Third Quarter 2011 Revenue of $99.8 Million
Loss per Share of $0.02 Includes $1.7 Million in Relocation Costs
NEW YORK, Nov. 9, 2011 (GLOBE NEWSWIRE) -- Fuel Systems Solutions, Inc. (Nasdaq:FSYS) reported results for its third quarter and nine months ended September 30, 2011.
Mariano Costamagna, Fuel Systems' CEO, said, "Our third quarter revenue grew 16% to $99.8 million and we reported gross margin of 24% as our industrial business delivered another solid quarter and our aftermarket business grew further. While our revenue mix continued to shift from prior year comparisons we continue to gain traction in newer markets. IMPCO Automotive's recently announced selection as the Tier-One supplier for General Motors' new CNG bi-fuel commercial pickup truck that will begin late in 2012 as well as increasing volumes from our partnerships in Asia/Pacific and Latin America exemplify these new market opportunities. We have also made the decision to consolidate our automotive business in the Netherlands into our Italian facilities. 2011 remains an investment year as we focus on building our North American automotive operations while addressing our entry into developing markets with appropriate local strategies."
Third Quarter Financial Results
Revenue for the third quarter of 2011 was $99.8 million compared to $86.1 million in the third quarter of 2010. The revenue increase is primarily attributable to the strength in the industrial markets and a $7.5 million increase due to foreign exchange rates.
During the third quarter, Fuel Systems incurred $1.7 million in costs associated with the relocation of a portion of the automobile business (GFI) from the Netherlands to Italy. This portion of the automotive business will be included in the BRC segment beginning with fourth quarter 2011 results.
Gross profit for the third quarter 2011 was $23.9 million, or 24% of revenue, compared to $24.8 million, or 29% of revenue a year ago, reflecting changes in the mix of transportation and industrial revenue, relatively lower margins in the US automotive business, and $0.9 million associated with the non-cash write-offs from the GFI business relocation. Operating income for the period totaled $1.7 million, or 2% of revenue, compared to $7.5 million, or 9% of revenue, in the third quarter of 2010, reflecting greater R&D and SG&A expenses than last year's quarter as the Company has completed four acquisitions and continues to invest in new technologies, and including $0.8 million in SG&A expense associated with severance and other costs resulting from the GFI business relocation.
Net loss for the third quarter 2011 was $0.4 million, or $0.02 per diluted share, compared to net income of $5.2 million, or $0.29 per diluted share in the third quarter 2010. The net loss was driven by an effective tax rate for the quarter in excess of 100% of pretax income which is a result of the taxable income in various jurisdictions combined with losses incurred in the United States and certain foreign jurisdictions for which no tax benefit has been recorded.
On a segment basis, third quarter 2011 revenues from BRC Operations increased 18% to $63.0 million, compared to $53.2 million from the same quarter a year ago, and revenues from IMPCO Operations increased 8% to $39.0 million from the same quarter a year ago. BRC third quarter 2011 operating income was $4.6 million compared to $3.7 million in the same period a year ago; IMPCO third quarter 2011 operating loss was $1.7 million, which reflects the start-up nature of and continued investment in the US automotive market and abovementioned relocation costs, compared to operating income of $5.1 million in the same period a year ago. A table presenting operating segment data can be found in the tables below.
Nine Months Ended September 30, 2011 Financial Results
Total revenue was $307.2 million compared to $347.5 million for the nine months of 2010. Net income for the nine months of 2011 was $3.8 million, or $0.19 per diluted share, compared to $40.1 million, or $2.27 per diluted share, for the nine months of 2010. The decrease in 2011 versus the prior year is primarily attributable to the expiration of the Italian government's 2009 incentive program in early 2010.
Company Outlook
Fuel Systems is updating its 2011 outlook, which expects: the current mix of revenue to continue; continued positive demand in the automotive business; and stable trends in the IMPCO division's industrial business; and continued investments for growth in the U.S. automotive business, which are expected to negatively impact the outlook for gross and operating profitability. The Company now expects:
- Full year 2011 revenue of $390 million to $410 million;
- 2011 gross margin of 23% to 24%, at the lower end of its prior outlook for 23% to 25%;
- 2011 operating margin of 4% to 5%, a revision from the prior outlook for 5% to 7%;
- The outlook for gross and operating margin includes the effect of the third quarter 2011 GFI relocation charges.
The company continues to target gross margin in excess of 25% and EBITDA margins in the mid-teens as its new markets begin to develop and operate in a more efficient manner over the medium term.
Pietro Bersani, Fuel Systems' CFO, stated, "Fuel Systems' industrial business continued to perform well in the third quarter, particularly as demand for auxiliary power units and mobile products increased. The aftermarket automotive business continues to benefit globally from the disparity in pricing of gasoline and natural gas, as well as from economic pressures in some European geographies that provide further incentive to invest in lower cost fuel solutions. We remain focused on investing for growth in emerging markets and believe these investments, in addition to our current mix of business, will position us for future growth."
Conference Call
The Company will host a conference call today, November 9th at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time to discuss its third quarter 2011 financial results and other matters. To listen to the call live, please dial 877-356-8063 at least 10 minutes before the start of the conference. International participants may dial 706-679-2544. The conference ID will be 17854815. The call is also being webcast and can be accessed from the "Investor Relations" section of the Company's website at www.fuelsystemssolutions.com. A telephone replay will be available until midnight Eastern Time on November 11th by dialing 855-859-2056 or 404-537-3406 and entering pass code 17854815. A replay will also be available at the web address above for 90 days.
Forward-Looking Statements
This press release contains certain forward-looking statements that involve risks and uncertainties, including, without limitation, expressed or implied statements concerning the Company's outlook for 2011, as well as its position in the market place, the success of products and the success and integration of recent acquisitions. Such statements represent only our opinions and predictions. The Company's actual results may differ materially. Factors that may cause the Company's results to differ include, but are not limited to our ability to integrate recently acquired businesses and to realize the expected synergies; economic uncertainties caused by political instability in certain of the local markets we do business in; the potential growth of non-gaseous alternative fuel products and other new technologies; currency rate fluctuations and devaluations; our ability to realign costs with current market conditions; unanticipated litigations; potential changes in tax policies and government incentives and their effect on the economic benefits of our products to consumers; the weakness in financial and credit markets and the economy; and the repeal or implementation of government regulations relating to reducing vehicle emissions. Readers also should consider the risk factors set forth in the Company's reports filed with the Securities and Exchange Commission, including, but not limited to, those contained in the "Risk Factors" section of the Company's Annual Report on Form 10-K, for the year ended December 31, 2010. The Company does not undertake to update or revise any of its forward-looking statements or guidance even if experience or future changes show that the indicated results or events will not be realized.
About Fuel Systems Solutions
Fuel Systems Solutions (Nasdaq:FSYS) is a leading designer, manufacturer and supplier of proven, cost-effective alternative fuel components and systems for use in transportation and industrial applications. Fuel Systems' components and systems control the pressure and flow of gaseous alternative fuels, such as propane and natural gas, used in internal combustion engines. These components and systems feature the Company's advanced fuel system technologies, which improve efficiency, enhance power output and reduce emissions by electronically sensing and regulating the proper proportion of fuel and air required by the internal combustion engine. In addition to the components and systems, the Company provides engineering and systems integration services to address unique customer requirements for performance, durability and configuration. The Company is composed of two operating subsidiaries: IMPCO Technologies and BRC. IMPCO Technologies is a leader in the heavy duty, industrial, power generation and stationary engines sectors and recently established a U.S. Automotive division. BRC is a leader in the light duty and automobile alternative fuel sectors and has established alliances with several major automobile manufacturers for OEM projects. Additional information is available at www.fuelsystemssolutions.com.
| FUEL SYSTEMS SOLUTIONS, INC. | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (In thousands, except share and per share data) | ||
| (Unaudited) | ||
| September 30, 2011 |
December 31, 2010 |
|
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents | $ 94,549 | $ 124,775 |
| Accounts receivable, less allowance for doubtful accounts of $2,708 and $2,858 at September 30, 2011 and December 31, 2010, respectively | 68,160 | 57,628 |
| Inventories | 105,984 | 85,854 |
| Deferred tax assets, net | 7,022 | 8,551 |
| Other current assets | 22,057 | 22,780 |
| Related party receivables | 7,435 | 7,340 |
| Total current assets | 305,207 | 306,928 |
| Equipment and leasehold improvements, net | 60,698 | 59,653 |
| Goodwill, net | 60,542 | 53,815 |
| Deferred tax assets, net | 356 | 335 |
| Intangible assets, net | 31,673 | 30,285 |
| Other assets | 2,071 | 2,196 |
| Related party receivables | 1,216 | 1,351 |
| Total Assets | $ 461,763 | $ 454,563 |
| LIABILITIES AND EQUITY | ||
| Current liabilities: | ||
| Accounts payable | $ 51,409 | $ 46,610 |
| Accrued expenses | 39,970 | 37,928 |
| Income taxes payable | 4,631 | 3,258 |
| Current portion of term loans and other loans | 5,543 | 4,823 |
| Deferred tax liabilities, net | 112 | 770 |
| Related party payables | 4,847 | 2,690 |
| Total current liabilities | 106,512 | 96,079 |
| Term and other loans | 5,789 | 7,571 |
| Other liabilities | 8,642 | 8,218 |
| Deferred tax liabilities | 3,139 | 4,128 |
| Total Liabilities | 124,082 | 115,996 |
| Equity: | ||
| Preferred stock, $0.001 par value, authorized 1,000,000 shares; none issued and outstanding at September 30, 2011 and December 31, 2010 | — | — |
| Common stock, $0.001 par value, authorized 200,000,000 shares; 20,089,375 issued and 20,013,849 outstanding at September 30, 2011; and 20,028,968 issued and 19,921,217 outstanding at December 31, 2010 |
20 |
20 |
| Additional paid-in capital | 318,369 | 322,948 |
| Shares held in treasury, 16,055 and 18,545 shares at September 30, 2011 and December 31, 2010, respectively |
(523) |
(588 ) |
| Retained Earnings | 13,946 | 10,189 |
| Accumulated other comprehensive income | 5,869 | 2,237 |
| Total Fuel Systems Equity | 337,681 | 334,806 |
| Non-controlling interests | — | 3,761 |
| Total Equity | 337,681 | 338,567 |
| Total Liabilities and Equity | $ 461,763 | $ 454,563 |
| FUEL SYSTEMS SOLUTIONS, INC. | ||||
| CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS | ||||
| (In thousands, except share and per share data) | ||||
| (Unaudited) | ||||
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||
| 2011 | 2010 | 2011 | 2010 | |
| Revenue | $ 99,758 | $ 86,099 | $307,174 | $ 347,525 |
| Cost of revenue | 75,884 | 61,258 | 234,590 | 233,357 |
| Gross profit | 23,874 | 24,841 | 72,584 | 114,168 |
| Operating expenses: | ||||
| Research and development expense | 7,112 | 5,344 | 20,660 | 14,759 |
| Selling, general and administrative expense | 15,043 | 11,996 | 40,847 | 37,957 |
| Total operating expenses | 22,155 | 17,340 | 61,507 | 52,716 |
| Operating income | 1,719 | 7,501 | 11,077 | 61,452 |
| Other income (expense), net | (402) | (77) | (435) | 640 |
| Interest income (expense), net | 277 | 81 | 665 | (174) |
| Income before income taxes | 1,594 | 7,505 | 11,307 | 61,918 |
| Income tax expense | (2,021) | (2,235) | (7,454) | (21,315) |
| Net income (loss) | (427) | 5,270 | 3,853 | 40,603 |
| Less: Net income attributable to non-controlling interests | -- | (89) | (96) | (484) |
| Net income (loss) attributable to Fuel Systems | $ (427) | $ 5,181 | $ 3,757 | $ 40,119 |
| Net income (loss) per share attributable to Fuel Systems: | ||||
| Basic | $ (0.02) | $ 0.29 | $ 0.19 | $ 2.28 |
| Diluted | $ (0.02) | $ 0.29 | $ 0.19 | $ 2.27 |
| Number of shares used in per share calculation: | ||||
| Basic | 19,986,960 | 17,620,801 | 19,959,182 | 17,616,908 |
| Diluted | 19,986,960 | 17,684,106 | 20,089,887 | 17,679,293 |
| FUEL SYSTEMS SOLUTIONS, INC. | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In thousands); (Unaudited) | ||
|
Nine Months Ended September 30, |
||
| 2011 | 2010 | |
| Net income | $ 3,853 | $ 40,603 |
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||
| Depreciation and other amortization | 8,161 | 6,765 |
| Amortization of intangibles arising from acquisitions | 6,275 | 3,422 |
| Provision for doubtful accounts | 430 | 1,051 |
| Write down of inventory | 1,683 | 2,058 |
| Unrealized loss (gain) on foreign exchange transactions, net | 601 | 506 |
| Compensation expense related to stock option and restricted stock grants | 942 | 144 |
| (Gain) loss on disposal of assets | (31) | 389 |
| Reduction of contingent consideration | (605) | — |
| Changes in assets and liabilities, net of acquisitions: | ||
| (Increase) decrease in accounts receivable | (10,758) | 54,221 |
| Increase in inventories | (20,538) | (3,601) |
| Decrease (increase) in other current assets | 5,590 | (4,843) |
| Decrease in other assets | 182 | (100) |
| Increase (decrease) in accounts payable | 5,271 | (19,722) |
| Increase (decrease) in income taxes payable | 1,417 | (3,707) |
| Decrease in accrued expenses | (2,037) | (4,577) |
| Receivables from/payables to related party, net | 2,652 | (962) |
| Increase (decrease) in deferred income taxes, net | 132 | (1,271) |
| Decrease in long-term liabilities | (363) | (555) |
| Net cash provided by operating activities | 2,857 | 69,821 |
| Cash flows from investing activities: | ||
| Purchase of equipment and leasehold improvements | (9,663) | (20,926) |
| Acquisitions, net of cash acquired | (13,441) | (11,740) |
| Investment in joint venture | (33) | — |
| Amount in restricted cash for acquisition of non-controlling interest | (3,179) | — |
| Amount in escrow for contingent consideration | — | (4,000) |
| Controlling interest in previously unconsolidated affiliate | — | 1,044 |
| Proceeds from sale of assets | 466 | 473 |
| Net cash used in investing activities | (25,850) | (35,149) |
| Cash flows from financing activities: | ||
| Increase (decrease) in callable revolving lines of credit, net | 599 | (1,528) |
| Proceeds from revolving lines of credit | — | 14,500 |
| Payments on revolving lines of credit | — | (10,500) |
| Proceeds from term loans and other loans | — | 154 |
| Payments on term loans and other loans | (2,233) | (1,536) |
| Acquisition of non-controlling interest | (7,498) | — |
| Dividends issued by consolidated affiliates | — | (241) |
| Proceeds from exercise of stock options and warrants | 16 | 24 |
| (Purchase) proceeds of common shares held in trust, net | — | 156 |
| Payments of capital lease obligations | (174) | (251) |
| Net cash used in financing activities | (9,290) | 778 |
| Net (decrease) increase in cash and cash equivalents | (32,283) | 35,450 |
| Effect of exchange rate changes on cash | 2,057 | (6,429) |
| Net (decrease) increase in cash and cash equivalents | (30,226) | 29,021 |
| Cash and cash equivalents at beginning of period | 124,775 | 46,519 |
| Cash and cash equivalents at end of period | 94,549 | $ 75,540 |
| FUEL SYSTEMS SOLUTIONS, INC. | ||||
| OPERATING SEGMENT INFORMATION | ||||
| (In thousands); (Unaudited) | ||||
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||
| 2011 | 2010 | 2011 | 2010 | |
| Revenue: | ||||
| IMPCO Operations | $ 38,958 | $ 36,255 | $ 120,745 | $ 90,095 |
| BRC Operations | 62,956 | 53,150 | 192,306 | 265,262 |
| Intersegment Eliminations | (2,156) | (3,306) | (5,877) | (7,832) |
| Total | $ 99,758 | $ 86,099 | $ 307,174 | $ 347,525 |
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||
| 2011 | 2010 | 2011 | 2010 | |
| Operating Income (Loss): | ||||
| IMPCO Operations | $ (1,712) | $ 5,050 | $ 999 | $ 8,700 |
| BRC Operations | 4,582 | 3,670 | 13,815 | 56,564 |
| Corporate Expenses (1) | (1,151) | (1,219) | (3,737) | (3,812) |
| Total | $ 1,719 | $ 7,501 | $ 11,077 | $ 61,452 |
(1) Represents corporate expense not allocated to either of the business segments.