NEW YORK, May 7, 2015 (GLOBE NEWSWIRE) -- Fuel Systems Solutions, Inc. (Nasdaq:FSYS) reported results for its first quarter ended March 31, 2015.
Highlights
- Q1 2015 Revenue of $63.3 million compared to $81.3 million for Q1 2014; revenue down 10.6% or $8.7 million excluding FX impact
- Q1 2015 Gross profit margin 22.9% compared to 21.4% in Q1 2014
- Q1 2015 Adjusted EBITDA was $1.9 million compared to $2.2 million for Q1 2014
- Share repurchase program has acquired 1,424,814 shares of common stock through May 1, 2015
- Extension and expansion of credit facility completed; term extended one year with facility capacity expanded to $30.0 million
Mariano Costamagna, Fuel Systems Solutions, Inc. (Fuel Systems or FSS) CEO, said, "First quarter results reflected continued challenges in both Automotive and Industrial end markets as world economies and oil pricing affected demand and competitive pressures remain high. To better confront these challenges, we are taking the initial steps of our three-year cost reduction and restructuring program implementation and further refined our action plan going forward. Our focus remains on creating efficiencies in terms of cost, organization and manufacturing footprint to better leverage our market positioning and technological leadership. The Board and Strategic Oversight Committee continue to evaluate actions to enhance value and deliver shareholder returns."
First Quarter 2015 Financial Results
Total revenue for the first quarter of 2015 was $63.3 million compared to $81.3 million for the first quarter of 2014. This variance includes the impact of foreign exchange on first quarter 2015 revenue, which was negative $9.3 million.
In constant currency, FSS Automotive revenue was negatively impacted by lower aftermarket, compressor, DOEM and OEM sales volumes as a result of difficult economic conditions in major markets, increased competition and lower oil prices. FSS Industrial revenue decreased compared to the prior-year period primarily reflecting lower demand for mobile and stationary equipment and increased competition and a decrease in heavy duty sales in Thailand that were partially offset by higher sales of auxiliary power units in North America.
Gross profit for the first quarter of 2015 was $14.5 million, or 22.9% of revenue, compared to $17.4 million, or 21.4% of revenue, for the first quarter of 2014. The lower gross profit primarily reflects the decreased volumes mentioned above.
Corporate expenses increased $1.7 million compared to the prior year as a result of increases in outside services for consultants in connection with restructuring and other activities. Operating loss for the first quarter of 2015 totaled $4.5 million, or 7.0% of revenue, compared to operating loss of $2.3 million, or 2.8% of revenue, for the first quarter of 2014.
Adjusted EBITDA for the first quarter of 2015 was $1.9 million, compared to $2.2 million for the first quarter of 2014. Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures" below for a discussion of this metric.
The Company's income tax rate is primarily a result of the fluctuation of earnings in various foreign jurisdictions and losses incurred for which no tax benefits have been recorded. In the first quarter of 2015, there were certain foreign jurisdictions where tax benefits were not included in the Company's income tax provision compared to certain jurisdictions that previously were benefitted. In addition, in the first quarter of 2015, the Company recorded a valuation allowance of $7.8 million for deferred tax assets that may not be realized in the future. This allowance has been recorded as a result of increased automotive market weakness and the expected impact of restructuring activities, in addition to increased costs for the previously announced management changes.
Net loss for the first quarter of 2015 was $11.9 million, or $0.62 per diluted share including $0.41 per diluted share from the valuation allowance mentioned above, compared to net loss of $2.0 million, or $0.10 per diluted share, for the first quarter of 2014.
FSS Automotive Operations
FSS Automotive first quarter 2015 revenue was $40.5 million, compared to $54.4 million for the same quarter a year ago. The impact of foreign exchange on FSS Automotive was negative $8.1 million; in constant currency, first quarter 2015 FSS Automotive revenue decreased 10.6% compared to the prior year period, reflecting the lower volumes mentioned above. FSS Automotive first quarter 2015 operating loss was $2.9 million compared to operating loss of $2.3 million for the same period a year ago. FSS Automotive first quarter 2015 Adjusted EBITDA was $1.4 million compared to Adjusted EBITDA of $1.6 million a year ago.
FSS Industrial Operations
FSS Industrial first quarter 2015 revenue was $22.8 million compared to $26.9 million for the same quarter a year ago. The impact of foreign exchange on FSS Industrial was negative $1.3 million; in constant currency, first quarter 2015 FSS Industrial revenue decreased 10.8% compared to the prior year period, primarily reflecting lower demand for the reasons explained above. FSS Industrial first quarter 2015 operating income was $2.1 million, compared to operating income of $1.9 million for the same period a year ago. FSS Industrial first quarter 2015 Adjusted EBITDA was $2.2 million compared to $2.3 million for the same period a year ago.
Cost Reduction and Restructuring Program Update
During the first quarter of 2015, the Company began to implement its cost reduction and restructuring program as follows:
- Completed initial voluntary severance to reduce the workforce in Italy
- Wrote down the carrying value of certain assets no longer required as we move to alternative sales and distribution models
Began laying the groundwork for next steps to be taken, including:
- Accelerating direct material reduction initiatives
- Consolidating selected manufacturing facilities
- Analyzing and implementing alternative sales and distribution models
- Reducing production volumes through temporary unemployment to decrease labor cost and working capital needs
- Reducing non-labor operating expenses
In connection with the above, the company recorded the abovementioned $2.4 million for restructuring and strategy expenses included in Adjusted EBITDA as follows: $0.7 million for severance; $0.2 million for the write-off of long-lived assets in connection with rationalization of activities; and $1.5 million for professional fees. At this point the Company believes its prior expectations for the restructuring program results are substantially unchanged with the exception of the impact that foreign exchange rates will have on the results.
Share Repurchase Program Update
During the first quarter of 2015, the Company repurchased 1,010,944 shares of common stock pursuant to the $25.0 million share repurchase program approved by the Board of Directors on November 3, 2014. This program is expected to continue for up to one year from its inception. Purchases under the share repurchase program may be made from time to time in open-market transactions, block transactions on or off an exchange, or in privately negotiated transactions. The Company expects shares to continue to be repurchased at prevailing market prices based on market conditions and other factors. Through May 1, 2015, the Company has repurchased 1,424,814 shares of common stock.
Liquidity and Capital Resources
During the first quarter of 2015, the Company used approximately $27.4 million in cash, including $10.9 million for the repurchase of common stock as mentioned above and a $9.9 million change in working capital, primarily accounts payable, inventory and other assets, which is expected to largely moderate later in the year as the effects of restructuring begin to take hold and the Company moves into seasonally higher-volume quarters. In addition, the Company invested $1.8 million in capital equipment, $1.0 million in investments and cash was negatively impacted by foreign exchange of $3.1 million in the first quarter of 2015.
On April 30, 2015, Fuel Systems Solutions, Inc. entered into a Second Amendment to the 2009 Committed Credit Facility Agreement with the New York Branch of Intesa SanPaolo S.p.A., increasing the committed amount under the Credit Facility to $30 million from $20 million and extending the stated maturity date to April 29, 2016 from April 30, 2015. All other provisions of the Credit Facility remain unchanged.
2015 Outlook
-
The Company has reduced its 2015 revenue to be in the range of between $290 million to $300 million, reflecting:
- An incremental negative impact of approximately $5.0 million from foreign exchange translation reflecting current strengthening of the US dollar
- Slower than previously anticipated growth from OEM, aftermarket and new business lines combined with continued maintenance of the Company's automotive market share amid slower market demand, in part due to challenging economic conditions and persistent aggressive competition in the global transportation market, as well as lower oil prices.
- Continued lower demand and continued high competition for mobile Industrial equipment partially offset by modest growth in the APU market
- 2015 gross margin remains unchanged in a range of 22% to 24%
-
Adjusted EBITDA outlook for 2015 of $10.0 million to $15.0 million, and comprised of:
- Approximately a $6.5 million reduction in the outlook for results from operations due to increased automotive market weakness and increased costs related to the previously announced management changes, offset by
- The inclusion in the Adjusted EBITDA calculation of costs related to the restructuring program, including activities and already anticipated fees, totaling approximately $7.0 million
- Additional tax expense as a result of losses in certain countries that now require the establishment of a $7.8 million valuation reserve on certain deferred tax assets as a result of increased automotive market weakness and the expected impact of restructuring activities, in addition to increased costs for the previously announced management changes as discussed in the previous paragraph.
With respect to the cost reduction and restructuring program, the Company continues to anticipate a net increase in expenses in 2015, as a result of the costs associated with the program. While there will be recurring benefits associated with the cost optimization actions and right-sizing, in 2015 they will be more than offset by the costs associated with the workforce right-sizing and the related external project management and implementation fees.
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 Adjusted 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." Adjusted EBITDA is determined by adding the following items to Net Income/(Loss), the closest GAAP financial measure: Depreciation & Amortization; Interest income/expense, net; and Benefit (Provision) for Income Taxes, Restructuring charges, Stock based compensation Consulting fees related to restructuring and strategy and other non-operating expenses. 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, May 7 at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time to discuss its first quarter 2015 financial results and other matters. To listen to the call live, please dial 877-359-9508 at least 10 minutes before the start of the conference. International participants may dial 224-357-2393. The conference ID will be 30853316. 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 May 11th by dialing 855-859-2056 or 404-537-3406 and entering pass code 30853316. 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 within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are not historical facts, but instead involve known and unknown risks, uncertainties and other factors that may cause our Company's actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward looking statements. Statements in this press release that are not historical facts are hereby identified as "forward-looking statements" for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Words such as: "may," "will," "would," "should," "could," "expect," "anticipate," "intend," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue," "seeks," "on-going" or the negative of these terms or other comparable terminology often identify forward-looking statements, although not all forward-looking statements contain these words. You should consider statements that contain these words carefully because they describe our expectations, plans, strategies and goals and beliefs concerning future business conditions, our results of operations, financial position and our business outlook, or state other "forward-looking" information based on currently available information. There are a number of important factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements. These risks and uncertainties and certain other factors which may impact our continuing business financial condition or results of operations, or which may cause actual results to differ from such forward-looking statements, include, but are not limited to, the unpredictable nature of the developing alternative fuel U.S. automotive market, customer dissatisfaction with our products or services, the inability to deliver our products on schedule, a further slowing of economic activity, our ability to maintain customer program relationships, our ability to achieve the anticipated benefits in connection with the Company's cost-cutting initiatives and restructuring plan, 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 of certain countries, the growth of non-gaseous alternative fuel products and other new technologies, the price differential between alternative gaseous fuels and gasoline, and the repeal or implementation of government regulations relating to reducing vehicle emissions, economic uncertainties caused by political instability in certain of the markets we do business in, the impact of the Argentinean debt crisis on our business, our ability to realign costs with current market conditions, as well as the risks and uncertainties included in our Annual Report on Form 10-K for the year ended December 31, 2014 and our other periodic reports filed with the SEC. These forward-looking statements are not guarantees of future performance. We cannot assure you that the forward-looking statements in this press release will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not place undue reliance on these forward looking statements. The forward-looking statements made in this press release relate to events and state our beliefs, intent and our view of future events only as of the date of this press release. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
About Fuel Systems Solutions
Fuel Systems Solutions, Inc. (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) | ||
| March 31, 2015 | December 31, 2014 | |
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents | $ 57,823 | $ 85,180 |
| Accounts receivable, less allowance for doubtful accounts of $2,972 and $3,129 at March 31, 2015 and December 31, 2014, respectively | 42,603 | 46,952 |
| Inventories | 76,765 | 80,001 |
| Deferred tax assets, net | 2,303 | 9,547 |
| Other current assets | 21,537 | 21,271 |
| Short-term investments | 7,626 | 6,614 |
| Related party receivables | 4,225 | 5,094 |
| Total current assets | 212,882 | 254,659 |
| Equipment and leasehold improvements, net | 43,250 | 48,937 |
| Goodwill, net | 7,243 | 7,363 |
| Deferred tax assets, net | 3,544 | 5,253 |
| Intangible assets, net | 6,044 | 6,964 |
| Other assets | 1,176 | 1,065 |
| Total Assets | $ 274,139 | $ 324,241 |
| LIABILITIES AND EQUITY | ||
| Current liabilities: | ||
| Accounts payable | $ 31,844 | $ 39,918 |
| Accrued expenses | 34,106 | 37,017 |
| Income taxes payable | 634 | 445 |
| Current portion of term loans and debt | 180 | 207 |
| Related party payables | 2,286 | 2,744 |
| Total current liabilities | 69,050 | 80,331 |
| Other liabilities | 5,750 | 6,174 |
| Deferred tax liabilities | 831 | 1,001 |
| Total Liabilities | 75,631 | 87,506 |
| Equity: | ||
| Preferred stock, $0.001 par value, authorized 1,000,000 shares; none issued and outstanding at March 31, 2015 and December 31, 2014 | 0 | 0 |
| Common stock, $0.001 par value, authorized 200,000,000 shares; 20,114,427 issued and 18,758,673 outstanding at March 31, 2015; and 20,114,427 issued and 19,769,617 outstanding at December 31, 2014 | 20 | 20 |
| Additional paid-in capital | 320,941 | 320,820 |
| Shares held in treasury, 1,355,754 shares and 344,810 shares at March 31, 2015 and December 31, 2014, respectively | (14,627) | (3,692) |
| Accumulated Deficit | (66,021) | (54,151) |
| Accumulated other comprehensive loss | (41,954) | (26,403) |
| Total Fuel Systems Solutions, Inc. Equity | 198,359 | 236,594 |
| Non-controlling interest | 149 | 141 |
| Total Equity | 198,508 | 236,735 |
| Total Liabilities and Equity | $ 274,139 | $ 324,241 |
| FUEL SYSTEMS SOLUTIONS, INC. | ||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| (In thousands, except share and per share data); (Unaudited) | ||
| Three Months Ended | ||
| March 31, | ||
| 2015 | 2014 | |
| Revenue | $ 63,292 | $ 81,296 |
| Cost of revenue | 48,768 | 63,895 |
| Gross profit | 14,524 | 17,401 |
| Operating expenses: | ||
| Research and development expense | 5,263 | 6,389 |
| Selling, general and administrative expense | 13,713 | 13,294 |
| Total operating expenses | 18,976 | 19,683 |
| Operating loss | (4,452) | (2,282) |
| Other income, net | 983 | 525 |
| Interest (expense) income, net | (7) | 13 |
| Loss from operations before income taxes and non-controlling interests | (3,476) | (1,744) |
| Income tax provision | (8,351) | (260) |
| Net loss | (11,82) | (2,004) |
| Less: Net (income) attributable to non-controlling interests | (43) | (2) |
| Net loss attributable to Fuel Systems Solutions, Inc. | $ (11,870) | $ (2,006) |
| Net loss per share attributable to Fuel Systems Solutions, Inc.: | ||
| Basic | ||
| $ (0.62) | $ (0.10) | |
| Diluted | ||
| $ (0.62) | $ (0.10) | |
| Number of shares used in per share calculation: | ||
| Basic | 19,194,976 | 20,096,010 |
| Diluted | 19,194,976 | 20,096,010 |
| FUEL SYSTEMS SOLUTIONS, INC. | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In thousands); (Unaudited) | ||
| Three Months Ended | ||
| March 31, | ||
| 2015 | 2014 | |
| Cash flows from operating activities: | ||
| Net loss | $ (11,827) | $ (2,004) |
| Less: Net income attributable to the non-controlling interest | (43) | (2) |
| Net loss attributable to Fuel Systems Solutions, Inc. | (11,870) | (2,006) |
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||
| Depreciation and other amortization | 2,379 | 2,707 |
| Amortization of intangibles arising from acquisitions | 473 | 659 |
| Provision for doubtful accounts | 179 | 34 |
| Write down of inventory | 455 | 636 |
| Other non-cash items | 0 | 12 |
| Deferred income taxes | 7,776 | (758) |
| Unrealized gain on foreign exchange transactions | (610) | (29) |
| Compensation expense related to equity awards | 121 | 95 |
| Loss on disposal of equipment and other assets | 222 | 0 |
| Changes in assets and liabilities, net of acquisitions: | ||
| Decrease in accounts receivable | 308 | 7,201 |
| Increase in inventories | (4,145) | (5,938) |
| Increase in other current assets | (2,307) | (889) |
| (Increase) decrease in other assets | (214) | 20 |
| (Decrease) increase in accounts payable | (4,308) | 2,070 |
| (Decrease) increase in income taxes payable | 153 | 285 |
| Increase (decrease) in accrued expenses | 122 | (404) |
| Increase (decrease) in long-term liabilities | 58 | (162) |
| Receivables from/payables to related party, net | 319 | (214) |
| Net cash (used in) provided by operating activities | (10,889) | 3,319 |
| Cash flows from investing activities: | ||
| Purchase of equipment and leasehold improvements | (1,787) | (3,645) |
| Redemption of investments at maturity | 5,000 | 0 |
| Purchase of investments | (6,000) | 0 |
| Other | 310 | 84 |
| Net cash used by investing activities | (2,477) | (3,561) |
| Cash flows from financing activities: | ||
| Payments on term loans and other loans | (6) | (15) |
| Increase in treasury shares (share repurchase program) | (10,935) | 0 |
| Other | 0 | (2) |
| Net cash used in financing activities | (10,941) | (17) |
| Net decrease in cash and cash equivalents | (24,307) | (259) |
| Effect of exchange rate changes on cash | (3,050) | 300 |
| Net (decrease) increase in cash and cash equivalents | (27,357) | 41 |
| Cash and cash equivalents at beginning of period | 85,180 | 80,961 |
| Cash and cash equivalents at end of period | $ 57,823 | $ 81,002 |
| FUEL SYSTEMS SOLUTIONS, INC. | ||
| NON-GAAP FINANCIAL MEASURE | ||
| RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA | ||
| (In thousands); (Unaudited) | ||
| Three Months Ended | ||
| March 31, | ||
| EBITDA (Non-GAAP) | 2015 | 2014 |
| Net loss attributable to Fuel Systems Solutions, Inc. | $ (11,870) | $ (2,006) |
| Net income attributable to non-controlling interest | 43 | 2 |
| Interest expense (income), net | 7 | (13) |
| Provision for income taxes | 8,351 | 260 |
| Depreciation and amortization | 2,852 | 3,366 |
| Total EBITDA (Non-GAAP) | $ (617) | $ 1,609 |
| Adjustments: | ||
| Restructuring charges | $ 881 | $ 466 |
| Consulting fees for restructuring and strategy | 1,498 | 0 |
| Stock based Compensation | 121 | 95 |
| Total Adjusted EBITDA (Non-GAAP) | $ 1,883 | $ 2,170 |
| Segment Adjusted EBITDA (Non-GAAP) | ||
| FSS Industrial | $ 2,240 | $ 2,276 |
| FSS Automotive | 1,408 | 1,612 |
| Corporate and Other | (1,765) | (1,718) |
| Total Adjusted EBITDA (Non-GAAP) | $ 1,883 | $ 2,170 |
| FUEL SYSTEMS SOLUTIONS, INC. | ||
| OPERATING SEGMENT INFORMATION | ||
| (In thousands); (Unaudited) | ||
| Three Months Ended | ||
| March 31, | ||
| 2015 | 2014 | |
| Revenue: | ||
| FSS Industrial | $ 22,751 | $ 26,931 |
| FSS Automotive | 40,541 | 54,365 |
| Total | $ 63,292 | $ 81,296 |
| Three Months Ended | ||
| March 31, | ||
| 2015 | 2014 | |
| Operating Loss: | ||
| FSS Industrial | $ 2,092 | $ 1,893 |
| FSS Automotive | (2,911) | (2,279) |
| Corporate Expenses | (3,633) | (1,896) |
| Total | $ (4,452) | $ (2,282) |