Customer Concentrations and Accounts Receivable
|9 Months Ended|
Dec. 31, 2017
|Customer Concentrations and Accounts Receivable|
|Customer Concentrations and Accounts Receivable||
4. Customer Concentrations and Accounts Receivable
Sales to E-Finity Distributed Generation, LLC (“E-Finity”) and Cal Microturbine (“CAL”), two of the Company’s domestic distributors, accounted for 29% and 14%, respectively, of revenue for the three months ended December 31, 2017. Sales to BPC Engineering (“BPC”), one of the Company’s former Russian distributors, and Horizon Power Systems (“Horizon”), one of the Company’s domestic distributors, each accounted for 16% of revenue for the three months ended December 31, 2016. For the nine months ended December 31, 2017, E-Finity and Horizon accounted for 19% and 10% of revenue, respectively. For the nine months ended December 31, 2016, BPC and Horizon, accounted for 12% and 10% of revenue, respectively.
Additionally, E-Finity, and CAL accounted for 42% and 15%, respectively, of net accounts receivable as of December 31, 2017. E-Finity, Dtc Soluciones Inmobiliarias S.A. de C.V. (“DTC”), one of the Company’s Mexican distributors and RSP accounted for 29%, 12% and 10%, respectively, of net accounts receivable as of March 31, 2017.
The Company recorded a net bad debt recovery of approximately $0.7 million and $0.8 million during the three and nine months ended December 31, 2017, respectively. As of December 31, 2017, the Company collected approximately $1.8 million from BPC on their accounts receivable allowance of approximately $8.1 million. The Company recorded net bad debt expense of approximately $12,000 for the three months ended December 31, 2016. During the nine months ended December 31, 2016, the Company recorded approximately $1.4 million in net bad debt recovery, which was previously reserved during Fiscal 2015, for cash received primarily from BPC and Electro Mecanique Industries, one of the Company’s distributors in the Middle East and Africa.
On October 18, 2017, the Company announced that it had granted Turbine International, LLC (“TI”) and its affiliate, MTE Service, the sole distribution rights for Capstone products and services in the Russian oil and gas sector in exchange for approximately $6.3 million in cash. In connection with the appointment of TI as the Company’s distributor in the Russian oil and gas sector, on October 13, 2017, the Company and TI entered into an Accounts Receivable Assignment Agreement (the “Accounts Receivable Agreement”) and Promissory Note (the “Promissory Note”). Pursuant to the terms of the Accounts Receivable Agreement, the Company assigned to TI its right, title and interest to receivables owed to the Company from BPC. As consideration for the assignment of the BPC receivable, TI agreed to pay the Company $2.5 million in three payments by February 1, 2018. Under the terms of the Promissory Note, TI agreed to pay the Company $3.8 million to be paid over a three-year period in 35 equal monthly installments starting in August 2018. On October 13, 2017, the Company and Hispania Petroleum, S.A. (the “Guarantor”), entered into a Guaranty Agreement (the “Guaranty Agreement”) whereby the Guarantor guarantees TI’s obligations under the Accounts Receivable Agreement and Promissory Note. MTE Service is a wholly owned subsidiary of Hispania Petroleum S.A. The Company received payments of approximately $0.6 million and $0.7 million under the Accounts Receivable Agreement during the three and nine months ended December 31, 2017, respectively and these payments have been recorded as recovery of bad debts and included under the caption “Selling, general and administrative” in the accompanying condensed consolidated statements of operations. As of date of issuance of the Company’s third quarter of Fiscal 2018 interim condensed consolidated financial statements the February 1, 2018 payment of $1.8 million has not yet been received. The Company is currently in discussions with TI regarding the timing of this payment.
The entire disclosure for any concentrations existing at the date of the financial statements that make an entity vulnerable to a reasonably possible, near-term, severe impact. This disclosure informs financial statement users about the general nature of the risk associated with the concentration, and may indicate the percentage of concentration risk as of the balance sheet date.
Reference 1: http://www.xbrl.org/2003/role/presentationRef