Power Solutions International Announces Third Quarter 2021 Financial Results
Third Quarter 2021 Results
Sales for the third quarter of 2021 were $117.6 million, an increase of $3.2 million, or 3%, compared to the comparable quarter last year as a result of higher sales of
Gross profit decreased by
Operating expenses decreased by
Other expense (income), net experienced no activity during the third quarter of 2021 compared to income of
Net loss in the third quarter of 2021 was
See “Non-GAAP Financial Measures” below for the Company’s definition of total Adjusted net income (loss), Adjusted earnings (loss) per share, EBITDA and Adjusted EBITDA and the financial tables that accompany this release for reconciliations of these measures to their closest comparable GAAP measures.
Debt and Liquidity
The Company’s total debt was approximately $156 million at September 30, 2021, while cash and cash equivalents were approximately $5 million. These amounts reflect the net impact of customer prepayments of approximately $3 million. Included in the Company’s total debt at
The Company is working with
Revised Outlook for 2021
During the fourth quarter of 2021, the Company believes that its sales will exhibit healthy year-over-year growth with contributions across all end markets. An improvement in gross profit as a percentage of sales in the fourth quarter versus the third quarter is also projected. Also, with the conclusion of the United States Attorney’s
Management Comments
About Power Solutions International, Inc.
PSI develops and delivers complete power systems that are used worldwide in stationary and mobile power generation applications supporting standby, prime, demand response, microgrid, and co-generation power (CHP) applications; and industrial applications that include forklifts, agricultural and turf, arbor care, industrial sweepers, aerial lifts, irrigation pumps, ground support, and construction equipment. In addition, PSI develops and delivers powertrains purpose-built for medium-duty trucks and buses including school and transit buses, work trucks, terminal tractors, and various other vocational vehicles. For more information on PSI, visit www.psiengines.com.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements regarding the current expectations of the Company about its prospects and opportunities. These forward-looking statements are entitled to the safe-harbor provisions of Section 21E of the Securities Exchange Act of 1934. The Company has tried to identify these forward-looking statements by using words such as “anticipate,” “believe,” “budgeted,” “contemplate,” “estimate,” “expect,” “forecast,” “guidance,” “may,” “outlook,” “plan,” “projection,” “should,” “target,” “will,” “would,” or similar expressions, but these words are not the exclusive means for identifying such statements. These statements are subject to a number of risks, uncertainties, and assumptions that may cause actual results, performance or achievements to be materially different from those expressed in, or implied by, such statements.
The Company cautions that the risks, uncertainties and other factors that could cause its actual results to differ materially from those expressed in, or implied by, the forward-looking statements, include, without limitation: the impact of the ongoing COVID-19 pandemic could have on the Company’s business and financial results; the Company’s ability to continue as a going concern; the Company’s ability to raise additional capital when needed and its liquidity; uncertainties around the Company’s ability to meet funding conditions under its financing arrangements and access to capital thereunder; the potential acceleration of the maturity at any time of the loans under the Company’s uncommitted senior secured revolving credit facility through the exercise by Standard Chartered Bank of its demand right; the timing of completion of steps to address, and the inability to address and remedy, material weaknesses; the identification of additional material weaknesses or significant deficiencies; risks related to complying with the terms and conditions of the settlements with the Securities and Exchange Commission (the “SEC”) and the United States Attorney’s Office for the Northern District of Illinois (the “USAO”); variances in non-recurring expenses; risks relating to the substantial costs and diversion of personnel’s attention and resources deployed to address the internal control matters; the Company’s obligations to indemnify past and present directors and officers and certain current and former employees with respect to the investigations conducted by the SEC and the criminal division of the USAO, which will be funded by the Company with its existing cash resources due to the exhaustion of its historical primary directors’ and officers’ insurance coverage; the ability of the Company to accurately forecast sales, and the extent to which sales result in recorded revenues; changes in customer demand for the Company’s products; volatility in oil and gas prices; the impact of U.S. tariffs on imports from China on the Company’s supply chain; disruptions to the Company’s supply chain; the impact of increasing warranty costs and the Company’s ability to mitigate such costs; any delays and challenges in recruiting key employees consistent with the Company’s plans; any negative impacts from delisting of the Company’s common stock par value $0.001 from the NASDAQ Stock Market and any delays and challenges in obtaining a re-listing on a stock exchange; and the risks and uncertainties described in reports filed by the Company with the SEC, including without limitation its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and the Company’s subsequent filings with the SEC.
The Company’s forward-looking statements are presented as of the date hereof. Except as required by law, the Company expressly disclaims any intention or obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.
Contact:
Director of Investor Relations
+1 (630) 451-5402
Philip.Kranz@psiengines.com
Results of operations for the three and nine months ended
(in thousands, except per share amounts) | For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||||||||||||||||
2021 | 2020 | Change | % Change | 2021 | 2020 | Change | % Change | |||||||||||||||||||||||
Net sales | $ | 117,630 | $ | 114,450 | $ | 3,180 | 3 | % | $ | 329,279 | $ | 312,603 | $ | 16,676 | 5 | % | ||||||||||||||
Cost of sales | 106,288 | 96,281 | 10,007 | 10 | % | 297,673 | 272,943 | 24,730 | 9 | % | ||||||||||||||||||||
Gross profit | 11,342 | 18,169 | (6,827 | ) | (38 | )% | 31,606 | 39,660 | (8,054 | ) | (20 | )% | ||||||||||||||||||
Gross margin % | 9.6 | % | 15.9 | % | (6.3 | )% | 9.6 | % | 12.7 | % | (3.1 | )% | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||
Research, development and engineering expenses | 5,437 | 6,555 | (1,118 | ) | (17 | )% | 17,772 | 19,121 | (1,349 | ) | (7 | )% | ||||||||||||||||||
Research, development and engineering expenses as a % of sales | 4.6 | % | 5.7 | % | (1.1 | )% | 5.4 | % | 6.1 | % | (0.7 | )% | ||||||||||||||||||
Selling, general and administrative expenses | 10,958 | 11,964 | (1,006 | ) | (8 | )% | 47,858 | 38,434 | 9,424 | 25 | % | |||||||||||||||||||
Selling, general and administrative expenses as a % of sales | 9.3 | % | 10.5 | % | (1.2 | )% | 14.5 | % | 12.3 | % | 2.2 | % | ||||||||||||||||||
Amortization of intangible assets | 634 | 763 | (129 | ) | (17 | )% | 1,901 | 2,290 | (389 | ) | (17 | )% | ||||||||||||||||||
Total operating expenses | 17,029 | 19,282 | (2,253 | ) | (12 | )% | 67,531 | 59,845 | 7,686 | 13 | % | |||||||||||||||||||
Operating loss | (5,687 | ) | (1,113 | ) | (4,574 | ) | NM | (35,925 | ) | (20,185 | ) | (15,740 | ) | 78 | % | |||||||||||||||
Other expense, net: | ||||||||||||||||||||||||||||||
Interest expense | 1,623 | 1,510 | 113 | 7 | % | 5,253 | 4,211 | 1,042 | 25 | % | ||||||||||||||||||||
Loss on extinguishment of debt | — | — | — | — | % | — | 497 | (497 | ) | (100 | )% | |||||||||||||||||||
Other expense (income), net | — | (947 | ) | 947 | (100 | )% | 1 | (1,202 | ) | 1,203 | (100 | )% | ||||||||||||||||||
Total other expense, net | 1,623 | 563 | 1,060 | 188 | % | 5,254 | 3,506 | 1,748 | 50 | % | ||||||||||||||||||||
Loss before income taxes | (7,310 | ) | (1,676 | ) | (5,634 | ) | NM | (41,179 | ) | (23,691 | ) | (17,488 | ) | 74 | % | |||||||||||||||
Income tax benefit | (133 | ) | (210 | ) | 77 | (37 | )% | (281 | ) | (3,771 | ) | 3,490 | (93 | )% | ||||||||||||||||
Net loss | $ | (7,177 | ) | $ | (1,466 | ) | $ | (5,711 | ) | NM | $ | (40,898 | ) | $ | (19,920 | ) | $ | (20,978 | ) | 105 | % | |||||||||
Loss per common share: | ||||||||||||||||||||||||||||||
Basic | $ | (0.31 | ) | $ | (0.06 | ) | $ | (0.25 | ) | NM | $ | (1.79 | ) | $ | (0.87 | ) | $ | (0.92 | ) | 106 | % | |||||||||
Diluted | $ | (0.31 | ) | $ | (0.06 | ) | $ | (0.25 | ) | NM | $ | (1.79 | ) | $ | (0.87 | ) | $ | (0.92 | ) | 106 | % | |||||||||
Non-GAAP Financial Measures: | ||||||||||||||||||||||||||||||
Adjusted net (loss) earnings * | $ | (4,841 | ) | $ | 652 | $ | (5,493 | ) | NM | $ | (21,571 | ) | $ | (12,197 | ) | $ | (9,374 | ) | 77 | % | ||||||||||
Adjusted (loss) earnings per share – diluted * | $ | (0.21 | ) | $ | 0.03 | $ | (0.24 | ) | NM | $ | (0.95 | ) | $ | (0.53 | ) | $ | (0.42 | ) | 79 | % | ||||||||||
EBITDA * | $ | (3,851 | ) | $ | 1,911 | $ | (5,762 | ) | NM | $ | (30,378 | ) | $ | (13,268 | ) | $ | (17,110 | ) | 129 | % | ||||||||||
Adjusted EBITDA * | $ | (1,515 | ) | $ | 4,316 | $ | (5,831 | ) | (135 | )% | $ | (10,496 | ) | $ | (1,640 | ) | $ | (8,856 | ) | NM |
NM | Not meaningful | |
* | See reconciliation of non-GAAP financial measures to GAAP results below |
CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
||||||||
(in thousands, except par values) | As of 2021 |
As of 2020 |
||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 4,993 | $ | 20,968 | ||||
Restricted cash | 3,081 | 3,299 | ||||||
Accounts receivable, net of allowances of |
54,545 | 60,148 | ||||||
Income tax receivable | 4,271 | 3,708 | ||||||
Inventories, net | 144,814 | 108,213 | ||||||
Prepaid expenses and other current assets | 10,628 | 6,351 | ||||||
Total current assets | 222,332 | 202,687 | ||||||
Property, plant and equipment, net | 18,562 | 20,181 | ||||||
Intangible assets, net | 8,418 | 10,319 | ||||||
29,835 | 29,835 | |||||||
Other noncurrent assets | 16,151 | 20,955 | ||||||
TOTAL ASSETS | $ | 295,298 | $ | 283,977 | ||||
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 89,745 | $ | 31,547 | ||||
Current maturities of long-term debt | 285 | 310 | ||||||
Revolving line of credit | 130,000 | 130,000 | ||||||
Other short-term financing | 25,459 | — | ||||||
Other accrued liabilities | 50,683 | 77,619 | ||||||
Total current liabilities | 296,172 | 239,476 | ||||||
Deferred income taxes | 1,066 | 886 | ||||||
Long-term debt, net of current maturities | 678 | 781 | ||||||
Noncurrent contract liabilities | 2,794 | 3,181 | ||||||
Other noncurrent liabilities | 29,095 | 33,556 | ||||||
TOTAL LIABILITIES | $ | 329,805 | $ | 277,880 | ||||
STOCKHOLDERS’ (DEFICIT) EQUITY | ||||||||
Preferred stock – |
$ | — | $ | — | ||||
Common stock – |
23 | 23 | ||||||
Additional paid-in capital | 157,496 | 157,262 | ||||||
Accumulated deficit | (190,792 | ) | (149,894 | ) | ||||
(1,234 | ) | (1,294 | ) | |||||
TOTAL STOCKHOLDERS’ (DEFICIT) EQUITY | (34,507 | ) | 6,097 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | $ | 295,298 | $ | 283,977 |
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
||||||||||||||||
(in thousands) | For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Cash used in operating activities | ||||||||||||||||
Net loss | $ | (7,177 | ) | $ | (1,466 | ) | $ | (40,898 | ) | $ | (19,920 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
Amortization of intangible assets | 634 | 763 | 1,901 | 2,290 | ||||||||||||
Depreciation | 1,202 | 1,314 | 3,647 | 3,922 | ||||||||||||
Stock-based compensation expense | 102 | 165 | 334 | 482 | ||||||||||||
Amortization of financing fees | 475 | 493 | 2,102 | 1,102 | ||||||||||||
Deferred income taxes | (192 | ) | 58 | 179 | (265 | ) | ||||||||||
Loss on extinguishment of debt | — | — | — | 497 | ||||||||||||
Other adjustments, net | 149 | (513 | ) | 652 | (260 | ) | ||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable, net | 5,034 | 9,591 | 5,611 | 52,083 | ||||||||||||
Inventory, net | (15,750 | ) | 11,138 | (37,167 | ) | (20,842 | ) | |||||||||
Prepaid expenses and other assets | (2,508 | ) | (5,384 | ) | (2,497 | ) | (5,362 | ) | ||||||||
Accounts payable | 10,323 | (21,848 | ) | 58,798 | (30,482 | ) | ||||||||||
Accrued expenses | (16,789 | ) | (8,120 | ) | (26,911 | ) | 16,572 | |||||||||
Other noncurrent liabilities | (365 | ) | 7,516 | (4,852 | ) | (2,100 | ) | |||||||||
Net cash used in operating activities | (24,862 | ) | (6,293 | ) | (39,101 | ) | (2,283 | ) | ||||||||
Cash (used in) provided by investing activities | ||||||||||||||||
Capital expenditures | (971 | ) | (575 | ) | (2,156 | ) | (1,991 | ) | ||||||||
Return of investment in joint venture | 82 | — | 2,263 | — | ||||||||||||
Proceeds from corporate-owned life insurance | — | 930 | — | 930 | ||||||||||||
Other investing activities, net | 52 | — | 88 | 7 | ||||||||||||
Net cash (used in) provided by investing activities | (837 | ) | 355 | 195 | (1,054 | ) | ||||||||||
Cash provided by (used in) financing activities | ||||||||||||||||
Repayments of long-term debt and lease liabilities | (93 | ) | — | (286 | ) | (55,200 | ) | |||||||||
Proceeds from short-term financings | 26,171 | — | 26,309 | — | ||||||||||||
Repayment of short-term financings | (708 | ) | — | (708 | ) | — | ||||||||||
Proceeds from revolving line of credit | — | — | — | 180,298 | ||||||||||||
Repayments of revolving line of credit | — | — | — | (89,826 | ) | |||||||||||
Payments of deferred financing costs | (13 | ) | — | (2,562 | ) | (1,970 | ) | |||||||||
Other financing activities, net | (36 | ) | (18 | ) | (40 | ) | 58 | |||||||||
Net cash provided by (used in) financing activities | 25,321 | (18 | ) | 22,713 | 33,360 | |||||||||||
Net (decrease) increase in cash, cash equivalents, and restricted cash | (378 | ) | (5,956 | ) | (16,193 | ) | 30,023 | |||||||||
Cash, cash equivalents, and restricted cash at beginning of the period | 8,452 | 35,982 | 24,267 | 3 | ||||||||||||
Cash, cash equivalents, and restricted cash at end of the period | $ | 8,074 | $ | 30,026 | $ | 8,074 | $ | 30,026 | ||||||||
Non-GAAP Financial Measures
In addition to the results provided in accordance with accounting principles generally accepted in
Non-GAAP Financial Measure | Comparable GAAP Financial Measure |
Adjusted net income (loss) | Net income (loss) |
Adjusted earnings (loss) per share | Earnings (loss) per common share – diluted |
EBITDA | Net income (loss) |
Adjusted EBITDA | Net income (loss) |
The Company believes that Adjusted net income (loss), Adjusted earnings (loss) per share, EBITDA, and Adjusted EBITDA provide relevant and useful information, which is widely used by analysts, investors and competitors in its industry as well as by the Company’s management in assessing the performance of the Company. Adjusted net income (loss) is defined as net income (loss) as adjusted for certain items that the Company believes are not indicative of its ongoing operating performance. Adjusted earnings (loss) per share is a measure of the Company’s diluted earnings (loss) per common share adjusted for the impact of special items. EBITDA provides the Company with an understanding of earnings before the impact of investing and financing charges and income taxes. Adjusted EBITDA further excludes the effects of other non-cash charges and certain other items that do not reflect the ordinary earnings of the Company’s operations.
Adjusted net income (loss), Adjusted earnings (loss) per share, EBITDA, and Adjusted EBITDA are used by management for various purposes, including as a measure of performance of the Company’s operations and as a basis for strategic planning and forecasting. Adjusted net income (loss), Adjusted earnings (loss) per share, and Adjusted EBITDA may be useful to an investor because these measures are widely used to evaluate companies’ operating performance without regard to items excluded from the calculation of such measures, which can vary substantially from company to company depending on the accounting methods, the book value of assets, the capital structure and the method by which the assets were acquired, among other factors. They are not, however, intended as alternative measures of operating results or cash flow from operations as determined in accordance with
The following table presents a reconciliation from Net loss to Adjusted net (loss) earnings for the three and nine months ended
(in thousands) | For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net loss | $ | (7,177 | ) | $ | (1,466 | ) | $ | (40,898 | ) | $ | (19,920 | ) | ||||
Stock-based compensation 1 | 102 | 165 | 334 | 482 | ||||||||||||
Loss on debt extinguishment 2 | — | — | — | 497 | ||||||||||||
Severance 3 | (2 | ) | 332 | 690 | 332 | |||||||||||
Incremental financial reporting 4 | — | 4 | — | 1,783 | ||||||||||||
Internal control remediation 5 | 268 | 137 | 971 | 1,029 | ||||||||||||
Government investigations and other legal matters 6 | 1,968 | 2,697 | 17,887 | 8,435 | ||||||||||||
Life insurance proceeds 7 | — | (930 | ) | — | (930 | ) | ||||||||||
Discrete income tax items 8 | — | (287 | ) | (555 | ) | (3,905 | ) | |||||||||
Adjusted net (loss) earnings | $ | (4,841 | ) | $ | 652 | $ | (21,571 | ) | $ | (12,197 | ) |
The following table presents a reconciliation from Loss per common share – diluted to Adjusted (loss) earnings per share for the three and nine months ended
For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Loss per common share – diluted | $ | (0.31 | ) | $ | (0.06 | ) | $ | (1.79 | ) | $ | (0.87 | ) | ||||
Stock-based compensation 1 | — | 0.01 | 0.01 | 0.02 | ||||||||||||
Loss on debt extinguishment 2 | — | — | — | 0.02 | ||||||||||||
Severance 3 | — | 0.01 | 0.03 | 0.01 | ||||||||||||
Incremental financial reporting 4 | — | — | — | 0.08 | ||||||||||||
Internal control remediation 5 | 0.01 | 0.01 | 0.04 | 0.05 | ||||||||||||
Government investigations and other legal matters 6 | 0.09 | 0.11 | 0.78 | 0.37 | ||||||||||||
Life insurance proceeds 7 | — | (0.04 | ) | — | (0.04 | ) | ||||||||||
Discrete income tax items 8 | — | (0.01 | ) | (0.02 | ) | (0.17 | ) | |||||||||
Adjusted (loss) earnings per share – diluted | $ | (0.21 | ) | $ | 0.03 | $ | (0.95 | ) | $ | (0.53 | ) | |||||
Diluted shares (in thousands) | 22,920 | 22,881 | 22,902 | 22,866 |
The following table presents a reconciliation from Net loss to EBITDA and Adjusted EBITDA for the three and nine months ended
(in thousands) | For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net loss | $ | (7,177 | ) | $ | (1,466 | ) | $ | (40,898 | ) | $ | (19,920 | ) | ||||
Interest expense | 1,623 | 1,510 | 5,253 | 4,211 | ||||||||||||
Income tax benefit | (133 | ) | (210 | ) | (281 | ) | (3,771 | ) | ||||||||
Depreciation | 1,202 | 1,314 | 3,647 | 3,922 | ||||||||||||
Amortization of intangible assets | 634 | 763 | 1,901 | 2,290 | ||||||||||||
EBITDA | (3,851 | ) | 1,911 | (30,378 | ) | (13,268 | ) | |||||||||
Stock-based compensation 1 | 102 | 165 | 334 | 482 | ||||||||||||
Loss on debt extinguishment 2 | — | — | — | 497 | ||||||||||||
Severance 3 | (2 | ) | 332 | 690 | 332 | |||||||||||
Incremental financial reporting 4 | — | 4 | — | 1,783 | ||||||||||||
Internal control remediation 5 | 268 | 137 | 971 | 1,029 | ||||||||||||
Government investigations and other legal matters 6 | 1,968 | 2,697 | 17,887 | 8,435 | ||||||||||||
Life insurance proceeds 7 | — | (930 | ) | — | (930 | ) | ||||||||||
Adjusted EBITDA | $ | (1,515 | ) | $ | 4,316 | $ | (10,496 | ) | $ | (1,640 | ) |
- Amounts reflect non-cash stock-based compensation expense.
- Amount represents the loss on the extinguishment of the Company’s prior credit facility with
Wells Fargo Bank, N.A. and the unsecured senior notes inApril 2020 . - Amounts represent severance and other post-employment costs for certain former employees of the Company.
- Amounts represent professional services fees related to the Company’s efforts to prepare, audit and file delinquent financial statements with the
SEC , as well as tax compliance matters impacted by the restatement of prior period financial statements. The amounts exclude$0.1 million and$1.0 million for the three and nine months endedSeptember 30, 2020 . - Amounts represent professional services fees related to the Company’s efforts to remediate internal control material weaknesses including certain costs to upgrade IT systems.
- Amounts include professional services fees for the three and nine months ended
September 30, 2021 of$1.6 million and$15.2 million , respectively, and$1.7 million and$5.5 million for the three and nine months endedSeptember 30, 2020 , respectively, related to costs to indemnify certain former officers and employees of the Company. The Company is obligated to pay legal costs of certain former officers and employees in accordance with Company bylaws and certain indemnification agreements. As further discussed in Note 9. Commitments and Contingencies of Part I, Item 1. Financial Statements within the Company’s Form 10-Q for the quarterly period endedSeptember 30, 2021 , the Company fully exhausted its historical primary directors’ and officers’ insurance coverage in connection with these matters during the first quarter of 2020. Also included are professional services fees and reserves related to certain other legal matters. - Amount represents a life insurance payment to the Company related to the death of a former employee.
- Amounts for all periods include adjustments to impacts of the CARES Act; the nine months ended
September 30, 2020 also include a change in the deferred tax liability related to an indefinite lived intangible asset.
![](https://ml.globenewswire.com/media/M2FjMjRhODAtNDExMS00OWJiLWFkNzktMzMwOGE3M2E2NjhhLTEwMzI4MDc=/tiny/Power-Solutions-International-.png)
Source: Power Solutions International, Inc.