Ballard Power Systems Issues 2000 First Quarter Report
2 May 2000
Ballard Power Systems Issues 2000 First Quarter Report
VANCOUVER, B.C.--May 2, 2000--Ballard Power Systems (TSE:BLD.) (NASDAQ:BLDP) today issued its report to shareholders including financial results for the first quarter ended March 31, 2000. All amounts reported are in Canadian dollars."The pace of progress at Ballard is evident in the events of the first quarter of 2000," said Kip Smith, Ballard's President and Chief Operating Officer. "We are making progress with our commercialization plans and are in a position of strength in terms of product development and finance. We are well prepared for the year ahead."
During the quarter, Ballard announced accomplishments in fuel cell technology, product development, field trials, and new collaborations and raised more than $500 million through a public offering of Common shares.
The quarter opened with the introduction in Detroit of Ballard's Mark 900 Series Fuel Cell Power Module. The powerful, compact Mark 900 fuel cell occupies half the space of its predecessor, the Mark 700 fuel cell, and provides auto manufacturers with a new level of design freedom. The Mark 900 uses materials suitable for low-cost, volume-manufacturing processes. The Mark 900 architecture forms the platform on which Ballard (R) fuel cell products for transportation, stationary and portable power applications will be built.
Following the introduction of the Mark 900, Ford, one of Ballard's Vehicular Alliance partners, unveiled the first prototype vehicle to use the Mark 900. The TH!NK FC5, a passenger sedan based on Ford's Focus platform, is the second fuel cell prototype vehicle Ford has publicly shown and its first to be fuelled by methanol. The fuel cell system in the FC5 does not compromise passenger or cargo space.
In January, Ballard also announced product development collaborations with Tokyo Gas and Coleman Powermate.
Ballard's subsidiary, Ballard Generation Systems (BGS), and Tokyo Gas are working on the development of a natural gas fuel processor for use in a one-kilowatt fuel cell power generator. The co-generation unit will provide the first kilowatt of electric power for Japanese homes and apartments (the electricity grid will supply additional power) as well as heat for space heating and hot water. Tokyo Gas is the largest natural gas company in Japan both in terms of the number of customers - over 8.5 million in total - and gas sales volume.
Ballard is working with Coleman Powermate to develop co-branded fuel cell powered products for portable and standby power markets. Coleman Powermate is a North American market leader in portable electric generators with an established distribution and retail network.
During the quarter, preparation of 250-kilowatt stationary fuel cell generators for shipment to customers continued and a unit was shipped to Bewag AG, a customer in Berlin, in April. Progress in field trials is central to Ballard's product development and commercialization activities. The first field trial unit, delivered to Cinergy Technology in 1999, is operating in Indiana and is providing data for use in the design of Ballard's next generation 250-kilowatt stationary power generator.
Ballard and the Chicago Transit Authority concluded a successful two-year field trial program involving three fuel cell buses on March 23. During the program, three zero-emission buses powered by Ballard(R) fuel cells clocked more than 5,000 hours in revenue service in Chicago, covering 30,000 miles (48,000 kilometres), and carrying more than 100,000 passengers. The Vancouver field trial program, which also involves three buses in revenue service, concludes this summer.
The value of Ballard's bus programs is evident in the pre-commercial fuel cell bus engine introduced last October by our associated company, XCELLSIS Fuel Cell Engines Inc. Improvements in the design of the new engine, which allowed a weight reduction of 50 per cent, were made possible with the knowledge gained during the Chicago and Vancouver field trial programs.
A bus using the new XCELLSIS engine will be delivered to the SunLine Transit Agency (SunLine) in Palm Springs, California this summer as the first vehicle in the California Fuel Cell Partnership, which was founded in 1999 by Ballard, DaimlerChrysler, Ford, Shell, Texaco, ARCO and the State of California. The partnership continues to gain momentum. In late 1999, auto companies Honda and Volkswagen joined, followed by Nissan, the U.S. Department of Energy, California's South Coast Air Quality Management District and associate partners Methanex Corporation, AC Transit, SunLine, Air Products and Chemicals, Linde, and Praxair. Under the partnership, more than 70 buses and cars will be introduced to the streets of California for testing and demonstration between 2000 and 2003.
Another important development late in the first quarter was the announcement by one of Ballard's Vehicular Alliance partners, DaimlerChrysler, that it will build 20 to 30 fuel cell buses for sale to customers starting in 2002. This is the first announcement by a bus manufacturer of their intention to offer fuel cell powered products.
Finally, on March 2, 2000, Ballard completed a public offering of 3,293,750 Common shares that raised gross proceeds of $504.6 million (US$345.8 million). Net proceeds of the offering will be used for commercialization programs with strategic partners, research and product development for transportation, stationary and portable power applications (including the new portable power and low power stationary programs), the development of manufacturing processes (including establishing Plant 1, Ballard's initial manufacturing-scale production facility) and for general corporate purposes. A portion of the net proceeds may also be used to pursue acquisitions that have strategic value.
Every year, Ballard measures its performance against objectives established at the beginning of the year and published in its Annual Report. Listed below are Ballard's objectives for the year 2000.
2000 Objectives Technology
* Complete and start-up manufacturing line in Plant 1. * Demonstrate engineering prototype Direct Methanol Fuel Cell
system. * Establish strategic supply relationships with additional
suppliers.
Transportation
* Secure fuel cell orders for heavy-duty bus engines. * Deliver fuel cells for first California Fuel Cell Partnership
demonstration vehicles. * Secure fuel cell orders for automotive engines. * Begin field trials of next generation heavy-duty bus engines.
Stationary
* Deliver additional 250-kilowatt stationary power generators for
field trials. * Demonstrate engineering prototype one-kilowatt natural gas
cogeneration power generator for Japanese residential market.
Portable
* Complete engineering prototypes for first portable power product. * Deliver prototypes for field testing. * Secure additional strategic relationships for portable power
applications.
Revenues for the first three months of 2000 were $4.0 million compared to $6.5 million in the same period in 1999. This decrease occurred primarily as a result of the timing of revenues from the supply of fuel cells and related systems to automotive customers, offset by an increase in revenues as a result of the start of the 250-kilowatt stationary power generator field trial program.
Ballard's cash position (which is made up of cash and short-term investments) was $835.6 million at the end of the first three months of 2000, compared to $431.5 million at the same date in 1999. The increase in cash was a result of the public offering completed in March 2000, offset by cash used in operations, capital expenditures for Plant 1, as well as the acquisition additional testing equipment.
Ballard's loss for the first three months of 2000 was $0.17 per share compared with a loss of $0.11 per share during the same period in 1999. The loss in 2000 includes a gain on the issue of shares by BGS to ALSTOM and GPU International, offset by a corresponding licence fee received from ALSTOM. Excluding the effects of the gains and a licence fee results in a loss per share for the first three months in 2000 of $0.19. The increase reflects Ballard's significant investments in research and development to complete product and manufacturing development in accordance with Ballard's commercialization plan.
A conference call is scheduled for Tuesday, May 2, 2000 at 12:00 noon ET (9:00 am PT) to review Ballard's first quarter. Access to the call may be obtained by calling the operator at (416) 641-6444 five minutes before 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 15054924. 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's 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 power technologies, competition from existing power technologies, evolving markets for generating electricity and power for transportation vehicles, and the ability to provide the capital required for product development, operations and marketing. These factors should be considered carefully and readers should not place undue reliance on Ballard's forward-looking statements. Investors are encouraged to review the section titled "Operating Results, Capital Requirements and Risks" (pages 30 to 34) in the Management's Discussion and Analysis section of Ballard's 1998 Annual Report for a more complete discussion of factors that could affect Ballard's future performance.
Consolidated Balance Sheets
Unaudited
Expressed in thousands of Canadian dollars
March 31 2000 1999
Assets
Current assets
Cash and cash equivalents $ 554,154 $ 378,182
Short-term investments 281,476 53,338
Accounts receivable 22,613 11,872
Inventories 12,428 8,804
Prepaid expenses 1,302 836
----------------------
871,973 453,032
Capital assets 66,737 45,634
Fuel cell technology acquired 45,510 49,175
Investments in associated companies 107,493 128,859
----------------------
$1,091,713 $ 676,700
----------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 17,428 $ 16,297
Current portion of capital lease obligation 117 91
Deferred revenue 7,322 9,256
Allowance for warranty 17,577 13,654
----------------------
42,444 39,298
Capital lease obligation 280 416
Minority interest 13,055 16,109
----------------------
55,779 55,823
Shareholders' equity
Share capital 1,153,201 658,030
Accumulated deficit (117,267) (37,153)
----------------------
1,035,934 620,877
----------------------
$1,091,713 $ 676,700
----------------------
Consolidated Statements of Operations and Accumulated Deficit
Unaudited
Expressed in thousands of Canadian dollars except per share amounts
Three months ended March 31
2000 1999
Revenues $ 4,022 $ 6,498
Investment income 6,732 5,156
----------------------
10,754 11,654
Cost of revenues and expenses
Cost of revenues 3,640 4,110
Research and product development 17,201 10,081
General and administrative 2,398 1,758
Marketing 536 753
Capital taxes 120 82
Amortization of fuel cell technology 916 916
Equity in loss of associated companies 4,481 3,523
Minority interest (2,389) (1,064)
----------------------
26,903 20,159
----------------------
Loss before undernoted (16,149) (8,505)
Gain on issuance of shares by
subsidiary and associated company 5,042 -
License received on issuance of
shares of subsidiary (3,138) -
----------------------
Loss before income taxes (14,245) (8,505)
Income taxes 497 313
----------------------
Net loss for period (14,742) (8,818)
Accumulated deficit, beginning of period (102,525) (28,335)
----------------------
Accumulated deficit, end of period ($ 117,267) ($ 37,153)
----------------------
Net loss per share ($0.17) ($0.11)
----------------------
Weighted average number of
common shares outstanding 85,476,506 83,406,181
----------------------
Consolidated Statements of Cash Flows
Unaudited
Expressed in thousands of Canadian dollars
Three months ended March 31
2000 1999
Cash provided by (used for):
Operating activities:
Net loss for period ($ 14,742) ($ 8,818)
Items not affecting cash:
Amortization 3,050 2,966
Minority interest (2,389) (1,064)
Gain on issuance of shares by
subsidiary and associated company (5,042) -
Equity in loss of associated companies 4,481 3,523
License received on issuance of shares
of subsidiary 3,138 -
----------------------
(11,504) (3,393)
Changes in non-cash working capital:
Accounts receivable 4,255 1,850
Inventories (3,779) (2,188)
Prepaid expenses (86) -
Accounts payable and accrued liabilities (4,493) (5,903)
Deferred revenue 50 204
Allowance for warranty (146) (44)
----------------------
(4,199) (6,081)
----------------------
(15,703) (9,474)
Investing activities:
Net changes in short-term investments (9,387) 39,568
Additions to capital assets (4,426) (2,286)
----------------------
(13,813) 37,282
Financing activities:
Net proceeds on issuance of share capital 491,381 2,003
Proceeds on issuance of shares by
subsidiary and associated company 5,855 -
Capital lease obligation (28) (26)
----------------------
497,208 1,977
----------------------
Increase in cash and cash equivalents 467,692 29,785
Cash and cash equivalents, beginning
of period 86,462 348,397
----------------------
Cash and cash equivalents, end of period $ 554,154 $ 378,182
----------------------
Ballard Power Systems is recognized as the world leader in developing, manufacturing and marketing zero-emission proton exchange membrane (PEM) fuel cells for use in transportation, electricity generation and portable power products. Ballard's 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. Ballard has also supplied fuel cells to Honda, Hyundai, Nissan, Volkswagen, Yamaha, Cinergy, Coleman Powermate and Matsushita Electric Works, among others.
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.