Power Solutions International, Inc 10-Q for FY2020 Q3

Power Solutions International, Inc. (PSIX)

10-Q 2020-11-16 For: 2020-09-30

Added on April 06, 2026

About this 10-Q

Power Solutions International, Inc filed this 10-Q on November 16, 2020, covering the quarter ended September 30, 2020 (FY2020 Q3).

Headline figures

Quarter ended September 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $114.45M; down 17.4% from $138.51M a year earlier
Net loss: $1.47M; compared with net income of $5.76M a year earlier
Diluted EPS: -$0.06; compared with $0.25 a year earlier

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Delaware		33-0963637
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
201 Mittel Drive, Wood Dale, IL		60191
(Address of Principal Executive Offices)		(Zip Code)
(630) 350-9400
(Registrant’s Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
None	___	___
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share


		Page
PART I – FINANCIAL INFORMATION
	Forward-Looking Statements	3
Item 1.	Financial Statements	4
	Consolidated Balance Sheets as of September 30, 2020 (Unaudited) and December 31, 2019	4
	Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (Unaudited)	5
	Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2020 and 2019 (Unaudited)	6
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
	Signatures	43


(in thousands, except par values)	As of September 30, 2020		As of December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	26,727	$	3
Restricted cash	3,299		—
Accounts receivable, net of allowances of $3,058 and $3,561 as of September 30, 2020 and December 31, 2019, respectively	52,379		104,515
Income tax receivable	3,716		1,055
Inventories, net	128,827		108,839
Prepaid expenses and other current assets	15,030		8,110

Total current assets	229,978		222,522
Property, plant and equipment, net	21,116		23,194
Intangible assets, net	11,082		13,372
Goodwill	29,835		29,835

Other noncurrent assets	22,042		24,749
TOTAL ASSETS	$	314,053	$	313,672

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	45,237	$	75,835
Current maturities of long-term debt	288		195
Revolving line of credit	130,000		39,527

Other accrued liabilities	83,049		66,030
Total current liabilities	258,574		181,587

Deferred income taxes	839		1,105
Long-term debt, net of current maturities	754		55,657
Noncurrent contract liabilities	10,009		17,998
Other noncurrent liabilities	34,841		28,828
TOTAL LIABILITIES	$	305,017	$	285,175





STOCKHOLDERS’ EQUITY
Preferred stock – $0.001 par value. Shares authorized: 5,000. No shares issued and outstanding at all dates.	$	—	$	—
Common stock – $0.001 par value; 50,000 shares authorized; 23,117 and 23,117 shares issued; 22,886 and 22,857 shares outstanding at September 30, 2020 and December 31, 2019, respectively	23		23
Additional paid-in capital	157,138		156,727
Accumulated deficit	(146,832)		(126,912)
Treasury stock, at cost, 231 and 260 shares at September 30, 2020 and December 31, 2019, respectively	(1,293)		(1,341)
TOTAL STOCKHOLDERS’ EQUITY	9,036		28,497
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	314,053	$	313,672


(in thousands, except per share amounts)	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Net sales	$	114,450	$	138,512	$	312,603	$	392,983
Cost of sales	96,281		111,640		272,943		322,793
Gross profit	18,169		26,872		39,660		70,190
Operating expenses:
Research, development and engineering expenses	6,555		6,366		19,121		18,695
Selling, general and administrative expenses	11,964		11,461		38,434		41,476

Amortization of intangible assets	763		910		2,290		2,729
Total operating expenses	19,282		18,737		59,845		62,900
Operating (loss) income	(1,113)		8,135		(20,185)		7,290
Other expense:
Interest expense	1,510		1,921		4,211		6,156

Loss from change in value of warrants	—		—		—		1,352
Loss on extinguishment of debt	—		—		497		—
Other income, net	(947)		(25)		(1,202)		(526)
Total other expense	563		1,896		3,506		6,982
(Loss) income before income taxes	(1,676)		6,239		(23,691)		308
Income tax (benefit) expense	(210)		483		(3,771)		136
Net (loss) income	$	(1,466)	$	5,756	$	(19,920)	$	172



Weighted-average common shares outstanding:
Basic	22,881		22,849		22,866		21,064
Diluted	22,881		22,876		22,866		21,088
(Loss) earnings per common share:
Basic	$	(0.06)	$	0.25	$	(0.87)	$	0.01
Diluted	$	(0.06)	$	0.25	$	(0.87)	$	0.01


(in thousands)	For the Three Months Ended
	Common Stock		Additional Paid-in Capital		Accumulated Deficit		Treasury Stock		Total Stockholders’ Equity
Balance at June 30, 2020	$	23	$	157,052	$	(145,366)	$	(1,354)	$	10,355
Net loss	—		—		(1,466)		—		(1,466)







Stock-based compensation expense	—		94		—		71		165
Common stock issued for stock-based awards, net	—		(8)		—		(10)		(18)







Balance at September 30, 2020	$	23	$	157,138	$	(146,832)	$	(1,293)	$	9,036

Balance at June 30, 2019	$	23	$	158,530	$	(140,744)	$	(3,418)	$	14,391
Net income	—		—		5,756		—		5,756







Stock-based compensation expense	—		173		—		—		173
Common stock issued for stock-based awards, net	—		(2,123)		—		2,080		(43)







Balance at September 30, 2019	$	23	$	156,580	$	(134,988)	$	(1,338)	$	20,277


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


(in thousands)	For the Nine Months Ended
	Common Stock		Additional Paid-in Capital		Accumulated Deficit		Treasury Stock		Total Stockholders’ Equity
Balance at December 31, 2019	$	23	$	156,727	$	(126,912)	$	(1,341)	$	28,497
Net loss	—		—		(19,920)		—		(19,920)







Stock-based compensation expense	—		411		—		71		482
Common stock issued for stock-based awards, net	—		—		—		(23)		(23)







Balance at September 30, 2020	$	23	$	157,138	$	(146,832)	$	(1,293)	$	9,036

Balance at December 31, 2018	$	19	$	119,724	$	(135,160)	$	(3,161)	$	(18,578)
Net income	—		—		172		—		172







Stock-based compensation expense	—		1,101		—		—		1,101
Common stock issued for stock-based awards, net	—		(2,309)		—		1,823		(486)

Exercise of Weichai Warrant	4		38,064		—		—		38,068





Balance at September 30, 2019	$	23	$	156,580	$	(134,988)	$	(1,338)	$	20,277


(in thousands)	As of September 30,
	2020		2019
Reconciliation of cash, cash equivalents, and restricted cash to the Consolidated Balance Sheets
Cash and cash equivalents	$	26,727	$	1
Restricted cash	3,299		—
Total cash, cash equivalents, and restricted cash	$	30,026	$	1


(in thousands)	December 31, 2019 (As Previously Reported)		Adjustment		December 31, 2019 (As Revised)
Additional paid-in capital	$	165,527	$	(8,800)	$	156,727
Treasury stock	$	(10,141)	$	8,800	$	(1,341)


	As of September 30, 2020		As of December 31, 2019
Customer A	**		49	%
Customer B	16	%	**
Customer C	18	%	**


(in thousands) Inventories	As of September 30, 2020		As of December 31, 2019
Raw materials	$	104,286	$	90,677
Work in process	5,014		2,007
Finished goods	22,751		19,119
Total inventories	132,051		111,803
Inventory allowance	(3,224)		(2,964)
Inventories, net	$	128,827	$	108,839


(in thousands) Other Accrued Liabilities	As of September 30, 2020		As of December 31, 2019
Accrued product warranty	$	16,210	$	17,142
Litigation reserves *	2,535		5,020
Contract liabilities	52,502		26,898
Accrued compensation and benefits	1,978		6,599
Operating lease liabilities	3,802		3,789

Accrued interest expense	917		1,087

Other	5,105		5,495
Total	$	83,049	$	66,030


(in thousands)	As of September 30, 2020
	Gross Carrying Value		Accumulated Amortization		Net Book Value

Customer relationships	$	34,940	$	(24,397)	$	10,543
Developed technology	700		(639)		61
Trade names and trademarks	1,700		(1,222)		478
Total	$	37,340	$	(26,258)	$	11,082


(in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

Operating lease cost	$	1,394	$	1,386	$	4,141	$	4,193
Finance lease cost
Amortization of right-of-use (“ROU”) asset	52		50		156		119
Interest expense	12		14		37		35
Short-term lease cost	105		177		322		453
Variable lease cost	363		390		1,160		1,156
Total lease cost	$	1,926	$	2,017	$	5,816	$	5,956


(in thousands)	For the Nine Months Ended September 30,
Accrued Product Warranty		2020		2019
Balance at beginning of period		$	25,501	$	23,102
Current year provision *		13,949		7,706

Changes in estimates for preexisting warranties **		8,756		2,730
Payments made during the period		(15,357)		(7,244)

Balance at end of period		32,849		26,294
Less: Current portion		16,210		14,677
Noncurrent accrued product warranty		$	16,639	$	11,617


(in thousands)	For the Nine Months Ended September 30,
	2020		2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows paid for operating leases	$	4,105	$	3,816
Operating cash flows paid for interest portion of finance leases	37		36
Financing cash flows paid for principal portion of finance leases	145		106
Right-of-use assets obtained in exchange for lease obligations
Operating leases	299		280
Finance leases	11		517


(in thousands)	Operating Leases		Finance Leases
Three months ending December 31, 2020	$	1,300	$	61
Year ending December 31, 2021	4,948		245
Year ending December 31, 2022	4,788		177
Year ending December 31, 2023	3,283		103
Year ending December 31, 2024	1,813		84
Thereafter	7,399		83
Total undiscounted lease payments	23,531		753
Less: imputed interest	4,615		92
Total lease liabilities	$	18,916	$	661


(in thousands)	September 30, 2020		December 31, 2019

Operating lease ROU assets, net 1	$	18,083	$	20,677

Operating lease liabilities, current 2	3,802		3,789
Operating lease liabilities, non-current 3	15,114		17,679
Total operating lease liabilities	$	18,916	$	21,468

Finance lease ROU assets, net 1	$	617	$	777

Finance lease liabilities, current 2	197		195
Finance lease liabilities, non-current 3	464		617
Total finance lease liabilities	$	661	$	812


(in thousands)	As of September 30, 2020
	Carrying Value		Fair Value
			Level 1		Level 2		Level 3
Revolving credit facility	$	130,000	$	—	$	130,000	$	—


(in thousands)	For the Nine Months Ended September 30, 2019
Balance at beginning of period	$	35,100
Change in value of warrants *	1,352
Settlement of warrants	(36,452)
Balance at end of period	$	—


(in thousands)	Common Shares Issued	Treasury Stock Shares	Common Shares Outstanding
Balance as of January 1, 2020	23,117	260	22,857
Net shares issued for Stock awards	—	(29)	29



Balance as of September 30, 2020	23,117	231	22,886


(in thousands, except per share basis)	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Numerator:
Net (loss) income	$	(1,466)	$	5,756	$	(19,920)	$	172





Denominator:
Shares used in computing net (loss) income per share:
Weighted-average common shares outstanding – basic	22,881		22,849		22,866		21,064
Effect of dilutive securities	—		27		—		24
Weighted-average common shares outstanding – diluted	22,881		22,876		22,866		21,088

(Loss) earnings per common share:
(Loss) earnings per share of common stock – basic	$	(0.06)	$	0.25	$	(0.87)	$	0.01
(Loss) earnings per share of common stock – diluted	$	(0.06)	$	0.25	$	(0.87)	$	0.01


Non-GAAP Financial Measure			Comparable GAAP Financial Measure
Adjusted net income (loss)			Net (loss) income
Adjusted earnings (loss) per share			(Loss) earnings per common share – diluted
EBITDA			Net (loss) income
Adjusted EBITDA			Net (loss) income