STR Holdings Reports Loss of Key Customer, Announces Operational Restructuring, Says Reviewing Alternatives
STR Holdings, Inc. (NYSE: STRI), believes that First Solar, Inc., a long-standing customer, will terminate its relationship with the Company in 2013. Though the exact timing remains uncertain, the Company expects that First Solar will begin a transition away from STR in the first quarter of 2013, completely cutting over to a new supplier during the course of the next few months.
As previously disclosed, First Solar is STR's largest customer and such loss is likely to have a material adverse effect on the business and financial results of the Company. Sales to First Solar during 2012 were approximately $39 million.
Robert S. Yorgensen, President & Chief Executive Officer commented, “We have enjoyed a very long and prosperous relationship with First Solar. Their loyalty over the years is a testament to our value as a reliable supplier of excellent quality products and service, for which First Solar honored us with their Top Supplier Award just over a year ago.” Yorgensen continued, “We have had no claim for defective product from First Solar, nor have we had any returns, and the product we have been supplying for years has been according to specification. Unfortunately, I cannot elaborate on their decision to work with another supplier at this time. On a more positive note, we have recently added three new customers in China, two of which have qualified and ordered our next-generation encapsulants. While this new work won't make up for the loss of First Solar's business in the short-term, we believe it represents very important progress toward increasing our share of the burgeoning Chinese market.”
The Company will continue its comprehensive review of its cost structure, and expects to cease manufacturing operations at its East Windsor, Connecticut facility by the end of the first quarter of 2013, and make significant headcount reductions throughout the organization. The Company is assessing its long-lived assets for impairment and expects to incur significant restructuring charges in 2013. The Company will communicate its restructuring plan in more detail at a later date. The Company plans to service its North American customer base from its production facilities in Spain and Malaysia.
Joseph C. Radziewicz, Vice President & Chief Financial Officer, said, “While the loss of First Solar as a customer is certainly an unfortunate development for STR, we have already taken swift action to reduce our costs, which will help to preserve our strong balance sheet as well as our options going forward.”
Separately and unrelated to the loss of First Solar as a customer, the Company engaged UBS Investment Bank as its financial advisor in December 2012 to assist the Board of Directors with a review of the Company's strategic alternatives.
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