KiOR Earnings Not Worth the Wait

KiOR delayed reporting its financials as long as possible. When the filing was finally made, big operational and technological troubles were revealed.

Mar 18, 2014 at 12:25PM

Last week, KiOR (NASDAQOTH:KIORQ) cancelled its scheduled release of fourth quarter and year-end results. Though the company has yet to release an official press release, the results on their Annual Report to the U.S. Securities and Exchange Commission (SEC) provide a lot of insight into why the company was not eager to share earnings results with their shareholders. In short, the company is losing money and struggling to raise new money to support much-needed improvements for both the technological side as well as for process operations.

Delaying the inevitable
Cancelling the release of fourth quarter results without providing a reason for the cancellation was enough to scare off some investors last week as the stock price dropped nearly 10% the day after the announcement. The only justification suggested for the delay was to align the release of the company's earnings results with the submittal of its Annual Report to the SEC. The company likewise delayed submitting its Form 10-K to the SEC as long as possible, hoping that investors might appreciate its slow pulling on the Band-Aid over ripping it quickly from the skin.

Unfortunately for KiOR, it had to eventually submit its Annual Report. Within the report, the company disclosed the reasons most likely to blame for its desire to avoid sharing the information with investors. The even worse news for investors is that these reasons had little to do with actual earnings and revenue, even though net losses for the year far exceeded analyst expectations.

KiORs first commercial scale facility in Columbus, Mississippi halted production at the end of the year, and plans to keep the plant on shut-down throughout the first quarter of 2014 until modifications can be made to improve productivity. When active, the plant was functioning well below nameplate capacity. The Columbus facility has been the company's sole utilization of positive results from pilot- and demonstration-scale plants, and is KiOR's only source of notable potential revenue.

Caught in a vicious cycle
KiOR now finds itself chasing its own tail. The company has investment commitments that are contingent on production milestones, but the production milestones are nearly impossible to achieve without further investments.

The Columbus facility needs upgrades and the overall production process at the facility needs refining before the company will resume operations at the plant, but the much-needed improvements to come with a substantial price tag. Vinod Khosla has long been committed and heavily invested in the success of KiOR, and he continues to pledge his support for the company. However, the terms for continued investments from Khosla Ventures will include installments dependent on set production milestones, which is something that KiOR has been unable to impress with at the production scale.

Financing agreements dependent on production milestones are common in the biofuel industry, and have helped KiOR previously advance to the production scale. Other companies involved in the sector like Amyris (NASDAQ:AMRS) have likewise benefited from such agreements, and they have been able to leverage their achievements to not only continue but also expand production.

The takeaway
Khosla is currently KiOR's sole near-term financing source until the company is able to demonstrate that their production facilities can produce cellulosic fuels at a level where they can start to utilize the established offtake agreements with Hunt Refining Company and others. While the ambitions and market potential for KiOR are enormous, until they can demonstrate some level of consistent production and ease substantiated fears of bankruptcy, they remain an extremely risky investment and a company I would avoid even as the stock price continues to drop.

The Motley Fool's stock of the year
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

 

Shamus Funk has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers