Tully's Coffee Inc.
Announced: September 15, 2008
Closed: March 30, 2009
Total consideration: $40.3 million

Timothy's Coffees of the World, Inc.
Announced: November 13, 2009
Closed: November 13, 2009
Total consideration: $157 million

Diedrich Coffee, Inc.
Tender offer announced: November 23, 2009
Closed: May 11, 2010
Total consideration: $300 million

LJVH Holdings Inc. ("Van Houtte")
Announced: September 14, 2010
Closed: December 17, 2010
Total consideration: $905 million

The Company did not record a reversal of expense related to the provision for sales returns or the sales returns reserve during the quarter ended March 26, 2011.

In the Fiscal 2010 Form 10-K and the Q1 Form 10-Q, the Company reported the sales returns adjustment using the total provision for sales returns or, in other words, the total amount by which net sales for the applicable period were reduced to account for anticipated sales returns. However, during the review process of the Unaudited Statements of Cash Flows for the second quarter of fiscal 2011, management determined that to reflect more appropriately the net cash impact due to sales returns in the line item to reconcile net income to net cash provided by operating activities, it should report the change in the sales return reserve rather than the provision for sales returns.

This adjustment led to a corresponding adjustment of the accounts receivable line item and did not result in the reporting of an incorrect net cash provided by operating activities number in any report. In addition, these adjustments made in the Unaudited Consolidated Statements of Cash Flows for sales returns had no impact on net cash provided by operating activities, the Company's Consolidated Balance Sheets or the Company's Consolidated Statements of Operations.

For additional detail, please read on.

Background
In response to an increase in sales returns over historical levels related to the Company's Keurig® Single-Cup Brewers experienced in fiscal 2010, the Company determined to provide greater transparency in its Consolidated Statements of Cash Flows by reporting the effect of sales returns as a separate adjustment when reconciling net income to net cash provided by operating activities. Prior to September 25, 2010, the effect of sales returns on cash flows provided by operating activities was reported on a net basis within the change in accounts receivable adjustment line in the Consolidated Statements of Cash Flows.

Beginning with the Consolidated Statements of Cash Flows provided in the Form 10-K filed for the fiscal year ended September 25, 2010 and continuing in the Unaudited Consolidated Statements of Cash Flows provided in the Form 10-Q filed for the thirteen-weeks ended December 25, 2010, the Company included a separate adjustment for sales returns in its reconciliation of net income to net cash provided by operating activities. In addition, starting with its Fiscal 2010 Form 10-K, the Company included in Schedule II- Valuation and Qualifying Accounts on page F-67 a description of the sales return reserve describing the balance at the beginning of the period, the various adjustments to the account over the relevant period and the balance at the end of the period. A similar presentation of the adjustments to the Company's sales returns reserve for the first two fiscal quarters of fiscal 2011 is as follows (amounts in millions):

Note regarding historical sales returns
The Company presented a provision for sales returns of $27.5 million in the Unaudited Consolidated Statements of Cash Flows for the thirteen weeks ended December 25, 2010 instead of the $12.9 million change in the reserve for sales returns reflected in the table above. Had the Company consistently presented the treatment of sales returns in both of the first two fiscal quarters of 2011, the Unaudited Consolidated Statement of Cash Flows for the twenty-six week period ended March 26, 2011 would have reflected a $7.6 million decrease in the change in sales returns over the thirteen week period ended March 26, 2011 that may still have been misinterpreted as a reversal of an expense when comparing the presentation of the thirteen weeks ended December 25, 2010 to the twenty-six weeks ended March 26, 2011 (see table above). This decrease in the reserve as well as a reduction in the provision for sales returns (which reduced net sales) in second quarter of fiscal 2011 compared to the first quarter of fiscal 2011 represents a valid reduction of the Company's sales returns reserve during the second quarter based on the Company's seasonal sales pattern and an actual decrease in the company's return rates. The Company's sales returns predominantly represent brewer returns, with coffee products comprising a less significant amount. Therefore, the dollar amount of the provision for sales returns for the second quarter of fiscal 2011 is (and historically has been) significantly lower than the first quarter of fiscal 2011 because overall brewer sales are seasonally higher in the first fiscal quarter and any related returns deriving from first quarter sales typically flow through prior to the end of the second quarter as deductions to the sales returns reserve.

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