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8-K - FORM 8-K - POWER SOLUTIONS INTERNATIONAL, INC.d321285d8k.htm

Exhibit 99.1

 

LOGO

POWER SOLUTIONS INTERNATIONAL, INC. REPORTS

FOURTH QUARTER AND FULL YEAR 2011 RESULTS

Fourth quarter net sales up 52% year over year, 6% sequentially

Fourth quarter net income of $0.6 million or $0.06 per diluted share

Fourth quarter adjusted net income of $1.7 million or $0.18 per diluted share

Wood Dale, IL – Mar 26, 2012—Power Solutions International, Inc. (OTC-BB: PSIX.OB), a leader in the design, engineering and manufacture of emissions-certified alternative-fuel and conventional power systems, today announced its financial results for the fourth quarter and year ended December 31, 2011.

Fourth Quarter 2011 Results

Net sales for the fourth quarter of 2011 were $45.5 million, an increase of $15.6 million, or 52%, from the fourth quarter of 2010 and a 6% increase from the third quarter of 2011. The Company reported net income of $0.6 million, or $0.06 per diluted share, in the fourth quarter of 2011 compared to $0.8 million, or $0.09 per diluted share, in last year’s fourth quarter. The 2011 fourth quarter includes a non-cash expense of $1.1 million, or $0.12 per diluted share, related to an increase in the estimated fair value of the liability associated with warrants issued in the Company’s April 2011 private placement. Excluding this amount, net income for the fourth quarter was $1.7 million, or $0.18 per diluted share.

“Our results reflect our successful new product and market initiatives, as well as the rapid movement toward the use of clean fuels,” said Gary Winemaster, Power Solutions’ Chief Executive Officer. “Few companies are as able as Power Solutions to exploit the new energy environment of sustainably inexpensive natural gas. Natural gas-powered engines are no longer an ‘alternative’, but make economic sense for an increasing number of applications. This dynamic is apparent in the growth we achieved in 2011, and in our outlook for continued strong growth in 2012.”

Gross profit for the fourth quarter of 2011 was $7.4 million, resulting in a gross margin of 16.3%. Gross margin improved as expected from the lower 15.3% level in the third quarter of 2011 as we resolved certain short term supply chain interruptions, resulting in strong sales of our higher margin large power systems in the fourth quarter.


Operating income of $2.6 million increased 78% from the fourth quarter of 2010 and rose 11% from the third quarter of 2011.

Other income and expense was $1.3 million in expense for the fourth quarter. Other income and expense also includes the non-cash charge of $1.1 million resulting from the increase in the estimated fair value of the liability associated with the warrants issued in the Company’s April 2011 private placement.

Net income for the fourth quarter of 2011, adjusted to remove the warrant valuation impact, was $1.7 million or $0.18 per diluted share. Net income which includes the warrant valuation expense was $0.6 million, or $0.06 per diluted share. Net income for the fourth quarter of 2010 was $0.8 million, or $0.09 per diluted share.

 

Summary of Fully Diluted EPS Attributable to Common Shareholders

“Adjusted” removes all impact of warrant valuation changes

 

  

  

     Q4
2011
     Q3
2011
     Q4
2010
     Seq
Growth
    Y/Y
Growth
 

EPS

   $ 0.06       $ 0.19       $ 0.09         (68 %)      (33 %) 

Adjusted EPS

   $ 0.18       $ 0.13       $ 0.09         38     100

Fourth quarter 2011 is the first quarter in which the company is reporting EPS under its simplified capital structure. As previously reported, all of the Company’s outstanding shares of preferred stock were converted into common stock as of August 26, 2011.

Full Year 2011 Results

Sales for 2011 were $155.0 million, an increase of $54.5 million, or 54%, from $100.5 million for 2010. Net income for the twelve months of 2011 was $4.1 million, or $0.44 per diluted share, compared to $1.6 million, or $0.19 per diluted share, for 2010.

Outlook

Winemaster continued, “We are optimistic about 2012 due to the initiatives we are undertaking to capture our expanding market opportunities. Inexpensive natural gas combined with environmental concerns is accelerating the shift away from diesel. To exploit that, we are introducing new products that we expect to accelerate our growth in the years ahead. In 2012, we plan to ramp up production of the 2.0 and 2.4 liter engines that we expect will gain acceptance in the forklift market. Our new 8.8 liter engine should be an attractive offering for both off-road and ultimately on-road applications. Finally, we are developing hybrid systems for which we expect future industrial demand.”

Fourth Quarter Conference Call and Presentation

The Company will discuss its financial results and future outlook in a conference call on March 27, 2012 at 8:30AM ET. It will be hosted by Gary Winemaster, Chief Executive Officer and Tom Somodi, Chief Financial Officer. Investors in the United States interested in participating in the call should dial +1 (888) 401-4669 (+1 (719) 325-2209 international and toll) and enter


passcode 5194656. A telephonic replay will be available two hours after the call and will be available for one week by dialing +1 (877) 870-5176 from the United States or +1 (858) 384-5517 from international locations and entering passcode 5194656. There also will be a simultaneous live webcast that will be available on the Company’s website at http://www.powersint.com. Afterward, it will be archived on the Company’s website.

About Power Solutions International, Inc.

Power Solutions International, Inc. (OTC-BB: PSIX.OB) is a leader in the design, engineering and manufacture of emissions-certified alternative-fuel and conventional power systems. PSI can provide integrated turnkey solutions to leading global original equipment manufacturers in the industrial, off-road and on-road markets. The Company's unique in-house design, prototyping, engineering and testing capacities enable the customized production of clean, high-performance engines that run on a wide variety of fuels, including natural gas, propane, biogas, diesel, gasoline, and hybrid systems.

PSI develops and delivers complete .97 to 22 liter power systems, including a new 8.8 liter engine aimed at the industrial and on-highway markets. PSI power systems are used worldwide in power generators, forklifts, aerial lifts and industrial sweepers, as well as in equipment for oil and gas production, aircraft ground support, agriculture, and construction. The new 8.8 liter system will be marketed to medium duty fleets, delivery trucks, school buses, and the garbage and waste truck segments.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements, including the statements under the heading “Outlook” and other statements regarding the current expectations of Power Solutions International, Inc. (the “Company”) about its prospects and opportunities. The Company has tried to identify these forward looking statements by using words such as “expect,” “anticipate,” “estimate,” “plan,” “will,” “would,” “should,” “forecast,” “believe,” “guidance,” “projection” 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 important 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 development of the market for alternative fuel systems, technological and other risks relating to the Company’s development of its new 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) changes in environmental and regulatory policies, significant competition, general economic conditions 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 SEC filings, 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. We use certain numerical measures in this press release which are or may be considered “Non-GAAP financial measures” under Regulation G. We have provided below for your reference supplemental financial disclosure for these measures, including the most directly comparable GAAP measures and associated reconciliations.

 

Reconciliation of Net Income to Adjusted Net Income

(Dollar amounts in millions)

 

  

  

     Three months
ended
December 31,
2011
     Three months
ended
December 31,
2010
 

Net Income

   $ 0.6       $ 0.8   

Non-cash expense from warrant revaluation

   $ 1.1       $ 0.0   

Adjusted Net Income

   $ 1.7       $ 0.8   

 

Reconciliation of EPS to Adjusted EPS

 

  

     Three months
ended
December 31,
2011
     Three months
ended
December 31,
2010
 

Earnings per share

   $ 0.06       $ 0.09   

Non-cash expense from warrant revaluation

   $ 0.12       $ 0.00   

Adjusted diluted earnings per share

   $ 0.18       $ 0.09   

Note: Adjusted net income and adjusted diluted earnings per share are derived from GAAP results by excluding the non-cash expense related to the increase in the estimated fair value of the liability associated with the warrants issued in the Company’s April 2011 private placement. The Company believes supplementing its consolidated financial statements presented in accordance with GAAP with non-GAAP measures will provide investors further understanding of the Company’s short-term and long-term trends. Investors may want to consider excluding the impact of this non-operating, non-cash expense, 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 net income, adjusted diluted earnings per share and other non-GAAP financial measures used 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.


Contact:

Power Solutions International, Inc .

Dan Gorey

Senior Vice President of Finance

+1 (630) 451-2290

dgorey@powergreatlakes.com

or

ICR, LLC

Gary Dvorchak

Senior Vice President

+1 (310) 954-1123

gary.dvorchak@icrinc.com


Power Solutions International, Inc.

Condensed Consolidated Balance Sheets

(Dollar amounts in thousands)

 

     (Unaudited)        
     December 31,     December 31,  
     2011     2010  

ASSETS

    

Current assets:

    

Cash

   $ —        $ —     

Accounts receivable, net

     29,523        16,282   

Inventories

     33,393        32,168   

Prepaid expenses and other current assets

     1,291        1,028   

Deferred income taxes

     1,814        687   

Total current assets

     66,021        50,165   

Property, plant, and equipment, net

     3,611        2,883   

Other noncurrent assets

     1,451        2,305   

Total assets

   $ 71,083      $ 55,353   

LIABILITIES AND STOCKHOLDERS' EQUITY

    

Current liabilities:

    

Income taxes payable

   $ 564      $ 619   

Current maturities of long-term debt and capital lease obligations

     23        2,226   

Line of credit

     19,666        21,633   

Accounts payable

     27,574        17,210   

Accrued liabilities

     4,015        2,211   

Total current liabilities

     51,842        43,899   

Other noncurrent liabilities

     116        189   

Deferred income taxes

     490        233   

Private placement warrants

     3,270        —     

Long-term debt and capital lease obligations, net of current maturities

     41        5,676   

Total liabilities

     55,759        49,997   

Commitments and contingencies

     —          —     

Stockholders’ Equity:

    

Series A convertible preferred stock—$0.001 par value: Authorized 114,000 shares. Issued and outstanding: 0 and 95,961 shares at December 31, 2011 and December 31, 2010, respectively

     —          —     

Common stock—$0.001 par value. Authorized 50,000,000 shares. Issued: 9,895,462 and 312,500 shares at December 31, 2011 and December 31, 2010, respectively

     10        —     

Additional paid-in capital

     10,154        7   

Retained earnings

     9,410        5,349   

Treasury stock, at cost, 830,925 shares and 0 at December 31, 2011 and 2010, respectively

     (4,250     —     

Total stockholders’ equity

     15,324        5,356   

Total liabilities and stockholders’ equity

   $ 71,083      $ 55,353   


Power Solutions International, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(Dollar amounts in thousands, except per share amounts)

 

     Three months
ended
December 31,
2011
     Three
months
ended
December 31,
2010
     Twelve
months
ended
December 31,
2011
     Twelve
months
ended
December 31,
2010
 

Net sales

   $ 45,489       $ 29,873       $ 154,969       $ 100,521   

Cost of sales

     38,087         24,490         128,541         83,894   

Gross profit

     7,402         5,383         26,428         16,627   

Operating expenses:

           

Research & development and engineering

     1,445         1,086         4,713         3,846   

Selling and service

     1,891         1,781         6,666         5,465   

General and administrative

     1,467         1,054         5,244         3,250   
     4,803         3,921         16,623         12,561   

Operating income

     2,599         1,462         9,805         4,066   

Other (income) expense:

           

Interest expense

     215         508         1,340         2,131   

Loss on debt extinguishment

     —           —           485         —     

Other (income) expense, net

     1,079         —           1,146         —     
     1,294         508         2,971         2,131   

Income before income taxes

     1,305         954         6,834         1,935   

Income tax provision

     720         183         2,773         366   

Net income

   $ 585       $ 771       $ 4,061       $ 1,569   

Undistributed earnings

   $ 585       $ 771       $ 4,061       $ 1,569   

Undistributed earnings allocable to Series A convertible preferred shares

   $ —         $ 742       $ 2,513       $ 1,510   

Undistributed earnings allocable to common shares

   $ 585       $ 29       $ 1,548       $ 59   

Weighted-average common shares outstanding:

           

Basic

     9,335,491         312,500         3,512,534         312,500   

Diluted

     9,335,491         312,500         3,512,534         312,500   

Undistributed earnings per share

           

- Basic

           

Common shares

   $ 0.06       $ 0.09       $ 0.44       $ 0.19   

Undistributed earnings per share

           

- Diluted

           

Common shares

   $ 0.06       $ 0.09       $ 0.44       $ 0.19   


Power Solutions International, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollar amounts in thousands)

 

     Twelve
months
ended
December 31,
2011
    Twelve
months
ended
December 31,
2010
 

Cash flows from operating activities:

    

Net income

   $ 4,061      $ 1,569   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     820        988   

Deferred income taxes

     (870     (159

Increase (decrease) in accounts receivable allowances

     (249     246   

Change in valuation of private placement warrants

     382        —     

Loss on debt extinguishment

     485        —     

Loss on disposal of assets

     6        —     

(Increase) decrease in operating assets:

    

Accounts receivable

     (12,992     12,012   

Inventories

     (1,225     (1,001

Prepaid and other current assets

     (410     (533

Other noncurrent assets

     173        76   

Increase (decrease) in operating liabilities:

    

Accounts payable

     7,365        (9,255

Accrued liabilities

     1,609        463   

Deferred revenue

     (73     189   

Income taxes payable

     (55     (671

Net cash (used in) provided by operating activities

     (973     3,924   

Cash flows from Investing activities:

    

Purchases of property, plant, equipment and other assets

     (1,557     (541

Increase in cash surrender value of life insurance

     (13     (42

Net cash used in investing activities

     (1,570     (583

Cash flows from financing activities:

    

Increase (decrease) in cash overdraft

     3,251        (120

Initial proceeds from borrowings under current line of credit

     18,338        —     

Net change in current line of credit

     1,328        (776

Repayment of prior line of credit

     (21,633     —     

Proceeds from long-term debt

     43        95   

Proceeds from issuance of preferred stock with warrants

     18,000        —     

Payments on long-term debt and capital lease obligations

     (7,880     (2,226

Repurchase of common stock

     (4,250     —     

Cash paid for transaction and financing fees

     (4,654     (314

Net cash provided by (used in) financing activities

     2,543        (3,341

Change in cash

     —          —     

Cash at beginning of the year

     —          —     

Cash at end of the year

   $ —        $ —     

Supplemental disclosures of cash flow information:

    

Cash paid for interest

   $ 580      $ 1,899   

Cash paid for income taxes

     3,695        1,196