Cereplast Says It Remains Confident in Collecting Outstanding Accounts Receivable and Has Implemented New Payment Terms
Cereplast, Inc. (Nasdaq: CERP) is providing shareholders with an update on the implementation of new payment terms being offered to customers. The Company also expects to collect all outstanding accounts receivables.
Cereplast has made adjustments in improving its current customer payment policy. First, all shipments to customers with outstanding invoices over 150 days have been halted. Second, more rigorous credit practices have been implemented including requiring advance payments, letters of credit or bank guarantees. As a result of the new payment terms, receivables outstanding have not increased. Also worth noting, Chairman and CEO Frederic Scheer has personally met with senior level executives of all of the customers with overdue invoices over the last two months.
Additionally, on December 21, 2011, the Company filed an amendment to its quarterly filing for the period ending September 30, 2011 to revise the disclosure in "Concentration of Credit Risk" and "Revenue Recognition" in Note 2 of the notes to the financial statements contained in the Form 10-Q. Cereplast had one large European customer that accounted for $7.6 million, or 36% of our accounts receivables, and another large European customer with $6.1 million, or 29% of our receivables. Management expects to be paid during the period December 2011 through February 2012, in accordance with agreed payments terms. These customers have acknowledged to Cereplast their agreement with the amounts owing and do not dispute the amounts recognized in revenue or recorded in accounts receivables by Cereplast.
As a result of the economic conditions in Europe felt by Cereplast's European customers, Cereplast increased its allowance for doubtful accounts by $1.7 million in the quarter ended September 30, 2011 to reflect management's assessment of credit risk associated with these customer balances. Cereplast is working with all customers to mitigate credit risk and ensure collection of all outstanding amounts.
