Third Quarter Revenue of $89.6 Million
Loss per Share of $0.03 Includes $0.09 Tax Expense
Reducing 2012 Outlook
NEW YORK, Nov. 8, 2012 (GLOBE NEWSWIRE) -- Fuel Systems Solutions, Inc. (Nasdaq:FSYS) reported results for its third quarter and nine months ended September 30, 2012.
Mariano Costamagna, Fuel Systems' CEO, said, "Fuel Systems' third quarter automotive revenue was essentially unchanged in constant currency, with growth in some European countries offset by softer aftermarkets and OEM demand in Latin America and Asia. We also experienced slowing in our industrial business as end markets are weaker near-term."
"Low natural gas prices compared to diesel or gasoline continues to drive the trend toward natural gas vehicles, and OEMs around the world are adopting gaseous and bi-fuel strategies. However, some markets, including the US, are in the early stages of natural gas adoption and OEM rollouts are slower to evolve than anticipated. This plus the near-term slowing in some of our key industrial markets causes us to reduce our outlook for the year. Long-term, we continue to believe our complete, proven systems offer highly competitive solutions in our target markets and that Fuel Systems is well-positioned to gain share as a top-three provider. We are dedicated to working with our partners to meet the global demand for vehicles that run on cheaper, cleaner and abundant alternative fuels," Mr. Costamagna added.
Third Quarter 2012 Financial Results
Revenue for the third quarter of 2012 was $89.6 million compared to $99.8 million in the third quarter of 2011. Foreign exchange negatively impacted revenues by $8.5 million in the third quarter of 2012. The remainder of the variance results from overall volumes being roughly comparable to last year's level, with declines in heavy duty and auxiliary power unit (APU) volumes in the industrial markets and a decrease in aftermarket volumes in automotive offset by gains in DOEM volumes in the US and abroad and increases in compressor sales.
Gross profit for the third quarter of 2012 was $18.8 million, or 21.0% of revenue, compared to $23.9 million, or 23.9% of revenue in the third quarter of 2011, primarily reflecting the changes in the margin profile of our mix of business and increased costs of $0.8 million associated with warranties and net inventory write-downs. Operating income for the third quarter of 2012 totaled $0.2 million, or 0.2% of revenue, compared to operating income of $1.7 million, or 1.7% of revenue in the third quarter of 2011, reflecting lower operating expenses, which were more than offset by lower gross margin.
EBITDA for the third quarter of 2012 was $5.3 million, or 5.9% of revenue, compared to $6.7 million, or 6.7% of revenue in the third quarter of 2011, primarily reflecting the abovementioned revenue and cost variances. EBITDA is a non-GAAP measure. See "Non-GAAP Measures" below for a discussion of this metric.
Pretax income for the third quarter of 2012 was $1.2 million compared to $1.6 million in the prior year third quarter. The tax rate for the third quarter of 2012 was 152% compared to 127% in the prior year third quarter. The Company operates in an international environment with significant operations in various locations outside of the United States which have statutory tax rates that are different from the US tax rate. Accordingly the consolidated income tax rate is a composite rate reflecting the earnings in various locations and the applicable rates. The unusually high income tax rates are primarily a result of the fluctuation of earnings in various jurisdictions and losses incurred in the US and certain foreign jurisdictions for which no tax benefits have been recorded. The Company now expects its effective tax rate for 2012 to be approximately 55%.
Net loss for the third quarter of 2012 was $0.6 million, or $0.03 per diluted share, compared to net loss of $0.4 million, or $0.02 per diluted share, in the third quarter of 2011.
A table presenting historical reclassified operating segment data can be found in the tables contained at the end of this release.
FSS Automotive Operations
FSS Automotive third quarter 2012 revenue was $61.2 million, compared to $68.4 million from the same quarter a year ago. The impact of foreign exchange on FSS Automotive was a negative $7.5 million; in constant currency, third quarter FSS Automotive revenue was comparable to the prior year reflecting increased DOEM volumes and increased compressor sales offset by declines in the aftermarket. FSS Automotive third quarter 2012 operating income was $0.6 million compared to an operating loss of $0.4 million in the same period a year ago. FSS Automotive third quarter 2012 EBITDA was $4.2 million, compared to $4.0 million a year ago.
FSS Industrial Operations
Revenue from FSS Industrial was $28.4 million compared to $31.3 million the same quarter a year ago. The impact of foreign exchange on FSS Industrial was a negative $1.0 million; in constant currency, third quarter FSS Industrial revenue decreased 6.1%, reflecting lower industrial demand in North America and Europe, and lower heavy duty and APU revenue. FSS Industrial third quarter 2012 operating income was $1.0 million compared to operating income of $3.3 million in the same period a year ago. FSS Industrial third quarter 2012 EBITDA was $2.4 million, compared to $3.8 million a year ago, which reflects the above revenue decrease and a lower gross profit margin.
Nine Months Ended September 30, 2012 Financial Results
Total revenue for the nine months of 2012 was $295.9 million compared to $307.2 million for the nine months of 2011. Net income for the nine months of 2012 was $5.3 million, or $0.27 per diluted share, compared to $3.8 million, or $0.19 per diluted share, for the nine months of 2011. EBITDA for the nine months of 2012 was $21.4 million compared to $25.1 million for the nine months of 2011.
Total FSS Automotive revenue for the nine months of 2012 was $203.1 million compared to $213.4 million for the same period a year ago. Automotive operating income was $4.4 million for the 2012 nine months compared to $4.2 million for the 2011 nine months. FSS Automotive EBITDA for the nine months of 2012 was $15.1 million compared to $15.9 million for the nine months of 2011.
Total FSS Industrial revenue for the nine months of 2012 was $92.8 million compared to $93.8 million for the same period a year ago. Industrial operating income was $7.9 million for the 2012 nine months compared to $10.6 million for the 2011 nine months. FSS Industrial EBITDA for the nine months of 2012 was $11.0 million compared to $12.9 million for the nine months of 2011.
Company Outlook
Fuel Systems has reduced its 2012 outlook, including the following assumptions:
- Automotive operations – based on the latest information available from OEM customers, revenue contributions are now expected to be delayed from programs planned in Thailand and certain Latin American automotive markets from 2012 until 2013; lower revenue from slower than previously expected growth in European aftermarket products; and a reduced revenue contribution from US Automotive as the market continues to develop more slowly than originally anticipated.
- Industrial operations – expected continued slowdown in stationery equipment, APUs and mobile industrial equipment markets.
Based on the aforementioned factors, the Company now expects full year 2012 revenue to be between $380 million and $395 million, and expects 2012 gross margin of 23% to 24% with 2012 operating margin of 1% to 3%.
Mr. Costamagna added, "We are implementing plans for performance improvement, and it is expected that we can reduce our cost structure and expenses, improve operating efficiencies and forecasting, and provide synergies that will enable us to manage our business well during this period of slower end market demand. We remain focused on execution and new product development as we invest in the future growth for bi- and mono-fuel systems worldwide."
Non-GAAP Measures
To provide investors and others with additional information regarding Fuel Systems' results, in addition to the results presented in accordance with generally accepted accounting principles, or GAAP, in this press release, Fuel Systems presents EBITDA, which is a non-GAAP measure. A reconciliation of this non-GAAP measure to the closest GAAP financial measure is presented in the financial tables below under the heading "Non-GAAP FINANCIAL MEASURE RECONCILIATION." EBITDA is determined by adding the following items to Net Income, the closest GAAP financial measure: Net Income attributable to non-controlling interest; Depreciation & Amortization; Interest income, net; and Benefit (Provision) for Income Taxes. Fuel Systems' management believes this non-GAAP financial measure offers additional insight into the Company's ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in the business, as it excludes certain non-cash items. This non-GAAP financial measure also can provide useful information to investors and others in understanding and evaluating Fuel Systems' operating results and future prospects when comparing financial results across accounting periods and to those of peer companies. Fuel Systems may not define this non-GAAP financial measure in a manner similar to other companies.
Conference Call
The Company will host a conference call today, November 8th at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time to discuss its third quarter 2012 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 40136696. The call will be webcast and can be accessed from the "Investor Relations" section of the Company's website at http://www.fuelsystemssolutions.com/. A telephone replay will be available until midnight Eastern Time on November 13th by dialing 855-859-2056 or 404-537-3406 and entering pass code 40136696. 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 2012, as well as its position in the market place, the success of products and the success and integration of recent acquisitions and organizational changes. 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 a further slowing of economic activity, our ability to integrate recently acquired businesses and to realize the expected synergies; our ability to reduce our cost structure and expenses as anticipated; the unpredictable nature of the developing alternative fuel US automotive market; unanticipated economic uncertainties caused by political instability in certain of the local markets we do business in; the growth of non-gaseous alternative fuel products and other new technologies; currency rate fluctuations and devaluations; our ability to promptly 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 continued 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, 2011. The Company does not undertake to update or revise any of its forward-looking statements.
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. Additional information is available at www.fuelsystemssolutions.com.
| Company Contact: |
| Pietro Bersani, Chief Financial Officer Fuel Systems Solutions, Inc. |
| (646) 502-7170 |
| Investor Relations Contacts: |
| LHA |
| Carolyn M. Capaccio |
| ccapaccio@lhai.com |
| Cathy Mattison |
| cmattison@lhai.com (415) 433-3777 |
– Tables Follow –
|
FUEL SYSTEMS SOLUTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) (Unaudited) |
||
| September 30, 2012 | December 31, 2011 | |
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents | $54,635 | $96,740 |
| Short-term investments | 11,593 | — |
| Accounts receivable, less allowance for doubtful accounts of $2,968 and $2,665 at September 30, 2012 and December 31, 2011, respectively | 72,735 | 62,551 |
| Inventories | 114,496 | 103,382 |
| Deferred tax assets, net | 7,636 | 6,512 |
| Other current assets | 13,008 | 19,125 |
| Related party receivables | 6,316 | 10,975 |
| Total current assets | 280,419 | 299,285 |
| Equipment and leasehold improvements, net | 60,564 | 59,051 |
| Goodwill, net | 58,539 | 58,968 |
| Deferred tax assets, net | 5,495 | 363 |
| Intangible assets, net | 25,845 | 29,422 |
| Other assets | 883 | 1,187 |
| Long-term investments | 7,446 | 884 |
| Related party receivables | — | 842 |
| Total Assets | $439,191 | $450,002 |
| LIABILITIES AND EQUITY | ||
| Current liabilities: | ||
| Accounts payable | $44,148 | $54,816 |
| Accrued expenses | 41,228 | 36,230 |
| Income taxes payable | 3,444 | 2,517 |
| Current portion of term loans and debt | 139 | 6,367 |
| Deferred tax liabilities, net | 162 | 82 |
| Related party payables | 3,653 | 4,680 |
| Total current liabilities | 92,774 | 104,692 |
| Term and other loans | 392 | 3,698 |
| Other liabilities | 9,694 | 7,885 |
| Deferred tax liabilities, net | 3,261 | 3,905 |
| Total Liabilities | 106,121 | 120,180 |
| Equity: | ||
| Preferred stock, $0.001 par value, authorized 1,000,000 shares; none issued and outstanding at June 30, 2012 and December 31, 2011 | — | — |
| Common stock, $0.001 par value, authorized 200,000,000 shares; 20,091,622 issued and 20,023,509 outstanding at September 30, 2012; and 20,089,591 issued and 20,014,065 outstanding at December 31, 2011 | 20 | 20 |
| Additional paid-in capital | 319,386 | 318,632 |
| Shares held in treasury, 8,642 and 16,055 shares at September 30, 2012 and December 31, 2011, respectively | (322) | (523) |
| Retained Earnings | 20,685 | 15,357 |
| Accumulated other comprehensive income (loss) | (6,699) | (3,664) |
| Total Equity | 333,070 | 329,822 |
| Total Liabilities and Equity | $439,191 | $450,002 |
|
FUEL SYSTEMS SOLUTIONS, INC. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except share and per share data) (Unaudited) |
||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| 2012 | 2011 | 2012 | 2011 | |
| Revenue | $89,561 | $99,758 | $295,902 | $307,174 |
| Cost of revenue | 70,728 | 75,884 | 225,400 | 234,590 |
| Gross profit | 18,833 | 23,874 | 70,502 | 72,584 |
| Operating expenses: | ||||
| Research and development expense | 6,772 | 7,112 | 21,935 | 20,660 |
| Selling, general and administrative expense | 11,842 | 15,043 | 41,076 | 40,847 |
| Total operating expenses | 18,614 | 22,155 | 63,011 | 61,507 |
| Operating income | 219 | 1,719 | 7,491 | 11,077 |
| Other income (expense), net | 863 | (402) | 1,013 | (435) |
| Interest income, net | 109 | 277 | 200 | 665 |
| Income from operations before income taxes and non-controlling interest | 1,191 | 1,594 | 8,704 | 11,307 |
| Income tax expense | (1,809) | (2,021) | (3,376) | (7,454) |
| Net (loss) income | (618) | (427) | 5,328 | 3,853 |
| Less: Net income attributable to non-controlling interests | — | — | — | (96) |
| Net (loss) income attributable to Fuel Systems Solutions, Inc. | $(618) | $(427) | $5,328 | $3,757 |
| Net (loss) income per share attributable to Fuel Systems Solutions, Inc: | ||||
| Basic | $(0.03) | $(0.02) | $0.27 | $0.19 |
| Diluted | $(0.03) | $(0.02) | $0.27 | $0.19 |
| Number of shares used in per share calculation: | ||||
| Basic | 20,023,509 | 19,986,960 | 20,019,218 | 19,959,182 |
| Diluted | 20,023,509 | 19,986,960 | 20,056,224 | 20,089,887 |
|
FUEL SYSTEMS SOLUTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
||
| Nine Months Ended | ||
| September 30, | ||
| 2012 | 2011 | |
| Net income | $5,328 | $3,853 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation and other amortization | 7,830 | 8,161 |
| Amortization of intangibles arising from acquisitions | 5,042 | 6,275 |
| Provision for doubtful accounts | 483 | 430 |
| Provision for related party loan receivable | 828 | — |
| Write down of inventory | 2,078 | 1,683 |
| Deferred income taxes | (6,749) | 132 |
| Unrealized (gain) loss on foreign exchange transactions, net | (258) | 601 |
| Compensation expense related to equity awards | 936 | 942 |
| Loss (gain) on disposal of equipment and leasehold improvements | 726 | (31) |
| Reduction of contingent consideration | — | (605) |
| Changes in assets and liabilities, net of acquisitions: | ||
| Increase in accounts receivable | (9,761) | (10,758) |
| Increase in inventories | (11,614) | (20,538) |
| Decrease in other current assets | 2,652 | 5,590 |
| Decrease in other assets | 160 | 182 |
| (Decrease) increase in accounts payable | (8,458) | 5,271 |
| Increase in income taxes payable | 957 | 1,417 |
| Increase (decrease) in accrued expenses | 9,037 | (2,037) |
| Receivables from/payables to related party, net | 3,300 | 2,652 |
| Decrease in long-term liabilities | (115) | (363) |
| Net cash provided by operating activities | 2,402 | 2,857 |
| Cash flows from investing activities: | ||
| Purchase of equipment and leasehold improvements | (11,295) | (9,663) |
| Purchase of investments | (18,277) | — |
| Acquisition, net of cash acquired | (5,700) | (13,441) |
| Amount in restricted cash for acquisition of non-controlling interest | 2,820 | (3,179) |
| Other | 253 | 433 |
| Net cash used in investing activities | (32,199) | (25,850) |
| Cash flows from financing activities: | ||
| (Decrease) increase in callable revolving lines of credit, net | (2,438) | 599 |
| Payments on term loans and other loans | (6,867) | (2,407) |
| Acquisition of non-controlling interest | (2,820) | (7,498) |
| Other | 18 | 16 |
| Net cash used in financing activities | (12,107) | (9,290) |
| Decrease in cash and cash equivalents | (41,904) | (32,283) |
| Effect of exchange rate changes on cash | (201) | 2,057 |
| Net decrease in cash and cash equivalents | (42,105) | (30,226) |
| Cash and cash equivalents at beginning of period | 96,740 | 124,775 |
| Cash and cash equivalents at end of period | $54,635 | $94,549 |
|
FUEL SYSTEMS SOLUTIONS, INC. OPERATING SEGMENT INFORMATION (In thousands) (Unaudited) |
||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| 2012 | 2011 | 2012 | 2011 | |
| Revenue: | ||||
| FSS Industrial | $28,403 | $31,314 | $92,800 | $93,776 |
| FSS Automotive | 61,158 | 68,444 | 203,102 | 213,398 |
| Total | $89,561 | $99,758 | $295,902 | $307,174 |
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| 2012 | 2011 | 2012 | 2011 | |
| Operating Income (Loss): | ||||
| FSS Industrial | $989 | $3,307 | $7,875 | $10,598 |
| FSS Automotive | 557 | (437) | 4,358 | 4,216 |
| Corporate Expenses (1) | (1,327) | (1,151) | (4,742) | (3,737) |
| Total | $219 | $1,719 | $7,491 | $11,077 |
| (1) Represents corporate expense not allocated to either of the business segments. | ||||
|
FUEL SYSTEMS SOLUTIONS, INC. NON-GAAP FINANCIAL MEASURE RECONCILIATION (In thousands) (Unaudited) |
||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| Segment EBITDA: | 2012 | 2011 | 2012 | 2011 |
| FSS Industrial | $2,398 | $3,833 | $10,962 | $12,899 |
| FSS Automotive | 4,221 | 3,999 | 15,126 | 15,915 |
| Corporate and Other | (1,347) | (1,160) | (4,712) | (3,736) |
| Total EBITDA (Non-GAAP) | $5,272 | $6,672 | $21,376 | $25,078 |
| Reconciliation: | ||||
| Net Income attributable to the non-controlling interest | -- | -- | -- | (96) |
| Interest income, net | 109 | 277 | 200 | 665 |
| (Provision) for Income taxes | (1,809) | (2,021) | (3,376) | (7,454) |
| Depreciation & Amortization | (4,190) | (5,355) | (12,872) | (14,436) |
| Net (Loss) Income attributable to Fuel Systems Solutions, Inc. | $(618) | $(427) | $5,328 | $3,757 |