Westport Innovations Inc.
TSX : WPT

Westport Innovations Inc.

November 06, 2007 09:01 ET

Westport Reports Second Quarter Fiscal 2008 Financial Results

Record quarterly revenues increase 54% to $21.2 million

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 6, 2007) - Westport Innovations Inc. (TSX:WPT), a global leader in gaseous-fuelled power technologies, today reported financial results for the second quarter of Fiscal Year 2008 ended September 30, 2007 (Q2 FY2008), and provided an update on operations.

"High oil prices coupled with growing acceptance that alternative fuels for heavy-duty transportation offer early and substantial greenhouse gas reductions are driving record demand for our natural gas engines," said David Demers, Westport's CEO. "In all product segments and in all of our global markets we see strong growth for our existing offerings and we are also seeing increased interest from new partners in working together to introduce new solutions and markets."

Financial and Business Highlights

- Consolidated quarterly revenues of $21.2 million for Q2 FY2008 increased 54% from $13.7 million for Q2 FY2007. Product revenues rose 61% to $16.6 million from $10.3 million last year.

- Second quarter FY2008 net loss of $4.9 million ($0.05 loss per share) compared to a net loss of $1.8 million ($0.03 loss per share) for Q2 FY2007.

- 22 Westport liquefied natural gas (LNG) heavy-duty trucks delivered to customers in California during the quarter.

- The Port of Los Angeles and South Coast Air Quality Management District (SCAQMD) approved funding for 158 trucks totalling US$27.5 million. This funding was the first approved of the recent solicitations from truck fleets representing over 383 trucks. The Ports' Clean Truck Program calls for more than 5,000 trucks to be on the road by 2011.

- Perseus, L.L.C. exercised their option to convert $22.1 million of secured convertible debentures to acquire 16.5 million common shares of Westport, which were then sold to third parties through a prospectus offering.

- Subsequent to the quarter end, Westport and OMVL SpA of Italy announced the formation of an equity joint venture to design, produce, and sell alternative fuel engines in the sub-5 litre class for global applications.

- Westport recognized as one of the inaugural "Technology Green 15" selected by Deloitte. The Deloitte Technology Green 15 Awards recognize those Canadian companies that offer solutions to global environmental challenges by creating intellectual property (IP) and technology that reduce society's environmental impact.

Second Quarter Fiscal Year 2008 Financial Results in Detail

Consolidated quarterly revenues for the period ended September 30, 2007 increased by 54% to $21.2 million from $13.7 million for the corresponding period in FY2007. The increase in revenues resulted from a $4.5 million increase in CWI product revenues primarily from higher shipments to Asia and Europe, a $1.1 million increase in CWI parts revenue and a $1.8 million increase in Westport product revenues arising from the delivery of 22 heavy-duty LNG systems in the quarter. For the six months ended September 30, 2007, consolidated revenues were up 52% to $36.9 million from $24.4 million in the same period in FY2007. In the fiscal year to date, Westport shipped 1,367 CWI engines and 33 LNG systems compared to 755 and nil, respectively, for the same period last fiscal year.

Net quarterly loss for the period ended September 30, 2007 was $4.9 million ($0.05 loss per share), compared to $1.8 million ($0.03 loss per share) in the corresponding period last fiscal year. The $1.8 million loss for the Q2 FY2007 included a net gain of $3.9 million recognized on the sale of 45% of Westport Research Inc., now Wild River Resources Ltd. Excluding the gain on sale of Wild River, the consolidated net loss for Q2 FY2008 improved by $0.9 million with our share of CWI income up $0.5 million and the loss from operations excluding CWI down $0.4 million. Our net loss for the six months ended September 30, 2007 was $9.6 million ($0.12 loss per share) compared to $7.3 million ($0.10 loss per share) in the comparable period of the prior year. For the six months ended September 30, 2007, our share of CWI income increased to $1.8 million, up $0.3 million from $1.5 million in the prior year and non-CWI operating losses, excluding the $3.9 million gain on the partial sale of Wild River, decreased by $1.2 million primarily due to increased gross margins from the sale of LNG systems.

Our cash and short term investments balance as at September 30, 2007 was $19.4 million compared to $23.1 million as at March 31, 2007, a decrease of $3.7 million. Cash used in operations and for capital expenditures for the three and six months ended September 30, 2007 was $1.5 million and $6.2 million compared to $2.8 million and $6.7 million in the comparable periods of the prior year. Year to date, operating cash usage has been offset by $1 million drawn in the quarter against our bank demand instalment loan to fund inventory, $1.1 million in proceeds received from our sale of Clean Energy shares in the first quarter and $0.8 million in proceeds received on the issuance of shares on conversion of employee stock options.

On July 26, 2007, Perseus, L.L.C. ("Perseus"), through its affiliates exercised the conversion option on the approximately $22.1 million of secured, subordinated convertible debentures (the "Notes") held by them in order to acquire approximately 16.5 million common shares of Westport, which were then sold to third parties at a price of $3.10 per share for total gross proceeds of approximately $51.3 million with all proceeds going to Perseus and its affiliates. As an inducement for them to convert, we agreed to pay to Perseus an amount equal to 50% of the interest that would otherwise have been payable on the Notes, on December 31, 2007 and June 30, 2008. Interest accrued to July 25, 2007 of $0.1 million and the inducement payment of $0.8 million total approximately $0.9 million and may be made, at Westport's option, in a combination of Common Shares, additional Notes and, in certain circumstances, cash.

Cummins Westport Inc. (CWI) Business Unit Highlights

Cummins Westport continued its global business growth, achieving record quarterly shipments of 845 units and revenue of US$18.3 million, representing growth of 53%. For the first time, CWI has reached a 50:50 balance between international orders and North American business. Year to date geographic mix has been North America 51%, Asia 31%, and other international 18%.

During the quarter, CWI initiated deliveries of the production ISL G engine, having received certification from the United States Environmental Protection Agency (US EPA) and the California Air Resources Board (CARB) for 0.2 grams per brake horsepower-hour (g/bhp-hr) oxides of nitrogen (NOx) and 0.01 g/bhp-hr particulate matter (PM). The ISL G is the only 2010-certified engine available for transit and medium duty truck applications in North America.

Westport Global Heavy Duty Business Unit Highlights

During the quarter, Westport delivered 22 LNG heavy-duty trucks. Subsequent to the end of the quarter, the Port of Los Angeles held a Board of Harbor Commissioners meeting at which US$21.5 million in funding was authorized to support the purchase by fleets of 117 LNG trucks (US$184,000 per vehicle). In addition, the SCAQMD authorized US$5.9 million for the purchase of an additional 41 trucks (US$144,000 per vehicle). These approvals were in response to an RFP introduced on August 2, 2007. Westport has established support agreements with Cummins Cal Pacific and Inland Kenworth in southern California to accommodate up to 25 LNG truck upfits per month to allow us to meet the increasing demand for LNG heavy-duty trucks at both the San Pedro Bay Ports as well as private fleets.

Westport's 2007 HPDI heavy-duty truck engine completed certification testing for US EPA 2007 and CARB 2007 standards. This new engine incorporates advanced emissions control technology introduced by Cummins with the base 2007 ISX diesel engine.

The Australian truck program commenced with delivery of trucks to Australia and an initial order for commercial delivery in March 2008. The first demonstration trucks made their first in-service trips in October.

Corporate & Technology Development Highlights

After the close of the quarter, Westport and OMVL SpA, of Pernumia, Italy announced the formation of an equity joint venture to design, produce and sell alternative fuel engines in the sub-5 litre class for global applications. The new, jointly controlled company will be headquartered in Vancouver, Canada and will exploit the global engineering, production and distribution strengths of OMVL and its parent company, SIT Group, to deliver engines worldwide.

Results Conference Call

Westport has scheduled a conference call for today, Tuesday, November 6, 2007 at 8:00AM Pacific Time (11:00AM Eastern Time) to discuss these results. 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: 1-866-425-6195 (North America Toll-Free) or 1-973-935-8752 (Toll-International). Alternatively, the web cast of the conference call can be accessed through the Westport website at www.westport.com by selecting "Investors" and then "Investor Overview" from the menu. Replays will be available in streaming audio on the same website shortly after the conclusion of the conference call.

To view Westport's full Second Quarter FY2008 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 business, operations, technology development or the environment in which it operates, which are based on Westport's estimates, forecasts and projections. 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.

Consolidated Financial Statements

(Expressed in Canadian dollars)

WESTPORT INNOVATIONS INC.

Three and six months ended September 30, 2007 and 2006



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

--------------------------------------------------------------------------
September 30, March 31,
2007 2007
--------------------------------------------------------------------------
(Unaudited)
Assets

Current assets:
Cash and cash equivalents $ 17,743 $ 1,702
Short-term investments 1,667 21,379
Accounts receivable 8,285 10,881
Inventories 3,820 2,816
Prepaid expenses 659 783
Current portion of future income tax asset 1,518 1,778
-------------------------------------------------------------------------
33,692 39,339

Long-term investments 34,606 13,115

Equipment, furniture and leasehold improvements 34,377 34,356
Accumulated depreciation (30,926) (30,493)
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3,451 3,863

Intellectual property 4,321 4,321
Accumulated amortization (3,675) (3,602)
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646 719

Deferred charges - 920

Future income tax asset 1,432 1,677

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$ 73,827 $ 59,633
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Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable and accrued liabilities $ 5,300 $ 6,030
Deferred revenue 160 365
Demand instalment loan 2,331 1,613
Current portion of long-term debt 6,816 6,816
Current portion of warranty liability 3,824 3,824
Obligation to issue warrants 4,000 -
-------------------------------------------------------------------------
22,431 18,648

Warranty liability 3,075 3,147

Obligation to issue warrants - 4,000

Long-term debt 23 13,781

Other long-term obligations 1,678 1,720

Joint Venture Partner's share of net assets from
joint venture 9,505 7,719

Shareholders' equity:
Share capital:
Authorised:
Unlimited common shares, no par value
Unlimited preferred shares in series, no
par value
Issued:
93,151,695 (2007 - 75,686,085) common shares 255,757 232,830
Other equity instruments 4,549 12,352
Additional paid in capital 5,170 5,301
Accumulated deficit (250,106) (239,865)
Accumulated other comprehensive income:
Unrealised gain on available for sale investments 21,745 -
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37,115 10,618

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$ 73,827 $ 59,633
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WESTPORT INNOVATIONS INC.
Consolidated Statements of Operations (unaudited)
(Expressed in thousands of Canadian dollars except share and per share
amounts)

--------------------------------------------------------------------------
Three months ended Six months ended
September 30 September 30
------------------------ ------------------------
2007 2006 2007 2006
--------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Product revenue $ 16,639 $ 10,327 $ 28,481 $ 17,971
Parts revenue 4,530 3,401 8,418 6,379
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21,169 13,728 36,899 24,350

Cost of revenue and
expenses:
Cost of revenue 15,116 8,951 25,508 15,536
Research and development 5,078 5,734 10,519 11,731
General and administrative 1,175 1,475 2,288 2,891
Sales and marketing 2,306 1,953 4,083 2,958
Foreign exchange loss
(gain) 458 (73) 997 (155)
Depreciation and
amortization 359 332 726 657
Bank charges, interest
and other 67 118 125 175
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24,559 18,490 44,246 33,793
--------------------------------------------------------------------------

Loss before undernoted (3,390) (4,762) (7,347) (9,443)

Interest on long-term debt
and amortization of
discount (216) (459) (986) (506)
Interest and other income 212 186 441 259
Gain on sale of interest in
subsidiary - 3,891 - 3,891
Gain on sale of long-term
investment - - 718 -
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Loss before income taxes
and Joint Venture
Partner's share of income
from joint venture (3,394) (1,144) (7,174) (5,799)

Income tax expense:
Current (58) - (125) -
Future (209) - (506) -
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(267) - (631) -

Loss before Joint Venture
Partner's share of income
from joint venture (3,661) (1,144) (7,805) (5,799)

Joint Venture Partner's
share of income from
joint venture (1,206) (696) (1,786) (1,460)

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Loss for the period (4,867) (1,840) (9,591) (7,259)
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Basic and diluted loss
per share $ 0.05 $ 0.03 $ 0.12 $ 0.10
Weighted average common
shares outstanding 88,535,739 75,196,048 82,175,661 74,917,305
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WESTPORT INNOVATIONS INC.
Consolidated Statements of Cash Flows (unaudited)
(Expressed in thousands of Canadian dollars)

--------------------------------------------------------------------------
Three months ended Six months ended
September 30 September 30
------------------------ ------------------------
2007 2006 2007 2006
--------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Cash provided by
(used in):

Operations:
Loss for the period $ (4,867) $ (1,840) $ (9,591) $ (7,259)
Items not involving
cash:
Depreciation and
amortization 359 332 726 657
Stock-based
compensation
expense 296 279 409 633
Accretion of TPC
warrants - 286 - 571
Future income tax
recovery 209 - 506 -
Change in deferred
lease inducements (64) (41) (121) (82)
Gain on sale of
interest in
subsidiary - (3,891) - (3,891)
Gain on sale of
long-term investments - - (718) -
Joint Venture Partner's
share of income from
joint venture 1,206 696 1,786 1,460
Interest on long-term
debt and amortization
of discount 216 459 986 506
Other - (40) - (40)
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(2,645) (3,760) (6,017) (7,445)

Change in non-cash
operating working
capital:
Accounts receivable 1,610 (1,058) 2,596 (1,027)
Inventory (753) (253) (1,004) 40
Prepaid expenses (21) (367) 124 (274)
Accounts payable and
accrued liabilities 18 1,879 (1,503) 2,280
Deferred revenue (169) 702 (125) 250
Warranty liability 493 305 (72) (23)
-------------------------------------------------------------------------
(1,467) (2,552) (6,001) (6,199)

Investments:
Purchase of equipment,
furniture, and leasehold
improvements (61) (281) (243) (483)
Proceeds on disposition
of equipment, furniture,
and leasehold
improvements - 3 - 3
Redemption (purchase) of
short-term investments,
net 16,803 (15,379) 19,712 (17,153)
Net proceeds from sale
of interest in
subsidiary - 3,891 - 3,891
Proceeds on disposition
of long-term investments - - 1,119 -
Deferred transaction
costs - (375) - (375)
-------------------------------------------------------------------------
16,742 (12,141) 20,588 (14,117)

Financing:
Share issue costs (31) (2) (31) (5)
Repayment of demand
instalment loan (147) (300) (282) (601)
Increase in demand
instalment loan 1,000 - 1,000 -
Repayment of long-term
debt obligations (19) (21) (37) (40)
Increase (repayment) of
bank loan - 7,346 - 7,346
Issuance of convertible
notes - 8,285 - 13,808
Finance costs incurred - (166) - (594)
Shares issued for cash 229 - 804 -
-------------------------------------------------------------------------
1,032 15,142 1,454 19,914
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Increase (decrease) in
cash and cash
equivalents 16,307 449 16,041 (402)
Cash and cash
equivalents, beginning
of period 1,436 195 1,702 1,046
--------------------------------------------------------------------------

Cash and cash
equivalents, end
of period $ 17,743 $ 644 $ 17,743 $ 644
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--------------------------------------------------------------------------

Supplementary
information

Interest paid $ 43 $ 63 $ 73 $ 108
Taxes paid 54 - 256 15
Non-cash transactions:
Shares issued on
exercise of performance
share units 153 - 288 510
Shares issued for
settlement of debt - 299 - 602
Shares issued on
conversion of debt 20,827 - 20,827 -
Shares issued for
settlement of interest
on convertible notes 553 - 553 -
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WESTPORT INNOVATIONS INC.
Consolidated Statements of Shareholders' Equity and Comprehensive Income
(Loss) (unaudited)
(Expressed in thousands of Canadian dollars except share amounts)

Three and six months ended September 30, 2007

--------------------------------------------------------------------------
Other Additional
Common Share equity paid in
shares capital instruments capital
--------------------------------------------------------------------------

Balance, March 31, 2007 75,686,085 $ 232,830 $ 12,352 $ 5,301

Transitional adjustment
on adoption of new
accounting policies for
financial instruments - - - -
--------------------------------------------------------------------------

Balance, April 1, 2007 75,686,085 232,830 12,352 5,301

Changes during the
period:
Issue of common shares
on exercise of
stock options 391,459 920 - (345)
Issue of common shares
on exercise of
performance share
units for no
additional
consideration 87,193 135 (135) -
Stock-based compensation - - 27 86
Unrealised loss on
available for sale
securities - - - -
Reclassification of net
realised gains on
available for sale
securities to net loss - - - -
Net loss - - - -

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Balance, June 30, 2007 76,164,737 $ 233,885 $ 12,244 $ 5,042

Changes during the
period:
Issue of common shares
on exercise of
stock options 153,286 370 - (141)
Issue of common shares
on exercise of
performance share
units for no
additional
consideration 79,183 153 (153) -
Issue of common shares
on conversion of
subordinated
convertible notes
(net of issue costs)
and accrued interest 16,754,489 21,349 (7,569) -
Stock-based compensation - - 27 269
Unrealised gain on
available for sale
securities - - - -
Net loss - - - -

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Balance, September 30,
2007 93,151,695 $ 255,757 $ 4,549 $ 5,170
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Accumulated
other Total
compre- share- Compre-
Accumulated hensive holders' hensive
deficit income equity loss
--------------------------------------------------------------------------

Balance, March 31, 2007 $ (239,865) $ - $ 10,618 $ -

Transitional adjustment
on adoption of new
accounting policies for
financial instruments 113 20,402 20,515 -
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Balance, April 1, 2007 (239,752) 20,402 31,133 -

Changes during the
period:
Issue of common shares
on exercise of
stock options - - 575 -
Issue of common shares
on exercise of
performance share
units for no
additional
consideration - - - -
Stock-based compensation - - 113 -
Unrealised loss on
available for sale
securities - (1,218) (1,218) (1,218)
Reclassification of net
realised gains on
available for sale
securities to net loss - (718) (718) (718)
Net loss (4,724) - (4,724) (4,724)

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Balance, June 30, 2007 $ (244,476) $ 18,466 $ 25,161 $ (6,660)

Changes during the
period:
Issue of common shares
on exercise of
stock options - - 229 -
Issue of common shares
on exercise of
performance share
units for no
additional
consideration - - - -
Issue of common shares
on conversion of
subordinated
convertible notes
(net of issue costs)
and accrued interest (763) - 13,017 -
Stock-based compensation - - 296 -
Unrealised gain on
available for sale
securities - 3,279 3,279 3,279
Net loss $ (4,867) - (4,867) (4,867)

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Balance, September
30, 2007 (250,106) $ 21,745 $ 37,115 $ (8,248)
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