Michael Kanellos
Is Black and Decker pulling away from A123? August 11, 2008 at 10:00 AM
The S-1. Such a troublesome document.
Unconfirmed rumors have swirled in recent weeks that Black & Decker, the large power tool maker, wasn’t happy with battery maker A123 Systems. Black & Decker is the largest customer for A123 and accounts for over half of the company’s revenue.
We called the company in July and A123 said that the relationship and contract with Black & Decker was still in place and that the tool maker was buying all the batteries “that we can supply.”
We have no reason to doubt it and the contract with Black & Decker is clearly still in place. But information about the company’s revenue contained in A123’s filing with the SEC that may give some people reason to ponder if something is going on between the two companies. On page 57 of the S-1, A123 says that demand has declined from its “most significant customer.” An increase in revenue in the first quarter of 2008 to $10.3 million from $8.1 million in the first quarter of 2007 was due to the acquisition. See below:
“The increase in product revenue was primarily due to sales of $2.2 million generated by Enerland, which we acquired in August 2007. This increase was partiallly offset by a decrease in demand from our most signficant customer and its affiliates during the three months ended March 31, 2008 compared to the three months ended March 31, 2007.”
Note. The S-1 doesn’t state that revenue from the significant customer has declined as a percentage of the whole because of additional customers. And it doesn’t say sales to that customer declined because of product delays or techincal issues. It is because of “a decrease in demand.” In other words, A123’s significant other bought fewer batteries in the first three months of the year than in the year before.
Now, there could easily be a lot of explanations here. The decrease in demand could have been because of a lull in research projects at the customer. “Significant” could also mean something other than the largest customer in terms of revenue: GM is a significant customer for A123 because it will get the company into the automotive space. Economic circumstances beyond anyone’s control could have caused this. Or it could be that the toolmaker added some technical requirements to its orders, which A123 needed time to install.
A123 could not comment because it’s in the quiet period.
On page 12, A123 rolls out the laundry list about risks they face, including a loss of a big customer. It’s boilerplate language and can’t be taken as evidence that the relationship is rocky in any way. Still, it lays out how much the small company depends on the toolmaker for revenue.
“Our strategic plan assumes that we will epxand our revenue base through the acquisition of new customers in new and emergin markets; however, Black and Decker and its affiliates have represented 70.7% of our total revenue since inception through March 31, 2008 and represented 55.1% of our total revenue in the quarter ended March 31, 2008. If in the near term we were to lose Black & Dcker as a customer, or if we were to lose revenue due to its inability or refusal to continue to purchase our batteries or pay our invoices, our business, results of operations and financial condition could be harmed.”
On other notes, losses are increasing faster than revenues, but that’s largely because of expansion. Revenue in 2006 came to $34.3 million and net losses for the year totalled $15.8 million. In 2007, revenue climbed to $41.3 million but net losses nearl ydoubled to $31 million. The number of full-time employees, however went from 227 at the end of 2006 to 904 at the end of last year.
[...] We have no reason to doubt it and the contract with Black & Decker is clearly still in place. But information about the company’s revenue contained in A123’s filing with the SEC that may give some people reason to ponder if something is going on between the two companies. On page 57 of the S-1, A123 says that demand has declined from its “most significant customer.” An increase in revenue in the first quarter of 2008 to $10.3 million from $8.1 million in the first quarter of 2007 was due to the acquisition. See below:…MORE [...]
Or maybe its nothing more insidious than demand is down at B&D. Here is an excerpt from BDK’s most recent 10Q: “Sales for the industrial power tools and accessories business in the United States decreased at a double-digit rate as a result of lower demand in all key product categories and channels. Sales for the consumer power tools and accessories business in the United States decreased approximately 30% from the 2007 level.”
Jack M has a point that ,in effect, demonstrates that Kannellos is obviously not bsuting his butt in producing these articles. How could Kannellos possibly miss as obvious an explanation that BDK sales are down? That’s a mark of total incompetentce. Someone tell Kanellos that the hosuing market and new construction is sort of …. down these days. Has Kanellos been living on Mars?
Thank you Kent Beuchert AKA Kerry Bradshaw AKA Tom C Gray for your fine qualitative analysis of the authors work. If it hadn’t have been for your astonishing ability to convey your keen insight within the confines of five simple and straightforward sentences, I might have spent hours rereading Mr. Kannellos article pondering what might be the proper way to insult the man. Although he might make his living writing on subjects related to environmentally friendlier technologies, it is necessary that he be emphatically reminded that his intellect is indeed lacking and he should, therefore, limit his textual output to exercises befitting his diminutive abilities. Perhaps you could leave him some suggestions as to how to break into the field of leaving multitudinous rude and ignorant comments replete with deprecatory verbiage.
[...] [Source: GreenTechMedia] [...]
[...] [Source: GreenTechMedia] [...]
[...] However, it hasn’t been smooth sailing for A123 lately. Earlier in the year, it reported a big drop in revenue from a large customer. Black & Decker has been the companies biggest customer and the tool [...]