Westport Innovations Inc.
TSX : WPT
NASDAQ : WPRT

Westport Innovations Inc.

November 06, 2008 16:07 ET

Westport Reports Second Quarter Financial Results; A Record Quarter: 84% Increase in Year Over Year Revenue

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 6, 2008) - Westport Innovations Inc. (TSX:WPT)(NASDAQ:WPRT), a global leader in alternative fuel, low-emissions transportation technologies, today reported financial results for the second quarter of fiscal 2009 ended September 30, 2008, and provided an update on operations.

"A record quarter for revenue, significant cash position, a proven, capital-efficient business model and partnerships and joint ventures established with some of the world's largest engine producers has Westport poised for further growth," said David Demers, Westport's CEO.

"Despite tough economic conditions, our international sales channels focused in vertical markets in government and municipal fleets are better positioned to weather the storm. Targeting niche markets, both domestically and internationally, where significant growth opportunities remain has successfully provided an economic diversity in our sales campaign. The recent sale to the Delhi Transport Corporation (DTC), our largest single order to date, is a prime example of our international reach where markets are still developing. We will continue to invest in our growth and product development as energy security and the direction to reduce dependency on foreign oil continues to drive interest for high performance engines running on clean domestically available natural gas."

Second Quarter Financial and Business Highlights

- Reported consolidated revenues of $39.0 million for the quarter ended September 30th compared to $21.2 million for the same period last year, an increase of 84%.

- Reported consolidated revenues of $64.5 million and $36.9 million for the six months ended September 30, 2008 and 2007 respectively, an increase of 75%.

- Reported net income of $0.7 million ($0.02 earnings per share) for the period ending September 30, 2008 compared to a net loss of $4.9 million ($0.19 loss per share) for the same period last year. During the quarter, Westport recognized $9.8 million in investment gains, net of taxes, on the sale of Clean Energy Fuels Corp. ("Clean Energy") shares.

- Reported a net loss of $2.8 million ($0.10 per share) compared to $9.6 million ($0.41 per share) for the six months ended September 30, 2008 and 2007, respectively.

- Reported a cash and short term investments balance as at September 30, 2008 of $96.8 million compared to $22.8 million as at March 31, 2008.

- Commenced trading on Nasdaq Global Stock Market in addition to successfully completing a US$54 million financing.

- Received an order from CleanAir Logix for liquefied natural gas (LNG) engines and fuel systems for heavy duty Trucks to be deployed at Port of Oakland

- Cummins Westport received order in Lima, Peru for over 200 natural gas bus engines; a new market

- Received a Leadership Award at the 2008 Deloitte Technology Fast 50 Awards

- Delivered 69 HD Trucks and reported a 184% increase in heavy duty business revenue in comparison to the same quarter last year

Second Quarter Fiscal Year 2009 Financial Results in Detail

Westport's consolidated revenue for the three months ended September 30, 2008 was $39.0 million compared to $21.2 million for the three months ended September 30, 2007. The increase in revenue is due primarily to a significant increase in sales of CWI products combined with a $3.5 million increase in revenue for Heavy Duty fuel systems. For the six months ended September 30, 2008 and 2007 respectively, consolidated revenue was $64.5 million and $36.9 million, respectively, an increase of 75%. CWI accounted for $24.8 million of the $27.6 million increase with unit shipments of 2,468 fiscal year to date, up from 1,367 fiscal year to date September 30, 2007. Non-CWI revenues accounted for $2.8 million of the increase with 70 LNG systems shipped year to date compared to 33 LNG systems shipped same period last year.

Westport reported a net income of $0.7 million for the three months ended September 30, 2008 ($0.02 earnings per share), compared to a net loss of $4.9 million ($0.19 loss per share) in the same period in fiscal 2008. The improvement from net loss to net income is primarily due to the sale of short term investments in Clean Energy shares. During the quarter, Westport recognized $9.8 million in investment gains, net of taxes, on the sale of 790,800 shares for net proceeds of $14.2 million. Net loss without the benefit of the sale of Clean Energy shares is approximately $9.1 million.

For the six months ended September 30, 2008 and 2007, net loss was $2.8 million, or $0.10 per share, and $9.6 million, or $0.41 per share, respectively, with Westport's 50% share of CWI income after taxes for those periods $3.0 million and $1.8 million, respectively. Year to date, Westport has recognized $12.7 million in gains, net of tax, primarily from the sale of Clean Energy shares compared to $0.7 million in the prior year.

Westport's 50% share of CWI, on an after tax basis, was $1.4 million in Q209, up from $1.2 million in Q208. CWI gross margin percentages decreased from 31% to 25% primarily because of additional warranty reserves taken against the L Gas and C Gas plus and higher warranty accruals associated with the ISL G. Having recognized the future benefit of its remaining tax losses, CWI is also now recognizing tax expense. Non-CWI operating expenses (research and development, general and administrative and sales and marketing) were up $3.8 million Q209 versus Q208. The increase relates primarily to higher expenses associated with launching Westport's LNG systems for the heavy duty market such as Kenworth integration costs, assembly centre related operating costs, and sales and marketing expenses. In addition, during the quarter, Westport listed on Nasdaq, incurring additional listing fees, board expenses, insurance, legal, accounting and other costs. The Company's 49% share of the loss from Juniper Engines Inc. ("Juniper") was $0.5 million and $0.6 million for the three and six months ended September 30, 2008.

Westport's cash and cash equivalents balance as at September 30, 2008 was $96.8 million compared to $22.8 million as at March 31, 2008. In the six months ended September 30, 2008, Westport raised approximately $52.4 million in net proceeds from its Nasdaq initial public offering, $14.0 million in net proceeds from the issuance of debenture units, and $19.4 million from the sale of shares in Clean Energy. Cash from operations for the three months ended September 30, 2008 was $6.1 million compared to cash used of $1.5 million in the comparable period of the prior year. Westport spent $1.7 million on capital expenditures associated primarily with the establishment of the Westport Assembly Centre and expansion of office facilities during the quarter, and approximately $4.0 million on a year to date basis.

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 and subsequent financing transaction in concert with the listing on Nasdaq, Westport had 32,024,930 Common Shares issued and outstanding as at September 30, 2008.

Cummins Westport Inc. (CWI) Business Unit Highlights

CWI revenue increased by $14.3 million to $33.3 million on 1,391 units shipped in Q209 from $19.0 million on 845 units shipped in Q208. CWI's gross margins increased to $8.4 million from $5.8 million on higher revenues.

In September, CWI received an order for over 200 CWI natural gas engines to equip new buses for transit providers in the capital city of Lima, Peru, a new market opportunity for CWI, with a growing market for natural gas vehicles and substantial indigenous supply of natural gas.

After the close of the quarter, CWI and Cummins India Limited announced an order for 3,125 natural gas engines, the largest order in CWI history, for Delhi Transport Corporation. The order is expected to be filled over the next 18 months.

Westport Global Heavy Duty Business Unit Highlights

Revenue for the heavy duty business has increased significantly to $5.4 million on 69 LNG systems shipped, which compares to $1.9 million in the prior year with 22 LNG systems shipped. Kenworth factory production for LNG trucks is on schedule for early 2009 along with the recent announcement of Peterbilt trucks launching 3 new LNG heavy duty truck models in mid-2009.

The San Pedro Bay Ports, including Los Angeles and Long Beach, initiated their clean trucks program on October 1st by banning pre-1989 trucks from port entry. With the concession program in place and financial incentives in place, Westport expects to see an increase in demand from port drayage fleets. Southern Counties Express, one of Westport's early adopters of LNG trucks and port customer, has now received all fifty trucks ordered earlier this year. In August, Westport received an order from Clean Air Logix for deployment at the Port of Oakland.

Results Conference Call

To coincide with the disclosure, Westport has scheduled a conference call for Thursday, November 6, 2008 at 1:30 pm Pacific Time (4:30 pm 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: 866-507-1212 (North America Toll-Free) or 416-695-9712. To access the replay after the call, please dial 800-408-3053 or 416-695-5800 using the passcode #3273670. The replay will be available until November 13, 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 Second 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.

This document contains forward-looking statements, including statements regarding the demand for our products, the future success of our business and technology strategies, investment, cash and capital requirements, intentions of partners and potential customers, the performance of our products, future market opportunities, our estimates and assumptions used in our accounting policies, accruals, and financial condition. These statements are neither promises nor guarantees, but involve known and unknown risks and uncertainties that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activities, performance or achievements expressed in or implied by these forward looking statements. These risks include risks related to our revenue growth, operating results, industry and products, the general economy, conditions of the capital and debt markets, governmental policies and regulation, technology innovations, as well as other risk factors that may affect our actual results, performance or achievements or financial position discussed in our most recent Annual Information Form and other filings with securities regulators. Readers should not place undue reliance on any such forward-looking statements, which speak only as of the date they were made. We disclaim any obligation to publicly update or revise such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward looking statements except as required by National Instrument 51-102.

Consolidated Financial Statements

(Expressed in thousands of Canadian dollars)

WESTPORT INNOVATIONS INC.

Three and six months ended September 30, 2008 and 2007



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

--------------------------------------------------------------------------
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September 30, March 31,
2008 2008
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(unaudited)

Assets

Current assets:
Cash and cash equivalents $ 72,037 $ 7,560
Short-term investments 24,793 15,202
Accounts receivable 7,514 7,028
Loan receivable 13,348 6,774
Inventories 10,947 9,020
Prepaid expenses 1,119 1,033
Current portion of future income tax assets 4,501 4,944
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134,259 51,561

Long-term investments 3,733 18,754

Equipment, furniture and leasehold
improvements, net 6,857 3,685

Intellectual property, net 502 574

Future income tax assets 2,321 4,366

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$ 147,672 $ 78,940
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Liabilities and Shareholders' Equity

Current liabilities
Accounts payable and accrued liabilities $ 11,249 $ 8,470
Current portion of deferred revenue 255 205
Demand instalment loan 5,454 5,776
Short-term debt 3,831 5,995
Current portion of long-term debt 30 54
Current portion of warranty liability 9,250 4,899
Obligation to issue warrants 4,000 4,000
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34,069 29,399

Warranty liability 6,717 4,258
Long-term debt 10,801 8
Deferred lease inducements 439 280
Deferred revenue 1,735 1,216
Joint Venture Partners' share of net assets
of joint ventures
17,567 13,983
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71,328 49,144

Shareholders' equity:
Share capital:
Authorized:
Unlimited common shares, no par value
Unlimited preferred shares in series, no par
value
Issued:
32,024,930 (2008 - 27,416,993) common shares 311,754 258,202
Other equity instruments 7,382 3,079
Additional paid in capital 5,180 5,097
Deficit (250,248) (247,460)
Accumulated other comprehensive income 2,276 10,878
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76,344 29,796

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$ 147,672 $ 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 Six months ended
September 30 September 30
2008 2007 2008 2007
--------------------------------------------------------------------------

Product revenue $ 34,332 $ 16,639 $ 55,760 $ 28,481
Parts revenue 4,680 4,530 8,761 8,418
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39,012 21,169 64,521 36,899

Cost of revenue and
expenses:
Cost of revenue 29,785 15,116 46,955 25,508
Research and development 7,105 5,078 14,268 10,519
General and
administrative 2,206 1,175 3,668 2,288
Sales and marketing 4,177 2,306 6,772 4,083
Foreign exchange loss 758 458 666 997
Depreciation and
amortization 512 359 888 726
Bank charges, interest
and other 100 67 205 125
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44,643 24,559 73,422 44,246
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Loss before undernoted (5,631) (3,390) (8,901) (7,347)

Loss from investment
accounted for by the
equity method (503) - (583) -
Interest on long-term
debt and amortization
of discount (648) (216) (648) (986)
Interest and other income 511 212 814 441
Gain on sale of
investments 10,666 - 14,479 718
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Income (loss) before
income taxes and
Joint Venture Partners'
share of income from
joint ventures 4,395 (3,394) 5,161 (7,174)

Income tax expense:
Current 204 58 305 125
Future 2,119 209 4,684 506
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2,323 267 4,989 631
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Income (loss) before
Joint Venture Partners'
share of income from
joint ventures 2,072 (3,661) 172 (7,805)

Joint Venture Partners'
share of net income
from joint ventures (1,396) (1,206) (2,960) (1,786)

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Income (loss) for
the period $ 676 $ (4,867) $ (2,788) $ (9,591)
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Income (loss) per
share:
Basic $ 0.02 $ (0.19) $ (0.10) $ (0.41)
Diluted $ 0.02 $ (0.19) $ (0.10) $ (0.41)

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Weighted average
common shares
outstanding:

Basic 29,530,003 25,295,925 28,512,672 23,478,760

Diluted 30,997,572 25,295,925 28,512,672 23,478,760
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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 Six months ended
September 30 September 30
2008 2007 2008 2007
--------------------------------------------------------------------------

Income (loss) for the
period $ 676 $ (4,867) $ (2,788) $ (9,591)

Other comprehensive
income (loss)
Unrealized gain on
available for sale
securities, net of tax
of $912 and $574
(2007 - $nil, $nil) 4,609 3,279 2,892 2,061
Reclassification of net
realized gains on
available for sale
securities to net
loss, net of tax of
$1,778 and $2,454
(2007 - $nil, $nil) (8,982) - (12,119) (718)
Cumulative translation
adjustment 702 - 625 -
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(3,671) 3,279 (8,602) 1,343
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Comprehensive loss $ (2,995) $ (1,588) $ (11,390) $ (8,248)
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WESTPORT INNOVATIONS INC.
Consolidated Statements of Shareholders' Equity
(Expressed in thousands of Canadian dollars, except share amounts)

Six months ended September 30, 2008

--------------------------------------------------------------------------
--------------------------------------------------------------------------
Accum-
Addit- ulated
Other ional other Total
equity paid Accum- compre- share
Common Share Instru- in ulated hensive holders'
shares capital ments capital Deficit income equity
--------------------------------------------------------------------------

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 93,006 861 - (329) - - 532

Issue of
common
shares on
settlement
of accrued
interest 14,931 249 - - - - 249

Issue of
common
shares on
public
offering 4,500,000 57,348 - - - - 57,348

Share issue
costs - (4,906) - - - - (4,906)

Value of
warrants
issued with
long-term debt - - 3,847 - - - 3,847

Financing costs
incurred - - (307) - - - (307)

Stock-based
compensation - - 763 412 - - 1,175

Net loss - - - - (2,788) - (2,788)

Other
comprehensive
loss - - - - - (8,602) (8,602)

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Balance,
September 30,
2008
(un-
audited) 32,024,930 $311,754 $ 7,382 $ 5,180 $(250,248) $ 2,276 $76,344
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WESTPORT INNOVATIONS INC.
Consolidated Statements of Shareholders' Equity
(Expressed in thousands of Canadian dollars, except share amounts)

Year ended March 31, 2008

--------------------------------------------------------------------------
--------------------------------------------------------------------------
Accum-
Addit- ulated
Other ional other Total
equity paid Accum- compre- share-
Common Share Instru- in ulated hensive holders'
shares capital ments capital Deficit income equity
--------------------------------------------------------------------------

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

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WESTPORT INNOVATIONS INC.
Consolidated Statements of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)

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Three months ended Six months ended
September 30 September 30
2008 2007 2008 2007
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(unaudited) (unaudited) (unaudited) (unaudited)

Cash flows from
operations:
Income (loss) for
the period $ 676 $ (4,867) $ (2,788) $ (9,591)
Items not involving
cash:
Depreciation and
amortization 512 359 888 726
Stock-based
compensation expense 944 296 1,175 409
Future income tax
recovery 2,119 209 4,684 506
Change in deferred
lease inducements (77) (64) (166) (121)
Gain on sale of
investments (10,666) - (14,479) (718)
Joint Venture Partners'
share of net income
from joint ventures 1,396 1,206 2,960 1,786
Loss from investment
accounted for by
the equity method 503 - 583 -
Interest on long-term
debt and amortization
of discount 648 216 648 986
Changes in non-cash
operating working
capital:
Accounts receivable 1,401 1,610 (486) 2,596
Inventories 727 (753) (1,927) (1,004)
Prepaid expenses (227) (21) (86) 124
Accounts payable and
accrued liabilities 3,197 18 2,686 (1,503)
Deferred revenue 409 (169) 569 (125)
Warranty liability 4,516 493 6,810 (72)
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6,078 (1,467) 1,071 (6,001)

Cash flows from
investments:
Purchase of equipment,
furniture and
leasehold
improvements (1,659) (61) (4,008) (243)
Sale (purchase) of
short-term investments,
net (24,793) 16,803 (9,591) 19,712
Disposition of long-term
investments 14,159 - 19,379 1,119
Loan receivable (4,892) - (6,574) -
Investment in joint
venture - - (1,500) -
Leasehold inducement - - 325 -
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(17,185) 16,742 (1,969) 20,588

Cash flows from
financing:
Issue of demand
instalment loan - 1,000 500 1,000
Repayment of demand
instalment loan (425) (147) (822) (282)
Increase in
short-term debt 170 - 170 -
Repayment of
short-term debt (2,549) - (2,549) -
Repayment of other
long-term debt (21) (19) (51) (37)
Issuance of
debenture units 15,000 - 15,000 -
Finance costs
incurred (1,006) - (1,006) -
Shares issued for
cash 57,510 229 57,880 804
Share issue costs (4,906) (31) (4,906) (31)
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63,773 1,032 64,216 1,454

Effect of foreign
exchange on cash
and cash equivalents 1,345 - 1,159 -
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Increase in cash and
cash equivalents 54,011 16,307 64,477 16,041

Cash and cash
equivalents,
beginning of
period 18,026 1,436 7,560 1,702

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Cash and cash
equivalents, end of
period $ 72,037 $ 17,743 $ 72,037 $ 17,743
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WESTPORT INNOVATIONS INC.
Consolidated Statements of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)

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Three months ended Six months ended
September 30 September 30
2008 2007 2008 2007
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(unaudited) (unaudited) (unaudited) (unaudited)

Supplementary
information:
Interest paid $ 103 $ 43 $ 165 $ 73
Taxes paid 213 54 238 256
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 - 153 - 288
Shares issued on
conversion of debt - 20,827 - 20,827
Shares issued for
settlement of
interest on
convertible notes 249 553 249 553
Broker warrants
issued with
subordinated debt 283 - 283 -
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