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Fuel Systems Solutions Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: March 8, 2012 03:52PM
Fuel Systems Solutions Inc. (FSYS) filed Annual Report for the period ended 2011-12-31. Fuel System Sol has a market cap of $522.8 million; its shares were traded at around $25.81 with a P/E ratio of 74.6 and P/S ratio of 1.2. Fuel System Sol had an annual average earning growth of 51.3% over the past 5 years.
Highlight of Business Operations:In 2011, no customers represented more than 10.0% of our consolidated sales. In 2010, one customer represented 14.6% of our consolidated sales. In 2009, two customers represented 13.0% and 11.6% of our consolidated sales, respectively. During 2011, 2010, and 2009 sales to our top ten customers accounted for 32.8%, 53.0%, and 62.0% of our consolidated sales, respectively. If our largest customer or several of these key customers were to reduce their orders substantially, we would suffer a decline in sales and profits, and those declines could be substantial.
A substantial portion of our business results from revenues from key customers. In the year ended December 31, 2011 no customers represented more than 10.0% of our consolidated revenues. In the year ended December 31, 2010, one customer represented 14.6% of our consolidated revenues. In the year ended December 31, 2009, two customers represented 13.0% and 11.6% of our consolidated revenues, respectively. Revenues from our top ten customers during the years ended December 31, 2011, 2010, and 2009 accounted for approximately 32.8%, 53.0%, and 62.0% of our consolidated revenues, respectively. If one or more of these key customers were to reduce their orders from us substantially, we would suffer a decline in revenue, which may materially and adversely affect us.
In addition to our operations in the United States, we currently operate in Canada, Italy, Australia, India, Pakistan, the Netherlands, Japan, Brazil, Argentina and Venezuela, and market our products and technologies in other international markets, including both industrialized and developing countries. During the year ended December 31, 2011, approximately 28% of our revenue was derived from sales to customers located within the United States and Canada, and the remaining 72% was derived from sales in Asia, Europe, Latin America and the Middle East. During 2010 and 2009, approximately 14% and 8% of our revenue, respectively, was derived from sales to customers located within the United States and Canada, and the remaining 86% and 92%, respectively, was derived from sales in Asia, Europe, Latin America and the Middle East. Additionally, approximately 86% of our employees and 83% of our approximately 700 distributors and dealers worldwide are located outside the United States. Our combined international operations are subject to various risks common to international activities, such as the following:
IMPCO Operations. The increase in revenue primarily relates to an increase in demand in the industrial market of approximately $33.8 million which includes approximately $19.2 million from our auxiliary power unit business. In addition, the transportation business at IMPCO increased approximately $9.0 million compared to the prior year. This increase was attributable to an increase in sales in the US automotive market primarily from the IMPCO Automotive Acquisitions of approximately $27.8 million, partially offset by a decrease in sales in the Asian transportation market of approximately $17.3 million, due to the completion of a large program in 2010, and in the Canadian market of $1.5 million. We expect quarterly revenue from the US Automotive market to be closely tied to orders from OEMs. Included in the results discussed above is the strengthening of local currencies compared to the US dollar which positively impacted revenues by approximately $4.5 million for the year ended December 31, 2011.
Income tax expense for the year ended December 31, 2011 and 2010 was approximately $7.1 million and $19.6 million, representing an effective tax rate of 57.3% and 32.7%, respectively, and primarily consisted of the provision for our foreign operations. A full valuation allowance is maintained against the income tax benefits generated in the United States and certain foreign jurisdictions due to cumulative losses incurred in those jurisdictions, as we cannot conclude that such tax benefits meet the more likely than not threshold for realization. For the year ended December 31, 2011, (loss) income before income taxes for the U.S. and foreign based operations was $(9.8) million and $22.1 million, respectively. Accordingly, for the year ended December 31, 2011, we have not recorded income tax benefits for losses incurred, or significant income tax expense for income generated for such jurisdictions, as such amounts will be offset by the valuation allowance. We operate 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.
Stocks Discussed: FSYS,