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Fuel Systems Solutions Reports First Quarter 2016 Results

Merger with Westport Innovations Anticipated to Close within Days of May 31 Special Meeting of Stockholders

/EIN News/ -- NEW YORK, May 09, 2016 (GLOBE NEWSWIRE) -- Fuel Systems Solutions, Inc. (Nasdaq:FSYS) reported results for its first quarter ended March 31, 2016. 

Highlights

  • Revenue of $56.1 million compared to $63.3 million for Q1 2015; revenue down 5.9% or $3.8 million, excluding foreign exchange impact
  • Gross profit margin of 26.1% compared to 22.9% in Q1 2015
  • Adjusted EBITDA of $1.1 million compared to Adjusted EBITDA of $1.9 million for Q1 2015

Mariano Costamagna, Fuel Systems Solutions, Inc. (“Fuel Systems” or “FSS”) CEO, said, “Our first quarter results reflect continued pressures in the Automotive segment, the success of new Industrial segment product introductions, and improvements to gross margin from higher Industrial revenues and the benefits of the cost and restructuring program we initiated last year. We continue to focus on execution as we move toward our special meeting of stockholders.”

As announced on May 2, 2016, Fuel Sytems will reconvene its special meeting of stockholders previously scheduled for March 22, 2016 on May 31, 2016, at 12:00 p.m., Eastern Time. Subject to the approval of Fuel Systems shareholders, the merger is expected to close within a few days of this meeting.

First Quarter 2016 Financial Results
Total revenue for the first quarter of 2016 was $56.1 million compared to $63.3 million for the first quarter of 2015. This variance includes the impact of foreign exchange (primarily the Argentina Peso) on first quarter 2016 revenue, which was negative $3.4 million.

In constant currency, FSS Automotive revenue was negatively impacted by lower OEM, DOEM, and Compressor sales volumes as a result of the impact of lower oil prices on customer demand in our major markets, specifically in North America and Europe. In constant currency, FSS Industrial revenue increased compared to the prior-year period primarily reflecting higher demand for components offset by lower demand for stationary equipment.

Gross profit for the first quarter of 2016 was $14.6 million, or 26.1% of revenue, compared to $14.5 million, or 22.9% of revenue, for the first quarter of 2015. The slightly higher gross profit and gross margin percentage increase primarily reflects the benefits of cost reduction initiatives and the stronger Industrial segment offset by decreased volumes mentioned above and the impact of foreign exchange. The impact of the revenue decreases has been partially mitigated by the cost reduction activities that have been initiated on both product costs and operating expenses. Corporate expenses increased $2.8 million compared to the prior year as a result of increases in outside services for consultants in connection with strategic and merger related activities.

Operating loss for the first quarter of 2016 totaled $5.1 million, or 9.1% of revenue, compared to operating loss for the first quarter of 2015 of $4.5 million, or 7.0% of revenue. The increased loss primarily reflects the revenue decreases and additional corporate expenses described above.

Income tax expense for the first quarter of 2016 was $0.8 million compared to an income tax expense of $8.4 million in the first quarter of 2015. In the first quarter of 2015, the Company recorded a valuation allowance of $7.8 million for deferred taxes that may not be realized in the foreseeable future. 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.

Net loss for the first quarter of 2016 was $6.5 million, or $0.36 per diluted share, compared to net loss of $11.9 million, or $0.62 per diluted share, for the first quarter of 2015.

Adjusted EBITDA for the first quarter of 2016 was $1.1 million, compared to Adjusted EBITDA of $1.9 million for the first quarter of 2015. Adjusted EBITDA is a non-GAAP measure. See “Non-GAAP Measures” below for a discussion of this metric.

FSS Automotive Operations
FSS Automotive first quarter of 2016 revenue was $32.3 million compared to $40.5 million for the same quarter a year ago. The impact of foreign exchange on FSS Automotive was negative $3.3 million; in constant currency, first quarter of 2016 FSS Automotive revenue decreased 12.2% compared to the prior year period, reflecting the lower volumes mentioned above. FSS Automotive first quarter 2016 Adjusted EBITDA loss was $0.8 million compared to Adjusted EBITDA of $1.4 million for the same period a year ago.

FSS Industrial Operations
FSS Industrial first quarter of 2016 revenue was $23.8 million compared to $22.8 million for the same quarter a year ago. The impact of foreign exchange on FSS Industrial was negative $0.1 million; in constant currency, first quarter of 2016 FSS Industrial revenue increased 5.2% compared to the prior year period. FSS Industrial first quarter 2016 Adjusted EBITDA was $4.0 million compared to Adjusted EBITDA of $2.2 million for the same period a year ago.

2016 Outlook and Conference Call
The Company will not provide a 2016 outlook nor conduct a first quarter 2016 conference call in light of the expected merger with Westport Innovations.

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, Impairments, 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.

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,” “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, the risks associated with the anticipated merger with Westport Innovations, Inc. including that we will be subject to various uncertainties and contractual restrictions while the merger is pending and failure to complete the merger could negatively affect our stock price and future business and financial results, as well as the risks and uncertainties included in our Annual Report on Form 10-K for the year ended December 31, 2015 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,     December 31,  
2016 2015
ASSETS                
Current assets:                
Cash and cash equivalents   $ 48,541     $ 60,162  
Accounts receivable, less allowance for doubtful accounts of $2,502 and $3,005 at March 31, 2016 and December 31, 2015, respectively     45,838       44,524  
Inventories     75,244       62,717  
Other current assets     15,466       15,523  
Short-term investments     1,000       1,000  
Related party receivables, net     303       316  
Total current assets     186,392       184,242  
Equipment and leasehold improvements, net     35,795       35,583  
Deferred tax assets, net     4,695       4,552  
Intangible assets, net     2,620       2,680  
Other assets     1,428       1,382  
Total Assets   $ 230,930     $ 228,439  
LIABILITIES AND EQUITY                
Current liabilities:                
Accounts payable   $ 35,718     $ 34,117  
Accrued expenses     28,819       26,859  
Income taxes payable     647       233  
Term loans and debt     35       9  
Related party payables     2,110       2,525  
Total current liabilities     67,329       63,743  
Other liabilities     10,090       9,858  
Term loans and debt     111       0  
Deferred tax liabilities, net     754       751  
Total Liabilities     78,284       74,352  
Equity:                
Preferred stock, $0.001 par value, authorized 1,000,000 shares; none issued and outstanding at March 31, 2016 and December 31, 2015     0       0  
Common stock, $0.001 par value, authorized 200,000,000 shares; 20,143,108 issued and 18,094,043 outstanding at March 31, 2016 and December 31, 2015, respectively     20       20  
Additional paid-in capital     322,535       322,144  
Shares held in treasury, 2,049,065 shares at March 31, 2016 and December 31, 2015, respectively     (20,742 )     (20,742 )
Accumulated Deficit     (107,760 )     (101,286 )
Accumulated other comprehensive loss     (41,407 )     (46,049 )
Total Fuel Systems Solutions, Inc. Equity     152,646       154,087  
Total Liabilities and Equity   $ 230,930     $ 228,439  
 


FUEL SYSTEMS SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data); (Unaudited)
 
      Three Months Ended  
    March 31,
      2016     2015  
Revenue     $ 56,142     $ 63,292  
Cost of revenue       41,505       48,768  
Gross profit       14,637       14,524  
Operating expenses:                  
Research and development expense       5,249       5,263  
Selling, general and administrative expense       14,516       13,713  
Total operating expenses       19,765       18,976  
Operating loss       (5,128 )     (4,452 )
Other (expense) income, net       (583 )     983  
Interest expense, net       (12 )     (7 )
Loss from operations before income taxes and       (5,723 )     (3,476 )
non-controlling interests    
Income tax provision       (751 )     (8,351 )
Net loss       (6,474 )     (11,827 )
Less:  Net income attributable to non-controlling interests       0       (43 )
Net loss attributable to Fuel Systems Solutions, Inc.     $ (6,474 )   $ (11,870 )
Net loss per share attributable to Fuel Systems Solutions, Inc.:                  
Basic     $ (0.36 )   $ (0.62 )
Diluted     $ (0.36 )   $ (0.62 )
Number of shares used in per share calculation:                  
Basic       18,094,043       19,194,976  
Diluted       18,094,043       19,194,976  
 


FUEL SYSTEMS SOLUTIONS, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands); (Unaudited)  
   
    Three  Months Ended
March 31,
 
    2016     2015  
Cash flows from operating activities:                
Net loss attributable to Fuel Systems Solutions, Inc.   $ (6,474   $ (11,870
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and other amortization     2,015       2,379  
Amortization of intangibles arising from acquisitions     190       473  
Provision for doubtful accounts     79       179  
Write down of inventory     782       455  
Deferred income taxes     (75     7,776  
Unrealized loss (gain) on foreign exchange transactions     367       (610 )
Compensation expense related to equity awards     391       121  
Loss on disposal of equipment and other assets     0       222  
Changes in assets and liabilities, net of acquisitions:                
(Increase) decrease in accounts receivable     (128     308  
Increase in inventories     (10,968     (4,145 )
Decrease (increase) in other current assets     337       (2,307 )
Decrease (increase) in other assets     11       (214
Increase (decrease) in accounts payable     624       (4,308
Increase in income taxes payable     384       153  
Increase in accrued expenses and long-term liabilities     1,176       180  
Receivables from/payables to related parties, net     (478     319  
Net cash used in operating activities     (11,767     (10,889
Cash flows from investing activities:                
Purchase of equipment and leasehold improvements     (935     (1,787
Redemption of investments at maturity     0       5,000  
Purchase of investments     0       (6,000
Other     102       310  
Net cash used in investing activities     (833     (2,477
Cash flows from financing activities:                
Payments on term loans and other loans     (31     (6 )
Increase in treasury shares (share repurchase program)     0       (10,935
Net cash used in financing activities     (31     (10,941
Net decrease in cash and cash equivalents     (12,631     (24,307
Effect of exchange rate changes on cash     1,010       (3,050
Net decrease in cash and cash equivalents     (11,621     (27,357
Cash and cash equivalents at beginning of period     60,162       85,180  
Cash and cash equivalents at end of period   $ 48,541     $ 57,823  

 


   
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)         2016     2015  
                   
Net loss attributable to Fuel Systems Solutions, Inc.       $ (6,474 ) $ (11,870 )
                   
Net income attributable to non-controlling interest         0     43  
Interest expense, net         12     7  
Provision for income taxes         751     8,351  
Depreciation and amortization         2,205     2,852  
Total EBITDA (Non-GAAP)         (3,506 )   (617 )
                   
Adjustments:                  
                   
Restructuring charges         126     881  
Consulting fees for restructuring and strategy         4,060     1,498  
Stock based Compensation         391     121  
Total Adjusted EBITDA (Non-GAAP)       $ 1,071   $ 1,883  
                   
                   
                   
Segment Adjusted EBITDA (Non-GAAP)                  
                   
FSS Industrial       $ 3,957   $ 2,240  
FSS Automotive         (792 )   1,408  
Corporate and Other         (2,094 )   (1,765 )
Total Adjusted EBITDA (Non-GAAP)       $ 1,071   $ 1,883  
 

 

 

FUEL SYSTEMS SOLUTIONS, INC. 
OPERATING SEGMENT INFORMATION
(In thousands); (Unaudited) 
       
       
       
        Three Months Ended  
        March 31,  
        2016     2015  
Revenue:                
FSS Industrial     $ 23,848   $ 22,751  
FSS Automotive       32,294     40,541  
Total     $ 56,142   $ 63,292  
                 
                 
        Three Months Ended  
        March 31,  
        2016     2015  
Operating Income (Loss):                
FSS Industrial     $ 3,233   $ 2,092  
FSS Automotive       (1,977 )   (2,911 )
Corporate Expenses       (6,384 )   (3,633 )
Total     $ (5,128 ) $ (4,452 )
       

 

 

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