Ballard Power Systems Reports 1999 Second Quarter Results
5 August 1999
Ballard Power Systems Reports 1999 Second Quarter Results
VANCOUVER, BRITISH COLUMBIA--Aug. 5, 1999--Ballard Power (TSE:BLD.) - Ballard Power Systems Inc. (TSE:BLD) today reported its financial results for the second quarter and six months ended June 30, 1999. All amounts reported are in Canadian dollars.Revenues for the second quarter were $4.5 million compared with $9.1 million a year ago. The net loss was $17.1 million, or $0.21 per share, compared with net earnings of $20.9 million, or $0.26 per share. Contributing to net earnings a year ago were gains totaling $32.7 million, or $0.40 per share, relating to the formation of alliances, and partially offset by a license fee (also relating to the formation of an alliance) amounting to $7.7 million, or $0.09 per share. Results for the 1999 second quarter compared with a year ago showed lower revenues, primarily reflecting the timing of development program deliverables, increased research and development expenditures, and increased equity in the loss of associated companies. At June 30, 1999, Ballard's financial condition was strong, with shareholders' equity of $605.0 million, and cash and short-term investments of $411.5 million.
"Ballard is on track to achieve its commercialization goals," said Ballard President and Chief Operating Officer Layle K. (Kip) Smith. "We have a plan to build a leading manufacturing capability on our foundation of leading research and development, and we have financial controls and processes in place to ensure we achieve our objectives."
Ballard increased research and development expenditures by almost $4 million over the same quarter last year as it aggressively pursued its commercialization and development goals.
An important development this quarter was Ballard's involvement in two new initiatives aimed at supporting fuel cell technology in North America. Petro-Canada, Methanex and Ballard are working together, through a new association, "Fuelling a Cleaner Canada," toward the establishment of a Canadian demonstration pilot program for fuel cell vehicles. The association will eventually operate along similar lines to the "California Fuel Cell Partnership -- Driving for the Future," which is committed to the demonstration and field testing of approximately 30 cars and 25 buses powered by engines using Ballard(R) fuel cells. Both initiatives will also focus on requirements relating to fuels, such as methanol, and the fuel infrastructure aspects including distribution and marketing.
"The establishment of partnerships with fuel providers in Canada and the U.S. represents movement into a new phase in fuel cell development and commercialization. It also shows a genuine interest on the part of automotive companies and fuel providers in exploring fuel issues and developing a fuel infrastructure for fuel cell-powered vehicles," said Firoz Rasul, Ballard's Chairman and Chief Executive Officer.
Members of the news media, investment analysts and employees had an opportunity to test drive prototype fuel cell vehicles in April at Ballard's corporate headquarters. This marked the first time fuel cell-powered cars, in this case DaimlerChrysler's Necar 4 and Ford's P2000 -- both powered by Ballard fuel cells, have been demonstrated in Canada.
In May, Nissan unveiled a methanol-fueled prototype vehicle powered by Ballard fuel cells. Nissan publicly stated that driving tests of the vehicle are underway and that it is planning commercial introduction between 2003 and 2005. Following Nissan's announcement, Toyota and Honda independently announced their intention to have a fuel cell vehicle ready for commercial introduction by 2003. Ballard is currently supplying fuel cells to Honda, which is one of seven automotive companies among Ballard's customers.
During the quarter, Ballard's subsidiary, Ballard Generation Systems (BGS), substantially completed assembly of the first field trial 250 kilowatt fuel cell power plant. Following factory testing, delivery in 1999 of two of these power plants is planned to customers for operation on their sites. A third power plant will remain at BGS for parallel operation and testing in Burnaby. Delivery to customers of two further field trial power plants is expected in the first quarter of 2000.
With these field trials, Ballard has entered a very important phase of product introduction. Field trials allow Ballard to assess performance at customer sites and to periodically inspect and evaluate components while also providing insight into our customers' requirements. Valuable data gained in this process will be incorporated into our product design. Information gathered during the ongoing field trial of transit buses in Vancouver, B.C. and Chicago has been used by Ballard and dbb fuel cell engines to improve the design and performance of the commercial bus engine.
Ballard secured a $365,000 (US$280,000) contract from a new customer, Yamaha Motor Co. Ltd. of Japan, to supply Ballard fuels cells, related equipment and support services. Yamaha will use the Ballard fuel cells in their research and development program for evaluation and development of fuel cell-powered products.
At Ballard's annual meeting of shareholders in May, Chief Executive Officer Firoz Rasul's appointment to the additional position of Chairman of the Board was announced, as was the retirement of Dr. J. Fraser Mustard from that position. Chief Operating Officer Layle K. (Kip) Smith was elected to the Board of Directors and was also named President.
"Ballard continues to meet its corporate objectives for 1999 as we progress toward commercializing competitive and cost-effective products," said Mr. Rasul. "We are moving ahead aggressively in the development of products and manufacturing while maintaining close and careful control of our expenditures and long-term financial position. Our commitment to performance and leadership continues to drive us forward."
A conference call is scheduled for Thursday, August 5, 1999 at 12:00 noon EDT (9:00 am PDT) to review Ballard's second quarter highlights. Access to the call may be obtained by calling the Confertech operator at 416-641-6652 five minutes prior to the call. A playback version of the conference call will be available for 24 hours after the call at 416-626-4100. The confirmation number to access the playback version is 12549734. The conference call playback will also be available on Ballard's Web site at www.ballard.com.
This release contains forward-looking statements reflecting Ballard Power Systems' current expectations as contemplated under the Safe Harbor provisions of the US Private Securities Litigation Reform Law of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including, without limitation, product development delays, changing environmental regulations, the ability to attract and retain business partners, future levels of government funding, competition from other fuel cell manufacturers, competition from other advanced energy technologies, competition from existing energy technologies, evolving markets for electric power and transportation vehicles, and the ability to provide the capital required for product development, operations and marketing. Investors are encouraged to review the Management's Discussion and Analysis section in Ballard's 1998 Annual Report titled "Operating Results, Capital Requirements, and Risks" (pages 30 to 34) for a more complete discussion of factors that could affect Ballard's future performance.
Consolidated Balance Sheets
unaudited
expressed in thousands of Canadian dollars
June 30 1999 1998
Assets
Current assets
Cash and cash equivalents $313,083 $108,562
Short-term investments 98,413 321,877
Accounts receivable 12,240 11,544
Inventories 13,765 2,357
Prepaid expenses 1,029 415
--------------------
438,530 444,755
Capital assets 48,338 39,899
Fuel cell technology acquired 48,258 51,924
Investments in associated companies 123,302 137,174
--------------------
$658,428 $673,752
--------------------
Liabilities
Current liabilities
Accounts payable and accrued
liabilities $16,026 $13,831
Current portion of capital lease
obligation 91 91
Deferred revenue 8,460 8,990
Allowance for warranty 13,678 9,810
--------------------
38,255 32,722
Capital lease obligation 389 493
Minority interest 14,797 6,181
--------------------
53,441 39,396
Shareholders' Equity
Share capital 659,522 650,762
Accumulated deficit (54,535) (16,406)
--------------------
604,987 634,356
--------------------
$658,428 $673,752
--------------------
Consolidated Statements of Income
and Accumulated Deficit
unaudited
expressed in thousands of Canadian dollars
except per share amounts
Three months ended Six months ended
June 30 June 30
1999 1998 1999 1998
Revenues $4,452 $9,108 $10,950 $13,946
Investment income 2,671 5,629 7,838 7,545
Gain on issuance of shares
by subsidiary and
associated company - 27,121 - 27,121
Gain on sale of capital
assets and intellectual
property - 5,606 - 5,606
--------------------------------------------
7,123 47,464 18,788 54,218
Cost of revenues and expenses
Cost of revenues 3,545 4,738 7,655 8,374
Research and product
development 12,517 8,565 22,598 14,741
General and
administrative 2,096 1,578 3,854 3,230
Marketing 781 543 1,534 1,130
Interest 10 12 21 25
Minority interest (1,312) (112) (2,376) (316)
Capital taxes 81 70 163 140
Equity in loss of
associated companies 5,557 2,525 9,080 4,587
Amortization of fuel
cell technology 917 917 1,833 1,833
License fee - 7,653 - 7,653
--------------------------------------------
24,192 26,489 44,362 41,397
--------------------------------------------
Earnings (loss) before
income taxes (17,069) 20,975 (25,574) 12,821
Income taxes 313 79 626 127
--------------------------------------------
Net earnings (loss)
for period (17,382) 20,896 (26,200) 12,694
Accumulated deficit,
beginning of period (37,153) (37,302) (28,335) (29,100)
--------------------------------------------
Accumulated deficit,
end of period ($54,535) ($16,406) ($54,535) ($16,406)
--------------------------------------------
Net earnings (loss)
per share ($0.21) $0.26 ($0.31) $0.17
--------------------------------------------
Weighted average number
of common shares
outstanding 83,753,568 81,165,972 83,597,763 75,531,947
--------------------------------------------
Consolidated Statements of Cash Flow
unaudited
expressed in thousands of Canadian dollars
Six months ended June 30 1999 1998
Cash provided by (used for) operating activities
Operations
Net earnings (loss) for period ($26,200) $12,694
Items not affecting cash:
Amortization 5,023 3,985
Minority interest (2,376) (316)
Gain on issuance of shares by
subsidiary and associated company - (27,121)
Gain on sale of capital assets and
intellectual property - (5,606)
Equity in loss of associated companies 9,080 4,587
License fee - 7,653
--------------------
(14,473) (4,124)
Changes in non-cash working capital
Accounts receivable 1,482 9,896
Inventories (7,149) (1,038)
Prepaid expenses (193) 86
Accounts payable and accrued liabilities (6,174) (535)
Deferred revenue (592) 1,746
Allowance for warranty (20) 582
--------------------
(12,646) 10,737
--------------------
(27,119) 6,613
Cash provided by (used in) financing activities
Net proceeds on issuance of
share capital 3,495 312,911
Proceeds on issuance of shares by
subsidiary and associated company - 25,460
Proceeds on sale of capital assets
and intellectual property - 5,606
Capital lease obligation (53) (49)
--------------------
3,442 343,928
Cash provided by (used in) investing activities
Net changes in short-term investments (5,507) (296,581)
Additions to capital assets (6,130) (18,924)
Investments in associated companies - (70,999)
--------------------
(11,637) (386,504)
--------------------
Decrease in cash and cash equivalents (35,314) (35,963)
Cash and cash equivalents,
beginning of period 348,397 144,525
--------------------
Cash and cash equivalents,
end of period $313,083 $108,562
--------------------
Ballard Power Systems is the world leader in developing, manufacturing and marketing zero-emission PEM fuel cells for use in transportation, electricity generation and portable products. Ballard Power Systems' proprietary fuel cell technology is enabling automobile, electrical equipment and portable power product manufacturers to develop environmentally clean products for sale. The fundamental component of these end-user products is the Ballard(R) fuel cell that combines hydrogen (which can be obtained from methanol, natural gas or petroleum) and oxygen (from air) without combustion to generate electricity. Ballard is partnering with strong, world-leading companies including DaimlerChrysler, Ford, GPU International, ALSTOM and EBARA to commercialize Ballard fuel cells. Additional customers using Ballard fuel cells include General Motors, Honda, Nissan, Volkswagen, Yamaha, Matsushita Electric Works, and Cinergy.
Ballard's Common shares are listed on The Toronto Stock Exchange under the trading symbol "BLD" and on the Nasdaq National Market System under the symbol "BLDP". Ballard and the Ballard logo are registered trademarks of Ballard Power Systems Inc.