STR Holdings, Inc. (NYSE:STRI) today announced its financial
results for the fourth quarter and full-year ended December 31,
2014.
Advisory Note
All share amounts and per share amounts below have been adjusted
to reflect the one-for-three reverse stock split effected January
30, 2015.
Fourth Quarter 2014 Summary:
- Closed common stock issuance to Zhen Fa New Energy (U.S.) Co.,
Ltd.
- Paid a special cash dividend of approximately $22.6 million to
all stockholders, other than Zhen Fa
- Net sales of $9.2 million
- Diluted GAAP loss per share from continuing operations of
$(1.36); Diluted non-GAAP loss per share from continuing operations
of $(1.32)
- Adjusted EBITDA of $(5.7) million, which included $(3.3)
million of special items
- Finished the quarter with $16.6 million in cash, $8.3 million
in tax receivables and no debt
2014 Financial Summary:
- Net sales of $39.3 million which increased 23% compared to
2013
- Diluted GAAP loss per share from continuing operations of
$(2.08); Diluted non-GAAP loss per share from continuing operations
of $(2.09)
- Returned $46.6 million to stockholders via share repurchase and
special cash dividend
Zhenfa Transaction Closing
On December 15, 2014, the Company sold approximately 9.2 million
shares of common stock, representing a 51% interest in STR, for an
aggregate purchase price of approximately $21.7 million to Zhen Fa
New Energy (U.S.) Co., Ltd. ("Zhenfa U.S."), an indirect wholly
owned subsidiary of Zhenfa Energy Group Co., Ltd., a Chinese
company ("Zhenfa"). As part of the transaction, the STR Board of
Directors declared a special cash dividend of $2.55 per share
payable to stockholders of record, excluding Zhenfa U.S., as of
December 26, 2014. The dividend payment date was January 2, 2015.
The Company transferred the funds to its transfer agent prior to
December 31, 2014 and recorded the special dividend in its 2014
consolidated financial statements.
Leveraging Synergies with Zhenfa
As contemplated by its Sales Service Agreement with Zhenfa, on
March 2, 2015, Mr. Kong Weijie, a Zhenfa Vice General Manager, was
appointed STR Sales Director for China. Under Mr. Kong's
leadership, the STR China sales team is currently focusing on
increasing sales to STR's existing customer base, and also
developing new sales to Chinese module manufacturers having
commercial relationships with Zhenfa. In certain cases, STR expects
to secure new encapsulant sales to module manufacturers under a
proposed three-party arrangement wherein Zhenfa will also commit to
purchase solar modules from STR's customers, to be deployed into
Zhenfa solar power stations. STR believes this multi-party approach
represents a competitive advantage and will help to accelerate
sales volume beginning in the second quarter of 2015. Zhenfa
remains keenly interested in assisting STR to grow sales in China,
as well as securing the highest quality solar panels available for
their power stations and therefore values the long-term protection
afforded by the use of STR encapsulant products within the panels
they deploy.
In addition, the Company has entered into a supply agreement
with module manufacturer Zhangjiagang Huhui Segpv Co. Ltd
("Huhui"), an affiliate of Zhenfa. Pursuant to the exclusive
one-year renewable supply contract, Huhui has agreed to purchase
approximately 500 MW worth of encapsulants annually, subject to the
Company's satisfactory completion of qualification testing,
currently underway. The Company expects to start receiving purchase
orders from Huhui during the second quarter of 2015.
The Company has also held substantive discussions with Zhenfa to
explore opportunities for cooperation beyond the sale of solar
encapsulants.
"I have been very pleased so far with our collaboration with
Zhenfa and I remain confident that together, we will be able to
bring STR back to scale and restore profitability," stated Robert
S. Yorgensen, STR's Chairman, President and Chief Executive
Officer. "Our goal is to have the Company's stock valued on a
multiple of EBITDA before the close of 2015."
Financial Results
Net sales for the quarter ended December 31, 2014 were $9.2
million, a decrease of 3% sequentially and an increase of 38% from
Q4 2013. The sequential decrease was driven by approximately 1%
lower volume and a 2% decline in average selling price ("ASP"). The
sequential volume decrease was primarily due to many of our
European customers pushing orders to 2015, which more than offset
higher net sales in China. The decline in ASP was primarily due to
a weaker Euro. On a year–over–year basis, volume increased by
approximately 57% and ASP declined by approximately 22%. The volume
increase was primarily driven by growth with Chinese customers,
including certain of their OEM partners.
Net sales for the year ended December 31, 2014 were $39.3
million, an increase of 23% driven by a 57% volume increase that
more than offset a 22% ASP decline. When removing the impact of net
sales to our former largest customer in 2013 of $5.7 million, our
net sales increased by 50% during 2014 driven by an approximate 85%
increase in sales volume.
Gross loss for the fourth quarter of 2014 was $(2.3) million, or
(25)% of net sales, compared to $(1.0) million, or (11)% of net
sales, from the third quarter of 2014 and gross loss of $(1.1)
million, or (16)% of net sales from the fourth quarter of 2013. The
sequential increase in gross loss was driven by $1.0 million of
charges related to inventory reserves and product performance
matters, $0.4 million of increased facility costs due to the
build-out of our Suzhou factory and the 2% ASP reduction, which
were partially offset by reduced material costs. The Company's
manufacturing operations continue to be impacted with
inefficiencies associated with low sales volume.
Selling, general and administrative expenses for the fourth
quarter of 2014 were $5.0 million compared to $2.5 million in the
third quarter of 2014 and $5.3 million in the fourth quarter of
2013. On a sequential basis, SG&A increased $2.5 million. The
increase was driven by the following special items that the Company
anticipates will not recur: $1.0 million of accelerated stock-based
compensation expense due to the cancellation of the Company's
outstanding options and acceleration of unvested restricted stock
resulting from the closing of the Zhenfa transaction; $1.2 million
of non-capitalizable professional fees and other costs relating to
the closing of the Zhenfa transaction; $0.5 million of additional
Connecticut franchise fee expense associated with selling its East
Windsor, CT facility; and $0.2 million related to the Company's
move to its Enfield, CT facility. When removing the impact of these
special items, SG&A decreased $0.4 million on a sequential
quarterly basis driven by continued cost-reduction efforts. The
year-over-year decrease of $0.3 million was primarily driven by
$1.9 million of lower restructuring charges, $0.4 million of lower
professional fees and $0.2 million of reduced labor and benefits,
partially offset by the $2.9 million of fourth quarter 2014 special
items described above.
Adjusted EBITDA for the fourth quarter of 2014 was $(5.7)
million compared to $(2.9) million from the third quarter of 2014.
This sequential decline was primarily driven by the 2% ASP decline,
lower sales volume and the $(3.3) million of special items
reflected above. When removing the impact of the special items,
adjusted EBITDA was $(2.4) million or a 17% sequential improvement,
as benefits from cost-reduction efforts exceeded the Company's net
sales decline. This compares to Adjusted EBITDA from continuing
operations of $(3.6) million for the fourth quarter of 2013.
Net loss from continuing operations for the fourth quarter of
2014 was $(13.2) million, or $(1.36) per diluted share. This
compares to a net loss from continuing operations of $(3.2)
million, or $(0.37) per diluted share, for the third quarter of
2014 and net loss from continuing operations of $(3.7) million, or
$(0.26) per diluted share, for the fourth quarter of 2013. The
sequentially higher net loss of $13.0 million was due to the
special items described above and $6.4 million of income tax
expense. The higher income tax expense was primarily driven by
recording non-cash valuation allowances on its deferred tax assets
as of December 31, 2014. On a year-over-year basis, net loss from
continuing operations increased by $9.7 million mainly driven by
increased income tax expense of $9.6 million and the $4.3 million
of special items disclosed above that more than offset $0.9 million
of net, non-cash reversals of prior loss contingencies that were
recorded to Other Income, $1.7 million in reduced restructuring
charges and benefits from prior cost-reduction actions.
Non–GAAP net loss from continuing operations for the fourth
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 $(12.8) million, or $(1.32) per
diluted share. This compares to non–GAAP net loss from continuing
operations of $(3.0) million, or $(0.34) per diluted share, for the
third quarter of 2014 and non–GAAP net loss from continuing
operations of $(1.9) million, or $(0.14) per diluted share, for the
fourth quarter of 2013.
Operations Update
In October, the Company completed the sale of its East Windsor,
CT facility for $4.4 million in net proceeds. As a result of the
sale, the Company also recorded an income tax receivable of
approximately $4.4 million in the fourth quarter of 2014. The
Company has relocated its corporate and research and development
functions to its owned-facility located in Enfield, Connecticut, at
a cost of approximately $1.5 million, including building
renovations and moving costs. The Company anticipates ongoing
operational savings of approximately $0.4 million per year
resulting from the move.
The Company's Suzhou factory became fully operational in
November, with approximately 1.2 GW of production capacity. Taken
together with available tolling capacity, the Company currently has
approximately 2.2 GW of production capacity on-line in China.
The Company continues to retrofit its existing production
equipment to produce low-shrink paperless encapsulants and has
achieved a product mix of approximately 60% paperless in the fourth
quarter of 2014. The Company expects to continue to increase its
product mix to the paperless configuration during 2015.
Balance Sheet and Liquidity
The Company finished the quarter with $16.6 million of cash and
no debt. As of December 31, 2014, the Company also had $8.3 million
of income tax receivables.
During the fourth quarter of 2014, the Company had a net
financing cash outflow of $5.7 million relating to payment of the
special dividend and closing costs associated with the Zhenfa
transaction. Such amounts were partially offset by $4.0 million of
net cash received from investing activities due to receiving $4.4
million of cash proceeds from the sale of its East Windsor
facility, partially offset by capital investments.
The Company generated negative operating cash flow of $4.1
million during the fourth quarter of 2014. The Company received
$5.7 million of income tax refunds, which was more than offset by
the negative adjusted EBITDA and higher working capital investment.
The higher working capital was driven by $2.4 million of increased
accounts receivable due to longer collection times in China and
lower accounts payable of $2.6 million due to timing of resin
payments.
The Company is currently seeking working capital financing to
support expected sales volume growth.
"Our fourth quarter results were negatively impacted by costs
associated with successfully executing strategic transactions with
Zhenfa and closing the sale of our East Windsor facility," stated
Joseph C. Radziewicz, STR's Vice President and Chief Financial
Officer. "We remain committed to our turnaround strategy as our
cost-reduction programs are solidly entrenched and our balance
sheet remains strong with no debt. As we enter 2015, we believe
that we are well-positioned to achieve our goal of returning STR to
profitability."
Fourth Quarter Conference Call and
Presentation
The Company will discuss its financial results in a conference
call today at 4:30 pm 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: 89837307. Those calling from outside
the U.S. should dial (970) 315-0282 and use the same passcode. A
telephone replay will be available at 7:30 pm ET through April 2,
2015, by dialing (855) 859-2056 from the U.S., or (404)
537-3406 from international locations, and entering passcode:
89837307. The webcast and presentation will be archived on the
Company's website for one year.
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 contains 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.
Forward-looking statements include, but are not limited to, the
statements regarding 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 net sales to new customers,
growing net 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 encapsulants; (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) our
failure to manufacture product in China negatively affecting our
ability to sell to Chinese solar module manufacturers;
(10) excess capacity in the solar supply chain;
(11) demand for solar energy in general and solar modules in
particular; (12) our operations and assets in China being
subject to significant political and economic uncertainties;
(13) limited legal recourse under the laws of China if
disputes arise; (14) our ability to adequately protect our
intellectual property, particularly during the outsource
manufacturing of our products in China; (15) our lack of
credit facility and our inability to obtain credit; (16) 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; (17) volatility in commodity costs; (18) our
customers' financial profile causing additional credit risk on our
accounts receivable; (19) our dependence on a limited number
of third-party suppliers for raw materials for our encapsulants and
other significant materials used in our process;
(20) potential product performance matters and product
liability; (21) our substantial international operations and
shift of business focus to emerging markets; (22) the impact
of changes in foreign currency exchange rates on financial results,
and the geographic distribution of revenues; (23) losses of
financial incentives from government bodies in certain foreign
jurisdictions; (24) compliance with the Continued Listing
Criteria of the NYSE; (25) the ability to realize synergies from
the transaction with Zhenfa; and (26) 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 Annual Report, whether
as a result of new information, future developments or otherwise,
except as may be required by law.
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STR Holdings,
Inc. |
CONDENSED CONSOLIDATED
INCOME STATEMENTS |
All amounts in
thousands except shares and per share amounts |
|
|
|
|
|
|
Three Months Ended
December 31, |
Twelve Months Ended
December 31, |
|
2014 |
2013 |
2014 |
2013 |
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Audited) |
|
|
|
|
|
Net Sales |
$ 9,216 |
$ 6,671 |
$ 39,288 |
$ 31,860 |
Cost of sales |
11,555 |
7,733 |
44,522 |
34,085 |
|
|
|
|
|
Gross loss |
(2,339) |
(1,062) |
(5,234) |
(2,225) |
|
|
|
|
|
Selling, general and administrative
expenses |
5,036 |
5,310 |
12,832 |
18,322 |
Research and development expense |
318 |
354 |
1,160 |
2,670 |
Provision (recovery) for bad debt
expense |
203 |
(276) |
483 |
1,824 |
Asset Impairment |
-- |
194 |
-- |
194 |
Operating loss |
(7,896) |
(6,644) |
(19,709) |
(25,235) |
|
|
|
|
|
Interest income (expense), net |
4 |
(24) |
27 |
(30) |
Amortization of deferred financing costs |
-- |
-- |
-- |
(189) |
Other Income, net |
868 |
-- |
3,634 |
-- |
(Loss) gain on disposal of fixed assets |
-- |
85 |
(451) |
185 |
Foreign currency transaction (loss)
gain |
153 |
(71) |
298 |
(366) |
Loss from continuing operations
before income tax expense (benefit) |
(6,871) |
(6,654) |
(16,201) |
(25,635) |
Income tax (benefit) expense from continuing
operations |
6,356 |
(3,003) |
6,532 |
(7,349) |
Net loss from continuing
operations |
(13,227) |
(3,651) |
(22,733) |
(18,286) |
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|
|
Discontinued operations: |
|
|
|
|
Earnings from discontinued
operations before income tax expense |
-- |
-- |
-- |
-- |
Income tax expense from discontinued
operations |
199 |
-- |
884 |
-- |
Net loss from discontinued
operations |
(199) |
-- |
(884) |
-- |
|
|
|
|
|
Net loss |
$ (13,426) |
$ (3,651) |
$ (23,617) |
$ (18,286) |
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GAAP loss per share: |
|
|
|
|
Basic from continuing
operations |
$ (1.36) |
$ (0.26) |
$ (2.08) |
$ (1.32) |
Basic from discontinued
operations |
(0.02) |
-- |
(0.08) |
-- |
Total basic GAAP net loss per
share |
$ (1.38) |
$ (0.26) |
$ (2.16) |
$ (1.32) |
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Diluted from continuing
operations |
$ (1.36) |
$ (0.26) |
$ (2.08) |
$ (1.32) |
Diluted from discontinued
operations |
(0.02) |
-- |
(0.08) |
-- |
Total diluted GAAP net loss per
share |
$ (1.38) |
$ (0.26) |
$ (2.16) |
$ (1.32) |
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(1) Non-GAAP net loss per
share: |
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|
|
|
Basic from continuing
operations |
$ (1.32) |
$ (0.14) |
$ (2.09) |
$ (1.00) |
Basic from discontinued
operations |
(0.02) |
-- |
(0.08) |
-- |
Total basic non-GAAP net loss
per share |
$ (1.34) |
$ (0.14) |
$ (2.17) |
$ (1.00) |
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|
|
Diluted from continuing
operations |
$ (1.32) |
$ (0.14) |
$ (2.09) |
$ (1.00) |
Diluted from discontinued
operations |
(0.02) |
-- |
(0.08) |
-- |
Total diluted non-GAAP net loss
per share |
$ (1.34) |
$ (0.14) |
$ (2.17) |
$ (1.00) |
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Weighted-average common shares
outstanding: |
|
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|
|
Basic shares outstanding
GAAP |
9,737,187 |
13,914,183 |
10,920,200 |
13,873,289 |
(2) Diluted shares outstanding
GAAP |
9,737,187 |
13,914,183 |
10,920,200 |
13,873,289 |
Stock options |
-- |
-- |
-- |
-- |
Restricted common stock |
-- |
-- |
-- |
-- |
(2) Diluted shares outstanding
non-GAAP |
9,737,187 |
13,914,183 |
10,920,200 |
13,873,289 |
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(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. |
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STR Holdings,
Inc. |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
All amounts in
thousands |
|
|
|
|
December 31,
2014 |
December 31,
2013 |
|
(Unaudited) |
(Audited) |
ASSETS |
|
|
CURRENT ASSETS |
|
|
Cash and cash equivalents |
$ 16,552 |
$ 58,173 |
Accounts receivable, net |
12,057 |
4,771 |
Income tax receivable |
8,252 |
11,812 |
Inventories, net |
8,248 |
8,557 |
Other current assets |
4,144 |
3,567 |
Total current assets |
49,253 |
86,880 |
|
|
|
Property, plant and equipment,
net |
20,195 |
28,398 |
Other noncurrent assets |
354 |
13,931 |
Total assets |
$ 69,802 |
$ 129,209 |
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LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
CURRENT LIABILITIES |
|
|
Accounts payable |
$ 2,653 |
$ 2,636 |
Accrued liabilities |
2,780 |
8,432 |
Other current liabilities |
204 |
630 |
Income taxes payable |
1,865 |
859 |
Total current liabilities |
7,502 |
12,557 |
|
|
|
Long-term
liabilities |
4,577 |
4,790 |
Total liabilities |
12,079 |
17,347 |
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STOCKHOLDERS' EQUITY |
|
|
Stockholders' equity |
57,723 |
111,862 |
Total liabilities and stockholders'
equity |
$ 69,802 |
$ 129,209 |
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STR Holdings,
Inc. |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
All amounts in
thousands |
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|
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|
Three Months Ended
December 31, |
Twelve Months Ended
December 31, |
|
2014 |
2013 |
2014 |
2013 |
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Audited) |
OPERATING ACTIVITIES |
|
|
|
|
Net loss |
$ (13,426) |
$ (3,651) |
$ (23,617) |
$ (18,286) |
Net loss from discontinued operations |
(199) |
-- |
(884) |
-- |
Net loss from continuing operations |
(13,227) |
(3,651) |
(22,733) |
(18,286) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
|
|
Depreciation |
538 |
521 |
2,078 |
2,024 |
Asset Impairment |
-- |
194 |
-- |
194 |
Amortization of deferred financing costs |
-- |
-- |
-- |
46 |
Write-off of deferred debt costs |
-- |
-- |
-- |
143 |
Stock-based compensation expense |
1,357 |
225 |
2,380 |
1,902 |
Non-cash reversal of loss contingency |
-- |
-- |
(4,089) |
-- |
Non-cash reversal of restructuring
accrual |
(250) |
-- |
(1,045) |
-- |
Loss (gain) on disposal of property, plant
and equipment |
-- |
(85) |
451 |
(185) |
Provision (recovery) for bad debt
expense |
203 |
(276) |
483 |
1,824 |
Loss on reclassification on held for sale
assets |
(144) |
-- |
1,179 |
-- |
Income tax receivable non-cash |
(5,704) |
(1,177) |
(7,166) |
(5,455) |
Deferred income tax expense (benefit) |
12,435 |
(1,662) |
14,867 |
(1,849) |
Changes in operating assets and
liabilities |
1,338 |
1,629 |
555 |
(3,555) |
Other, net |
(646) |
(7) |
(1,398) |
403 |
Net cash used in continuing operations |
(4,100) |
(4,289) |
(14,438) |
(22,794) |
Net cash (used in) provided by discontinued
operations |
(31) |
-- |
(31) |
834 |
Total net cash used in operating
activities |
(4,131) |
(4,289) |
(14,469) |
(21,960) |
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|
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INVESTING ACTIVITIES |
|
|
|
|
Capital investments |
(458) |
(79) |
(3,115) |
(2,238) |
Proceeds from sale of fixed assets |
4,414 |
186 |
6,805 |
186 |
Net cash provided by (used in) continuing
operations |
3,956 |
107 |
3,690 |
(2,052) |
Net cash used in discontinued operations |
-- |
-- |
-- |
-- |
Total net cash provided by (used in)
investing activities |
3,956 |
107 |
3,690 |
(2,052) |
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FINANCING ACTIVITIES |
|
|
|
|
Repurchase of common stock in tender
offer |
-- |
-- |
(24,042) |
-- |
Tender offer fees |
-- |
-- |
(2,387) |
-- |
Special dividend |
(22,580) |
-- |
(22,580) |
-- |
Common stock issuance to Zhenfa |
18,262 |
-- |
21,662 |
-- |
Share issuance fees |
(1,411) |
-- |
(3,016) |
-- |
Proceeds from common stock issued under
employee stock purchase plan |
-- |
1 |
2 |
19 |
Net cash (used in) provided by continuing
operations |
(5,729) |
1 |
(30,361) |
19 |
Net cash provided by discontinued
operations |
-- |
-- |
-- |
-- |
Total net cash (used in) provided by
financing activities |
(5,729) |
1 |
(30,361) |
19 |
|
|
|
|
|
Effect of exchange rate changes on cash |
(325) |
105 |
(481) |
181 |
|
|
|
|
|
Net change in cash and cash
equivalents |
(6,229) |
(4,076) |
(41,621) |
(23,812) |
Cash and cash equivalents, beginning of
period |
22,781 |
62,249 |
58,173 |
81,985 |
Cash and cash equivalents, end of period |
$ 16,552 |
$ 58,173 |
$ 16,552 |
$ 58,173 |
|
|
|
|
|
* Free cash flow from continuing
operations |
$ (4,558) |
$ (4,368) |
$ (17,553) |
$ (25,032) |
|
|
|
|
|
* 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 September
30, |
Three Months Ended
December 31, |
Twelve Months Ended
December 31, |
|
2014 |
2014 |
2013 |
2014 |
2013 |
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
|
|
|
|
|
|
Non-GAAP Loss Per Share from
Continuing Operations |
|
|
|
|
|
Net loss from continuing operations |
$ (3,224) |
$ (13,227) |
$ (3,651) |
$ (22,733) |
$ (18,286) |
Adjustments to net loss from continuing
operations: |
|
|
|
|
|
Amortization of deferred
financing costs |
-- |
-- |
-- |
-- |
189 |
Stock-based compensation
expense |
322 |
1,357 |
225 |
2,380 |
1,902 |
Restructuring |
-- |
374 |
2,176 |
(356) |
4,331 |
Tax impact of option
cancellation due to restructuring |
-- |
-- |
-- |
1,058 |
-- |
Loss on reclassification on
held for sale assets |
-- |
(144) |
-- |
1,179 |
-- |
Spanish grant reversal |
-- |
(974) |
-- |
(974) |
-- |
Non-cash reversal of loss
contingency |
-- |
-- |
-- |
(4,089) |
-- |
Asset Impairment |
-- |
-- |
194 |
-- |
194 |
Tax effect of non-GAAP
adjustments |
(110) |
(206) |
(826) |
677 |
(2,154) |
Non-GAAP net loss from Continuing
operations |
$ (3,012) |
$ (12,820) |
$ (1,882) |
$ (22,858) |
$ (13,824) |
|
|
|
|
|
|
Non-GAAP Loss Per Share from
Discontinued Operations |
|
|
|
|
|
Net loss from discontinued operations |
$ (685) |
$ (199) |
$ -- |
$ (884) |
$ -- |
Tax effect of non-GAAP
adjustments |
-- |
-- |
-- |
-- |
-- |
Non-GAAP net loss from Discontinued
operations |
$ (685) |
$ (199) |
$ -- |
$ (884) |
$ -- |
|
|
|
|
|
|
Non-GAAP net loss per share from
Continuing Operations: |
|
|
|
|
|
Basic from continuing operations |
$ (0.34) |
$ (1.32) |
$ (0.14) |
$ (2.09) |
$ (1.00) |
Diluted from continuing operations |
$ (0.34) |
$ (1.32) |
$ (0.14) |
$ (2.09) |
$ (1.00) |
|
|
|
|
|
|
Non-GAAP net loss per share from
Discontinued Operations: |
|
|
|
|
|
Basic from discontinued operations |
$ (0.08) |
$ (0.02) |
$ -- |
$ (0.08) |
$ -- |
Diluted from discontinued operations |
$ (0.08) |
$ (0.02) |
$ -- |
$ (0.08) |
$ -- |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares
outstanding: |
|
|
|
|
|
Basic |
8,795,542 |
9,737,187 |
13,914,183 |
10,920,200 |
13,873,289 |
(1) Diluted |
8,795,542 |
9,737,187 |
13,914,183 |
10,920,200 |
13,873,289 |
|
|
|
|
|
|
(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 December 31, |
Twelve Months Ended
December 31, |
|
|
2014 |
2013 |
2014 |
2013 |
|
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
|
Free Cash Flow from Continuing
Operations |
|
|
|
|
|
Cash flow used in operations from continuing
operations |
$ (4,100) |
$ (4,289) |
$ (14,438) |
$ (22,794) |
|
Less: |
|
|
|
|
|
Capital investments |
(458) |
(79) |
(3,115) |
(2,238) |
|
Free cash flow |
$ (4,558) |
$ (4,368) |
$ (17,553) |
$ (25,032) |
|
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: (1) Non–GAAP loss per share from
continuing operations (EPS) and (2) 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
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–Q filed with the
Securities and Exchange Commission (SEC) on November 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, there was one new item included as defined
below:
- Non-cash reversal of Spanish grants: During 2014, the Company
received notification that it fulfilled the necessary grant
requirements provided by the government. The Company is excluding
this positive benefit as it is non-cash in nature and the initial
charge recorded in prior periods was also excluded. As such, the
Company does not believe this benefit is reflective of the
operational conditions of its core business and may aid in
comparing its current period results with those of prior
periods.
Although the Company uses non–GAAP EPS as a measure to assess
the operating performance of its 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 its 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
the Company's 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
December 31, |
Twelve Months Ended
December 31, |
|
2014 |
2013 |
2014 |
2013 |
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
Weighted-average shares
outstanding |
|
|
|
|
Basic shares outstanding
GAAP |
9,737,187 |
13,914,183 |
10,920,200 |
13,873,289 |
Diluted shares outstanding
GAAP |
9,737,187 |
13,914,183 |
10,920,200 |
13,873,289 |
Stock
options |
-- |
-- |
-- |
-- |
Restricted common
stock |
-- |
-- |
-- |
-- |
Diluted shares outstanding
non-GAAP |
9,737,187 |
13,914,183 |
10,920,200 |
13,873,289 |
Diluted non–GAAP Shares Outstanding: Due to the
loss from continuing operations for the three and twelve months
ended December 31, 2014, diluted weighted-average common
shares outstanding does not include 18 and 11 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.
Due to a loss from continuing operations during the quarter and
year ended December 31, 2013, the diluted weighted–average common
shares outstanding for purposes of its diluted GAAP loss per share
does not include 5 and 107 shares of unvested restricted common
stock, 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 used in continuing operations
excluding cash spent on capital investments. A limitation of using
free cash flow versus the GAAP measure of cash used in 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.
STR Holdings,
Inc. |
ADJUSTED
EBITDA |
All amounts in
thousands |
|
|
|
|
|
|
|
Three Months Ended September
30, |
Three Months Ended
December 31, |
Twelve Months Ended
December 31, |
|
2014 |
2014 |
2013 |
2014 |
2013 |
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
Adjusted EBITDA |
$ (2,930) |
$ (5,724) |
$ (3,599) |
$ (15,559) |
$ (17,150) |
Depreciation expense |
(514) |
(538) |
(521) |
(2,078) |
(2,024) |
Amortization of deferred financing
costs |
|
-- |
-- |
-- |
(189) |
Interest income (expense), net |
3 |
4 |
(24) |
27 |
(30) |
Income tax bemefot (expense) |
559 |
(6,356) |
3,003 |
(6,532) |
7,349 |
Asset Impairment |
|
-- |
(194) |
-- |
(194) |
Spain grant reversal |
|
974 |
-- |
974 |
-- |
Loss on reclassification on held for sale
assets |
|
144 |
-- |
(1,179) |
-- |
Non-cash reversal of loss contingency |
|
-- |
-- |
4,089 |
-- |
Restructuring |
|
(374) |
(2,176) |
356 |
(4,331) |
Stock-based compensation |
(322) |
(1,357) |
(225) |
(2,380) |
(1,902) |
(Loss) gain on disposal of fixed assets |
(20) |
-- |
85 |
(451) |
185 |
Net loss from continuing
operations |
$ (3,224) |
$ (13,227) |
$ (3,651) |
$ (22,733) |
$ (18,286) |
ASC 280–10–50 Disclosure about Segment of an Enterprise and
Related Information, establishes standards for the manner in which
companies report information about operating segments, products,
geographic areas and major customers. The method of determining
what information to report is based on the way that management
organizes the operating segment within the enterprise for making
operating decisions and assessing financial performance. Since the
Company has one product line, sells to global customers in one
industry, procures raw materials from similar vendors and expects
similar long-term economic characteristics, the Company has one
reporting segment.
Adjusted EBITDA is the main metric used by the management team
and the Board of Directors to plan, forecast and review the
Company's segment performance. Adjusted EBITDA represents net loss
from continuing operations before interest income, income tax
(expense) benefit, depreciation, stock-based compensation expense,
amortization of deferred financing costs, restructuring and certain
non-recurring income and expenses from the results of
operations.
CONTACT: STR Holdings, Inc.
Joseph C. Radziewicz
Vice President and Chief Financial Officer
+1 (860) 265-1247
joseph.radziewicz@strholdings.com
STR (CE) (USOTC:STRI)
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