Fuel Systems Solutions: Q3 results
NEW YORK - Fuel Systems Solutions, Inc. reported results for its third quarter ended and nine months ended September 30, 2013.
Mariano Costamagna, Fuel Systems' CEO, said, "Fuel Systems' third quarter results were solid, with revenue of $97.6 million reflecting an increase in Automotive DOEM sales mostly in the US market and increases in Industrial systems and APU sales compared to last year. Profitability improved nicely on both sides of the business through mix as well as our focus on driving efficiencies across the organization. We are narrowing our 2013 revenue outlook to the lower end of the range and increasing our new product and market development and cost control efforts as we plan for continued economic and competitive challenges in certain geographies as we move into 2014. We are focusing on our brands and our profitability while being realistic about competition, both on the OEM and the aftermarket sides, while nurturing growth in expanding markets. Fuel Systems expertise, core technologies, global platform, and our investments in technology position us well to serve our addressable market opportunities."
Third Quarter 2013 Financial Results
Revenue for the third quarter of 2013 was $97.6 million an increase of $8.0 million or 8.9% compared to $89.6 million in the third quarter of 2012. Automotive revenue increased $6.3 million or 10.3% compared to the prior-year period, primarily due to an increase in DOEM sales, mostly in the US market while Industrial revenues increased $1.7 million, or 5.9% compared to the prior-year period, primarily as a result of increased demand for systems and kits as well as auxiliary power units in North America partially offset by lower volumes of heavy duty business in Asia. The impact of foreign exchange on third quarter revenue was insignificant.
Gross profit for the third quarter of 2013 was $22.1 million, or 22.6% of revenue, compared to $18.8 million, or 21.0% of revenue in the third quarter of 2012, primarily reflecting expanded margins in both areas of the business, including stronger profitability in the US DOEM Automotive business and lower warranty costs in Industrial. Included in Cost of Revenue was a $1.7 million loss relating to the purchase of an additional 45% equity interest of Fuel Systems' joint venture in India. Operating income for the third quarter of 2013 totaled $1.6 million, or 1.7% of revenue, compared to operating income of $0.2 million, or 0.2% of revenue in the third quarter of 2012. Excluding the abovementioned loss on the equity purchase, operating income was $3.3 million, or 3.4% of revenue, reflecting higher gross margin in the quarter, partially offset by an operating expense increase relating to bad debt expenses and outside services costs.
EBITDA for the third quarter of 2013 was $5.3 million, or 5.5% of revenue, compared to $5.3 million, or 5.9% of revenue in the third quarter of 2012, primarily reflecting the abovementioned revenue and cost variances. EBITDA is a non-GAAP measure. See "Non-GAAP Measures" below for a discussion of this metric.
The tax rate for the third quarter of 2013 was 47% compared to 152% in the prior year quarter. The high income tax rate 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 2013 to be approximately 60% resulting from the current mix of business by tax jurisdiction.
Net income for the third quarter of 2013 was $1.0 million, or $0.05 per diluted share, compared to a net loss of $0.6 million or $(0.03) per diluted share loss for the third quarter of 2012.
FSS Automotive Operations
FSS Automotive third quarter 2013 revenue was $67.5 million, compared to $61.2 million from the same quarter a year ago. The impact of foreign exchange on FSS Automotive was a positive $0.9 million; in constant currency, third quarter FSS Automotive revenue increased 10.3% from the prior-year period, reflecting the above mentioned growth in the US DOEM market. FSS Automotive third quarter 2013 operating income was $0.8 million compared to operating income of $0.6 million in the same period a year ago. FSS Automotive third quarter 2013 EBITDA was $3.4 million, compared to $4.2 million in the same period a year ago.
FSS Industrial Operations
FSS Industrial third quarter 2013 revenue was $30.1 million compared to $28.4 million from the same quarter a year ago. The impact of foreign exchange on FSS Industrial was a negative $0.8 million; in constant currency, third quarter FSS Industrial revenue increased 5.9% from the prior year, reflecting the above mentioned increased sales of kits and components and APUs. FSS Industrial third quarter 2013 operating income was $2.4 million compared to operating income of $1.0 million in the same period a year ago. FSS Industrial third quarter 2013 EBITDA was $3.4 million, compared to $2.4 million in the same period a year ago.
Nine Months Ended September 30, 2013 Financial Results
Total revenue for the first nine months of 2013 was $307.3 million compared to $295.9 million for the first nine months of 2012. Net income for the first nine months of 2013 was $2.9 million, or $0.14 per diluted share, compared to $5.3 million, or $0.27 per diluted share, for the first nine months of 2012. EBITDA for the first nine months of 2013 was $17.0 million compared to $21.4 million for the first nine months of 2012.
Total FSS Automotive revenue for the first nine months of 2013 was $212.1 million compared to $203.1 million for the same period a year ago. Automotive operating income was $3.9 million for the first nine months of 2013 compared to $4.4 million for the first nine months of 2012. FSS Automotive EBITDA for the first nine months of 2013 was $11.8 million compared to $15.1 million for the first nine months of 2012.
Total FSS Industrial revenue for the first nine months of 2013 was $95.2 million compared to $92.8 million for the same period a year ago. Industrial operating income was $8.5 million for the first nine months of 2013 compared to $7.9 million for the first nine months of 2012. FSS Industrial EBITDA for the first nine months of 2013 was $9.8 million compared to $11.0 million for the first nine months of 2012.
The Company is narrowing its 2013 revenue outlook toward the lower end of the previous range of $400 to $420 million. The outlook for 2013 gross margin of 21% to 23% and for 2013 operating margin of 2% to 4% are reaffirmed. This updated outlook is based upon the following expectations:
Automotive operations – slower global transportation market given increasingly aggressive competition and the difficult economies in developing countries and Europe, and the timing of certain major projects and initiatives in the fourth quarter of 2013 and into the future. The slower markets will be partially offset by contributions from DOEM programs, particularly in the US, combined with additional contributions from Asia and Latin American automotive markets.
Industrial operations – growth in the APU market; slight growth in stationery equipment and mobile industrial markets overall with a mix of stable and weaker geographies.
A comparable margin performance in 2013 relative to 2012 as the Company focuses on achieving greater operational efficiencies given some margin compression expected from an increasingly competitive environment; continued selected investments in key leading edge technologies.
In addition, certain OEM/DOEM programs will conclude in the late 2013 and early 2014 time frame and have not been renewed because of the automakers' decisions, partly influenced by economic conditions, to either in-source systems or source from local suppliers. Fuel Systems expects that new programs will partly defray the loss of this revenue. The Company is now performing its 2014 budgeting process and sales and marketing plans, and will disclose expected impacts as well as greater detail on future initiatives when it offers its 2014 outlook as part of fourth quarter 2013 reporting.
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 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." 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 (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.
Pietro Bersani, Chief Financial Officer Fuel Systems Solutions, Inc.
Investor Relations Contacts:
Carolyn M. Capaccio
email@example.com (415) 433-3777