Ballard Power Systems Reviews 2000 Results, Provides 2001 Goals
VANCOUVER, B.C.--Feb. 20, 2001--Ballard Power SystemsBallard Power Systems today reviewed its progress against its goals for 2000, provided its goals for 2001 and reported its financial results for the fourth quarter and the year ending December 31, 2000.
All amounts are reported in Canadian dollars.
"During 2000 we made significant progress towards the commercialization of our fuel cell products by achieving all but one of the goals for 2000," said Firoz Rasul, Ballard's Chairman and Chief Executive Officer. "We commissioned the first facility in the world to use volume processes for the manufacture of proton exchange membrane (PEM) fuel cells, our customers and alliance partners continued to demonstrate prototype vehicles powered by BALLARD(R) fuel cells, and successful field trials of buses and stationary power plants continue to drive our product development efforts in those areas."
Ballard achieved 11 of its 12 goals in 2000. The goals for 2000 and the progress achieved against those goals are outlined below:
Complete and start-up manufacturing line in Plant 1. Ballard commissioned its first manufacturing plant, Plant 1, in December 2000. This plant will be used to manufacture Ballard's initial products.
Demonstrate engineering prototype Direct Methanol Fuel Cell (DMFC) system. In November, Ballard and DaimlerChrysler unveiled the world's first DMFC demonstration prototype in the form of a go-cart. This experimental technology, which enables the use of methanol as fuel without requiring a fuel processor, has potential in portable and transportation applications.
Establish strategic supply relationships with additional suppliers. The year 2000 saw the introduction of a supply agreement review process that has streamlined Ballard's supplier evaluation and approval. At the end of 1999, we had two supply agreements in place. By the end of 2000, Ballard had established 23 separate supply agreements including seven covering key components of our fuel cells and 16 related to our first commercial product.
Secure orders for fuel cells for heavy-duty bus engines. This goal was not met. Although Ballard's alliance partner DaimlerChrysler announced its intention to put 36 buses in 12 cities in 2002 and 2003, Ballard has not yet received purchase orders for fuel cells for these buses. Ballard is preparing to meet DaimlerChrysler's program requirements when the orders are in place.
Deliver fuel cells for first California Fuel Cell Partnership demonstration vehicles. In November 2000, Ballard's leadership position in the industry was evident at the opening of the California Fuel Cell Partnership's headquarters in Sacramento. BALLARD(R) fuel cells powered 11 of the 14 fuel cell vehicles demonstrated at the opening. Fuel cell automobiles demonstrated by DaimlerChrysler, Ford, Honda and Nissan were all powered by Ballard.
Secure fuel cell orders for automotive engines. In January 2000, Ballard unveiled its next generation fuel cell, the Mark 900 Series Fuel Cell Power Module. The Mark 900 uses low-cost materials and is designed for manufacturing in automotive volumes. Throughout 2000, Ballard received orders for the Mark 900 from its alliance partners DaimlerChrysler and Ford, in addition to Honda, Nissan and another automotive company.
Begin field trials of next generation heavy-duty bus engines. In July 2000, Ballard and its associated company, XCELLSIS GmbH, announced their plans for the next stage of field trials of pre-commercial fuel cell bus engines. The ZEBUS, the fourth generation of fuel cell bus developed by XCELLSIS using BALLARD(R) fuel cells, is being tested by the SunLine Transit Agency in Palm Springs, California. It was the first vehicle to begin testing under the California Fuel Cell Partnership.
Deliver additional 250-kilowatt stationary power generators for field trials. Ballard delivered three 250-kilowatt field trials units in 2000. Generators were installed in Berlin, with the electric utility Bewag AG; in Basel, Switzerland with the electric utility Elektra Birseck (EBM); and in Tokyo, with the telecommunication company, Nippon Telegraph and Telephone (NTT). The first 250-kilowatt field trial unit has been operating with the U.S. utility Cinergy Technologies since 1999.
Demonstrate engineering prototype one-kilowatt natural gas cogeneration power generator for Japanese residential market. In January 2000, Ballard entered into a collaboration agreement between its subsidiary, Ballard Generation Systems; its associated company, EBARA BALLARD; its stationary power alliance partner, EBARA Corporation; and Tokyo Gas for the development of a fuel processor for a one-kilowatt natural gas-fuelled fuel cell power generator. The engineering prototype was completed in 2000 and is currently being tested at EBARA BALLARD's facilities in Fujisawa, Japan.
Secure additional strategic relationships for portable power applications. In January 2000, Ballard entered into a collaboration with Coleman Powermate, Inc., for the development of portable power products utilizing BALLARD(R) fuel cells. In October, Ballard established a supply relationship with Matsushita Electric Works of Japan for the supply of fuel cells for use in 250-watt portable power generators for the Japanese market.
Complete engineering prototypes for first portable power product. Ballard developed and shipped engineering prototypes to both Coleman Powermate and Matsushita Electric Works as well as to an additional three original equipment manufacturers (OEM) for testing and evaluation.
Deliver portable power prototypes for field testing. The initial units shipped as part of the Matsushita Electric Works supply contract were integrated into field trial testing units and are currently being tested in their 250-watt compact power generators.
In addition to the goals achieved, Ballard made other significant achievements in 2000 and early 2001.
Early in 2000, Ballard raised gross proceeds of $505 million with the completion of a public offering of 3,293,750 Common shares. Ballard's cash, cash equivalents, and short-term investments provide the Company with sufficient capital to fund its operations through the initial commercialization of its fuel cell products.
In early January 2001, Ballard and Victrex plc announced an alliance for the development and manufacture of ionomers for BALLARD(R) fuel cells. This agreement, when combined with the agreements signed in 2000 with Millennium Cell for storage systems for hydrogen, and with QuestAir Technologies for hydrogen purification and oxygen enrichment technology, highlight Ballard's strategy of actively searching out companies that can enhance Ballard's technology base or offer complementary technologies.
These agreements will complement Ballard's intellectual property position, which grew during the year to more than 500 patents issued or pending worldwide, covering more than 150 distinct inventions.
Changes also took place in the industry. In January 2001, the California Air Resources Board (CARB) confirmed its Zero-Emission-Vehicle (ZEV) regulations. In so doing, the CARB modified the regulations to provide an incentive and a clear roadmap for the continued investment in fuel cell vehicle technology by the automobile industry, and to encourage the development of electric-drive technologies that are required for fuel cell-powered vehicles.
The goals for 2001 provide meaningful measurement of Ballard's progress against its commercialization plan. They are:
Portable: -- Launch power module product for portable power application. -- Establish additional customer relationships for portable power products. -- Demonstrate next generation portable power engineering prototype. -- Demonstrate portable power engineering prototype using direct methanol fuel cell technology. Transportation: -- Deliver fuel cells for use in California Fuel Cell Partnership vehicles. -- Secure orders for fuel cells for transportation engines. -- Introduce advanced Mark 900 series fuel cell power module for transportation applications. -- Reduce variable cost of Mark 900 series fuel cells by 40 per cent. Stationary: -- Achieve customer acceptance of performance before delivery of five 250-kilowatt stationary power generators for field trials. -- Demonstrate 10-kilowatt engineering prototype backup stationary power generator. -- Demonstrate 60-kilowatt engineering prototype backup stationary power generator.
Revenues increased by 24 per cent in 2000 to $41.1 million from $33.2 million a year ago. This is the result of an increase in automotive orders and higher revenues from 250-kilowatt stationary power generators. Investment income increased to $44.4 million from $15.8 million due to the proceeds of the equity financing, higher interest rates and foreign currency gains. Cost of revenues increased to $55.1 million or 85 per cent from $29.8 million in 1999. This increase reflects higher production of stationary products and customer service for field trial units. In addition, in the fourth quarter, a total of $10 million was accrued representing conservative warranty estimates and an allowance for future costs on stationary power generator field trial unit contracts not complete at year end.
Research and product development increased 40 per cent to $86.5 million from $62.0 million a year ago. This reflects the investment in advancing Ballard's core technology, developing products, intellectual property protection, and manufacturing process development.
Equity in loss of associated companies increased $14.5 million or 71 per cent to $35.0 million in 2000. This non-cash item represents Ballard's share of losses in companies accounted for on the equity method, XCELLSIS, Ecostar Electric Drive Systems, ALSTOM BALLARD and EBARA BALLARD. This increase reflects the increased research and product development activities undertaken by these companies during the year.
Gain on issuance of shares by a subsidiary and associated company of $24.8 million represents the gain on issuance of shares by BGS to ALSTOM, EBARA and GPU during the year. These gains are partially offset by a corresponding license fee paid to ALSTOM that is included in license and royalty fees. In addition, license and royalty fees include the prepayment of a royalty made to an unassociated company to access intellectual property.
The net loss for 2000 was $85.7 million, or $0.98 per share compared to $74.2 million, or $0.89 per share in 1999.
Cash used in operations, including investment in property, plant and equipment, was $91.6 million in 2000, within Ballard's publicly projected range of $80 million to $100 million. The investment of $32.1 million in property, plant and equipment includes the costs associated with Plant 1. An additional $40.3 million was invested in three companies during the year. $16.7 million was invested for a 10-per-cent interest in QuestAir. The remaining $23.6 million was invested in Ballard's associated companies, Ecostar and XCELLSIS, as Ballard's pro rata share of investments made in these companies with DaimlerChrysler and Ford.
At December 31, 2000, Ballard's cash position remained strong, with cash and short-term investments totaling $770 million. The increase during the year is primarily a result of the Company's equity offering completed in March 2000 for gross proceeds of $505 million.
Consolidated Balance Sheets
Unaudited
Expressed in thousands of Canadian dollars
------------------------
December 31 2000 1999
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Assets
Current assets
Cash and cash equivalents $ 288,729 $ 86,462
Short-term investments 480,944 272,089
Accounts receivable 23,054 26,518
Inventories 17,643 8,649
Prepaid expenses 667 1,216
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811,037 394,934
Property, plant and equipment 86,765 64,445
Fuel cell technology acquired 42,760 46,426
Investments 117,370 111,974
Long-term receivables 1,700 350
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$1,059,632 $ 618,129
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Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 29,085 $ 21,921
Current portion of capital lease obligation 117 91
Deferred revenue 784 1,283
Allowance for warranty 26,098 17,723
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56,084 41,018
Capital lease obligation 191 334
Long-term deferred revenue 5,989 5,989
Minority interest 16,395 11,493
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78,659 58,834
Shareholders' equity
Share capital 1,169,231 661,820
Accumulated deficit (188,258) (102,525)
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980,973 559,295
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$1,059,632 $ 618,129
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Consolidated Statements of Operations and Accumulated Deficit
Unaudited
Expressed in thousands of Canadian dollars, except per share amounts
--------------------------------------------
Three months ended Year ended
December 31 December 31
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2000 1999 2000 1999
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Revenues $19,167 $14,948 $41,085 $33,150
Investment income 11,830 3,208 44,436 15,755
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30,997 18,156 85,521 48,905
Cost of revenues and expenses:
Cost of revenues 28,009 14,477 55,069 29,773
Research and product
development 26,735 19,026 86,502 62,025
General and administrative 4,935 4,920 14,257 11,595
Marketing 1,263 734 3,142 2,965
Amortization of fuel
cell technology 917 916 3,666 3,665
Capital taxes 554 210 1,078 475
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62,413 40,283 163,714 110,498
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Loss before undernoted (31,416) (22,127) (78,193) (61,593)
Equity in loss of
associated companies (16,425) (6,090) (34,952) (20,408)
Minority interest 6,943 2,232 16,763 6,813
Gain on issuance of shares
by subsidiary and
associated company 522 - 24,782 4,334
License and royalty fees (5,922) - (12,243) (2,571)
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Loss before income taxes (46,298) (25,985) (83,843) (73,425)
Income taxes 367 (176) 1,890 765
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Net loss for period (46,665) (25,809) (85,733) (74,190)
Accumulated deficit,
beginning of period (141,593) (76,716) (102,525) (28,335)
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Accumulated deficit,
end of period ($188,258) ($102,525) ($188,258) ($102,525)
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Net loss per share ($0.53) ($0.31) ($0.98) ($0.89)
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Weighted average number
of common shares
outstanding 88,820,624 83,988,423 87,801,559 83,765,902
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Consolidated Statements of Cash Flows
Unaudited
Expressed in thousands of Canadian dollars
------------------------
Year ended December 31 2000 1999
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Cash provided by (used for):
Operating activities:
Net loss for period ($85,733) ($74,190)
Items not affecting cash:
Gain on issuance of shares by subsidiary
and associated company (24,782) (4,334)
Depreciation and amortization 13,442 10,198
License received on issuance of shares
of subsidiary 8,643 2,571
Equity in loss of associated companies 34,952 20,408
Minority interest (16,763) (6,813)
Other 696 -
------------------------
(69,545) (52,160)
Changes in non-cash working capital:
Accounts receivable 3,464 (12,796)
Inventories (8,994) (2,033)
Prepaid expenses 549 (380)
Accounts payable and accrued liabilities 7,164 (279)
Deferred revenue (499) (1,780)
Allowance for warranty 8,375 4,025
------------------------
10,059 (13,243)
------------------------
(59,486) (65,403)
Investing activities:
Net increase in short-term investments (208,855) (179,183)
Additions to property, plant and equipment (32,096) (25,580)
Investments (40,348) -
Long-term receivables (1,350) (350)
------------------------
(282,649) (205,113)
Financing activities:
Net proceeds on issuance of share capital 506,715 5,793
Proceeds on issuance of shares by
subsidiary and associated company 37,804 2,896
Capital lease obligation (117) (108)
------------------------
544,402 8,581
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Increase (decrease) in cash
and cash equivalents 202,267 (261,935)
Cash and cash equivalents,
beginning of period 86,462 348,397
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Cash and cash equivalents,
end of period $288,729 $86,462
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