This excerpt taken from the GMCR 10-Q filed Aug 10, 2005.
The Company relies on a single third party supplier for its integrated software management system that is integral to the success and operation of the Company.The Company relies on PeopleSoft (recently acquired by Oracle Incorporated) and its employees and subcontractors in connection with its software management system that is essential to the Company's operations, including without limitation accounting, inventory, and sales. If PeopleSoft (now part of Oracle) was to experience financial, operational, or quality assurance difficulties, or if there were any other disruption in the Company's relationship with PeopleSoft, the Company may decide to purchase and/or implement a new software management system, which could have a material adverse effect on the Company.
With the continued significant increase in the sales of K-CupsÒ for the KeurigÒ Single Cup Brewers, the Company may not be able to increase K-cup manufacturing capacity in time to keep up with sales volume.
The demand for K-Cups is expected to continue to increase rapidly driven by the growth in sales of Keurig brewers to offices and homes and by continued success of teas in K-Cups. The Company has reached maximum K-Cup manufacturing capacity at its Waterbury facility and is currently adding additional K-cup manufacturing capacity. Although the Company is in the process of adding additional K-cup manufacturing capacity that would be adequate to meet the anticipated demand, there is a risk that K-cup manufacturing capacity will not be brought fully online to meet short-term sales demand.
Because a substantial portion of the Company's business is based in New England, a worsening of the regional New England economy, a decrease in consumer spending or a change in the competitive conditions in this market may substantially decrease the Company's revenue and may adversely impact the Company's ability to implement its business strategy.
Coffee pounds shipped to customers in New England accounted for 43% of the Company's total pounds shipped in 2004. The Company expects that its New England operations will continue to generate a substantial portion of its revenue. An economic downturn or other decrease in consumer spending in New England may not only lead to a substantial decrease in revenue, but may also adversely impact the Company's ability to market its brand, build customer loyalty, or otherwise implement its business strategy and further diversify the geographical concentration of its operations.
Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on the Company's business and the market price of the Company's Common Stock.
The Company is in the process of implementing the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires management to assess the effectiveness of the Company's internal controls over financial reporting and include an assertion in the Company's annual report as to the effectiveness of its controls. Subsequently, the Company's Registered Public Accounting Firm, PricewaterhouseCoopers LLP, will be required to attest to whether the Company's assessment of the effectiveness of its internal controls over financial reporting is fairly stated in all material respects and separately report on whether it believes the Company maintained, in all material respects, effective internal controls over financial reporting as of September 24, 2005.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
31.1 Principal Executive Officer Certification Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to the Section 302 of the Sarbanes-Oxley Act of 2002.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GREEN MOUNTAIN COFFEE ROASTERS, INC.