Power Solutions International, Inc. Reports Fourth Quarter and Full Year 2015 Results
Fourth Quarter
Net Income of
Fourth Quarter 2015 Results
Net sales for the fourth quarter of 2015 were
Operating loss of
Other (income) expense for the fourth quarter of 2015 includes non-cash income of
The Company recognized an income tax benefit in the fourth quarter of 2015 which includes an estimated benefit of
Net income for the fourth quarter of 2015, which includes the warrant revaluation adjustment, federal research tax credit, contingent consideration revaluation and transaction costs, was
Net income for the fourth quarter of 2015, adjusted to remove the warrant revaluation impact, federal research tax credits, contingent
consideration revaluation and transaction costs, was a loss of
Summary of Diluted EPS Attributable to Common Stockholders "Adjusted" removes the Q4 2015 impact of transaction costs, federal research tax credits and contingent consideration revaluation and the Q4 2014 impact of contingent consideration revaluation | ||||||
Q4 2015 | Q4 2014 | |||||
Diluted EPS | $ | 0.04 | $ | 0.48 | ||
Adjusted diluted EPS | $ | (0.01 | ) | $ | 0.48 | |
Diluted shares | 10,932,427 | 11,151,120 | ||||
Adjusted diluted shares | 10,932,427 | 11,151,120 |
Full Year 2015 Results
Net sales for 2015 were
"The second half of 2015 was challenging, but we consider our performance in 2015 to be a sound basis to move forward," said
2016 Outlook
The Company now expects 2016 revenue 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 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." 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 Income to Adjusted Net (Loss) Income (Dollar amounts in thousands) | ||||||
Three months ended | Three months ended | |||||
Net income | $ | 1,704 | $ | 10,321 | ||
Non-cash (income) expense from warrant revaluation | (1,259 | ) | (4,979 | ) | ||
Non-cash (income) expense from contingent consideration revaluation, net of tax | 59 | (35 | ) | |||
Federal research tax credit | (900 | ) | - | |||
Transaction costs, net of tax | 236 | - | ||||
Adjusted net (loss) income | $ | (160 | ) | $ | 5,307 |
Reconciliation of Diluted EPS to Adjusted Diluted EPS | ||||||
Three months ended | Three months ended | |||||
Earnings per diluted common share | $ | 0.04 | $ | 0.48 | ||
Non-cash (income) expense from warrant revaluation | - | - | ||||
Non-cash (income) expense from contingent consideration revaluation, net of tax | 0.01 | - | ||||
Federal research tax credit | (0.08 | ) | - | |||
Transaction costs, net of tax | 0.02 | - | ||||
Adjusted earnings (loss) per diluted common share | $ | (0.01 | ) | $ | 0.48 |
Reconciliation of Net Income to Adjusted Net Income (Dollar amounts in thousands) | ||||||
Twelve months ended | Twelve months ended | |||||
Net income | $ | 14,278 | $ | 23,726 | ||
Non-cash (income) expense from warrant revaluation | (9,299 | ) | (6,169 | ) | ||
Non-cash (income) expense from contingent consideration revaluation, net of tax | 29 | (2,305 | ) | |||
Federal research tax credits | - | - | ||||
Transaction costs, net of tax | 662 | 487 | ||||
Adjusted net income | $ | 5,670 | $ | 15,739 |
Reconciliation of Diluted EPS to Adjusted Diluted EPS | ||||||
Twelve months ended | Twelve months ended | |||||
Earnings per diluted common share | $ | 0.45 | $ | 1.58 | ||
Non-cash (income) expense from warrant revaluation | - | - | ||||
Non-cash (income) expense from contingent consideration revaluation, net of tax | - | (0.22 | ) | |||
Federal research tax credits | - | - | ||||
Transaction costs, net of tax | 0.06 | 0.05 | ||||
Adjusted earnings per diluted common share | $ | 0.51 | $ | 1.41 |
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 income (loss) 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 income (loss), adjusted earnings (loss) 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 | $ | 8,445 | $ | 6,561 | ||||||
Accounts receivable, net | 104,365 | 81,740 | ||||||||
Income tax receivable | 5,230 | - | ||||||||
Inventories, net | 130,347 | 93,903 | ||||||||
Prepaid expenses and other current assets | 4,288 | 4,801 | ||||||||
Deferred income taxes | - | 3,998 | ||||||||
Total current assets | 252,675 | 191,003 | ||||||||
Property, plant & equipment, net | 26,001 | 20,892 | ||||||||
Intangible assets, net | 31,745 | 21,392 | ||||||||
41,466 | 23,546 | |||||||||
Deferred income tax asset | 819 | - | ||||||||
Other noncurrent assets | 7,230 | 5,804 | ||||||||
TOTAL ASSETS | $ | 359,936 | $ | 262,637 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
Current liabilities | ||||||||||
Accounts payable | $ | 76,078 | $ | 60,877 | ||||||
Income taxes payable | - | 779 | ||||||||
Accrued compensation and benefits | 4,009 | 5,983 | ||||||||
Current maturities of long-term debt | - | 1,667 | ||||||||
Other accrued liabilities | 19,175 | 6,742 | ||||||||
Total current liabilities | 99,262 | 76,048 | ||||||||
Long-term obligations | ||||||||||
Revolving line of credit | 97,299 | 78,030 | ||||||||
Deferred income taxes | - | 3,241 | ||||||||
Private placement warrants | 1,482 | 11,036 | ||||||||
Long-term debt, less current maturities, net | 53,820 | 2,361 | ||||||||
Other noncurrent liabilities | 1,776 | 1,122 | ||||||||
TOTAL LIABILITIES | 253,639 | 171,838 | ||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||
STOCKHOLDERS' EQUITY | ||||||||||
Series A convertible preferred stock—$0.001 par value. Authorized: 114,000 shares. Issued and outstanding: -0- shares at | - | - | ||||||||
Common stock—$0.001 par value. Authorized: 50,000,000 shares. Issued: 11,583,831 and 11,562,209 shares at | 12 | 12 | ||||||||
Additional paid-in-capital | 75,179 | 73,959 | ||||||||
Retained earnings | 35,356 | 21,078 | ||||||||
(4,250 | ) | (4,250 | ) | |||||||
TOTAL STOCKHOLDERS' EQUITY | 106,297 | 90,799 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 359,936 | $ | 262,637 | ||||||
Consolidated Statements of Operations (Unaudited) | ||||||||||||||||||
(Dollar amounts in thousands, except per share amounts) | ||||||||||||||||||
Three months ended | Three months ended
| Twelve months ended | Twelve months ended | |||||||||||||||
Net sales | $ | 96,670 | $ | 103,910 | $ | 389,446 | $ | 347,995 | ||||||||||
Cost of sales | 82,975 | 82,819 | 326,612 | 280,950 | ||||||||||||||
Gross profit | 13,695 | 21,091 | 62,834 | 67,045 | ||||||||||||||
Operating expenses: | ||||||||||||||||||
Research & development and engineering | 4,708 | 5,056 | 21,681 | 16,900 | ||||||||||||||
Selling and service | 3,133 | 2,815 | 11,658 | 9,686 | ||||||||||||||
General and administrative | 4,765 | 3,588 | 15,718 | 13,402 | ||||||||||||||
Amortization of intangible assets | 1,827 | 521 | 4,582 | 1,013 | ||||||||||||||
Total operating expenses | 14,433 | 11,980 | 53,639 | 41,001 | ||||||||||||||
Operating (loss) income | (738 | ) | 9,111 | 9,195 | 26,044 | |||||||||||||
Other (income) expense: | ||||||||||||||||||
Interest expense | 1,341 | 444 | 4,327 | 1,331 | ||||||||||||||
Contingent consideration | 98 | (58 | ) | 48 | (3,840 | ) | ||||||||||||
Private placement warrant (income) expense | (1,259 | ) | (4,979 | ) | (9,299 | ) | (6,169 | ) | ||||||||||
Other (income) expense, net | (31 | ) | 74 | 229 | 183 | |||||||||||||
Total other expense (income) | 149 | (4,519 | ) | (4,695 | ) | (8,495 | ) | |||||||||||
(Loss) income before income taxes | (887 | ) | 13,630 | 13,890 | 34,539 | |||||||||||||
Income tax (benefit) provision | (2,591 | ) | 3,309 | (388 | ) | 10,813 | ||||||||||||
Net income | $ | 1,704 | $ | 10,321 | $ | 14,278 | $ | 23,726 | ||||||||||
Weighted-average common shares outstanding: | ||||||||||||||||||
Basic | 10,817,859 | 10,796,744 | 10,808,005 | 10,706,780 | ||||||||||||||
Diluted | 10,932,427 | 11,151,120 | 11,073,647 | 11,131,617 | ||||||||||||||
Earnings per common share: | ||||||||||||||||||
Basic | $ | 0.16 | $ | 0.96 | $ | 1.32 | $ | 2.22 | ||||||||||
Diluted | $ | 0.04 | $ | 0.48 | $ | 0.45 | $ | 1.58 | ||||||||||
Consolidated Statements of Cash Flows (Unaudited) | ||||||||||
(Dollar amounts in thousands) | ||||||||||
Twelve months ended | Twelve months ended | |||||||||
Cash flows from operating activities | ||||||||||
Net income | $ | 14,278 | $ | 23,726 | ||||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||||
Depreciation | 4,347 | 2,562 | ||||||||
Amortization | 5,324 | 2,147 | ||||||||
Deferred income taxes | (62 | ) | 1,011 | |||||||
Non-cash interest expense | 454 | 87 | ||||||||
Share-based compensation expense | 1,186 | 1,254 | ||||||||
Increase in accounts receivable allowances | 641 | 204 | ||||||||
Increase in inventory reserves | 945 | 679 | ||||||||
Amortization of inventory step up to fair value | 538 | 482 | ||||||||
Decrease in valuation of private placement warrants liability | (9,299 | ) | (6,169 | ) | ||||||
Increase (decrease) in valuation of contingent consideration liability | 48 | (3,840 | ) | |||||||
Loss on investment in joint ventures | 229 | 209 | ||||||||
Loss on disposal of assets | 267 | 284 | ||||||||
(Increase) decrease in operating assets, net of effects of business combinations: | ||||||||||
Accounts receivable | (18,123 | ) | (35,225 | ) | ||||||
Income tax receivable | (5,230 | ) | - | |||||||
Inventories | (27,336 | ) | (34,125 | ) | ||||||
Prepaid expenses and other assets | (83 | ) | (4,492 | ) | ||||||
Increase (decrease) in operating liabilities, net of effects of business combinations: | ||||||||||
Accounts payable | 8,160 | 34,140 | ||||||||
Accrued compensation and benefits and other accrued liabilities | 792 | 667 | ||||||||
Income taxes payable | (779 | ) | 585 | |||||||
Other noncurrent liabilities | 654 | 129 | ||||||||
Net cash used in operating activities | (23,049 | ) | (15,685 | ) | ||||||
Cash flows from investing activities | ||||||||||
Purchases of property, plant & equipment | (8,174 | ) | (7,239 | ) | ||||||
Business combinations, net of cash acquired | (34,396 | ) | (44,122 | ) | ||||||
Investment in joint ventures | (1,000 | ) | (350 | ) | ||||||
Increase in cash surrender value of life insurance | - | (2 | ) | |||||||
Net cash used in investing activities | (43,570 | ) | (51,713 | ) | ||||||
Cash flows from financing activities | ||||||||||
Advances from revolving line of credit - noncurrent obligation | 93,628 | 82,402 | ||||||||
Repayments of revolving line of credit - noncurrent obligation | (74,359 | ) | (22,305 | ) | ||||||
Proceeds from exercise of private placement warrants | 65 | 1,425 | ||||||||
Proceeds from long-term debt | 55,000 | 5,000 | ||||||||
Payments on long-term debt | (4,028 | ) | (972 | ) | ||||||
Payment of withholding taxes from net settlement of share-based awards | (351 | ) | (430 | ) | ||||||
Excess tax benefit from exercise of share-based awards | 65 | 2,704 | ||||||||
Cash paid for financing and transaction fees | (1,517 | ) | (171 | ) | ||||||
Net cash provided by financing activities | 68,503 | 67,653 | ||||||||
Increase in cash | 1,884 | 255 | ||||||||
Cash at beginning of period | 6,561 | 6,306 | ||||||||
Cash at end of period | $ | 8,445 | $ | 6,561 | ||||||
Contact:Source:Power Solutions International, Inc. Michael P. Lewis Chief Financial Officer +1 (630) 451-2290 Michael.Lewis@psiengines.comThe Blueshirt Group Gary T. Dvorchak , CFA Managing Director +1 (323) 240-5796 gary@blueshirtgroup.com
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