Westport Reports Third Fiscal 2006 Quarter Results and 30% Revenue Increase Year to Date
VANCOUVER, British Columbia--Feb. 9, 2006--Westport Innovations Inc. (TSX:WPT), a leading developer of environmental technologies that allow engines to operate on clean-burning gaseous fuels, today reported its third quarter financial results for the three and nine month periods ended December 31, 2005, and provided an update on business operations.Westport's loss for the three months ended December 31, 2005 was $3.6 million, or $0.05 per share, a 13% improvement from the same period last year. Consolidated revenues were $8.6 million compared to $9.2 million for the third quarter last year. For the nine months ended December 31, 2005, net loss was $13.1 million, a 22% improvement from the prior year's loss of $16.9 million with loss per share of $0.18 and $0.25 respectively. Consolidated revenues for the same period were $31.4 million, a 30% increase over the prior year period. Product revenue rose 24% and parts revenue increased by 46%.
During the third quarter, better warranty claims experience than anticipated in Cummins Westport Inc. (CWI) and lower amortisation and depreciation compensated for the slightly lower sales volume. Quarterly sales volumes are volatile and dependant on the timing of major engine shipments. For the three months ended December 31, 2005, net research and development expenses decreased by $1.1 million primarily as a result of increased government and partner funding of R&D programs. Sales and marketing expenses increased by $0.9 million as several global marketing initiatives continue to develop.
Cash used in operations before changes in working capital was $2.2 million for the quarter and $6.7 million year to date, up $0.1 million from the same period last year but $3.8 million better year to date. Cash and short term investments as of December 31, 2005 totalled $11.5 million.
"We are pleased with CWI's sales growth year to date, which is better than our goal of 20% annual revenue growth in US dollar terms. While our quarterly results will be volatile from quarter to quarter, CWI products have shown steady improvements in quality and increasing market penetration around the world," said David Demers, Westport's Chief Executive Officer. "With CWI's recent launch of production in India with Cummins India Ltd., and the recent conclusion of a similar production agreement with Dongfeng Cummins Engine Company Ltd. in China, CWI is now positioned to move into the largest potential markets in the world with lower cost, locally assembled products. We expect continued strong growth as high oil prices, an ever-increasing focus on urban air pollution and climate change draw new customers to the demonstrated benefits of natural gas vehicles."
"We are also continuing to improve bottom line performance year over year while still making strategic investments in new products, technologies and markets," added Mr. Demers. "To fund commercialisation, we will continue to look for industry, strategic partner, and government funding to finance operations. If needed, we also have the option of realising gains on some of our non-core assets. We are excited by our business progress over the last three quarters and are positioning ourselves to capitalize on several near-term opportunities for growth, including our LNG tank joint venture with Beijing Tianhai Industry Co. and large scale demonstration projects."
Business Programs Update - Third Quarter 2006
Cummins Westport Inc.
Cummins Westport continues to execute on its strategy of maintaining a leading position in environmental leadership and product quality. Lower overall cost of ownership is emerging as the primary reason for shifting to natural gas as a fuel for commercial fleets. To effectively compete in India and China, local manufacturing through local alliances has been the primary strategy.
In China, Cummins Westport finalised its agreement with Dongfeng Cummins Engine Company (DCEC) to manufacture Cummins Westport B-series engines which will be jointly marketed and sold. Under CWI's agreement, DCEC will manufacture engines for CWI for resale in China, but will also supply its other parent, Dongfeng Motors, with this natural gas engine. Dongfeng Motors was ranked the largest manufacturer of heavy-duty trucks and buses in China in 2005.
In India, with Cummins India Ltd. (CIL), the manufacturing launch in January marks the start of production of B Gas International engines by CIL with natural gas-specific components from Cummins Westport. CIL will market the engines in India to Tata, the largest manufacturer of buses in that market.
Local manufacturing will also allow CWI and its partners to build a base for potentially exporting from India and China to price-sensitive, developing regions.
On the quality and emissions side, a Cummins Westport-powered bus won two awards in Russia for "Best City Bus" and "Development of Ecological Transport" at the Moscow International Motor Show.
Cummins Westport recently signed a contract with Utilization Technology Development, with program management and research by Gas Technology Institute, for US$350,000 for demonstration of the advanced Cummins Westport ISL G natural gas engine. The ISL G will meet US Environmental Protection Agency (EPA) and California Air Resources Board (CARB) 2010 emissions regulations at launch in 2007, while also improving fuel efficiency and carbon dioxide emissions.
Other Program Highlights
During the third quarter, Westport made significant progress on several new initiatives outside its CWI joint venture.
"With high oil prices, energy security concerns, and environmental issues appearing almost daily on the front pages of newspapers around the world, we are seeing increasing market readiness for our products from Australia to Asia to North America," noted Mr. Demers. "Governments and industry partners are encouraging us to enter their markets with our High Pressure Direct Injection (HPDI) and HPDI-related products, and we are excited about our ongoing initiatives as we approach a new fiscal year."
"We hope to soon be producing new LNG tanks with our joint venture with Beijing Tianhai Industry Co. Ltd. (BTIC), which will be our first intellectual property licensing arrangement in China," said Dr. Michael Gallagher, Westport's President and Chief Operating Officer. "Market feasibility studies for heavy-duty natural gas engines and our Green Corridor infrastructure development plans are also advancing. We remain excited about the long term potential for natural gas as a key transportation fuel for Asia as it works to reduce dependence on imported oil."
In addition to its activities in China, Westport continued on its path to commercialisation by advancing negotiations with Isuzu Motors of Japan and Energy Developments Ltd. of Australia:
- Westport signed a $1.5 million, 1 year development agreement with Isuzu. With Isuzu funding the development work and committing increased resources to the program, Westport and Isuzu expect to deepen their working relationship in this phase of the agreement and to begin discussions on an Intellectual Property Rights framework in the first quarter of 2006 which would form the basis of future commercial agreements.
- Energy Developments Limited (EDL or ENE) agreed to fund a formal joint business plan for the commercialisation of an LNG mine truck retrofit product using Westport's High Pressure Direct Injection (HPDI) technology. The proposed program forms part of EDL's plans for expanding LNG production and distribution in Australia and is expected to reach a go-no-go position in the first calendar quarter of 2006. If approved, EDL and Westport would enter into an agreement to develop, manufacture, and sell LNG retrofit engine kits to Australian mine customers.
In the quarter, Westport also announced significant technology advancements:
- Westport announced its participation in the $12.2 million Integrated Waste Hydrogen Utilization Project in which, along with a consortium of Vancouver-based industry partners, Westport will be converting and showcasing four public transit buses running on hydrogen and compressed natural gas blended fuel. The project will be funded by Sustainable Development Technology Canada, the Hydrogen Early Adopters program, and Natural Resources Canada.
- The City of San Francisco and Norcal Waste Systems Inc., the city's refuse collection, recycling, and transfer company, committed to demonstrating and deploying Westport's most advanced natural gas technology for heavy-duty trucks through to 2011. Goals of the program include improving combustion and reducing greenhouse gas emissions through the upgrade of three of the current 13 patented HPDI trucks to Westport's second generation technology. This latest technology is also being demonstrated in Canada along the Highway 401 corridor where five patented HPDI trucks have already logged almost 500,000 kilometres since their launch last May.
More recently, Westport and Ford Motor Company announced a project to develop and demonstrate an advanced direct injection fuel system for vehicles powered by high-efficiency, high performance engines operating on pure hydrogen. The two-year development program will be divided into two phases. Phase one will define advanced fuel system requirements including the design of fuel injectors. Phase two will incorporate the design and manufacture of new prototype fuel systems. The Government of Canada will contribute up to $250,000 during phase one and the project will include participation from the US Department of Energy Pacific Northwest National Laboratory.
"Westport's technologies and products can provide a near term solution for the world's energy and environmental issues. We are working hard with companies like BTIC, Isuzu, and EDL to lower our total solution costs and to provide an end to end solution for our customers," concluded Dr. Gallagher.
Results Conference Call
Westport has scheduled a conference call for Thursday, February 9, 2006 at 8:00 am (Pacific Time) to discuss the quarterly results. The public is invited to listen to the conference call in real time or by replay. To access the conference call by telephone, please dial: 1-800-936-9754 (North America Toll- Free) or 1-973-935-2048 (International).
Alternatively, the webcast of the conference call can be accessed through the Westport website at www.westport.com by selecting "Investors" and then "Investor Overview" from the menu. Replays will be available in streaming audio on the same website shortly after the conclusion of the conference call.
To view Westport's full financials, please point your browser to the following link: www.westport.com/investor/financial.php.
About Westport Innovations Inc.
Westport Innovations Inc. is the leading developer of environmental technologies that allow engines to operate on clean-burning fuels such as natural gas, hydrogen, and hydrogen-enriched natural gas (HCNG). Westport has technology development alliances in place with Cummins, Ford, MAN, BMW, and Isuzu, as well as an ownership interest in Clean Energy, the largest provider of natural gas for vehicles in North America. Cummins Westport Inc., Westport's joint venture with Cummins Inc., manufactures and sells the world's widest range of low-emissions alternative fuel engines for commercial transportation applications such as trucks and buses.
Note: This document contains forward-looking statements about Westport's business, operations, technology development or 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)
--------------------------------------------------------------------
December 31, March 31,
2005 2005
--------------------------------------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,305,195 $ 319,806
Short-term investments 10,146,517 19,970,877
Accounts receivable 4,685,033 6,040,026
Inventory 998,848 1,481,513
Prepaid expenses 777,195 552,231
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17,912,788 28,364,453
Long-term investments 9,133,876 9,133,876
Equipment, furniture and
leasehold improvements 33,662,823 33,525,179
Accumulated depreciation (29,489,459) (27,750,304)
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4,173,364 5,774,875
Intellectual property 4,321,394 4,321,394
Accumulated amortisation (3,422,690) (3,152,978)
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898,704 1,168,416
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$ 32,118,732 $ 44,441,620
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Liabilities and Shareholders'
Equity
Current liabilities:
Accounts payable and accrued
liabilities $ 3,218,334 $ 4,466,661
Deferred revenue 1,952,485 2,639,316
Demand instalment loan 2,123,363 2,252,720
Current portion of long-term
debt obligations 136,897 104,975
Current portion of warranty
liability 3,244,885 3,665,175
Current portion of financial
instruments 3,814,346 335,745
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14,490,310 13,464,592
Long-term debt and other
long-term obligations 837,659 1,545,064
Warranty liability 2,673,633 3,063,678
Joint Venture Partner's share
of income from joint venture 1,144,633 68,870
Financial instruments - 2,621,458
Shareholders' equity:
Share capital:
Authorised:
Unlimited common shares, no
par value
Unlimited preferred shares in
series, no par value
Issued:
74,272,651 (2005 - 73,964,088)
common shares 230,979,873 230,378,934
Other equity instruments 2,169,891 2,078,460
Additional paid in capital 4,669,516 2,918,568
Deficit (224,846,783) (211,698,004)
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12,972,497 23,677,958
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$ 32,118,732 $ 44,441,620
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Westport Innovations Inc.
Consolidated Statements of Operations and Deficit
(Expressed in Canadian dollars)
--------------------------------------------------------------------
Three months ended Nine months ended
December 31 December 31
---------------------------- ----------------------------
2005 2004 2005 2004
--------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Product
revenue $ 5,147,076 $ 7,030,516 $ 21,247,689 $ 17,129,110
Parts
revenue 3,465,728 2,211,330 10,107,482 6,917,987
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8,612,804 9,241,846 31,355,171 24,047,097
Cost of
revenues
and expenses:
Cost of
revenue 4,932,962 5,692,734 20,670,869 16,422,731
Research
and
development 3,737,894 4,836,980 12,742,703 13,974,224
General and
adminis-
trative 1,105,049 966,307 3,554,676 3,941,621
Sales and
marketing 1,655,360 771,496 4,449,877 2,589,209
Foreign
exchange
gain (49,895) (408,976) (93,639) (730,241)
Depreciation
and
amortisation 591,399 1,578,002 2,243,797 4,802,605
Bank charges
and interest
on capital
leases 104,849 75,657 219,124 223,034
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12,077,618 13,512,200 43,787,407 41,223,183
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Loss
before
undernoted (3,464,814) (4,270,354) (12,432,236) (17,176,086)
Interest,
investment
and other
income 108,583 172,791 359,220 333,435
Write down of
equipment,
furniture,
and
leasehold
improvements - (58,678) - (58,678)
Joint
Venture
Partner's
share of
income from
joint
venture (251,211) - (1,075,763) -
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Loss for
the period (3,607,442) (4,156,241) (13,148,779) (16,901,329)
Deficit,
beginning of
period as
reported (221,239,341) (198,234,479) (211,698,004) (182,996,238)
Cumulative
adjustment
for change
in
accounting
for
stock-based
compensation - - - (2,493,153)
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Deficit,
beginning
of period
as
adjusted (221,239,341) (198,234,479) (211,698,004) (185,489,391)
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Deficit,
end of
period $(224,846,783) $(202,390,720) $(224,846,783) $(202,390,720)
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Basic and
diluted
loss per
share $ 0.05 $ 0.06 $ 0.18 $ 0.25
Weighted
average
common
shares
outstanding 74,272,651 73,888,504 74,194,502 67,891,683
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Westport Innovations Inc.
Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)
--------------------------------------------------------------------
Three months ended Nine months ended
December 31 December 31
---------------------------- ----------------------------
2005 2004 2005 2004
--------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash provided
by (used in):
Operations:
Loss for
the
period $ (3,607,442) $ (4,156,241) $ (13,148,779) $ (16,901,329)
Items not
involving
cash:
Depreciation
and amort-
isation 591,399 1,578,002 2,243,797 4,802,605
Stock-based
compen-
sation
expense 295,995 213,250 2,443,318 685,832
Accretion
of TPC
warrants 285,714 285,714 857,143 857,142
Change in
deferred
lease
inducements (41,020) (84,537) (112,953) 25,941
Net loss
(gain) on
disposal of
equipment,
furniture,
and
leasehold
improvements (1,000) 58,678 (64,945) 58,678
Joint
Venture
Partner's
share of
income
from joint
venture 251,211 - 1,075,763 -
------------------------------------------------------------------
(2,225,143) (2,105,134) (6,706,656) (10,471,131)
Change in
non-cash
operating
working
capital:
Accounts
receivable 3,182,184 (2,546,560) 1,354,993 (1,213,931)
Inventory 248,611 (1,175,624) 482,665 (1,594,866)
Prepaid
expenses (97,309) 102,415 (224,964) (63,551)
Accounts
payable
and
accrued
liabilities 205,114 1,558,705 (1,248,327) 1,988,679
Deferred
revenue (747,471) - (686,831) -
Warranty
liability (1,127,810) (1,045,622) (810,335) (1,333,555)
-------------------------------------------------------------------
(561,824) (5,211,820) (7,839,455) (12,688,355)
Investments:
Purchase of
equipment,
furniture,
and
leasehold
improvements (229,315) (64,712) (393,316) (283,902)
Proceeds on
disposition
of equipment,
furniture,
and
leasehold
improvements - - 85,687 -
Purchase of
short-term
investments,
net 1,746,464 5,432,113 9,824,360 (2,279,708)
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1,517,149 5,367,401 9,516,731 (2,563,610)
Financing:
Issue of
common
shares,
net of
issuance
costs - (34,188) - 15,248,248
Issue of
demand
instalment
loan 535,000 - 535,000 -
Repayment
of demand
instalment
loan (187,339) (238,509) (664,357) (715,527)
Repayment of
long-term
debt
obligations (484,646) (36,117) (562,530) (205,975)
Lease
inducement - 90,000 - 90,000
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(136,985) (218,814) (691,887) 14,416,746
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Increase
(decrease)
in cash
and cash
equivalents 818,340 (63,233) 985,389 (835,219)
Cash and
cash
equivalents,
beginning
of period 486,855 664,652 319,806 1,436,638
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Cash and cash
equivalents,
end of
period $ 1,305,195 $ 601,419 $ 1,305,195 $ 601,419
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Supplementary
information
Interest
paid $ 73,918 $ 57,402 $ 144,829 $ 153,060
Non-cash
transactions:
Shares
issued on
exercise
of
performance
share
units - - 600,939 1,003,629
Shares to be
issued on
acquisition
of
intellectual
property
and other
intangible
assets - - - 1,551,426
Leasehold
improvements
acquired
through
lease
inducement - 551,000 - 551,000
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Westport Innovations Inc. (TSX:WPT)