Westport Reports Strong Fourth Quarter and Fiscal 2004; CWI Cash Positive in its First Quarter
VANCOUVER, British Columbia--May 27, 2004--Westport Innovations Inc. (TSX:WPT) today reported total consolidated revenues of $32.4 million for fiscal 2004, a 32% increase from prior year revenues of $24.6 million. Engine shipments in Cummins Westport Inc. (CWI) totaled 1,255 compared to 884 engines in 2003. On a US dollar basis, product revenues were up 55% but were offset by the appreciation in the Canadian dollar. Loss for the year was $37.7 million compared to $48.5 million last year, a 22% improvement due to higher revenues and lower research and development spending. The corresponding loss on a per share basis for fiscal 2004 and the year prior was $0.64 and $0.95 respectively.Revenues in the fourth quarter were $13.3 million, with 463 units shipped compared to $8.3 million and 321 units for the same quarter last year. Loss for the quarter was $6.5 million compared to $11.3 million in the fourth quarter last year. Westport's fourth quarter loss per share was $0.10 compared to $0.22 for the same quarter last year. This was the lowest loss per share for Westport since the inception of CWI three years ago.
Cash use during the quarter, defined as loss for the period adjusted for items not involving cash, a non-GAAP measure, improved to $3.4 million (Figure 1). This is a significant accomplishment over the company's announced goal of $5 million for the quarter. Cash use in the same quarter last year was $9.3 million and in the third quarter this year was $7.6 million.
"We are very pleased with our fiscal 2004 results, which demonstrate our continuing transformation from a technology development company to a growing product company with expanding markets," said David Demers, President and Chief Executive Officer.
Cummins Westport Inc.
At the end of 2003, Westport and Cummins Inc. announced a renewed focus for their 50:50 joint venture company, Cummins Westport Inc. As of January 2004, CWI's new business focus is on the sale of mid-range engines for truck and bus applications worldwide. CWI's first quarter of operations under the new agreement, Westport's fourth fiscal quarter, saw CWI generate positive cashflow on sales of $12.6 million.
Under the new joint venture agreement effective January 1, 2004, CWI is reporting full revenue for its parts business, where previously it reported only gross margin on parts. Parts revenue in the quarter was $2.2 million compared to $0.8 million this quarter last year. In 2004, parts revenue was $4.3 million compared to $3.6 million last year.
During Westport's past fiscal year ended March 31, 2004, 84% of CWI's revenue came from shipments to customers in North America, primarily for transit bus applications, and the balance were to international customers. CWI's installed customer base includes more than 10,000 engines in 18 countries around the world. More than 40 OEM vehicle or chassis manufacturers now incorporate CWI engines into more than 70 different product models.
CWI is focusing its efforts on markets that rank the highest under its target profile. Regions with dense populations, poor air quality, government incentives, natural gas supply and Cummins presence typically rank high in this analysis. CWI is now the dominant supplier of natural gas engines in North American transit buses, with leading fleet operators in cities like Washington DC, Los Angeles, Boston, Tacoma and San Diego selecting CWI engines. Although growth is anticipated in North American markets, particularly in applications such as refuse trucks with the recently introduced L Gas Plus engine, international sales are expected to take an increasingly important role. In key international markets such as India and China, CWI announced that it has signed memorandum of understandings to locally manufacture its new B Gas International engine. This will allow increased penetration of these high-growth markets for natural gas engines. In China, CWI has now delivered engines to nine major cities including Beijing, where approximately 2,300 buses use CWI engines.
Westport Programs Update
Outside of CWI, Westport is investing to develop commercial products in strategic markets with leading international OEM's. These include Isuzu trucks to be sold in Asia and North America, Western European trucks and buses with MAN and VW, and heavy-duty trucks in North America with Cummins. Westport also invests in industry-leading technology research programs, including projects with BMW and Ford on hydrogen engines, and a number of collaborations with governments and universities around the world.
During the quarter, Westport invested $6 million in gross research and development, approximately 25.3% of which was offset by funding from governments and partners. In 2004, more than $8 million was received from government agencies under research collaboration contracts against $34.1 million of gross research and development spending.
Dr. Michael Gallagher, Westport's Chief Operating Officer, said, "We made excellent progress last year and we believe our strong financial results can be sustained. Westport's objective continues to be to develop market alliances with our strategic partners that are similar to our Cummins Westport partnership in order to realize commercial opportunities and grow our business."
Fiscal 2005 Financial Goals
Westport publishes its business and financial milestones in its Annual Report to Shareholders each year. All of the 2004 financial goals were met or exceeded. For 2005, Westport's financial goals are:
1. Increase CWI's unit shipments by at least 20% to over 1,500.
2. CWI will at least break even for the Westport fiscal year.
3. Continue to decrease annual burn rate by another 30% this year.
Westport has scheduled a public conference call for Thursday, May 27, 2004 at 8 am (Pacific Time) to discuss the quarterly and year end results. To access the conference call by telephone, please call 1-877-563-8311 no later than 7:55 am on May 27, 2004. 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 Westport's fiscal 2004 financials, please point your browser to the following link: http://www.westport.com/investor/financial.php.
Westport Innovations Inc. is a leading developer of gaseous fuel engine technologies. It develops, manufactures 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.
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.
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Figure 1. Cash Used in Operations
Three Months Ended
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(unaudited) (audited)
March 31, 2004 March 31, 2003
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Loss for the period, a GAAP measure (6,619) (11,292)
Items not involving cash:
Amortization 1,760 1,816
Stock-based compensation expense 1,151 166
Accretion of TPC warrants
(notes 10 and 12(b)) 286 -
Deferred rent expense 52 -
Loss from investment accounted
for by the equity method - 46
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Cash use during the quarter,
a non-GAAP measure (3,372) (9,263)
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WESTPORT INNOVATIONS INC.
Consolidated Balance Sheets
(Expressed in Canadian dollars)
March 31, 2004 (unaudited) and 2003 (audited)
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2004 2003
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Assets
Current assets:
Cash and cash equivalents $ 2,105,161 $ 2,981,999
Short-term investments 18,678,441 25,137,389
Accounts receivable 5,073,384 7,080,281
Prepaid expenses 532,848 266,892
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26,389,834 35,466,561
Long-term investments 12,206,286 12,206,286
Equipment, furniture and leasehold
improvements 10,704,682 17,157,065
Intellectual property 847,850 1,567,525
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$ 50,148,652 $ 66,397,437
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $ 3,743,467 $ 8,316,177
Demand instalment loan 3,206,755 2,500,000
Current portion of long-term debt
obligations 214,413 369,999
Current portion of warranty
liability 3,814,163 4,186,348
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10,978,798 15,372,524
Long-term debt obligations 1,041,846 832,270
Warranty liability 4,059,744 2,960,881
Shareholders' equity:
Share capital:
Authorized:
Unlimited common shares, no par value
Unlimited preferred shares in
series, no par value
Issued:
64,340,430 (2003 - 51,316,053)
common shares 213,965,067 189,864,603
Other equity instruments 3,007,665 2,600,892
Additional paid in capital 91,770 40,664
Deficit (182,996,238) (145,274,397)
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34,068,264 47,231,762
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$ 50,148,652 $ 66,397,437
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WESTPORT INNOVATIONS INC.
Consolidated Statements of Operations and Deficit
(Expressed in Canadian dollars)
Years ended March 31, 2004 (unaudited) and 2003 (audited)
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2004 2003
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Product revenue $ 28,113,478 $ 21,006,458
Parts revenue 4,316,336 3,628,727
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32,429,814 24,635,185
Cost of revenue and expenses:
Cost of revenue 22,516,283 16,619,626
Research and development 26,090,116 37,852,292
General and administrative 6,226,986 5,906,989
Sales and marketing 6,213,389 5,425,911
Foreign exchange gain (1,022,997) (1,288,997)
Amortization 6,861,066 6,682,795
Bank charges and interest 307,621 338,748
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67,192,464 71,537,364
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Loss before undernoted (34,762,650) (46,902,179)
Interest and investment income 717,678 1,871,550
Restructuring costs (457,400) (1,447,403)
Write down of equipment, furniture
and leasehold improvements (3,219,469) -
Write down of long-term investment - (1,356,300)
Loss from investment accounted for
by the equity method - (675,484)
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Loss for the year (37,721,841) (48,509,816)
Deficit, beginning of year (145,274,397) (96,764,581)
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Deficit, end of year $ (182,996,238) $ (145,274,397)
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Basic and diluted loss per share $ (0.64) $ (0.95)
Weighted average common shares
outstanding 59,046,993 50,870,915
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WESTPORT INNOVATIONS INC.
Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)
Years ended March 31, 2004 (unaudited) and 2003 (audited)
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2004 2003
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Cash flows from operations:
Loss for the year $ (37,721,841) $ (48,509,816)
Items not involving cash:
Amortization 6,861,066 6,682,795
Stock-based compensation expense 1,315,237 926,556
Accretion of TPC warrants 1,142,857 -
Deferred rent expense 189,285 -
Write down of equipment, furniture,
and leasehold improvements 3,219,469 -
Loss from investment accounted for
by the equity method - 675,484
Write down of long-term investment - 1,356,300
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(24,993,927) (38,868,681)
Changes in non-cash operating
working capital:
Accounts receivable 2,006,897 (5,337,141)
Prepaid expenses (265,956) 214,513
Accounts payable and accrued
liabilities (4,572,711) 3,159,442
Warranty liability 726,678 1,480,417
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(27,099,019) (39,351,450)
Cash flows from investments:
Purchase of equipment, furniture and
leasehold improvements (2,704,227) (3,851,788)
Sale of short-term investments 6,458,948 47,325,446
Acquisition of assets - (223,041)
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3,754,721 43,250,617
Cash flows from financing:
Issue of common shares, net of
issuance costs 22,100,250 542,301
Issue of demand instalment loan 1,700,000 -
Decrease in demand instalment loan (993,245) (1,666,667)
Repayment of line of credit - (383,443)
Repayment of capital leases and
other long-term obligations (339,545) (269,913)
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22,467,460 (1,777,722)
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Increase (decrease) in cash and cash
equivalents (876,838) 2,121,445
Cash and cash equivalents, beginning
of year 2,981,999 860,554
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Cash and cash equivalents, end of
year $ 2,105,161 $ 2,981,999
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Supplementary information:
Interest paid $ 248,063 $ 311,855
Non-cash transactions:
Purchase of equipment, furniture and
leasehold improvements by assumption
of capital lease obligation 204,250 -
Shares issued on exercise of
performance share units 2,000,214 3,150,000
Shares issued on purchase of assets - 106,497
Assumption of line of credit and
capital lease obligation on
purchase of asset - 984,270
Acquisition of equipment, furniture
and leasehold improvements by
assumption of line of credit and
capital lease obligation - 623,828
Acquisition of intellectual property
by assumption of line of credit
and capital lease obligation - 360,442
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