KiOR's CFO Takes a Hike With No Advance Notice

KiOR's CFO Takes a Hike With No Advance Notice

KiOR is no stranger to problems. The biofuel company has a history of production well below the estimates it has given shareholders. When Bill Gates made a token investment, it seemed like things might finally be turning around. Then in an SEC filing, it was disclosed that CFO John Karnes abruptly quit in a fashion reminiscent of the Ruby Tuesday exodus of executives and in contrast to the advance notice the CFO of Suncor gave his company.

KiOR 8-K SEC Filing
Karnes gave his resignation notice to KiOR on Dec. 1. Two days later, he was gone. There was no new hotshot CFO coming in to replace him. No publicly displayed resignation letter. No press release thanking him for his service. No explanation that he was retiring or got offered a job elsewhere. And the worst part is - there was nothing in the filing that contained the customary language letting the world know that there were no disagreements. Typically, if there is no press release, you would at least see something to the tune of "There were no disagreements between Mr. Karnes and the company on any matter relating to operations, financial controls, policies or procedures." There was none of that.

The Suncor way
On Nov. 29, Suncor announced the resignation of CFO Bart Demosk. The press release explained that he is "leaving his position to pursue an opportunity in another industry." CEO Steve Williams stated, "Bart's contributions to our company will be missed." We appreciate his efforts on behalf of Suncor and wish him well as he embarks on this next stage in his career." It was a very classy farewell, and he gave a full month's advance notice.

Suncor is a successful company. Last quarter the company had $0.95 per share in operating earnings and $1.69 per share in cash flow from operations. There doesn't appear to be a cause for concern.

Goodbye, Ruby Tuesday
In October, Senior VP Robert LeBoeuf and chairman of the board Matthew A. Drapkin quit within a week of each other. Matthew A. Drapkin dumped almost all of his stock even though the price was near 52-week lows. Just as with KiOR, Ruby Tuesday offered no press release thanking them for their service, and no explanation was given.

The Ruby Tuesday resignations came soon after the company reported terrible results. Sales were down 11.6%, same-store sales were down 11.4% at company locations, and the net loss was $21.5 million or $0.36 per share.

KiOR financials
Similar to Ruby Tuesday, the CFO resignation comes just weeks after KiOR reported third-quarter results. Though KiOR reported record fuel production of a tad over 300,000 gallons, it was barely within the original guidance range that KiOR was expected to reach a full quarter prior. Total revenue was $720,000 with a net loss of $43.1 million.

KiOR is already defending itself in a class action suit for the missed second-quarter guidance. For November and December, KiOR is forecasting similar production levels to October.

Did something go wrong that will cause KiOR to miss its forecasts again? And is that the reason the CFO left? We won't know for sure probably until the results are reported early next year. Speaking of next year, in the previous conference call, now-ex-CFO John H. Karnes stated, "We're not in a position to provide any forward-looking information at all for 2014 at this point."

Foolish final thoughts
Uncertainty is the enemy of Foolish investors. In the case of KiOR, that uncertainty seems pervasive. Investors who are interested in KiOR may want to at least wait until better, clearer information comes out before jumping on board. After all, its CFO seemed to have jumped out very quickly. Why should you be in a rush to jump in?

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