Westport reports results for second fiscal quarter ending September 30, 2003
VANCOUVER, Oct. 28, 2003 -- Westport Innovations Inc. (TSX:WPT) today reported results for its second fiscal quarter ended September 30, 2003 and provided an update on operations.
Westport's net loss for the quarter was $9.8 million ($0.17 per share), compared with a loss of $13.6 million ($0.27 per share) during the same period in fiscal 2003, representing a 28% improvement over the same period last year. For the six month period ending September 30, 2003, our loss was $18.1 million compared to $25.0 million the same quarter last year.
"Westport is pleased to report our fiscal 2004 second quarter earnings. As the 28% decrease in our quarterly and year to date net loss shows, we are continuing to manage our burn rate. Moreover, engine unit sales to the end of September actually increased by 12% and US dollar revenues were up 16% year over year although these growth numbers were not reflected on our top line because of the depreciation in the US dollar," said David Demers, President & CEO of Westport Innovations. "The closing of our $22.0 million financing in August has provided us with more flexibility in our operating plans and a stronger balance sheet for Westport."
Total revenue in Canadian dollars was flat at $6.9 million compared to the same quarter last year, but in US dollars total revenue was up 16% because of increased parts margin, higher volumes and product mix. On a year to date basis, total revenue increased by 25% in US dollars. This increase has been offset by a 12% depreciation in the US dollar this quarter over this quarter last year. Product gross margins improved by 10% to 23% from 21% because of customer and product mix. Parts revenue also increased to $650,000 from $384,000.
Expenses, excluding cost of product revenue, totalled $12.0 million, down from $14.1 million the same quarter last year. Research and development, the largest expense category, was down 22% to $7.1 million from $9.2 million in the same quarter last year, and on a year to date basis, has decreased 24% to $13.8 million from $18.2 million. This drop is primarily attributed to funding awarded by Technology Partnership Canada in March 2003 and other government funding, which together have increased to $5.5 million from $0.4 million to the end of September year over year and our commitment to pace program spending with available funding and market opportunities.
At the end of September 30, 2003, cash, short-term investments and accounts receivable, net of accounts payable, totalled $31.8 million compared to $26.8 million at March 31, 2003. In August, Westport issued twelve million common shares at $1.90 per share through a bought deal financing, offering net proceeds of $22.0 million in new capital. As part of its commitment to its profitability goals, Westport continues to focus on its advanced technology and diversification paths.
Business Programs Update CWI
Cummins Westport Inc. (CWI) increased engine shipments year over year and is focused on achieving stated targets of 30% growth in unit sales for fiscal 2004.
Early in the quarter, CWI announced the sale of up to 600 engines to the Metropolitan Transportation Authority of Los Angeles for transit bus service. This was the first order for the 320-horsepower L Gas Plus engine. The base order of 200 engines including its option for 400 more is CWI's largest engine order to date. The L Gas Plus will be in trials later this year at Norcal and will be released in mid-2004.
In July, CWI reported its first order for engines powered by liquefied natural gas (LNG) in China. The engines will be installed in new buses for transit service in Beijing. The city of Beijing alone will have over 18,000 buses in transit service by 2008, which is equivalent to approximately 30% of the total transit bus market in the US. Delivery of the 75 B-series engines will be complete this year. Beijing's commitment to improve air quality ahead of the Olympics in 2008 has been a driving factor in their interest to purchase CWI's natural gas engines.
"We have an economic value proposition in China, unlike any other market," said Hugh Foden, President of Cummins Westport. "Where US markets are driven by environmental factors, Asian markets are more motivated by economic issues and opportunities."
After the close of the quarter, CWI announced further expansion and sales in China. The new market of Chongqing and the repeat sales into Xian mark significant achievements for CWI and signal deeper market penetration and a satisfied customer base. CWI's success in China suggests that a local assembly option will facilitate further penetration into the Asian market with lower cost, low-emissions engines.
CWI continued to advance its Westport-Cycle(TM) heavy-duty engine technology during the quarter. The ISX G heavy-duty engine achieved certification to California Air Resources Board (CARB) Optional Low NOx standards of 1.5 grams per brake horsepower hour (g/bhp-hr). The ultimate target is to achieve NOx levels of 0.2 g/bhp-hr in a cost effective manner to meet 2010 emissions regulations.
Development work on the 60-liter QSK engine for power generation has also advanced during the quarter. Shortly after the close of the quarter, CWI announced it has now commissioned the field trial unit in Grande Prairie, Alberta, which is now delivering 1.6 megawatts of power to the Alberta Power Pool. Engineers and technicians are currently implementing the final touches on the generator set installed in Anaheim, California. Westport continues to monitor the demand in the distributed power generation market and will determine the pace of the program based on market conditions and funding sources.
Under the joint venture agreement of March 2001, CWI will see a significant change in its operations as of January 1, 2004. The agreement states that Westport will fund the losses of the joint venture until December 31, 2003 after which point the two parents will contribute equally to the cash needs of CWI. Cummins also has the right at any time to dissolve the joint venture, paying a negotiable fee to Westport linked to Westport's investments in intellectual property within CWI, and both parties continuing with a supplier/customer relationship on commercial terms to be negotiated.
As we have previously disclosed, formal discussions between Cummins and Westport commenced some time ago to reach agreement on the CWI business plan going forward, and the corresponding commitments to CWI from each parent under that plan. Although no decisions have yet been made, Westport anticipates that the discussions will conclude before the end of the calendar year.
Development Projects with Isuzu, MAN & Ford
Ford's interest in Westport technology continues with the agreement announced in July for Westport to support the automaker's hydrogen engine development program. Ford purchased fuel injection hardware, controls and engineering support from Westport based on a hydrogen-specific version of Westport's patented direct injection technology.
In September, Westport showcased the results of its Isuzu program with the impressive success of the prototype ELF CNG-DI truck at the Michelin Challenge Bibendum in Sonoma, California. Bibendum is the world's largest environmental event and the premier competition for alternative fuel vehicles aimed at sustainable transportation. The prototype ELF won two gold medals, in the efficiency and emissions categories, and one silver medal in the vehicle noise category. The truck has now returned to Japan, where it will undergo further testing and development.
"The ELF CNG-DI's achievements at Bibendum are a tribute to the immense amount of work both Westport and Isuzu have put into the program and we are very pleased with the results," said Michael Gallagher, Chief Operating Officer for Westport. "We are honored to be a part of this joint project with Isuzu and look forward to continued collaboration with the automaker."
Westport's development program with MAN for CNG-powered heavy-duty trucks is also progressing. Funding from MAN, Ruhrgas and other German gas industry members has assisted in the completion of tests at MAN in Germany. We have seen some impressive results and the engine will now be tested in our own facility in Dortmund, Germany. The market studies around the opportunity for this natural gas automotive product in Germany and elsewhere in Europe is currently underway.
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 Cummins Westport Inc., its joint venture with Cummins Inc. Technology development alliances are in place with a number of other leading engine manufacturers, including Ford, MAN, Isuzu, and BMW to develop engines that operate using cleaner-burning fuels such as natural gas, propane, hydrogen, and blended fuels such as HCNG.
Westport has scheduled a public conference call for Tuesday, October 28, 2003 at 8 am (Pacific Time) to discuss the quarterly results. To access the conference call by telephone, please call 1-888-295-1311 no later than 7:55 am on October 28. Alternatively, the webcast 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.
For further information, please contact:
Gordon Neal
Director, Investor Relations
Phone: (604) 718-2046 Fax: (604) 718-2001
Email: invest@westport.com Web: www.westport.com
WESTPORT INNOVATIONS INC.
Six months ended September 30, 2003 and 2002
WESTPORT INNOVATIONS INC.
Consolidated Balance Sheets
(Expressed in Canadian dollars)
-------------------------------------------------------------------------
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September 30, March 31,
2003 2003
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(Unaudited)
Assets
Current assets:
Cash and cash equivalents (note 3) $ 1,629,558 $ 2,981,999
Short-term investments 29,069,660 25,137,389
Accounts receivable 5,409,115 7,080,281
Prepaid expenses 462,614 266,892
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36,570,947 35,466,561
Long-term investments 12,206,286 12,206,286
Equipment, furniture and leasehold
improvements 34,669,213 33,038,443
Accumulated amortization (18,856,733) (15,881,378)
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15,812,480 17,157,065
Intellectual property 3,314,160 3,314,160
Accumulated amortization (2,126,659) (1,746,635)
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1,187,501 1,567,525
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$ 65,777,214 $ 66,397,437
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Liabilities and Shareholders' Deficiency
Current liabilities:
Accounts payable and accrued
liabilities $ 4,251,009 $ 8,316,177
Demand instalment loan 1,842,105 2,500,000
Current portion of capital
lease obligations 255,436 369,999
Current portion of warranty liability 3,869,752 4,186,348
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10,218,302 15,372,524
Capital lease obligations 701,316 832,270
Warranty liability 2,893,943 2,960,881
Shareholders' equity:
Share capital:
Issued: 63,759,877
(2003 - 51,316,053)
common shares (note 4) 211,942,400 189,864,603
Other equity instruments (note 5) 3,289,658 2,600,892
Additional paid in capital 86,616 40,664
Deficit (163,355,021) (145,274,397)
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51,963,653 47,231,762
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$ 65,777,214 $ 66,397,437
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See accompanying notes to consolidated financial statements.
WESTPORT INNOVATIONS INC.
Consolidated Statements of Operations and Deficit
(Expressed in Canadian dollars)
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Three months ended Six months ended
September 30 September 30
------------------------ ------------------------
2003 2002 2003 2002
-------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Product
revenue $ 6,265,362 $ 6,555,507 $ 9,805,589 $ 9,974,975
Parts revenue 650,455 384,103 1,467,722 672,486
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6,915,817 6,939,610 11,273,311 10,647,461
Cost of
revenues and
expenses:
Cost of
product
revenue 4,804,686 5,191,077 7,610,347 7,870,065
Research and
development
(notes 6
and 7) 7,140,283 9,220,004 13,764,124 18,187,132
General and
administra-
tive
(note 6) 1,379,999 1,438,040 2,598,058 2,636,521
Sales and
marketing
(note 6) 1,636,718 1,030,089 3,026,987 2,156,722
Foreign
exchange
(gain) loss 71,543 688,674 (834,311) 470,776
Amortization 1,713,648 1,637,249 3,371,379 3,193,142
Bank charges
and interest
on capital
leases 72,513 119,395 174,993 193,986
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16,819,390 19,324,528 29,711,577 34,708,344
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Loss before
undernoted 9,903,573 12,384,918 18,438,266 24,060,883
Interest and
other income (153,170) (413,157) (357,642) (920,662)
Writedown of
long-term
investment - 1,356,300 - 1,356,300
Loss from
investment
accounted
for by the
equity
method - 303,495 - 516,547
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Loss for the
period 9,750,403 13,631,556 18,080,624 25,013,068
Deficit,
beginning
of period 153,604,618 108,146,093 145,274,397 96,764,581
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Deficit, end
of period $ 163,355,021 $ 121,777,649 $ 163,355,021 $ 121,777,649
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Basic and
diluted
loss per
share $ 0.17 $ 0.27 $ 0.33 $ 0.49
Weighted
average
common
shares,
used in
computing
loss per
share
basic and
diluted 56,739,110 50,767,989 54,042,398 50,740,569
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See accompanying notes to consolidated financial statements.
WESTPORT INNOVATIONS INC.
Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)
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Three months ended Six months ended
September 30 September 30
------------------------ ------------------------
2003 2002 2003 2002
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(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash provided
by (used in):
Operations:
Loss for the
period $ (9,750,403) $ (13,631,556) $ (18,080,624) $ (25,013,068)
Items not
involving
cash:
Amortiza-
tion 1,713,648 1,637,249 3,371,379 3,193,142
Stock
based
compen-
sation
expense 35,195 360,666 163,290 743,612
Accretion
of TPC
warrants
(note 6
(b)) 285,715 - 571,428 -
Write
down of
invest-
ment - 1,356,300 - 1,356,300
Loss from
invest-
ment
account-
ed for
by the
equity
method - 303,495 - 516,547
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(7,715,845) (9,973,846) (13,974,527) (19,203,467)
Change in
non-cash
operating
working
capital:
Accounts
receivable 3,959,576 97,047 1,671,166 (677,875)
Prepaid
expenses (243,519) (3,613) (195,722) (60,117)
Accounts
payable
and
accrued
liabil-
ities (1,140,444) (2,232,763) (4,065,168) (1,694,337)
Warranty
liability 203,011 1,222,338 (383,534) 1,308,537
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(4,937,221) (10,890,837) (16,947,785) (20,327,259)
Investments:
Purchase of
equipment,
furniture,
and
leasehold
improvements (487,132) (1,310,824) (1,646,770) (2,084,859)
Sale
(purchase)
of short-
term
investments,
net (15,927,263) 14,220,225 (3,932,271) 24,546,111
Acquisition
of assets - (223,041) - (223,041)
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(16,414,395) 12,686,360 (5,579,041) 22,238,211
Financing:
Issue of
common
shares, net
of
issuance
costs 22,077,797 12,229 22,077,797 446,003
Repayment of
demand
instalment
loan (241,229) (416,666) (657,895) (833,334)
Repayment
of line
of credit - (383,445) - (383,445)
Repayment of
capital
lease
obligation (135,006) (80,945) (245,517) (173,463)
-------------------------------------------------------------------------
21,701,562 (868,827) 21,174,385 (944,239)
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Increase
(decrease)
in cash
and cash
equivalents 349,946 926,696 (1,352,441) 966,713
Cash and cash
equivalents,
beginning
of period 1,279,612 900,571 2,981,999 860,554
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Cash and cash
equivalents,
end of
period $ 1,629,558 $ 1,827,267 $ 1,629,558 $ 1,827,267
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Supplementary
information
Interest paid $ 58,541 $ 51,163 $ 157,188 $ 107,720
Non-cash
transactions:
Shares
issued on
exercise of
performance
share units - 105,000 - 245,000
Shares
issued on
purchase of
assets - 106,497 - 106,497
Assumption
of debt on
purchase
of assets - 984,270 - 984,270
Assumption
of capital
assets by
assumption
of debt - 623,828 - 623,828
Acquisition
of intell-
ectual
property
by issue
of shares - 106,497 - 106,497
Acquisition
of intell-
ectual
property by
assumption
of debt - 360,442 - 360,442
See accompanying notes to consolidated financial statements.