Green Mountain Shares Plummet After $4.4 Million Accounting Error Is Revealed

Green Mountain Coffee Roasters' (GMCR) stock plummeted 17.4% to as low as $30.55 in morning trading Wednesday after the company announced that it had discovered accounting errors dating back to 2007, and that the Securities and Exchange Commission had started a probe. Green Mountain said the accounting error produced an overall overstatement in net income of $4.4 million, or 3 cents a share, as of June 26.

The accounting error was discovered when Green Mountain's management was preparing its fourth-quarter financial results. The company found that it had been overstating its consolidated inventory and understating its cost of sales relating to its Keurig business unit. That business unit handles Green Mountain's K-Cup inventory, according to its SEC filing.

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According to the company, the error traces back to fiscal 2007, and Green Mountain applied its impact from that point forward. The company said the damage was not great enough to any one quarter or year to be retroactively applied: Instead, the cumulative effect will be reflected in the numbers for the last quarter, which ended Saturday.

SEC officials contacted Green Mountain early last week, saying Commission was conducting an inquiry and wanted various documents and information. Green Mountain says it believes regulators are focusing on how and when it accounts for its revenues and its relationship with one of its vendors that fulfills its orders.

For Green Mountain, the discovery of this error is occurring at an already busy time. Just two weeks ago, the company announced plans to acquire gourmet coffee roaster Van Houtte in an $891 million deal.