STR Holdings, Inc. (NYSE:STRI) today announced its financial
results for the first quarter ended March 31, 2014.
First Quarter 2014 Financial Summary:
- Net sales of $9.3 million
- Diluted GAAP loss per share from continuing operations of
$(0.12); Diluted non-GAAP loss per share from continuing operations
of $(0.08)
- Adjusted EBITDA of $(2.9) million
- Repurchased 15,611,958 shares of common stock for $25.8 million
(including associated fees) in modified "Dutch auction" tender
offer
- Finished the quarter with $26.5 million in cash and no
debt
Financial Results
Net sales for the quarter ended March 31, 2014 were $9.3
million, an increase of 40% sequentially and a decline of 17% from
Q1 2013. The sequential increase was driven by approximately 50%
higher volume that more than offset a 7% decline in average selling
price ("ASP"). On a year–over–year basis, sales volume increased by
approximately 10% and ASP declined by approximately 24%. Net sales
in the first quarter of 2013 included $5.1 million of non-recurring
sales to First Solar, Inc. The Company's non-First Solar net sales
increased 55% in the first quarter of 2014 compared to the first
quarter of 2013.
Gross loss for the first quarter of 2014 was $(0.7) million, or
(7)% of net sales, compared to $(1.1) million, or (16)% of net
sales, from the fourth quarter of 2013 and $(0.7) million, or (6)%
of net sales from the first quarter of 2013. The sequential
improvement was primarily driven by $0.4 million of restructuring
costs recorded in the fourth quarter of 2013 associated with the
previously announced plant shutdown in Malaysia. Compared to the
first quarter of 2013, a 24% ASP decline and a higher scrap more
than offset $1.3 million of lower restructuring charges, an
increase in paperless product sales mix and prior cost-reduction
actions.
Selling, general and administrative expenses for the first
quarter of 2014 were $3.0 million compared to $5.3 million in the
fourth quarter of 2013 and $4.1 million in the first quarter of
2013. The sequential decrease was driven by $1.0 million of reduced
professional fees and $1.7 million of restructuring expense that
did not reoccur in the first quarter offset by $0.4 million of
higher non-cash stock-based compensation expense. The
year-over-year decrease was primarily driven by $0.8 million of
reduced labor and benefits due to previous cost-reduction actions,
$0.3 million of decreased professional fees and $0.3 million of
lower restructuring charges, which more than offset $0.3 million of
higher non-cash stock based compensation.
Net loss from continuing operations for the first quarter of
2014 was $(4.6) million, or $(0.12) per diluted share. This
compares to a net loss from continuing operations of $(3.7)
million, or $(0.09) per diluted share, for the fourth quarter of
2013 and net loss from continuing operations of $(4.2) million, or
$(0.10) per diluted share, for the first quarter of 2013. The
sequential higher net loss was driven by increased tax expense of
$3.1 million partially offset by lower SG&A, research and
development expense and bad debt expense. The higher tax expense
was driven by a $1.1 million non-cash deferred tax write-off
associated with stock options that were cancelled in the first
quarter of 2014 for terminated employees in conjunction with prior
year cost-reduction actions.
Adjusted EBITDA for the first quarter of 2014 was $(2.9) million
compared to $(3.6) million from the fourth quarter of 2013. This
19% sequential improvement was primarily driven by lower SG&A,
research and development and bad debt expense. This compares to
Adjusted EBITDA from continuing operations of $(3.6) million for
the first quarter of 2013 or (32)% of net sales.
Non-GAAP net loss from continuing operations for the first
quarter of 2014, which excludes certain tax-effected adjustments
(as disclosed following the non-GAAP reconciliation table at the
end of this press release), was $(3.2) million, or $(0.08) per
diluted share. This compares to non-GAAP net loss from continuing
operations of $(1.9) million, or $(0.05) per diluted share, for the
fourth quarter of 2013 and non-GAAP net earnings from continuing
operations of $(2.9) million, or $(0.07) per diluted share, for the
first quarter of 2013.
Operations Update
During the first quarter, the Company began outsourcing some of
its encapsulant production in China to its contract manufacturer,
ZheJiang FeiYu Photo-Electrical Science & Technology Co., Ltd.
("FeiYu"), which entailed significant coordination in training,
testing and supply chain logistics. After encountering some
unexpected delays, FeiYu initiated production and commenced small
shipments in the latter part of the first quarter. In addition, the
Company recently finalized engineering changes required to produce
low-shrink paperless encapsulants with its existing production
equipment and achieved a first quarter product mix of approximately
29% paperless.
Dutch Auction Tender Offer
During the first quarter of 2014, the Company commenced a
modified "Dutch auction" tender offer to repurchase, for cash, up
to $30.0 million of our common stock. Upon the closing of the
tender offer on March 7, 2014, the Company repurchased and retired
a total of 15,611,958 shares of common stock at $1.54 per share.
The total repurchase price for the shares was $24.0 million plus
approximately $2.3 million of related fees, of which approximately
$1.8 million were paid during the first quarter of 2014.
Balance Sheet and Liquidity
The Company finished the quarter with $26.5 million of cash and
no debt. As of March 31, 2014, the Company also had $12.6 million
of income tax receivables.
The Company had negative operating cash flow of $4.9 million
during the first quarter of 2014. The use of cash was driven by
negative EBITDA generation, increased working capital investment
associated with its sequential sales increase and higher inventory
required to support its product introduction and initial launch of
its contract manufacturing agreement. In addition, the Company
incurred approximately $0.5 million of restructuring payments and a
one-time $0.6 million deferred compensation payment during the
first quarter of 2014.
Strategic Alternatives
The Company will continue to assess strategic alternatives as it
executes its China Tolling Plan with the intention of maximizing
value to its stockholders. Should the Company fail to meet its
objectives under the China Tolling Plan, or otherwise return to
profitability in the near term, the Company will consider pursuing
other strategic alternatives including acquisitions, divestitures,
joint ventures and/or the winding down of its business.
First Quarter Conference Call and
Presentation
The Company will not host a quarterly conference call. The
Company will continue to report its financial results and other
events in the normal course of filing its Forms 10-K, 10-Q and 8-K
with the Securities and Exchange Commission.
About STR Holdings, Inc.
STR Holdings, Inc. is a provider of encapsulants to the
photovoltaic module industry. Further information about STR
Holdings, Inc. can be obtained via the Company's website at
www.strsolar.com.
Forward-Looking Statements
This press release and any oral statement made in respect of the
information in this press release contain forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Such statements are subject to inherent risks
and uncertainties. These forward-looking statements present our
current expectations and projections relating to our financial
condition, results of operations, plans, objectives, future
performance and business and are based on assumptions that we have
made in light of our industry experience and perceptions of
historical trends, current conditions, expected future developments
and other factors management believes are appropriate under the
circumstances. However, these forward-looking statements are not
guarantees of future performance or financial or operating results.
In addition to the risks and uncertainties discussed in this press
release, we face risks and uncertainties that include, but are not
limited to, the following: (1) incurring substantial losses for the
foreseeable future and our inability to achieve or sustain
profitability in the future; (2) the potential impact of pursuing
strategic alternatives, including dissolution and liquidation of
our Company; (3) our reliance on a single product line; (4) our
securing sales to new customers, growing sales to existing key
customers and increasing our market share, particularly in China;
(5) customer concentration in our business and our relationships
with and dependence on key customers; (6) the outsourcing
arrangements and reliance on third parties for the manufacture of a
portion of our encapuslants; (7) technological changes in the solar
energy industry or our failure to develop and introduce or
integrate new technologies could render our encapsulants
uncompetitive or obsolete; (8) competition; (9) excess capacity in
the solar supply chain; (10) demand for solar energy in general and
solar modules in particular; (11) our operations and assets in
China being subject to significant political and economic
uncertainties; (12) limited legal recourse under the laws of China
if disputes arise; (13) our ability to adequately protect our
intellectual property, particularly during the outsource
manufacturing of our products in China; (14) our lack of credit
facility and our inability to obtain credit; (15) a significant
reduction or elimination of government subsidies and economic
incentives or a change in government policies that promote the use
of solar energy, particularly in China and the United States; (16)
volatility in commodity costs; (17) our customers' financial
profile causing additional credit risk to our accounts receivable;
(18) our dependence on a limited number of third‑party suppliers
for raw materials for our encapsulants and other significant
materials used in our process; (19) potential product performance
matters and product liability; (20) our substantial international
operations and shift of business focus to emerging markets; (21)
the impact of changes in foreign currency exchange rates on
financial results, and the geographic distribution of revenues;
(22) losses of financial incentives from government bodies in
certain foreign jurisdictions; (23) compliance with the Continued
Listing Criteria of the NYSE; (24) the other risks and
uncertainties described under "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and in subsequent periodic reports on Form 10-K, 10-Q
and 8-K. You are urged to carefully review and consider the
disclosure found in our filings which are available on
http://www.sec.gov or http://www.strsolar.com. Should one or more
of these risks or uncertainties materialize, or should any of these
assumptions prove to be incorrect, actual results may vary
materially from those projected in these forward‑looking
statements. We undertake no obligation to publicly update any
forward-looking statement contained in this release, whether as a
result of new information, future developments or otherwise, except
as may be required by law.
STR Holdings,
Inc. |
CONDENSED CONSOLIDATED
INCOME STATEMENTS |
All amounts in
thousands except shares and per share amounts |
|
|
|
|
Three Months Ended
March 31, |
|
2014 |
2013 |
|
(Unaudited) |
(Unaudited) |
|
|
|
Net sales |
$ 9,336 |
$ 11,215 |
Cost of sales |
10,017 |
11,916 |
|
|
|
Gross loss |
(681) |
(701) |
|
|
|
Selling, general and administrative
expenses |
2,975 |
4,137 |
Research and development expense |
256 |
904 |
Provision for bad debt expense |
24 |
340 |
Operating loss |
(3,936) |
(6,082) |
|
|
|
Interest income, net |
4 |
1 |
Amortization of deferred financing costs |
-- |
(17) |
Loss on disposal of fixed assets |
(433) |
-- |
Foreign currency transaction (loss) gain |
(138) |
44 |
Loss from continuing operations
before income tax expense (benefit) |
(4,503) |
(6,054) |
Income tax expense (benefit) from continuing
operations |
139 |
(1,844) |
Net loss from continuing
operations |
(4,642) |
(4,210) |
|
|
|
Discontinued operations: |
|
|
Earnings from discontinued
operations before income tax expense |
-- |
-- |
Income tax expense from discontinued
operations |
-- |
-- |
Net earnings from discontinued
operations |
-- |
-- |
|
|
|
Net loss |
$ (4,642) |
$ (4,210) |
|
|
|
GAAP loss per share: |
|
|
Basic from continuing
operations |
$ (0.12) |
$ (0.10) |
Basic from discontinued
operations |
$ -- |
$ -- |
Total basic GAAP net loss per
share |
$ (0.12) |
$ (0.10) |
|
|
|
Diluted from continuing
operations |
$ (0.12) |
$ (0.10) |
Diluted from discontinued
operations |
$ -- |
$ -- |
Total diluted GAAP net loss per
share |
$ (0.12) |
$ (0.10) |
|
|
|
(1) Non-GAAP net loss per
share: |
|
|
Basic from continuing
operations |
$ (0.08) |
$ (0.07) |
Basic from discontinued
operations |
$ -- |
$ -- |
Total basic non-GAAP net loss
per share |
$ (0.08) |
$ (0.07) |
|
|
|
Diluted from continuing
operations |
$ (0.08) |
$ (0.07) |
Diluted from discontinued
operations |
$ -- |
$ -- |
Total diluted non-GAAP net loss
per share |
$ (0.08) |
$ (0.07) |
|
|
|
Weighted-average common shares
outstanding: |
|
|
Basic shares outstanding
GAAP |
40,238,712 |
41,556,736 |
(2) Diluted shares outstanding
GAAP |
40,238,712 |
41,556,736 |
Stock
options |
-- |
-- |
Restricted common
stock |
-- |
-- |
(2) Diluted shares outstanding
non-GAAP |
40,238,712 |
41,556,736 |
|
|
|
(1) Please refer to the
reconciliation of non-GAAP measures included in this press
release. |
(2) Please refer to the
reconciliation of diluted shares outstanding for non-GAAP net loss
per share included in this press release. |
|
|
|
|
|
|
STR Holdings,
Inc. |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
All amounts in
thousands |
|
|
|
|
March 31,
2014 |
December 31,
2013 |
|
(Unaudited) |
(Unaudited) |
ASSETS |
|
|
CURRENT ASSETS |
|
|
Cash and cash equivalents |
$ 26,457 |
$ 58,173 |
Accounts receivable, net |
6,127 |
4,771 |
Inventories, net |
9,542 |
8,557 |
Other current assets |
19,321 |
15,379 |
Total current
assets |
61,447 |
86,880 |
|
|
|
Property, plant and equipment,
net |
26,774 |
28,398 |
Other noncurrent assets |
14,105 |
13,931 |
Total assets |
$ 102,326 |
$ 129,209 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
CURRENT LIABILITIES |
|
|
Accounts payable |
$ 6,248 |
$ 2,636 |
Accrued liabilities |
9,202 |
8,432 |
Other current liabilities |
-- |
630 |
Income taxes payable |
861 |
859 |
Total current
liabilities |
16,311 |
12,557 |
|
|
|
Long-term liabilities |
4,792 |
4,790 |
Total
liabilities |
21,103 |
17,347 |
|
|
|
STOCKHOLDERS' EQUITY |
|
|
Stockholders' equity |
81,223 |
111,862 |
Total liabilities and stockholders'
equity |
$ 102,326 |
$ 129,209 |
|
|
|
|
|
|
STR Holdings,
Inc. |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
All amounts in
thousands |
|
|
|
|
Three Months Ended
March 31, |
|
2013 |
2013 |
|
(Unaudited) |
(Unaudited) |
OPERATING ACTIVITIES |
|
|
Net loss |
$ (4,642) |
$ (4,210) |
Net earnings from discontinued
operations |
-- |
-- |
Net loss from continuing operations |
(4,642) |
(4,210) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
Depreciation |
511 |
492 |
Amortization of deferred financing costs |
-- |
17 |
Stock-based compensation expense |
613 |
354 |
Loss on disposal of property, plant and
equipment |
433 |
-- |
Provision for bad debt expense |
24 |
340 |
Income tax receivable non-cash |
(922) |
(1,634) |
Deferred income tax benefit |
1,057 |
(248) |
Changes in operating assets and
liabilities |
(1,150) |
1,156 |
Other, net |
(831) |
72 |
Net cash used in continuing operations |
(4,907) |
(3,661) |
Net cash provided by discontinued
operations |
-- |
738 |
Total net cash used in operating
activities |
(4,907) |
(2,923) |
|
|
|
INVESTING ACTIVITIES |
|
|
Capital expenditures |
(946) |
(480) |
Net cash used in continuing operations |
(946) |
(480) |
Net cash used in discontinued operations |
-- |
-- |
Total net cash used in investing
activities |
(946) |
(480) |
|
|
|
FINANCING ACTIVITIES |
|
|
Repurchase of common stock in tender
offer |
(25,836) |
-- |
Proceeds from common stock issued under
employee stock purchase plan |
1 |
9 |
Net cash (used in) provided by continuing
operations |
(25,835) |
9 |
Net cash used in discontinued operations |
-- |
-- |
Total net cash (used in) provided by
financing activities |
(25,835) |
9 |
|
|
|
Effect of exchange rate changes on cash |
(28) |
(216) |
|
|
|
Net change in cash and cash
equivalents |
(31,716) |
(3,610) |
Cash and cash equivalents, beginning of
period |
58,173 |
81,985 |
Cash and cash equivalents, end of period |
$ 26,457 |
$ 78,375 |
|
|
|
SUPPLEMENTAL DISCOLSURE OF NON-CASH
INVESTING ACTIVITIES |
|
|
Proceeds received from sale of
land |
$ 1,912 |
$ -- |
|
|
|
* Free cash flow from continuing
operations |
$ (5,853) |
$ (4,141) |
|
|
|
* Please refer to the
reconciliation of non-GAAP measures included in this press
release. |
|
|
|
|
|
|
STR Holdings,
Inc. |
RECONCILIATION OF
NON-GAAP MEASURES |
All amounts in
thousands except shares and per share amounts |
|
|
|
|
Three Months Ended
March 31, |
|
2014 |
2013 |
|
(Unaudited) |
(Unaudited) |
Non-GAAP Loss Per Share |
|
|
Net loss from continuing operations |
$ (4,642) |
$ (4,210) |
Adjustments to net loss from continuing
operations: |
|
|
Amortization of deferred
financing costs |
-- |
17 |
Stock-based compensation
expense |
613 |
354 |
Restructuring |
27 |
1,573 |
Tax impact of option
cancellation due to restructuring |
1,058 |
-- |
Tax effect of non-GAAP
adjustments |
(215) |
(654) |
Non-GAAP net loss from continuing
operations |
$ (3,159) |
$ (2,920) |
|
|
|
Non-GAAP net loss per share: |
|
|
Basic from continuing operations |
$ (0.08) |
$ (0.07) |
Diluted from continuing operations |
$ (0.08) |
$ (0.07) |
|
|
|
Weighted-average common shares
outstanding: |
|
|
Basic |
40,238,712 |
41,556,736 |
(1) Diluted |
40,238,712 |
41,556,736 |
|
|
|
(1) Please refer to the
reconciliation of diluted shares outstanding for non-GAAP net loss
per share included in this press release. |
|
|
|
|
Three Months
Ended March 31, |
|
2014 |
2013 |
|
(Unaudited) |
(Unaudited) |
Free Cash Flow from Continuing
Operations |
|
|
Cash flow used in operations from continuing
operations |
$ (4,907) |
$ (3,661) |
Less: |
|
|
Capital expenditures |
(946) |
(480) |
Free cash flow |
$ (5,853) |
$ (4,141) |
|
|
|
|
Three Months
Ended March 31, |
|
2014 |
2013 |
|
(Unaudited) |
(Unaudited) |
Adjusted EBITDA: |
|
|
Adjusted EBITDA |
$ (2,923) |
$ (3,619) |
Depreciation expense |
(511) |
(492) |
Amortization of deferred financing
costs |
-- |
(17) |
Interest income net |
4 |
1 |
Income tax (expense) benefit |
(139) |
1,844 |
Restructuring |
(27) |
(1,573) |
Stock‑based compensation |
(613) |
(354) |
Loss on disposal of property, plant and
equipment |
(433) |
-- |
Net loss from continuing
operations |
$ (4,642) |
$ (4,210) |
|
|
|
|
|
|
Non-GAAP Financial Measures
To supplement the Company's condensed consolidated financial
statements, which statements are prepared and presented in
accordance with generally accepted accounting principles in the
United States of America (GAAP), the Company uses non-GAAP
financial measures to facilitate better understanding of its
operating results. In this press release, there are three non-GAAP
financial metrics mentioned: (1) Non-GAAP loss per share from
continuing operations (EPS); (2) free cash flow from continuing
operations as defined below; and (3) Adjusted EBITDA.
Non-GAAP EPS: The Company believes that
non-GAAP EPS from continuing operations provides meaningful
supplemental information regarding its performance by excluding
certain expenses that may not be indicative of the core business
operating results and may help in comparing current period results
with those of prior periods as well as with its peers.
Non-GAAP EPS from continuing operations is defined as net loss
from continuing operations not including the tax effected impact of
deferred financing costs, stock-based compensation and
restructuring divided by the weighted-average common shares
outstanding. Please refer to the Company's Form 10-K filed with the
Securities and Exchange Commission (SEC) on March 13, 2014, as well
as prior SEC filings, for detailed discussion on some of these
adjustments that have been recorded in previous periods. During the
current period, we have also included a deferred tax asset
write-off relating to canceled stock options as a non-GAAP
adjustment. Information regarding this item is set forth below:
- Tax impact of option cancellation: The non-cash deferred tax
asset write-off related to vested stock options that were cancelled
in 2014 due to terminated employees associated with prior
restructuring actions. We believe this non-cash charge was directly
associated with prior restructuring actions and will not occur in
our normal future operations.
Although we use non-GAAP EPS as a measure to assess the
operating performance of our business, non-GAAP EPS has significant
limitations as an analytical tool because it excludes certain
material costs. Because non-GAAP EPS does not account for these
expenses, its utility as a measure of our operating performance has
material limitations. The omission of restructuring and stock–based
compensation expense limits the usefulness of this measure.
Non-GAAP EPS also adjusts for the related tax effects of the
adjustments and the payment of taxes is a necessary element of our
operations. Because of these limitations, management does not view
non-GAAP EPS in isolation and uses other measures, such as Adjusted
EBITDA, net loss from continuing operations, net sales, gross loss
and operating loss, to measure operating performance.
STR Holdings,
Inc. |
RECONCILIATION OF
NON-GAAP SHARES OUTSTANDING |
|
|
|
|
Three Months Ended
March 31, |
|
2014 |
2013 |
|
(Unaudited) |
(Unaudited) |
Weighted-average shares
outstanding |
|
|
Basic shares outstanding
GAAP |
40,238,712 |
41,556,736 |
Diluted shares outstanding
GAAP |
40,238,712 |
41,556,736 |
Stock
options |
-- |
-- |
Restricted common
stock |
-- |
-- |
Diluted shares outstanding
non-GAAP |
40,238,712 |
41,556,736 |
Diluted non-GAAP Shares
Outstanding: Due to a loss from continuing operations
during the quarter ended March, 31, 2014, the diluted
weighted-average common shares outstanding for purposes of its
diluted GAAP loss per share does not include 10 shares of unvested
restricted common stock, as these potential awards do not share in
any loss generated by the Company and are anti-dilutive.
Due to a loss from continuing operations during the quarter and
year ended March 31, 2013, the diluted weighted–average common
shares outstanding for purposes of its diluted GAAP loss per share
does not include 193 of restricted common stock, respectively, as
these potential awards do not share in any loss generated by the
Company and are anti-dilutive.
Free Cash Flow from Continuing Operations: The
Company believes free cash flow from continuing operations is an
important measure of its overall liquidity and its ability to fund
future growth and provide a return to shareowners. Free cash flow
is defined as operating cash flow from continuing operations
excluding cash spent on capital expenditures. A limitation of using
free cash flow versus the GAAP measure of cash provided by
operating activities as a means for evaluating the Company's
business is that free cash flow does not represent the total
increase or decrease in the cash balance from operations for the
period. We compensate for this limitation by providing information
about the changes in our cash balance on the face of the Condensed
Consolidated Statements of Cash Flows.
CONTACT: STR Holdings, Inc.
Joseph C. Radziewicz
Vice President and Chief Financial Officer
+1 (860) 758-7437
joseph.radziewicz@strholdings.com
Grafico Azioni STR (CE) (USOTC:STRI)
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