Net sales up 45% year over year, 13% sequentially
Adjusted net income of $4,365,000 or $0.39 per diluted common share
Net income of $8,431,000 or $0.68 per diluted common share
WOOD DALE, Ill., Nov. 6, 2014 (GLOBE NEWSWIRE) -- Power Solutions International, Inc. (Nasdaq:PSIX), a leader in the design, engineering and manufacture of emissions-certified alternative-fuel and conventional power systems, today announced its financial results for the third quarter ended September 30, 2014.
Third Quarter 2014 Results
Net sales for the third quarter of 2014 were $93,972,000, an increase of 45% from $64,628,000 in the third quarter of 2013 and a 13% sequential increase from $83,378,000 in the second quarter of 2014. Contributing to the sales increase was continued growth in the Company's heavy-duty power generation systems and aftermarket parts sales. Also contributing to net sales in the period were sales of approximately $6.3 million from Professional Power Products, Inc. which was acquired on April 1, 2014.
Operating income was $7,519,000, an increase of 82% from $4,122,000 in the third quarter of 2013, and a sequential increase of 28% from $5,893,000 in the second quarter of 2014. Operating margin of 8.0% in the current quarter compares to 6.4% in the comparable prior year period and 7.1% in the second quarter of 2014.
"Our results this quarter demonstrate the resilience of our business model and market opportunities," stated Gary Winemaster, Chairman and Chief Executive Officer of Power Solutions. "Solid demand across our end-markets drove strong sales growth and attractive gross margin expansion."
Winemaster continued, "We reached a critical milestone in our on-road efforts this quarter, with Navistar's announcement that they will use the PSI 8.8 liter engine for an alternative-fuel option in their ICC school bus product line. We believe this design win is the first of many to come and demonstrates the strength of our products and strategy. By focusing on medium duty fleets and offering a complete drop-in power system solution, we enable OEMs to introduce alternative fuel options inexpensively and quickly."
Other income for the third quarter includes a non-cash gain of $858,000 resulting from a decrease in the estimated fair value of the liability associated with the warrants issued in the Company's April 2011 private placement. In addition, other income for the third quarter includes a non-cash gain of $3,208,000 resulting from a decrease in the estimated fair value of the contingent consideration liability recorded in connection with the acquisition of Professional Power Products, Inc.
Net income for the third quarter of 2014, which includes the warrant revaluation adjustment and contingent consideration liability revaluation, was $8,431,000, or $0.68 per diluted common share. This compares to a net loss of $9,981,000 or $0.97 per diluted common share for the third quarter of 2013, which also includes a warrant revaluation adjustment.
Net income for the third quarter of 2014, adjusted to remove the warrant revaluation impact and contingent consideration liability revaluation was $4,365,000, or $0.39 per diluted common share. This compares to adjusted net income for the third quarter of 2013 of $2,624,000 or $0.24 per diluted common share, which has been adjusted to remove the warrant revaluation impact.
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Summary of Diluted EPS Attributable to Common Stockholders "Adjusted" removes the impact of warrant revaluation and Q3 2014 contingent consideration liability revaluation |
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| Q3 2014 | Q3 2013 | |
| Diluted EPS | $0.68 | $(0.97) |
| Adjusted diluted EPS | $0.39 | $0.24 |
| Diluted shares | 11,167,598 | 10,266,176 |
| Adjusted diluted shares | 11,167,598 | 10,770,687 |
Outlook
Today, the Company reaffirmed its outlook for full-year 2014 revenue. The Company expects revenue to be in the range of $330 to $360 million.
The Company cautions that its 2014 outlook reflects its current assessment of a number of factors, including, but not limited to, the timing of new product ramps 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 the financial results and outlook on a conference call scheduled for today, November 6, at 4:30 p.m. ET/3:30 p.m. CT. The call will be hosted by Gary Winemaster, Chief Executive Officer, Eric Cohen, Chief Operating Officer, and Daniel Gorey, Chief Financial Officer.
Investors in the U.S. interested in participating in the call should dial +1 (888) 461-2031 and reference passcode 7022013. Those calling from outside the U.S. should dial +1 (719) 325-2295 and reference the same passcode 7022013. A telephone replay will be available approximately two hours after the call concludes through November 13, 2014 by dialing +1 (877) 870-5176 from the U.S. or +1 (858) 384-5517 from international locations, using passcode 7022013.
A simultaneous live webcast will be available on the Investor Relations section of the Company's website at http://www.psiengines.com. The webcast will be archived on the website for one year.
About Power Solutions International, Inc.
Power Solutions International, Inc. (PSI) is a leader in the design, engineering and manufacture of emissions-certified, alternative-fuel power systems. PSI provides integrated turnkey solutions to leading global original equipment manufacturers in the industrial and on-road markets. The Company's unique in-house design, prototyping, engineering and testing capacities allows PSI to customize clean, high-performance engines that run on a wide variety of fuels, including natural gas, propane, biogas, diesel and gasoline.
PSI develops and delivers complete .97 to 22 liter power systems, including the 8.8 liter engine aimed at the industrial and on-road markets, including medium duty fleets, delivery trucks, school buses and garbage/refuse trucks. PSI power systems are currently used worldwide in power generators, forklifts, aerial lifts, and industrial sweepers, as well as in oil and gas, aircraft ground support, agricultural and construction equipment.
PSI recently acquired Professional Power Products, Inc. (3PI), a leading designer and manufacturer of large, custom engineered integrated electrical power generation systems serving the global diesel and natural gas power generation market. 3PI specializes in power generation systems for both standby and prime power applications.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements, regarding the current expectations of Power Solutions International, Inc. (the "Company") about its prospects and opportunities, including expectations for revenues in 2014 as set forth under "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 liter engine, 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 product ramps; the Company's ability to integrate 3PI 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 the 3PI acquisition 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 the acquisition of 3PI); 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 Securities and Exchange Commission, including the disclosures under "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" in those filings. Except as expressly required by the federal securities laws, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances or future events or for any other reason.
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.
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Reconciliation of Net Income (Loss) to Adjusted Net Income (Dollar amounts in thousands) |
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Three months ended September 30, 2014 |
Three months ended September 30, 2013 |
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| Net income (loss) | $ 8,431 | $ (9,981) |
| Non-cash (income) expense from warrant revaluation | (858) | 12,605 |
| Non-cash (income) expense from contingent consideration liability revaluation |
(3,208) |
-- |
| Adjusted net income | $ 4,365 | $ 2,624 |
| Reconciliation of Diluted EPS to Adjusted Diluted EPS | ||
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Three months ended September 30, 2014 |
Three months ended September 30, 2013 |
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| Earnings (loss) per diluted common share | $ 0.68 | $ (0.97) |
| Non-cash (income) expense from warrant revaluation | -- | 1.21 |
| Non-cash (income) expense from contingent consideration liability revaluation | (0.29) | -- |
| Adjusted earnings per diluted common share | $ 0.39 | $ 0.24 |
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 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 April 2011 private placement. The Company excludes this non-operating, non-cash impact, as the Company believes it is not indicative of its core operating results or future performance. The warrant revaluation results from facts and circumstances that fluctuate in impact and is excluded by management in its forecast and evaluation of the Company's operational performance. Adjusted earnings per diluted common share is also derived from GAAP results by excluding the non-cash impact,even when antidilutive, related to the change in the estimated fair value of the liability associated with the warrants. Adjusted net income and adjusted earnings per diluted common share also include an adjustment to remove the revaluation of the contingent consideration liability recorded in connection with the Company's acquisition of Professional Power Products, Inc., which was completed on April 1, 2014. The Company believes that this non-cash item, similar to the warrant related impact on earnings, is not indicative of the Company's core operating results or future performance. These costs are excluded by management in its forecast and evaluation of the Company's operational performance.
Adjusted net income, adjusted 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.
| Power Solutions International, Inc. | ||
| Condensed Consolidated Balance Sheets (Unaudited) | ||
| (Dollar amounts in thousands, except per share amounts) | ||
| September 30, 2014 | December 31, 2013 | |
| ASSETS | ||
| Current assets | ||
| Cash | $ 7,602 | $ 6,306 |
| Accounts receivable, net | 68,886 | 42,730 |
| Inventories, net | 83,240 | 55,986 |
| Prepaid expenses and other current assets | 4,054 | 2,173 |
| Deferred income taxes | 2,811 | 2,811 |
| Total current assets | 166,593 | 110,006 |
| Property, plant & equipment, net | 19,508 | 13,104 |
| Intangible assets, net | 21,779 | -- |
| Goodwill | 23,337 | -- |
| Other noncurrent assets | 4,879 | 3,509 |
| TOTAL ASSETS | $ 236,096 | $ 126,619 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current liabilities | ||
| Accounts payable | $ 46,424 | $ 24,444 |
| Income taxes payable | -- | 167 |
| Accrued compensation and benefits | 5,005 | 3,758 |
| Current maturities of long-term debt | 1,667 | -- |
| Other accrued liabilities | 6,768 | 4,016 |
| Total current liabilities | 59,864 | 32,385 |
| Long-term obligations | ||
| Revolving line of credit | 74,048 | 17,933 |
| Deferred income taxes | 304 | 304 |
| Private placement warrants | 16,015 | 24,525 |
| Long-term debt, less current maturities | 2,778 | -- |
| Other noncurrent liabilities | 855 | 1,051 |
| TOTAL LIABILITIES | 153,864 | 76,198 |
| COMMITMENTS AND CONTINGENCIES | -- | -- |
| STOCKHOLDERS' EQUITY | ||
| Series A convertible preferred stock—$0.001 par value. Authorized: 114,000 shares. Issued and outstanding: -0- shares at September 30, 2014 and December 31, 2013. | -- | -- |
| Common stock—$0.001 par value. Authorized: 50,000,000 shares. Issued: 11,559,803 and 11,352,812 shares at September 30, 2014 and December 31, 2013, respectively. Outstanding: 10,728,878 and 10,521,887 shares at September 30, 2014 and December 31, 2013, respectively. | 12 | 11 |
| Additional paid-in-capital | 74,201 | 57,308 |
| Retained earnings (accumulated deficit) | 12,269 | (2,648) |
| Treasury stock, at cost, 830,925 shares at September 30, 2014 and December 31, 2013. | (4,250) | (4,250) |
| TOTAL STOCKHOLDERS' EQUITY | 82,232 | 50,421 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 236,096 | $ 126,619 |
| Power Solutions International, Inc. | ||||
| Condensed Consolidated Statements of Operations (Unaudited) | ||||
| (Dollar amounts in thousands, except per share amounts) | ||||
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Three months ended September 30, 2014 |
Three months ended September 30, 2013 |
Nine months ended September 30, 2014 |
Nine months ended September 30, 2013 |
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| Net sales | $ 93,972 | $ 64,628 | $ 244,085 | $ 176,342 |
| Cost of sales | 75,344 | 52,256 | 198,131 | 143,617 |
| Gross profit | 18,628 | 12,372 | 45,954 | 32,725 |
| Operating expenses: | ||||
| Research & development and engineering | 4,501 | 3,250 | 11,844 | 7,310 |
| Selling and service | 2,706 | 1,841 | 6,871 | 5,810 |
| General and administrative | 3,902 | 3,159 | 10,306 | 8,563 |
| Total operating expenses | 11,109 | 8,250 | 29,021 | 21,683 |
| Operating income | 7,519 | 4,122 | 16,933 | 11,042 |
| Other (income) expense: | ||||
| Interest expense | 407 | 135 | 887 | 570 |
| Loss on debt extinguishment | -- | -- | -- | 270 |
| Contingent consideration | (3,208) | -- | (3,782) | -- |
| Private placement warrant (income) expense | (858) | 12,605 | (1,190) | 21,658 |
| Other expense (income), net | 34 | (19) | 109 | (36) |
| Total other (income) expense | (3,625) | 12,721 | (3,976) | 22,462 |
| Income (loss) before income taxes | 11,144 | (8,599) | 20,909 | (11,420) |
| Income tax provision | 2,713 | 1,382 | 5,992 | 3,588 |
| Net income (loss) | $ 8,431 | $ (9,981) | $ 14,917 | $ (15,008) |
| Weighted-average common shares outstanding: | ||||
| Basic | 10,794,229 | 10,266,176 | 10,676,792 | 9,536,687 |
| Diluted | 11,167,598 | 10,266,176 | 11,125,116 | 9,536,687 |
| Earnings (loss) per common share: | ||||
| Basic | $ 0.78 | $ (0.97) | $ 1.40 | $ (1.57) |
| Diluted | $ 0.68 | $ (0.97) | $ 1.23 | $ (1.57) |
| Power Solutions International, Inc. | ||
| Condensed Consolidated Statements of Cash Flows (Unaudited) | ||
| (Dollar amounts in thousands) | ||
|
Nine months ended September 30, 2014 |
Nine months ended September 30, 2013 |
|
| Cash flows from operating activities | ||
| Net income (loss) | $ 14,917 | $ (15,008) |
| Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||
| Depreciation and amortization | 3,132 | 1,144 |
| Non-cash interest expense | 62 | 50 |
| Share-based compensation expense | 982 | 931 |
| Decrease in accounts receivable allowances | (250) | (4) |
| Increase in inventory reserves | 615 | 820 |
| Inventory step up to fair value | 482 | -- |
| (Decrease) increase in valuation of private placement warrants liability | (1,190) | 21,658 |
| Decrease in valuation of contingent consideration liability | (3,782) | -- |
| Loss on investment in joint venture | 136 | -- |
| Loss on disposal of assets | 77 | 14 |
| Loss on debt extinguishment | -- | 270 |
| (Increase) decrease in operating assets, net of effects of business acquisition: | ||
| Accounts receivable | (21,917) | (1,733) |
| Inventories | (23,398) | (10,376) |
| Prepaid expenses and other assets | (2,342) | 8 |
| Increase (decrease) in operating liabilities: | ||
| Accounts payable | 19,549 | (3,698) |
| Accrued compensation and benefits and other accrued liabilities | (133) | 2,073 |
| Income taxes payable | (27) | (2,126) |
| Other noncurrent liabilities | (363) | (40) |
| Net cash used in operating activities | (13,450) | (6,017) |
| Cash flows from investing activities | ||
| Purchases of property, plant, equipment and other assets | (4,749) | (4,322) |
| Acquisition of Professional Power Products, Inc., net of cash acquired | (44,122) | -- |
| Investment in joint venture | (350) | (500) |
| Net cash used in investing activities | (49,221) | (4,822) |
| Cash flows from financing activities | ||
| Proceeds from stock offering | -- | 36,750 |
| Advances from revolving line of credit - noncurrent obligation | 67,946 | 59,907 |
| Repayments of revolving line of credit - noncurrent obligation | (11,831) | (78,600) |
| Initial proceeds from borrowings under revolving line of credit | -- | 38,995 |
| Repayment of prior revolving line of credit | -- | (38,945) |
| Proceeds from long-term debt | 5,000 | -- |
| Proceeds from exercise of private placement warrants | 1,425 | 3,865 |
| Excess tax benefit from exercise of share-based awards | 2,469 | 1,642 |
| Payment of withholding taxes from net settlement of share-based awards | (361) | (2,063) |
| Payments on long-term debt | (555) | -- |
| Cash paid for financing and transaction fees | (126) | (2,923) |
| Net cash provided by financing activities | 63,967 | 18,628 |
| Increase in cash | 1,296 | 7,789 |
| Cash at beginning of period | 6,306 | 543 |
| Cash at end of period | $ 7,602 | $ 8,332 |