07.08.09

Fuel Systems Solutions: Q2 2009 Results

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Fuel Systems Solutions, Inc. reported results for its second quarter ended June 30, 2009.

Mariano Costamagna, Fuel Systems' CEO, said, "Our quarterly results demonstrate we are successfully executing our plan to be a leader in alternative fuel systems and complementary services for transportation and industrial vehicles. Our expanded delayed original equipment manufacturer (DOEM) capacity delivered record quarterly systems installations of 37,000 and our business is on track to exceed 120,000 conversions in 2009, more than doubling the nearly 58,000 conversions in 2008. Demand for alternative fuel vehicles is strong in Europe and will undoubtedly return worldwide as global markets improve. As such, during the quarter, we raised $30 million to continue to invest in opportunities in existing and adjacent businesses like our Teleflex Power Systems, Distribuidora Shopping S.A., and FuelMaker Corporation asset acquisitions and global automotive expansions."

Recent Operational Highlights

* Reached 37,000 DOEM conversions in the second quarter 2009, up from 30,000 conversions in the first quarter 2009.
* Completed the acquisition of Teleflex Power Systems for $14.5 million in August.
-- Two of Teleflex's Power Systems' three lines of business complement the global transportation and industrial businesses. The technology and testing equipment augment Fuel Systems' existing capabilities and the patents and certifications further build upon the company's intellectual property portfolio.
-- The third business, anti-idling auxiliary power units (APUs), expands the product line with solutions that generate power for parked heavy-duty class-8 trucks and diesel locomotives.
* Purchased compressed natural gas (CNG) refueling products, including the home appliance Phill(tm), for $7.0 million from FuelMaker Corporation in May, expanding Fuel Systems' ability to serve consumers, small-to-medium fleets and commercial fleets.
* Acquired the remaining minority interest of WMTM joint venture in Brazil further streamlining its corporate structure, and maximizing operating flexibility.
* Enhanced U.S. Automotive fleet strategy for liquid propane gas (LPG) and CNG vehicles by signing a non-exclusive distribution agreement with privately-held, CleanFUEL USA, to market and sell Fuel Systems' kits in the U.S. market.

Matthew Beale, Fuel Systems' President, CFO and Secretary, said, "Our DOEM business performed better than expected, which partially offset the impact of the global recession on our transportation aftermarket and industrial business. In fact, if the Euro to U.S. Dollar exchange rate had remained constant, our quarterly revenue would have been up slightly compared to last year. More notably, our DOEM business has achieved a critical mass that made an important contribution to the improvement of gross margins. These results combined with our acquisitions have driven us to increase annual revenue guidance to between $370 million to $380 million."

Recent Corporate Highlights
* Completed $30 million registered direct common stock offering for general corporate purposes and to help fund its growth strategy.
* Appointed Mike Helfand, Senior Vice President Finance and Chief Accounting Officer, and named Matthew Beale Chief Financial Officer in addition to President and Secretary.
* Announced corporate headquarters' relocation to New York City to increase efficiencies managing global operations.

Financial Results

Revenue for the second quarter of 2009 was $92.3 million, compared to $98.3 million in the second quarter of 2008. The decrease in revenues was due to negative foreign exchange impact of approximately $10.2 million, or 10%. The increase in transportation DOEM revenue offset the lower demand in the industrial market. Gross profit for the second quarter 2009 was $28.6 million, or 31% of revenue, compared to $28.6 million, or 29% of revenue, a year ago, reflecting the operating efficiencies achieved by reaching a critical mass. Operating income for the second quarter of 2009 totaled $12.5 million, or 14% of revenue, compared to $10.2 million, or 10% of revenue, in the second quarter of 2008. Net income for the second quarter 2009 was $7.4 million, or $0.46 per diluted share, compared to $4.6 million, $0.29 per diluted share, which included a non-cash goodwill impairment charge of $3.9 million, in the second quarter of 2008.

For the six-month period ending June 30, 2009, total revenues were $172.4 million, compared to $192.9 million for the first half of 2008. Net income for the first half of 2009 was $14.5 million, or $0.90 per diluted share, compared to $10.8 million, including the impairment charge of $3.9 million, or $0.69 per diluted share, for the first half of 2008.

Company Outlook

Based on the current market outlook, margin improvements and acquisitions, the company expects 2009 revenue to be between $370 million and $380 million. The company is targeting 2009 gross margin between 28% and 30% and 2009 operating margin to be between 11% and 13%.

Conference Call

The company will host a conference call on August 7th at 8:00 a.m. Pacific Time / 11:00 a.m. Eastern Time to discuss its second quarter 2009 financial results. To listen to the call live, please dial 877-356-8063 at least 10 minutes before the start of the conference. International participants may dial 706-679-2544. The pass code for the conference call will be 18966890. The call is also being webcast and can be accessed from the "Investor Relations" section of the company's website at www.fuelsystemssolutions.com. A telephone replay will be available until midnight ET on August 21st by dialing 800-642-1687 or 706-645-9291 and entering pass code 18966890#. 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 its ability to achieve 2009 revenue between $370 million and $380 million with gross profit margin between 28 percent and 30 percent and operating margin between 11 percent and 13 percent, as well as the success of products and the success and integration of recent acquisitions. Such statements represent only our opinions and predictions. 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 we cannot integrate the acquired assets into our business promptly and efficiently, that the patents or certifications acquired are insufficient or not useable by us, that expected sales do not materialize, that changes in emissions regulations may not significantly increase demand for the Company's products, the global economic downturn may reduce customers' demand for new automobiles and/or our products, and that all closing conditions will be met, 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 reduce the demand for our products and that currency fluctuations will 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, 2008. The Company does not undertake to update or revise any of its forward-looking statements or guidance even if experience or future changes show that the indicated results or events will not be realized.

About Fuel Systems Solutions

Fuel Systems Solutions (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. The company is composed of two operating subsidiaries: IMPCO Technologies and BRC. IMPCO Technologies is a leader in the heavy duty, industrial, power generation and stationary engines sectors. 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. Additional information is available at www.fuelsystemssolutions.com.


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




                                                    June 30,  Dec. 31,
                                                      2009      2008
                                                    --------  --------
 ASSETS
 Current assets:
  Cash and cash equivalents                         $ 53,051  $ 26,477
  Accounts receivable less allowance for doubtful
   accounts of $5,709 and $3,293 at June 30, 2009
   and December 31, 2008, respectively                91,203    70,009
  Inventories:

   Raw materials and parts                            42,034    38,925
   Work-in-process                                     1,021     1,700
   Finished goods                                     51,195    50,253
   Inventory on consignment with unconsolidated
    affiliates                                           629     1,732
                                                    --------  --------
    Total inventories                                 94,879    92,610
  Deferred tax assets, net                             5,518     5,734
  Other current assets                                 6,522     5,749
  Related party receivables                              176        69
                                                    --------  --------
   Total current assets                              251,349   200,648
                                                    --------  --------
 Equipment and leasehold improvements:
  Dies, molds and patterns                             4,141     3,889
  Machinery and equipment                             32,914    25,996
  Office furnishings and equipment                    12,386    11,198
  Automobiles and trucks                               2,783     2,235
  Leasehold improvements                               9,096     8,098
                                                    --------  --------
                                                      61,320    51,416
  Less accumulated depreciation and amortization      27,210    23,744
                                                    --------  --------
    Net equipment and leasehold improvements          34,110    27,672
 Goodwill                                             49,519    41,295
 Deferred tax assets, net                                242       174
 Intangible assets, net                               19,151    10,021
 Investment in unconsolidated affiliates               3,451     3,334
 Other assets                                          2,525     4,183
                                                    --------  --------
     Total Assets                                   $360,347  $287,327
                                                    ========  ========


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


                                                    June 30,  Dec. 31,
                                                      2009      2008
                                                    --------  --------

 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
  Accounts payable                                  $ 41,287  $ 65,224
  Accrued expenses                                    52,942    34,212
  Current revolving lines of credit                   12,212     2,413
  Current portion of term loans and other loans        8,043     4,470
  Current portion of capital leases                      266       192
  Deferred tax liabilities, net                           11       112
  Related party payables                               6,982    11,263
                                                    --------  --------
   Total current liabilities                         121,743   117,886
 Term loans and other loans                           21,301     4,689
 Capital leases                                          181       238
 Other liabilities                                     6,092     6,258
 Deferred tax liabilities                              6,806     4,301
                                                    --------  --------
   Total liabilities                                 156,123   133,372
                                                    --------  --------
 Stockholders' equity:
  Preferred stock, $0.001 par value, authorized
   1,000,000 shares; none issued and outstanding at
   June 30, 2009 and December 31, 2008                    --        --
  Common stock, $0.001 par value, authorized
   200,000,000 shares; 17,597,095 issued and
   17,582,062 outstanding at June 30, 2009; and
   15,801,745 issued and 15,749,783 outstanding at
   December 31, 2008                                      18        16
  Additional paid-in capital                         257,144   220,270
  Shares held in treasury, 15,033 and 51,962 shares
   at June 30, 2009 and December 31, 2008,
   respectively                                         (649)   (1,399)
  Accumulated deficit                                (64,889)  (79,354)
  Accumulated other comprehensive income              12,600    14,422
                                                    --------  --------
   Total stockholders' equity                        204,224   153,955
                                                    --------  --------
   Total Liabilities and Stockholders' Equity       $360,347  $287,327
                                                    ========  ========


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

                       Three Months Ended        Six Months Ended
                             June 30,                  June 30,
                    ------------------------  ------------------------
                        2009         2008         2009         2008
                    -----------  -----------  -----------  -----------
 Revenue            $    92,323  $    98,284  $   172,405  $   192,884
 Cost of revenue         63,698       69,704      119,443      136,820
                    -----------  -----------  -----------  -----------
  Gross profit           28,625       28,580       52,962       56,064
 Operating expenses:
  Research and
   development
   expense                3,303        2,702        6,214        5,530
  Selling, general
   and
   administrative
   expense               12,699       11,659       22,658       22,830
  Goodwill
   impairment loss           --        3,907           --        3,907
  Amortization
   of intangible
   assets                   144           98          253          191
                    -----------  -----------  -----------  -----------
   Total operating
    expenses             16,146       18,366       29,125       32,458
                    -----------  -----------  -----------  -----------
 Operating income        12,479       10,214       23,837       23,606
 Other income
  (expense), net            836          (43)       1,552       (1,164)
 Interest expense,
  net                      (524)        (200)        (908)        (392)
                    -----------  -----------  -----------  -----------
 Income before
  income taxes and
  equity share in
  income (loss) of
  unconsolidated
  affiliates             12,791        9,971       24,481       22,050
 Equity share in
  income (loss) of
  unconsolidated
  affiliates                193          (91)         306           77
 Income tax expense      (5,589)      (4,878)     (10,322)     (10,418)
                    -----------  -----------  -----------  -----------
 Net income               7,395        5,002       14,465       11,709
 Less: Net income
  attributable to
  noncontrolling
  interests                  --          394           --          875
                    -----------  -----------  -----------  -----------
 Net income
  attributable to
  Fuel Systems      $     7,395  $     4,608  $    14,465  $    10,834
                    ===========  ===========  ===========  ===========
 Net income per
  share
  attributable
  to Fuel Systems:
  Basic             $      0.46  $      0.30  $      0.90  $      0.70
                    ===========  ===========  ===========  ===========
  Diluted           $      0.46  $      0.29  $      0.90  $      0.69
                    ===========  ===========  ===========  ===========

 Number of shares
  used in per share
  calculation:
  Basic              16,160,857   15,611,190   16,092,091   15,565,358
                    ===========  ===========  ===========  ===========
  Diluted            16,223,095   15,749,806   16,159,752   15,692,418
                    ===========  ===========  ===========  ===========


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

                                                     Six Months Ended
                                                          June 30,
                                                    ------------------
                                                      2009      2008
                                                    --------  --------

 Net income                                         $ 14,465  $ 11,709
 Adjustments to reconcile net income to net cash
  provided by operating activities:
  Depreciation and amortization expense                3,699     3,180
  Amortization of intangibles                          1,902     1,456
  Provision for doubtful accounts                       (171)      121
  Provision for inventory reserve                      2,658     1,041
  Provision for loan to unconsolidated affiliate          --     1,091
  Goodwill impairment loss                                --     3,907
  Equity share in income of unconsolidated
  affiliates                                            (298)      (77)
  Dividends from unconsolidated affiliates               196       230
  Unrealized (gain) loss on foreign exchange          (1,389)    1,094
  Loss on disposal of asset                               41        79
  Stock-based compensation expense                       101       191
 Changes in assets and liabilities:
  Increase in accounts receivable                    (18,495)  (10,370)
  (Increase) decrease in inventory                     3,872   (15,220)
  (Increase) decrease in other current assets            301    (2,432)
  Increase (decrease) in deferred income taxes           (90)   (1,560)
  Increase (decrease) in accounts payable            (25,528)   13,471
  Increase in accrued expenses                        14,391    12,745
  Decrease in other assets                               344        10
  Increase (decrease) in long term liabilities          (338)      685
  Receivables from/payables to related party, net     (3,172)    3,911
                                                    --------  --------
 Net cash (used in) provided by operating activities  (7,511)   25,262
                                                    --------  --------
 Cash flows from investing activities:
  Purchase of equipment and leasehold improvements    (6,706)   (4,950)
  Purchase of noncontrolling interest in
   consolidated subsidiary                                --      (227)
  Investment in joint venture                             10        --
  Acquisitions, net of cash acquired of $0.7 million (12,615)       --
  Purchase of intangible asset                            --      (193)
  Proceeds from sale of assets                            35         3
                                                    --------  --------
 Net cash used in investing activities               (19,276)   (5,367)
                                                    --------  --------
 Cash flows from financing activities:
  Borrowing (Payment) on revolving lines of
   credit, net                                         9,359    (3,307)
  Payments on term loans                              (3,967)   (2,045)
  Proceeds from term loans                            19,757        --
  Payment of capital lease obligations                  (202)     (247)
  Proceeds from issuance of common stock, net of
   expenses of $2.3 million                           27,713        --
  Proceeds from exercise of stock options
   and warrants                                           --     1,466
  (Purchase of)/proceeds from the sale of common
   shares held in trust, net                             (28)      (72)
  Dividends paid to noncontrolling interest in
   consolidated subsidiaries                              --      (900)
                                                    --------  --------
 Net cash provided by (used in) financing activities  52,632    (5,105)
                                                    --------  --------
 Net increase in cash                                 25,845    14,790
 Effect of exchange rate changes on cash                 729     2,056
                                                    --------  --------
 Net increase in cash and cash equivalents            26,574    16,846
 Cash and cash equivalents at beginning of period     26,477    26,797
                                                    --------  --------
 Cash and cash equivalents at end of period         $ 53,051  $ 43,643
                                                    ========  ========
 Supplemental disclosure of cash flow information:
  Non-cash financing activities:
 Acquisition of equipment under capital lease       $     --  $     20
                                                    ========  ========
 Issuance of 1,382 shares and 5,321 shares of
  restricted stock in 2009 and 2008, respectively   $     15  $     99
                                                    ========  ========
 Issuance of 282,932 shares of common stock for the
  acquisition of Distribuidora Shopping             $  8,654  $     --
                                                    ========  ========
 Issuance of 39,868 shares from treasury stock for
  the acquisition of Distribuidora Shopping         $  1,220  $     --
                                                    ========  ========

CONTACT:
Fuel Systems Solutions, Inc.
Matthew Beale, President, CFO & Secretary
(714) 656-1300
         
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