Fuel Systems Solutions: Q1 results

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NEW YORK - Fuel Systems Solutions, Inc. (FSYS) reported results for its first quarter ended March 31, 2014.

Mariano Costamagna, Fuel Systems' CEO, said, "First quarter 2014 results were largely as anticipated given, as we have already disclosed, reduced volumes from the conclusion of specific DOEM and OEM programs, highly competitive European aftermarkets, and product and customer transitions in mobile industrial engines. During the quarter, we won small contracts in industrial APUs, compressors, and initiated or continued discussions with automotive and industrial OEMs to develop future opportunities. We also made progress in right sizing our European automotive workforce and expect to complete this process by year-end, with these savings expected to be visible in next year's results. For 2014, we remain focused on efficient execution and eliminating and avoiding costs wherever possible, extending and diversifying our technological leadership into new sources of growth, and are on the lookout for possible strategic and opportunistic M&A."

First Quarter 2014 Financial Results

Revenue for the first quarter of 2014 was $81.3 million compared to $98.6 million in the first quarter of 2013. Automotive revenue decreased $12.3 million primarily reflecting lower DOEM and OEM volumes and the impact of the competitive aftermarket pressure partially offset by growth in the compressor business. Industrial revenue decreased $5.0 million compared to the prior-year period primarily reflecting increased competition and the previously announced loss of a large customer. The impact of foreign exchange on the first quarter revenue was negative $2.3 million.

Gross profit for the first quarter of 2014 was $17.4 million, or 21.4% of revenue, compared to $21.6 million, or 21.9% of revenue, in the first quarter of 2013. The lower gross profit primarily reflects the lower revenue discussed above and a shift in the mix of business.

Operating loss for the first quarter of 2014 totaled $2.3 million, or 2.8% of revenue, compared to an operating income of $1.1 million, or 1.2% of revenue, in the first quarter of 2013, reflecting the lower gross profit mentioned above partially offset by lower operating costs.

Adjusted EBITDA for the first quarter of 2014 was $1.6 million, or 2.0% of revenue, compared to $4.4 million, or 4.4% of revenue, in the first quarter of 2013, primarily reflecting the abovementioned revenue and cost variances. Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures" below for a discussion of this metric.

Although the tax rate for the first quarter of 2014 was much lower than in the prior year first quarter, the Company continues to experience the high income tax rate that is 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 expects its effective tax rate for 2014 to be comparable to 2013.

Net loss for the first quarter of 2014 was $2.0 million, or $0.10 per diluted share, compared to net loss of $0.7 million, or $0.04 per diluted share, in the first quarter of 2013.

FSS Automotive Operations

FSS Automotive first quarter 2014 revenue was $54.4 million, compared to $66.7 million from the same quarter a year ago. The impact of foreign exchange on FSS Automotive was a negative $1.0 million; in constant currency, first quarter FSS Automotive revenue decreased 16.9%, reflecting decreases in both aftermarket and OEM/DOEM volumes partially offset by growth in the compressor business. FSS Automotive first quarter 2014 operating loss was $2.3 million, compared to an operating income of $0.3 million in the same period a year ago. FSS Automotive first quarter 2014 Adjusted EBITDA was $1.1 million, compared to $3.3 million a year ago.

FSS Industrial Operations

Revenue from FSS Industrial was $26.9 million compared to $31.9 million the same quarter a year ago. The impact of foreign exchange on FSS Industrial was a negative $1.3 million; in constant currency, first quarter FSS Industrial revenue decreased 11.8%, primarily reflecting increased competition which resulted in the previously announced loss of a large customer. FSS Industrial first quarter 2014 operating income was $1.9 million, compared to operating income of $2.5 million in the same period a year ago. FSS Industrial first quarter 2014 Adjusted EBITDA was $2.3 million, compared to $2.7 million a year ago.

Credit Facility Renewal

On April 30, 2014, the Company renewed and expanded the amount of its credit facility to $20 million. The agreement with the New York Branch of Intesa SanPaolo S.p.A. also extended the maturity date to April 30, 2015, ensuring an appropriate level of global liquidity.

Company Outlook

The Company outlook for 2014 is unchanged, and expects full year 2014 revenue to be between $340 million and $360 million, 2014 gross margin of 21% to 23%, and 2014 positive cash flow as defined by Adjusted EBITDA of between $14 million and $20 million. This outlook is based upon the following expectations:

    Automotive operations -- slower global transportation market given increasingly aggressive competition and the difficult economies in developing countries in Latin America and Europe, including the previously disclosed loss of certain OEM and DOEM programs in Asia and Europe, and the discontinuation of the Chevrolet brand in Europe. The slower markets will be partially offset by continued positive margin contributions from the US market and the anticipated maintenance of the Company's leading market share in the European aftermarket.
    Industrial operations -- the previously announced loss of a large customer is expected to be partially offset by new engine programs beginning in late 2014 and early 2015, and by modest growth in the APU and mobile markets.
    A comparable margin performance in 2014 relative to 2013 on lower volumes given the expected revenue mix as the Company continues to implement cost reductions and focus on achieving greater operational efficiencies. The Company expects its effective tax rate for 2014 to be comparable to 2013 resulting from the anticipated mix of business by tax jurisdiction.

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, the closest GAAP financial measure: 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.

 About Fuel Systems Solutions

Fuel Systems Solutions (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
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