SANTA ANA, Calif., Nov. 9, 2006 (PRIMEZONE) -- Fuel Systems Solutions, Inc. (Nasdaq:FSYS) today reported results for its third quarter ended September 30, 2006, reflecting continued revenue growth and profitability.
Revenue for the third quarter climbed 13.0 percent to $55.4 million from $49.1 million last year. Operating income increased significantly to $6.8 million from $467,000 a year ago, reflecting strength of its BRC and IMPCO operations, as well as certain cost-control initiatives implemented in 2005. Other income in the third quarter of 2006 totaled $203,000, primarily from unrealized foreign exchange gains on an inter-company loan, compared with expense of $35,000 during the same quarter in 2005. Income tax expense, which primarily represents foreign taxes, was $2.7 million in the third quarter of 2006, compared with $9.3 million in the same quarter of 2005, which included an increase in the valuation allowance for deferred tax assets of approximately $8.7 million. Net income for the third quarter increased to $3.4 million, or $0.22 per diluted share, compared with a net loss of $9.2 million, or $0.64 per share, during the same period one year ago.
For the nine months ended September 30, revenue jumped 37.5 percent to $168.7 million from $122.7 million compared with the same period a year earlier. Operating income during the same period increased to $18.2 million from $901,000 during the same period in 2005. Both the increases to revenue and to operating income reflect the inclusion of 100 percent of the company's wholly owned BRC subsidiary in results for the entire nine-month period of 2006, while only 50 percent of BRC's results were included for the three months ended March 31, 2005, prior to being consolidated. In addition to the strength of BRC and gains within the transportation market, the company's industrial business, IMPCO Technologies, previously reported as U.S. and International operation segments, experienced solid performance. Other expense of $1.0 million for the nine months in 2006 consisted primarily of an unrealized foreign exchange loss on an inter-company loan, compared with other income of $936,000 in the same period of the prior year, primarily from unrealized foreign exchange gains on the same inter-company loan. Income tax expense, which primarily consists of foreign taxes, was $7.4 million during the nine months of 2006, compared with $11.6 million for the same period last year. As noted above, the nine months of 2005 included an increase in the valuation allowance for deferred tax assets of approximately $8.7 million. Net income was $8.4 million, or $0.55 per diluted share for the nine month-period of 2006, compared with a net loss of $10.2 million, or $0.78 per diluted share, a year ago -- reflecting improvements in both IMPCO and BRC operations.
Outlook
"Our results for the third quarter continue to support management's optimism about the company's leadership position within the gaseous fuels market -- enhanced by three primary market drivers: high oil prices, an increasing global focus on tangible energy security and clean air solutions," said Mariano Costamagna, president and chief executive officer of Fuel Systems Solutions.
He indicated that the company expects to surpass its previously stated revenue guidance of $200 million for the year, and now expects to achieve revenue of at least $210 million in 2006. He also reiterated that the company expects to achieve gross profit margin of 25 to 27 percent and operating margin of approximately 10 percent for 2006.
Fuel Systems Solutions, which completed its first quarter as a new holding company, expects its industrial business segment to ramp up beginning in the fourth quarter and full contributions to be realized in 2007 from OEM customer demand related to new U.S. EPA Tier III emission regulations.
Costamagna noted the launch at the end of the third quarter of a new Compressed Natural Gas (CNG) refueling station. The company, as previously announced, expects to produce and deliver 40 to 45 CNG refueling stations in 2007 -- representing additional revenues of approximately $6.0 to $7.0 million derived from models ranging in price from $80,000 to $400,000. Initial CNG charging station orders are from customers located in European and Asian countries.
Teleconference and Web Cast
Mariano Costamagna, president and chief executive officer, and Thomas M. Costales, chief financial officer, will host an investor conference call today at 1:30 p.m. Pacific Time to discuss the company's financial results and operations for the quarter. The call will be open to all interested investors, either through a live audio Web broadcast via the Internet at http://fuelsystemssolutions.com or live by calling (866) 715-8813 (domestic) or (706) 634-1323 (international) with call ID number 1178054. For those who are not available to listen to the live broadcast, the call will be archived for two weeks on IMPCO's Web site. A telephone playback of the conference call will also be available from 4:30 p.m. PDT Thursday, November 9 through 9:00 p.m. Thursday, November 16 by calling (800) 642-1687 (domestic) or (706) 645-9291 (international) and using access code: 1178054.
Fuel Systems Solutions is a holding company currently comprised of two operating subsidiaries, IMPCO Technologies and BRC Gas Equipment. Additional information is available at www.fuelsystemssolutions.com. IMPCO designs, manufactures, markets and supplies advanced products and systems to enable internal combustion engines to run on clean burning gaseous fuels such as natural gas, propane and biogas. IMPCO is a leader in the heavy duty, industrial, power generation and stationary engines sectors. Headquartered in Santa Ana, California, IMPCO has offices throughout Asia, Europe, Australia and North America. Additional information is available at www.impcotechnologies.com. BRC produces a complete range of systems for converting vehicles to gaseous fuel to meet market requirements. 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. Headquartered in Cherasco, Italy, BRC has offices throughout Asia, Europe and South America. Additional information is available at BRC's Web site, http://www.brc.it.
The matters discussed in this press release under the heading "Outlook" are forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed in any forward-looking statement. Those forward-looking statements include statements relating to expected industrial business segment ramp up, expected production and delivery of 40 to 46 CNG refueling stations in 2007 and expected revenue of $210 million, expected gross profit margin of 25 to 27 percent and expected operating margin of 10 percent in 2006. Factors that could cause or contribute to such differences between our expected future results and actual results include, but are not limited to, prevailing market and global economic conditions; changes in environmental regulations that impact the demand for the company's products; the company's ability to manage its leverage and address operating covenant restrictions relating to its indebtedness; the company's ability to negotiate and comply with waivers pertaining to existing loan covenant defaults; the company's ability to design and market advanced fuel metering, fuel storage and electronic control products; the company's ability to meet OEM specifications; and the level and success of the company's development programs with OEMs. 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 "Management's Discussion & Analysis of Financial Condition and Results of Operation -- Risk Factors" section of the company's Quarterly Report on Form 10-Q, for the quarter ended September 30, 2006. The company does not undertake to update or revise any of its forward-looking statements even if experience or future changes show that the indicated results or events.
FUEL SYSTEMS SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
-------- -------- -------- --------
Revenue $ 55,437 $ 49,073 $168,677 $122,683
Costs and expenses:
Cost of revenue 39,784 36,791 125,411 93,320
Research and development
expense 2,156 2,488 6,277 6,503
Selling, general and
administrative expense 6,283 7,293 17,475 19,850
Amortization of intangible
assets 463 1,905 1,362 1,905
Acquired in-process
technology -- 129 -- 204
-------- -------- -------- --------
Total costs
and expenses 48,686 48,606 150,525 121,782
-------- -------- -------- --------
Operating income 6,751 467 18,152 901
Other income
(expense), net 203 (35) (1,000) 936
Interest expense, net (71) (126) (342) (506)
-------- -------- -------- --------
Income before income taxes
and equity share in income
of unconsolidated
affiliates 6,883 306 16,810 1,331
Equity share in (loss)
income of unconsolidated
affiliates (7) 138 439 990
Income tax expense (2,737) (9,282) (7,447) (11,649)
-------- -------- -------- --------
Income (loss) before
minority interests and
cumulative effect of a
change in accounting
principle 4,139 (8,838) 9,802 (9,328)
Minority interest in income
of consolidated
subsidiaries 702 264 1,388 783
-------- -------- -------- --------
Income (loss) before
cumulative effect of a
change in accounting
principle 3,437 (9,102) 8,414 (10,111)
Cumulative effect of a
change in accounting
principle -- (117) -- (117)
-------- -------- -------- --------
Net income (loss) $ 3,437 $ (9,219) $ 8,414 $(10,228)
======== ======== ======== ========
Net income (loss) per share
before cumulative effect
of a change in accounting
principle:
Basic $ 0.23 $ (0.63) $ 0.57 $ (0.77)
======== ======== ======== ========
Diluted $ 0.22 $ (0.63) $ 0.55 $ (0.77)
======== ======== ======== ========
Per share effect of the
cumulative effect of a
change in accounting
principle:
Basic $ -- $ (.01) $ -- $ (0.01)
======== ======== ======== ========
Diluted $ -- $ (.01) $ -- $ (0.01)
======== ======== ======== ========
Net income (loss) per share:
Basic $ 0.23 $ (0.64) $ 0.57 $ (0.78)
======== ======== ======== ========
Diluted $ 0.22 $ (0.64) $ 0.55 $ (0.78)
======== ======== ======== ========
Number of shares used in
per share calculation:
Basic 15,102 14,339 14,791 13,168
======== ======== ======== ========
Diluted 15,394 14,339 15,173 13,168
======== ======== ======== ========
FUEL SYSTEMS SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
September 30, December 31,
2006 2005
-------- --------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 13,707 $ 27,110
Accounts receivable less allowance for
doubtful accounts of $3,691 and $3,194 44,243 37,447
Inventories:
Raw materials and parts 34,240 22,349
Work-in-process 2,658 1,256
Finished goods 18,524 9,926
-------- --------
Total inventories 55,422 33,531
Other current assets 7,027 4,475
Related party receivables 2,833 3,306
Deferred tax assets 1,957 1,097
-------- --------
Total current assets 125,189 106,966
Equipment and leasehold improvements
Dies, molds and patterns 7,755 7,196
Machinery and equipment 15,825 16,599
Office furnishings and equipment 7,498 9,818
Automobiles and trucks 1,271 1,043
Leasehold improvements 3,091 3,649
-------- --------
35,440 38,305
Less accumulated depreciation
and amortization 16,727 24,231
-------- --------
Net equipment and leasehold
improvements 18,713 14,074
Goodwill 38,530 36,338
Intangible assets, net 10,411 11,009
Investment in affiliates 1,324 1,387
Other assets 2,008 3,501
Non-current related party receivable 3,578 3,570
-------- --------
Total Assets $199,753 $176,845
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 36,466 $ 34,427
Other accrued expenses 21,141 17,836
Current revolving line of credit 3,356 6,248
Current maturities of other loans 3,060 2,634
Current maturities of capital leases 340 278
Related party payables 3,733 4,925
--------- ---------
Total current liabilities 68,096 66,348
Term loans 6,325 7,688
Capital leases 770 774
Other liabilities 4,395 3,679
Minority interest 4,244 3,152
Deferred tax liabilities 6,876 6,918
--------- ---------
Total liabilities 90,706 88,559
--------- ---------
Stockholders' equity:
Preferred stock, $0.001 par value,
authorized 1,000,000 shares; none issued
and outstanding at December 31, 2005 and
September 30, 2006 -- --
Common stock, $0.001 par value, authorized
200,000,000 shares; 15,126,485 issued and
outstanding at September 30, 2006 and
14,451,396 issued and outstanding at
December 31, 2005 15 14
Additional paid-in capital 198,648 192,070
Shares held in treasury (537) (616)
Accumulated deficit (93,146) (101,560)
Accumulated other comprehensive
income (loss) 4,067 (1,622)
--------- ---------
Total stockholders' equity 109,047 88,286
--------- ---------
Total Liabilities and
Stockholders' Equity $ 199,753 $ 176,845
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