Westport Innovations Inc.
TSX : WPT

Westport Innovations Inc.

August 05, 2008 08:00 ET

Westport Reports First Quarter Fiscal 2009 Financial Results

Revenues grow 62% to new quarterly record

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 5, 2008) - Westport Innovations Inc. (TSX:WPT), a global leader in alternative fuel, low-emissions transportation technologies, today reported financial results for the first quarter of Fiscal Year 2009 ended June 30, 2008, and provided an update on operations.

"The environmental benefits of our natural gas engines have always been understood, but with the rapid rise in oil prices over the past three years we are now offering significant economic benefits as well," said David Demers, Westport's Chief Executive Officer.

"We are seeing substantial growth from both bus and truck OEM customers as a result. Our program with the San Pedro Bay Ports reached a new milestone with the selection of Sterling and Kenworth trucks using our engines as the only qualifying alternative fuel vehicles for this major program. The Ports have announced a Jumpstart order for 100 Sterling trucks with CWI engines and 100 Kenworth T800 trucks with Westport ISX LNG fuel systems. And this quarter we announced major new programs to deliver HPDI technology on Weichai engine platforms in Asia and on engine platforms of a leading European engine manufacturer. We look forward to continued strong growth throughout 2009."

First Quarter Financial and Business Highlights

- Consolidated quarterly revenues of $25.5 million for Q1 FY2009 increased $9.8 million (62%) from $15.7 million for Q1 FY2008.

- First quarter FY2009 net loss of $3.5 million ($0.13 loss per share) compared to a net loss of $4.7 million ($0.22 loss per share) for Q1 FY2008.

- Westport announced a joint venture agreement with Weichai Power Co., Ltd., China's largest heavy-duty engine manufacturer, and Hong Kong Peterson (CNG) Equipment Limited. The joint venture will develop, manufacture, sell and distribute alternative fuel engines for use in various applications including automobiles and heavy-duty trucks.

- Westport signed an agreement with a leading European engine manufacturer to integrate and test Westport's fuel systems on the manufacturer's engine platforms.

- Invested $1.5 million in Juniper Engines Inc., Westport's joint venture with OMVL of Italy.

- Westport received its largest non-port ISX LNG order to date; HayDay Farms in California will acquire 20 Kenworth LNG trucks with Westport HPDI technology.

- Subsequent to the quarter end, Westport effected 3.5:1 share consolidation.

First Quarter Fiscal Year 2009 Financial Results in Detail

Westport's consolidated revenue for the three months ended June 30, 2008 was $25.5 million compared to $15.7 million for the three months ended June 30, 2007, an increase of $9.8 million or 62%. CWI product revenues increased by 72% with deliveries of the ISL G and as a result of orders that slipped from the previous quarter. Non-CWI revenues decreased by $0.7 million in the period with continued delays at the Ports of Los Angeles and Long Beach.

Net loss for the three months ended June 30, 2008 was $3.5 million ($0.13 loss per share), compared to a net loss of $4.7 million ($0.22 loss per share) in the same period in fiscal 2008, an improvement of $1.2 million. The improvement was due primarily to the increase in net gain after taxes on sale of long-term investments of $2.2 million and a $1.0 million improvement in contribution from CWI after taxes (and JV partner's share), offset by a $2.7 million increase in non-CWI operating expenses related primarily to the launch of Westport's LNG systems for heavy-duty applications.

Interest on long-term debt and amortization of discount decreased by $0.8 million as a result of decreased debt on Perseus LLC conversion of convertible notes to common shares in July 2007. Westport also recognized a $0.1 million foreign exchange gain in the three months ended June 30, 2008 compared to a loss of $0.5 million in the three months ended June 30, 2007.

Research and development expenses, on a net basis, for the three months ended June 30, 2008, were $7.2 million compared to $5.4 million for the same period last year. CWI research and development expenses decreased by $0.4 million as a result of foreign exchange as well as flooding in Indiana in June 2008, which shut down the Cummins Technology Center. Non-CWI research and development expenses increased by $2.1 million largely because of increased product development and support costs, lower government funding in the period, and a $0.3 million accrual for royalty payments to the Industrial Technologies Office, formerly Technology Partnerships Canada.

Westport's cash and cash equivalents balance as at June 30, 2008 was $18.0 million compared to $22.8 million as at March 31, 2008. CWI's gross margins increased to $8.2 million from $5.1 million on higher revenues. Cash used in operations for the three months ended June 30, 2008 was $5.0 million compared to $4.5 million in the comparable period of the prior year, with $2.7 million used in the period to acquire inventory. Westport also spent $2.3 million on purchases of equipment, furniture and leasehold improvements, primarily associated with the building of Westport's assembly centre and expansion of office space. Westport invested $1.5 million in Juniper Engines Inc. acquiring a 49% equity interest in the joint venture with OMVL, SpA. Westport received $5.2 million from the sale of shares of Clean Energy.

Subsequent to June 30, 2008, on July 3, 2008, Westport issued 15,000 debenture units for total gross proceeds of $15 million. Each debenture unit consists of an unsecured subordinated debenture in the principal amount of $1,000 bearing interest at 9% per annum and 51 Common Share purchase warrants exercisable into Common Shares at any time for a period of two years from the date of issue at $18.73 per share. Westport has the option to redeem the debentures at any time after 12 months and before 18 months from the date of issue at 115% of their principal amount and at 110% of their principal amount after 18 months. Interest is payable semi-annually and the debentures mature on July 3, 2011. Westport also issued 46,118 broker warrants which are exercisable into Common Shares at a price of $16.10 per share for a period of two years from the date of issue.

On July 21, 2008, Westport effected a 3.5:1 share consolidation of its issued and outstanding shares. As a result of the share consolidation, as at July 25th, Westport had approximately 27,509,573 Common Shares issued and outstanding.

Cummins Westport Inc. (CWI) Business Unit Highlights

During the quarter, Cummins Westport Inc. shipped 1,077 units with revenues of US$24.8 million representing an 84% revenue growth over the same quarter last year. During the first quarter, major orders consisted of the San Diego Metropolitan Transit System ordering 250 CWI ISL G engines to be installed in New Flyer, 40-foot, low-floor vehicles and UPS ordering additional CWI engine-based trucks.

The OEM growth in the first quarter of 2009 for CWI came from Sterling trucks. In May, CWI announced the ISL G was selected by Sterling trucks to be offered in their first natural gas vehicle.

Westport Global Heavy-Duty Business Unit Highlights

On July 7, 2008, the Port of Long Beach announced $35 million in funding to purchase heavy-duty trucks to jumpstart the Clean Trucks Program. Included in the funding is the purchase of 100 Sterling LNG-powered trucks utilizing the CWI ISL G engine. On July 14, 2008, the Port of Long Beach approved an additional US$19.7 million for the purchase of 100 Kenworth LNG trucks utilizing the Westport ISX G engine, under the same jumpstart initiative for the Clean Trucks Program.

During the quarter, Westport reported an order for 20 Class 8 heavy-duty Kenworth T800 trucks with Westport's HPDI technology from HayDay Farms in California for operation in regional hauling applications. This is Westport's largest non-Port order to date.

In July, Westport signed a 30-year joint venture agreement with Weichai Power Co., Ltd. and Hong Kong Peterson (CNG) Equipment Limited, creating a new entity, Weichai Westport Inc. The joint venture company will research, develop, design, manufacture, market, distribute, and sell advanced, alternative fuel engines (and relevant parts and kits) for use in automobiles, heavy-duty trucks, power generation and shipping applications. In China, the demand for cleaner fuel with economic advantages over traditional fuels, such as natural gas, is increasing, with an estimated 185,000 natural gas vehicles already in China and a growing infrastructure to support them.

In July, Westport entered into a development agreement with a leading European engine manufacturer on the proprietary High Pressure Direct Injection (HPDI) fuel system operating with natural gas and biogas. Westport and the European engine manufacturer will work together to integrate and test Westport's HPDI fuel system on their engine platforms.

Results Conference Call

To coincide with the disclosure, Westport has scheduled a conference call for Tuesday, August 5, 2008 at 7:00am Pacific Time (10:00am Eastern Time). The public is invited to listen to the conference call in real time or by replay. To access the conference call by telephone, please dial: 800-952-4972 (North America Toll-Free) or 416-641-2140. To access the replay after the call, please dial 800-408-3053 or 416-695-5800 using the passcode #3267784. The replay will be available until August 12, 2008, however, the webcast will be archived on Westport's website. The webcast of the conference call can be accessed on the Westport website at www.westport.com by selecting "Investors" and then "Investor Overview" from the main menu. Replays will be available in streaming audio on the same website after the conclusion of the conference call.

To view Westport's full First Quarter FY2009 financials, please point your browser to the following link: http://www.westport.com/investor/financial.php.

About Westport Innovations Inc.

Westport Innovations Inc. is a leading global supplier of proprietary solutions that allow engines to operate on clean-burning fuels such as compressed natural gas (CNG), liquefied natural gas (LNG), hydrogen and biofuels such as landfill gas. Cummins Westport Inc., Westport's joint venture with Cummins Inc., manufactures and sells the world's broadest range of low-emissions alternative fuel engines for commercial transportation applications such as trucks and buses. BTIC Westport Inc., Westport's joint venture with Beijing Tianhai Industry Co. Ltd., manufactures and sells LNG fuel tanks for vehicles.

Note: This document contains forward-looking statements about Westport's financial results, business, operations, technology development, customer orders, funding for the Jumpstart initiative or the environment in which Westport operates, which are based on Westport's estimates, forecasts and projections and information provided by third parties. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict, or are beyond Westport's control. Consequently, readers should not place any undue reliance on such forward-looking statements. In addition, these forward-looking statements relate to the date on which they are made. Westport disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

On July 21, 2008, Westport effected a three and one-half-to-one (3.5:1) consolidation of its common shares. Each 3.5 common shares were consolidated to represent one common share as of such date with fractional shares rounded down to the nearest whole share. All common share, per share and price data set forth in this press release for dates or periods prior to July 21, 2008 have been adjusted to give retroactive effect to Westport's 3.5-to-1 share consolidation.

Consolidated Financial Statements

(Expressed in thousands of Canadian dollars)

WESTPORT INNOVATIONS INC.

Three months ended June 30, 2008 and 2007



WESTPORT INNOVATIONS INC.
Consolidated Balance Sheets
(Expressed in thousands of Canadian dollars)

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June 30, March 31,
2008 2008
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(unaudited)
Assets

Current assets:
Cash and cash equivalents $ 18,026 $ 7,560
Short-term investments - 15,202
Accounts receivable 8,915 7,028
Loan receivable 8,456 6,774
Inventories 11,674 9,020
Prepaid expenses 892 1,033
Current portion of future income tax assets 7,362 4,944
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55,325 51,561

Long-term investments 12,899 18,754

Equipment, furniture and leasehold improvements, net 5,744 3,685

Intellectual property, net 538 574

Future income tax assets 399 4,366

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$ 74,905 $ 78,940
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Liabilities and Shareholders' Equity

Current liabilities
Accounts payable and accrued liabilities $ 7,959 $ 8,470
Current portion of deferred revenue 206 205
Demand instalment loan 5,879 5,776
Short-term debt 5,955 5,995
Current portion of long-term debt 48 54
Current portion of warranty liability 5,588 4,899
Obligation to issue warrants 4,000 4,000
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29,635 29,399

Warranty liability 5,863 4,258
Long-term debt 44 8
Deferred lease inducements 516 280
Deferred revenue 1,375 1,216
Joint Venture Partners' share of net assets of joint
ventures 15,470 13,983
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52,903 49,144

Shareholders' equity:
Share capital:
Authorized:
Unlimited common shares, no par value
Unlimited preferred shares in series, no par value
Issued:
27,483,717 (2008 - 27,416,993) common shares 258,798 258,202
Other equity instruments 3,236 3,079
Additional paid in capital 4,945 5,097
Deficit (250,924) (247,460)
Accumulated other comprehensive income 5,947 10,878
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22,002 29,796

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$ 74,905 $ 78,940
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WESTPORT INNOVATIONS INC.
Consolidated Statements of Operations (unaudited)
(Expressed in thousands of Canadian dollars, except share and per share
amounts)

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Three months ended June 30
2008 2007
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Product revenue $ 21,428 $ 11,842
Parts revenue 4,081 3,888
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25,509 15,730

Cost of revenue and expenses:
Cost of revenue 17,170 10,392
Research and development 7,163 5,441
General and administrative 1,462 1,113
Sales and marketing 2,595 1,777
Foreign exchange loss (gain) (92) 539
Depreciation and amortization 376 367
Bank charges, interest and other 105 58
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28,779 19,687
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Loss before undernoted (3,270) (3,957)

Loss from investment accounted for by the equity
method (80) -
Interest on long-term debt and amortization of
discount - (770)
Interest and other income 303 229
Gain on sale of investments 3,813 718
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Income (loss) before income taxes and Joint Venture
Partners' share of income from joint ventures 766 (3,780)

Income tax expense:
Current 101 67
Future 2,565 297
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2,666 364
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Loss before Joint Venture Partners' share of income
from joint ventures (1,900) (4,144)

Joint Venture Partners' share of net income from
joint ventures (1,564) (580)

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Loss for the period $ (3,464) $ (4,724)
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Basic and diluted loss per share $ (0.13) $ (0.22)
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Weighted average common shares outstanding -
Basic and diluted 27,443,257 21,641,626
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WESTPORT INNOVATIONS INC.
Consolidated Statements of Comprehensive Loss (unaudited)
(Expressed in thousands of Canadian dollars)

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Three months ended June 30
2008 2007
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Loss for the period $ (3,464) $ (4,724)

Other comprehensive loss
Unrealized loss on available for sale securities,
net of tax of $338 (2007 - $nil) (1,717) (1,218)
Reclassification of net realized gains on
available for sale securities to net loss, net
of tax of $676 (2007 - $nil) (3,137) (718)
Cumulative translation adjustment (77) -
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(4,931) (1,936)
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Comprehensive loss $ (8,395) $ (6,660)
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WESTPORT INNOVATIONS INC.
Consolidated Statements of Shareholders' Equity
(Expressed in thousands of Canadian dollars, except share amounts)

Three months ended June 30, 2008

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Accum-
Addit- ulated
Other ional other Total
equity paid Accum- compre- share-
Common Share instr- in ulated hensive holders'
shares capital uments capital Deficit income equity
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Balance,
March 31,
2007 21,624,594 232,830 12,352 5,301 (239,865) - 10,618

Transitional
adjustment
on adoption
of new
accounting
standards
for
financial
instruments,
net of tax
of $3,370 - - - - 3,483 17,032 20,515

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Balance,
April 1,
2007 21,624,594 232,830 12,352 5,301 (236,382) 17,032 31,133

Issue of
common
shares
on exercise
of stock
options 232,024 1,967 - (762) - - 1,205

Issue of
common
shares
on exercise
of
performance
share units 60,383 390 (390) - - - -

Issue of
common
shares
on
conversion
of
subordinated
convertible
notes and
settlement
of accrued
interest 4,831,801 21,759 (7,569) - (763) - 13,427

Issue of
common
shares
on exercise
of warrants 668,191 1,420 (1,420) - - - -

Share issue
costs - (164) - - - - (164)

Stock-based
compensation - - 106 558 - - 664

Net loss - - - - (10,315) - (10,315)

Other
comprehensive
loss - - - - - (6,154) (6,154)

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Balance,
March 31,
2008 27,416,993 $258,202 $3,079 $5,097 $(247,460) $10,878 $29,796

Issue of
common
shares
on exercise
of stock
options 66,724 596 - (226) - - 370

Stock-based
compensation - - 157 74 - - 231

Net loss - - - - (3,464) - (3,464)

Other
comprehensive
loss - - - - - (4,931) (4,931)

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Balance,
June 30,
2008
(unaudited) 27,483,717 $258,798 $3,236 $4,945 $(250,924) $5,947 $22,002
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WESTPORT INNOVATIONS INC.
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)

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Three months ended June 30
2008 2007
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(Unaudited) (Unaudited)
Cash flows from operations:
Loss for the period $ (3,464) $ (4,724)
Items not involving cash:
Depreciation and amortization 376 367
Stock-based compensation expense 231 113
Future income tax recovery 2,565 297
Change in deferred lease inducements (89) (57)
Gain on sale of investments (3,813) (718)
Joint Venture Partners' share of net income from
joint ventures 1,564 580
Loss from investment accounted for by the equity
method 80 -
Interest on long-term debt and amortization of
discount - 770
Changes in non-cash operating working capital:
Accounts receivable (1,887) 986
Inventories (2,654) (251)
Prepaid expenses 141 145
Accounts payable and accrued liabilities (511) (1,521)
Deferred revenue 160 44
Warranty liability 2,294 (565)
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(5,007) (4,534)
Cash flows from investments:
Purchase of equipment, furniture and leasehold
improvements (2,349) (182)
Sale of short-term investments, net 15,202 2,909
Disposition of long-term investments 5,220 1,119
Loan receivable (1,682) -
Investment in joint venture (1,500) -
Leasehold inducement 325 -
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15,216 3,846
Cash flows from financing:
Issue of demand instalment loan 500 -
Repayment of demand instalment loan (397) (135)
Repayment of other long-term debt (30) (18)
Shares issued for cash 370 575
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443 422
Effect of foreign exchange on cash and cash
equivalents (186) -
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Increase in cash and cash equivalents 10,466 (266)

Cash and cash equivalents, beginning of period 7,560 1,702

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Cash and cash equivalents, end of period $ 18,026 $ 1,436
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Supplementary information:
Interest paid $ 62 $ 30
Taxes paid 25 -
Non-cash transactions:
Purchase of equipment, furniture and leasehold
improvements by assumption of capital lease
obligation 50 -
Shares issued on exercise of performance share
units - 135
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The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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