VANCOUVER, B.C. –Westport Innovations Inc. (TSX:WPT) today reported results for its third fiscal quarter ended Dec. 31, 2003.
Revenues were $7.9 million for the quarter, up from $5.6 million for the same quarter last year. Revenues for the nine-month period ending December 31, 2003 are $19.2 million, up 18 per cent over the same period last year.
Engine shipments for the quarter were up 124 per cent compared to the same period last year, with 323 engines shipped compared to 144 last year. For the first nine months of the year, shipments are up 41 per cent compared to last year. Engine revenue for the quarter increased by 108 per cent, and for the first nine months by 27 per cent over the corresponding periods last year. Since all sales are made in United States currency, and because of the significant appreciation in currency exchange rates between the Canadian and U.S. dollar over the past year, revenue expressed in Canadian dollars has dropped correspondingly. Despite the negative currency impact, total revenue, including parts revenue, increased by more than 40 per cent over the same period last year and by 14 per cent over the second quarter this year.
Westport’s net loss for the quarter was $13 million ($0.20 per share) including a writedown of assets and restructuring charges of $3.7 million, compared with a loss of $12.2 million ($0.24 per share) during the same period in fiscal 2003. Excluding restructuring costs and the writedown of equipment, furniture and leasehold improvements, the basic and diluted loss per share would have been $0.15 per share for the quarter and $0.48 per share for the three quarters ended Dec. 31, 2003. This computation is a non-GAAP measure included to assist readers in their financial analysis. The company uses non-GAAP measures internally to assess performance and to assist with planning on a go-forward basis. Readers should note that because non-GAAP measures do not have standardized definitions, they may not always have the same meaning when used by different companies.
“We are very pleased with our progress on our business plan this quarter,” said David Demers, President & CEO of Westport Innovations. “With improved margins, high customer satisfaction, significant sales growth and lower expenses, we are continuing to demonstrate the potential in our business. Meeting our profitability goals remains the top priority for our management team. We are optimistic that we will be able to meet our goal of a $5 million per quarter burn rate in Q4, which is more than 50 per cent rate improvement year over year. We will continue this focus through our next fiscal year as we work towards profitability and profit growth.”
Expenses, excluding cost of product revenue, totalled $12.2 million, down from $15.4 million in the same quarter last year. Research and development, the largest expense category, was down 34 per cent to $7.8 million from $11.8 million in the same quarter last year, and on a year to date basis, has decreased 28 per cent to $21.6 million from $30.0 million. This drop is primarily attributed to Westport’s commitment to pace program spending with available funding and market opportunities. Both increased government and partner support, and strategic reductions in product development expenses have contributed to this financial improvement.
At the end of Dec. 31, 2003, cash, short-term investments and accounts receivable, net of accounts payable, totalled $23.5 million compared to $26.9 million at the beginning of the year. In addition to its commitment to its profitability goals, Westport’s management team continued to make progress on its advanced technology leadership and diversification goals this quarter.
Business Programs Update — CWI Joint Venture Agreement
On Dec. 16, 2003 Westport and Cummins entered into a renewed Joint Venture agreement for the joint venture company, Cummins Westport Inc (CWI). On Jan. 1, 2004 Cummins converted its preferred shares in CWI to common shares, to hold an equal number of common shares with Westport. The parents have agreed to fund CWI’s business needs equally going forward, after a transition year. The two companies also signed a Technology Partnership Agreement that creates a flexible arrangement for future technology development between Cummins and Westport. CWI’s new mandate is to quickly grow this global business into a profitable, high-growth enterprise. CWI’s market and product opportunities have been priority ranked and resourced in accordance with profitability, growth and leadership potential in each market.
CWI’s engines have proven successful in varied customer markets and are now in service in 18 countries worldwide. In North America, CWI is now the leader in natural gas transit buses. Transit agencies in large cities such as Los Angeles, Tacoma, Boston, San Diego and Washington have selected CWI engines. In China, cities such as Beijing and Xian have purchased multiple orders, in addition to six other cities that have received their first shipments in the past year. These eight Chinese cities have a combined transit fleet of nearly 50,000 buses.
Cummins is the largest foreign investor in China’s engine sector and has the largest distribution and service network of any foreign manufacturer. Because of this advantage, CWI believes that its opportunity in China is its most significant growth opportunity. To better meet customer delivery and price expectations, CWI will explore opportunities to produce complete engines in China, potentially as soon as 2005.
CWI has also identified India as a key market opportunity. Cummins has significant production and distribution resources in India and CWI’s goal is to negotiate a licensed manufacturing arrangement with local partners. “We are very excited about the economic value proposition that China, India and the Middle East offer to CWI,” said Hugh Foden, President of Cummins Westport Inc. “While our North American business remains a strong focus for us, we have no doubt that with the support of industry leading organizations and the Cummins distributor and dealer network, international opportunities offer us excellent growth potential over the next few years.”
Technology Partnership Agreement
Westport and Cummins have also undertaken a new comprehensive framework agreement for collaboration on a range of technology development programs. This includes programs applicable to both alternative fuel engines and conventional diesel engines. The framework agreement allows either partner to initiate a project and request the technical and financial assistance of the other. The resulting technologies and products will be shared by both partners, and in some cases may be marketed to other industry partners.
A new Technology Partnership Advisory Board will manage this agreement. Dr Michael Gallagher, Westport’s Chief Operating Officer and a member of this Board, commented, “The combined Westport and Cummins technology portfolio and capabilities will allow us to pursue a range of exciting opportunities as market conditions develop. Naturally, we will pace our product development strategy to maximize returns for our investors. Our recent successes with our ultra-low emissions programs suggest it may be reasonable to advance our own 2010 emissions solutions and accelerate the availability of these products. We will be examining the market opportunity for this in more detail with stakeholders and customers throughout 2004.”
Other Technology Program Updates
Isuzu and Westport recently signed a new collaboration agreement to further advance their development partnership. The two companies will assess global market opportunity for the monofuel CNG-powered direct injection technology the two companies have developed. Isuzu will provide funding for Westport to continue development of key technologies for the project while the marketing analysis is underway.
Ford’s interest in Westport technology continues with the agreement announced last year for Westport to support the a
utomaker’s hydrogen engine development program. Westport provides Ford with fuel injection hardware, controls and engineering support from Westport based on a hydrogen-specific version of Westport’s patented direct injection technology.
Truck and bus manufacturer MAN recently completed a market study for the potential of Westport technologies in their product line. Discussions of commercialization arrangements continue.
Westport Innovations Inc. is a developer of gaseous fuel engine technologies. It develops, manufactures and sells a wide range of engines for commercial transportation applications such as trucks and buses through Cummins Westport Inc., its joint venture with Cummins Inc.
Technology development alliances are in place with a number of other leading engine manufacturers, including Ford, MAN, Isuzu, and BMW to develop engines that operate using cleaner-burning fuels such as natural gas, propane, hydrogen, and blended fuels such as HCNG.
Westport held a public conference earlier today to discuss the quarterly results. The Web cast of the conference call can be accessed through the Westport Web site at www.westport.com by following the link on the Investor Information menu. Replays will be available in streaming audio shortly after the conclusion of the conference call.
To view the financials and management’s discussion and analysis, please point your browser to the following link: http://www.westport.com/investor/financial.php.
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