Exhibit 99.1
STR HOLDINGS, INC. REPORTS SECOND QUARTER 2012 RESULTS
ENFIELD, Conn. — Aug 8, 2012 — STR Holdings, Inc. (NYSE: STRI) today announced its financial results for the second quarter and six months ended June 30, 2012.
Second Quarter 2012 Financial Summary:
· Net sales of $25.1 million
· Diluted GAAP loss per share from continuing operations of $(0.06); Diluted non-GAAP EPS from continuing operations of $0.00
· Operating cash flow from continuing operations of $8.1 million; Free cash flow from continuing operations of $4.3 million
· Finished the quarter with $72.2 million in cash and no debt
Financial Results
Net sales for the quarter ended June 30, 2012 were $25.1 million. This represents a decline of 19.2% sequentially and 65.0% from Q2 2011. On a sequential basis, the decline was driven primarily by a 16.6% volume decline and a 2.0% decline in average selling price (ASP). On a year-over-year basis, volume declined 53.0% and ASP declined 20.7%.
“The sequential volume decline was mainly the result of softer-than-anticipated demand from our customer base,” said Robert S. Yorgensen, STR’s President and Chief Executive Officer. “While we are not yet aligned with certain Chinese module manufacturers who are driving global volume growth, our continuing cost-reduction efforts enabled us to achieve the low end of our second quarter non-GAAP EPS guidance range.”
Gross profit for the second quarter of 2012 was $1.6 million, or 6.3% of sales, compared to $2.0 million, or 6.4% of sales, from the first quarter of 2012. The Company was able to maintain gross margin despite lower sales as a result of its successful cost-reduction efforts, which decreased our cost per square meter sold by 3% sequentially.
Selling, general and administrative expenses for the second quarter of 2012 were $6.7 million compared to $7.7 million in the first quarter of 2012. The reduction was driven by lower labor and incentive compensation expense and lower professional fees. Together, these more than offset increased R&D and selling expenses.
During the second quarter, the Company reversed previously recorded bad debt expense as a result of cash collections of long-outstanding receivables from certain customers in Asia.
section of the Company’s website at www.strholdings.com. Investors accessing the live call by phone from the U.S. should dial 866-383-7989 and enter passcode: 53838118. Those calling from outside the U.S. should dial 617-597-5328 and use the same passcode. A telephone replay will be available approximately two hours after the call concludes through Wednesday, August 15, 2012 by dialing 888-286-8010 from the U.S., or 617-801-6888 from international locations, and entering passcode: 24636063. The webcast and presentation will be archived on the Company’s website for one year.
About STR Holdings, Inc.
STR Holdings, Inc. is a leading global provider of high quality, superior performance encapsulants to the photovoltaic module industry. Further information about STR Holdings, Inc. can be obtained via the Company’s website at www.strholdings.com.
Forward-Looking Statements
This press release and any oral statement made in respect of the information in this press release contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to inherent risks and uncertainties. These forward-looking statements present the Company’s current expectations and projections relating to its financial condition, results of operations, plans, objectives, future performance and business and are based on assumptions that the Company has made in light of its industry experience and perceptions of historical trends, current conditions, expected future developments and other factors management believes are appropriate under the circumstances. However, these forward-looking statements are not guarantees of future performance or financial or operating results. In addition to the risks and uncertainties discussed in this press release, the Company faces risks and uncertainties that include, but are not limited to, the following: (i) technological changes in the solar energy industry or the Company’s failure to develop and introduce or integrate new technologies could render its encapsulants uncompetitive or obsolete, particularly in China; (ii) excess capacity in the solar supply chain; (iii) its ability to increase its market share; (iv) demand for solar energy in general and solar modules in particular; (v) the timing and effects of the implementation of government incentives and policies for renewable energy, primarily in China and the United States; (vi) the effects of the announced reductions to solar incentives in Germany and Italy; (vii) the extent to which it may be required to write-off accounts receivable, inventory or intangible assets; (viii) product pricing pressures and other competitive factors; (ix) customer concentration in its business and its relationships with key customers; (x) its ability to protect its intellectual property; (xi) volatility in commodity costs, such as resin or paper used in its encapsulants, and its ability to successfully manage any increases in these commodity costs; (xii) its dependence on a limited number of third party suppliers for raw materials for its encapsulants and materials used in its processes; (xiii) operating new manufacturing facilities and increasing production capacity at existing facilities; (xiv) its reliance on vendors and potential supply chain disruptions, including those resulting from bankruptcy filings by customers or vendors; (xv) potential product performance matters and product liability; (xvi) the extent and duration of the current downturn in the global economy; (xvii) the impact negative credit markets may have on the Company or its customers or suppliers; (xviii) the impact of changes in foreign currency exchange rates on financial results, and the geographic distribution of revenues and earnings; (xix) maintaining sufficient liquidity in order to fund future profitable growth and long-term vitality; (xx)
Net loss from continuing operations for the second quarter of 2012 was $(2.4) million, or $(0.06) per diluted share. This compares to a net loss from continuing operations of $(82.1) million, or $(2.00) per diluted share, for the first quarter of 2012 and net earnings from continuing operations of $11.2 million, or $0.27 per diluted share, for the second quarter of 2011. The first quarter of 2012 was negatively impacted by a non-cash goodwill impairment of $82.5 million.
Non-GAAP net earnings from continuing operations for the second quarter of 2012, which excludes certain tax-effected adjustments (as disclosed following the non-GAAP reconciliation table at the end of this press release) was $0.0 million, or $0.00 per diluted share. This compares to non-GAAP net earnings from continuing operations of $2.9 million, or $0.07 per diluted share, for the first quarter of 2012 and non-GAAP net earnings from continuing operations of $12.0 million, or $0.28 per diluted share, for the second quarter of 2011.
The Company’s first quarter earnings include pretax income of $7.2 million from the settlement of its trade secret misappropriation case.
Balance Sheet and Liquidity
During the second quarter of 2012, the Company generated $8.1 million in operating cash flow from continuing operations, including improvements to working capital, mainly from reduced accounts receivable and raw material inventory. Free cash flow from continuing operations was $4.3 million. The Company finished the quarter with $72.2 million of cash and no debt.
“We continued to generate cash and strengthen our balance sheet despite challenging market conditions,” stated Barry A. Morris, STR’s Executive Vice President and Chief Financial Officer. “We believe our healthy balance sheet and continued focus on cost reduction position us well to pursue our strategic objectives.”
Guidance
The Company today provided guidance for the third quarter and updated its full-year 2012 guidance as follows:
Amounts in millions, except per share amounts
Quarter ending September 30, 2012 | | Low | | High | |
Net sales | | $ | 23.0 | | $ | 25.0 | |
Diluted non-GAAP EPS | | $ | (0.03 | ) | $ | 0.00 | |
| | | | | |
Year ending December 31, 2012 | | Low | | High | |
Net sales | | $ | 102.0 | | $ | 108.0 | |
Diluted non-GAAP EPS | | $ | 0.01 | | $ | 0.07 | |
Second Quarter Conference Call and Presentation
The Company will discuss its financial results and guidance in a conference call today at 4:30 p.m. ET. A live webcast of the conference call and presentation will be available through the Investor Relations
outcomes of litigation and regulatory actions; and (xxi) the other risks and uncertainties described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in subsequent periodic reports on Forms 10-K, 10-Q and 8-K. You are urged to carefully review and consider the disclosure found in the Company’s filings which are available on http://www.sec.gov or http://www.strholdings.com. Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove to be incorrect, actual results may vary materially from those projected in these forward-looking statements. The Company undertakes no obligation to publicly update any forward-looking statement contained in this release, whether as a result of new information, future developments or otherwise, except as may be required by law.
Contact:
STR Holdings, Inc.
Joseph C. Radziewicz
Controller and Principal Accounting Officer
+1 (860) 758-7325
joseph.radziewicz@strholdings.com
STR Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
All amounts in thousands except shares and per share amounts
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 2012 | | 2011 | | 2012 | | 2011 | |
| | (Unaudited) | | (Unaudited) | | (Unaudited) | | (Unaudited) | |
| | | | | | | | | |
Net sales | | $ | 25,119 | | $ | 71,677 | | $ | 56,202 | | $ | 139,655 | |
Cost of sales | | 23,534 | | 46,799 | | 52,617 | | 86,492 | |
| | | | | | | | | |
Gross profit | | 1,585 | | 24,878 | | 3,585 | | 53,163 | |
| | | | | | | | | |
Selling, general and administrative expenses | | 6,708 | | 7,406 | | 14,454 | | 14,828 | |
(Recovery) provision for bad debt expense | | (1,156 | ) | 802 | | 450 | | 1,041 | |
Goodwill impairment | | — | | — | | 82,524 | | — | |
| | | | | | | | | |
Operating (loss) income | | (3,967 | ) | 16,670 | | (93,843 | ) | 37,294 | |
| | | | | | | | | |
Other income (expense) | | 71 | | (263 | ) | 6,841 | | (279 | ) |
(Loss) earnings from continuing operations before income tax (benefit) expense | | (3,896 | ) | 16,407 | | (87,002 | ) | 37,015 | |
Income tax (benefit) expense from continuing operations | | (1,475 | ) | 5,233 | | (2,450 | ) | 11,783 | |
Net (loss) earnings from continuing operations | | $ | (2,421 | ) | $ | 11,174 | | $ | (84,552 | ) | $ | 25,232 | |
| | | | | | | | | |
Discontinued operations: | | | | | | | | | |
Loss from discontinued operations before income tax benefit | | — | | (1,985 | ) | — | | (6,543 | ) |
Income tax benefit from discontinued operations | | — | | (521 | ) | — | | (1,861 | ) |
Net loss from discontinued operations | | $ | — | | $ | (1,464 | ) | $ | — | | $ | (4,682 | ) |
| | | | | | | | | |
Net (loss) earnings | | $ | (2,421 | ) | $ | 9,710 | | $ | (84,552 | ) | $ | 20,550 | |
| | | | | | | | | |
GAAP net (loss) earnings per share: | | | | | | | | | |
Basic from continuing operations | | $ | (0.06 | ) | $ | 0.27 | | $ | (2.05 | ) | $ | 0.62 | |
Basic from discontinued operations | | — | | (0.03 | ) | — | | (0.12 | ) |
Total basic GAAP net (loss) earnings per share | | $ | (0.06 | ) | $ | 0.24 | | $ | (2.05 | ) | $ | 0.50 | |
| | | | | | | | | |
Diluted from continuing operations | | $ | (0.06 | ) | $ | 0.27 | | $ | (2.05 | ) | $ | 0.60 | |
Diluted from discontinued operations | | — | | (0.04 | ) | — | | (0.11 | ) |
Total diluted GAAP net (loss) earnings per share | | $ | (0.06 | ) | $ | 0.23 | | $ | (2.05 | ) | $ | 0.49 | |
| | | | | | | | | |
(1) Non-GAAP net earnings (loss) per share: | | | | | | | | | |
Basic from continuing operations | | $ | — | | $ | 0.29 | | $ | 0.07 | | $ | 0.66 | |
Basic from discontinued operations | | — | | (0.02 | ) | — | | (0.09 | ) |
Total basic non-GAAP net earnings per share | | $ | — | | $ | 0.27 | | $ | 0.07 | | $ | 0.57 | |
| | | | | | | | | |
Diluted from continuing operations | | $ | — | | $ | 0.28 | | $ | 0.07 | | $ | 0.64 | |
Diluted from discontinued operations | | — | | (0.01 | ) | — | | (0.08 | ) |
Total diluted non-GAAP net earnings per share | | $ | — | | $ | 0.27 | | $ | 0.07 | | $ | 0.56 | |
| | | | | | | | | |
Weighted-average common shares outstanding: | | | | | | | | | |
Basic shares outstanding GAAP | | 41,287,338 | | 40,882,026 | | 41,239,316 | | 40,821,482 | |
(2) Diluted shares outstanding GAAP | | 41,287,338 | | 42,012,274 | | 41,239,316 | | 42,129,184 | |
Stock options | | — | | — | | — | | — | |
Restricted common stock | | 284 | | — | | 130 | | — | |
(2) Diluted shares outstanding non-GAAP | | 41,287,622 | | 42,012,274 | | 41,239,446 | | 42,129,184 | |
(1) Please refer to the reconciliation of Non-GAAP measures included in this press release.
(2) Please refer to the reconciliation of diluted shares outstanding for non-GAAP net earnings per share included in this press release.
STR Holdings, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
All amounts in thousands
| | June 30, 2012 | | December 31, 2011 | |
| | (Unaudited) | | (Unaudited) | |
ASSETS | | | | | |
CURRENT ASSETS | | | | | |
Cash and cash equivalents | | $ | 72,191 | | $ | 58,794 | |
Accounts receivable, net | | 11,464 | | 14,535 | |
Inventories | | 15,039 | | 28,809 | |
Other current assets | | 8,599 | | 8,168 | |
Total current assets | | 107,293 | | 110,306 | |
| | | | | |
Property, plant and equipment, net | | 68,660 | | 63,474 | |
Intangible assets, net | | 139,696 | | 143,912 | |
Goodwill | | — | | 82,524 | |
Other noncurrent assets | | 1,940 | | 1,875 | |
Total assets | | $ | 317,589 | | $ | 402,091 | |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | |
CURRENT LIABILITIES | | | | | |
Accounts payable | | $ | 7,396 | | $ | 4,647 | |
Accrued liabilities | | 8,486 | | 9,445 | |
Income taxes payable | | 5,046 | | 6,735 | |
Total current liabilities | | 20,928 | | 20,827 | |
| | | | | |
Deferred tax liabilities | | 46,165 | | 48,585 | |
Other long-term liabilities | | 2,121 | | 2,174 | |
Total liabilities | | 69,214 | | 71,586 | |
| | | | | |
STOCKHOLDERS’ EQUITY | | | | | |
Stockholders’ equity | | 248,375 | | 330,505 | |
Total liabilities and stockholders’ equity | | $ | 317,589 | | $ | 402,091 | |
STR Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
All amounts in thousands
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 2012 | | 2011 | | 2012 | | 2011 | |
| | (Unaudited) | | (Unaudited) | | (Unaudited) | | (Unaudited) | |
OPERATING ACTIVITIES | | | | | | | | | |
Net (loss) earnings | | $ | (2,421 | ) | $ | 9,710 | | $ | (84,552 | ) | $ | 20,550 | |
Net loss from discontinued operations | | — | | 1,464 | | — | | 4,682 | |
Net (loss) earnings from continuing operations | | (2,421 | ) | 11,174 | | (84,552 | ) | 25,232 | |
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities: | | | | | | | | | |
Depreciation | | 2,277 | | 1,935 | | 4,115 | | 3,793 | |
Goodwill impairment | | — | | — | | 82,524 | | — | |
Amortization of intangibles | | 2,108 | | 2,108 | | 4,216 | | 4,216 | |
Amortization of deferred financing costs | | 81 | | 331 | | 163 | | 663 | |
Stock-based compensation expense | | 1,504 | | 1,100 | | 2,978 | | 2,200 | |
(Recovery) provision for bad debt expense | | (1,156 | ) | 802 | | 450 | | 1,041 | |
Deferred income tax benefit | | (288 | ) | (266 | ) | (1,811 | ) | (580 | ) |
Changes in operating assets and liabilities | | 5,848 | | (11,731 | ) | 21,099 | | (34,723 | ) |
Other, net | | 195 | | (986 | ) | 115 | | 1,987 | |
Net cash provided by continuing operations | | 8,148 | | 4,467 | | 29,297 | | 3,829 | |
Net cash used in discontinued operations | | (676 | ) | (664 | ) | (5,786 | ) | (1,952 | ) |
Net cash provided by operating activites | | $ | 7,472 | | $ | 3,803 | | $ | 23,511 | | $ | 1,877 | |
| | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | |
Capital expenditures | | $ | (3,887 | ) | $ | (9,417 | ) | $ | (9,425 | ) | $ | (14,535 | ) |
Net cash used in continuing operations | | (3,887 | ) | (9,417 | ) | (9,425 | ) | (14,535 | ) |
Net cash used in discontinued operations | | — | | (1,345 | ) | — | | (1,993 | ) |
Net cash used in investing activities | | $ | (3,887 | ) | $ | (10,762 | ) | $ | (9,425 | ) | $ | (16,528 | ) |
| | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | |
Net cash provided by continuing operations | | $ | 14 | | $ | 111 | | $ | 25 | | $ | 673 | |
Net cash used in discontinued operations | | — | | (462 | ) | — | | (925 | ) |
Net cash provided by (used in) financing activities | | $ | 14 | | $ | (351 | ) | $ | 25 | | $ | (252 | ) |
| | | | | | | | | |
Effect of exchange rate changes on cash | | (1,632 | ) | 1,460 | | (714 | ) | 3,650 | |
| | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | 1,967 | | (5,850 | ) | 13,397 | | (11,253 | ) |
Cash and cash equivalents, beginning of period | | 70,224 | | 101,227 | | 58,794 | | 106,630 | |
Cash and cash equivalents, end of period | | $ | 72,191 | | $ | 95,377 | | $ | 72,191 | | $ | 95,377 | |
Less cash and cash equivalents of discontinued operations, end of period | | — | | 8,297 | | — | | 8,297 | |
Cash and cash equivalents from continuing operations, end of period | | $ | 72,191 | | $ | 87,080 | | $ | 72,191 | | $ | 87,080 | |
| | | | | | | | | |
* Free cash flow from continuing operations | | $ | 4,261 | | $ | (4,950 | ) | $ | 19,872 | | $ | (10,706 | ) |
* Please refer to the reconciliation of non-GAAP measures included in this press release.
STR Holdings, Inc.
RECONCILIATION OF NON-GAAP MEASURES
All amounts in thousands except shares and per share amounts
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 2012 | | 2011 | | 2012 | | 2011 | |
| | (Unaudited) | | (Unaudited) | | (Unaudited) | | (Unaudited) | |
Non-GAAP Earnings Per Share | | | | | | | | | |
Net (loss) earnings from continuing operations | | $ | (2,421 | ) | $ | 11,174 | | $ | (84,552 | ) | $ | 25,232 | |
Adjustments to net (loss) earnings from continuing operations: | | | | | | | | | |
Amortization of intangibles | | 2,108 | | 2,108 | | 4,216 | | 4,216 | |
Amortization of deferred financing costs | | 81 | | 331 | | 163 | | 663 | |
Stock-based compensation expense | | 1,504 | | 1,100 | | 2,978 | | 2,200 | |
Goodwill impairment | | — | | — | | 82,524 | | — | |
Interest expense from prior credit facilities | | — | | (2,487 | ) | — | | (4,977 | ) |
Tax effect of non-GAAP adjustments | | (1,201 | ) | (253 | ) | (2,385 | ) | (504 | ) |
Non-GAAP net earnings from continuing operations | | $ | 71 | | $ | 11,973 | | $ | 2,944 | | $ | 26,830 | |
| | | | | | | | | |
Non-GAAP net earnings per share: | | | | | | | | | |
Basic from continuing operations | | $ | — | | $ | 0.29 | | $ | 0.07 | | $ | 0.66 | |
Diluted from continuing operations | | $ | — | | $ | 0.28 | | $ | 0.07 | | $ | 0.64 | |
| | | | | | | | | |
Weighted-average common shares outstanding: | | | | | | | | | |
Basic | | 41,287,338 | | 40,882,026 | | 41,239,316 | | 40,821,482 | |
(1) Diluted | | 41,287,622 | | 42,012,274 | | 41,239,446 | | 42,129,184 | |
(1) Please refer to the reconciliation of diluted shares outstanding for non-GAAP net earnings per share included in this press release.
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 2012 | | 2011 | | 2012 | | 2011 | |
| | (Unaudited) | | (Unaudited) | | (Unaudited) | | (Unaudited) | |
Free Cash Flow from Continuing Operations | | | | | | | | | |
Cash flow from operations from continuing operations | | $ | 8,148 | | $ | 4,467 | | $ | 29,297 | | $ | 3,829 | |
Less: | | | | | | | | | |
Capital expenditures | | (3,887 | ) | (9,417 | ) | (9,425 | ) | (14,535 | ) |
Free cash flow | | $ | 4,261 | | $ | (4,950 | ) | $ | 19,872 | | $ | (10,706 | ) |
Non-GAAP Financial Measures
To supplement the Company’s condensed consolidated financial statements, which statements are prepared and presented in accordance with generally accepted accounting principles in the United States of America (GAAP), the Company uses non-GAAP financial measures to facilitate better understanding of its operating results. In this press release, there are two non-GAAP financial metrics mentioned: Non-GAAP earnings per share from continuing operations (EPS) and free cash flow from continuing operations as defined below:
Non-GAAP EPS: The Company believes that non-GAAP EPS from continuing operations provides meaningful supplemental information regarding its performance by excluding certain expenses that may not be indicative of the core business operating results and may help in comparing current period results with those of prior periods as well as with its peers.
Non-GAAP EPS from continuing operations is defined as net (loss) earnings from continuing operations not including the tax effected impact of deferred financing costs, stock-based compensation, intangible asset amortization expense, goodwill impairment, plus interest expense from prior credit facilities divided by the weighted-average common shares outstanding. Please refer to the Company’s Form 10-K filed with the SEC on March 14, 2012 for detailed discussion on these adjustments.
Although the Company uses non-GAAP EPS from continuing operations as a measure to assess the operating performance of its business, non-GAAP EPS from continuing operations has significant limitations as an analytical tool because it excludes certain material costs. Because non-GAAP EPS from continuing operations does not account for these expenses, its utility as a measure of its operating performance has material limitations. Because of these limitations, the Company does not view non-GAAP EPS from continuing operations in isolation and uses other metrics to measure operating performance such as, but not limited to, net sales, gross margin, operating (loss) income, adjusted EBITDA, and net (loss) earnings from continuing operations.
STR Holdings, Inc.
RECONCILIATION OF NON-GAAP SHARES OUTSTANDING
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 2012 | | 2011 | | 2012 | | 2011 | |
| | (Unaudited) | | (Unaudited) | | (Unaudited) | | (Unaudited) | |
Weighted-average shares outstanding | | | | | | | | | |
Basic shares outstanding GAAP | | 41,287,338 | | 40,882,026 | | 41,239,316 | | 40,821,482 | |
Diluted shares outstanding GAAP | | 41,287,338 | | 42,012,274 | | 41,239,316 | | 42,129,184 | |
Stock options | | — | | — | | — | | — | |
Restricted common stock | | 284 | | — | | 130 | | — | |
Diluted shares outstanding non-GAAP | | 41,287,622 | | 42,012,274 | | 41,239,446 | | 42,129,184 | |
Diluted GAAP Shares Outstanding: Due to a loss from continuing operations during the three and six months ended June 30, 2012, the diluted weighted-average common shares outstanding for purposes of our diluted GAAP loss per share EPS does not include 284 and 130 shares of unvested restricted common stock respectively, as these potential awards do not share in any loss generated by the Company and are anti-dilutive.
Free Cash Flow from Continuing Operations: The Company believes free cash flow from continuing operations is an important measure of its overall liquidity and its ability to fund future growth and provide a return to shareowners. Free cash flow is defined as operating cash flow from continuing operations excluding cash spent on capital expenditures. A limitation of using free cash flow versus the GAAP measure of cash provided by operating activities as a means for evaluating the Company’s business is that free cash flow does not represent the total increase or decrease in the cash balance from operations for the period because it excludes cash used for capital expenditures during the period.
