Filing summary
Entity and period: The supplied filing is American Lorain Corporation’s Form 10-K for the fiscal year ended December 31, 2017, filed April 17, 2018. This does not match the request metadata, which names Planet Green Holdings Corp. and specifies 2017 Q4. The filing reports annual results; it does not provide a standalone Q4 financial summary.
Business context and financial performance
American Lorain manufactured chestnut, convenience and frozen food products, primarily in China, with exports mainly to Japan and South Korea. The company reported major operating disruption, including the shutdown or non-operation of several businesses and the loss of its French operation.
| Metric | 2017 | 2016 |
|---|---|---|
| Revenue | $5.11 million | $79.67 million |
| Gross profit (loss) | $(0.35) million; margin -6.9% | $10.50 million; margin 13.2% |
| Operating loss | $(41.35) million | $(36.42) million |
| Net loss | $(78.31) million | $(136.36) million |
| Net loss attributable to common shareholders | $(63.23) million | $(135.97) million |
| Operating cash flow | $(0.36) million | $(29.79) million |
| Cash and cash equivalents at year-end | $0.09 million | $0.43 million |
Revenue fell 93.6%. Frozen foods represented 38.9% of 2017 revenue versus 22.7% in 2016; chestnuts represented 41% versus 57%, and convenience foods 20.1% versus 20.3%. The company reported negative gross profit in 2017. Its net loss improved year over year, but operating loss worsened; the prior-year comparison included substantially larger impairment and other expenses.
Liquidity, debt and material changes
- At December 31, 2017, the balance sheet showed current assets of $16.94 million and current liabilities of $79.28 million. The resulting working-capital deficit is approximately $62.34 million by calculation. The filing gives differing deficit figures elsewhere, including approximately $53.52 million in one risk disclosure and $63.00 million in the audited going-concern note.
- Short-term bank loans were $23.77 million, and the company said all were in default. Current long-term debt was $30.51 million, including debentures of approximately $9.52 million and $15.37 million; the filing says the debentures and DEG loan were in default and repayment terms were under negotiation. Current capital-lease obligations were $1.07 million.
- Total liabilities were $79.28 million against total assets of $68.49 million; total equity was negative $10.79 million. Management reported a debt-to-assets ratio of 113.3%.
- Operating cash use narrowed substantially from 2016, but cash remained very low. The cash-flow statement reports $0.75 million provided by investing activities, principally reflecting a decrease in restricted cash, and $0.75 million used in financing activities.
- General and administrative expense was $40.57 million, including a reported $46.83 million write-off of trade and other receivables and other receivables deemed unrecoverable. The filing also reports $2.50 million of other expenses, including $2.23 million of property and equipment impairment.
Outlook, risks and unusual items
- The auditor and management identified substantial doubt about the company’s ability to continue as a going concern. Management said existing resources and expected cash flows and borrowing were insufficient for 2018 liquidity needs; it was considering financing and spending reductions, with no assurance these would succeed.
- After year-end, the company completed a private placement on January 23, 2018, issuing 7.5 million shares for $1.275 million. The filing says proceeds were designated for general corporate purposes.
- Management attributed the revenue collapse to weak demand and competition, discontinued or non-operating businesses, reduced sales activity and the shutdown of the French operation. It also cited increased chestnut costs, distributor-related bad debts, and reduced staffing and sales-office footprint.
- The company reported a pending Shandong lawsuit seeking a fixed return under a development agreement; the retrial decision was pending. Management expected to prevail. The filing does not quantify a recognized loss contingency for the case.
- Disclosure controls and internal control over financial reporting were deemed ineffective due to a material weakness: insufficient accounting personnel with appropriate U.S. GAAP experience. Management described plans for training and recruitment.
- Other risks include further creditor enforcement against pledged assets, raw-material price and supply volatility, food-safety and product-liability exposure, PRC regulatory and currency risks, and possible NYSE American delisting. The company said it had no product-liability or general-liability insurance.
Important facts for investors to verify
- Confirm the issuer: the provided filing is for American Lorain Corporation, not Planet Green Holdings Corp.
- Reconcile the conflicting working-capital deficit disclosures and the differing common-shareholder loss figures in the MD&A versus the audited statements.
- Verify the status, collateral, maturity terms and creditor negotiations for defaulted bank loans, debentures and the DEG loan, including potential enforcement actions.
- Assess whether the $1.275 million post-year-end share issuance and any additional financing can address near-term liquidity needs.
- Confirm the status and financial treatment of businesses described as discontinued or non-operating, and the pending litigation and any related recovery or liability.
- Review remediation of the disclosed material weakness and the company’s continued exchange-listing compliance.