NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2016
(Unaudited)
1. Basis of Presentation
The accompanying condensed consolidated balance sheet as of December 31, 2015 has been derived from the audited consolidated financial statements included in the Fuel Systems Solutions, Inc. (“Fuel Systems” or “the Company”) 2015 Annual Report on Form 10-K. The accompanying condensed consolidated financial statements as of and for the periods ended March 31, 2016 and 2015 are unaudited and reflect all adjustments (including normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial position and operating results for the interim periods. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in Fuel Systems’ Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
On September 1, 2015, Fuel Systems, Westport Innovations Inc., an Alberta, Canada corporation (“Westport”), and Whitehorse Merger Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of Westport (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). Under the terms of the Merger Agreement, the Company will be merged with and into Merger Sub, with the Company surviving the Merger and becoming a direct wholly owned subsidiary of Westport. Pursuant to the original terms of the Merger Agreement, at the effective time of the merger, each outstanding share of common stock of the Company, will be cancelled and converted into the right to receive 2.129 shares of common shares of Westport, subject to certain adjustments.
On March 6, 2016 the Company entered into an Amendment to the Merger Agreement. This Amendment changed the exchange ratio from 2.129 shares to a range of 3.0793 to 2.129 shares depending on the weighted average price of Westport shares as defined by the Amendment. Consummation of the merger is subject to various closing conditions.
The Company designs, manufactures and supplies alternative fuel components and systems for use in the transportation, industrial and power generation industries on a global basis. The Company’s components and systems control the pressure and flow of gaseous alternative fuels, such as propane and natural gas used in internal combustion engines.
The condensed consolidated financial statements include the accounts of the Company and our majority-owned subsidiaries. All intercompany transactions, including intercompany profits and losses and intercompany balances, have been eliminated in consolidation. Investments in unconsolidated joint ventures or affiliates (“joint ventures”) are accounted for under the equity method of accounting, whereby the investment is initially recorded at the cost of acquisition and adjusted to recognize the Company’s share in undistributed earnings or losses since acquisition.
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ from those estimates.
The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2016, or for any future period.
2. Recent Accounting Standards
In May 2014, the FASB issued a new accounting standard update providing additional guidance for revenue recognition in relation to contractual arrangements with customers. The core principle of the guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In July 2015, the FASB finalized a deferral of this standard resulting in the standard being effective beginning in 2018, with early adoption permitted in the beginning of 2017. This standard can be adopted either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the effect that adopting this new accounting guidance will have on the Company’s consolidated financial statements.
In June 2014, the FASB issued a new accounting standard update providing additional guidance on how to account for share-based payments where the terms of an award may provide that the performance target could be achieved after an employee completes the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite period is treated as a performance condition. The amendments in this update are effective for fiscal years, and interim periods within those years beginning after December 15, 2015, and may be applied (a) prospectively to all awards granted or modified
7
after the effective date or (b) retrospectively to all awards with
performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all ne
w or modified awards thereafter
. The adoption of this standard
did
not
impact the Company’s financial statements
.
In August 2014, the FASB issued a new accounting standard update intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. Under GAAP, financial statements are prepared under the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. Financial reporting under this presumption is commonly referred to as the going concern basis of accounting. The going concern basis of accounting is critical to financial reporting because it establishes the fundamental basis for measuring and classifying assets and liabilities. The amendments in this update apply to all companies and not-for-profit organizations. They become effective in the annual period ending after December 15, 2016, with early application permitted. The adoption of this standard is not expected to have a material impact on the Company’s financial statements.
In February 2015, the FASB issued a new accounting standard update providing amendments to the consolidation guidance. Among other aspects, the amendments in this update affect the consolidation analysis of reporting entities that are involved with Variable Interest Entities (“VIEs”), and the effect of related parties on the primary beneficiary determination. The amendments in this update reduce the application of the related party guidance for VIEs on the basis of the following three changes: (i) for single decision makers, related party relationships must be considered indirectly on a proportionate basis, rather than in their entirety, (ii) related party relationships should be considered in their entirety for entities that are under common control, only if that common control group has the characteristics of a primary beneficiary, and (iii) if the assessment in clause (ii) is not applicable, but substantially all of the activities of the VIE are conducted on behalf of a single variable interest holder (excluding the decision maker) in a related party group that has the characteristics of a primary beneficiary, that single variable interest holder must consolidate the VIE as the primary beneficiary. The standard is effective for calendar year-end public business entities in 2016, and early adoption is allowed, including in any interim period. The adoption of this standard did not impact the Company’s financial statements.
In August 2015, the FASB issued a new accounting standard, which simplifies the measurement of inventory by requiring certain inventory to be measured at the “lower of cost and net realizable value” and the previous parameters for “market value” will be eliminated. The new accounting standard defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.” The standard will be effective for fiscal years beginning after December 15, 2016, with earlier adoption permitted. The Company is currently evaluating the impact of adopting this new guidance on its financial statements.
In February 2016, the FASB issued a new lease accounting standard. The key objective of the new standard is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Lessees will need to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). For income statement purposes, a dual model has been retained, with leases to be designated as operating leases or finance leases. Expenses will be recognized on a straight-line basis for operating leases, and a front-loaded basis for finance leases. For public entities, the new standard is effective for periods beginning after December 15, 2018, with early adoption permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. The Company is currently evaluating the impact of the new standard on its financial statements.
In March 2016, the FASB issued amendments to simplify several aspects of the accounting for share-based payment transactions through ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The amendments simplify areas such as income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments are effective for annual periods beginning after December 15, 2016, and interim periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. The application of this guidance is not expected to have a material impact on the Company’s financial statements.
3. Cash and Investments
All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents. The Company’s marketable securities have been classified and accounted for as available-for-sale. Management determines the appropriate classification of its investments at the time of purchase and reevaluates the designations at each balance sheet date. The Company classifies its marketable securities as either short-term or long-term based on each instrument’s underlying contractual maturity date. Marketable securities with maturities of 12 months or less are classified as short-term and marketable securities with maturities greater than 12 months are classified as long-term. The Company’s marketable securities are carried at fair value, with the unrealized gains and losses, net of taxes, reported as a component of shareholders’ equity. The Company determines realized gains and losses on the sale of marketable securities on a specific identification method, and reflects such gains and losses as a component of interest and other income, net, in the accompanying Condensed Consolidated Statements of Operations.
8
Cash, cash equivalents, and marketable securities consist of the following (in thousands):
|
|
As of
|
|
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
41,468
|
|
|
$
|
48,343
|
|
Money market funds
|
|
|
7,073
|
|
|
|
11,819
|
|
Total cash and cash equivalents
|
|
$
|
48,541
|
|
|
$
|
60,162
|
|
Investments:
|
|
|
|
|
|
|
|
|
Other investments, held to maturity:
|
|
|
|
|
|
|
|
|
Time deposits (1)
|
|
|
1,000
|
|
|
|
1,000
|
|
Total investments
|
|
$
|
1,000
|
|
|
$
|
1,000
|
|
Short-term investments
|
|
$
|
1,000
|
|
|
$
|
1,000
|
|
Note (1): At March 31, 2016 and December 31, 2015, these amounts represent one Bank of America certificate of deposit (no interest if withdrawn before maturity): a $1.0 million certificate of deposit with a maturity date of June 27, 2016 and 0.52% interest rate.
At March 31, 2016 and December 31, 2015, restricted cash included in other assets was approximately $0.4 million and $0.4 million, respectively.
4. Fair Value Measurements
The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring or non-recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact business and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1
|
|
—
|
|
Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
Level 2
|
|
—
|
|
Include other inputs that are directly or indirectly observable in the marketplace.
|
Level 3
|
|
—
|
|
Unobservable inputs that are supported by little or no market activities.
|
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The Company classifies its cash equivalents and marketable securities within Level 1 or Level 2. This is because the Company values its cash equivalents, available for sale and trading securities using quoted market prices or alternative pricing sources and models utilizing market observable inputs.
|
|
As of
March 31,
2016
|
|
|
Fair value measurement at
reporting date using
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
7,073
|
|
|
$
|
7,073
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Other investments, held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
|
1,000
|
|
|
|
0
|
|
|
|
1,000
|
|
|
|
0
|
|
Total
|
|
$
|
8,073
|
|
|
$
|
7,073
|
|
|
$
|
1,000
|
|
|
$
|
0
|
|
9
|
|
As of
December 31,
2015
|
|
|
Fair value measurement at
reporting date using
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
11,819
|
|
|
$
|
11,819
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Other investments, held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
|
1,000
|
|
|
|
0
|
|
|
|
1,000
|
|
|
|
0
|
|
Total
|
|
$
|
12,819
|
|
|
$
|
11,819
|
|
|
$
|
1,000
|
|
|
$
|
0
|
|
5. Inventories
Inventories, consisting of raw materials and parts, work-in-process, and finished goods are stated at the lower of cost or market value. Cost is determined by the first-in, first-out, or the FIFO method, while market value is determined by replacement cost for raw materials and parts and net realizable value for work-in-process and finished goods.
Inventories are comprised of the following (in thousands):
|
|
As of
|
|
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Raw materials and parts
|
|
$
|
50,967
|
|
|
$
|
41,268
|
|
Work-in-process
|
|
|
1,938
|
|
|
|
1,875
|
|
Finished goods
|
|
|
21,403
|
|
|
|
18,462
|
|
Inventory on consignment
|
|
|
936
|
|
|
|
1,112
|
|
Total inventories
|
|
$
|
75,244
|
|
|
$
|
62,717
|
|
6. Equipment and Leasehold Improvements, Net
Equipment and leasehold improvements, net, consist of the following (in thousands):
|
|
As of
|
|
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Dies, molds, and patterns
|
|
$
|
5,207
|
|
|
$
|
4,964
|
|
Machinery and equipment
|
|
|
58,759
|
|
|
|
56,108
|
|
Office furnishings and equipment
|
|
|
20,463
|
|
|
|
19,787
|
|
Automobiles and trucks
|
|
|
4,542
|
|
|
|
4,121
|
|
Leasehold improvements
|
|
|
16,437
|
|
|
|
15,881
|
|
Total equipment and leasehold improvements
|
|
|
105,408
|
|
|
|
100,861
|
|
Less: accumulated depreciation
|
|
|
(69,613
|
)
|
|
|
(65,278)
|
|
Equipment and leasehold improvements, net of accumulated depreciation
|
|
$
|
35,795
|
|
|
$
|
35,583
|
|
Depreciation expense related to equipment and leasehold improvements was approximately $2.0 million and $2.4 million for the three months ended March 31, 2016 and 2015, respectively.
10
7
.
Intangibles
At March 31, 2016 and December 31, 2015, intangible assets consisted of the following (in thousands):
|
|
WT Average
Remaining
Amortization
period (in years)
|
|
|
As of March 31, 2016
|
|
|
As of December 31, 2015
|
|
|
|
Gross
Book Value
|
|
|
Accumulated
Amortization
|
|
|
Net
Book Value
|
|
|
Gross
Book Value
|
|
|
Accumulated
Amortization
|
|
|
Net
Book Value
|
|
Existing technology
|
|
|
3.5
|
|
|
$
|
24,115
|
|
|
$
|
(23,266
|
)
|
|
$
|
849
|
|
|
$
|
23,551
|
|
|
$
|
(22,693
|
)
|
|
$
|
858
|
|
Customer relationships
|
|
|
12.2
|
|
|
|
18,079
|
|
|
|
(16,669
|
)
|
|
|
1,410
|
|
|
|
17,800
|
|
|
|
(16,383
|
)
|
|
|
1,417
|
|
Trade name
|
|
|
6.1
|
|
|
|
3,953
|
|
|
|
(3,592
|
)
|
|
|
361
|
|
|
|
3,810
|
|
|
|
(3,405
|
)
|
|
|
405
|
|
Total
|
|
|
|
|
|
$
|
46,147
|
|
|
$
|
(43,527
|
)
|
|
$
|
2,620
|
|
|
$
|
45,161
|
|
|
$
|
(42,481
|
)
|
|
$
|
2,680
|
|
Amortization expense related to existing technology and customer relationships of $0.1 million and $0.4 million for the three months ended March 31, 2016 and 2015, respectively, is reported as a component of cost of revenue. Amortization expense related to trade name and non-compete agreements of $0.1 million and $0.1 million for three months ended March 31, 2016 and 2015, respectively, is reported as a component of operating expenses.
Amortization expense for the remaining lives of the intangible assets is estimated to be as follows (in thousands):
|
|
Amortization
Expense
|
|
Nine months ending December 31, 2016
|
|
$
|
491
|
|
2017
|
|
|
509
|
|
2018
|
|
|
370
|
|
2019
|
|
|
297
|
|
2020
|
|
|
266
|
|
2021
|
|
|
228
|
|
Thereafter
|
|
|
459
|
|
|
|
$
|
2,620
|
|
8. Warranties
Estimated future warranty obligations related to certain products are provided by charges to operations in the period in which the related revenue is recognized. Estimates are based, in part, on historical experience.
Changes in the Company’s product warranty liability during the three months ended March 31, 2016 and 2015 are as follows (in thousands):
|
|
Three Months Ended
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Balance at beginning of period
|
|
$
|
5,333
|
|
|
$
|
6,424
|
|
Provisions charged to costs and expenses
|
|
|
877
|
|
|
|
703
|
|
Settlements
|
|
|
(267
|
)
|
|
|
(941
|
)
|
Adjustments to pre-existing warranties
|
|
|
(860
|
)
|
|
|
(382
|
)
|
Effect of foreign currency translation
|
|
236
|
|
|
|
(441
|
)
|
Balance at end of period
|
|
$
|
5,319
|
|
|
$
|
5,363
|
|
9. Income Taxes
The Company’s effective tax rate for the three months ended March 31, 2016 was (13.1)% compared to an effective tax rate of (240.2)% for the three months ended March 31, 2015.
The Company operates in an international environment with significant operations in various locations outside of the United States, which have statutory tax rates that are different from the United States tax rate. Accordingly, the consolidated income tax rate is a composite rate reflecting the earnings in the various locations and the applicable rates. The change in the effective tax rate is primarily a result of the fluctuation of earnings in the various jurisdictions and losses incurred in the United States and certain foreign jurisdictions (“loss jurisdictions”) for which no tax benefit has been recorded.
11
For the three months ended March 31, 2015, our effective tax rate was impacted by a tax expense of $7.8
million related to an increase in valuation allowance on deferred tax assets that existed as of the beginning of 2015 in Italy, as the Company has determined that it is more likely than not that these assets will not be realized in the foreseeable future.
This conclusion was based on the weight of the available positive and negative evidence, including the three year cumulative loss recorded in Italy (after adjustments required for tax purposes) as of 2015.
The Company believes that the likelihood of recoverability of the net deferred tax assets in the loss jurisdictions is less than the “more likely than not” threshold, in addition to the valuation allowance recorded in connection with the deferred tax assets in Italy in the first quarter of 2015, a valuation allowance is maintained on the entire domestic and certain foreign jurisdictions deferred tax assets.
For the three months ended March 31, 2016 and 2015 the Company incurred a pre-tax loss of approximately $8.5 million and $5.0 million, respectively, in the loss jurisdictions.
As of March 31, 2016, the Company had approximately $14.9 million of unrecognized tax benefits. There was no significant change in unrecognized tax benefits for the three months ended March 31, 2016. Although it is reasonably possible that our unrecognized tax benefits will change over the next 12 months, the Company does not anticipate such changes to have a significant impact on our income tax expense due to the valuation allowance position maintained in certain jurisdictions.
10. Debt Payable
The Company’s outstanding debt is summarized as follows (in thousands):
|
|
Available as of
March 31,
2016
|
|
|
March 31, 2016
|
|
|
December 31,
2015
|
|
(a) Revolving lines of credit—Italy and Argentina
|
|
$
|
9,333
|
|
|
$
|
0
|
|
|
$
|
0
|
|
(b) Revolving line of credit—USA
|
|
|
30,000
|
|
|
|
0
|
|
|
|
0
|
|
(c) Other indebtedness
|
|
|
|
|
|
|
146
|
|
|
|
9
|
|
|
|
$
|
39,333
|
|
|
|
146
|
|
|
|
9
|
|
Less: current portion
|
|
|
|
|
|
|
35
|
|
|
|
9
|
|
Non-current portion
|
|
|
|
|
|
$
|
111
|
|
|
$
|
0
|
|
At March 31, 2016, the Company’s weighted average interest rate on outstanding debt was 11.0%. The Company is party to numerous credit agreements and other borrowings. All foreign currency denominated revolving lines of credit have been converted using the closing currency rate as of March 31, 2016.
(a) Revolving Lines of Credit – Italy and Argentina
The Company maintains various revolving lines of credit in Italy and Argentina. The revolving lines of credit in Italy include $2.3 million, which is unsecured, and $4.4 million which is collateralized by accounts receivable. The interest rates on these revolving lines of credit are fixed and variable and range from 0.8% to 3.8% as of March 31, 2016. At March 31, 2016 and December 31, 2015, there were no balances outstanding.
The revolving lines of credit in Argentina consist of two lines for a total amount of availability of approximately $2.6 million. These lines are unsecured with no balance outstanding at March 31, 2016 and December 31, 2015. At March 31, 2016, the interest rates for the lines of credit in Argentina ranged from 4.5% to 30.0%.
All lines are callable on demand.
(b) Revolving Line of Credit – USA
As of March 31, 2016, the Company and IMPCO Technologies, Inc. (“IMPCO”) maintain an unsecured, revolving short term credit facility with Intesa SanPaolo S.p.A. (“Intesa”) amounting to $30.0 million. IMPCO intends to use the borrowings for its general corporate purposes and Fuel Systems guarantees IMPCO’s payments. At March 31, 2016 and December 31, 2015, there were no balances outstanding. The maximum aggregate principal amount of loans available at any time was $30.0 million with a maturity date of April 29, 2016. The Company did not renew this agreement. At March 31, 2016, the Company was in compliance with the covenants as defined by the agreement.
12
(c) Other indebtedness
Other indebtedness includes a capital lease bearing interest at 11.0%.
11. Equity
The following table summarizes the changes in equity for the three month period ended March 31, 2016 (in thousands, except for share amounts):
|
Fuel Systems Stockholders’ Equity
|
|
|
|
|
|
Common Stock
|
|
|
Additional
Paid-In
Capital
|
|
|
Shares Held
in
Treasury
|
|
|
Accumulated
Deficit
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
Total
Equity
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
18,094,043
|
|
|
$
|
20
|
|
|
$
|
322,144
|
|
|
$
|
(20,742
|
)
|
|
$
|
(101,286
|
)
|
|
$
|
(46,049
|
)
|
|
$
|
154,087
|
|
Net loss
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(6,474
|
)
|
|
|
0
|
|
|
|
(6,474
|
)
|
Foreign currency translation adjustment
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
4,642
|
|
|
|
4,642
|
|
Vesting of stock options
|
|
0
|
|
|
|
0
|
|
|
|
57
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
57
|
|
Issuance and vesting of restricted stock, net of shares withheld for employee tax
|
|
0
|
|
|
|
0
|
|
|
|
334
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
334
|
|
Balance, March 31, 2016
|
|
18,094,043
|
|
|
$
|
20
|
|
|
$
|
322,535
|
|
|
$
|
(20,742
|
)
|
|
$
|
(107,760
|
)
|
|
$
|
(41,407
|
)
|
|
$
|
152,646
|
|
Shares Held in Treasury
As of March 31, 2016 and December 31, 2015, the Company had 2,049,065 shares, respectively, held in treasury with a value of approximately $20.7 million, respectively. On November 3, 2014, the Company’s Board of Directors approved a share repurchase program for up to $25.0 million of the Company’s common stock for up to one year. Under this program, 2,041,066 shares were repurchased in the open market. The remainder of the treasury shares held by the Company at March 31, 2016 relates to 1,419 shares that came from surrender of shares tendered for the exercise price in lieu of cash from the exercise of warrants, and 6,580 shares that came from the surrender of shares for U.S. payroll tax withholding obligations associated with vesting of restricted stock.
12. Changes and Reclassifications in Accumulated Other Comprehensive Loss by Component
(a) Changes in Accumulated Other Comprehensive Loss by Component (all amounts are net of tax, except foreign currency items)
|
|
Three Months Ended March 31, 2016
(in thousands)
|
|
|
|
Unrealized Gains and
(Losses) on Available
-for-Sale Securities
|
|
|
Foreign
Currency
Items
|
|
|
Total
|
|
Beginning balance, December 31, 2015
|
|
|
0
|
|
|
|
(46,049
|
)
|
|
|
(46,049
|
)
|
Current period Other Comprehensive Income activity before reclassifications
|
|
|
0
|
|
|
|
4,642
|
|
|
|
4,642
|
|
Net current-period Other Comprehensive Income
|
|
|
|
|
|
|
4,642
|
|
|
|
4,642
|
|
Ending balance, March 31, 2016
|
|
|
0
|
|
|
|
(41,407
|
)
|
|
|
(41,407
|
)
|
13
|
|
Three Months Ended March 31, 2015
(in thousands)
|
|
|
|
Unrealized Gains and
(Losses) on Available
-for-Sale Securities
|
|
|
Foreign
Currency
Items
|
|
|
Total
|
|
Beginning balance, December 31, 2014
|
|
|
0
|
|
|
|
(26,403
|
)
|
|
|
(26,403
|
)
|
Current period Other Comprehensive Income (Loss) activity before reclassifications
|
|
|
0
|
|
|
|
(15,586
|
)
|
|
|
(15,586
|
)
|
Net current-period Other Comprehensive Income (Loss)
|
|
|
0
|
|
|
|
(15,586
|
)
|
|
|
(15,586
|
)
|
Net current-period Other Comprehensive Income attributable to noncontrolling interest
|
|
|
0
|
|
|
|
35
|
|
|
|
35
|
|
Ending balance, March 31, 2015
|
|
|
0
|
|
|
|
(41,954
|
)
|
|
|
(41,954
|
)
|
(b) Reclassifications out of Accumulated Other Comprehensive Loss
For the three months ended March 31, 2016 and 2015, there were no reclassifications out of Accumulated Other Comprehensive Loss.
13. Stock-Based Compensation
The Company has one stock option plan and one phantom stock option plan that provide for the issuance of options and phantom stock options respectively, to key employees and directors of the Company at the fair market value at the time of grant. Options and phantom stock options granted under these plans generally vest in four or five years and are generally exercisable while the individual is an employee or a non-employee director, or ordinarily within one month following termination of employment. In no event may options or phantom stock options be exercised more than ten years after the date of the grant. Phantom stock options convey the right to the grantee to receive a cash payment once exercisable, equal to the positive difference between the fair market value of the stock on the date of the exercise less the exercise price on the date of the grant.
Under the Company’s 2009 Restricted Stock Plan, the Company’s Board of Directors may grant restricted stock and restricted stock units to officers, employees and non-employee directors. Restricted stock is awarded to non-employee directors and normally vests in one year. In the current year, certain key employee personnel were awarded restricted stock units vesting on each anniversary of the grant date, over a period of three years. When the restricted stock units vest, at the discretion of the Board of Directors, employees will receive either stock or cash equal to the closing price of the stock on the vesting date times the number of units.
In estimating the fair value of stock-based compensation, the Company uses the historical volatility of its shares based on seven year averages.
Stock-based compensation expense for the three months ended
March
31, 2016 and 2015 was allocated as follows (in thousands):
|
|
Three Months Ended
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Cost of revenue
|
|
$
|
12
|
|
|
$
|
12
|
|
Research and development expense
|
|
|
14
|
|
|
|
9
|
|
Selling, general and administrative expense
|
|
|
365
|
|
|
|
100
|
|
|
|
$
|
391
|
|
|
$
|
121
|
|
Excess tax benefits are realized tax benefits from tax deductions for exercised options in excess of the deferred tax asset attributable to stock compensation costs for such options. The Company has not recorded any excess tax benefits as a result of the net operating loss carry-forward position for United States income tax purposes.
Stock-Based Compensation Activity – Stock Options
Shares of common stock issued upon exercise of stock options are from previously unissued shares.
14
The following table displays stock option activity including the weighted average stock option prices for the
three
month
s
ended
March
3
1
, 201
6
:
|
|
Number of
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual Term
|
|
Aggregate
Intrinsic
Value
(in thousands)
|
|
Outstanding at December 31, 2015
|
|
|
117,020
|
|
|
$
|
13.97
|
|
|
7.1 yrs
|
|
$
|
0
|
|
Granted
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
Exercised
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
Forfeited
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
Outstanding at March 31, 2016
|
|
|
117,020
|
|
|
$
|
13.97
|
|
|
6.9 yrs
|
|
$
|
0
|
|
Vested and exercisable at March 31, 2016
|
|
|
48,606
|
|
|
$
|
14.87
|
|
|
6.5 yrs
|
|
$
|
0
|
|
The aggregate intrinsic value as of a particular date is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for the options that were in-the-money at each respective period. During the three months ended March 31, 2016 and 2015, the aggregate intrinsic value of options exercised under the Company’s stock option plans was zero, as there were no options exercised.
As of March 31, 2016, total unrecognized stock-based compensation cost related to unvested stock options was $0.4 million, expected to be recognized over a weighted-average period of 2.4 years. As of December 31, 2015, total unrecognized stock-based compensation cost related to unvested stock options was $0.4 million, expected to be recognized over a weighted-average period of 2.7 years.
Phantom Stock Options
The following table displays stock option activity including the weighted average phantom stock option prices for the three months ended March 31, 2016:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual Term
|
Outstanding at December 31, 2015
|
|
|
118,750
|
|
|
$
|
14.02
|
|
|
7.1 yrs
|
Granted
|
|
|
0
|
|
|
|
0
|
|
|
|
Exercised
|
|
|
0
|
|
|
|
0
|
|
|
|
Forfeited
|
|
|
0
|
|
|
|
0
|
|
|
|
Outstanding at March 31, 2016
|
|
|
118,750
|
|
|
$
|
14.02
|
|
|
6.8 yrs
|
Vested and exercisable at March 31, 2016
|
|
|
49,875
|
|
|
$
|
14.91
|
|
|
6.2 yrs
|
The Company’s cash-settled phantom stock options are accounted for as liability awards and are re-measured at fair value each reporting period. Compensation expense is recognized over the requisite service period and is equal to the fair value less the exercise price of the stock. If the fair value is below the exercise price, no expense is recognized.
The phantom stock options have been accounted for as a liability within the Condensed Consolidated Financial Statements based on the closing price of the Company’s stock price at the reporting period end. As of
March
31, 2016 and December 31, 2015, total liability related to phantom stock options were zero.
15
Stock-Based Compensation Activity – Restricted Stock
and Restricted Stock Units
A summary of unvested restricted stock awards as of
March
31, 2016 and changes during the three month period then ended are presented below.
|
|
Number of
Shares
|
|
|
Weighted Average
Grant Date Fair
Value
|
|
Unvested at December 31, 2015
|
|
|
303,859
|
|
|
$
|
10.65
|
|
Granted
|
|
|
30,000
|
|
|
|
5.68
|
|
Vested
|
|
|
0
|
|
|
|
0
|
|
Forfeited
|
|
|
(6,054
|
)
|
|
|
8.26
|
|
Unvested at March 31, 2016 (1)
|
|
|
327,805
|
|
|
$
|
10.24
|
|
(1)
Includes 291,000 restricted stock units
As of
March
31, 2016, total unrecognized stock-based compensation cost related to unvested restricted stock and restricted stock units was approximately $2.0 million, which is expected to be recognized over a weighted-average period of approximately 2.1 years. As of December 31, 2015, total unrecognized stock-based compensation cost related to unvested restricted stock was approximately $2.3 million, expected to be recognized over a weighted-average period of approximately 2.1 years.
14. Loss Per Share
The following table sets forth the computation of unaudited basic and diluted loss per share (in thousands, except share and per share data):
|
|
Three Months Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss attributable to Fuel Systems Solutions, Inc.
|
|
$
|
(6,474)
|
|
|
$
|
(11,870)
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share - weighted average number of shares
|
|
|
18,094,043
|
|
|
|
19,194,976
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
Employee stock options
|
|
|
0
|
|
|
|
0
|
|
Unvested restricted stock
|
|
|
0
|
|
|
|
0
|
|
Dilutive potential common shares
|
|
|
18,094,043
|
|
|
|
19,194,976
|
|
Net loss per share attributable to Fuel Systems Solutions, Inc.:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.36)
|
|
|
$
|
(0.62)
|
|
Diluted
|
|
$
|
(0.36)
|
|
|
$
|
(0.62)
|
|
The following table represents the numbers of anti-dilutive instruments excluded from the computation of diluted earnings per share:
|
Three Months Ended March 31,
|
|
|
2016
|
|
|
2015
|
|
Anti-dilutive instruments excluded from computation of diluted net income per share:
|
|
|
|
|
|
|
|
Options
|
|
117,020
|
|
|
|
88,264
|
|
Restricted stock and restricted stock units
|
|
305,387
|
|
|
|
1,493
|
|
16
1
5
.
Related Party Transactions
The following table sets forth amounts (in thousands) that are included within the captions noted on the Condensed Consolidated Balance Sheets at March 31, 2016 and December 31, 2015 representing related party transactions with the Company:
|
|
As of
|
|
|
|
March
31, 2016
|
|
|
December 31, 2015
|
|
Current Receivables with related parties:
|
|
|
|
|
|
|
|
|
Bianco S.p.A. (a)
|
|
$
|
263
|
|
|
$
|
249
|
|
Others (b)
|
|
|
12
|
|
|
|
6
|
|
IMCOS Due S.r.L (c)
|
|
|
0
|
|
|
|
32
|
|
Current Receivables with JVs and related partners:
|
|
|
|
|
|
|
|
|
PDVSA Industrial S.A. (d)
|
|
|
1,505
|
|
|
|
1,445
|
|
Ideas & Motion S.r.L. (e)
|
|
|
28
|
|
|
|
29
|
|
|
|
|
1,808
|
|
|
|
1,761
|
|
Less Allowance on Doubtful Accounts:
|
|
|
|
|
|
|
|
|
PDVSA Industrial S.A. (d)
|
|
|
(1,505)
|
|
|
|
(1,445)
|
|
|
|
$
|
303
|
|
|
$
|
316
|
|
Current Payables with related parties:
|
|
|
|
|
|
|
|
|
TCN Vd S.r.L. (f)
|
|
|
631
|
|
|
|
773
|
|
TCN S.r.L. (g)
|
|
|
579
|
|
|
|
555
|
|
Europlast S.r.L. (h)
|
|
|
437
|
|
|
|
647
|
|
A.R.S. Elettromeccanica (i)
|
|
|
277
|
|
|
|
366
|
|
Grosso, de Rienzo, Riscossa, Di Toro e Associati (j)
|
|
|
76
|
|
|
|
104
|
|
Ningbo Topclean Mechanical Technology Co. Ltd. (k)
|
|
|
68
|
|
|
|
13
|
|
Others (b)
|
|
|
22
|
|
|
|
43
|
|
Erretre S.r.L. (l)
|
|
|
14
|
|
|
|
11
|
|
IMCOS Due S.r.L (c)
|
|
|
6
|
|
|
|
13
|
|
Current Payable with JVs and related partners:
|
|
|
|
|
|
|
|
|
Ideas & Motion S.r.L. (e)
|
|
|
0
|
|
|
|
0
|
|
|
|
$
|
2,110
|
|
|
$
|
2,525
|
|
(a)
|
Bianco S.p.A. is 100% owned by TCN S.r.L. (see note (g) below).
|
(
b
)
|
Includes Biemmedue S.p.A. (100% owned by the Company’s Chief Executive Officer along with his brother, Pier Antonio Costamagna, who retired as an executive officer of the Company and as General Manager of MTM S.r.L., effective February 5, 2014), MTM Hydro S.r.L. (46% owned by the Company’s Chief Executive Officer along with his brother, Pier Antonio Costamagna), Immobiliare IV Marzo (30% owned directly and indirectly by the Company’s Chief Executive Officer, his brother, Pier Antonio Costamagna, and two employees of the Company), Delizie Bakery Srl (100% owned by IMCOS Due S.r.L., see (c) below), and Galup S.r.L. (90% owned by TCN S.r.L., see note (g) below).
|
(
c
)
|
IMCOS Due S.r.L. is 100 % owned by the Company’s Chief Executive Officer along with his brother Antonio Costamagna and their immediate family.
|
(
d
)
|
PDVSA Industrial S.A. (“PDVSA”) is a 70% owner of a joint venture, Sistemas De Conversion Del Alba, S.A. (“SICODA”) with the remaining 30% owned by the Company. Due to uncertainty as to the collectability of the above receivable, a full allowance has been maintained.
|
(
e
)
|
Ideas & Motion S.r.L. is an Italian consulting and services company in which the Company owns an equity ownership interest of 14.28%.
|
(
f
)
|
TCN Vd S.r.L. is 90% owned by TCN S.r.L. (see note (g) below) as well as 3% by the Company’s Chief Executive Officer, along with his brother, Pier Antonio Costamagna.
|
(
g
)
|
TCN S.r.L. is 30% owned by Mariano Costamagna, the Company’s Chief Executive Officer, along with his brother, Pier Antonio Costamagna.
|
(
h
)
|
Europlast S.r.L. is 90% owned by the Company’s Chief Executive Officer, his brother, Pier Antonio Costamagna and one immediate family member.
|
(
i
)
|
A.R.S. Elettromeccanica is 100% owned by Biemmedue S.p.A. (see note (b) above).
|
(
j
)
|
Marco Di Toro, a former director of the Company who resigned effective March 4, 2016, is a partner of the law firm Grosso, de Rienzo, Riscossa, Di Toro e Associati.
|
(
k
)
|
Ningbo Topclean Mechanical Technology Co. Ltd. is 100% owned by MTM Hydro S.r.L. (see note (b) above).
|
(
l
)
|
Erretre S.r.l. is 70% owned by the Company’s Chief Executive Officer’s immediate family.
|
17
The following table sets forth amounts (services and goods) purchased from and sold to related parties (in thousands).
|
|
Three Months Ended
March
31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Purchases
|
|
|
Sales
|
|
|
Purchases
|
|
|
Sales
|
|
Related Party Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TCN Vd S.r.L
|
|
$
|
533
|
|
|
$
|
0
|
|
|
$
|
633
|
|
|
$
|
0
|
|
Ningbo Topclean Mechanical Technology Co. Ltd.
|
|
|
383
|
|
|
|
0
|
|
|
|
355
|
|
|
|
0
|
|
A.R.S. Elettromeccanica
|
|
|
364
|
|
|
|
0
|
|
|
|
265
|
|
|
|
0
|
|
TCN S.r.L
|
|
|
308
|
|
|
|
0
|
|
|
|
377
|
|
|
|
0
|
|
Europlast S.r.L.
|
|
|
288
|
|
|
|
0
|
|
|
|
669
|
|
|
|
0
|
|
Erretre S.r.L
|
|
|
29
|
|
|
|
2
|
|
|
|
34
|
|
|
|
0
|
|
Others
|
|
|
16
|
|
|
|
12
|
|
|
|
37
|
|
|
|
17
|
|
Bianco S.p.A.
|
|
|
1
|
|
|
|
184
|
|
|
|
0
|
|
|
|
226
|
|
Grosso, de Rienzo, Riscossa, Di Toro e Associati
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
JVs and related partners:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
PDVSA Industrial S.A.
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
342
|
|
Ideas & Motion S.r.L.
|
|
|
0
|
|
|
|
14
|
|
|
|
0
|
|
|
|
23
|
|
|
|
$
|
1,922
|
|
|
$
|
212
|
|
|
$
|
2,370
|
|
|
$
|
608
|
|
Other Transactions with Related Parties
The Company leases buildings under separate facility agreements from IMCOS Due S.r.L., a real estate investment company owned 100% by Messrs. Mariano Costamagna, Pier Antonio Costamagna (former executive officer of the Company and General Manager of MTM) and members of their immediate families. The terms of these leases reflect the fair market value of such properties based upon appraisals. These lease agreements begin to expire in 2016, with the last agreement ending in 2020. The Company made payments to IMCOS Due S.r.L. of $0.6 million for the three months ended March 31, 2016 and 2015, respectively. In the fourth quarter of 2014, as part of the ongoing efforts for rationalization of operations and costs, the Company decided to abandon a facility leased in Italy from IMCOS Due S.r.L which resulted in write-offs of leasehold improvements for approximately $2.0 million. In the second quarter of 2015, IMCOS Due S.r.L. agreed to reimburse the Company approximately $0.3 million for the improvements made based on the related increase in market value of the facility. This amount is reflected in other (expense) income, net for the three months ended December 31, 2015. IMCOS Due S.r.l. will pay this amount in twelve half-yearly installments, subject to annual revaluation on the basis of local inflation indices. As of March 31, 2016, approximately $45 thousand is included in Other Current Assets and $0.2 million is included in Other Assets on the Condensed Consolidated Balance Sheet. After termination of one of the leases from IMCOS Due S.r.L effective December 31, 2014, the billing of certain public utility connections was not transferred back to IMCOS Due S.r.L and payments in the amount of $32 thousand (€29 thousand) were made on behalf of IMCOS Due S.r.L. during 2015. All costs which were not billed to the new tenant by Company were reimbursed by IMCOS Due S.r.L. to the Company at the end of February 2016.
The Company leases a building from Immobiliare 4 Marzo S.a.s., a real estate investment company owned 30% by Messrs. Mariano Costamagna, Pier Antonio Costamagna and one employee of the Company. The Company made payments to Immobiliare 4 Marzo S.a.s. of $0.1 million and $0.1 million for the three months ended March 31, 2016 and 2015, respectively. The terms of this lease reflects the fair market value of such property based upon an appraisal.
The Company entered into an agreement to develop the basic and detailed engineering and outfit the facility for the installation of an integrated production plant for natural gas vehicles for PDVSA in Venezuela. The Company accounts for this project under the completed contract method. In connection with this agreement, the Company determined it would be in a loss position at its completion, and in accordance with the applicable guidance, recorded a loss of approximately $0.4 million in cost of revenue for the third quarter of 2015. As of March 31, 2016 the total amount of cost (included in other current assets) and revenue (included in accrued expenses) deferred under this project totals approximately $4.1 million and $4.1 million, respectively. As of December 31, 2015 the total amount of cost (included in other current assets) and revenue (included in accrued expenses) deferred under this project totals approximately $5.9 million and $5.9 million, respectively.
18
1
6
.
Commitments and Contingencies
Contingencies
From time to time, the Company may be involved in litigation relating to claims arising out of the ordinary course of its business including, but not limited to, product liability, asbestos related liability, employment matters, patent and trademarks, and customer account collections. The Company is not a party to, and, to our knowledge, there are not threats of any claims or actions against us related to these topics, the ultimate disposition of which would have a material adverse effect on our consolidated results of operations or liquidity.
The Company is aware of four putative stockholder class actions that have been filed since the announcement of the merger with Westport which challenge the proposed merger. We believe that the claims are without merit and intend to defend the actions vigorously.
On April 24, 2015, Mariano Costamagna agreed with the Company that, effective December 31, 2015 (the “Retirement Date”), he would retire and resign as the Chief Executive Officer of the Company and relinquish all executive authority with regard to the Company’s wholly-owned subsidiary, MTM S.r.L. (“MTM”). In connection with his retirement, Mr. Costamagna entered into a Retirement Agreement (the “Retirement Agreement”) with the Company and MTM. Under the Retirement Agreement, in addition to his compensation until the Retirement Date, Mr. Costamagna is entitled to (i) an award of 100,000 shares of Company restricted stock units issued on April 24, 2015, which will vest, subject to compliance with confidentiality, non-solicitation and non-competition provisions in the Retirement Agreement, on December 31, 2016, and (ii) a lump sum cash payment of €450,000 paid on December 31, 2015. Mr. Costamagna will continue as a director of MTM and the Company after the Retirement Date. Upon vesting of the restricted stock units, Mr. Costamagna will receive 60,000 shares of common stock with the remaining 40,000 units paid in cash equal to the fair market value of the shares of common stock underlying the vested units.
On December 16, 2015, Mariano Costamagna entered in an amendment (the “Amendment”) to the Retirement Agreement with Fuel Systems and MTM. Mr. Costamagna agreed to continue serving as the Chief Executive Officer of Fuel Systems and to maintain executive authority with regard to MTM beyond the originally agreed retirement date of December 31, 2015. The Amendment provided for Mr. Costamagna to continue to serve in such capacities until the earlier of (i) the closing date of the Merger with Westport (see Note 1), and (ii) April 30, 2016. On April 30, 2016, Mariano Costamagna entered in a second amendment (the “Second Amendment”) to the Retirement Agreement, as amended by the Amendment, with Fuel Systems and MTM. Mr. Costamagna agreed to continue serving as the Chief Executive Officer of Fuel Systems and to maintain executive authority with regard to MTM beyond the previously agreed extension of his retirement date of April 30, 2016. The Second Amendment provides for Mr. Costamagna to continue to serve in such capacities until the earlier of (i) the closing date of the Merger with Westport (see Note 1), and (ii) June 30, 2016. All other terms of the Retirement Agreement and the Restricted Stock Unit Agreement entered into as of April 24, 2015 between Fuel Systems and Mr. Costamagna remain unchanged and are in full force and effect.
Due to changes in the economic environment, and ensuing updated business strategies, during the year ended December 31, 2014, the Company started a rationalization of its operations. The Company incurred costs associated with work force reduction, as well as the closing of facilities, recorded within selling, general, and administrative expenses on the Company’s Condensed Consolidated Statement of Operations.
The following tables represent the roll-forward of the accrued employee severance liability as of March 31, 2016 and December 31, 2015 included in Accrued expenses on the Condensed Consolidated Balance Sheets, as well as a detail of the costs accrued for rationalization of operations for the three months ended March 31, 2016 and 2015:
|
|
As of
|
|
|
March 31, 2016
|
|
December 31, 2015
|
Accrued Employee Severance (amounts in thousands):
|
FSS Industrial
|
FSS Automotive
|
Corporate
|
Total
|
|
FSS Industrial
|
FSS Automotive
|
Corporate
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$0
|
|
$654
|
|
$30
|
|
$684
|
|
$81
|
|
$48
|
|
$108
|
|
$237
|
Expenses
|
|
0
|
|
126
|
|
0
|
|
126
|
|
100
|
|
2,836
|
|
0
|
|
2,936
|
Payments
|
|
0
|
|
(419)
|
|
(8)
|
|
(427)
|
|
(181)
|
|
(2,214)
|
|
(78)
|
|
(2,473)
|
Effect of foreign currency translation
|
|
0
|
|
17
|
|
0
|
|
17
|
|
0
|
|
(16)
|
|
0
|
|
(16)
|
Balance at end of period
|
|
$0
|
|
$378
|
|
$22
|
|
$400
|
|
$0
|
|
$654
|
|
$30
|
|
$684
|
19
|
|
Three Months Ended March 31, 2016
|
Total Restructuring Costs (amounts in thousands):
|
FSS Industrial
|
FSS Automotive
|
Total
|
|
|
|
|
|
|
|
Employee Severance
|
|
$0
|
|
$126
|
|
$126
|
Long-lived and other assets write-off
|
|
0
|
|
0
|
|
0
|
Total Restructuring Costs
|
|
$0
|
|
$126
|
|
$126
|
|
|
Three Months Ended March 31, 2015
|
Total Restructuring Costs (amounts in thousands):
|
FSS Industrial
|
FSS Automotive
|
Total
|
|
|
|
|
|
|
|
Employee Severance
|
|
$100
|
|
$557
|
|
$657
|
Long-lived and other assets write-off
|
|
0
|
|
224
|
|
224
|
Total Restructuring Costs
|
|
$100
|
|
$781
|
|
$881
|
17. Business Segment Information
Business Segments
. FSS Industrial consists of the Company’s industrial mobile and stationary equipment and auxiliary power unit (APU), and the Company’s heavy duty commercial transportation operations. FSS Automotive consists of the Company’s passenger and light duty commercial transportation, (automotive OEM and aftermarket), and transportation infrastructure operations (compressors).
Corporate expenses consist of general and administrative expenses at the Fuel Systems corporate level. Intercompany sales between FSS Industrial and FSS Automotive have been eliminated in the results reported.
The Company evaluates performance based on profit or loss from operations before interest and income taxes. The accounting policies of the reportable segments are the same as those described in the Summary of Significant Accounting Policies contained in the Fuel Systems’ Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
Financial Information by Business Segments
. Financial information by business segment follows (in thousands):
|
|
|
Three Months Ended
March 31,
|
|
Revenue:
|
|
|
2016
|
|
|
2015
|
|
FSS Industrial
|
|
$
|
23,848
|
|
|
$
|
22,751
|
|
FSS Automotive
|
|
|
32,294
|
|
|
|
40,541
|
|
Total
|
|
$
|
56,142
|
|
|
$
|
63,292
|
|
|
|
Three Months Ended
March 31,
|
|
Operating Income (Loss):
|
|
2016
|
|
|
2015
|
|
FSS Industrial
|
|
$
|
3,233
|
|
|
$
|
2,092
|
|
FSS Automotive
|
|
|
(1,977
|
)
|
|
|
(2,911
|
)
|
Corporate Expenses
|
|
|
(6,384
|
)
|
|
|
(3,633
|
)
|
Total
|
|
$
|
(5,128
|
)
|
|
$
|
(4,452
|
)
|
|
|
As of
|
|
Total Assets:
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
FSS Industrial
|
|
$
|
110,750
|
|
|
$
|
106,295
|
|
FSS Automotive
|
|
|
152,479
|
|
|
|
152,318
|
|
Corporate (1)
|
|
|
145,274
|
|
|
|
148,176
|
|
Eliminations
|
|
|
(177,573
|
)
|
|
|
(178,350
|
)
|
Total
|
|
$
|
230,930
|
|
|
$
|
228,439
|
|
(1)
|
Represents corporate balances not allocated to either of the business segments and primarily investments in subsidiaries, which eliminate on consolidation.
|
20
18. Concentrations
Revenue
The Company routinely sells products to a broad base of domestic and international customers, which includes distributors and original equipment manufacturers. Based on the nature of these customers, credit is generally granted without collateral being required.
For the three months ended March 31, 2016 and 2015, no customers represented more than 10.0% of consolidated sales.
Accounts Receivable
At March 31, 2016 and December 31, 2015, no customer represented more than 10.0% of consolidated accounts receivable.
21