March 12, 2014

STR Holdings, Inc. Reports Fourth Quarter and Full-Year 2013 Results

EAST WINDSOR, Conn., March 12, 2014 (GLOBE NEWSWIRE) -- STR Holdings, Inc. (NYSE:STRI) today announced its financial results for the fourth quarter and full-year ended December 31, 2013.

Fourth Quarter 2013 Financial Summary:

  • Net sales of $6.7 million in-line with pre-announcement
  • Diluted GAAP loss per share from continuing operations of $(0.09); Diluted non-GAAP loss per share from continuing operations of $(0.05)
  • Finished the quarter with $58.2 million in cash and no debt in-line with pre-announcement
  • Adjusted EBITDA of $(3.6) million in-line with pre-announcement

2013 Financial Summary:

  • Net sales of $31.9 million
  • Diluted GAAP loss per share from continuing operations of $(0.44); Diluted non-GAAP loss per share from continuing operations of $(0.33)

Financial Results

Net sales for the quarter ended December 31, 2013 were $6.7 million. This represents a decrease of 58% from Q4 2012. On a year-over-year basis, volume declined by approximately 46% and average sales price ("ASP") declined by approximately 23%. However, on a sequential basis, quarterly net sales increased 7%. The sequential improvement was driven primarily by a volume increase of approximately 13% and a 5% decline in ASP. The sales volume increase on a sequential basis was the Company's first quarterly increase in 9 quarters.

"Our fourth quarter sequential volume increase reflects progress in the launch of our next-generation EVA encapsulants," said Robert S. Yorgensen, STR's President and Chief Executive Officer. "In the first quarter of 2014, we expect further improvement in quarterly sales on positive market acceptance and sequential share gains."

Gross loss for the fourth quarter of 2013 was $(1.1) million, or (15.9)% of net sales, compared to $(0.8) million, or (13.2)% of net sales, from the third quarter of 2013, primarily driven by $0.4 million of restructuring costs associated with the previously announced plant shutdown in Malaysia and lower ASP.

Selling, general and administrative expenses for the fourth quarter of 2013 were $5.3 million compared to $4.6 million in the third quarter of 2013. The increase was driven by higher restructuring expense of $1.3 million offset by $0.3 million of lower non-cash stock based compensation expense and benefits received from prior cost-reduction actions.

Net loss from continuing operations for the fourth quarter of 2013 was $(3.7) million, or $(0.09) per diluted share. This compares to a net loss from continuing operations of $(5.9) million, or $(0.14) per diluted share, for the third quarter of 2013 and net loss from continuing operations of $(123.4) million, or $(2.97) per diluted share, for the fourth quarter of 2012. The sequential improvement in net loss was driven by additional tax benefit of $2.7 million and benefits from prior cost-reductions that more than offset $1.7 million of higher restructuring charges and a $0.2 million fixed asset impairment. The fourth quarter of 2012 included $172.9 million of non-cash long-lived asset impairments.

Adjusted EBITDA for the fourth quarter of 2013 was $(3.6) million, or (54.0)% of net sales, compared to $(4.6) million, or (74.7)% of net sales, from the third quarter of 2013, primarily driven by a $0.3 million decrease of research and development expense and $0.4 million of decreased labor and benefits. This compares to Adjusted EBITDA from continuing operations of $(3.4) million for the fourth quarter of 2012 or (21.4)% of net sales.

Non-GAAP net loss from continuing operations for the fourth 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 $(1.9) million, or $(0.05) per diluted share. This compares to non-GAAP net loss from continuing operations of $(5.1) million, or $(0.12) per diluted share, for the third quarter of 2013 and non-GAAP net loss from continuing operations of $(3.7) million, or $(0.09) per diluted share, for the fourth quarter of 2012.

"We continue to execute our turnaround strategy by implementing our China Tolling Plan and reducing our cost structure," said Joseph C. Radziewicz, STR's Vice President and Chief Financial Officer. "Based upon these actions, we expect to grow our top-line and improve our financial results as we progress through 2014 while maintaining a healthy cash balance even after repurchasing approximately $24.0 million of our common stock earlier this month in the Dutch auction tender offer."

Balance Sheet and Liquidity

The Company finished the quarter with $58.2 million of cash and no debt. As of December 31, 2013, the Company also had $11.8 million of income tax receivables, of which approximately $7.0 million relates to income tax returns filed in 2012.

Fourth 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 Form 10-K, 10-Q and 8-K's 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. 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 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, 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) 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 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 December 31,Twelve Months Ended December 31,
 2013201220132012
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
         
Net sales  $ 6,671  $ 16,051  $ 31,860  $ 95,345
Cost of sales  7,733  22,066  34,085  97,193
Gross loss  (1,062)  (6,015)  (2,225)  (1,848)
Selling, general and administrative expenses  5,310  4,302  18,322  21,345
Research and development expense  354  1,116  2,670  4,371
(Recovery) provision for bad debt expense  (276)  (11)  1,824  486
Goodwill impairment  --  --  --  82,524
Intangible asset impairment  --  135,480  --  135,480
Asset impairment  194  37,431  194  37,431
Operating loss  (6,644)  (184,333)  (25,235)  (283,485)
Other (loss) income  (10)  (125)  (400)  5,646
Loss from continuing operations before income tax benefit  (6,654)  (184,458)  (25,635)  (277,839)
Income tax benefit from continuing operations  (3,003)  (61,014)  (7,349)  (66,264)
Net loss from continuing operations  (3,651)  (123,444)  (18,286)  (211,575)
Discontinued operations:        
Earnings from discontinued operations before income tax expense  --  --  --  --
Income tax expense (benefit) from discontinued operations  --  18  --  (4,228)
Net (loss) earnings from discontinued operations  --  (18)  --  4,228
Net loss   $ (3,651)  $ (123,462)  $ (18,286)  $ (207,347)
         
GAAP net (loss) earnings per share:        
Basic from continuing operations  $ (0.09)  $ (2.97)  $ (0.44)  $ (5.12)
Basic from discontinued operations  $ --   $ --   $ --   $ 0.10
Total basic GAAP net loss per share  $ (0.09)  $ (2.97)  $ (0.44)  $ (5.02)
         
Diluted from continuing operations  $ (0.09)  $ (2.97)  $ (0.44)  $ (5.12)
Diluted from discontinued operations  $ --   $ --   $ --   $ 0.10
Total diluted GAAP net loss per share  $ (0.09)  $ (2.97)  $ (0.44)  $ (5.02)
         
(1) Non-GAAP net (loss) earnings per share:        
Basic from continuing operations  $ (0.05)  $ (0.09)  $ (0.33)  $ (0.05)
Basic from discontinued operations  $ --   $ --   $ --   $ 0.11
Total basic non-GAAP net (loss) earnings per share  $ (0.05)  $ (0.09)  $ (0.33)  $ 0.06
         
Diluted from continuing operations  $ (0.05)  $ (0.09)  $ (0.33)  $ (0.05)
Diluted from discontinued operations  $ --   $ --   $ --   $ 0.11
Total diluted non-GAAP net (loss) earnings per share  $ (0.05)  $ (0.09)  $ (0.33)  $ 0.06
         
Weighted-average common shares outstanding:        
Basic shares outstanding GAAP  41,742,549  41,526,822  41,619,868  41,314,608
(2) Diluted shares outstanding GAAP  41,742,549  41,526,822  41,619,868  41,314,608
Stock options  --  --  --  --
Restricted common stock  --  --  --  --
(2) Diluted shares outstanding non-GAAP  41,742,549  41,526,822  41,619,868  41,314,608
         
(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
     
 December 31, 2013December 31, 2012
   (Unaudited)   (Unaudited) 
ASSETS    
CURRENT ASSETS    
Cash and cash equivalents  $ 58,173  $ 81,985
Accounts receivable, net  4,771  5,316
Inventories, net  8,557  8,585
Other current assets  15,379  10,732
Total current assets  86,880  106,618
Property, plant and equipment, net  28,398  27,750
Other noncurrent assets  13,931  12,796
Total assets  $ 129,209  $ 147,164
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
CURRENT LIABILITIES    
Accounts payable  $ 2,636  $ 2,893
Accrued liabilities  8,432  10,376
Other current liabilities  630  — 
Income taxes payable  859  917
Total current liabilities  12,557  14,186
 Long-term liabilities  4,790  5,539
Total liabilities  17,347  19,725
     
STOCKHOLDERS' EQUITY    
Stockholders' equity  111,862  127,439
Total liabilities and stockholders' equity  $ 129,209  $ 147,164
 
STR Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
All amounts in thousands
         
 Three Months Ended December 31,Twelve Months Ended December 31,
 2013201220132012
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
OPERATING ACTIVITIES        
Net loss  $ (3,651)  $ (123,462)  $ (18,286)  $ (207,347)
Net (loss) earnings from discontinued operations  --   (18)  --   4,228
Net loss from continuing operations  (3,651)  (123,444)  (18,286)  (211,575)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:        
Depreciation   521  5,098  2,024  11,255
Goodwill impairment  --  --  --  82,524
Intangible asset impairment  --  135,480  --  135,480
Asset impairment  194  37,431  194  37,431
Amortization of intangibles  --  2,109  --  8,432
Amortization of deferred financing costs  --  17  46  235
Write-off of deferred debt costs  --  --  143  844
Stock-based compensation expense  225  (188)  1,902  3,494
Gain on disposal of property, plant and equipment  (185)  --  (185)  2
(Recovery) provision for bad debt expense  (276)  (11)  1,824  486
Deferred income tax benefit  (1,662)  (57,139)  (1,849)  (60,194)
Changes in operating assets and liabilities  452  6,568  (9,010)  25,706
Other, net  93  (603)  403  (238)
Net cash (used in) provided by continuing operations  (4,289)  5,318  (22,794)  33,882
Net cash provided by (used in) discontinued operations  --  5,754  834  (32)
Total net cash (used in) provided by operating activities  (4,289)  11,072  (21,960)  33,850
         
INVESTING ACTIVITIES        
Capital expenditures  (79)  (200)  (2,238)  (10,677)
Proceeds from sale of fixed assets  186  --  186  --
Net cash used in continuing operations  107  (200)  (2,052)  (10,677)
Net cash used in discontinued operations  --  --  --  --
Total net cash used in investing activities  107  (200)  (2,052)  (10,677)
         
FINANCING ACTIVITIES        
Net cash provided by (used in) continuing operations  1  (3)  19  (2)
Net cash used in discontinued operations  --  --  --  --
Total net cash provided by (used in) financing activities  1  (3)  19  (2)
         
Effect of exchange rate changes on cash  105  491  181  20
         
Net change in cash and cash equivalents   (4,076)  11,360  (23,812)  23,191
Cash and cash equivalents, beginning of period  62,249  70,625  81,985  58,794
Cash and cash equivalents, end of period  $ 58,173  $ 81,985  $ 58,173  $ 81,985
         
* Free cash flow from continuing operations  $ (4,368)  $ 5,118  $ (25,032)  $ 23,205

* 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 December 31,Twelve Months Ended December 31,
 2013201220132012
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
Non-GAAP Loss Per Share        
Net loss from continuing operations  $ (3,651)  $ (123,444)  $ (18,286)  $ (211,575)
Adjustments to net loss from continuing operations:        
Amortization of intangibles  --  2,109  --   8,432
Amortization of deferred financing costs  --  17  189  1,079
Stock-based compensation expense  225  (188)  1,902  3,494
Restructuring   2,176  3,888  4,331  3,888
Goodwill impairment  --   --  --   82,524
Intangible asset impairment  --   135,480  --   135,480
Asset impairment  194  37,431  194  37,431
Tax effect of non-GAAP adjustments  (826)  (59,010)  (2,154)  (62,649)
Non-GAAP net loss from continuing operations  $ (1,882)  $ (3,717)  $ (13,824)  $ (1,896)
         
Non-GAAP net loss per share:        
Basic from continuing operations  $ (0.05)  $ (0.09)  $ (0.33)  $ (0.05)
Diluted from continuing operations  $ (0.05)  $ (0.09)  $ (0.33)  $ (0.05)
         
Weighted-average common shares outstanding:        
Basic  41,742,549  41,526,822  41,619,868  41,314,608
(1) Diluted  41,742,549  41,526,822  41,619,868  41,314,608
         
(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, 
 2013201220132012
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
Free Cash Flow from Continuing Operations        
Cash flow (used in) provided by operations from continuing operations  $ (4,289)  $ 5,318  $ (22,794)  $ 33,882
Less:        
Capital expenditures  (79)  (200)  (2,238)  (10,677)
Free cash flow  $ (4,368)  $ 5,118  $ (25,032)  $ 23,205
         
  Three Months Ended December 31,  Twelve Months Ended December 31, 
 2013201220132012
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
Adjusted EBITDA:        
Adjusted EBITDA   $ (3,599)  $ (3,442)  $ (17,150)  $ 3,123
Depreciation expense   (521)  (7,207)  (2,024)  (19,687)
Amortization of deferred financing costs   --   (17)  (189)  (1,079)
Interest income (expense) net   (24)  --  (30)  (196)
Income tax benefit   3,003  61,014  7,349  66,264
Goodwill impairment  --  --  --  (82,524)
Intangible asset impairment  --  (135,480)  --  (135,480)
Asset impairment   (194)  (37,431)  (194)  (37,431)
Restructuring   (2,176)  (1,069)  (4,331)  (1,069)
Stock‑based compensation   (225)  188  (1,902)  (3,494)
Gain (loss) on disposal of property, plant and equipment   85  —   185  (2)
Net loss from continuing operations   $ (3,651)  $ (123,444)  $ (18,286)  $ (211,575)

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 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 from continuing operations not including the tax effected impact of deferred financing costs, stock-based compensation, intangible asset amortization expense, intangible asset impairment, restructuring, goodwill impairment, and asset 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, for detailed discussion on some of these adjustments that have been recorded in previous periods. During 2013, we did not include any new items to arrive at non‑GAAP EPS.

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 December 31,Twelve Months Ended December 31,
 2013201220132012
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
Weighted-average shares outstanding         
Basic shares outstanding GAAP  41,742,549  41,526,822  41,619,868  41,314,608
Diluted shares outstanding GAAP  41,742,549  41,526,822  41,619,868  41,314,608
Stock options  --   --   --   -- 
Restricted common stock  --   --   --   -- 
Diluted shares outstanding non-GAAP  41,742,549  41,526,822  41,619,868  41,314,608

Diluted GAAP Shares Outstanding: 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.

Due to a loss from continuing operations during the quarter and year ended December 31, 2012, the diluted weighted-average common shares outstanding for purposes of its diluted GAAP loss per share does not include 142 and 161 of restricted common stock, respectively, as these potential awards do not share in any loss generated by the Company and are anti-dilutive.

Diluted non-GAAP shares outstanding: Due to a non-GAAP net loss from continuing operations during the quarter and year ended December 31, 2013, the weighted-average common shares outstanding for the purposes of its non-GAAP EPS 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.

Due to a non-GAAP net loss from continuing operations during the quarter and year ended December 31, 2012, the weighted-average common shares outstanding for the purposes of its non-GAAP EPS does not include 142 and 161 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 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) 758-7437

         joseph.radziewicz@strholdings.com


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