Matrixx claims to have had extraordinary sales and profits this last quarter considering they lost their main sales item. Upon review of the earnings call transcript,
Upon reviewing the earnings call transcript I came across an item that I am puzzled about. On page 8, the answer to Kevin Kendra's question said that the 4th quarter is traditionally when the company works down the inventory and converts the accounts receivables to cash.
Now my knowledge in this area is very limited but I believe that a great deal of product is sent to the retail outlets on a type of consignment type, guaranteed sales program. What these usually mean is tha tthe product is not paid for initially but is provided on a post dated invoice. Then, if the product is not sold by a certain date, the product is guaranteed to be returnable to Matrixx for a full credit and the retailer is credited and Matrixx is never paid for those items.
What I wonder is if a large amount of Matrixx's 3rd quarter sales product was shipped under these type of programs, then were the profits reported for the 3rd quarter maybe not real profits if a lot of that product were returned in the 4th quarter when the unsold product of these promotion consignment program merchandise are returned and taken off the accounts receivable. What would be nice to know is if the 3rd quarter profit reported was only for sold non-returnable merchandise or the profit if the promotion product sells through at a 100%.

This could be a major concern because in my area, I have gone to several drugstores and grocery stores and the product of Matrixx appears to be stuffed full on the shelves. Very little appears to be sold and none are completely empty spaces on the shelf. None of the products are sold out and most are full as far back on shelf as I could see. except for one of the oral cold products that had a couple of boxes seeming to be missing,
If this is the same everywhere, I wonder if when all of this guaranteed sale product is returned if the sales and profit from those sells will be taken off from the accounts receivable and a huge loss would result in the 4th quarter. If this is the case, then are all of the 3rd quarter profits non existent? I wish I knew if this is how they were computing the sales and profit for the 3rd quarter.
Each of you should go check the product level on the shelves in your area. I would be interested in the status in other areas.

All of this is conjecture on my part as how they have calculated the 3rd quarter sales and profits and whether these sales are refundable. Wish some of the so called expert analyst would have asked this on the earnings call.

If anyone else has any thought or imput on this I would be very interested.

I am currently short and am very strong sell on this. If I was 100% sure that this is how the 3rd quarter profits were calculated I would load up on puts before the 4th quarter results are announced.