Westport Innovations Inc.
TSX : WPT

Westport Innovations Inc.

November 02, 2005 09:00 ET

Westport Reports 100% Growth in Revenue in Second Fiscal 2006 Quarter

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Nov. 2, 2005) - Westport Innovations Inc. (TSX:WPT) today reported results for the three and six months ended September 30, 2005, and provided an update on its business operations.

Westport's consolidated net loss for the three months ended September 30, 2005 decreased by 43% to $3.3 million ($0.05 loss per share) compared to $5.8 million ($0.09 loss per share) for this quarter last year. The primary contributor to the lower loss was a $1.4 million improvement in contribution from Cummins Westport Inc. (CWI). Westport's consolidated revenues more than doubled from $6.0 million to $12.2 million. Depreciation and amortisation was also down by $1.0 million primarily because of assets becoming fully depreciated. For the six months ended September 30, 2005, Westport's consolidated net loss was down 25% and consolidated revenues up 54%.

Westport's consolidated cash used in operations before changes in working capital decreased by 61% to $1.5 million for the second quarter ended September 30, 2005, from $3.7 million this quarter last year. For the six months ended September 30, 2005, Westport used $4.5 million in cash for operations, $2.8 million for working capital purposes and $0.6 million for loan repayments. At September 30, 2005, Westport's cash and short term investments were $12.4 million.

"This quarter showed good progress on our strategic plan," said David Demers, Westport's Chief Executive Officer. "Each of our global initiatives shows satisfactory progress. We believe that with continued uncertainty around availability and cost of petroleum-based fuels, and with the increased focus on environmental compliance worldwide, natural gas as a transportation fuel will continue to grow."

Business Programs Update

Cummins Westport Inc.

During the quarter, South Coast Air Quality Management District awarded $690,000 in funding to Cummins Westport for the development of its ISL G natural gas engine. Combined with the $600,000 from the DOE's National Renewable Energy Laboratory, the money will be used to fund development of the new ISL G, which will be introduced in 2007 but will be capable of meeting Environmental Protection Agency and California Air Resources Board 2010 standards at launch.

Cummins Westport leveraged its access to China's export markets through Chinese bus manufacturers during the quarter, with an order from Bangladesh and a delivery to Manila in the Philippines. In North America, CWI delivered engines that will go into bus chassis destined for San Diego County and LA Metro, both in southern California.

After the close of the quarter, Cummins Westport, through Cummins Inc., completed a manufacturing agreement in China. Dongfeng Cummins Engine Company, a joint venture of Cummins Inc. and Dongfeng Motors of China, will produce the CWI B Gas International natural gas engine at its manufacturing facility in Xiangfan, Hubei Province. The ability to manufacture locally will allow CWI to access a wider market and to compete with existing lower priced Chinese products while maintaining quality.

Westport Program Highlights

In August, Westport announced its intent to form a joint venture company with Beijing Tianhai Industry Company (BTIC) of China. The joint venture company will market and sell liquefied natural gas fuel tanks for on-board transportation applications. Joint venture tanks are planned to be available for sale in 2006.

During the quarter, Westport also announced its intent to form an alliance with Weichai Power Co. Ltd. of China to cooperate on the development, marketing and sales of gaseous-fuelled engines and vehicles for the Chinese market. With 70% market share, Weichai Power is the dominant Chinese engine manufacturer in the Chinese heavy-duty market.

"We continue to see China as a key market for Westport's technologies," said Phil Hodge, Westport's Vice-President responsible for China. "Our strategy is to leverage partners like BTIC and Weichai to allow us to more quickly introduce our technologies to a growing Chinese market facing both environmental and energy security challenges."

Westport was named fourth on Deloitte's Canadian Technology Fast 50, an annual recognition of the fastest growing technology companies in Canada. Business in Vancouver also recognized Westport as a leader in revenue growth, naming Westport as the third fasting growing company in British Columbia this year.

Just after the close of the quarter, Westport reported a new agreement and commitment from the City of San Francisco and Norcal Waste Systems for heavy-duty truck demonstration in its recycling and disposal fleet through to 2011. The agreement includes demonstration and deployment of Westport's most advanced natural gas technology for heavy-duty trucks. Norcal will upgrade three of its 13 trucks currently operating on Westport's first-generation technology to Westport's latest technology, enhancing performance, reducing emissions, and improving fuel economy and reliability.

Westport reported in October the launch and announcement of additional funding for the Integrated Waste Hydrogen Utilization Project (IWHUP), a consortium effort led by Sacre-Davey Innovations Inc. The $18.3 million Vancouver-based project includes $12.2 million of funding combined from the Hydrogen Early Adopters (h2EA) program, Sustainable Development Technology Canada, and Natural Resources Canada's Canadian Transportation Fuel Cell Alliance. Westport will convert four Cummins Westport-powered buses to run on a blend of hydrogen and compressed natural gas (HCNG). The buses will be part of a TransLink bus technology and alternative fuel test and evaluation program in Greater Vancouver.

Results Conference Call

Westport has scheduled a conference call for Wednesday, November 2, 2005 at 8:00 am (Pacific Time) to discuss the quarterly 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: 1-800-936-9754 (North America Toll-Free) or 1-973-935-2048 (International).

Alternatively, the webcast 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 financials, please point your browser to the following link: www.westport.com/investor/financial.php.

About Westport Innovations Inc.

Westport Innovations Inc. is the leading developer of environmental technologies that allow engines to operate on clean-burning fuels such as natural gas, hydrogen, and hydrogen-enriched natural gas (HCNG). Westport has technology development alliances in place with Cummins, Ford, MAN, BMW, and Isuzu, as well as an ownership interest in Clean Energy, the largest provider of natural gas for vehicles in North America. Cummins Westport Inc., Westport's joint venture with Cummins Inc., manufactures and sells the world's widest range of low-emissions alternative fuel engines for commercial transportation applications such as trucks and buses.

Note: This document contains forward-looking statements about Westport's business, operations, technology development or to 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.



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

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September 30, March 31,
2005 2005
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(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 486,855 $ 319,806
Short-term investments 11,892,981 19,970,877
Accounts receivable 7,867,217 6,040,026
Inventory 1,247,459 1,481,513
Prepaid expenses 679,886 552,231
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22,174,398 28,364,453

Long-term investments 9,133,876 9,133,876

Equipment, furniture and leasehold
improvements 33,519,255 33,525,179
Accumulated depreciation (29,021,074) (27,750,304)
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4,498,181 5,774,875

Intellectual property 4,321,394 4,321,394
Accumulated amortisation (3,386,422) (3,152,978)
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934,972 1,168,416
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$ 36,741,427 $ 44,441,620
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $ 3,013,223 $ 4,466,661
Deferred revenue 2,699,956 2,639,316
Demand instalment loan 1,775,702 2,252,720
Current portion of long-term debt
obligations 93,751 104,975
Current portion of warranty liability 3,515,598 3,665,175
Current portion of financial instruments 3,528,632 335,745
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14,626,862 13,464,592

Long-term debt and other long-term
obligations 1,406,471 1,545,064

Warranty liability 3,530,730 3,063,678

Joint Venture Partner's share of income
from joint venture 893,422 68,870

Financial instruments - 2,621,458

Shareholders' equity:
Share capital:
Authorised:
Unlimited common shares, no par value
Unlimited preferred shares in series,
no par value
Issued:
74,272,651 (2005 - 73,964,088) common
shares 230,979,873 230,378,934
Other equity instruments 1,939,099 2,078,460
Additional paid in capital 4,604,311 2,918,568
Deficit (221,239,341) (211,698,004)
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16,283,942 23,677,958
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$ 36,741,427 $ 44,441,620
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WESTPORT INNOVATIONS INC.
Consolidated Statements of Operations and Deficit
(Expressed in Canadian dollars)

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Three months ended Six months ended
September 30 September 30
---------------------------- ----------------------------
2005 2004 2005 2004
--------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Product
revenue $ 9,094,348 $ 3,617,359 $ 16,100,613 $ 10,098,594
Parts
revenue 3,134,237 2,363,745 6,641,754 4,706,657
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12,228,585 5,981,104 22,742,367 14,805,251

Cost of
revenues
and
expenses:
Cost of
revenue 7,933,715 4,205,200 15,737,907 10,729,997
Research and
development 4,077,639 4,103,632 9,004,809 9,137,244
General and
admini-
strative 907,696 1,450,442 2,449,627 2,975,314
Sales and
marketing 1,496,357 875,041 2,794,517 1,817,713
Foreign
exchange
gain (124,217) (388,178) (43,744) (321,265)
Depreciation
and
amortisation 578,000 1,566,125 1,652,398 3,224,603
Bank charges
and interest
on capital
leases 64,807 75,813 114,275 147,377
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14,933,997 11,888,075 31,709,789 27,710,983
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Loss before
undernoted (2,705,412) (5,906,972) (8,967,422) (12,905,732)

Interest,
investment
and other
income 134,775 70,458 250,637 160,644

Joint Venture
Partner's
share of
income from
joint venture (758,117) - (824,552) -

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Loss for the
period (3,328,754) (5,836,513) (9,541,337) (12,745,088)

Deficit,
beginning
of period
as
reported (217,910,587) (192,397,966) (211,698,004) (182,996,238)

Cumulative
adjustment
for change
in
accounting
for stock-
based
compensation - - - (2,493,153)
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Deficit,
beginning of
period as
adjusted (217,910,587) (192,397,966) (211,698,004) (185,489,391)
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Deficit,
end of
period $(221,239,341) $(198,234,479) $(221,239,341) $(198,234,479)
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Basic and
diluted
loss per
share $ 0.05 $ 0.09 $ 0.13 $ 0.20

Weighted
average
common
shares
outstanding 74,272,651 65,078,800 74,155,215 64,876,888

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

--------------------------------------------------------------------
Three months ended Six months ended
September 30 September 30
---------------------------- ----------------------------
2005 2004 2005 2004
--------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash provided
by (used in):

Operations:
Loss for
the
period $ (3,328,754) $ (5,836,513) $ (9,541,337) $ (12,745,088)
Items not
involving
cash:
Depreciation
and
amortisation 578,000 1,566,125 1,652,398 3,224,603
Stock based
compensation
expense 349,037 215,537 2,147,323 472,582
Accretion
of TPC
warrants 285,714 285,715 571,428 571,428
Change in
deferred
lease
inducements (41,019) 55,962 (71,932) 110,478
Net gain on
disposal of
equipment,
furniture,
and leasehold
improvements (63,945) - (63,945) -
Joint Venture
Partner's
share of
income from
joint
venture 758,117 - 824,552 -
------------------------------------------------------------------
(1,462,850) (3,713,175) (4,481,513) (8,365,997)
Change in
non-cash
operating
working
capital:
Accounts
receivable (792,332) 74,906 (1,827,191) 1,332,629
Inventory 67,270 (419,242) 234,054 (419,242)
Prepaid
expenses (286,671) (223,884) (127,655) (165,966)
Accounts
payable
and accrued
liabilities 267,931 1,212,350 (1,453,441) 429,974
Deferred
revenue 160,742 - 60,640 -
Warranty
liability 106,055 (577,047) 317,475 (287,933)
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(1,939,855) (3,646,092) (7,277,631) (7,476,535)
Investments:
Purchase of
equipment,
furniture,
and
leasehold
improvements (79,239) (94,578) (164,001) (219,190)
Proceeds on
disposition
of equipment,
furniture,
and leasehold
improvements 85,687 - 85,687 -
Purchase of
short-term
investments,
net 2,276,458 (11,290,680) 8,077,896 (7,711,821)
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2,282,906 (11,385,258) 7,999,582 (7,931,011)
Financing:
Issue of
common
shares,
net of
issuance
costs - 15,156,755 - 15,282,436
Repayment
of demand
installment
loan (238,509) (238,509) (477,018) (477,018)
Repayment
of long-
term debt
obligations (38,865) (108,706) (77,884) (169,858)
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(277,374) 14,809,540 (554,902) 14,635,560
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Increase
(decrease)
in cash and
cash
equivalents 65,677 (221,810) 167,049 (771,986)

Cash and cash
equivalents,
beginning of
period 421,178 886,462 319,806 1,436,638
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Cash and cash
equivalents,
end of
period $ 486,855 $ 664,652 $ 486,855 $ 664,652
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Supplementary
information

Interest
paid $ 44,705 $ 46,134 $ 70,911 $ 95,658

Non-cash
transactions:
Shares
issued on
exercise of
performance
share units - - 600,939 1,003,629
Shares to be
issued on
acquisition
of intellectual
property and
other intangible
assets - - - 1,551,426

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