Friday, May 11, 2012

A123 Systems ($AONE) Announces Late Filing, Net Loss for First Quarter, and Lowered Revenue Guidance

In addition to the dilutive debt offering, some other negative news was also announced by AONE today:

"[T]he company announced it has filed a Notification of Late Filing on Form 12b-25 with the Securities and Exchange Commission requesting a 5-day extension to file its Quarterly Report on Form 10-Q for the period ended March 31, 2012. The company plans to file its Quarterly Report on Form 10-Q as soon as practicable.

In conjunction with this filing, the company also provided preliminary financial results for the first quarter of 2012. Revenue for the first quarter of 2012 is expected to be approximately $10.9 million.

Net loss in the first quarter of 2012 is expected to be approximately ($125.0) million. Anticipated net loss for the first quarter includes an estimated $51.6 million warranty expense related to the previously announced field campaign to replace battery modules and packs that may contain defective prismatic cells produced at the Company's Livonia, Mich. manufacturing facility. Also included in the anticipated net loss for the first quarter is an estimated $15.2 million increase in inventory reserves related to battery packs, modules and cells manufactured in Livonia, Mich. that may be defective. Net cash used in operating activities is expected to be ($46.5) million in the first quarter of 2012. Cash and cash equivalents are anticipated to be $113.1 million at the end of March 31, 2012.

The Company anticipates that capacity for prismatic cell production will be constrained for the foreseeable future due to the field campaign, a deliberate manufacturing ramp-up and continued demand for prismatic cell-based products. As a result, the company anticipates that revenue in 2012 will be in the range of $145 million to $175 million, compared to prior expectations of $230 million to $300 million.
Yikes! I've written about AONE in the past. At 30, the bonds seem underpriced relative to the stock. (By which I mean, I can't see how the stock has any value at all.)

Despite the huge cash burn, buyers of the notes are still creating the company at a negative valuation and buyers of the stock pay an enterprise valuation that is around $260 million higher.

It seems clear that the dilution from the most recent note offering, as well as further transactions to come, will weigh on the shares. Meanwhile, the current liquidation value is probably actually higher than where the notes trade, although it falls as the cash is burned.

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