Business Context and Reporting Period
This Form 8-K was filed by Power Solutions International, Inc. on October 3, 2018. The report addresses a determination to restate consolidated financial statements for the fiscal year ended December 31, 2013, due to identified accounting errors. This action follows previous restatements for fiscal years 2014 and 2015, and the quarter ended March 31, 2016.
Key Financial Metrics
The filing does not provide current revenue, profit, cash flow, or liquidity metrics for the 2018 reporting period. The primary financial disclosure relates to a historical adjustment:
- 2013 Pre-tax Loss Adjustment: Correction of non-cash accounting errors is anticipated to increase the pre-tax loss for the fiscal year ended December 31, 2013, by approximately $5 million.
- Source of Errors: Errors primarily relate to the capitalization of certain product development expenses and inventory valuations.
Material Changes Versus Prior Period
The material change disclosed is the expansion of the restatement scope to include the 2013 fiscal year. Consequently, the previously issued 2013 financial statements, management reports on disclosure controls, and related audit reports by RSM US LLP should no longer be relied upon. The company is also continuing efforts to complete restatements and file delinquent reports for 2016 and 2017.
Outlook, Risks, and Management Commentary
Management Commentary: Senior management and the Audit Committee have discussed the errors with the current auditor, BDO USA, LLP. The company expects to complete the restatement process prior to the end of 2018, though this timeline is not assured.
Risks and Contingencies:
- Internal Controls: Ongoing reviews may identify additional accounting errors or material weaknesses in internal controls.
- Regulatory and Legal: Risks include the impact of an SEC investigation, potential litigation, and the resignation of the former auditor (RSM US LLP).
- Operational and Financial: Potential defaults on debt, exercise of creditor remedies, and negative impacts from the delisting of common stock from Nasdaq.
- Personnel: Challenges in recruiting replacements for resigned directors and executive officers.
Investor Verification Checklist
- Verify the final magnitude of the $5 million estimated adjustment to the 2013 pre-tax loss once the restatement is complete.
- Confirm the status of the delinquent 2016 and 2017 financial reports and the timeline for their filing.
- Monitor the outcome of the Audit Committee's independent internal review for additional material weaknesses.
- Assess the status of the SEC investigation and any related enforcement proceedings.
- Check the company's current standing with lenders and trade creditors regarding potential defaults.
- Verify the status of the company's stock listing and efforts to re-list on a stock exchange.