Power Solutions International Announces Second Quarter and First Half 2020 Financial Results

The novel coronavirus COVID-19 pandemic (“COVID-19 pandemic”) has resulted in the implementation of significant governmental measures to control the spread of the virus, including quarantines, travel restrictions, business shutdowns and restrictions on the movement of people in the United States and abroad, and the related recent historic decline in oil demand. The Company has experienced a significant overall reduction in demand for its products which is, in large part, attributable to the impact of the COVID-19 pandemic.  This reduction in demand has adversely impacted the Company’s financial results for the second quarter and first half of 2020.  Sales for the second quarter of 2020 were $93.1 million, a decrease of $45.6 million, or 33%, versus the comparable period last year. The sales decrease is comprised of declines of $24.2 million and $22.6 million in the industrial and energy end markets, respectively, partly offset by a $1.2 million increase in the transportation end market.  The decreased sales within the industrial end market reflect lower demand for products used across a wide range of applications, with the largest decrease attributable to those products used in the material handling/forklift markets. Lower energy end market sales were driven by decreased demand for the Company’s power generation products, particularly for those used within the oil and gas industry, partly offset by higher demand for demand response products. The nominal increase in transportation end market sales were primarily due to increased medium-duty truck market business as the Company began shipping to a new customer, while it also saw higher demand in the terminal tractor market. These increases were partly offset by lower demand for products used within the school bus market.

Gross profit decreased by $21.8 million, or 85%, in the second quarter of 2020 compared to the same period last year.  Gross margin in the second quarter of 2020 was 4.1% versus 18.5% last year, primarily due to reduced operating leverage as a result of lower sales, unfavorable product mix, and significantly higher warranty expense related to charges for adjustments to preexisting warranties, largely within the transportation end market, partly mitigated by favorable tariff costs. For the second quarter of 2020, warranty costs were $13.8 million (net of supplier recoveries of $0.6 million), including $9.3 million of charges for adjustments to preexisting warranties, an increase of $10.8 million compared to warranty costs of $3.0 million (net of supplier recoveries of $0.2 million) for the second quarter of 2019. The warranty costs for the second quarter of 2020 included $0.6 million of charges related to specific engine supplier quality issues, for which the Company is actively seeking cost reimbursement.

Operating expenses decreased by $1.7 million, or 8%, versus the comparable period in 2019, mostly attributable to lower selling, general and administrative (SG&A) expenses, in part due to lower financial reporting costs as a result of the completion of the restatement of the Company’s financial statements in May 2019, lower incentive compensation expense, the absence of severance costs in the second quarter of 2020 and the impact from cost savings actions.  Partly offsetting the decline were higher legal costs related to the ongoing government investigations and the Company’s indemnification obligations of former officers and employees as a result of the exhaustion of its directors and officers insurance during the early part of 2020, among other items.

In the 2019 period, the Company recognized a loss of $5.8 million as a result of the change in the value of the Weichai Warrant, including the impact of it being exercised in April 2019.  Because the Weichai Warrant was exercised in April 2019, it had no impact on 2020 results.

Net loss was $17.7 million, or a loss of $0.78 per share, versus a net loss of $3.0 million, or a loss of $0.14 per share for the comparable prior year period.  Adjusted net loss was $12.2 million, or Adjusted loss per share of $0.53, versus Adjusted net income of $8.5 million, or Adjusted earnings per share of $0.39 for the second quarter of 2019.  Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) was a loss of $8.6 million compared to Adjusted EBITDA of $13.0 million for the second quarter of 2019.

See “Non-GAAP Financial Measures” below for the Company’s definition of total Adjusted net (loss) income, Adjusted (loss) earnings per share, EBITDA and Adjusted EBITDA and the financial tables that accompany this release for reconciliations of these measures to their closest comparable GAAP measures.

Sales for the first half of 2020 were $198.2 million, a decrease of $56.3 million, or 22%, versus 2019, the result of decreased sales of $37.7 million, $18.2 million and $0.5 million in the industrial, energy and transportation end markets, respectively. The decreased sales within the industrial end market reflects lower demand for products used across a wide range of applications, with the largest decreases attributable to lower demand for products used in the material handling/forklift and arbor care markets. Lower energy end market sales were primarily driven by decreased demand for the Company’s power generation products, particularly for those used within the oil and gas industry, partly offset by stronger demand for demand response products.  The nominal decrease in transportation end market sales were primarily due to lower demand for products used in the medium-duty truck market mostly attributable to the previously disclosed acceleration of the shipment of certain engines during the fourth quarter of 2019, which negatively impacted sales in the first six months of 2020 notwithstanding shipments to a new customer during the second quarter of 2020.  The decrease was partly offset by stronger demand for products used within the school bus and terminal tractor markets.

Gross profit decreased by $21.8 million, or 50%, in the first half of 2020 compared to the same period last year.  Gross margin in the first half of 2020 was 10.8% versus 17.0% for the same period last year, primarily due to reduced operating leverage as a result of lower sales, and significantly higher warranty expense related to charges for adjustments to preexisting warranties, largely within the transportation end market. For the six months ended June 30, 2020, warranty costs were $15.5 million (net of supplier recoveries of $1.9 million), including $9.9 million of charges for adjustments to preexisting warranties, an increase of $11.1 million compared to warranty costs of $4.4 million (net of supplier recoveries of $2.9 million) for the six months ended June 30, 2019. The warranty costs for the six months ended June 30, 2020 included $0.6 million of charges related to specific engine supplier quality issues, for which the Company is actively seeking cost reimbursement.

Operating expenses decreased by $3.6 million, or 8%, in 2020 mostly due to lower SG&A expenses, in part attributable to lower financial reporting costs as a result of the completion of the restatement of the Company’s financial statements in May 2019, lower incentive compensation expense, and the absence of severance costs in the first half of 2020.  Partly offsetting the decline were higher legal costs related to the ongoing government investigations and the Company’s indemnification obligations of former officers and employees as a result of the exhaustion of its directors and officers insurance during the early part of 2020, among other items.

First half 2020 net loss was $18.5 million, or $0.81 per share, versus a net loss of $5.6 million, or a loss per share of $0.28 in 2019.  Adjusted net loss was $12.8 million, or Adjusted loss per share of $0.56, versus Adjusted net income of $8.4 million, or Adjusted earnings per share of $0.41 in 2019.  Adjusted EBITDA was a loss of $6.0 million compared to Adjusted EBITDA of $16.7 million in 2019.

See “Non-GAAP Financial Measures” below for how the Company defines total Adjusted net (loss) income, Adjusted (loss) earnings per share, EBITDA and Adjusted EBITDA and the financial tables that accompany this release for reconciliations of these measures to their closest comparable GAAP measures.

The Company’s total debt was approximately $131 million at June 30, 2020, compared to approximately $73 million at March 31, 2020, while cash and cash equivalents were nearly $33 million at June 30, 2020, versus approximately $1 million at March 31, 2020.  These amounts reflect the net impact of customer prepayments of approximately $12 million and $13 million at June 30, 2020 and March 31, 2020, respectively.  The increase in debt during the second quarter of 2020 was largely attributable to the late April draw down of $35 million under the Company’s senior secured revolving credit facility pursuant to a credit agreement with Standard Chartered Bank (the “Credit Agreement”), which significantly strengthened the Company’s cash position, as well as the impact from the loss from operations and an increase in working capital.  The Credit Agreement includes financial covenants which were effective for the Company beginning with the six months ended June 30, 2020. The financial covenants include an interest coverage ratio and a minimum EBITDA threshold, as further defined in the Credit Agreement. For the six months ended June 30, 2020, the Company did not meet the defined minimum EBITDA requirement. A breach of the financial covenants under the Credit Agreement constitutes an event of default and if not cured or waived, could result in the obligations under the Credit Agreement being accelerated. The Company is currently in discussion with Standard Chartered Bank in connection with the financial covenant breach.

The Company is cautiously optimistic that its third quarter 2020 sales will increase sequentially versus the second quarter.  However, projected sales and profitability for the full year of 2020 are currently expected to be substantially lower than 2019 levels in large part due to the impact of the COVID-19 pandemic.  Further, the previously disclosed customer requested fourth quarter 2019 acceleration of approximately $30 million of transportation end market sales, and industrial end market headwinds are also anticipated to negatively impact the Company’s 2020 financial results.  The Company has initiated certain actions to mitigate the significant negative impacts of these factors.  To date in 2020, the Company’s production facility workforce has been reduced to align with current volume trends.  Additionally, the Company implemented various temporary cost reduction measures, including reduced pay for salaried employees, suspension of the 401(k) match program, and deferred spending on certain R&D programs, among others. The measures with regard to pay for employees and the Company’s 401(k) match program are currently anticipated to run through September 30, 2020, with the Company continuing to assess market conditions. The Company continues to review operating expenses as part of the contingency planning process.

John Miller, chief executive officer, commented, “I would like to commend our employees for their dedication to working safely while meeting the needs of our customers during these difficult times. Although sales within the transportation end market saw a nominal uptick due in part to new business, our financial results during the second quarter were impacted by challenging conditions across our industrial and energy end markets as a result of the COVID-19 pandemic.  We also experienced significantly higher warranty expense in the quarter due largely to increased charges for changes in estimates to preexisting warranties, primarily within transportation, which further negatively impacted our gross margin and profitability.  We continue to undertake efforts to reduce future warranty expense through actively seeking cost reimbursement from suppliers, where applicable, and through the continued improvement of engineering validation and reliability programs and further investment in technology to enhance our tools and processes.”

Miller added, “As we enter the second half of 2020, we continue to remain positive on the numerous long-term opportunities for our business.  While we are cautiously optimistic that our third quarter sales will grow sequentially versus the second quarter, given the significant uncertainty that exists across the economy and within our key markets, we’ll continue to closely monitor our operating expenses and intend to maintain the Company’s healthy liquidity position.”

Power Solutions International, Inc. (PSI) is a leader in the design, engineering and manufacture of a broad range of advanced, emission-certified engines and power systems.  PSI provides integrated turnkey solutions to leading global original equipment manufacturers and end-user customers within the energy, industrial and transportation end markets.  The Company’s unique in-house design, prototyping, engineering and testing capacities allow PSI to customize clean, high-performance engines using a fuel agnostic strategy to run on a wide variety of fuels, including natural gas, propane, gasoline, diesel and biofuels.

This press release contains forward-looking statements regarding the current expectations of the Company about its prospects and opportunities.  These forward-looking statements are entitled to the safe-harbor provisions of Section 21E of the Securities Exchange Act of 1934. The Company has tried to identify these forward-looking statements by using words such as “anticipate,” “believe,” “budgeted,” “contemplate,” “estimate,” “expect,” “forecast,” “guidance,” “may,” “outlook,” “plan,” “projection,” “should,” “target,” “will,” “would,” or similar expressions, but these words are not the exclusive means for identifying such statements.  These statements are subject to a number of risks, uncertainties, and assumptions that may cause actual results, performance or achievements to be materially different from those expressed in, or implied by, such statements.

The Company cautions that the risks, uncertainties and other factors that could cause its actual results to differ materially from those expressed in, or implied by, the forward-looking statements, include, without limitation: management’s ability to successfully implement the Audit Committee’s remedial recommendations; the timing of completion of steps to address, and the inability to address and remedy, material weaknesses; the identification of additional material weaknesses or significant deficiencies; variances in non-recurring expenses; risks relating to the substantial costs and diversion of personnel’s attention and resources deployed to address the financial reporting and internal control matters; the ability of the Company to accurately forecast sales, and the extent to which sales result in recorded revenues; changes in customer demand for the Company’s products; volatility in oil and gas prices; the impact of U.S. tariffs on imports from China on the Company’s supply chain; the impact of the investigations being conducted by the Securities and Exchange Commission (“the SEC”), and the criminal division of the United States Attorney’s Office for the Northern District of Illinois and any related or additional governmental investigative or enforcement proceedings; any delays and challenges in recruiting key employees consistent with the Company’s plans; the impact the coronavirus pandemic could have on the Company’s business and financial results; any negative impacts from delisting of the Company’s common stock from the NASDAQ Stock Market and any delays and challenges in obtaining a re-listing on a stock exchange; and the risks and uncertainties described in reports filed by the Company with the SEC, including without limitation its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and the Company’s subsequent filings with the SEC.

The Company’s forward-looking statements are presented as of the date hereof. Except as required by law, the Company expressly disclaims any intention or obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.

(in thousands, except per share amounts)   For the Three Months Ended June 30,           For the Six Months Ended June 30,        
    2020   2019   Change   % Change   2020   2019   Change   % Change
Net sales   $ 93,056     $ 138,684     $ (45,628 )   (33 )%   $ 198,153     $ 254,471     $ (56,318 )   (22 )%
Cost of sales   89,279     113,070     (23,791 )   (21 )%   176,662     211,153     (34,491 )   (16 )%
Gross profit   3,777     25,614     (21,837 )   (85 )%   21,491     43,318     (21,827 )   (50 )%
Gross margin %   4.1 %   18.5 %   (14.4 )%       10.8 %   17.0 %   (6.2 )%    
Operating expenses:                                
Research, development and engineering expenses   5,814     6,030     (216 )   (4 )%   12,566     12,329     237     2 %
Research, development and engineering expenses as a % of sales   6.2 %   4.3 %   1.9 %       6.3 %   4.8 %   1.5 %    
Selling, general and administrative expenses   12,580     13,955     (1,375 )   (10 )%   26,470     30,015     (3,545 )   (12 )%
Selling, general and administrative expenses as a % of sales   13.5 %   10.1 %   3.4 %       13.4 %   11.8 %   1.6 %    
Amortization of intangible assets   764     909     (145 )   (16 )%   1,527     1,819     (292 )   (16 )%
Total operating expenses   19,158     20,894     (1,736 )   (8 )%   40,563     44,163     (3,600 )   (8 )%
Operating (loss) income   (15,381 )   4,720     (20,101 )   NM   (19,072 )   (845 )   (18,227 )   NM
Other expense:                                
Interest expense   1,427     2,122     (695 )   (33 )%   2,701     4,235     (1,534 )   (36 )%
Loss from change in value of warrants       5,752     (5,752 )   (100 )%       1,352     (1,352 )   (100 )%
Loss on extinguishment of debt   497         497     %   497         497     %
Other income, net   (44 )   (395 )   351     (89 )%   (255 )   (501 )   246     (49 )%
Total other expense   1,880     7,479     (5,599 )   (75 )%   2,943     5,086     (2,143 )   (42 )%
Loss before income taxes   (17,261 )   (2,759 )   (14,502 )   NM   (22,015 )   (5,931 )   (16,084 )   NM
Income tax expense (benefit)   481     239     242     101 %   (3,561 )   (347 )   (3,214 )   NM
Net loss   $ (17,742 )   $ (2,998 )   $ (14,744 )   NM   $ (18,454 )   $ (5,584 )   $ (12,870 )   NM
                                 
Loss per common share:                                
Basic   $ (0.78 )   $ (0.14 )   $ (0.64 )   NM   $ (0.81 )   $ (0.28 )   $ (0.53 )   189 %
Diluted   $ (0.78 )   $ (0.14 )   $ (0.64 )   NM   $ (0.81 )   $ (0.28 )   $ (0.53 )   189 %
                                 
Non-GAAP Financial Measures:                                
Adjusted net (loss) income *   $ (12,178 )   $ 8,456     $ (20,634 )   NM   $ (12,849 )   $ 8,355     $ (21,204 )   NM
Adjusted (loss) earnings per share – diluted *   $ (0.53 )   $ 0.39     $ (0.92 )   NM   $ (0.56 )   $ 0.41     $ (0.97 )   NM
EBITDA *   $ (13,758 )   $ 1,534     $ (15,292 )   NM   $ (15,179 )   $ 2,728     $ (17,907 )   NM
Adjusted EBITDA *   $ (8,582 )   $ 12,988     $ (21,570 )   (166 )%   $ (5,956 )   $ 16,667     $ (22,623 )   (136 )%
NM Not meaningful
* See reconciliation of non-GAAP financial measures to GAAP results below

(in thousands, except par values)   As of June 30, 2020   As of December 31, 2019
ASSETS        
Current assets:        
Cash and cash equivalents   $ 32,533     $ 3  
Restricted cash   3,449      
Accounts receivable, net of allowances of $3,834 and $3,561 as of June 30, 2020 and December 31, 2019, respectively   62,038     104,515  
Income tax receivable   3,419     1,055  
Inventories, net   140,321     108,839  
Prepaid expenses and other current assets   9,500     8,110  
Total current assets   251,260     222,522  
Property, plant and equipment, net   22,137     23,194  
Intangible assets, net   11,845     13,372  
Goodwill   29,835     29,835  
Other noncurrent assets   22,787     24,749  
TOTAL ASSETS   $ 337,864     $ 313,672  
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable   $ 67,367     $ 75,835  
Current maturities of long-term debt   282     195  
Revolving line of credit   130,000     39,527  
Other accrued liabilities   91,004     66,030  
Total current liabilities   288,653     181,587  
Deferred income taxes   781     1,105  
Long-term debt, net of current maturities   816     55,657  
Noncurrent contract liabilities   3,062     17,998  
Other noncurrent liabilities   34,197     28,828  
TOTAL LIABILITIES   $ 327,509     $ 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; 22,860 and 22,857 shares outstanding at June 30, 2020 and December 31, 2019, respectively   23     23  
Additional paid-in capital   165,852     165,527  
Accumulated deficit   (145,366 )   (126,912 )
Treasury stock, at cost, 257 and 260 shares at June 30, 2020 and December 31, 2019, respectively   (10,154 )   (10,141 )
TOTAL STOCKHOLDERS’ EQUITY   10,355     28,497  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 337,864     $ 313,672  
                 

(in thousands)   For the Six Months Ended June 30,
    2020   2019
Cash provided by operating activities        
Net loss   $ (18,454 )   $ (5,584 )
Adjustments to reconcile net loss to net cash provided by operating activities:        
Amortization of intangible assets   1,527     1,819  
Depreciation   2,608     2,605  
Change in value of warrants       1,352  
Stock-based compensation expense   317     928  
Amortization of financing fees   609     361  
Deferred income taxes   (323 )   (458 )
Loss on extinguishment of debt   497      
Other non-cash adjustments, net   253     (68 )
Changes in operating assets and liabilities:        
Accounts receivable, net   42,492     10,292  
Inventory, net   (31,980 )   (4,393 )
Prepaid expenses and other assets   22     4,902  
Accounts payable   (8,634 )   (1,201 )
Accrued expenses   24,692     (5,354 )
Other noncurrent liabilities   (9,616 )   (3,230 )
Net cash provided by operating activities   4,010     1,971  
Cash used in investing activities        
Capital expenditures   (1,416 )   (1,536 )
Other investing activities, net   7      
Net cash used in investing activities   (1,409 )   (1,536 )
Cash provided by (used in) financing activities        
Repayments of long-term debt and lease liabilities   (55,200 )   (78 )
Proceeds from revolving line of credit   180,298     267,584  
Repayments of revolving line of credit   (89,826 )   (268,743 )
Payments of deferred financing costs   (1,970 )   (375 )
Proceeds from Weichai Warrant exercise       1,616  
Other financing activities, net   76     (443 )
Net cash provided by (used in) financing activities   33,378     (439 )
Net increase (decrease) in cash, cash equivalents, and restricted cash   35,979     (4 )
Cash, cash equivalents, and restricted cash at beginning of the period   3     54  
Cash, cash equivalents, and restricted cash at end of the period   $ 35,982     $ 50  
                 

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

The Company believes that Adjusted net income (loss), Adjusted earnings (loss) per share, EBITDA, and Adjusted EBITDA provide relevant and useful information, which is widely used by analysts, investors and competitors in its industry as well as by the Company’s management in assessing the performance of the Company. Adjusted net (loss) income is defined as net loss as adjusted for certain items that the Company believes are not indicative of its ongoing operating performance. Adjusted (loss) earnings per share is a measure of the Company’s diluted net loss per share adjusted for the impact of special items. EBITDA provides the Company with an understanding of earnings before the impact of investing and financing charges and income taxes. Adjusted EBITDA further excludes the effects of other non-cash charges and certain other items that do not reflect the ordinary earnings of the Company’s operations.

Adjusted net income (loss), Adjusted earnings (loss) per share, EBITDA, and Adjusted EBITDA are used by management for various purposes, including as a measure of performance of the Company’s operations and as a basis for strategic planning and forecasting. Adjusted net income (loss), Adjusted earnings (loss) per share, and Adjusted EBITDA may be useful to an investor because these measures are widely used to evaluate companies’ operating performance without regard to items excluded from the calculation of such measures, which can vary substantially from company to company depending on the accounting methods, the book value of assets, the capital structure and the method by which the assets were acquired, among other factors. They are not, however, intended as alternative measures of operating results or cash flow from operations as determined in accordance with U.S. GAAP.

During 2020, the Company changed the presentation of certain non-GAAP financial measures to separate incremental financial reporting and government investigation expenses into: (1) incremental financial reporting, (2) internal control remediation, and (3) government investigations and other legal matters. In addition, the Company changed the presentation of non-GAAP adjustments for the comparative periods of 2019 in order to align to the current period presentation. There was no impact to Adjusted net income, Adjusted earnings per share, EBITDA or Adjusted EBITDA for the three and six months ended June 30, 2019 as a result of this change in presentation. The Company believes the updated presentation may provide more useful information to investors regarding the Company’s non-GAAP adjustments and better aligns with management’s use of the information.

(in thousands)   For the Three Months Ended June 30,   For the Six Months Ended June 30,
    2020   2019   2020   2019
Net loss   $ (17,742 )   $ (2,998 )   $ (18,454 )   $ (5,584 )
Change in value of warrants 1       5,752         1,352  
Stock-based compensation 2   160     393     317     668  
Loss on debt extinguishment 3   497         497      
Key employee retention program 4       6         482  
Severance 5       690         1,598  
Incremental financial reporting 6   957     2,195     1,779     5,493  
Internal control remediation 7   294     472     892     1,251  
Government investigations and other legal matters 8   3,268     1,946     5,738     3,095  
Discrete income tax items 9   388         (3,618 )    
Adjusted net (loss) income   $ (12,178 )   $ 8,456     $ (12,849 )   $ 8,355  
                                 

    For the Three Months Ended June 30,   For the Six Months Ended June 30,
    2020   2019   2020   2019
Loss per common share – diluted   $ (0.78 )   $ (0.14 )   $ (0.81 )   $ (0.28 )
Changes in value of warrants 1       0.27         0.07  
Stock-based compensation 2   0.01     0.02     0.01     0.03  
Loss on debt extinguishment 3   0.02         0.02      
Key employee retention program 4               0.02  
Severance 5       0.03         0.08  
Incremental financial reporting 6   0.04     0.10     0.08     0.27  
Internal control remediation 7   0.02     0.02     0.04     0.06  
Government investigations and other legal matters 8   0.14     0.09     0.25     0.16  
Discrete income tax items 9   0.02         (0.15 )    
Adjusted (loss) earnings per share – diluted   $ (0.53 )   $ 0.39     $ (0.56 )   $ 0.41  
                 
Diluted shares (in thousands)   22,858     21,702     22,858     20,171  
                         

(in thousands)   For the Three Months Ended June 30,   For the Six Months Ended June 30,
    2020   2019   2020   2019
Net loss   $ (17,742 )   $ (2,998 )   $ (18,454 )   $ (5,584 )
Interest expense   1,427     2,122     2,701     4,235  
Income tax expense (benefit)   481     239     (3,561 )   (347 )
Depreciation   1,312     1,262     2,608     2,605  
Amortization of intangible assets   764     909     1,527     1,819  
EBITDA   (13,758 )   1,534     (15,179 )   2,728  
Change in value of warrants 1       5,752         1,352  
Stock-based compensation 2   160     393     317     668  
Loss on debt extinguishment 3   497         497      
Key employee retention program 4       6         482  
Severance 5       690         1,598  
Incremental financial reporting 6   957     2,195     1,779     5,493  
Internal control remediation 7   294     472     892     1,251  
Government investigations and other legal matters 8   3,268     1,946     5,738     3,095  
Adjusted EBITDA   $ (8,582 )   $ 12,988     $ (5,956 )   $ 16,667