Cover Page
Cover Page - shares | 6 Months Ended | |
Jun. 30, 2021 | Aug. 02, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jun. 30, 2021 | |
Document Transition Report | false | |
Entity File Number | 001-35944 | |
Entity Registrant Name | POWER SOLUTIONS INTERNATIONAL, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 33-0963637 | |
Entity Address, Address Line One | 201 Mittel Drive | |
Entity Address, City or Town | Wood Dale | |
Entity Address, State or Province | IL | |
Entity Address, Postal Zip Code | 60191 | |
City Area Code | 630 | |
Local Phone Number | 350-9400 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 22,923,486 | |
Entity Central Index Key | 0001137091 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Filer Category | Non-accelerated Filer |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) shares in Thousands, $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 5,503 | $ 20,968 |
Restricted cash | 2,949 | 3,299 |
Accounts receivable, net of allowances of $3,896 and $3,701 as of June 30, 2021 and December 31, 2020, respectively | 59,578 | 60,148 |
Income tax receivable | 4,273 | 3,708 |
Inventories, net | 129,262 | 108,213 |
Prepaid expenses and other current assets | 7,926 | 6,351 |
Total current assets | 209,491 | 202,687 |
Property, plant and equipment, net | 19,162 | 20,181 |
Intangible assets, net | 9,052 | 10,319 |
Goodwill | 29,835 | 29,835 |
Other noncurrent assets | 16,888 | 20,955 |
TOTAL ASSETS | 284,428 | 283,977 |
Current liabilities: | ||
Accounts payable | 79,786 | 31,547 |
Current maturities of long-term debt | 304 | 310 |
Revolving line of credit | 130,000 | 130,000 |
Other accrued liabilities | 67,476 | 77,619 |
Total current liabilities | 277,566 | 239,476 |
Deferred income taxes | 1,258 | 886 |
Long-term debt, net of current maturities | 743 | 781 |
Noncurrent contract liabilities | 2,640 | 3,181 |
Other noncurrent liabilities | 29,617 | 33,556 |
TOTAL LIABILITIES | 311,824 | 277,880 |
STOCKHOLDERS’ (DEFICIT) EQUITY | ||
Preferred stock – $0.001 par value. Shares authorized: 5,000. No shares issued and outstanding at all dates. | 0 | 0 |
Common stock – $0.001 par value; 50,000 shares authorized; 23,117 shares issued; 22,894 and 22,892 shares outstanding June 30, 2021 and December 31, 2020, respectively | 23 | 23 |
Additional paid-in capital | 157,394 | 157,262 |
Accumulated deficit | (183,615) | (149,894) |
Treasury stock, at cost, 223 and 225 shares at June 30, 2021 and December 31, 2020, respectively | (1,198) | (1,294) |
TOTAL STOCKHOLDERS’ (DEFICIT) EQUITY | (27,396) | 6,097 |
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | $ 284,428 | $ 283,977 |
Treasury stock (in shares) | 223 | 225 |
Common stock, shares outstanding (in shares) | 22,894 | 22,892 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 |
Current assets: | ||
Accounts receivable allowance | $ 3,896 | $ 3,701 |
STOCKHOLDERS’ (DEFICIT) EQUITY | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Common stock, shares issued (in shares) | 23,117,000 | 23,117,000 |
Common stock, shares outstanding (in shares) | 22,894,000 | 22,892,000 |
Treasury stock (in shares) | 223,000 | 225,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | |
Income Statement [Abstract] | ||||
Net sales | $ 111,478 | $ 93,056 | $ 211,649 | $ 198,153 |
Cost of sales | 98,284 | 89,279 | 191,385 | 176,662 |
Gross profit | 13,194 | 3,777 | 20,264 | 21,491 |
Operating expenses: | ||||
Research, development and engineering expenses | 6,111 | 5,814 | 12,335 | 12,566 |
Selling, general and administrative expenses | 21,089 | 12,580 | 36,900 | 26,470 |
Amortization of intangible assets | 633 | 764 | 1,267 | 1,527 |
Total operating expenses | 27,833 | 19,158 | 50,502 | 40,563 |
Operating loss | (14,639) | (15,381) | (30,238) | (19,072) |
Other expense, net: | ||||
Interest expense | 1,469 | 1,427 | 3,630 | 2,701 |
Loss on debt extinguishment and modifications | 0 | 497 | 0 | 497 |
Other expense (income), net | 1 | (44) | 1 | (255) |
Total other expense, net | 1,470 | 1,880 | 3,631 | 2,943 |
Loss before income taxes | (16,109) | (17,261) | (33,869) | (22,015) |
Income tax (benefit) expense | (538) | 481 | (148) | (3,561) |
Net loss | $ (15,571) | $ (17,742) | $ (33,721) | $ (18,454) |
Weighted-average common shares outstanding: | ||||
Basic (in shares) | 22,893 | 22,858 | 22,893 | 22,858 |
Diluted (in shares) | 22,893 | 22,858 | 22,893 | 22,858 |
Loss per common share: | ||||
Basic (in dollars per share) | $ (0.68) | $ (0.78) | $ (1.47) | $ (0.81) |
Diluted (in dollars per share) | $ (0.68) | $ (0.78) | $ (1.47) | $ (0.81) |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock |
Beginning balance at Dec. 31, 2019 | $ 28,497 | $ 23 | $ 156,727 | $ (126,912) | $ (1,341) |
Increase (Decrease) in Stockholders' Equity | |||||
Net loss | (18,454) | (18,454) | |||
Stock-based compensation expense | 317 | 317 | |||
Common stock issued for stock-based awards, net | (5) | 8 | (13) | ||
Ending balance at Jun. 30, 2020 | 10,355 | 23 | 157,052 | (145,366) | (1,354) |
Beginning balance at Mar. 31, 2020 | 27,941 | 23 | 156,891 | (127,624) | (1,349) |
Increase (Decrease) in Stockholders' Equity | |||||
Net loss | (17,742) | (17,742) | |||
Stock-based compensation expense | 160 | 160 | |||
Common stock issued for stock-based awards, net | (4) | 1 | (5) | ||
Ending balance at Jun. 30, 2020 | 10,355 | 23 | 157,052 | (145,366) | (1,354) |
Beginning balance at Dec. 31, 2020 | 6,097 | 23 | 157,262 | (149,894) | (1,294) |
Increase (Decrease) in Stockholders' Equity | |||||
Net loss | (33,721) | (33,721) | |||
Stock-based compensation expense | 232 | 132 | 100 | ||
Common stock issued for stock-based awards, net | (4) | (4) | |||
Ending balance at Jun. 30, 2021 | (27,396) | 23 | 157,394 | (183,615) | (1,198) |
Beginning balance at Mar. 31, 2021 | (11,945) | 23 | 157,371 | (168,044) | (1,295) |
Increase (Decrease) in Stockholders' Equity | |||||
Net loss | (15,571) | (15,571) | |||
Stock-based compensation expense | 123 | 23 | 100 | ||
Common stock issued for stock-based awards, net | (3) | (3) | |||
Ending balance at Jun. 30, 2021 | $ (27,396) | $ 23 | $ 157,394 | $ (183,615) | $ (1,198) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | |
Cash (used in) provided by operating activities | ||||
Net loss | $ (15,571) | $ (17,742) | $ (33,721) | $ (18,454) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||
Amortization of intangible assets | 633 | 764 | 1,267 | 1,527 |
Depreciation | 2,445 | 2,608 | ||
Stock-based compensation expense | 232 | 317 | ||
Amortization of financing fees | 1,627 | 609 | ||
Deferred income taxes | 371 | (323) | ||
Loss on extinguishment of debt | 0 | 497 | 0 | 497 |
Other adjustments, net | 503 | 253 | ||
Changes in operating assets and liabilities: | ||||
Accounts receivable, net | 577 | 42,492 | ||
Inventory, net | (21,417) | (31,980) | ||
Prepaid expenses and other assets | 11 | 22 | ||
Accounts payable | 48,475 | (8,634) | ||
Accrued expenses | (10,122) | 24,692 | ||
Other noncurrent liabilities | (4,487) | (9,616) | ||
Net cash (used in) provided by operating activities | (14,239) | 4,010 | ||
Cash provided by (used in) investing activities | ||||
Capital expenditures | (1,185) | (1,416) | ||
Return of investment in joint venture | 2,181 | 0 | ||
Other investing activities, net | 36 | 7 | ||
Net cash provided by (used in) investing activities | 1,032 | (1,409) | ||
Cash (used in) provided by financing activities | ||||
Repayments of long-term debt and lease liabilities | (193) | (55,200) | ||
Proceeds from revolving line of credit | 0 | 180,298 | ||
Repayments of revolving line of credit | 0 | (89,826) | ||
Payments of deferred financing costs | (2,549) | (1,970) | ||
Other financing activities, net | 134 | 76 | ||
Net cash (used in) provided by financing activities | (2,608) | 33,378 | ||
Net (decrease) increase in cash, cash equivalents, and restricted cash | (15,815) | 35,979 | ||
Cash, cash equivalents, and restricted cash at beginning of the period | 24,267 | 3 | ||
Cash, cash equivalents, and restricted cash at end of the period | 8,452 | 35,982 | 8,452 | 35,982 |
Reconciliation of cash, cash equivalents, and restricted cash to the Consolidated Balance Sheets | ||||
Cash and cash equivalents | 5,503 | 32,533 | 5,503 | 32,533 |
Restricted cash | 2,949 | 3,449 | 2,949 | 3,449 |
Total cash, cash equivalents, and restricted cash | $ 8,452 | $ 35,982 | $ 8,452 | $ 35,982 |
Summary of Significant Accounti
Summary of Significant Accounting Policies and Other Information | 6 Months Ended |
Jun. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Summary of Significant Accounting Policies and Other Information | Summary of Significant Accounting Policies and Other Information Nature of Business Operations Power Solutions International, Inc. (“Power Solutions,” “PSI” or the “Company”), a Delaware corporation, is a global producer and distributor of a broad range of high-performance, certified, low-emission power systems, including alternative-fueled power systems for original equipment manufacturers (“OEMs”) of off-highway industrial equipment and certain on-road vehicles and large custom-engineered integrated electrical power generation systems. The Company’s customers include large, industry-leading and multinational organizations. The Company’s products and services are sold predominantly to customers throughout North America as well as to customers located throughout the Pacific Rim and Europe. The Company’s power systems are highly engineered, comprehensive systems which, through the Company’s technologically sophisticated development and manufacturing processes, including its in-house design, prototyping, testing and engineering capabilities and its analysis and determination of the specific components to be integrated into a given power system (driven in large part by emission standards and cost considerations), allow the Company to provide its customers with power systems customized to meet specific OEM application requirements, other technical customers’ specifications and requirements imposed by environmental regulatory bodies. The Company’s power system configurations range from a basic engine integrated with appropriate fuel system components to completely packaged power systems that include any combination of cooling systems, electronic systems, air intake systems, fuel systems, housings, power takeoff systems, exhaust systems, hydraulic systems, enclosures, brackets, hoses, tubes and other assembled componentry. The Company also designs and manufactures large, custom-engineered integrated electrical power generation systems for both standby and prime power applications. The Company purchases engines from third-party suppliers and produces internally designed engines, all of which are then integrated into its power systems. Of the other components that the Company integrates into its power systems, a substantial portion consist of internally designed components and components for which it coordinates significant design efforts with third-party suppliers, with the remainder consisting largely of parts that are sourced off-the-shelf from third-party suppliers. Some of the key components (including purchased engines) embody proprietary intellectual property of the Company’s suppliers. As a result of its design and manufacturing capabilities, the Company is able to provide its customers with a power system that can be incorporated into a customer’s specified application. In addition to the certified products described above, the Company sells diesel, gasoline and non-certified power systems and aftermarket components. Stock Ownership and Control In March 2017, the Company executed a share purchase agreement (the “SPA”) with Weichai America Corp., a wholly-owned subsidiary of Weichai Power Co., Ltd. (HK2338, SZ000338) (herein collectively referred to as “Weichai”). Under the terms of the SPA, Weichai invested $60.0 million in the Company purchasing a combination of newly issued Common and Preferred Stock as well as a stock purchase warrant (the “Weichai Warrant”). With the exercise of the Weichai Warrant in April 2019, Weichai owns a majority of the outstanding shares of the Company’s common stock par value $0.001 (“Common Stock”). As a result, Weichai is able to exercise control over matters requiring stockholders’ approval, including the election of the directors, amendment of the Company’s Certificate of Incorporation and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control of the Company or changes in management and will make the approval of certain transactions impractical without the support of Weichai. Weichai also entered into an Investor Rights Agreement (the “Rights Agreement”) with the Company upon execution of the SPA. The Rights Agreement provides Weichai with representation on the Company’s Board of Directors (the “Board”) and management representation rights. Weichai currently has four representatives on the Board, which constitutes the majority of the directors serving on the Board. According to the Rights Agreement, during any period when the Company is a “controlled company” within the meaning of the NASDAQ Stock Market (“NASDAQ”) Listing Rules, it will take such measures as to avail itself of the “controlled company” exemptions available under Rule 5615 of the NASDAQ Listing Rules of Rules 5605(b), (d) and (e). Going Concern Considerations In March 2021, the Company entered into an amended and restated uncommitted revolving credit agreement between the Company and Standard Chartered Bank (“Standard Chartered”), as administrative agent (the “Amended and Restated Uncommitted Revolving Credit Agreement”). The Amended and Restated Uncommitted Revolving Credit Agreement continues to allow the Company to borrow up to $130.0 million and matures on March 25, 2022. Under the Amended and Restated Uncommitted Revolving Credit Agreement, Standard Chartered has the right to demand payment of any and all outstanding borrowings and other amounts outstanding under the Amended and Restated Uncommitted Revolving Credit Agreement at any point in time at its discretion. In connection with the execution of the Amended and Restated Uncommitted Revolving Credit Agreement, the Company entered into an amendment and restatement of the shareholder’s loan agreement originally executed with Weichai in December 2020 (the “First Amended and Restated Shareholder’s Loan Agreement”). The First Amended and Restated Shareholder’s Loan Agreement provides the Company with access to $130.0 million of credit solely for purposes of repaying outstanding borrowings under the Amended and Restated Uncommitted Revolving Credit Agreement. The First Amended and Restated Shareholder’s Loan Agreement expires on April 25, 2022. The Amended and Restated Uncommitted Revolving Credit Agreement provides Standard Chartered with a power of attorney (“POA”) to submit a borrowing request to Weichai under the First Amended and Restated Shareholder’s Loan Agreement if the Company fails to submit a borrowing request within five business days of receiving a request from Standard Chartered. As of June 30, 2021, the Company had $130.0 million outstanding under the Amended and Restated Uncommitted Revolving Credit Agreement. On July 14, 2021, the Company entered into an additional Shareholder’s Loan Agreement (the “Second Shareholder’s Loan Agreement”) with Weichai. The Second Shareholder’s Loan Agreement provides the Company with a $25 million uncommitted facility that is subordinated to the Amended and Restated Uncommitted Revolving Credit Agreement and any borrowing requests made under the Second Shareholder’s Loan Agreement are subject to Weichai’s discretionary approval. Borrowings under the Second Shareholder’s Loan Agreement bear interest at LIBOR plus 4.50% and can be used for general corporate purposes, except for certain legal expenditures which require additional approval from Weichai. The Second Shareholder’s Loan Agreement expires on May 20, 2022 with any outstanding principal and accrued interest due upon maturity. As of August 11, 2021, the Company had $15.0 million outstanding under the Second Shareholder’s Loan Agreement. See Note 6. Debt for further information regarding the terms and conditions of the Company’s debt agreements. The Amended and Restated Uncommitted Revolving Credit Agreement includes financial covenants which were effective for the Company beginning with the three months ended June 30, 2021. The financial covenants include an interest coverage ratio and a minimum threshold for earnings before interest, taxes, depreciation and amortization (“EBITDA”) as further defined in the Amended and Restated Uncommitted Revolving Credit Agreement. For the three months ended June 30, 2021, the Company did not meet the defined minimum interest coverage ratio nor the minimum EBITDA threshold. A breach of the financial covenants under the Amended and Restated Uncommitted Revolving Credit Agreement constitutes an event of default and, if not cured or waived, could result in the obligations under the Amended and Restated Uncommitted Revolving Credit Agreement being accelerated. The Company is currently in discussion with Standard Chartered in connection with the financial covenant breaches. Significant uncertainties exist about the Company’s ability to refinance, extend, or repay its outstanding indebtedness, maintain sufficient liquidity to fund its business activities, obtain a cure or waiver in connection with the financial covenant breaches (as discussed above), and maintain compliance with the covenants and other requirements under the Amended and Restated Uncommitted Revolving Credit Agreement in the future. Without additional financing, the Company anticipates that it will not have sufficient cash and cash equivalents to repay amounts owing under its existing debt arrangements as they become due. In order to provide the Company with a more permanent source of liquidity, management plans to seek an extension and amendment and/or replacement of its existing debt agreements or seek additional liquidity from its current or other lenders before the maturity dates in 2022 as discussed above. There can be no assurance that the Company’s management will be able to successfully complete an extension and amendment of its existing debt agreements or obtain new financing on acceptable terms, when required or if at all. These consolidated financial statements do not include any adjustments that might result from the outcome of the Company’s efforts to address these issues. Furthermore, if the Company cannot raise capital on acceptable terms, it may not, among other things, be able to do the following: • continue to expand the Company’s research and product investments and sales and marketing organization; • continue to fund and expand operations both organically and through acquisitions; and • respond to competitive pressures or unanticipated working capital requirements. Additionally, as discussed further below, the global economy continues to be impacted by the outbreak of the coronavirus (“COVID-19”) that was first declared a global pandemic (the “COVID-19 pandemic”) in March 2020. The potential for continued disruptions, economic uncertainty, and unfavorable oil and gas market dynamics may continue to have a material adverse impact on the results of operations, financial position and liquidity of the Company. The Company’s management has concluded that, due to uncertainties surrounding the Company’s future ability to refinance, extend and amend, or repay its outstanding indebtedness under its existing debt arrangements, maintain sufficient liquidity to fund its business activities, obtain a cure or waiver of its financial covenant breaches, and maintain compliance with the covenants and other requirements under the Amended and Restated Uncommitted Revolving Credit Agreement in the future, substantial doubt exists as to its ability to continue as a going concern within one year after the date that these financial statements are issued. The Company’s plans to alleviate the substantial doubt about its ability to continue as a going concern may not be successful, and it may be forced to limit its business activities or be unable to continue as a going concern, which would have a material adverse effect on its results of operations and financial condition. The consolidated financial statements included herein have been prepared assuming that the Company will continue as a going concern and contemplating the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company’s ability to continue as a going concern is dependent on generating profitable operating results, having sufficient liquidity, maintaining compliance with the covenants and other requirements under the Amended and Restated Uncommitted Revolving Credit Agreement in the future, and extending and amending, refinancing or repaying the indebtedness outstanding under the Company’s existing debt arrangements. COVID-19 Pandemic and Other Recent Business Impacts During 2020, as a result of the COVID-19 pandemic, the global economy experienced substantial turmoil, which led to challenging market conditions across certain areas of the Company’s business. In addition, due to unprecedented decreases in demand, an oil price war, and economic uncertainty resulting from the COVID-19 pandemic, average crude oil prices were considerably lower in 2020 as compared to prices at the end of 2019. Since May 2020, crude oil prices increased considerably from their lows reached in April 2020. However, U.S. rig counts have been slower to return as levels at the end of June 2021 remain below the average for the first half of 2020 and significantly below the full year average during 2019. These factors have contributed to a challenging environment for the sale of the Company’s oil and gas related products through the first half of 2021. A significant portion of the Company’s sales and profitability is derived from the sale of products that are used within the oil and gas industry. In addition, the Company experienced delays in its supply chain during the first half of 2021 due to temporary shortages of raw materials and container delays of overseas materials as bottlenecks occurred at ports in Asia and North America. This, in turn, caused delivery delays to some of the Company’s customers. The Company also experienced inflationary cost pressures for certain materials and has also experienced higher tariff costs as a result of the non-renewal of certain tariff exclusions. The Company is working to mitigate the impact of these matters through price increases and other measures, such as obtaining certain tariff exclusions, where possible. The potential for continued disruptions, economic uncertainty, and unfavorable oil and gas market dynamics may have a material adverse impact on the timing of delivery of customer orders and the levels of future customer orders. Additionally, during the first half of 2021, the Company incurred significantly higher legal costs due to its obligation to indemnify certain former officers and employees as a result of exhaustion of its directors and officers insurance during the early part of 2020. In particular, spending activity was elevated in the first half of 2021 as a result of the United States Attorney’s Office for the Northern District of Illinois (the “USAO”) trial involving former officers and employees of the Company. At this time, the Company is not able to estimate the potential future amount of its indemnity obligations related to this matter nor the pending U.S. Securities and Exchange Commission (“SEC”) matter involving these prior officers and employees. See Note 9. Commitments and Contingencies for further discussion of the Company’s indemnification obligations. A ccordingly, the above challenges may continue to have a material adverse impact on the Company’s future results of operations, financial position, and liquidity. Basis of Presentation and Consolidation The Company is filing this Form 10-Q for the three and six months ended June 30, 2021, which contains unaudited consolidated financial statements as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020. The consolidated financial statements include the accounts of Power Solutions International, Inc. and its wholly-owned subsidiaries and majority-owned subsidiaries in which the Company exercises control. The foregoing financial information was prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and rules and regulations of the SEC for interim financial reporting. All intercompany balances and transactions have been eliminated in consolidation. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying consolidated financial statements should be read in conjunction with, and have been prepared in accordance with accounting policies reflected in, the consolidated financial statements and related notes, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (“the 2020 Annual Report”). The Company’s significant accounting policies are described in the aforementioned 2020 Annual Report. Included below are certain updates to those policies. The accompanying interim financial information is unaudited; however, the Company believes the financial information reflects all adjustments (consisting of items of a normal recurring nature) necessary for a fair presentation of financial position, results of operations and cash flows in conformity with U.S. GAAP. Operating results for interim periods are not necessarily indicative of annual operating results. The Company operates as one business and geographic operating segment. Operating segments are defined as components of a business that can earn revenue and incur expenses for which discrete financial information is available that is evaluated on a regular basis by the chief operating decision maker (“CODM”). The Company’s CODM is its principal executive officer, who decides how to allocate resources and assess performance. A single management team reports to the CODM, who manages the entire business. The Company’s CODM reviews consolidated statements of operations to make decisions, allocate resources and assess performance, and the CODM does not evaluate the profit or loss from any separate geography or product line. Concentrations The following table presents customers individually accounting for more than 10% of the Company’s net sales: For the Three Months Ended June 30, For the Six Months Ended June 30, 2021 2020 2021 2020 Customer A 17 % 15 % 16 % 15 % Customer B 11 % 10 % ** 10 % Customer C 21 % ** 21 % ** The following table presents customers individually accounting for more than 10% of the Company’s accounts receivable: As of June 30, 2021 As of December 31, 2020 Customer A 27 % 16 % Customer B 16 % ** Customer D ** 22 % The following table presents suppliers individually accounting for more than 10% of the Company’s purchases: For the Three Months Ended June 30, For the Six Months Ended June 30, 2021 2020 2021 2020 Supplier A 15 % ** 14 % ** Supplier B 12 % 30 % ** 20 % ** Less than 10% of the total Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions include the valuation of allowances for uncollectible receivables, inventory reserves, warranty reserves, evaluation of goodwill, other intangibles, property, plant and equipment for impairment, and determination of useful lives of long-lived assets. Actual results could materially differ from those estimates. Research and Development R&D expenses are expensed when incurred. R&D expenses consist primarily of wages, materials, testing and consulting related to the development of new engines, parts and applications. These costs were $5.8 million and $5.6 million for the three months ended June 30, 2021 and 2020, respectively. These costs were $11.8 million and $12.0 million for the six months ended June 30, 2021 and 2020, respectively. Restricted Cash The Company is required to maintain minimum levels of cash collateral to support the letters of credit. The cash collateral is held in a separate bank account which the Company is restricted from accessing. As discussed in Note 9. Commitments and Contingencies , the Company had outstanding letters of credi t of $2.3 million at both June 30, 2021 and December 31, 2020 and restricted cash of $2.9 million and $3.3 million at June 30, 2021 and December 31, 2020, respectively . Inventories The Company’s inventories consist primarily of engines and parts. Engines are valued at the lower of cost plus estimated freight-in or net realizable value. Parts are valued at the lower of cost or net realizable value. Net realizable value approximates replacement cost. Cost is principally determined using the first-in, first-out method and includes material, labor and manufacturing overhead. It is the Company’s policy to review inventories on a continuing basis for obsolete, excess and slow-moving items and to record valuation adjustments for such items in order to eliminate non-recoverable costs from inventory. Valuation adjustments are recorded in an inventory reserve account and reduce the cost basis of the inventory in the period in which the reduced valuation is determined. Inventory reserves are established based on quantities on hand, usage and sales history, customer orders, projected demand and utilization within a current or future power system. Specific analysis of individual items or groups of items is performed based on these same criteria, as well as on changes in market conditions or any other identified conditions. Inventories consisted of the following: (in thousands) Inventories As of June 30, 2021 As of December 31, 2020 Raw materials * $ 103,979 $ 89,684 Work in process 7,464 2,482 Finished goods 21,406 19,375 Total inventories 132,849 111,541 Inventory allowance (3,587) (3,328) Inventories, net $ 129,262 $ 108,213 * As of June 30, 2021 and December 31, 2020, raw materials included $23.6 million and $36.6 million, respectively, of 6.0L engines that were purchased for a customer under a long-term supply agreement. See Note 2. Revenue for additional information related to contract liabilities and remaining performance obligations related to these engines. Activity in the Company’s inventory allowance was as follows: (in thousands) For the Six Months Ended June 30, Inventory Allowance 2021 2020 Balance at beginning of period $ 3,328 $ 2,964 Charged to expense 459 897 Write-offs (200) (819) Balance at end of period $ 3,587 $ 3,042 Other Accrued Liabilities Other accrued liabilities consisted of the following: (in thousands) Other Accrued Liabilities As of June 30, 2021 As of December 31, 2020 Accrued product warranty $ 14,782 $ 14,928 Litigation reserves * 4,288 3,128 Contract liabilities 34,751 47,960 Accrued compensation and benefits 3,247 3,124 Operating lease liabilities 3,826 3,793 Accrued interest expense 72 895 Other 6,510 3,791 Total $ 67,476 $ 77,619 * As of June 30, 2021 and December 31, 2020 liti gation reserves related to various ongoing legal matters including associated legal fees as well as accrued indemnification costs related to former officers and employees of the Company. See Note 9. Commitments and Contingencies for additional information. Warranty Costs The Company offers a standard limited warranty on the workmanship of its products that in most cases covers defects for a defined period. Warranties for certified emission products are mandated by the U.S. Environmental Protection Agency (the “EPA”) and/or the California Air Resources Board (the “CARB”) and are longer than the Company’s standard warranty on certain emission related products. The Company’s products also carry limited warranties from suppliers. The Company’s warranties generally apply to engines fully manufactured by the Company and to the modifications the Company makes to supplier base products. Costs related to supplier warranty claims are generally borne by the supplier and passed through to the end customer. Warranty estimates are based on historical experience and represent the projected cost associated with the product. A liability and related expense are recognized at the time products are sold. The Company adjusts estimates when it is determined that actual costs may differ from initial or previous estimates. The Company’s warranty liability is generally affected by failure rates, repair costs, and the timing of failures. Future events and circumstances related to these factors could materially change the estimates and require adjustments to the warranty liability. In addition, new product launches require a greater use of judgment in developing estimates until historical experience becomes available. Accrued product warranty activities are presented below: (in thousands) For the Six Months Ended June 30, Accrued Product Warranty 2021 2020 Balance at beginning of period $ 31,542 $ 25,501 Current year provision * 8,770 7,418 Changes in estimates for preexisting warranties ** 780 9,925 Payments made during the period (11,767) (10,373) Balance at end of period 29,325 32,471 Less: current portion 14,782 16,660 Noncurrent accrued product warranty $ 14,543 $ 15,811 * Warranty costs, net of supplier recoveries, were $7.5 million and $15.5 million for the six months ended June 30, 2021 and 2020, respectively. Supplier recoveries were $2.5 million and $1.9 million for the six months ended June 30, 2021 and 2020, respectively. ** Change in estimates for preexisting warranties reflect changes in the Company’s estimate of warranty costs for products sold in prior periods. Such adjustments typically occur when claims experience deviates from historical and expected trends. The Company recorded charges for changes in estimates of preexisting warranties of $0.8 million, or $0.03 per diluted share, for the six months ended June 30, 2021, and charges of $9.9 million, or $0.43 per diluted share, for the six months ended June 30, 2020, respectively. Recently Issued Accounting Pronouncements – Adopted In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting , which provided optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendment allows entities to elect not to apply certain modification accounting requirements to contracts affected by reference rate reform if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. The guidance was effective upon issuance and expires after December 31, 2022. There was no impact on the Company’s Consolidated Balance Sheets, Statements of Operations, Statements of Cash Flows or Statement of Stockholders’ Equity as a result of this guidance. The Company continues to monitor contracts potentially impacted by reference rate reform, including the Company’s debt agreements, and will continue to assess the potential impacts of this guidance as reference rates are updated. Recently Issued Accounting Pronouncements – Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which applies primarily to the Company’s accounts receivable impairment loss allowances. The guidance provides a revised model whereby the current expected credit losses are used to compute impairment of financial instruments. The new model requires evaluation of historical experience and various current and expected factors, which may affect the estimated amount of losses and requires determination of whether the affected financial instruments should be grouped in units of account. The guidance, as originally issued, was effective for fiscal years beginning after December 15, 2019. In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates , which deferred the effective dates of these standards for certain entities. Based on the guidance, the effective date of ASU 2016-13 is deferred for the Company until fiscal year 2023. The Company currently plans to adopt the guidance on January 1, 2023 when it becomes effective. The Company is continuing to assess the impact of the standard on its consolidated financial statements. |
Revenue
Revenue | 6 Months Ended |
Jun. 30, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Revenue | Revenue Disaggregation of Revenue The following table summarizes net sales by end market: (in thousands) For the Three Months Ended June 30, For the Six Months Ended June 30, End Market 2021 2020 2021 2020 Energy $ 24,651 $ 29,649 $ 49,810 $ 79,733 Industrial 36,900 30,463 71,220 67,594 Transportation 49,927 32,944 90,619 50,826 Total $ 111,478 $ 93,056 $ 211,649 $ 198,153 The following table summarizes net sales by geographic area: (in thousands) For the Three Months Ended June 30, For the Six Months Ended June 30, Geographic Area 2021 2020 2021 2020 North America $ 101,869 $ 81,979 $ 193,784 $ 176,499 Pacific Rim 5,420 6,295 10,948 12,749 Europe 1,958 2,578 3,568 5,235 Other 2,231 2,204 3,349 3,670 Total $ 111,478 $ 93,056 $ 211,649 $ 198,153 Contract Balances Most of the Company’s contracts are for a period of less than one year; however, certain long-term manufacturing and extended warranty contracts extend beyond one year. The timing of revenue recognition may differ from the time of invoicing to customers and these timing differences result in contract assets, or contract liabilities, on the Company’s Consolidated Balance Sheet. Contract assets include amounts related to the contractual right to consideration for completed performance when the right to consideration is conditional. The Company records contract liabilities when cash payments are received or due in advance of performance. Contract assets and contract liabilities are recognized at the contract level. (in thousands) As of June 30, 2021 As of December 31, 2020 Short-term contract assets (included in Prepaid expenses and other current assets ) $ 2,884 $ 547 Short-term contract liabilities (included in Other accrued liabilities ) (34,751) (47,960) Long-term contract liabilities (included in Noncurrent contract liabilities ) (2,640) (3,181) Net contract liabilities $ (34,507) $ (50,594) During the six months ended June 30, 2021 and 2020, the Company recognized $20.4 million and $4.8 million, respe ctively, of revenue upon satisfaction of performance obligations related to amounts that were included in the net contract liabilities balance as of December 31, 2020 and 2019, respectively . The increase in the contract asset during the six months ended June 30, 2021 is related to the Company’s right to consideration being conditional at the end of the period. The decrease in the contract liabilities during the six months ended June 30, 2021 was primarily related to revenue recognized upon satisfaction of performance obligations related to 6.0L engines that were previously prepaid by a customer under a long-term supply agreement. Remaining Performance Obligations For performance obligations that extend beyond one year, the Company had $33.5 million of remaining performance obligations as of June 30, 2021 primarily related to a long-term manufacturing contract with a customer and extended warranties. The Company expects to recognize revenue related to these remaining performance obligations of approximately $30.5 million in the remainder of 2021, $0.8 million in 2022, $0.9 million in 2023, $0.9 million in 2024, $0.4 million in 2025 and less than $0.1 million in 2026 and beyond. |
Weichai Transactions
Weichai Transactions | 6 Months Ended |
Jun. 30, 2021 | |
Equity [Abstract] | |
Weichai Transactions | Weichai Transactions Weichai Shareholder’s Loan Agreements In December 2020, the Company entered into the Shareholder’s Loan Agreement with Weichai. The Shareholder’s Loan Agreement was amended and restated in March 2021. On July 14, 2021, the Company entered into the Second Shareholder’s Loan Agreement with Weichai. See additional discussion of these debt agreements in Note 6. Debt. Weichai Collaboration Arrangement and Related Party Transactions The Company and Weichai executed a strategic collaboration agreement (the “Collaboration Agreement”) in March 2017, in order to achieve their respective strategic objectives and enhance the strategic cooperation alliance to share experiences, expertise and resources. Among other things, the Collaboration Agreement established a joint steering committee, permitted Weichai to second a limited number of certain technical, marketing, sales, procurement and finance personnel to work at the Company and established several collaborations related to stationary natural-gas applications and Weichai diesel engines. The Collaboration Agreement provided for the steering committee to create various sub-committees with operating roles and otherwise governs the treatment of intellectual property of parties prior to the collaboration and the intellectual property developed during the collaboration. The Collaboration Agreement is set to expire in March 2023. The Company evaluates whether an arrangement is a collaborative arrangement at its inception based on the facts and circumstances specific to the arrangement. The Company also reevaluates whether an arrangement qualifies or continues to qualify as a collaborative arrangement whenever there is a change in either the roles of the participants or the participants’ exposure to significant risks and rewards dependent on the ultimate commercial success of the endeavor. For those collaborative arrangements where it is determined that the Company is the principal participant, costs incurred, and revenue generated from third parties are recorded on a gross basis in the financial statements. For the three and six months ended June 30, 2021 and 2020, the Company’s sales to Weichai were immaterial in all periods. Purchases of inventory from Weichai were $3.7 million and $6.7 million for the three and six months ended June 30, 2021, respectively. Purchases of inventory from Weichai were $7.1 million and $12.2 million for the three and six months ended June 30, 2020, respectively. As of June 30, 2021 and December 31, 2020, the Company had immaterial receivables from Weichai and outstanding payables to Weichai of $7.2 million and $4.0 million, respectively. Common and Treasury Stock The changes in shares of Common and Treasury Stock are as follows: (in thousands) Common Shares Issued Treasury Stock Shares Common Shares Outstanding Balance at December 31, 2020 23,117 225 22,892 Net shares issued for Stock awards — (2) 2 Balance as of June 30, 2021 23,117 223 22,894 |
Property, Plant and Equipment
Property, Plant and Equipment | 6 Months Ended |
Jun. 30, 2021 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment by type were as follows: (in thousands) As of June 30, 2021 As of December 31, 2020 Property, Plant and Equipment Leasehold improvements $ 6,669 $ 6,725 Machinery and equipment 43,619 43,030 Construction in progress 1,852 1,670 Total property, plant and equipment, at cost 52,140 51,425 Accumulated depreciation (32,978) (31,244) Property, plant and equipment, net $ 19,162 $ 20,181 |
Goodwill and Other Intangibles
Goodwill and Other Intangibles | 6 Months Ended |
Jun. 30, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangibles | Goodwill and Other Intangibles Goodwill The carrying amount of goodwill at both June 30, 2021 and December 31, 2020 was $29.8 million. Accumulated impairment losses at both June 30, 2021 and December 31, 2020 were $11.6 million. Other Intangible Assets Components of intangible assets are as follows: (in thousands) As of June 30, 2021 Gross Carrying Value Accumulated Amortization Net Book Value Customer relationships $ 34,940 $ (26,316) $ 8,624 Developed technology 700 (664) 36 Trade names and trademarks 1,700 (1,308) 392 Total $ 37,340 $ (28,288) $ 9,052 (in thousands) As of December 31, 2020 Gross Carrying Value Accumulated Amortization Net Book Value Customer relationships $ 34,940 $ (25,117) $ 9,823 Developed technology 700 (650) 50 Trade names and trademarks 1,700 (1,254) 446 Total $ 37,340 $ (27,021) $ 10,319 |
Debt
Debt | 6 Months Ended |
Jun. 30, 2021 | |
Debt Disclosure [Abstract] | |
Debt | Debt The Company’s outstanding debt consisted of the following: (in thousands) As of June 30, 2021 As of December 31, 2020 Short-term financing: Revolving credit facility * $ 130,000 $ 130,000 Long-term debt: Finance leases and other debt 1,047 1,091 Total long-term debt and finance leases 1,047 1,091 Less: Current maturities of long-term debt and finance leases 304 310 Long-term debt $ 743 $ 781 * Unamortized financing costs and deferred fees on the revolving credit facility are not presented in the above table as they are classified in Prepaid expenses and other current assets on the Consolidated Balance Sheet. Unamortized debt issuance costs, were $1.4 million and $1.1 million as of June 30, 2021 and December 31, 2020, respectively. Credit Agreement and Shareholders’ Loan Agreement On March 26, 2021, the Company entered into the Amended and Restated Uncommitted Revolving Credit Agreement with Standard Chartered. The Amended and Restated Uncommitted Revolving Credit Agreement allows the Company to borrow up to $130.0 million (all of which has been fully borrowed as of June 30, 2021), is uncommitted, and matures on March 25, 2022. Borrowings under the Amended and Restated Uncommitted Revolving Credit Agreement shall bear interest at either the alternate base rate or LIBOR plus 2.70%. In addition, the Company paid fees of $1.9 million related to the Amended and Restated Uncommitted Revolving Credit Agreement, which were deferred and are being amortized over the term of the Amended and Restated Uncommitted Revolving Credit Agreement. The Amended and Restated Uncommitted Revolving Credit Agreement is secured by substantially all of the Company’s assets and includes financial covenants related to the Company’s financial performance for the second, third, and fourth quarters of 2021. There were no financial covenants applicable to the first quarter of 2021. The Amended and Restated Uncommitted Revolving Credit Agreement gives Standard Chartered the right to demand payment of any and all of the outstanding borrowings and other amounts owed under the Amended and Restated Uncommitted Revolving Credit Agreement at any point in time prior to the maturity date at Standard Chartered’s discretion. Furthermore, the Amended and Restated Uncommitted Revolving Credit Agreement grants Standard Chartered a power of attorney (POA) to submit a borrowing request to Weichai under the amended Shareholder’s Loan Agreement (see discussion below) if the Company does not submit a borrowing request to Weichai within five b usiness days of receiving a request from Standard Chartered to submit said borrowing request. In connection with the Amended and Restated Uncommitted Revolving Credit Agreement, the Company entered into the First Amended and Restated Shareholder’s Loan Agreement with Weichai. The First Amended and Restated Shareholder’s Loan Agreement provides the Company with a $130.0 million secured subordinated loan facility that expires on April 25, 2022. Under the First Amended and Restated Shareholder’s Loan Agreement, Weichai is obligated to advance funds solely for purposes of repaying outstanding borrowings under the Amended and Restated Uncommitted Revolving Credit Agreement if the Company is unable to repay such borrowings. Any potential borrowings under the First Amended and Restated Shareholder’s Loan Agreement would bear interest at LIBOR plus 4.50% per annum. As discussed above, the Amended and Restated Uncommitted Revolving Credit Agreement includes financial covenants which were effective for the Company beginning with the three months ended June 30, 2021 and each of the third and fourth quarters of 2021. The financial covenants include an interest coverage ratio and a minimum EBITDA threshold as further defined in the Amended and Restated Credit Agreement. For the three months ended June 30, 2021, the Company did not meet the defined minimum interest coverage nor EBITDA requirements. A breach of the financial covenants under the Amended and Restated Uncommitted Revolving Credit Agreement constitutes an event of default which, if not cured or waived, could result in the obligations under the Amended and Restated Uncommitted Revolving Credit Agreement being accelerated. The Company is currently in discussion with Standard Chartered in connection with the financial covenant breaches. On July 14, 2021, the Company entered into an additional Shareholder’s Loan Agreement (the “Second Shareholder’s Loan Agreement”) with Weichai. The Second Shareholder’s Loan Agreement provides the Company with a $25 million uncommitted facility that is subordinated to the Amended and Restated Uncommitted Revolving Credit Agreement and any borrowing requests made under the Second Shareholder’s Loan Agreement are subject to Weichai’s discretionary approval. Borrowings under the Second Shareholder’s Loan Agreement bear interest at LIBOR plus 4.50% and can be used for general corporate purposes, except for certain legal expenditures which require additional approval from Weichai. The Second Sha reholder’s Loan Agreement expires on May 20, 2022 with any outstanding principal and accrued interest due upon maturity. As of August 11, 2021, the Company had $15.0 million outstanding under the Second Shareholder’s Loan Agreement. See Note 1. Summary of Significant Accounting Policies and Other Information for further discussion of t |
Leases
Leases | 6 Months Ended |
Jun. 30, 2021 | |
Leases [Abstract] | |
Leases | Leases Leases The Company has obligations under lease arrangements primarily for facilities, equipment and vehicles. These leases have original lease periods expiring between August 2021 and August 2034. For the three and six months ended June 30, 2021, the Company recorded lease expense of $1.4 million and $3.0 million within Cost of sales , $0.1 million and $0.2 million within Research, development, and engineering expenses , less than $0.1 million within Selling, general and administrative expenses and less than $0.1 million within Interest expense in the Consolidated Statements of Operations, respectively. For the three and six months ended June 30, 2020, the Company recorded lease expense of $1.6 million and $3.4 million within Cost of sales , $0.1 million and $0.2 million within Research, development and engineering expenses , $0.1 million and $0.2 million within Selling, general and administrative expenses and less than $0.1 million within Interest expense in the Consolidated Statements of Operations, respectively. The following table summarizes the components of lease expense: (in thousands) Three Months Ended June 30, For the Six Months Ended June 30, 2021 2020 2021 2020 Operating lease cost $ 1,225 $ 1,368 $ 2,467 $ 2,747 Finance lease cost Amortization of right-of-use (“ROU”) asset 52 52 104 104 Interest expense 9 12 19 25 Short-term lease cost 130 108 232 217 Variable lease cost 176 374 514 797 Total lease cost $ 1,592 $ 1,914 $ 3,336 $ 3,890 The following table presents supplemental cash flow information related to leases: (in thousands) For the Six Months Ended June 30, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows paid for operating leases $ 2,498 $ 2,734 Operating cash flows paid for interest portion of finance leases 19 25 Financing cash flows paid for principal portion of finance leases 104 96 Right-of-use assets obtained in exchange for lease obligations Operating leases 9 299 Finance leases — — As of June 30, 2021 and December 31, 2020, the weighted-average remaining lease term was 6.0 years and 6.2 years for operating leases and 3.5 years and 3.8 years for finance leases, respectively. The weighted-average discount rate was 7.1% for operating leases as of both June 30, 2021 and December 31, 2020 and 6.7% for finance leases as of both June 30, 2021 and December 31, 2020. The following table presents supplemental balance sheet information related to leases: (in thousands) June 30, 2021 December 31, 2020 Operating lease ROU assets, net 1 $ 15,259 $ 17,104 Operating lease liabilities, current 2 3,826 3,793 Operating lease liabilities, non-current 3 12,245 14,156 Total operating lease liabilities $ 16,071 $ 17,949 Finance lease ROU assets, net 1 $ 460 $ 568 Finance lease liabilities, current 2 192 200 Finance lease liabilities, non-current 3 314 413 Total finance lease liabilities $ 506 $ 613 1. Included in Other noncurrent assets for operating leases and Property, plant and equipment, net for finance leases on the Consolidated Balance Sheets. 2. Included in Other accrued liabilities for operating leases and Current maturities of long-term debt for finance leases on the Consolidated Balance Sheets. 3. Included in Other noncurrent liabilities for operating leases and Long-term debt, net of current maturities for finance leases on the Consolidated Balance Sheets. The following table presents maturity analysis of lease liabilities as of June 30, 2021: (in thousands) Operating Leases Finance Leases Six months ending December 31, 2021 $ 2,450 $ 123 Year ending December 31, 2022 4,788 177 Year ending December 31, 2023 3,283 103 Year ending December 31, 2024 1,813 84 Year ending December 31, 2025 1,851 72 Thereafter 5,554 9 Total undiscounted lease payments 19,739 568 Less: imputed interest 3,668 62 Total lease liabilities $ 16,071 $ 506 |
Leases | Leases Leases The Company has obligations under lease arrangements primarily for facilities, equipment and vehicles. These leases have original lease periods expiring between August 2021 and August 2034. For the three and six months ended June 30, 2021, the Company recorded lease expense of $1.4 million and $3.0 million within Cost of sales , $0.1 million and $0.2 million within Research, development, and engineering expenses , less than $0.1 million within Selling, general and administrative expenses and less than $0.1 million within Interest expense in the Consolidated Statements of Operations, respectively. For the three and six months ended June 30, 2020, the Company recorded lease expense of $1.6 million and $3.4 million within Cost of sales , $0.1 million and $0.2 million within Research, development and engineering expenses , $0.1 million and $0.2 million within Selling, general and administrative expenses and less than $0.1 million within Interest expense in the Consolidated Statements of Operations, respectively. The following table summarizes the components of lease expense: (in thousands) Three Months Ended June 30, For the Six Months Ended June 30, 2021 2020 2021 2020 Operating lease cost $ 1,225 $ 1,368 $ 2,467 $ 2,747 Finance lease cost Amortization of right-of-use (“ROU”) asset 52 52 104 104 Interest expense 9 12 19 25 Short-term lease cost 130 108 232 217 Variable lease cost 176 374 514 797 Total lease cost $ 1,592 $ 1,914 $ 3,336 $ 3,890 The following table presents supplemental cash flow information related to leases: (in thousands) For the Six Months Ended June 30, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows paid for operating leases $ 2,498 $ 2,734 Operating cash flows paid for interest portion of finance leases 19 25 Financing cash flows paid for principal portion of finance leases 104 96 Right-of-use assets obtained in exchange for lease obligations Operating leases 9 299 Finance leases — — As of June 30, 2021 and December 31, 2020, the weighted-average remaining lease term was 6.0 years and 6.2 years for operating leases and 3.5 years and 3.8 years for finance leases, respectively. The weighted-average discount rate was 7.1% for operating leases as of both June 30, 2021 and December 31, 2020 and 6.7% for finance leases as of both June 30, 2021 and December 31, 2020. The following table presents supplemental balance sheet information related to leases: (in thousands) June 30, 2021 December 31, 2020 Operating lease ROU assets, net 1 $ 15,259 $ 17,104 Operating lease liabilities, current 2 3,826 3,793 Operating lease liabilities, non-current 3 12,245 14,156 Total operating lease liabilities $ 16,071 $ 17,949 Finance lease ROU assets, net 1 $ 460 $ 568 Finance lease liabilities, current 2 192 200 Finance lease liabilities, non-current 3 314 413 Total finance lease liabilities $ 506 $ 613 1. Included in Other noncurrent assets for operating leases and Property, plant and equipment, net for finance leases on the Consolidated Balance Sheets. 2. Included in Other accrued liabilities for operating leases and Current maturities of long-term debt for finance leases on the Consolidated Balance Sheets. 3. Included in Other noncurrent liabilities for operating leases and Long-term debt, net of current maturities for finance leases on the Consolidated Balance Sheets. The following table presents maturity analysis of lease liabilities as of June 30, 2021: (in thousands) Operating Leases Finance Leases Six months ending December 31, 2021 $ 2,450 $ 123 Year ending December 31, 2022 4,788 177 Year ending December 31, 2023 3,283 103 Year ending December 31, 2024 1,813 84 Year ending December 31, 2025 1,851 72 Thereafter 5,554 9 Total undiscounted lease payments 19,739 568 Less: imputed interest 3,668 62 Total lease liabilities $ 16,071 $ 506 |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 6 Months Ended |
Jun. 30, 2021 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | Fair Value of Financial InstrumentsFor assets and liabilities measured at fair value on a recurring and nonrecurring basis, a three-level hierarchy of measurements based upon observable and unobservable inputs is used to arrive at fair value. Observable inputs are developed based on market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about valuation based on the best information available in the circumstances. Depending on the inputs, the Company classifies each fair-value measurement as follows: • Level 1 – based on quoted prices in active markets for identical assets or liabilities; • Level 2 – based on other significant observable inputs for the assets or liabilities through corroborations with market data at the measurement date; and • Level 3 – based on significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date. Financial Instruments Measured at Carrying Value Current Assets Cash and cash equivalents are measured at carrying value, which approximates fair value because of the short-term maturities of these instruments. Debt The Company measured its revolving credit facility at original carrying value. Unamortized financing costs and deferred fees on the revolving credit facility are classified in Prepaid expenses and other current assets on the Consolidated Balance Sheet. The fair value of the revolving credit facility approximated carrying value, as it consisted of short-term variable rate loans. (in thousands) As of June 30, 2021 Carrying Value Fair Value Level 1 Level 2 Level 3 Revolving credit facility $ 130,000 $ — $ 130,000 $ — (in thousands) As of December 31, 2020 Carrying Value Fair Value Level 1 Level 2 Level 3 Revolving credit facility $ 130,000 $ — $ 130,000 $ — |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Legal Contingencies The legal matters discussed below and others could result in losses, including damages, fines, civil penalties and criminal charges, which could be substantial. The Company records accruals for these contingencies to the extent the Company concludes that a loss is both probable and reasonably estimable. Regarding the matters disclosed below, unless otherwise disclosed, the Company has determined that liabilities associated with these legal matters are reasonably possible; however, unless otherwise stated, the possible loss or range of possible loss cannot be reasonably estimated. Given the nature of the litigation and investigations and the complexities involved, the Company is unable to reasonably estimate a possible loss for all such matters until the Company knows, among other factors, the following: • what claims, if any, will survive dispositive motion practice; • the extent of the claims, particularly when damages are not specified or are indeterminate; • how the discovery process will affect the litigation; • the settlement posture of the other parties to the litigation; and • any other factors that may have a material effect on the litigation or investigation. However, the Company could incur judgments, enter into settlements or revise its expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on the Company’s results of operations in the period in which the amounts are accrued and/or liquidity in the period in which the amounts are paid. Securities and Exchange Commission and United States Attorney’s Office for the Northern District of Illinois Investigations In September 2020, the Company entered into agreements with the SEC and the USAO to resolve the investigations into the Company’s past revenue recognition practices. As further discussed in Part II. Item 8. Financial Statements and Supplementary Data ., Note 10. Commitments and Contingencies of the Company’s 2020 Form 10-K, under the settled administrative order with the SEC, the Company committed to remediate the deficiencies in its internal control over financial reporting that constituted material weaknesses identified in its 2017 Form 10-K filed in May 2019 by April 30, 2021 unless an extension was provided by the SEC. On April 12, 2021, the SEC granted the Company’s request for an extension of time until March 31, 2022 in which to comply with the requirements of the administrative order to remediate the remaining outstanding material weaknesses. Jerome Treadwell v. the Company In October 2018, a putative class-action complaint was filed against the Company and NOVAtime Technology, Inc. (“NOVAtime”) in the Circuit Court of Cook County, Illinois. In December 2018, NOVAtime removed the case to the U.S. District Court for the Northern District of Illinois, Eastern Division under the Class Action Fairness Act. Plaintiff has since voluntarily dismissed NOVAtime from the lawsuit without prejudice and filed an amended complaint in April 2019. The operative, amended complaint asserts violations of the Illinois Biometric Information Privacy Act (“BIPA”) in connection with employees’ use of the time clock to clock in and clock out using a finger scan and seeks statutory damages, attorneys’ fees, and injunctive and equitable relief. An aggrieved party under BIPA may recover (i) $1,000 per violation if the Company is found to have negligently violated BIPA or (ii) $5,000 per violation if the Company is found to have intentionally or recklessly violated BIPA plus reasonable attorneys’ fees. In May 2019, the Company filed its motion to dismiss the plaintiff’s amended complaint. In December 2019, the court denied the Company’s motion to dismiss. In January 2020, the Company moved for reconsideration of the court’s order denying the motion to dismiss, or in the alternative, to stay the case pending the Illinois Appellate Court’s ruling in McDonald v. Symphony Healthcare on a legal question that would be potentially dispositive in this matter. In February 2020, the court denied the Company’s motion for reconsideration, but required the parties to submit additional briefing on the Company’s motion to stay. In April 2020, the court granted the Company’s motion to stay and stayed the case pending the Illinois Appellate Court’s ruling in McDonald v. Symphony Healthcare . In October 2020, after the McDonald ruling, the court granted the parties’ joint request to continue the stay of the case f or 60 days. The court also ordered the parties to schedule a settlement conference with the Magistrate Judge in May 2021 which went forward without a settlement being reached. The stay remains in place pending further guidance from the Court. As of June 30, 2021 and December 31, 2020, the Company had recorded an estimated liabili ty of $0.3 million related t o the potential settlement of this matter. Mast Powertrain v. the Company In February 2020, the Company received a demand for arbitration from Mast Powertrain, LLC (“Mast”) pursuant to a development agreement entered into in November 2011 (the “Development Agreement”). Mast claimed that it is owed more than $9.0 million in past royalties and other damages for products sold by the Company pursuant to the Development Agreement. The Company disputed Mast’s damages, denied that any royalties are owed to Mast, denied any liability, and counterclaimed for overpayment on invoices paid to Mast. Mast subsequently clarified its claim for past royalties owed to be approximately $4.5 million. In July 2021, the Company reached a settlement with Mast to resolve past claims for royalties owed for $1.5 million which the Company had previously recorded within Selling, general and administrative expenses in the Statement of Operations for the year-ended December 31, 2020 . As of June 30, 2021 and December 31, 2020, the Company had recognized a liability of $1.5 million within Other accrued liabilities on the Consolidated Balance Sheet related to the settlement of this matter. In addition, the Company entered into an agreement with Mast under which Mast will provide various technical services. Indemnification Agreements Under the Company’s bylaws and certain indemnification agreements, the Company has obligations to indemnify current and former officers and directors and certain current and former employees. As a result of cumulative legal fees and settlements previously paid, the Company fully exhausted its primary directors’ and officers’ insurance coverage of $30 million during the first quarter of 2020. Additional expenses currently expected to be incurred and that will occur in the future and/or liabilities that may be imposed in connection with actions against certain of the Company’s past directors and officers and certain former employees who are entitled to indemnification will be funded by the Company with its existing cash resources. The Company accrues for such costs as incurred within Selling, general and administrative expenses in the Company’s Consolidated Statements of Operations. For the three and six months ended June 30, 2021, the Company incurred $10.5 million and $13.6 million, respectively, of costs related to these indemnification obligations and $2.4 million and $3.8 million for the three and six months ended June 30, 2020. Included in the total indemnification obligations incurred for the three and six months ended June 30, 2021 are costs of $5.9 million and $7.9 million, respectively, that the Company incurred on behalf of Gary Winemaster, former Chairman of the Board and former Chief Executive Officer and President, who is also a related party. For the three and six ended June 30, 2020 these costs were $1.1 million and $2.3 million, respectively. At this time, the Company is not able to estimate the impact of these obligations due to the actions ongoing; however, the impact has been and may continue to be material to the Company’s results of operations, financial condition, and cash flows. In June 2020, the Company entered into a new directors’ and officers’ liability insurance policy, which was renewed in June 2021. The insurance policy includes standard exclusions including for any ongoing or pending litigation such as the previously disclosed investigations by the SEC and USAO. Other Commitments At June 30, 2021, the Company had six outstanding letters of credit totaling $2.3 million. The letters of credit primarily serve as collateral for the Company for certain facility leases and insurance policies. As discussed in Note 1. Summary of Significant Accounting Policies and Other Information , the Company had restricted cash of $2.9 million as of June 30, 2021 related to these letters of credit. The Company has arrangements with certain suppliers that require it to purchase minimum volumes or be subject to monetary penalties. As discussed in Note 1. Summary of Significant Accounting Policies and Other Information , oil prices have increased from their lows reached in April 202 0. However, rig counts in the U.S. have been slower to return as levels at the end of June 2021 remain below the average for the first half of 2020 and significantly below the full year average for 2019. This has impacted the demand for the Company’s products sold into the oil and gas market. Based on current and forecasted demand of the Company’s product s, current and forecasted oil prices for 2021 and the significant lead time for the Company to order and acquire certain materials, the Company does not expect to meet the minimum purchase commitment for 2021 related to one of its supply agreements and recorded an expense of $1.0 million within Cost of sales |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes On a quarterly basis, the Company computes an estimated annual effective tax rate considering ordinary income and related income tax expense. Ordinary income refers to income (loss) before income tax expense excluding significant, unusual or infrequently occurring items. The tax effect of an unusual or infrequently occurring item is recorded in the interim period in which it occurs. The Company has assessed the need to maintain a valuation allowance for deferred tax assets based on an assessment of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income. Appropriate consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. In assessing the realizability of the Company’s deferred tax assets, the Company considered whether it is more likely than not that some or all of the deferred tax assets will be realized through the generation of future taxable income. In making this determination, the Company assessed all of the evidence available at the time, including recent earnings, forecasted income projections and historical performance. The Company determined that the negative evidence outweighed the objectively verifiable positive evidence and continues to maintain a full valuation allowance against deferred tax assets. The effective tax rate for the three and six months ended June 30, 2021 was 3.3% and 0.4%, compared to an effective tax rate for the three and six months ended June 30, 2020 of (2.8)% and 16.2%. The effective tax rates for all periods were significantly different than the applicable U.S. statutory tax rate primarily due to the Company’s full valuation allowance recorded against the deferred tax assets related to the Company’s net losses and adjustments for the impact of the Coronavirus Aid, Relief, and Economic Security Act |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Jun. 30, 2021 | |
Equity [Abstract] | |
Stockholders' Equity | Weichai Transactions Weichai Shareholder’s Loan Agreements In December 2020, the Company entered into the Shareholder’s Loan Agreement with Weichai. The Shareholder’s Loan Agreement was amended and restated in March 2021. On July 14, 2021, the Company entered into the Second Shareholder’s Loan Agreement with Weichai. See additional discussion of these debt agreements in Note 6. Debt. Weichai Collaboration Arrangement and Related Party Transactions The Company and Weichai executed a strategic collaboration agreement (the “Collaboration Agreement”) in March 2017, in order to achieve their respective strategic objectives and enhance the strategic cooperation alliance to share experiences, expertise and resources. Among other things, the Collaboration Agreement established a joint steering committee, permitted Weichai to second a limited number of certain technical, marketing, sales, procurement and finance personnel to work at the Company and established several collaborations related to stationary natural-gas applications and Weichai diesel engines. The Collaboration Agreement provided for the steering committee to create various sub-committees with operating roles and otherwise governs the treatment of intellectual property of parties prior to the collaboration and the intellectual property developed during the collaboration. The Collaboration Agreement is set to expire in March 2023. The Company evaluates whether an arrangement is a collaborative arrangement at its inception based on the facts and circumstances specific to the arrangement. The Company also reevaluates whether an arrangement qualifies or continues to qualify as a collaborative arrangement whenever there is a change in either the roles of the participants or the participants’ exposure to significant risks and rewards dependent on the ultimate commercial success of the endeavor. For those collaborative arrangements where it is determined that the Company is the principal participant, costs incurred, and revenue generated from third parties are recorded on a gross basis in the financial statements. For the three and six months ended June 30, 2021 and 2020, the Company’s sales to Weichai were immaterial in all periods. Purchases of inventory from Weichai were $3.7 million and $6.7 million for the three and six months ended June 30, 2021, respectively. Purchases of inventory from Weichai were $7.1 million and $12.2 million for the three and six months ended June 30, 2020, respectively. As of June 30, 2021 and December 31, 2020, the Company had immaterial receivables from Weichai and outstanding payables to Weichai of $7.2 million and $4.0 million, respectively. Common and Treasury Stock The changes in shares of Common and Treasury Stock are as follows: (in thousands) Common Shares Issued Treasury Stock Shares Common Shares Outstanding Balance at December 31, 2020 23,117 225 22,892 Net shares issued for Stock awards — (2) 2 Balance as of June 30, 2021 23,117 223 22,894 |
Loss Per Share
Loss Per Share | 6 Months Ended |
Jun. 30, 2021 | |
Earnings Per Share [Abstract] | |
Loss Per Share | Loss Per Share The Company computes basic earnings (loss) per share by dividing net income (loss) by the weighted-average common shares outstanding during the year. Diluted earnings (loss) per share is calculated to give effect to all potentially dilutive common shares that were outstanding during the year. Weighted-average diluted common shares outstanding primarily reflect the additional shares that would be issued upon the assumed exercise of stock options and the assumed vesting of unvested share awards. The treasury stock method has been used to compute diluted loss per share for the three and six months ended June 30, 2021 and 2020. The Company issued Stock Appreciation Rights (“SARs”) and Restricted Stock Awards (“RSAs”), all of which have been evaluated for their potentially dilutive effect under the treasury stock method. See Note 13. Stock-Based Compensation in the Company’s 2020 Annual Report for additional information on the SARs and the RSAs. The computations of basic and diluted loss per share are as follows: (in thousands, except per share basis) For the Three Months Ended June 30, For the Six Months Ended June 30, 2021 2020 2021 2020 Numerator: Net loss $ (15,571) $ (17,742) $ (33,721) $ (18,454) Denominator: Shares used in computing net loss per share: Weighted-average common shares outstanding – basic 22,893 22,858 22,893 22,858 Effect of dilutive securities — — — — Weighted-average common shares outstanding – diluted 22,893 22,858 22,893 22,858 Loss per common share: Loss per share of common stock – basic $ (0.68) $ (0.78) $ (1.47) $ (0.81) Loss per share of common stock – diluted $ (0.68) $ (0.78) $ (1.47) $ (0.81) The aggregate number of shares excluded from the diluted loss per share calculations, because they would have been anti-dilutive, were 0.2 million shares for each of the three and six months ended June 30, 2021 and 2020. For the three and six months ended June 30, 2021 and 2020, SARs and RSAs were not included in the diluted loss per share calculations as they would have been anti-dilutive (1) due to the losses reported in the Consolidated Statements of Operations or (2) the Company’s average stock price was less than the exercise price of the SARs or the grant price of the RSAs. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2021 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions Weichai Transactions See Note 3. Weichai Transactions for information regarding the Amended and Restated Shareholder’s Loan Agreement, the Second Shareholder’s Loan Agreement and the Collaboration Agreement with Weichai . Transactions with Joint Ventures MAT-PSI Holdings, LLC In December 2012, the Company and MAT Holdings, Inc. (“MAT”) entered into an agreement to create MAT-PSI Holdings, LLC (“MAT-PSI”), which was intended to be a holding company of its 100% Chinese wholly-owned foreign entity, referred to as Green Power. The Company invested $0.9 million for its 50% share of MAT-PSI, which was formed to manufacture, assemble and supply natural gas, gas and alternative-fueled power systems to Chinese and Asian forklift customers. The venture established a production facility in Dalian and also sourced base engines from a local Chinese factory. As MAT-PSI was not profitable, the venture was closed in 2017; however, the Company had previously been in dispute with Green Power related to the wind up of the joint venture and outstanding receivables. On March 29, 2021, the Company executed a settlement agreement with MAT and Green Power which resolved the dispute. The final settlement agreement did not have a material impact on the Company’s consolidated financial statements. Doosan-PSI, LLC In 2015, the Company and Doosan Infracore Co., Ltd. (“Doosan”), a subsidiary of Doosan Group, entered into an agreement to form Doosan-PSI, LLC. The Company invested $1.0 million to acquire 50% of the venture, which was formed to operate in the field of developing, designing, testing, manufacturing, assembling, branding, marketing, selling, distributing and providing support for industrial gas engines and all components and materials required for assembly of the gas engines to the global power generation market outside of North America and South Korea. In the fourth quarter of 2019, Doosan and the Company agreed to wind down and dissolve the joint venture. In the second quarter of 2021, the Company received a cash distribution from the joint venture of $2.2 million as a result of the final wind down and dissolution of the joint venture. Joint Venture Operating Results The Company’s investments in joint ventures are accounted for under the equity method of accounting. Expense from this investment for both the three and six months ended June 30, 2021 was less than $0.1 million. Income from this investment was less than $0.1 million and $0.3 million for the three and six months ended June 30, 2020, respectively. The joint venture operating results are presented in Other income, net in the Company’s Consolidated Statements of Operations. Other Related Party Transactions See Note 9. Commitments and Contingencies for information regarding the Company’s indemnification obligations related to certain former directors and officers of the Company. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies and Other Information (Policies) | 6 Months Ended |
Jun. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Consolidation | The consolidated financial statements include the accounts of Power Solutions International, Inc. and its wholly-owned subsidiaries and majority-owned subsidiaries in which the Company exercises control. The foregoing financial information was prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and rules and regulations of the SEC for interim financial reporting. All intercompany balances and transactions have been eliminated in consolidation. |
Basis of Presentation | Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying consolidated financial statements should be read in conjunction with, and have been prepared in accordance with accounting policies reflected in, the consolidated financial statements and related notes, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (“the 2020 Annual Report”). The Company’s significant accounting policies are described in the aforementioned 2020 Annual Report. Included below are certain updates to those policies. The accompanying interim financial information is unaudited; however, the Company believes the financial information reflects all adjustments (consisting of items of a normal recurring nature) necessary for a fair presentation of financial position, results of operations and cash flows in conformity with U.S. GAAP. Operating results for interim periods are not necessarily indicative of annual operating results. |
Use of Estimates | The preparation of consolidated financial statements in conformity with U.S. GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions include the valuation of allowances for uncollectible receivables, inventory reserves, warranty reserves, evaluation of goodwill, other intangibles, property, plant and equipment for impairment, and determination of useful lives of long-lived assets. Actual results could materially differ from those estimates. |
Research and Development | R&D expenses are expensed when incurred. R&D expenses consist primarily of wages, materials, testing and consulting related to the development of new engines, parts and applications. |
Restricted Cash | The Company is required to maintain minimum levels of cash collateral to support the letters of credit. The cash collateral is held in a separate bank account which the Company is restricted from accessing. |
Inventories | The Company’s inventories consist primarily of engines and parts. Engines are valued at the lower of cost plus estimated freight-in or net realizable value. Parts are valued at the lower of cost or net realizable value. Net realizable value approximates replacement cost. Cost is principally determined using the first-in, first-out method and includes material, labor and manufacturing overhead. It is the Company’s policy to review inventories on a continuing basis for obsolete, excess and slow-moving items and to record valuation adjustments for such items in order to eliminate non-recoverable costs from inventory. Valuation adjustments are recorded in an inventory reserve account and reduce the cost basis of the inventory in the period in which the reduced valuation is determined. Inventory reserves are established based on quantities on hand, usage and sales history, customer orders, projected demand and utilization within a current or future power system. Specific analysis of individual items or groups of items is performed based on these same criteria, as well as on changes in market conditions or any other identified conditions. |
Warranty Costs | The Company offers a standard limited warranty on the workmanship of its products that in most cases covers defects for a defined period. Warranties for certified emission products are mandated by the U.S. Environmental Protection Agency (the “EPA”) and/or the California Air Resources Board (the “CARB”) and are longer than the Company’s standard warranty on certain emission related products. The Company’s products also carry limited warranties from suppliers. The Company’s warranties generally apply to engines fully manufactured by the Company and to the modifications the Company makes to supplier base products. Costs related to supplier warranty claims are generally borne by the supplier and passed through to the end customer. Warranty estimates are based on historical experience and represent the projected cost associated with the product. A liability and related expense are recognized at the time products are sold. The Company adjusts estimates when it is determined that |
Recently Issued Accounting Pronouncements - Adopted and Not Yet Adopted | Recently Issued Accounting Pronouncements – Adopted In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting , which provided optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendment allows entities to elect not to apply certain modification accounting requirements to contracts affected by reference rate reform if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. The guidance was effective upon issuance and expires after December 31, 2022. There was no impact on the Company’s Consolidated Balance Sheets, Statements of Operations, Statements of Cash Flows or Statement of Stockholders’ Equity as a result of this guidance. The Company continues to monitor contracts potentially impacted by reference rate reform, including the Company’s debt agreements, and will continue to assess the potential impacts of this guidance as reference rates are updated. Recently Issued Accounting Pronouncements – Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which applies primarily to the Company’s accounts receivable impairment loss allowances. The guidance provides a revised model whereby the current expected credit losses are used to compute impairment of financial instruments. The new model requires evaluation of historical experience and various current and expected factors, which may affect the estimated amount of losses and requires determination of whether the affected financial instruments should be grouped in units of account. The guidance, as originally issued, was effective for fiscal years beginning after December 15, 2019. In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates , which deferred the effective dates of these standards for certain entities. Based on the guidance, the effective date of ASU 2016-13 is deferred for the Company until fiscal year 2023. The Company currently plans to adopt the guidance on January 1, 2023 when it becomes effective. The Company is continuing to assess the impact of the standard on its consolidated financial statements. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies and Other Information (Tables) | 6 Months Ended |
Jun. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedules of Concentration of Risk, by Risk Factor | The following table presents customers individually accounting for more than 10% of the Company’s net sales: For the Three Months Ended June 30, For the Six Months Ended June 30, 2021 2020 2021 2020 Customer A 17 % 15 % 16 % 15 % Customer B 11 % 10 % ** 10 % Customer C 21 % ** 21 % ** The following table presents customers individually accounting for more than 10% of the Company’s accounts receivable: As of June 30, 2021 As of December 31, 2020 Customer A 27 % 16 % Customer B 16 % ** Customer D ** 22 % The following table presents suppliers individually accounting for more than 10% of the Company’s purchases: For the Three Months Ended June 30, For the Six Months Ended June 30, 2021 2020 2021 2020 Supplier A 15 % ** 14 % ** Supplier B 12 % 30 % ** 20 % ** Less than 10% of the total |
Schedule of Inventory, Current | Inventories consisted of the following: (in thousands) Inventories As of June 30, 2021 As of December 31, 2020 Raw materials * $ 103,979 $ 89,684 Work in process 7,464 2,482 Finished goods 21,406 19,375 Total inventories 132,849 111,541 Inventory allowance (3,587) (3,328) Inventories, net $ 129,262 $ 108,213 * As of June 30, 2021 and December 31, 2020, raw materials included $23.6 million and $36.6 million, respectively, of 6.0L engines that were purchased for a customer under a long-term supply agreement. See Note 2. Revenue for additional information related to contract liabilities and remaining performance obligations related to these engines. Activity in the Company’s inventory allowance was as follows: (in thousands) For the Six Months Ended June 30, Inventory Allowance 2021 2020 Balance at beginning of period $ 3,328 $ 2,964 Charged to expense 459 897 Write-offs (200) (819) Balance at end of period $ 3,587 $ 3,042 |
Schedule of Other Accrued Liabilities | Other accrued liabilities consisted of the following: (in thousands) Other Accrued Liabilities As of June 30, 2021 As of December 31, 2020 Accrued product warranty $ 14,782 $ 14,928 Litigation reserves * 4,288 3,128 Contract liabilities 34,751 47,960 Accrued compensation and benefits 3,247 3,124 Operating lease liabilities 3,826 3,793 Accrued interest expense 72 895 Other 6,510 3,791 Total $ 67,476 $ 77,619 * As of June 30, 2021 and December 31, 2020 liti gation reserves related to various ongoing legal matters including associated legal fees as well as accrued indemnification costs related to former officers and employees of the Company. See Note 9. Commitments and Contingencies for additional information. |
Schedule of Accrued Product Warranty | Accrued product warranty activities are presented below: (in thousands) For the Six Months Ended June 30, Accrued Product Warranty 2021 2020 Balance at beginning of period $ 31,542 $ 25,501 Current year provision * 8,770 7,418 Changes in estimates for preexisting warranties ** 780 9,925 Payments made during the period (11,767) (10,373) Balance at end of period 29,325 32,471 Less: current portion 14,782 16,660 Noncurrent accrued product warranty $ 14,543 $ 15,811 * Warranty costs, net of supplier recoveries, were $7.5 million and $15.5 million for the six months ended June 30, 2021 and 2020, respectively. Supplier recoveries were $2.5 million and $1.9 million for the six months ended June 30, 2021 and 2020, respectively. |
Revenue (Tables)
Revenue (Tables) | 6 Months Ended |
Jun. 30, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Revenue from External Customers by Geographic Areas | The following table summarizes net sales by end market: (in thousands) For the Three Months Ended June 30, For the Six Months Ended June 30, End Market 2021 2020 2021 2020 Energy $ 24,651 $ 29,649 $ 49,810 $ 79,733 Industrial 36,900 30,463 71,220 67,594 Transportation 49,927 32,944 90,619 50,826 Total $ 111,478 $ 93,056 $ 211,649 $ 198,153 The following table summarizes net sales by geographic area: (in thousands) For the Three Months Ended June 30, For the Six Months Ended June 30, Geographic Area 2021 2020 2021 2020 North America $ 101,869 $ 81,979 $ 193,784 $ 176,499 Pacific Rim 5,420 6,295 10,948 12,749 Europe 1,958 2,578 3,568 5,235 Other 2,231 2,204 3,349 3,670 Total $ 111,478 $ 93,056 $ 211,649 $ 198,153 |
Schedule of Contract Balances | (in thousands) As of June 30, 2021 As of December 31, 2020 Short-term contract assets (included in Prepaid expenses and other current assets ) $ 2,884 $ 547 Short-term contract liabilities (included in Other accrued liabilities ) (34,751) (47,960) Long-term contract liabilities (included in Noncurrent contract liabilities ) (2,640) (3,181) Net contract liabilities $ (34,507) $ (50,594) |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 6 Months Ended |
Jun. 30, 2021 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property, plant and equipment by type were as follows: (in thousands) As of June 30, 2021 As of December 31, 2020 Property, Plant and Equipment Leasehold improvements $ 6,669 $ 6,725 Machinery and equipment 43,619 43,030 Construction in progress 1,852 1,670 Total property, plant and equipment, at cost 52,140 51,425 Accumulated depreciation (32,978) (31,244) Property, plant and equipment, net $ 19,162 $ 20,181 |
Goodwill and Other Intangibles
Goodwill and Other Intangibles (Tables) | 6 Months Ended |
Jun. 30, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Finite-Lived Intangible Assets | Components of intangible assets are as follows: (in thousands) As of June 30, 2021 Gross Carrying Value Accumulated Amortization Net Book Value Customer relationships $ 34,940 $ (26,316) $ 8,624 Developed technology 700 (664) 36 Trade names and trademarks 1,700 (1,308) 392 Total $ 37,340 $ (28,288) $ 9,052 (in thousands) As of December 31, 2020 Gross Carrying Value Accumulated Amortization Net Book Value Customer relationships $ 34,940 $ (25,117) $ 9,823 Developed technology 700 (650) 50 Trade names and trademarks 1,700 (1,254) 446 Total $ 37,340 $ (27,021) $ 10,319 |
Debt (Tables)
Debt (Tables) | 6 Months Ended |
Jun. 30, 2021 | |
Debt Disclosure [Abstract] | |
Schedule of Debt | The Company’s outstanding debt consisted of the following: (in thousands) As of June 30, 2021 As of December 31, 2020 Short-term financing: Revolving credit facility * $ 130,000 $ 130,000 Long-term debt: Finance leases and other debt 1,047 1,091 Total long-term debt and finance leases 1,047 1,091 Less: Current maturities of long-term debt and finance leases 304 310 Long-term debt $ 743 $ 781 * Unamortized financing costs and deferred fees on the revolving credit facility are not presented in the above table as they are classified in Prepaid expenses and other current assets on the Consolidated Balance Sheet. Unamortized debt issuance costs, were $1.4 million and $1.1 million as of June 30, 2021 and December 31, 2020, respectively. |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jun. 30, 2021 | |
Leases [Abstract] | |
Components of Lease Expense and Cash Flow Information | The following table summarizes the components of lease expense: (in thousands) Three Months Ended June 30, For the Six Months Ended June 30, 2021 2020 2021 2020 Operating lease cost $ 1,225 $ 1,368 $ 2,467 $ 2,747 Finance lease cost Amortization of right-of-use (“ROU”) asset 52 52 104 104 Interest expense 9 12 19 25 Short-term lease cost 130 108 232 217 Variable lease cost 176 374 514 797 Total lease cost $ 1,592 $ 1,914 $ 3,336 $ 3,890 The following table presents supplemental cash flow information related to leases: (in thousands) For the Six Months Ended June 30, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows paid for operating leases $ 2,498 $ 2,734 Operating cash flows paid for interest portion of finance leases 19 25 Financing cash flows paid for principal portion of finance leases 104 96 Right-of-use assets obtained in exchange for lease obligations Operating leases 9 299 Finance leases — — |
Supplemental Balance Sheet Information | The following table presents supplemental balance sheet information related to leases: (in thousands) June 30, 2021 December 31, 2020 Operating lease ROU assets, net 1 $ 15,259 $ 17,104 Operating lease liabilities, current 2 3,826 3,793 Operating lease liabilities, non-current 3 12,245 14,156 Total operating lease liabilities $ 16,071 $ 17,949 Finance lease ROU assets, net 1 $ 460 $ 568 Finance lease liabilities, current 2 192 200 Finance lease liabilities, non-current 3 314 413 Total finance lease liabilities $ 506 $ 613 1. Included in Other noncurrent assets for operating leases and Property, plant and equipment, net for finance leases on the Consolidated Balance Sheets. 2. Included in Other accrued liabilities for operating leases and Current maturities of long-term debt for finance leases on the Consolidated Balance Sheets. 3. Included in Other noncurrent liabilities for operating leases and Long-term debt, net of current maturities for finance leases on the Consolidated Balance Sheets. |
Maturity Analysis of Operating Lease Liabilities | The following table presents maturity analysis of lease liabilities as of June 30, 2021: (in thousands) Operating Leases Finance Leases Six months ending December 31, 2021 $ 2,450 $ 123 Year ending December 31, 2022 4,788 177 Year ending December 31, 2023 3,283 103 Year ending December 31, 2024 1,813 84 Year ending December 31, 2025 1,851 72 Thereafter 5,554 9 Total undiscounted lease payments 19,739 568 Less: imputed interest 3,668 62 Total lease liabilities $ 16,071 $ 506 |
Maturity Analysis of Financing Lease Liabilities | The following table presents maturity analysis of lease liabilities as of June 30, 2021: (in thousands) Operating Leases Finance Leases Six months ending December 31, 2021 $ 2,450 $ 123 Year ending December 31, 2022 4,788 177 Year ending December 31, 2023 3,283 103 Year ending December 31, 2024 1,813 84 Year ending December 31, 2025 1,851 72 Thereafter 5,554 9 Total undiscounted lease payments 19,739 568 Less: imputed interest 3,668 62 Total lease liabilities $ 16,071 $ 506 |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 6 Months Ended |
Jun. 30, 2021 | |
Fair Value Disclosures [Abstract] | |
Schedule of Fair Value Measurements at Reporting Date | (in thousands) As of June 30, 2021 Carrying Value Fair Value Level 1 Level 2 Level 3 Revolving credit facility $ 130,000 $ — $ 130,000 $ — (in thousands) As of December 31, 2020 Carrying Value Fair Value Level 1 Level 2 Level 3 Revolving credit facility $ 130,000 $ — $ 130,000 $ — |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 6 Months Ended |
Jun. 30, 2021 | |
Equity [Abstract] | |
Schedule of Common Stock Outstanding Roll Forward | The changes in shares of Common and Treasury Stock are as follows: (in thousands) Common Shares Issued Treasury Stock Shares Common Shares Outstanding Balance at December 31, 2020 23,117 225 22,892 Net shares issued for Stock awards — (2) 2 Balance as of June 30, 2021 23,117 223 22,894 |
Loss Per Share (Tables)
Loss Per Share (Tables) | 6 Months Ended |
Jun. 30, 2021 | |
Earnings Per Share [Abstract] | |
Schedule of Basic and Diluted Loss Per Share | The computations of basic and diluted loss per share are as follows: (in thousands, except per share basis) For the Three Months Ended June 30, For the Six Months Ended June 30, 2021 2020 2021 2020 Numerator: Net loss $ (15,571) $ (17,742) $ (33,721) $ (18,454) Denominator: Shares used in computing net loss per share: Weighted-average common shares outstanding – basic 22,893 22,858 22,893 22,858 Effect of dilutive securities — — — — Weighted-average common shares outstanding – diluted 22,893 22,858 22,893 22,858 Loss per common share: Loss per share of common stock – basic $ (0.68) $ (0.78) $ (1.47) $ (0.81) Loss per share of common stock – diluted $ (0.68) $ (0.78) $ (1.47) $ (0.81) |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies and Other Information - Narrative (Details) | Jul. 15, 2021USD ($) | Mar. 26, 2021USD ($)day | Mar. 31, 2017USD ($) | Jun. 30, 2021USD ($)boardMemberday$ / shares | Jun. 30, 2020USD ($) | Jun. 30, 2021USD ($)boardMembersegmentday$ / shares | Jun. 30, 2020USD ($) | Aug. 11, 2021USD ($) | Dec. 31, 2020USD ($)$ / shares |
Concentration Risk [Line Items] | |||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | ||||||
Number of board members | boardMember | 4 | 4 | |||||||
Number of operating segments | segment | 1 | ||||||||
Research and development and engineering expenses | $ 5,800,000 | $ 5,600,000 | $ 11,800,000 | $ 12,000,000 | |||||
Outstanding letters of credit amount | 2,300,000 | 2,300,000 | $ 2,300,000 | ||||||
Restricted cash | 2,949,000 | $ 3,449,000 | 2,949,000 | $ 3,449,000 | $ 3,299,000 | ||||
Share Purchase Agreement, Weichai Transaction | |||||||||
Concentration Risk [Line Items] | |||||||||
Consideration received on transaction | $ 60,000,000 | ||||||||
Revolving Credit Facility | Standard Chartered Bank Credit Agreement | |||||||||
Concentration Risk [Line Items] | |||||||||
Borrowing amount | $ 130,000,000 | $ 130,000,000 | $ 130,000,000 | ||||||
Revolving Credit Facility | Standard Chartered Bank Credit Agreement | LIBOR | |||||||||
Concentration Risk [Line Items] | |||||||||
Basis spread on variable rate | 2.70% | ||||||||
Revolving Credit Facility | Shareholder's Loan Agreement, Weichai | |||||||||
Concentration Risk [Line Items] | |||||||||
Number of days to submit borrowing request | day | 5 | 5 | 5 | ||||||
Revolving Credit Facility | Shareholder's Loan Agreement, Weichai | LIBOR | |||||||||
Concentration Risk [Line Items] | |||||||||
Basis spread on variable rate | 4.50% | ||||||||
Revolving Credit Facility | Shareholder's Loan Agreement, Weichai | Subsequent Event | |||||||||
Concentration Risk [Line Items] | |||||||||
Borrowing amount | $ 25,000,000 | ||||||||
Remaining outstanding balance | $ 15,000,000 | ||||||||
Revolving Credit Facility | Shareholder's Loan Agreement, Weichai | Subsequent Event | LIBOR | |||||||||
Concentration Risk [Line Items] | |||||||||
Basis spread on variable rate | 4.50% |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies and Other Information - Schedules of Concentration of Risk, by Risk Factor (Details) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | |
Supplier Concentration Risk | Supplier A | Purchases | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 15.00% | 14.00% | |||
Supplier Concentration Risk | Supplier B | Purchases | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 12.00% | 30.00% | 20.00% | ||
Customer A | Customer Concentration Risk | Net Sales | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 17.00% | 15.00% | 16.00% | 15.00% | |
Customer A | Customer Concentration Risk | Accounts Receivable | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 27.00% | 16.00% | |||
Customer B | Customer Concentration Risk | Net Sales | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 11.00% | 10.00% | 10.00% | ||
Customer B | Customer Concentration Risk | Accounts Receivable | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 16.00% | ||||
Customer C | Customer Concentration Risk | Net Sales | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 21.00% | 21.00% | |||
Customer C | Customer Concentration Risk | Accounts Receivable | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 22.00% |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies and Other Information - Schedule of Inventory, Current (Details) - USD ($) $ in Thousands | 6 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | |
Inventories | |||
Raw materials * | $ 103,979 | $ 89,684 | |
Work in process | 7,464 | 2,482 | |
Finished goods | 21,406 | 19,375 | |
Total inventories | 132,849 | 111,541 | |
Inventory allowance | (3,587) | (3,328) | |
Inventories, net | 129,262 | 108,213 | |
Inventory Allowance | |||
Balance at beginning of period | 3,328 | $ 2,964 | |
Charged to expense | 459 | 897 | |
Write-offs | (200) | (819) | |
Balance at end of period | 3,587 | $ 3,042 | |
6.0L Engine Supply Commitment | |||
Inventories | |||
Raw materials * | $ 23,600 | $ 36,600 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies and Other Information - Schedule of Other Accrued Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 | Jun. 30, 2020 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Accrued product warranty | $ 14,782 | $ 14,928 | $ 16,660 |
Litigation reserves | 4,288 | 3,128 | |
Contract liabilities | 34,751 | 47,960 | |
Accrued compensation and benefits | 3,247 | 3,124 | |
Operating lease liabilities | 3,826 | 3,793 | |
Accrued interest expense | 72 | 895 | |
Other | 6,510 | 3,791 | |
Total | $ 67,476 | $ 77,619 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies and Other Information - Schedule of Product Warranty Liability (Details) - USD ($) $ / shares in Units, $ in Thousands | 6 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | |
Accrued Product Warranty | |||
Balance at beginning of period | $ 31,542 | $ 25,501 | |
Current year provision | 8,770 | 7,418 | |
Changes in estimates for preexisting warranties | 780 | 9,925 | |
Payments made during the period | (11,767) | (10,373) | |
Balance at end of period | 29,325 | 32,471 | |
Less: current portion | 14,782 | 16,660 | $ 14,928 |
Noncurrent accrued product warranty | 14,543 | 15,811 | |
Warranty costs, net of supplier recoveries | 7,500 | 15,500 | |
Supplier recoveries | $ 2,500 | $ 1,900 | |
Diluted share (in dollars per share) | $ 0.03 | $ 0.43 |
Revenue - Revenue from External
Revenue - Revenue from External Customers by Geographic Areas (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | |
Disaggregation of Revenue [Line Items] | ||||
Total | $ 111,478 | $ 93,056 | $ 211,649 | $ 198,153 |
North America | ||||
Disaggregation of Revenue [Line Items] | ||||
Total | 101,869 | 81,979 | 193,784 | 176,499 |
Pacific Rim | ||||
Disaggregation of Revenue [Line Items] | ||||
Total | 5,420 | 6,295 | 10,948 | 12,749 |
Europe | ||||
Disaggregation of Revenue [Line Items] | ||||
Total | 1,958 | 2,578 | 3,568 | 5,235 |
Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Total | 2,231 | 2,204 | 3,349 | 3,670 |
Energy | ||||
Disaggregation of Revenue [Line Items] | ||||
Total | 24,651 | 29,649 | 49,810 | 79,733 |
Industrial | ||||
Disaggregation of Revenue [Line Items] | ||||
Total | 36,900 | 30,463 | 71,220 | 67,594 |
Transportation | ||||
Disaggregation of Revenue [Line Items] | ||||
Total | $ 49,927 | $ 32,944 | $ 90,619 | $ 50,826 |
Revenue - Schedule of Contract
Revenue - Schedule of Contract Balances (Details) - USD ($) $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 |
Revenue from Contract with Customer [Abstract] | ||
Short-term contract assets (included in Prepaid expenses and other current assets) | $ 2,884 | $ 547 |
Short-term contract liabilities (included in Other accrued liabilities) | (34,751) | (47,960) |
Long-term contract liabilities (included in Noncurrent contract liabilities) | (2,640) | (3,181) |
Net contract liabilities | $ (34,507) | $ (50,594) |
Revenue - Narrative (Details)
Revenue - Narrative (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Revenue recognized | $ 20.4 | $ 4.8 |
Revenue, remaining performance obligation, amount | 33.5 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-07-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Revenue, remaining performance obligation, amount | $ 30.5 | |
Revenue, remaining performance obligation, period | 6 months | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Revenue, remaining performance obligation, amount | $ 0.8 | |
Revenue, remaining performance obligation, period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Revenue, remaining performance obligation, amount | $ 0.9 | |
Revenue, remaining performance obligation, period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Revenue, remaining performance obligation, amount | $ 0.9 | |
Revenue, remaining performance obligation, period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Revenue, remaining performance obligation, amount | $ 0.4 | |
Revenue, remaining performance obligation, period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Revenue, remaining performance obligation, amount | $ 0.1 | |
Revenue, remaining performance obligation, period |
Weichai Transactions (Details)
Weichai Transactions (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | |
Equity [Abstract] | |||||
Purchased inventory | $ 3.7 | $ 7.1 | $ 6.7 | $ 12.2 | |
Outstanding payables | $ 7.2 | $ 7.2 | $ 4 |
Property, Plant and Equipment_2
Property, Plant and Equipment (Details) - USD ($) $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 |
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment, at cost | $ 52,140 | $ 51,425 |
Accumulated depreciation | (32,978) | (31,244) |
Property, plant and equipment, net | 19,162 | 20,181 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment, at cost | 6,669 | 6,725 |
Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment, at cost | 43,619 | 43,030 |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment, at cost | $ 1,852 | $ 1,670 |
Goodwill and Other Intangible_2
Goodwill and Other Intangibles - Narrative (Details) - USD ($) $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill | $ 29,835 | $ 29,835 |
Accumulated impairment losses | $ 11,600 | $ 11,600 |
Goodwill and Other Intangible_3
Goodwill and Other Intangibles - Schedule of Finite-Lived Intangible Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Value | $ 37,340 | $ 37,340 |
Accumulated Amortization | (28,288) | (27,021) |
Net Book Value | 9,052 | 10,319 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Value | 34,940 | 34,940 |
Accumulated Amortization | (26,316) | (25,117) |
Net Book Value | 8,624 | 9,823 |
Developed technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Value | 700 | 700 |
Accumulated Amortization | (664) | (650) |
Net Book Value | 36 | 50 |
Trade names and trademarks | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Value | 1,700 | 1,700 |
Accumulated Amortization | (1,308) | (1,254) |
Net Book Value | $ 392 | $ 446 |
Debt - Schedule of Debt (Detail
Debt - Schedule of Debt (Details) - USD ($) $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 |
Long-term debt: | ||
Finance leases and other debt | $ 1,047 | $ 1,091 |
Total long-term debt and finance leases | 1,047 | 1,091 |
Less: Current maturities of long-term debt and finance leases | 304 | 310 |
Long-term debt | 743 | 781 |
Revolving credit facility * | ||
Short-term financing: | ||
Revolving credit facility * | 130,000 | 130,000 |
Long-term debt: | ||
Debt issuance costs | $ 1,400 | $ 1,100 |
Debt - Narrative (Details)
Debt - Narrative (Details) - Revolving Credit Facility | Jul. 15, 2021USD ($) | Mar. 26, 2021USD ($)day | Aug. 11, 2021USD ($) | Jun. 30, 2021USD ($)day |
Standard Chartered Bank Credit Agreement | ||||
Debt Instrument [Line Items] | ||||
Borrowing amount | $ 130,000,000 | $ 130,000,000 | ||
Debt issuance costs, line of credit | $ 1,900,000 | |||
Standard Chartered Bank Credit Agreement | LIBOR | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate | 2.70% | |||
Shareholder's Loan Agreement, Weichai | ||||
Debt Instrument [Line Items] | ||||
Number of days to submit borrowing request | day | 5 | 5 | ||
Shareholder's Loan Agreement, Weichai | Subsequent Event | ||||
Debt Instrument [Line Items] | ||||
Borrowing amount | $ 25,000,000 | |||
Remaining outstanding balance | $ 15,000,000 | |||
Shareholder's Loan Agreement, Weichai | LIBOR | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate | 4.50% | |||
Shareholder's Loan Agreement, Weichai | LIBOR | Subsequent Event | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate | 4.50% |
Leases - Narrative (Details)
Leases - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Lease expense | $ 1,592 | $ 1,914 | $ 3,336 | $ 3,890 | |
Weighted-average remaining lease term, operating leases | 6 years | 6 years | 6 years 2 months 12 days | ||
Weighted-average remaining lease term, financing leases | 3 years 6 months | 3 years 6 months | 3 years 9 months 18 days | ||
Weighted-average discount rate for operating leases | 7.10% | 7.10% | 7.10% | ||
Weighted-average discount rate for financing leases | 6.70% | 6.70% | 6.70% | ||
Cost of Sales | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Lease expense | $ 1,400 | 1,600 | $ 3,000 | 3,400 | |
Research, Development and Engineering Expense | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Lease expense | 100 | 100 | 200 | 200 | |
Selling, General and Administrative Expenses | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Lease expense | 100 | 100 | 100 | 200 | |
Interest Expense | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Lease expense | $ 100 | $ 100 | $ 100 | $ 100 |
Leases - Components of Lease Ex
Leases - Components of Lease Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | |
Leases [Abstract] | ||||
Operating lease cost | $ 1,225 | $ 1,368 | $ 2,467 | $ 2,747 |
Finance lease cost | ||||
Amortization of right-of-use (“ROU”) asset | 52 | 52 | 104 | 104 |
Interest expense | 9 | 12 | 19 | 25 |
Short-term lease cost | 130 | 108 | 232 | 217 |
Variable lease cost | 176 | 374 | 514 | 797 |
Total lease cost | $ 1,592 | $ 1,914 | $ 3,336 | $ 3,890 |
Leases - Supplemental Cash Flow
Leases - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Cash paid for amounts included in the measurement of lease liabilities | ||
Operating cash flows paid for operating leases | $ 2,498 | $ 2,734 |
Operating cash flows paid for interest portion of finance leases | 19 | 25 |
Financing cash flows paid for principal portion of finance leases | 104 | 96 |
Right-of-use assets obtained in exchange for lease obligations | ||
Operating leases | 9 | 299 |
Finance leases | $ 0 | $ 0 |
Leases - Supplemental Balance S
Leases - Supplemental Balance Sheet Information (Details) - USD ($) $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 |
Operating Leases | ||
Operating lease ROU assets, net | $ 15,259 | $ 17,104 |
Operating lease liabilities, current | 3,826 | 3,793 |
Operating lease liabilities, non-current | 12,245 | 14,156 |
Total operating lease liabilities | 16,071 | 17,949 |
Finance Leases | ||
Finance lease ROU assets, net | 460 | 568 |
Finance lease liabilities, current | 192 | 200 |
Finance lease liabilities, non-current | 314 | 413 |
Total finance lease liabilities | $ 506 | $ 613 |
Operating ROU assets, net, statement of financial position, extensible list | Other noncurrent assets | Other noncurrent assets |
Finance ROU assets, net, statement of financial position, extensible list | Property, plant and equipment, net | Property, plant and equipment, net |
Operating lease liabilities, current, statement of financial position, extensible list | Other accrued liabilities | Other accrued liabilities |
Finance lease liabilities, current, statement of financial position, extensible list | Current maturities of long-term debt | Current maturities of long-term debt |
Operating lease liabilities, noncurrent, statement of financial position, extensible list | Other noncurrent liabilities | Other noncurrent liabilities |
Finance lease liabilities, noncurrent, statement of financial position, extensible list | Long-term debt, net of current maturities | Long-term debt, net of current maturities |
Leases - Maturity Analysis of L
Leases - Maturity Analysis of Lease Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 |
Operating Leases | ||
Six months ending December 31, 2021 | $ 2,450 | |
Year ending December 31, 2022 | 4,788 | |
Year ending December 31, 2023 | 3,283 | |
Year ending December 31, 2024 | 1,813 | |
Year ending December 31, 2025 | 1,851 | |
Thereafter | 5,554 | |
Total undiscounted lease payments | 19,739 | |
Less: imputed interest | 3,668 | |
Total lease liabilities | 16,071 | $ 17,949 |
Finance Leases | ||
Six months ending December 31, 2021 | 123 | |
Year ending December 31, 2022 | 177 | |
Year ending December 31, 2023 | 103 | |
Year ending December 31, 2024 | 84 | |
Year ending December 31, 2025 | 72 | |
Thereafter | 9 | |
Total undiscounted lease payments | 568 | |
Less: imputed interest | 62 | |
Total lease liabilities | $ 506 | $ 613 |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments (Details) - Revolving credit facility * - USD ($) $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Carrying Value | $ 130,000 | $ 130,000 |
Fair Value, Measurements, Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Carrying Value | 130,000 | 130,000 |
Fair Value, Measurements, Recurring | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Revolving credit facility | 0 | 0 |
Fair Value, Measurements, Recurring | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Revolving credit facility | 130,000 | 130,000 |
Fair Value, Measurements, Recurring | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Revolving credit facility | $ 0 | $ 0 |
Commitments and Contingencies (
Commitments and Contingencies (Details) | Mar. 31, 2020USD ($) | Oct. 31, 2020 | Feb. 29, 2020USD ($) | Oct. 31, 2018USD ($) | Jun. 30, 2021USD ($) | Jun. 30, 2020USD ($) | Mar. 31, 2020USD ($) | Jun. 30, 2021USD ($)letterOfCredit | Jun. 30, 2020USD ($) | Dec. 31, 2020USD ($) |
Loss Contingencies [Line Items] | ||||||||||
Accrued penalties | $ 4,288,000 | $ 4,288,000 | $ 3,128,000 | |||||||
Insurance coverage | $ 30,000,000 | |||||||||
Number of outstanding letters of credit | letterOfCredit | 6 | |||||||||
Outstanding letters of credit amount | 2,300,000 | $ 2,300,000 | 2,300,000 | |||||||
Restricted cash | 2,949,000 | $ 3,449,000 | 2,949,000 | $ 3,449,000 | 3,299,000 | |||||
Cost of sales | 98,284,000 | 89,279,000 | 191,385,000 | 176,662,000 | ||||||
Supply Commitment Fee, COVID-19 | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Cost of sales | 1,000,000 | |||||||||
Indemnification Agreement | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Related costs | 10,500,000 | 2,400,000 | 13,600,000 | 3,800,000 | ||||||
Indemnification Agreement | Former Chairman, CEO, And President | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Related costs | 5,900,000 | $ 1,100,000 | 7,900,000 | $ 2,300,000 | ||||||
Jerome Treadwell v. The Company | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Recovery per negligent violation | $ 1,000 | |||||||||
Recovery per intentional or reckless violation | $ 5,000 | |||||||||
Stay case term | 60 days | |||||||||
Estimated liability | 300,000 | 300,000 | 300,000 | |||||||
Mast Powertrain v. The Company | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Damages sought | $ 4,500,000 | $ 9,000,000 | ||||||||
Accrued penalties | $ 1,500,000 | $ 1,500,000 | $ 1,500,000 |
Income Taxes (Details)
Income Taxes (Details) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | |
Income Tax Disclosure [Abstract] | ||||
Effective income tax rate | 3.30% | (2.80%) | 0.40% | 16.20% |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - shares shares in Thousands | 6 Months Ended | |
Jun. 30, 2021 | Dec. 31, 2020 | |
Common Shares Issued | ||
Common Shares Issued (in shares) | 23,117 | 23,117 |
Treasury Stock Shares | ||
Balance at beginning of period (in shares) | 225 | |
Net shares issued for Stock awards (in shares) | (2) | |
Balance at end of period (in shares) | 223 | |
Common Shares Outstanding | ||
Balance at beginning of period (in shares) | 22,892 | |
Net shares issued for Stock awards (in shares) | 2 | |
Balance at end of period (in shares) | 22,894 |
Loss Per Share (Details)
Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | |
Numerator: | ||||
Net loss | $ (15,571) | $ (17,742) | $ (33,721) | $ (18,454) |
Shares used in computing net loss per share: | ||||
Weighted average basic shares outstanding - basic (in shares) | 22,893,000 | 22,858,000 | 22,893,000 | 22,858,000 |
Effect of dilutive securities (in shares) | 0 | 0 | 0 | 0 |
Weighted average common shares outstanding - diluted (in shares) | 22,893,000 | 22,858,000 | 22,893,000 | 22,858,000 |
Loss per common share: | ||||
Loss per share of common stock — basic (in dollars per share) | $ (0.68) | $ (0.78) | $ (1.47) | $ (0.81) |
Loss per share of common stock — diluted (in dollars per share) | $ (0.68) | $ (0.78) | $ (1.47) | $ (0.81) |
Antidilutive shares (in shares) | 200,000 | 200,000 | 200,000 | 200,000 |
SARs | ||||
Loss per common share: | ||||
Antidilutive shares (in shares) | 0 | 0 | 0 | 0 |
Restricted Stock Awards | ||||
Loss per common share: | ||||
Antidilutive shares (in shares) | 0 | 0 | 0 | 0 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Dec. 31, 2012 | Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2015 | |
Related Party Transaction [Line Items] | ||||||
Cash distribution from joint venture | $ 2,181 | $ 0 | ||||
Other expense (income), net | $ 1 | $ (44) | 1 | (255) | ||
Corporate Joint Venture | ||||||
Related Party Transaction [Line Items] | ||||||
Other expense (income), net | 100 | $ (100) | $ 100 | $ (300) | ||
Corporate Joint Venture | Green Power | ||||||
Related Party Transaction [Line Items] | ||||||
Investment amount with related party | $ 900 | |||||
Percent of noncontrolling interest | 50.00% | |||||
Corporate Joint Venture | Green Power | MAT-PSI Holdings, LLC | ||||||
Related Party Transaction [Line Items] | ||||||
Ownership interest | 100.00% | |||||
Corporate Joint Venture | Doosan-PSI, LLC | ||||||
Related Party Transaction [Line Items] | ||||||
Investment amount with related party | $ 1,000 | |||||
Percent of noncontrolling interest | 50.00% | |||||
Cash distribution from joint venture | $ 2,200 |