Westport reports fourth fiscal quarter and year end results for March 31, 2003
VANCOUVER, June 3 -- Westport Innovations Inc. (WPT:TSE) today reported results for its fourth quarter and fiscal year ended March 31, 2003. Westport also reviewed milestones achieved during the past year and provided an update on strategy, business plans, and operations. Full quarterly and annual statements including notes are posted on the Westport website, www.westport.com, along with the Management Discussion and Analysis of the annual results.
The financial results for fiscal 2003 met or exceeded management's guidance as discussed in December, 2002.
Westport saw strong sales growth as total revenue rose to $8.3 million for the fourth quarter, compared to $7.2 million for the same quarter last year and $5.6 million in the third quarter. The revenue growth was driven by an increase in engine shipments to 321 units for the fourth quarter, compared to 198 units for the same quarter last year, as well as parts revenue, which grew to $0.8 million from $0.4 million for the same quarter last year. For the full year, total revenue was $24.6 million for fiscal 2003, down from $31.4 in 2002. The decrease in revenue for the year was attributable to a decrease in engine shipments in 2003 to 884 units from 1,161 in 2002, primarily as a result of lower demand for natural gas engines in the North American transit market.
Gross margins grew to $8.0 million for 2003 from $7.5 million for 2002 as a result of the large increase in parts revenue, offsetting the decrease in engine shipments on an annual basis. Gross margins also increased on a quarterly basis to $2.3 million for the fourth quarter of 2003, from $1.9 million in the same quarter last year.
Research and development, the largest expense category, decreased on both a quarterly and annual basis as a result of significantly improved program funding. Net R&D spending for the fourth quarter of 2003 was $7.4 million, down from $8.8 million in the same quarter last year and $37.3 million for the full 2003 year, down from $38.6 million for 2002. Program funding from government and industry sources was $7.0 million for the fourth quarter of 2003, up from $0.1 million in the same quarter last year, and $8.0 million for the full 2003 year, up from $1.5 million for 2002. The largest funding source in 2003 was Technology Partnerships Canada (TPC), which contributed $5.6 million in the first year of a three-year $18.9 million program.
In order to focus and strengthen its operations going forward and reduce its overall cash requirements, Westport recently announced and undertook a restructuring of its business activities. As a result of these actions, a charge of $1.4 million was accrued in the fourth quarter of 2003, of which $0.5 million was a non-cash expense.
The net loss was $11.3 million or $0.22 per share for the fourth quarter compared with $11.7 million or $0.25 per share a year earlier. For the full fiscal year ended March 31, 2003, the loss was $48.5 million or $0.95 per share compared with $46.7 million or $1.06 per share a year earlier. Excluding restructuring charges of $1.4 million, the loss per share was $0.19 in the quarter and $0.93 for the year.
At March 31, 2003, cash, cash equivalents and short-term investments totaled $28.1 million. In addition, $5.6 million due from the Canadian Government's Technology Partnership Canada Program (TPC) was included in accounts receivable at year end.
"2003 was an important transition year for Westport," said David Demers, Westport's President and Chief Executive Officer. "The company has established a strong presence in new markets such as Asia and Europe, we developed strong alliances and relationships that will help us build our business, and we assembled a top notch operational management team that is committed to delivering our business plan. During the year we launched a number of important new products, and established ourselves in the emerging technology of hydrogen combustion engines. Despite the tough economic climate, we grew our gross margin line year over year, and managed our cash to meet guidance. We are confident that we have built the foundation for a strong, global business."
Review of Fourth Quarter
Westport made significant progress towards its commercialization goals during the fourth quarter. The achievements include the second highest quarterly revenues in the company's history, significant expansion by Cummins Westport Inc. (CWI) into new global markets, major funding from governments for both technology development and market demonstration of products, enhancing our relationships with partners, and implementing the transition plan developed during the quarter that will drive the company to sharper business focus and operational success as we transition from a development company to a growing commercial business.
CWI improved market share and received important orders for the C Gas Plus engine for bus fleets in the U.S. In Asia, CWI started the quarter with a market presence in only one city and by the end of the quarter CWI had expanded into six additional cities. The North American launch of the B LPG Plus propane engine occurred shortly after the end of the quarter. It joins the family of natural gas engines, including the B Gas Plus engine, the C Gas Plus engine, and the B5.9G engine.
Governments and industry continued to recognize the clean air value of natural gas engines through technology development programs during the quarter. For example, CWI was awarded $760,000 to test and demonstrate catalyzed particulate controls on its natural gas engines. These controls have the potential to dramatically reduce particulate matter, a leading cause of health concerns related to diesel engines, to almost undetectable levels in natural gas engines. CWI also received $770,000 related to Hythane (a natural gas and hydrogen blend) engine testing in Vancouver and at Sunline Transit in Thousand Palms, CA from the U.S. Department of Energy's National Renewable Energy Laboratory and California's South Coast Air Quality Management District.
At the end of the quarter, Westport was awarded a strategic project investment of $18.9 million from Technology Partnerships Canada to support the development of low-emissions, natural gas and hydrogen engines for vehicular applications over the next several years. This investment will enable the Company to maintain technology leadership in the development of clean gaseous- fueled engines.
Westport continued building its relationship with MAN Nutzfahrzeuge AG, one of the largest heavy-duty truck and bus manufacturers in Europe. In February, we completed testing of a MAN 12-liter truck engine equipped with our proprietary high-pressure direct-injection natural gas system. This engine was shipped to MAN's Nurnberg, Germany facility to start the next stage of testing, which is expected to be completed by the third quarter of fiscal 2004. The German gas industry, led by RuhrGas AG, has provided funding to offset Westport's development during this phase. In addition, to prioritize commercial opportunities for these vehicles, MAN, Westport and the German gas industry are commissioning an independent market study. This is an important step forward that will lead to establishing a broader relationship with MAN.
Westport's technology development program with Isuzu Motors Ltd. is also progressing on schedule, with significant technical progress made during fiscal 2003. This has progressed to a planned intense testing regime in the first half of fiscal 2004 leading to a light-duty delivery truck, equipped with Westport's high pressure, direct injection technology, being commissioned by Isuzu in the third quarter of fiscal 2004. Following that delivery, Isuzu and Westport will conduct engine testing along with an evaluation of market opportunities for low-emissions trucks using Westport's technology in Japan.
CWI continued to advance its new engine programs during the quarter. The B LPG Plus propane engine commercially launched as scheduled in May 2003. The ISX G (400 horsepower) engine for heavy-duty trucks is continuing its field trials at Norcal with over 1.8 million miles clocked on the 14 trucks in service over the past sixteen months of field-testing. The next version of the engine with cooled exhaust gas recirculation is being readied for testing at Norcal in the third quarter of fiscal 2004. This final phase of field-testing will lead to the commercial product launch in the first quarter of fiscal 2005 with a 450 horsepower version of the ISX G engine being launched about six months following. The L Gas Plus engine is also planned to commence field trials by the end of December 2003 with commercial launch planned by mid-2004.
During the quarter, the next generation technology for the 60-liter QSK engine was installed on field-trial power generation units operating in Anaheim, California and Grande Prairie, Alberta. Significant improvements in emissions performance, power density and reliability are incorporated into this new generation. Despite the significant technical progress and the emerging market opportunities, commercial launch of a product incorporating this technology will depend on the availability of development funding.
Review of Fiscal 2003 Milestones
Westport's 2002 annual report set out management's goals for the fiscal
year ending March 31, 2003. Management's assessment of the year follows:
- We did not meet our revenue growth target; growth in new markets was
slower than anticipated and our core market, North American natural gas
transit engines, shrank substantially from the previous year. However,
in this tough environment we were able to improve both our market share
and gross margin.
- The loss per share goal was met.
- The ISX G engine is expected to be certified with emissions
significantly below the 2002 U.S. EPA regulatory limits. As discussed
during the year, the launch date for the 400 horsepower version of this
engine will be in 2004 to allow for the appropriate testing and launch
of the cooled exhaust gas recirculation version of this engine.
- Our cooperative development agreements with both MAN and Isuzu have
gone well this year, and a new program with BMW was announced and
completed. However, our relationship with Ford did not move forward to
a commercial vehicle program because of budgetary constraints at Ford.
- During the year a number of important new industry and government
alliances were developed and expanded, including Westport becoming a
founding partner in the California Natural Gas Vehicle Partnership.
Funding projects were initiated with Sustainable Development Technology
Canada, the U.S. National Renewable Energy Laboratory, Brookhaven
National Laboratory, California's South Coast Air Quality Management
District, the California Air Resources Board, the U.S. Propane
Education & Research Council, the Canadian International Development
Agency, and WestStart-CALSTART, a California-based non-profit
consortium developing advanced transportation technologies. The
Government of Canada invested $18.9 million through the Technology
Partnerships Canada program. Overall, financial support from government
increased tenfold during the year.
- Both Asian and European markets were entered successfully. In Europe,
Westport has completed the acquisition of GVH and is now operating from
research facilities in Dortmund, Germany; Cummins Westport business
leaders are in place for Europe and Asia as well as North America.
Sales were made for the first time in six additional cities in Asia,
the UK, France, the Czech Republic, Argentina, Egypt and New Zealand.
Fiscal 2004 Milestones
In April, management announced goals for the fiscal year ending March 31,
2004. They are:
- Continue to manage our transition from a development company to a
financially strong, growing, and profitable business
- Diversify our markets and technologies through expanded geographic
coverage, new customer segments, new strategic partners, and the launch
of both new and improved products
- Strengthen Westport's technological leadership in the area of clean
gaseous-fueled engines
- Grow total consolidated revenues by at least 20% over fiscal 2003 (to
$30 million)
- Reduce cash invested in operations and capital by at least 30% (to $25
million)
- Maintain the introduction schedules of new CWI engine products,
including the B Propane Plus, the 400 horsepower and the 450 horsepower
versions of the ISX G, and the L Gas Plus.
- Expand international business opportunities in the Americas, Europe,
and Asia. Further develop local manufacturing relationships to enable
enhanced future penetration of the Indian and China engine markets
"Westport and Cummins Westport are well positioned to make the commercial progress represented by these milestones during 2004," said Dr. Michael Gallagher, Westport's Chief Operating Officer. "We are, and will remain, focused on the right things to make the business a commercial success in a prudent, financially responsible way."
Westport Innovations Inc. is the leading developer of gaseous fuel engine technologies. It develops, manufacturers and sells a wide range of engines for commercial transportation applications such as trucks and buses through its joint venture with Cummins, Inc. Technology development alliances are in place with a number of other leading engine manufacturers, including MAN, Isuzu, and BMW.
Westport has scheduled a public conference call for Tuesday, June 3, 2003 at 8 am (Pacific Time) to discuss the quarterly and year-end results. To access the conference call by telephone, please call either 1-800-387-6216 (Vancouver) or 416-405-9328 (Toronto) no later than 7:55 am (Pacific Time) on June 3. Alternatively, the web cast of the conference call can be accessed through the Westport web site at www.westport.com by following the link on the investor information menu. Replays will be available in streaming audio shortly after the conclusion of the conference call. To view the financials and management's discussion and analysis, please point your browser to the following link: http://www.westport.com/investor/financial.php
Note: This document contains forward-looking statements about Westport's business, operations, technology development or to the environment in which it operates, which are based on Westport's estimates, forecasts and projections. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict, or are beyond Westport's control. Consequently, readers should not place any undue reliance on such forward-looking statements. In addition, these forward-looking statements relate to the date on which they are made. Westport disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
WESTPORT INNOVATIONS INC.
Consolidated Balance Sheets
(Expressed in Canadian dollars)
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March 31, 2003 March 31, 2002
-------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 2,981,999 $ 860,554
Short-term investments 25,137,389 72,462,835
Accounts receivable 7,080,281 1,743,140
Prepaid expenses 266,892 481,405
-------------------------------
35,466,561 75,547,934
Long-term investments 12,206,286 14,238,070
Equipment, furniture and leasehold
improvements 33,038,443 28,562,827
Accumulated amortization (15,881,378) (9,907,349)
-------------------------------
17,157,065 18,655,478
Intellectual property 3,314,160 2,624,180
Accumulated amortization (1,746,635) (1,037,869)
-------------------------------
1,567,525 1,586,311
-------------------------------
$ 66,397,437 $ 110,027,793
-------------------------------
-------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $ 8,316,177 $ 5,156,735
Demand instalment loan 2,500,000 4,166,667
Current portion of capital
lease obligation 369,999 365,368
Current portion of warranty liability 4,186,348 1,888,937
-------------------------------
15,372,524 11,577,707
Capital lease obligations 832,270 505,989
Warranty liability 2,960,881 3,777,875
Shareholders' equity:
Share capital:
Issued: 51,316,053 (2002-50,557,724)
common shares 189,864,603 186,065,803
Other equity instruments 2,600,892 4,865,000
Additional paid in capital 40,664 -
Deficit (145,274,397) (96,764,581)
-------------------------------
47,231,762 94,166,222
-------------------------------
$ 66,397,437 $ 110,027,793
-------------------------------
-------------------------------
WESTPORT INNOVATIONS INC.
Consolidated Statements of Operations and Deficit
(Expressed in Canadian dollars)
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Three Months Ended Twelve Months Ended
Mar 31 2003 Mar 31, 2002 Mar 31, 2003 Mar 31, 2002
----------------------------- -----------------------------
(Unaudited) (Unaudited) (Unaudited)
Product
revenue $ 7,531,174 6,755,677 $ 21,006,458 30,084,076
Parts revenue 805,568 427,591 3,628,727 1,286,304
----------------------------- -----------------------------
8,336,742 7,183,268 24,635,185 31,370,380
Cost of
revenue and
expenses:
Cost of
product
revenue 6,002,672 5,276,333 16,619,626 23,905,608
Research and
development 7,430,485 8,782,088 37,286,339 38,641,708
General and
admini-
strative 1,353,649 3,410,997 5,122,125 8,665,454
Sales and
marketing 2,014,483 759,171 5,487,731 2,895,191
Amortization 1,816,497 1,487,917 6,682,795 5,703,934
Bank charges
and interest 69,527 152,032 338,748 343,042
----------------------------- -----------------------------
18,687,313 19,868,538 71,537,364 80,154,937
----------------------------- -----------------------------
Loss from
operations 10,350,571 12,685,270 46,902,179 48,784,557
Interest and
investment
income (552,352) (374,855) (1,871,550) (1,724,311)
Restructuring
charge 1,447,403 - 1,447,403 -
Write down
of long-term
investment - - 1,356,300 -
Loss from
investment
accounted for
by the equity
method 46,130 (670,231) 675,484 (365,221)
Gain on
disposal
of capital
assets - 37,628 - (2,612)
----------------------------- -----------------------------
Loss for
the period 11,291,752 11,677,812 48,509,816 46,692,413
Deficit,
beginning
of period 133,982,645 85,086,769 96,764,581 50,072,168
----------------------------- -----------------------------
Deficit, end
of period $ 145,274,397 $ 96,764,581 $ 145,274,397 $ 96,764,581
----------------------------- -----------------------------
----------------------------- -----------------------------
Basic loss
per share $ 0.22 $ 0.25 $ 0.95 $ 1.06
----------------------------- -----------------------------
Weighted
average
common shares
outstanding 51,148,905 47,173,719 50,870,915 43,843,521
----------------------------- -----------------------------
----------------------------- -----------------------------
WESTPORT INNOVATIONS INC.
Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)
-------------------------------------------------------------------------
Three Months Ended Twelve Months Ended
Mar 31 2003 Mar 31, 2002 Mar 31, 2003 Mar 31, 2002
----------------------------- -----------------------------
(Unaudited) (Unaudited) (Unaudited)
Cash flows
from
operating
activities:
Loss for
the period $ (11,291,752) $ (11,677,812) $ (48,509,816) $ (46,692,413)
Items not
involving
cash:
Deprecia-
tion and
amortiza-
tion 1,816,498 1,487,917 6,682,795 5,703,934
Stock-based
compensa-
tion
expense (360,110) 2,870,000 926,556 5,705,000
Loss from
investment
accounted
for by the
equity
method 46,130 (670,231) 675,484 (365,221)
Loss from
write down
of invest-
ment - - 1,356,300 -
Gain on
disposal
of capital
assets - 37,628 - (2,612)
Changes in
non-cash
operating
working
capital:
Accounts
receivable (4,772,752) 3,338,681 (5,337,141) (366,662)
Prepaid
expenses 167,412 (126,004) 214,513 (126,940)
Accounts
payable
and
accrued
liabili-
ties 2,669,088 777,668 3,159,442 (3,188,001)
Warranty
accrual 172,900 1,099,484 1,480,417 5,666,812
----------------------------- -----------------------------
(11,552,586) (2,862,669) (39,351,450) (33,666,103)
Cash flows
from investing
activities:
Purchase of
equipment,
furniture
and
leasehold
improvements (740,207) (724,669) (3,851,788) (8,904,864)
Short-term
investments 12,941,053 (41,611,037) 47,325,446 (32,287,867)
Acquisition
of assets - - (223,041) -
Purchase of
long-term
investments - (397,799) - (1,442,869)
Proceeds on
disposition
of capital
assets - 85,000 - 178,616
----------------------------- -----------------------------
12,200,846 (42,648,505) 43,250,617 (42,456,984)
Cash flows
from
financing
activities:
Issue of
common
shares, net
of costs 521,502 46,401,690 542,301 70,764,269
Repayment
of demand
instalment
loan (416,670) (416,667) (1,666,667) (833,333)
Repayment of
capital
lease
obligations (32,542) (94,789) (269,913) (393,817)
Repayment of
line of
credit - - (383,443) -
Issue
of demand
instalment
loan - - - 5,000,000
----------------------------- -----------------------------
72,290 45,890,234 (1,777,722) 74,537,119
----------------------------- -----------------------------
Increase
(decrease)
in cash and
cash
equivalents 720,550 379,060 2,121,445 (1,585,968)
Cash and cash
equivalents,
beginning of
period 2,261,449 481,494 860,554 2,446,522
----------------------------- -----------------------------
Cash and cash
equivalents,
end of
period $ 2,981,999 $ 860,554 $ 2,981,999 $ 860,554
----------------------------- -----------------------------
----------------------------- -----------------------------
Supplementary
information:
Interest
paid $ 153,888 $ 64,364 $ 311,855 $ 196,922
Non-cash
transactions:
Shares issued
on exercise
of perform-
ance share
units $ 2,905,000 $ - $ 3,150,000 $ 840,000
Shares
issued on
purchase of
assets - - 106,497 -
Assumption
of debt on
purchase of
assets - - 984,270 -
Acquisition
of capital
assets by
assumption
of debt - - 623,828 -
Acquisition
of intell-
ectual prop-
erty by
issue of
shares - - 106,497 -
Acquisition
of intell-
ectual prop-
erty by
assumption
of debt - - 360,442 -
Conversion
of shares
to be
issued for
common
shares - 1,500,000 - 1,500,000
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