Power Solutions International, Inc. Reports First Quarter 2016 Results
First Quarter Net sales of
Working Capital Improvement Contributes to Operating Cash Flow of
Net Debt Reduction of
"Our first quarter revenues were in line with our expectations and reflected the continued softness in the oil and gas end market," commented
Winemaster continued, "We've made meaningful progress with our balance sheet and gained financial flexibility with an amendment to our debt. Since the fourth quarter of 2015, we've lowered our operating expenses, while at the same time increasing R&D to support the success of our on-road initiatives. We remain enthusiastic in our ability to achieve growth in this valuable end market in 2016 and well into the future. Further, we reiterate our prior revenue guidance which includes profitability for the full year."
First Quarter 2016 Results
Net sales for the first quarter of 2016 were
Operating loss of
Other expense for the first quarter of 2016 includes non-cash income of
Net loss, which includes the warrant revaluation adjustment, was
Net loss, adjusted to remove the warrant revaluation impact, was
Summary of Diluted EPS Attributable to Common Stockholders "Adjusted" removes the Q1 2016 and Q1 2015 impact of warrant revaluation and the Q1 2015 impact of transaction costs |
||||||
Q1 2016 | Q1 2015 | |||||
Diluted EPS | $ | (0.49 | ) | $ | (0.13 | ) |
Adjusted diluted EPS | $ | (0.60 | ) | $ | 0.20 | |
Diluted shares | 10,818,678 | 10,797,056 | ||||
Adjusted diluted shares | 10,818,678 | 11,132,773 | ||||
2016 Outlook
The Company reiterates the revenue guidance previously provided. The Company anticipates 2016 full year net sales to be in the range of
The Company cautions that its 2016 outlook reflects its current assessment of a number of factors, including, but not limited to, the timing of new product ramps, oil and gas pricing and the impact of global economic conditions on demand growth in its current markets. Please see the "Cautionary Note Regarding Forward-Looking Statements" below for additional risk factors.
Earnings Results Conference Call
The Company
will discuss financial results and its outlook on a conference call scheduled for today,
Investors in the
A simultaneous live webcast will be available on the Investor Relations section of the Company's website at www.psiengines.com. A presentation will accompany the live webcast. For those listening on the webcast, the slides will download automatically. For those dialing in, the presentation can be downloaded from the Investor Relations section of our website. The webcast will be archived on the website for one year.
About
PSI develops and delivers complete industrial power systems that are used worldwide in stationary and mobile power generation applications supporting standby, prime, and Co-generation power (CHP) applications; mobile industrial applications that include forklifts, aerial lifts, industrial sweepers, aircraft ground support, arbor, agricultural and construction equipment. In addition, PSI develops and delivers power systems purpose built for the Class 3 through Class 7 medium duty trucks and buses for the North American and Asian markets.
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, including expectations for sales as set forth under "2016 Outlook" and expectations for profitability for the 2016 full year. These forward-looking statements are covered by the "Safe Harbor for Forward-Looking Statements" provided by the Private Securities Litigation Reform Act of 1995. The Company has tried to identify these forward looking statements by using words such as "expect," "contemplate,"
"anticipate," "estimate," "plan," "will," "would," "should," "forecast," "believe," "outlook, " "guidance," "projection," "target" or similar expressions, but these words are not the exclusive means for identifying such statements. The Company cautions that a number of risks, uncertainties and other factors could cause the Company's actual results to differ materially from those expressed in, or implied by, the forward-looking statements, including, without limitation, the continued development and expansion of the market for alternative-fuel power systems; technological and other risks relating to the Company's development of its 8.8 and 4.3 liter engines, introduction of other new products and entry into on-road markets (including the risk that these initiatives may not be successful); the timing of new products; the Company's ability to integrate recent acquisitions into the business
of the Company successfully and the amount of time and expense spent and incurred in connection with the integration; the risk that the economic benefits, cost savings and other synergies that the Company originally anticipated as a result of recent acquisitions are not fully realized or take longer to realize than expected; the significant strain on the Company's senior management team, support teams, manufacturing lines, information technology platforms and other resources resulting from rapid expansion of the Company's operations (including as a result of recent acquisitions); volatility in oil and gas prices; changes in environmental and regulatory policies; significant competition; global economic conditions (including their impact on demand growth); and the Company's dependence on key suppliers. For a detailed discussion of factors that could affect the Company's future operating
results, please see the Company's filings with the
Non-GAAP Financial Measures and Reconciliations
As used herein, "GAAP" refers to generally accepted accounting principles in the United States. The Company uses certain numerical measures in this press release which are or may be considered "Non-GAAP financial measures" under Regulation G. The Company has provided below for your reference supplemental financial disclosure for these measures, including the most directly comparable GAAP measures and associated reconciliations.
Reconciliation of Net Loss to Adjusted Net (Loss) Income (Dollar amounts in thousands) | ||||||
Three months ended 2016 | Three months ended 2015 | |||||
Net loss | $ | (5,251 | ) | $ | (1,456 | ) |
Non-cash (income) expense from warrant revaluation | (1,256 | ) | 3,614 | |||
Transaction costs, net of tax | - | 120 | ||||
Adjusted net (loss) income | $ | (6,507 | ) | $ | 2,278 |
Reconciliation of Diluted EPS to Adjusted Diluted EPS | ||||||
Three months ended 2016 | Three months ended 2015 | |||||
Earnings per diluted common share | $ | (0.49 | ) | $ | (0.13 | ) |
Non-cash (income) expense from warrant revaluation | (0.11 | ) | 0.32 | |||
Transaction costs, net of tax | - | 0.01 | ||||
Adjusted (loss) earnings per diluted common share | $ | (0.60 | ) | $ | 0.20 | |
The Company believes supplementing its consolidated financial statements presented in accordance with GAAP with non-GAAP measures provides investors with useful information regarding the Company's short-term and long-term trends. Adjusted net (loss) income is derived from GAAP results by excluding the non-cash impact related to the change in the estimated fair value of the liability associated with the warrants issued in the Company's
Adjusted net (loss) income, adjusted (loss) earnings per diluted common share and other non-GAAP financial measures used and presented by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Investors should consider non-GAAP measures in addition to, and not as a substitute for, or as superior to, financial performance measures prepared in accordance with GAAP.
Consolidated Balance Sheets (Unaudited) | ||||||||||
(Dollar amounts in thousands, except per share amounts) | ||||||||||
ASSETS | ||||||||||
Current assets | ||||||||||
Cash | $ | 1,495 | $ | 8,445 | ||||||
Accounts receivable, net | 63,163 | 104,365 | ||||||||
Inventories, net | 120,735 | 130,347 | ||||||||
Prepaid expenses and other current assets | 9,496 | 9,518 | ||||||||
Total current assets | 194,889 | 252,675 | ||||||||
Property, plant & equipment, net | 24,289 | 26,001 | ||||||||
Intangible assets, net | 30,316 | 31,745 | ||||||||
41,466 | 41,466 | |||||||||
Deferred income taxes, net | 819 | 819 | ||||||||
Other noncurrent assets | 7,181 | 7,230 | ||||||||
TOTAL ASSETS | $ | 298,960 | $ | 359,936 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
Current liabilities | ||||||||||
Accounts payable | $ | 41,491 | $ | 76,078 | ||||||
Accrued compensation and benefits | 3,649 | 4,009 | ||||||||
Other accrued liabilities | 16,043 | 19,175 | ||||||||
Total current liabilities | 61,183 | 99,262 | ||||||||
Long-term obligations | ||||||||||
Revolving line of credit | 80,568 | 97,299 | ||||||||
Private placement warrants | 226 | 1,482 | ||||||||
Long-term debt, net | 53,946 | 53,820 | ||||||||
Other noncurrent liabilities | 1,670 | 1,776 | ||||||||
TOTAL LIABILITIES | 197,593 | 253,639 | ||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||
STOCKHOLDERS' EQUITY | ||||||||||
Series A convertible preferred stock—$0.001 par value. Authorized: 114,000 shares. Issued and outstanding: -0- shares at 2015. | - | - | ||||||||
Common stock—$0.001 par value. Authorized: 50,000,000 shares. Issued: 11,583,831 shares at 10,752,906 shares at | 12 | 12 | ||||||||
Additional paid-in-capital | 75,500 | 75,179 | ||||||||
Retained earnings | 30,105 | 35,356 | ||||||||
(4,250 | ) | (4,250 | ) | |||||||
TOTAL STOCKHOLDERS' EQUITY | 101,367 | 106,297 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 298,960 | $ | 359,936 | ||||||
Consolidated Statements of Operations (Unaudited) | ||||||||||
(Dollar amounts in thousands, except per share amounts) | ||||||||||
Three months ended March 31, 2016 | Three months ended March 31, 2015 | |||||||||
Net sales | $ | 61,814 | $ | 86,139 | ||||||
Cost of goods sold | 57,758 | 69,682 | ||||||||
Gross profit | 4,056 | 16,457 | ||||||||
Operating expenses: | ||||||||||
Research & development and engineering | 5,250 | 5,168 | ||||||||
Selling | 2,609 | 2,750 | ||||||||
General and administrative | 3,449 | 3,655 | ||||||||
Amortization of intangible assets | 1,429 | 814 | ||||||||
Total operating expenses | 12,737 | 12,387 | ||||||||
Operating (loss) income | (8,681 | ) | 4,070 | |||||||
Other (income) expense: | ||||||||||
Interest expense | 1,421 | 489 | ||||||||
Private placement warrant (income) expense | (1,256 | ) | 3,614 | |||||||
Other expense, net | 85 | 39 | ||||||||
Total other expense | 250 | 4,142 | ||||||||
Loss before income taxes | (8,931 | ) | (72 | ) | ||||||
Income tax (benefit) provision | (3,680 | ) | 1,384 | |||||||
Net loss | $ | (5,251 | ) | $ | (1,456 | ) | ||||
Weighted-average common shares outstanding: | ||||||||||
Basic | 10,818,678 | 10,797,056 | ||||||||
Diluted | 10,818,678 | 10,797,056 | ||||||||
Loss per common share: | ||||||||||
Basic | $ | (0.49 | ) | $ | (0.13 | ) | ||||
Diluted | $ | (0.49 | ) | $ | (0.13 | ) | ||||
Consolidated Statements of Cash Flows (Unaudited) | ||||||||||
(Dollar amounts in thousands) | ||||||||||
Three months ended March 31, 2016 | Three months ended March 31, 2015 | |||||||||
Cash flows from operating activities | ||||||||||
Net loss | $ | (5,251 | ) | $ | (1,456 | ) | ||||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||||
Depreciation | 1,270 | 833 | ||||||||
Amortization | 1,429 | 850 | ||||||||
Non-cash interest expense | 149 | 25 | ||||||||
Share-based compensation expense | 321 | 305 | ||||||||
Increase in accounts receivable allowances | 62 | 163 | ||||||||
Increase in inventory reserves | 219 | 225 | ||||||||
(Decrease) increase in valuation of private placement warrants liability | (1,256 | ) | 3,614 | |||||||
Loss on investment in joint ventures | 85 | 47 | ||||||||
Loss on disposal of assets | - | 18 | ||||||||
(Increase) decrease in operating assets, net of effects of business combination: | ||||||||||
Accounts receivable | 41,140 | 6,251 | ||||||||
Income tax receivable | 5,230 | - | ||||||||
Inventories | 9,393 | (18,059 | ) | |||||||
Prepaid expenses and other assets | (3,924 | ) | 672 | |||||||
Increase (decrease) in operating liabilities, net of effects of business combination: | ||||||||||
Accounts payable | (35,274 | ) | (4,820 | ) | ||||||
Accrued compensation and benefits and other accrued liabilities | (517 | ) | 568 | |||||||
Income taxes payable | - | 812 | ||||||||
Other noncurrent liabilities | (3,081 | ) | 221 | |||||||
Net cash provided by (used in) operating activities | 9,995 | (9,731 | ) | |||||||
Cash flows from investing activities | ||||||||||
Purchases of property, plant & equipment | (214 | ) | (806 | ) | ||||||
Business combination | - | (9,735 | ) | |||||||
Net cash used in investing activities | (214 | ) | (10,541 | ) | ||||||
Cash flows from financing activities | ||||||||||
Advances from revolving line of credit - noncurrent obligation | 46,902 | 32,363 | ||||||||
Repayments of revolving line of credit - noncurrent obligation | (63,633 | ) | (8,000 | ) | ||||||
Payments on long-term debt | - | (417 | ) | |||||||
Net cash (used in) provided by financing activities | (16,731 | ) | 23,946 | |||||||
(Decrease) increase in cash | (6,950 | ) | 3,674 | |||||||
Cash at beginning of period | 8,445 | 6,561 | ||||||||
Cash at end of period | $ | 1,495 | $ | 10,235 | ||||||
Contact:Source:Power Solutions International, Inc. Michael P. Lewis Chief Financial Officer +1 (630) 451-2290 Michael.Lewis@psiengines.comPower Solutions International, Inc. Philip Kranz Director of Investor Relations +1 (630) 451-5402 Philip.Kranz@psiengines.com
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