STR Holdings, Inc. (NYSE:STRI) today announced its financial
results for the second quarter ended June 30, 2013.
Second Quarter 2013 Financial Summary:
- Net sales of $7.8 million
- Diluted GAAP loss per share from continuing operations of
$(0.11); Diluted non-GAAP loss per share from continuing operations
of $(0.09)
- Finished the quarter with $72.3 million in cash and no
debt
Financial Results
Net sales for the quarter ended June 30, 2013 were $7.8 million.
This represents a decline of 31% sequentially and 69% from Q2 2012.
On a year–over–year basis, volume declined in the second quarter of
2013 by approximately 62% and our average sale price ("ASP")
declined by approximately 19%. On a sequential basis, the decrease
was driven by a volume decline of approximately 26% and a 7%
decrease in ASP. When excluding sales to First Solar, the Company's
net sales increased by approximately 20% on a sequential basis.
"Despite continued headwinds, we have begun production-scale
shipments of our next-gen EVA-based encapsulants to three new
customers in China. These prominent solar manufacturers have in
excess of 1 GW of capacity each and represent important
relationships leading up to the launch of our factory in Suzhou
later this year," said Robert S. Yorgensen, STR's President and
Chief Executive Officer. "We are still early in our relationships
and may experience further delays in ramping into their
production."
Gross profit for the second quarter of 2013 was $0.4 million, or
4.6% of sales, compared to $(0.7) million, or (6.3)% of sales, for
the first quarter of 2013. The improvement was mainly a result of a
$1.3 million decrease in restructuring charges and benefits from
cost–reduction efforts that more than offset a 7% ASP decrease and
lower absorption of fixed costs associated with the sales volume
decline.
Selling, general and administrative expenses for the second
quarter of 2013 were $4.3 million compared to $4.1 million in the
first quarter of 2013. The increase was primarily driven by a $0.4
million increase in non–cash, stock–based compensation and a $0.2
million increase in professional fees. These increases were offset
by a $0.3 million decrease in labor and benefits due to previous
headcount reductions and $0.2 million of lower restructuring
charges.
Net loss from continuing operations for the second quarter of
2013 was $(4.5) million, or $(0.11) per diluted share. This
compares to a net loss from continuing operations of $(4.2)
million, or $(0.10) per diluted share, for the first quarter of
2013 and a net loss from continuing operations of $(2.4) million,
or $(0.06) per diluted share, for the second quarter of 2012.
Non–GAAP net loss from continuing operations for the second
quarter of 2013, which excludes certain tax-effected adjustments
(as disclosed following the non–GAAP reconciliation table at the
end of this press release), was $(3.9) million, or $(0.09) per
diluted share. This compares to non–GAAP net loss from continuing
operations of $(2.9) million, or $(0.07) per diluted share, for the
first quarter of 2013 and non–GAAP net earnings from continuing
operations of $0.1 million, or $0.00 per diluted share, for the
second quarter of 2012.
Liquidity
The Company finished the quarter with $72.3 million of cash and
no debt. As of June 30, 2013, the Company also had $9.3 million of
income tax receivables, of which approximately $7.0 million relates
to income tax returns filed in 2012. The Company recently learned
that its 2011 and 2012 U.S. Federal income tax returns will be
routinely audited by the I.R.S. As such, approximately $5.6 million
of the income tax receivable will not be received by the Company
until the audit is completed.
Guidance
The Company is retracting its previously-issued 2013 guidance.
"We continue to execute our strategic objectives. However, there is
inherent risk associated with any product launch when entering mass
production, as evidenced by delays experienced so far. In addition,
we have learned that a portion of our income tax receivable will be
audited in the normal course. These recent events along with one of
our largest customers possibly emerging from insolvency proceedings
during the second half of 2013, create a high-degree of variability
and uncertainty in our ability to forecast in the short-term." said
Joseph C. Radziewicz, STR's Vice President and Chief Financial
Officer. "Based upon these events, we believe it is appropriate to
retract our 2013 guidance until we have better visibility into the
execution of our product launch and paperless roll-out during the
second half of the year. We will continue to provide an update on
our business during our normal quarterly reporting process."
Second Quarter Conference Call and
Presentation
The Company will discuss its financial results and guidance in a
conference call today at 4:30 p.m. ET. A live webcast of the
conference call and presentation will be available through the
Investor Relations section of the Company's website at
www.strsolar.com. Investors accessing the live call by phone from
the U.S. should dial (877) 312–8789 and enter passcode: 22257965.
Those calling from outside the U.S. should dial (970) 315–0450 and
use the same passcode. A telephone replay will be available
approximately two hours after the call concludes through Wednesday,
August 14, 2013, by dialing (855) 859–2056 from the U.S., or (404)
537–3406 from international locations, and entering passcode:
22257965. The webcast and presentation will be archived on the
Company's website for one year.
About STR Holdings, Inc.
STR Holdings, Inc. is a global 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 the
Company's current expectations and projections relating to its
financial condition, results of operations, plans, objectives,
future performance and business and are based on assumptions that
the Company has made in light of its 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, the Company faces risks and
uncertainties that include, but are not limited to, the following:
(1) customer concentration in our business and our relationships
with and dependence on key customers; (2) 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, particularly in China; (3) our ability
to increase our market share; (4) product pricing pressures and
other competitive factors; (5) excess capacity in the solar supply
chain; (6) the extent to which we may be required to write–off
accounts receivable, inventory or other assets; (7) trade
complaints and lawsuits diminishing the growth of the solar
industry; (8) demand for solar energy in general and solar
modules in particular; (9) the extent and duration of the
current downturn in the global economy; (10) the impact
negative credit markets may have on us or our customers or
suppliers; (11) the timing and effects of the implementation
of government incentives and policies for renewable energy,
primarily in China and the United States; (12) the effects of
the announced reductions to solar incentives in Germany and Italy;
(13) operating new manufacturing facilities and increasing
production capacity at existing facilities; (14) volatility in
commodity costs, such as resin or paper used in our encapsulants,
and our ability to successfully manage any increases in these
commodity costs; (15) our dependence on a limited number of
third–party suppliers for raw materials for our encapsulants and
materials used in our processes; (16) our reliance on vendors
and potential supply chain disruptions, including those resulting
from bankruptcy filings by customers or vendors;
(17) potential product performance matters and product
liability; (18) our ability to protect our intellectual
property; (19) the impact of changes in foreign currency
exchange rates on financial results, and the geographic
distribution of revenues and earnings; (20) maintaining
sufficient liquidity in order to fund future profitable growth and
long–term vitality; (21) outcomes of litigation and regulatory
actions; and (22) 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 Forms 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 June
30, |
Six Months Ended June
30, |
|
2013 |
2012 |
2013 |
2012 |
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
|
|
|
|
|
Net sales |
$ 7,755 |
$ 25,119 |
$ 18,970 |
$ 56,202 |
Cost of sales |
7,396 |
23,534 |
19,312 |
52,617 |
|
|
|
|
|
Gross profit |
359 |
1,585 |
(342) |
3,585 |
|
|
|
|
|
Selling, general and administrative
expenses |
4,345 |
5,595 |
8,482 |
12,263 |
Research and development expense |
709 |
1,113 |
1,613 |
2,191 |
Provision (recovery) for bad debt
expense |
1,898 |
(1,156) |
2,238 |
450 |
Goodwill impairment |
-- |
-- |
-- |
82,524 |
Operating loss |
(6,593) |
(3,967) |
(12,675) |
(93,843) |
|
|
|
|
|
Other (loss) income |
(132) |
71 |
(104) |
6,841 |
Loss from continuing operations before
income tax benefit |
(6,725) |
(3,896) |
(12,779) |
(87,002) |
Income tax benefit from continuing
operations |
(2,234) |
(1,475) |
(4,078) |
(2,450) |
Net loss from continuing operations |
(4,491) |
(2,421) |
(8,701) |
(84,552) |
|
|
|
|
|
Discontinued operations: |
|
|
|
|
Earnings from discontinued operations
before income tax expense |
-- |
-- |
-- |
-- |
Income tax expense from discontinued
operations |
-- |
-- |
-- |
-- |
Net earnings from discontinued
operations |
-- |
-- |
-- |
-- |
|
|
|
|
|
Net loss |
$ (4,491) |
$ (2,421) |
$ (8,701) |
$ (84,552) |
|
|
|
|
|
GAAP net loss per
share: |
|
|
|
|
Basic from continuing operations |
$ (0.11) |
$ (0.06) |
$ (0.21) |
$ (2.05) |
Basic from discontinued operations |
$ -- |
$ -- |
$ -- |
$ -- |
Total basic GAAP net loss per
share |
$ (0.11) |
$ (0.06) |
$ (0.21) |
$ (2.05) |
|
|
|
|
|
Diluted from continuing operations |
$ (0.11) |
$ (0.06) |
$ (0.21) |
$ (2.05) |
Diluted from discontinued operations |
$ -- |
$ -- |
$ -- |
$ -- |
Total diluted GAAP net loss per
share |
$ (0.11) |
$ (0.06) |
$ (0.21) |
$ (2.05) |
|
|
|
|
|
(1) Non-GAAP net (loss) earnings per
share: |
|
|
|
|
Basic from continuing operations |
$ (0.09) |
$ -- |
$ (0.16) |
$ 0.07 |
Basic from discontinued operations |
$ -- |
$ -- |
$ -- |
$ -- |
Total basic non-GAAP net (loss) earnings
per share |
$ (0.09) |
$ -- |
$ (0.16) |
$ 0.07 |
|
|
|
|
|
Diluted from continuing operations |
$ (0.09) |
$ -- |
$ (0.16) |
$ 0.07 |
Diluted from discontinued operations |
$ -- |
$ -- |
$ -- |
$ -- |
Total diluted non-GAAP net (loss)
earnings per share |
$ (0.09) |
$ -- |
$ (0.16) |
$ 0.07 |
|
|
|
|
|
Weighted-average common shares
outstanding: |
|
|
|
|
Basic shares outstanding GAAP |
41,607,310 |
41,287,338 |
41,574,713 |
41,239,316 |
(2) Diluted shares outstanding GAAP |
41,607,310 |
41,287,338 |
41,574,713 |
41,239,316 |
Stock options |
-- |
-- |
-- |
-- |
Restricted common stock |
-- |
284 |
-- |
130 |
(2) Diluted shares outstanding
non-GAAP |
41,607,310 |
41,287,622 |
41,574,713 |
41,239,446 |
|
|
|
|
|
(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) earnings per share included in this press release. |
|
STR Holdings,
Inc. |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
All amounts in
thousands |
|
|
|
|
June 30, 2013 |
December 31,
2012 |
|
(Unaudited) |
(Unaudited) |
ASSETS |
|
|
CURRENT ASSETS |
|
|
Cash and cash equivalents |
$ 72,273 |
$ 81,985 |
Accounts receivable, net |
1,949 |
5,316 |
Inventories, net |
9,635 |
8,585 |
Other current assets |
13,334 |
10,732 |
Total current assets |
97,191 |
106,618 |
|
|
|
Property, plant and equipment, net |
28,333 |
27,750 |
Other noncurrent assets |
13,933 |
12,796 |
Total assets |
$ 139,457 |
$ 147,164 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
CURRENT LIABILITIES |
|
|
Accounts payable |
$ 4,854 |
$ 2,893 |
Accrued liabilities |
8,570 |
10,376 |
Income taxes payable |
857 |
917 |
Total current liabilities |
14,281 |
14,186 |
|
|
|
Long-term liabilities |
5,531 |
5,539 |
Total liabilities |
19,812 |
19,725 |
|
|
|
STOCKHOLDERS' EQUITY |
|
|
Stockholders' equity |
119,645 |
127,439 |
Total liabilities and stockholders'
equity |
$ 139,457 |
$ 147,164 |
|
STR Holdings,
Inc. |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
All amounts in
thousands |
|
|
|
|
|
|
Three Months Ended June
30, |
Six Months Ended June
30, |
|
2013 |
2012 |
2013 |
2012 |
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
OPERATING ACTIVITIES |
|
|
|
|
Net loss |
$ (4,491) |
$ (2,421) |
$ (8,701) |
$ (84,552) |
Net earnings from discontinued
operations |
-- |
-- |
-- |
-- |
Net loss from continuing operations |
(4,491) |
(2,421) |
(8,701) |
(84,552) |
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities: |
|
|
|
|
Depreciation |
524 |
2,277 |
1,016 |
4,115 |
Goodwill impairment |
-- |
-- |
-- |
82,524 |
Amortization of intangibles |
-- |
2,108 |
-- |
4,216 |
Amortization of deferred financing costs |
17 |
81 |
34 |
163 |
Stock-based compensation expense |
760 |
1,504 |
1,114 |
2,978 |
Provision (recovery) for bad debt
expense |
1,898 |
(1,156) |
2,238 |
450 |
Deferred income tax benefit (expense) |
186 |
(288) |
(62) |
(1,811) |
Changes in operating assets and
liabilities |
(4,125) |
5,848 |
(4,603) |
21,099 |
Other, net |
226 |
195 |
298 |
115 |
Net cash (used in) provided by continuing
operations |
(5,005) |
8,148 |
(8,666) |
29,297 |
Net cash provided by (used in) discontinued
operations |
96 |
(676) |
834 |
(5,786) |
Total net cash (used in) provided by
operating activities |
(4,909) |
7,472 |
(7,832) |
23,511 |
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
Capital expenditures |
(1,277) |
(3,887) |
(1,757) |
(9,425) |
Net cash used in continuing operations |
(1,277) |
(3,887) |
(1,757) |
(9,425) |
Net cash used in discontinued operations |
-- |
-- |
-- |
-- |
Total net cash used in investing
activities |
(1,277) |
(3,887) |
(1,757) |
(9,425) |
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
Net cash provided by continuing
operations |
5 |
14 |
14 |
25 |
Net cash used in discontinued operations |
-- |
-- |
-- |
-- |
Total net cash provided by financing
activities |
5 |
14 |
14 |
25 |
|
|
|
|
|
Effect of exchange rate changes on cash |
79 |
(1,632) |
(137) |
(714) |
|
|
|
|
|
Net change in cash and cash
equivalents |
(6,102) |
1,967 |
(9,712) |
13,397 |
Cash and cash equivalents, beginning of
period |
78,375 |
70,224 |
81,985 |
58,794 |
Cash and cash equivalents, end of period |
$ 72,273 |
$ 72,191 |
$ 72,273 |
$ 72,191 |
|
|
|
|
|
* Free cash flow from continuing
operations |
$ (6,282) |
$ 4,261 |
$ (10,423) |
$ 19,872 |
|
|
|
|
|
* 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 June
30, |
Six Months Ended June
30, |
|
2013 |
2012 |
2013 |
2012 |
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
Non-GAAP (Loss) Earnings Per
Share |
|
|
|
|
Net loss from continuing operations |
$ (4,491) |
$ (2,421) |
$ (8,701) |
$ (84,552) |
Adjustments to net loss from continuing
operations: |
|
|
|
|
Amortization of intangibles |
-- |
2,108 |
-- |
4,216 |
Amortization of deferred financing
costs |
17 |
81 |
34 |
163 |
Stock-based compensation expense |
760 |
1,504 |
1,114 |
2,978 |
Restructuring |
91 |
-- |
1,664 |
-- |
Goodwill impairment |
-- |
-- |
-- |
82,524 |
Tax effect of non-GAAP adjustments |
(277) |
(1,201) |
(931) |
(2,385) |
Non-GAAP net (loss) earnings from continuing
operations |
$ (3,900) |
$ 71 |
$ (6,820) |
$ 2,944 |
|
|
|
|
|
Non-GAAP net (loss) earnings per share: |
|
|
|
|
Basic from continuing operations |
$ (0.09) |
$ -- |
$ (0.16) |
$ 0.07 |
Diluted from continuing operations |
$ (0.09) |
$ -- |
$ (0.16) |
$ 0.07 |
|
|
|
|
|
Weighted-average common shares
outstanding: |
|
|
|
|
Basic |
41,607,310 |
41,287,338 |
41,574,713 |
41,239,316 |
(1) Diluted |
41,607,310 |
41,287,622 |
41,574,713 |
41,239,446 |
|
|
|
|
|
(1) Please refer to the
reconciliation of diluted shares outstanding for non-GAAP net
(loss) earnings per share included in this press release. |
|
|
|
|
|
|
Three Months
Ended June 30, |
Six Months Ended
June 30, |
|
2013 |
2012 |
2013 |
2012 |
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
Free Cash Flow from Continuing
Operations |
|
|
|
|
Cash flow (used in) provided by operations
from continuing operations |
$ (5,005) |
$ 8,148 |
$ (8,666) |
$ 29,297 |
Less: |
|
|
|
|
Capital expenditures |
(1,277) |
(3,887) |
(1,757) |
(9,425) |
Free cash flow |
$ (6,282) |
$ 4,261 |
$ (10,423) |
$ 19,872 |
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 two non–GAAP
financial metrics mentioned: Non–GAAP (loss) earnings per share
from continuing operations (EPS) and free cash flow from continuing
operations as defined below:
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)
earnings from continuing operations not including the tax effected
impact of deferred financing costs, stock-based compensation,
intangible asset amortization expense, restructuring and goodwill
impairment 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 15, 2013, as well
as prior SEC filings, for detailed discussion on some of these
adjustments that have been recorded in previous periods.
Although the Company uses non-GAAP EPS from continuing
operations as a measure to assess the operating performance of its
business, non–GAAP EPS from continuing operations has significant
limitations as an analytical tool because it excludes certain
material costs. Because non–GAAP EPS from continuing operations
does not account for these expenses, its utility as a measure of
its operating performance has material limitations. Because of
these limitations, the Company does not view non-GAAP EPS from
continuing operations in isolation and uses other metrics to
measure operating performance such as, but not limited to, net
sales, gross margin, operating (loss) income, adjusted EBITDA, and
net (loss) earnings from continuing operations.
|
STR Holdings,
Inc. |
RECONCILIATION OF
NON-GAAP SHARES OUTSTANDING |
|
|
|
|
|
|
Three Months Ended June
30, |
Six Months Ended June
30, |
|
2013 |
2012 |
2013 |
2012 |
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
Weighted-average shares
outstanding |
|
|
|
|
Basic shares outstanding GAAP |
41,607,310 |
41,287,338 |
41,574,713 |
41,239,316 |
Diluted shares outstanding GAAP |
41,607,310 |
41,287,338 |
41,574,713 |
41,239,316 |
Stock options |
-- |
-- |
-- |
-- |
Restricted common stock |
-- |
284 |
-- |
130 |
Diluted shares outstanding non-GAAP |
41,607,310 |
41,287,622 |
41,574,713 |
41,239,446 |
Diluted GAAP shares outstanding: Due to the
loss from continuing operations for the three and six months ended
June 30, 2012, diluted weighted–average common shares outstanding
for purposes of our diluted GAAP loss per share does not include
284 and 130 shares of unvested restricted common stock
respectively, as these potential awards do not share in any net
loss generated by the Company and are anti–dilutive.
Diluted non–GAAP
Shares Outstanding: Due to a net loss from continuing
operations during the three and six months ended June 30, 2013, the
diluted weighted–average common shares outstanding for purposes of
its diluted GAAP loss per share does not include 17 and 141 shares
of unvested 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 because it excludes cash used for capital expenditures
during the period.
CONTACT: STR Holdings, Inc.
Joseph C. Radziewicz
Vice President and Chief Financial Officer
+1 (860) 758-7325
joseph.radziewicz@strholdings.com
STR (CE) (USOTC:STRI)
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