CORRECTING and REPLACING STR Holdings Reports Third Quarter 2009 Financial Results

http://www.businesswire.com/news/home/20091116006243/en

ENFIELD, Conn.--(Business Wire)--
In the Reconciliation of Non-GAAP Measures, please note the addition of the Tax
effect of the Non-GAAP adjustments erroneously omitted, thereby reducing
Non-GAAP Net Income and Non-GAAP earnings per share for each period presented.
This is also reflected in The Condensed Consolidated Income Statement under the
Non-GAAP earnings per share as well as in the operating highlights.

The corrected release reads:

STR HOLDINGS REPORTS THIRD QUARTER 2009 FINANCIAL RESULTS

STR Holdings, Inc. (NYSE: STRI) today announced its consolidated financial
results for the quarter and nine months ended September 30, 2009.

Third Quarter 2009 consolidated financial and operating highlights include:

* Solar Net Sales rose 19% to $35.4 million, on a quarterly sequential basis
* Quality Assurance Net Sales increased 13% to $32.0 million from the 2008 third
quarter
* Operating Cash Flow of $15.7 million significantly exceeded Net Income

During the third quarter of 2009, the Company`s Solar segment net sales declined
by $12.8 million, or 27%, compared to the third quarter of 2008. Solar segment
adjusted EBITDA for the third quarter of 2009 was $16.5 million, compared with
$21.9 million a year ago.

During 2009, the Company`s Solar segment has been negatively impacted by an
oversupply of inventory in the Solar module supply chain. However, on a
sequential basis, third quarter 2009 Solar sales rose 19% to $35.4 million as a
result of increased sales in the United States and Europe as overall solar
industry conditions have shown improvement during the quarter in key end markets
including California, Germany and Italy.

STR`s Quality Assurance segment net sales for the third quarter of 2009 rose
$3.6 million, or 13%, from the same quarter last year due to increased testing
volume in the United States and Asia. Quality Assurance adjusted EBITDA rose to
$7.1 million, up from $5.6 million a year ago.

"This quarter`s financial results reflected double digit improvement in our
sequential top-line performance as well as significant growth in our cash flow
generation," stated Chairman, President and Chief Executive Officer Dennis L.
Jilot. "And, while it came as no surprise that we saw a year over year decline
in our Solar segment sales, we are now seeing signs that economic conditions are
improving. At the same time, we recently began shipping from our new Malaysian
plant, making us the only encapsulant provider with manufacturing and
distribution capabilities in North America, Europe and Asia. As such, STR is
well positioned to capitalize on the solar industry`s global expansion,
including the emerging China market."

Selling, general and administrative expense for the third quarter of 2009
declined by $2.3 million, or 19% compared to the corresponding third quarter of
2008. This reduction was primarily due to lower professional fees and lower
annual incentive compensation expense.

On November 12, 2009, the Company closed its initial public offering (IPO) of
12.3 million shares of common stock at $10 per share. Prior to the closing of
the IPO, the Company converted from a limited liability company to a corporation
and all of the Company`s outstanding units were converted into 36.7 million
shares of common stock and 1.3 million shares of restricted common stock. The
impact of this issuance has been applied on a retrospective basis to determine
earnings per share (EPS) for each of the periods presented.

Net income for the third quarter of 2009 was $7.9 million, or $0.21 on a diluted
EPS basis, compared with $8.9 million, or $0.24 on a diluted EPS basis for the
corresponding 2008 period. Diluted non-GAAP EPS for the third quarter of 2009
totaled $0.28. This compares with $0.30 on a diluted non-GAAP EPS basis, for the
third quarter of 2008. (See discussion of Non-GAAP Financial Measures and the
reconciliation table below for details).

During the third quarter of 2009, the Company generated $15.7 million of
operating cash flow, up 19% from $13.2 million of the same quarter last year.
Free Cash Flow, which is defined as operating cash flow less capital
expenditures, increased 137%, or $7.4 million, from the third quarter of 2008.
This increase in free cash flow was primarily due to lower spending on capacity
expansion and improved working capital performance. (See discussion of Non-GAAP
Financial Measures and the reconciliation table below for details).

STR`s Executive Vice President and Chief Financial Officer Barry A. Morris
stated, "Even in recessionary times, STR continues to deliver strong cash flow
to fund future growth and provide liquidity. We will continue to focus on
maintaining effective cost controls and managing working capital in order to
increase shareholder value as we have demonstrated this quarter."

About STR

STR Holdings, Inc. is a diversified global leader providing high quality,
superior performance solar encapsulants to the photovoltaic module industry. It
is also one of the world`s top providers of quality assurance testing, audit,
inspection and responsible sourcing services. STR works with over 6,000
manufacturers, importers, raw materials suppliers and retailers around the globe
to ensure that they have the highest level of confidence in the quality and
safety of their products and the social standards of the supply chain producing
them. Further information about STR Holdings, Inc. can be obtained via the
Company`s website at www.strholdings.com.

Forward Looking Statements

This press release contains forward-looking statements that 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 release, the Company
faces risks and uncertainties that include, but are not limited to, the
following: (i) demand for solar energy in general and solar modules in
particular; (ii) the timing and effects of the implementation of recently
announced government incentive plans for renewable energy, primarily in China
and the United States.; (iii) the continual operation of the Company`s Malaysian
plant which commenced shipments in August 2009; (iv) the need to utilize its
existing $20 million revolving credit facility, and the ability to further
access the credit markets on acceptable terms; (v) maintaining sufficient
liquidity in order to fund future profitable growth and long term vitality; (vi)
the continuing effects of the ongoing recession on sales in Europe for the
remainder of 2009; (vii) pricing pressures and other changes in competitive
markets; (viii) the impact the current negative credit markets may have on the
Company or its customers or suppliers; (viii) loss of professional
accreditations and memberships; (ix) the extent to which the Company may be
required to write-off accounts receivable or inventory; (x) potential supply
chain disruptions, including those resulting from bankruptcy filings by
customers or vendors; (xi) any potential inflation of commodity costs, including
paper and resin used in the Company`s encapsulants, and the Company`s ability to
successfully manage any increases in these commodity costs; (xii) the impact of
changes in foreign currency exchange rates on financial results, and the
geographic distribution of revenues and earnings; (xiii) the impact of changes
in interest rates in relation to the Company`s variable rate debt; (xiv) the
impact of events that cause or may cause disruption in the Company inspection,
testing, manufacturing, distribution and sales networks such as war, terrorist
activities, and political unrest; and (xv) the extent and duration of the
current recession in the global economy, including the timing of expected
economic recovery in the United States. and abroad; (xvi) outcomes of litigation
and regulatory actions; and (xvii) the other risks and uncertainties described
under "Risk Factors" and "Management`s Discussion and Analysis of Financial
Condition and Results of Operations" in the Company`s prospectus filed pursuant
to Rule 424(b) under the Securities Act of 1933 as amended (the Securities Act),
with the SEC on November 9, 2009 and in subsequent periodic reports on Forms
10-K and 10-Q. Should one or more of these risks or uncertainties materialize,
or should any of these assumptions prove to be incorrect, actual results may
vary in material respects 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.

STR Holdings, Inc.
CONDENSED CONSOLIDATED INCOME STATEMENT
All amounts in thousands except shares and per share amounts

Quarter Ended September 30, 2009 Quarter Ended September 30, 2008 Nine Months Ended September 30, 2009 Nine Months Ended September 30, 2008
(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Net sales - Solar $ 35,362 $ 48,134 $ 99,192 $ 134,007
Net sales - Quality Assurance 31,956 28,333 85,804 79,192
Total net sales 67,318 76,467 184,996 213,199

Cost of sales - Solar 21,837 26,324 62,904 69,407
Cost of sales - Quality Assurance 20,155 18,273 56,259 53,311
Total cost of sales 41,992 44,597 119,163 122,718

Gross profit 25,326 31,870 65,833 90,481

Selling, general and administrative expenses 9,498 11,771 29,760 33,414
Bad debt expense 20 129 1,372 726
Operating Income 15,808 19,970 34,701 56,341

Other income (expense) (3,966 ) (5,846 ) (12,020 ) (16,457 )
Income before income tax expense 11,842 14,124 22,681 39,884
Income tax expense 3,955 5,219 8,551 15,006
Net Income $ 7,887 $ 8,905 $ 14,130 $ 24,878

Earnings per share:
Basic $ 0.22 $ 0.25 $ 0.39 $ 0.69
Diluted $ 0.21 $ 0.24 $ 0.38 $ 0.67

* Non-GAAP earnings per share:
Basic $ 0.29 $ 0.31 $ 0.58 $ 0.88
Diluted $ 0.28 $ 0.30 $ 0.57 $ 0.85

Weighted average shares outstanding:
Basic 36,665,586 36,175,080 36,490,833 36,051,405
Diluted 37,298,120 37,398,417 37,201,579 37,260,225

* Please refer to the reconciliation of Non-GAAP measures included in this release.

STR Holdings, Inc.
CONDENSED CONSOLIDATED BALANCE SHEET
All amounts in thousands except unit amounts

September 30, 2009 December 31, 2008
ASSETS (Unaudited)

CURRENT ASSETS
Cash, cash equivalents and short term investments $ 50,340 $ 27,868
Accounts receivable, trade, net 32,453 36,454
Inventories 10,295 18,771
Other current assets 7,173 7,145
Total current assets 100,261 90,238

Property, plant and equipment, net 67,403 62,516
Intangibles 442,397 450,965
Other noncurrent assets 17,554 17,203
Total assets $ 627,615 $ 620,922

LIABILITIES, CONTINGENTLY REDEEMABLE UNITS AND UNITHOLDERS' EQUITY

CURRENT LIABILITIES
Current portion of long-term debt $ 2,023 $ 2,015
Interest rate swap 5,110 -
Other current liabilities 37,850 45,055
Total current liabilities 44,983 47,070
Long-term debt, less current portion 253,988 255,506
Interest rate swap liability - 6,013
Other long-term liabilities 96,886 97,436
Total liabilities 395,857 406,025

CONTINGENTLY REDEEMABLE UNITS 3,776 2,930

UNITHOLDERS' EQUITY
Unitholders' equity 227,982 211,967
Total liabilities, contingently redeemable units and unitholders' equity $ 627,615 $ 620,922

STR Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
As of September 30, 2009
All amounts in thousands

Quarter Ended September 30, 2009 Quarter Ended September 30, 2008 Nine Months Ended September 30, 2009 Nine Months Ended September 30, 2008
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
OPERATING ACTIVITIES
Net income $ 7,887 $ 8,905 $ 14,130 $ 24,878
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 3,062 2,203 8,822 6,304
Amortization of intangibles 2,876 2,875 8,628 8,627
Amortization of deferred financing costs 288 285 863 878
Stock-based compensation expense 859 413 1,852 1,346
Unrealized (gain) loss on interest rate swap (316 ) (172 ) (903 ) 115
Earnings in equity investments (68 ) (74 ) (227 ) (74 )
Loss on disposal of property, plant and equipment - - 10 -
Provision for bad debt expense 20 129 1,372 726
Provision for deferred taxes (520 ) 373 (573 ) (521 )
Changes in operating assets and liabilities 1,616 (1,728 ) 2,636 (3,335 )
Net cash provided by operating activities 15,704 13,209 36,610 38,944

INVESTING ACTIVITIES (3,832 ) (7,774 ) (14,443 ) (22,733 )

FINANCING ACTIVITIES (1,167 ) (2,753 ) (2,403 ) (3,754 )

Effect of exchange rate changes on cash 1,170 (1,934 ) 1,708 (774 )

Net increase in cash and cash equivalents 11,875 748 21,472 11,683
Cash and cash equivalents, Beginning of period 37,465 32,115 27,868 21,180
Cash and cash equivalents, End of period $ 49,340 $ 32,863 $ 49,340 $ 32,863

* Free cash flow $ 12,872 $ 5,435 $ 23,167 $ 16,211

* Please refer to the reconciliation of Non-GAAP measures included in this release.

STR Holdings, Inc.
RECONCILIATION OF NON-GAAP MEASURES
As of September 30, 2009
All amounts in thousands except shares and per share amounts

Three Months Ended September 30, 2009 Three Months Ended September 30, 2008 Nine Months Ended September 30, 2009 Nine Months Ended September 30, 2008
Non-GAAP Earnings Per Share (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Income $ 7,887 $ 8,905 $ 14,130 $ 24,878
Add:
Amortization of deferred financing costs 288 285 863 878
Stock-based compensation expense 859 413 1,852 1,346
Intangible asset amortization expense 2,876 2,875 8,628 8,627
Tax effect of Non-GAAP adjustments (1,344 ) (1,320 ) (4,435 ) (4,074 )
Non-GAAP net income $ 10,566 $ 11,158 $ 21,038 $ 31,655

Non-GAAP earnings per share:
Basic $ 0.29 $ 0.31 $ 0.58 $ 0.88
Diluted $ 0.28 $ 0.30 $ 0.57 $ 0.85

Weighted average shares outstanding:
Basic 36,665,586 36,175,080 36,490,833 36,051,405
Diluted 37,298,120 37,398,417 37,201,579 37,260,225

Three Month Ended September 30, 2009 Three Month Ended September 30, 2008 Nine Months Ended September 30, 2009 Nine Months Ended September 30, 2008
Free Cash Flow (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash flow from operations $ 15,704 $ 13,209 $ 36,610 $ 38,944
Less:
Capital expenditures (2,832 ) (7,774 ) (13,443 ) (22,733 )

Free cash flow $ 12,872 $ 5,435 $ 23,167 $ 16,211

Non-GAAP Financial Measures

To supplement the Company`s condensed consolidated financial statements, which
statements are prepared and presented in accordance with accounting principles
generally accepted in the United States of America (GAAP), the Company uses two
non-GAAP financial measures called non-GAAP EPS and free cash flow. The Company
defines non-GAAP EPS as net income not including the impact of amortization of
deferred financing costs, stock-based compensation and intangible asset
amortization expense divided by the weighted average shares outstanding. Free
cash flow is defined as cash flow from operations less capital expenditures. The
Company uses these non-GAAP financial measures for financial and operational
decision making and as a means to evaluate period-to-period comparisons. Our
presentations of these measures, however, may not be comparable to similarly
titled measures used by other companies.

Management believes that non-GAAP EPS provides meaningful supplemental
information regarding the Company's 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.

The Company believes free cash flow is an important measure of its overall
liquidity and its ability to fund future growth and provide a return to
shareowners. Free cash flow does not reflect, among other things, mandatory debt
service, other borrowing activity, discretionary dividends on the Company's
common stock and acquisitions.

STR Holdings, Inc.
Barry Morris, Executive Vice President and Chief Financial Officer
(860) 749-8371
barry.morris@strus.com
or
Joseph Radziewicz, Controller and Principal Accounting Officer
(860) 749-8371
joseph.radziewicz@strus.com
or
ICR Inc.
Ina McGuiness, Investor Relations Consultant
(310) 954-1100
Ina.McGuinness@icrinc.com

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