green Mountain's lawyers are being extra careful to choreograph and sanitize all information while the SEC inquiry continues. It sends the subtle signal that they are concerned about the SEC inquiry and that the company is far from being out of the woods.
My personal guess is that the SEC may start a formal investigation. With a formal investigation, the SEC can take testimony from witnesses such as Green Mountain's officers and employees of M. Block & Sons and subpoena documents from them.
Whether or not Green Mountain files its 10-K report on December 9, the SEC inquiry will continue to leave uncertainty for investors. As for the 10-K, we'll see today.