08.08.08

Fuel Systems Solutions, Inc.: Second Quarter Results 2008

Fuel Systems Solutions, Inc. reported results for its second quarter ended June 30, 2008.

Matthew Beale, president, said. ``The second quarter marks another quarter of growth. Revenue increased approximately 50% year-over-year, reflecting the rapidly expanding demand for alternatives to petroleum to fuel vehicles. Additionally, we drove gross margin improvements with successful engineering, production and distribution synergies developed in the past year. US-based Fuel Systems Solutions delivers alternative fuel solutions for transportation and industrial applications that reduce emissions, displace petroleum and generate savings. We are capturing the demand for our immediate, real-world solutions with our extensive reach in Europe, Asia and Latin America, where high fuel costs have long been a concern. As oil prices continue to rise and emissions concerns increase, we perceive important medium term opportunities in the United States for our transportation products and technology. We expect the macro environment to continue to drive growth, and we are excited about the future.''

Financial Results

Revenue for the second quarter was $98.3 million, up 49.9% from revenue of $65.6 million for the second quarter 2007, driven by strong performance in the transportation business. Gross profit for the quarter reached $28.6 million and represented 29% of revenue, compared to $14.5 million, or 22% of revenue, in the second quarter 2007. In the second quarter of 2008, the company recorded a non-cash goodwill impairment charge related to the company's Australian operations of $3.9 million, or $0.25 per diluted share. Net income for the second quarter of 2008 reached $4.6 million, or $0.29 per diluted share, including the non-cash goodwill impairment charge of $3.9 million, compared to $395,000, or $0.03 per share, in the second quarter of 2007.

For the six-month period ending June 30, 2008, total revenues were $192.9 million, compared to $120.4 million for the first half of 2007. Net income for the first half of 2008, which includes the non-cash goodwill impairment charge of $3.9 million, was $10.8 million, or $0.69 per diluted share, compared to $1.4 million, or $0.09 per diluted share, for the first half of 2007.

Bill Larkin, CFO, said, ``We generated cash from operations of $19.9 million in the second quarter of 2008, compared to $12.2 million in the second quarter of 2007. The strength of our financial position provides us the foundation for executing our growth strategy organically and through acquisitions.''

Company Outlook

Based on its current assessment of near-term market trends, the company is increasing its full year 2008 consolidated revenue guidance to $350 million and increasing its gross profit margin to approximately 27% and operating margin to approximately 12%.

Conference Call

The company will host a conference call on August 8th at 10:00 a.m. Pacific Time / 1:00 p.m. Eastern Time to discuss its second quarter 2008 financial results. To listen to the call live, please dial 877-397-0291 at least 10 minutes before the start of the conference. International participants may dial 719-325-4889. No pass code is required. The call is also being 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 ET on August 22 by dialing 888-203-1112 or 719-457-0820 and entering pass code 8771384#. 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 sales and output expectations for its delayed original equipment manufacturing operations; and its ability to achieve 2008 revenue of approximately $350 with gross profit margin of 27 percent and operating margin of 12 percent. Such statements are only predictions, and the company's actual results may differ materially. Factors that may cause the company's results to differ include, but are not limited to, risks that original equipment automobile manufacturers do not adopt the company's fuel systems as expected, that expected sales not based on long-term contracts will materialize, that changes in emissions regulations will not significantly impact demand for the company's products, that a global economic downturn may reduce customers' demand for our products, that reduction in oil prices will not reduce the demand for our products and that currency fluctuations will not reduce our revenue or financial condition. 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, 2007. 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 will not be realized.

About Fuel Systems Solutions

Fuel Systems Solutions (NasdaqGM:FSYS - News), a U.S.-based company, through its U.S. and foreign subsidiaries, delivers alternative fuel solutions for transportation and industrial applications that reduce emissions, displace petroleum and generate savings, which is extremely relevant today. The company's industrial division is run through IMPCO Technologies and its subsidiaries and the company's transportation division is run through BRC and its subsidiaries. The company is comprised of two subsidiaries, industrial under IMPCO Technologies and transportation under BRC. 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. BRC, through its subsidiaries, 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 http://www.fuelsystemssolutions.com.

                  FUEL SYSTEMS SOLUTIONS, INC.
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except per share data)
                              (Unaudited)

                             Three Months Ended     Six Months Ended
                                  June 30,              June 30,
                             ------------------    -------------------
                               2008      2007        2008       2007
                             --------  --------    --------   --------
 Revenue                     $ 98,284   $65,552    $192,884   $120,385
 Cost of revenue               69,704    51,065     136,820     92,120
                             --------  --------    --------   --------
   Gross profit                28,580    14,487      56,064     28,265

 Operating expenses:
   Research and development
    expense                     2,702     2,036       5,530      4,084
   Selling, general and
    administrative expense     11,659     9,302      22,830     17,235
   Goodwill impairment loss     3,907        --       3,907         --
   Amortization of
    intangible assets              98        50         191         83
                             --------  --------    --------   --------
 Total operating expenses      18,366    11,388      32,458     21,402

 Operating income              10,214     3,099      23,606      6,863
 Other expense, net               (43)     (415)     (1,164)      (661)
 Interest expense, net           (200)     (201)       (392)      (492)
                             --------  --------    --------   --------
 Income from operations
  before income taxes and
  equity share in income of
  unconsolidated affiliates     9,971     2,483      22,050      5,710
 Equity share in income
  (loss) of unconsolidated
  affiliates                      (91)      107          77        270
 Income tax expense            (4,878)   (1,725)    (10,418)    (3,630)
                             --------  --------    --------   --------
 Income before minority
  interests                     5,002       865      11,709      2,350
 Minority interests in income
  of consolidated
  subsidiaries                    394       470         875        937
                             --------  --------    --------   --------
 Net income                  $  4,608  $    395    $ 10,834   $  1,413
                             ========  ========    ========   ========
 Net income per share:
   Basic                     $   0.30  $   0.03    $   0.70   $   0.09
                             ========  ========    ========   ========
   Diluted                   $   0.29  $   0.03    $   0.69   $   0.09
                             ========  ========    ========   ========
 Number of shares used in
  per share calculation:
   Basic                       15,611    15,406      15,565     15,329
                             ========  ========    ========   ========
   Diluted                     15,750    15,601      15,692     15,569
                             ========  ========    ========   ========

                     FUEL SYSTEMS SOLUTIONS, INC.
                 CONDENSED CONSOLIDATED BALANCE SHEETS
            (In thousands, except share and per share data)
                              (Unaudited)

                                             June 30,     December 31,
                                               2008          2007
                                            -----------   -----------
 ASSETS
 Current assets:
   Cash and cash equivalents                $    43,643   $    26,797
   Accounts receivable less allowance
    for doubtful accounts of $2,618
    and $2,399 at June 30, 2008 and
    December 31, 2007, respectively              65,499        51,876
   Inventories:
     Raw materials and parts                     41,498        33,890
     Work-in-process                              1,901         2,247
     Finished goods                              42,655        31,197
     Inventory on consignment with
      unconsolidated affiliates                   3,126         2,991
                                            -----------   -----------
       Total inventories                         89,180        70,325
   Deferred tax assets                            3,718         2,248
   Related party receivables                         49            44
   Other current assets                           6,549         3,820
                                            -----------   -----------
       Total current assets                     208,638       155,110
                                            -----------   -----------
 Equipment and leasehold
  improvements:
   Dies, molds and patterns                       4,060         5,725
   Machinery and equipment                       28,120        25,049
   Office furnishings and equipment               9,402         8,601
   Automobiles and trucks                         2,474         2,047
   Leasehold improvements                         7,043         4,769
                                            -----------   -----------
                                                 51,099        46,191
   Less accumulated depreciation
    and amortization                             22,953        21,151
                                            -----------   -----------
     Net equipment and leasehold
      improvements                               28,146        25,040
 Goodwill                                        45,840        46,486
 Intangible assets, net                          12,700        13,059
 Investment in unconsolidated
  affiliates                                      2,816         2,310
 Non-current related party
  receivable                                      2,399         3,450
 Deferred tax assets, net                           249           184
 Other assets                                     1,820         1,731
                                            -----------   -----------
 Total Assets                               $   302,608   $   247,370
                                            ===========   ===========

                   FUEL SYSTEMS SOLUTIONS, INC.
               CONDENSED CONSOLIDATED BALANCE SHEETS
                 (In thousands, except share data)
                           (Unaudited)

                                                  June 30,     Dec. 31,
                                                    2008        2007
                                                  --------    --------
LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:
   Accounts payable                                $67,184     $50,314
   Accrued expenses                                 34,032      19,666
   Current revolving lines of credit                    --       3,307
   Current portion of term loans and other loans     5,438       4,791
   Current portion of capital leases                   346         428
   Deferred tax liabilities                             82         117
   Related party payables                           10,392       5,921
                                                  --------    --------
    Total current liabilities                      117,474      84,544
 Term loans                                          7,692       9,449
 Capital leases                                        301         431
 Other liabilities                                   6,912       5,860
 Minority interest                                   6,687       6,601
 Deferred tax liabilities                            5,602       5,432
                                                  --------    --------
    Total liabilities                              144,668     112,317
                                                  --------    --------
 Stockholders' equity:
   Preferred stock, $0.001 par value, authorized
    1,000,000 shares; none issued and outstanding
    at June 30, 2008 and December 31, 2007              --          --
   Common stock, $0.001 par value, authorized
    200,000,000 shares; 15,749,948 issued and
    15,677,163 outstanding at June 30, 2008; and
    15,512,798 issued and 15,499,115 outstanding
    at December 31, 2007                                16          15
   Additional paid-in capital                      219,013     216,483
   Shares held in treasury, 72,785 shares at
    June 30, 2008 and 13,683 shares
    at December 31, 2007                            (1,279)       (432)
   Accumulated deficit                             (91,862)   (102,696)
   Accumulated other comprehensive income           32,052      21,683
                                                  --------    --------
    Total stockholders' equity                     157,940     135,053
                                                  --------    --------
    Total Liabilities and Stockholders' Equity    $302,608    $247,370
                                                  ========    ========

                        FUEL SYSTEMS SOLUTIONS, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (In thousands)
                               (Unaudited)

                                                    Six Months Ended
                                                        June 30,
                                                  --------------------
                                                    2008        2007
                                                  --------    --------
 Net income                                       $ 10,834    $  1,413
 Adjustments to reconcile net income to net
  cash provided by operating activities:
   Depreciation and amortization expense             3,180       2,566
   Amortization of intangibles                       1,456         953
   Provision for doubtful accounts                     121         698
   Provision for loan to unconsolidated affiliate    1,091          --
   Provision for inventory reserve                   1,041         249
   Goodwill impairment loss                          3,907          --
   Equity share in income of
    unconsolidated affiliates                          (77)       (270)
   Dividends from unconsolidated affiliates            230          --
   Minority interest                                   875         937
   Unrealized loss on foreign exchange               1,094         121
   Loss in disposal of asset                            79           3
   Stock-based compensation expense                    191          38
 Changes in assets and liabilities:
   Increase in accounts receivable                 (10,370)     (6,708)
   (Increase) decrease in inventory                (15,220)      2,207
   (Increase) decrease in other assets              (2,422)      1,067
   Increase in deferred income taxes                (1,560)       (730)
   Increase in accounts payable                     13,471       4,559
   Increase in accrued expenses                     12,745       4,619
   Increase (decrease) in long term liabilities        685        (699)
   Receivables from/payables to related party, net   3,911       2,487
                                                  --------    --------
 Net cash provided by operating activities          25,262      13,510
                                                  --------    --------
 Cash flows from investing activities:
   Purchase of equipment and
    leasehold improvements                          (4,950)     (2,775)
   Purchase of minority interest in
    consolidated subsidiary                           (227)         --
   Purchase of intangible asset                       (193)         --
   Proceeds from sale of assets                          3          --
                                                  --------    --------
 Net cash used in investing activities              (5,367)     (2,775)
                                                  --------    --------
 Cash flows from financing activities:
   Payment of revolving line of credit              (3,307)     (3,892)
   Payments on term loans                           (2,045)       (307)
   Proceeds from term loans                             --       6,738
   Proceeds from exercise of stock
    options and warrants                             1,466       3,665
   (Purchase of)/proceeds from the sale of common
    shares held in trust, net                          (72)         64
   Payment of capital lease obligations               (247)       (182)
   Dividend paid to minority interest in
    consolidated subsidiaries                         (900)       (822)
                                                  --------    --------
 Net cash (used in) provided by
  financing activities                              (5,105)      5,264
                                                  --------    --------
 Net increase in cash                               14,790      15,999
 Effect of exchange rate changes on cash             2,056       1,357
                                                  --------    --------
 Net increase in cash and cash equivalents          16,846      17,356
 Cash and cash equivalents at beginning of period   26,797      11,546
                                                  --------    --------
 Cash and cash equivalents at end of period       $ 43,643    $ 28,902
                                                  ========    ========
 Supplemental disclosure of cash flow information:
    Non-cash financing activities:
 Acquisition of equipment under capital lease     $     20    $    160
                                                  ========    ========

Contact:

          Fuel Systems Solutions, Inc.
          Bill Larkin, CFO
          (714) 656-1320

          Lippert / Heilshorn & Associates
          Investor Relations Contacts:
          Kirsten Chapman
          Cathy Mattison
            cmattison@lhai.com
          (415) 433-3777

Source: Fuel Systems Solutions, Inc.
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