Ballard Power Systems Issues 2000 Third Quarter Report
31 October 2000
Ballard Power Systems Issues 2000 Third Quarter Report
Business Editors
VANCOUVER, B.C.--Oct. 31, 2000--Ballard
Power
Ballard Power Systems today issued its
report to shareholders, including financial results for the third
quarter and nine months ended September 31, 2000.
All amounts reported are in Canadian dollars.
"The steps we have taken in the past nine months are directed at
enhancing our strength and position of leadership in the fuel cell
industry as we prepare for commercialization," said Kip Smith,
Ballard's President and Chief Operating Officer. "In the third quarter
we continued to expand our field trial programs while building on
customer relationships, cost reduction and manufacturing."
Early in the quarter, Ballard and XCELLSIS GmbH (XCELLSIS), a
company jointly owned by DaimlerChrysler, Ford and Ballard, delivered
a pre-commercial fuel cell powered bus to the SunLine Transit Agency
of Palm Springs, California. The bus, which uses the XCELLSIS fourth
generation bus engine, is being road tested by SunLine under the
auspices of the California Fuel Cell Partnership. The Partnership was
formed in 1999 by automobile manufacturers, energy providers,
California government agencies and Ballard to help advance the
development and commercialization of fuel cell powered vehicles.
Additional bus engines will be tested with customers as part of the
Partnership's activities, yielding valuable data on fuel cell engine
operation, refuelling, and servicing.
Interest in Ballard(R) fuel cells for transportation applications
remained strong in the quarter, with three automotive companies,
including Honda, placing orders for Ballard Mark 900 Series Fuel Cell
Power Modules and support services. Ballard's Mark 900 also won
recognition from the automotive community late in the quarter when
Ballard was presented an award for the "Most Promising Technology" at
the Automotive World Automotive Awards 2000 in Paris, France.
In September, Honda introduced its FCX-V3, a fuel cell vehicle
powered by Ballard fuel cells. Honda announced that this vehicle is
Honda's third fuel cell prototype and will be part of the California
Fuel Cell Partnership program commencing in November 2000.
Another significant event during the quarter in Ballard's
transportation business was the California Air Resources Board's
decision in September to reaffirm its zero emission vehicle (ZEV)
policy. The ZEV mandate, which the board unanimously voted to retain
without change, requires that beginning in 2003 at least 10 per cent
of new cars and light trucks delivered for sale in California must be
ZEVs or near-ZEVs. This is significant for Ballard's transportation
fuel cell program, as vehicles powered by Ballard fuel cells will
receive ZEV or partial ZEV credit, depending on fuel, enabling auto
manufacturers to comply with the Board's ZEV mandate.
In Ballard's stationary business, Ballard Generation Systems (BGS)
delivered its third 250-kilowatt stationary fuel cell power generator
in association with ALSTOM BALLARD, a company jointly owned by ALSTOM
SA and Ballard. This power generator is being field tested by Elektra
Birseck Muenchenstein, one of the largest power suppliers in
Switzerland, at its corporate headquarters in Basel.
At the end of the quarter, Ballard's first 250-kilowatt field
trial unit completed its first year in operation with Cinergy
Technology Inc. of Cincinnati, Ohio yielding valuable operational and
maintenance data. Field testing and service and support experience,
together with the market insight of Ballard's testing partners, forms
the foundation for the development of future Ballard stationary power
products. The first stationary power product is expected to be
introduced in the 2002 - 2003 timeframe and will be targeted at
high-value applications such as standby power where quality of power
and assurance of supply is valued. This is planned to be followed by a
one-kilowatt residential cogeneration product for the Japanese market
that BGS and EBARA BALLARD, a company jointly owned by BGS and Japan's
EBARA Corporation, are developing using natural gas fuel-processing
technology from Tokyo Gas. Subsequent products will target the
commercial, institutional and small industrial distributed power
markets.
During the quarter, EBARA reaffirmed its commitment to Ballard's
stationary fuel cell power generator business with the exercise of an
option to increase its ownership in BGS to 10 per cent, on a fully
diluted basis, by the investment of $28.2 million.
Late in the quarter, Ballard announced an exclusive agreement with
QuestAir Technologies Inc. to develop and commercialize QuestAir's
proprietary hydrogen purification and oxygen enrichment technology for
use with Ballard fuel cells. The development of QuestAir's technology
for use with Ballard fuel cells is expected to contribute to Ballard's
cost reduction efforts in its next generation of fuel cell products.
Under the agreement Ballard acquired 10 per cent of QuestAir shares.
This agreement reflects Ballard's strategy of securing relationships
that have strategic value in the development of its products.
Throughout the quarter Ballard continued to test and qualify
volume-manufacturing equipment, and to install additional equipment,
in Plant 1, the Company's initial commercial manufacturing facility.
In mid-October, the Right Honourable Jean Chretien, Prime Minister of
Canada, officially opened the Plant 1 building. The manufacturing
facility is planned for commissioning by the end of 2000.
Ballard is adding further strength and depth to its senior
management team with the appointment of four new senior executives in
November. John Harris, previously Vice-President, Marketing with
Panasonic Personal Computer Company, joins Ballard as Vice-President,
Marketing; Mike Murry, previously Vice-President, Marketing with
American Natural Soda Ash Corporation, joins BGS as Chief Operating
Officer; Fred Vasconcelos, previously Vice-President, Operations at
Seagate Technology, joins Ballard as Vice-President, Product
Development; and Dave Smith, previously Vice-President, Corporate
Relations with Placer Dome, joins Ballard as Vice-President,
Controller.
Ballard's revenues for the third quarter of 2000 were $13.6
million compared to $7.3 million in the same period in 1999. Revenues
for the first nine months of 2000 were $21.9 million compared to $18.2
million in 1999. Ballard reports on two segments, Fuel Cells and Fuel
Cell Systems. For the nine-month period ended September 30, 2000, Fuel
Cells revenue of $15.2 million was higher than for the same period
last year of $11.9 million. Fuel Cell Systems revenue increased to
$6.8 million from $6.3 million over the same period in 1999.
Investment income was $32.6 million in the first nine months of
2000 compared to $12.5 million for the same period in 1999 as a result
of higher average cash balances from the equity offering completed in
March, higher interest rates available for our investments and foreign
exchange gains from a stronger US dollar.
Cost of revenues increased to $27.1 million from $15.3 million for
the same period in 1999, primarily due to higher costs associated with
BGS's field trial programs and from transportation sales.
Expanded research and product development activities related to
fuel cells, stationary fuel cell power generators, portable fuel cell
products and manufacturing processes, resulted in a 39 per cent
increase in research and product development expenses to $59.8 million
from $43 million in 1999. General and Administrative expenses were
$9.3 million compared to $6.7 million in 1999 as a result of growth to
match the Company's expanded operations and relationships and
investment in developing business systems to support Ballard's
commercial evolution. Equity in loss of associated companies of $18.5
million is a non-cash item relating to Ballard's allocated share of
the net losses of XCELLSIS, Ecostar Electric Drive Systems, ALSTOM
BALLARD and EBARA BALLARD, all associated companies formed as a result
of Ballard's Vehicular Alliance with Ford and DaimlerChrysler or the
Stationary Alliance with ALSTOM, EBARA and GPU International.
Amortization of fuel cell technology of $2.7 million relates to assets
acquired from DaimlerChrysler as a result of our 1997 alliance.
Ballard's cash position, including short-term investments, was
$812.4 million at the end of the first nine months of 2000, compared
to $386.1 million at the same date in 1999. The increase in cash was a
result of the equity financing completed in March 2000 and cash
received from the issuance of shares of BGS. This was offset by cash
used in operations, capital expenditures for Plant 1, and investment
in associated companies representing an additional equity investment
of $18.9 million. This equity investment in XCELLSIS represents
Ballard's proportionate share of a financing of XCELLSIS by its
shareholders. As a result of Ballard's increased sales, accounts
receivable increased to $24.6 million from $16.6 million in 1999 and
warranty allowance increased to $20.3 million from $14.5 million in
1999. To meet deliveries to customers, construction of stationary
power generators for field trials, and to support the ramp up in
production of fuel cells as commissioning of Plant 1 nears completion,
inventories increased to $24.9 million from $13.0 million in 1999.
As at September 30, 2000 Ballard had 88,689,978 Common shares
outstanding and options for 5,039,200 shares outstanding. Ballard's
loss for the third quarter of 2000 was $0.06 per share compared to a
loss in the same period of 1999 of $0.26 per share. The loss for the
first nine months of 2000 was $0.45 per share compared with a loss of
$0.58 per share for the same period in 1999. The loss in 2000 includes
a gain on issue of shares by BGS to ALSTOM, GPU and EBARA, offset by a
corresponding license fee paid by ALSTOM. Excluding the effect of
these gains and the license fee, results in a loss per share for the
first nine months in 2000 of $0.65. Ballard will continue to invest in
research and development to complete product and manufacturing process
development in accordance with Ballard's commercialization plan as it
nears the launch of its first commercial product in 2001.
Consolidated Balance Sheets
Unaudited
Expressed in thousands of Canadian dollars
September 30 2000 1999
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Assets
Current assets
Cash and cash equivalents $321,570 $187,953
Short-term investments 490,794 198,124
Accounts receivable 24,632 16,563
Inventories 24,931 13,002
Prepaid expenses 1,477 1,420
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863,404 417,062
Capital assets 79,510 55,772
Fuel cell technology acquired 44,373 47,342
Investments in associated companies 112,346 118,064
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$1,099,633 $638,240
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Liabilities
Current liabilities
Accounts payable and accrued liabilities $26,863 $17,706
Current portion of capital lease obligation 117 91
Deferred revenue 7,591 7,923
Allowance for warranty 20,298 14,496
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54,869 40,216
Capital lease obligation 221 362
Minority interest 21,538 13,725
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76,628 54,303
Shareholders' equity
Share capital 1,164,598 660,653
Accumulated deficit (141,593) (76,716)
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1,023,005 583,937
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$1,099,633 $638,240
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Consolidated Statements of Operations and Accumulated Deficit
Unaudited
Expressed in thousands of Canadian dollars, except per share amounts
Three months Nine months
ended ended
September 30 September 30
2000 1999 2000 1999
--------------------------------------------------------------------
Revenues $13,642 $7,252 $21,918 $18,202
Investment income 13,170 4,730 32,606 12,547
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26,812 11,982 54,524 30,749
Cost of revenues and expenses
Cost of revenues 17,981 7,641 27,060 15,296
Research and product
development 22,128 20,401 59,767 42,999
General and
administrative 3,149 2,821 9,322 6,675
Marketing 637 697 1,879 2,231
Capital taxes 112 102 524 265
Amortization of fuel
cell technology 916 916 2,749 2,749
Equity in loss of
associated companies 6,035 5,238 18,527 14,318
Minority interest (4,927) (2,205) (9,820) (4,581)
--------------------------------------------------------------------
46,031 35,611 110,008 79,952
--------------------------------------------------------------------
Loss before undernoted (19,219) (23,629) (55,484) (49,203)
Gain on issuance of
shares by subsidiary
and associated
company 17,185 4,334 24,260 4,334
License received on
issuance of shares of
subsidiary (3,183) (2,571) (6,321) (2,571)
-------------------------------------------------------------------
Loss before income taxes (5,217) (21,866) (37,545) (47,440)
Income taxes 491 315 1,523 941
-------------------------------------------------------------------
Net loss for period (5,708) (22,181) (39,068) (48,381)
Accumulated deficit,
beginning of period (135,885) (54,535) (102,525) (28,335)
-------------------------------------------------------------------
Accumulated deficit,
end of period ($141,593) ($76,716) ($141,593) ($76,716)
-------------------------------------------------------------------
Net loss per share ($0.06) ($0.26) ($0.45) ($0.58)
-------------------------------------------------------------------
Weighted average number
of common shares
outstanding 88,592,467 83,872,459 87,459,391 83,861,684
-------------------------------------------------------------------
Consolidated Statements of Cash Flows
Unaudited
Expressed in thousands of Canadian dollars
Nine months ended September 30 2000 1999
-------------------------------------------------------------------
Cash provided by (used for):
Operating activities:
Net loss for period ($39,068) ($48,381)
Items not affecting cash:
Amortization 9,758 7,649
Minority interest (9,820) (4,581)
Gain on issuance of shares by
subsidiary and associated company (24,260) (4,334)
Equity in loss of associated companies 18,527 14,318
License received on issuance of
shares of subsidiary 6,321 2,571
-------------------------------------------------------------------
(38,542) (32,758)
Changes in non-cash working capital:
Accounts receivable 2,236 (2,841)
Inventories (16,282) (6,386)
Prepaid expenses (261) (584)
Accounts payable and accrued liabilities 4,942 (4,494)
Deferred revenue 319 (1,129)
Allowance for warranty 2,575 798
-------------------------------------------------------------------
(6,471) (14,636)
-------------------------------------------------------------------
(45,013) (47,394)
Investing activities:
Net changes in short-term investments (218,705) (105,218)
Additions to capital assets (22,074) (15,274)
Investments in associated companies (18,900) -
-------------------------------------------------------------------
(259,679) (120,492)
Financing activities:
Net proceeds on issuance of share capital 502,082 4,626
Proceeds on issuance of shares by
subsidiary and associated company 37,805 2,896
Capital lease obligation (87) (80)
-------------------------------------------------------------------
539,800 7,442
-------------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents 235,108 (160,444)
Cash and cash equivalents,
beginning of period 86,462 348,397
-------------------------------------------------------------------
Cash and cash equivalents, end of period $321,570 $187,953
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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, 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.