Azure Dynamics Reports First Quarter 2006 Results
TORONTO, Candada, May 11, 2006 --
- All Amounts are Canadian Dollars
Azure Dynamics Corporation (TSX: AZD & LSE: ADC) ("Azure" or the "Company") a leading developer of hybrid electric and electric powertrains for commercial and military vehicles, today announced its financial results for the first quarter ended March 31, 2006. The Company also provided an update on corporate and product development activities in the period.
Azure is also pleased to announce that its annual shareholder meeting will be held at The National Club, 303 Bay Street, Toronto, Ontario at 4: 30p.m. (local time) on July 24, 2006.
Q1 2006 Highlights:
- Revenue increased to $1.1 million from $1.0 million in Q1 2005;
- Formed Strategic Committee of the Board of Directors and retained
Rothschild, a leading independent investment banking group, to advise
and assist in a review of strategic, value creation opportunities;
- Delivered first P1 parallel hybrid delivery van to the United States
Postal Service;
- Completed proof-of-concept hybrid Ford Transit Van in collaboration
with Ingimex Ltd. and GKN Plc for testing and market evaluation
purposes; the vehicle was displayed at the Commercial Vehicle Show
(Birmingham, England) in April 2006;
- Commenced deliveries of electric powertrain systems to Smith Electric
Vehicles under an existing supply agreement; and,
- Commenced product build of second generation P2 parallel hybrid
delivery vans, two of which will be delivered to the Charmer-Sunbelt
Group in 2006.
"We continued to advance our product commercialization objectives in the quarter including the delivery of our first P1 parallel hybrid van to the United States Postal Service," said Campbell Deacon, Deputy Chairman and Chief Executive Officer of Azure. "Strategically, we retained the international investment bank, Rothschild, to help evaluate strategic partnership and business alliance opportunities to enable Azure to more fully and quickly exploit the intrinsic value of our core technologies and engineering expertise. Our primary objective in 2006 is to increase commercial volumes and to broaden our market penetration."
Financial Results
Revenue for the first quarter ended March 31, 2006 increased 10% to $1. 1 million compared to $1.0 million in the first quarter of 2005. The increase in revenue is primarily attributable to increased activity on funded engineering contracts in the Company's U.S. based operations. Revenue is mainly comprised of sales of components, customer engineering contracts, and after-sales service support. After considering direct and applicable indirect costs of sales, gross margin in the first quarter of 2006 was $0.3 million, or 27% of revenue, compared to $0.3 million or 30% of revenue in the first quarter a year ago.
Net loss for the first quarter of 2006, was $4.6 million or $0.03 per share compared to a net loss of $4.9 million or $0.04 per share in the corresponding quarter a year ago. Reduced net loss in the first quarter of 2006 is primarily attributable to decreased losses associated with foreign currency translation.
Before contributions, the Company incurred $2.7 million in engineering and research and development ("R&D") expenses in the first quarter of 2006, compared to engineering and R&D expenses of $3.1 million in the comparable 2005 quarter. R&D expenses in the first quarter of 2006 included $1.6 million in product development costs. Reduced engineering and R&D expenses were a result of higher cost recoveries from increased activity levels on funded engineering programs by technical employees. Expenses were reduced by $0.3 million in the first quarter of 2006 due to government subsidies and customer contributions. At March 31, 2006, Azure employed 84 research, engineering, and technical employees.
The Company had cash and cash equivalents of $15.8 million as at March 31, 2006, compared to cash and cash equivalents of $20.7 million as at December 31, 2005. Net cash outflows were approximately $4.9 million in the quarter compared to net cash inflows of $4.9 million in the first quarter of 2005. The prior year quarter included net equity financings of $11.8 million compared to $0.7 million in the first quarter of 2006. Net cash outflows in respect of operations, working capital financing, and capital expenditures were approximately $5.6 million compared to $6.6 million in the first quarter of 2005. The decrease in cash outflows is attributable to the decreased net loss and lower working capital requirements ($1.8 million in 2006 compared to $2.9 million in the prior year). In addition, cash inflows in the first quarter of 2005 included approximately $0.4 million in cash and cash equivalents acquired through the Company's acquisition of Solectria.
The Company's complete 2006 first quarter Financial Statements and Management Discussion and Analysis are available at www.sedar.com or on the Company's website at www.azuredynamics.com. The Company's financial statements for the three-month period ended March 31, 2006, are attached to this press release.
Corporate
Azure Dynamics formed a Strategic Committee of the Board of Directors and retained Rothschild, a leading international investment bank, to advise and assist in the review of strategic, value creation opportunities available to the Company, including the identification and evaluation of potential strategic partnerships. The primary mandate of the Strategic Committee and Rothschild is to identify opportunities to leverage the intrinsic value of Azure Dynamics' core technologies and engineering expertise in order to increase commercial production volumes and accelerate broader market penetration.
Product Developments
In the first quarter of 2006, the Company remained focused on deploying its proprietary technology into powertrain products for light to heavy duty commercial and military vehicles. Azure develops hybrid and electric powertrains and components for four broad vehicle categories. Within each vehicle category, Azure leverages its powertrain designs to satisfy a broad range of vehicle applications. The product developments in the first quarter of 2006 included:
G1 Series (7,500 to 16,000 lbs. gross vehicle weight, "GVW")
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- Completion of proof-of-concept Ford Transit Van in collaboration with
Ingimex and GKN;
- Continued operation of a delivery van for testing and validation
purposes by the United States Postal Service;
- Commenced delivery of electric powertrains under a supply agreement
with Smith Electric Vehicles;
- Continued collaboration with Smith Electric Vehicles in the
development of an all-electric airport tug and the conversion of an
OEM delivery vehicle to a full electric platform;
- Commencement of marketing programs for Azure's hybrid "CitiBus"
shuttle bus. Azure has received orders for nine buses to date; and,
- Continued development of the second-generation CitiBus to be used for
independent testing to qualify for use by US public transit
authorities and for marketing.
G2 Series (5,000 to 7,500 lbs. GVW)
-----------------------------------
- Completed successful design and evaluation of the smaller version of
the G1 series hybrid.
P1 Parallel (10,000 - 19,000 lbs. GVW)
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- Completion and delivery of the first P1 delivery van for the United
States Postal Service; and
- Redesigned components to reassemble the AM General High-Mobility
Multipurpose Vehicle integrated with a third generation Auxiliary
Power Distribution System for military use. The vehicle is expected
to be completed in the 2nd quarter of 2006.
P2 Parallel (over 19,000 lbs. GVW)
----------------------------------
- Initiated development of the second generation P2 parallel
powertrains; and,
- Commenced building two P2 Class 7 delivery trucks for Charmer-Sunbelt
with delivery scheduled for the second half of 2006.
Electric Components
-------------------
- Continued design, development, and testing of power electronics and
drive systems for supply agreement with Engineered Air Systems Inc.,
valued at approximately CDN$17 million, with delivery scheduled for
late 2006 or early 2007.
About Azure Dynamics
Azure Dynamics Corporation is a world leader in the development and production of hybrid electric and electric commercial and military vehicles and systems. The group estimates it has over 25 million miles of vehicle experience. Azure's operations are based in North America and Europe.
Azure is currently working internationally with various partners and customers including Purolator Courier Ltd., Canada Post, United States Postal Service, Smith Electric Vehicles, Engineered Support Systems Inc. and AM General LLC. Azure Dynamics Corporation is a public company trading on the TSX (AZD) in Canada and on the AIM (ADC) in the UK. For more company information please visit www.azuredynamics.com.
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Azure Dynamics Corporation
(A Development Stage Enterprise)
Consolidated Balance Sheets
(Stated in thousands)
March 31 December 31 March 31
2006 2005 2005
As at (unaudited) (audited) (unaudited)(xx)
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$ $ $
ASSETS
Current
Cash and cash equivalents 15,775 20,721 18,520
Accounts receivable 583 1,004 891
Contributions receivable 782 597 1,354
Inventory and related
prepayments 3,043 2,696 2,440
Prepaid expenses 1,067 980 775
---------------------------------------------
21,249 25,998 23,980
Restricted cash 701 698 726
Property and equipment 5,615 5,573 5,382
Other assets 54 61 60
Intangible assets, net of
amortization of 1,646
(note 3) 11,754 12,133 13,398
Goodwill (note 3) 2,932 2,932 2,875
---------------------------------------------
42,306 47,395 46,422
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued
liabilities 2,398 3,403 2,175
Customer deposits &
deferred revenue 1,042 1,574 1,398
Current portion of notes
payable (note 4) 2,554 2,558 372
---------------------------------------------
5,993 7,535 3,945
Long-term
Deferred revenue 1,015 1,038 -
Notes payable - - 2,331
---------------------------------------------
1,015 1,038 2,331
---------------------------------------------
Shareholders' equity
Share capital (note 5) 81,387 80,701 66,145
Contributed surplus (note 5) 2,672 2,316 1,223
Deficit (48,761) (44,195) (27,221)
---------------------------------------------
35,298 38,822 40,147
---------------------------------------------
42,306 47,395 46,422
(xx) Certain reclassifications have been made to the March 31, 2005
comparative numbers to conform to the current period
presentation.
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Azure Dynamics Corporation
(A Development Stage Enterprise)
Consolidated Statements of Operations and Deficit
(Stated in thousands, except per share amounts)
For the three months ending
March 31
2006 2005(xx)
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$ $
Revenues 1,147 984
Cost of sales 843 693
------------------------------
Gross Margin 304 291
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Expenses
Engineering, research, development
and related costs, net 2,416 2,707
Selling and marketing 725 647
General and administrative 1,816 1,604
------------------------------
Total expenses 4,957 4,958
------------------------------
Loss from operations (4,654) (4,667)
------------------------------
Interest and other income, net 137 42
Foreign currency loss (49) (297)
------------------------------
Net loss for the period (4,566) (4,922)
Deficit, beginning of period (44,195) (22,299)
------------------------------
Deficit, end of period (48,761) (27,221)
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Loss per share - basic (0.03) (0.04)
Weighted average number of shares - basic(x) 156,631 124,892
(x) No fully diluted earnings per share have been disclosed, as these
would be anti dilutive.
(xx) Certain reclassifications have been made to the March 31, 2005
comparative numbers to conform to the current period presentation
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Azure Dynamics Corporation
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
(Stated in thousands)
For the three months ending
March 31
2006 2005
-------------------------------------------------------------------------
$ $
Cash flows from operating activities
Net loss for the period (4,566) (4,922)
Adjustments for:
Amortization of property and equipment
and other assets 193 143
Amortization of intangible assets 401 283
Unrealized foreign currency losses (39) 301
Stock option compensation expense 424 505
------------------------------
(3,587) (3,690)
Changes in non-cash working capital items (1,764) (2,864)
Movement due to exchange impact 5 -
------------------------------
Net changes in non-cash working capital items (1,759) (2,864)
------------------------------
(5,346) (6,554)
------------------------------
Cash flows from financing activities
Issuance of common shares (net of costs) 617 11,750
Principle payments on notes payable (15) (15)
Movement due to exchange impact 11 (243)
------------------------------
613 11,492
------------------------------
Cash flows from investing activities
Acquisition of property and equipment (235) (290)
Acquisition of other assets (15) (97)
Acquisition of subsidiary - 422
Movement due to exchange impact 64 (39)
------------------------------
(186) (4)
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Increase (decrease) in cash and cash equivalents (4,919) 4,934
Exchange loss on cash held in foreign currency (27) (1)
Cash and cash equivalents, beginning of period 20,721 13,587
------------------------------
Cash and cash equivalents, end of period 15,775 18,520
------------------------------