Westport Innovations Inc.
TSX : WPT

Westport Innovations Inc.

August 03, 2006 09:00 ET

Westport Reports First Quarter Fiscal 2007 Financial Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Aug. 3, 2006) - Westport Innovations Inc. (TSX:WPT), a global leader in gaseous-fuelled power technologies, today reported financial results for the first quarter of fiscal year 2007 ended June 30, 2006 (FY2007), and provided an update on operations.

Financial Highlights

- Consolidated product revenues increased 9% to $7.6 million in Q1 FY2007 from $7.0 million in Q1 FY2006. Consolidated total revenues increased 1% to $10.6 million in Q1 FY2007 compared to $10.5 million for Q1 FY2006, due to a decrease in parts revenue compared to last year.

- Excluding foreign exchange effects, product revenues increased by 22% compared to last year.

- Consolidated gross margins improved to 38% in Q1 FY2007 compared to 26% in Q1 FY2006. The improved gross margins were primarily due to improved product reliability and favourable product mix.

- Cash used in operations before changes in working capital increased to $3.7 million compared to $3.0 million for the same period last year primarily due to timing of government funding of research and development activities, which increased to support new product launch activities.

- Net loss improved 13% to $5.4 million ($0.07 per share) in Q1 FY2007 from $6.2 million ($0.08 per share) in Q1 FY2006.

- Subsequent to the end of the quarter, Westport substantially completed two major financial transactions, a strategic investment from Perseus, L.L.C., and a non-dilutive reorganization and partial sale of one of its subsidiaries, Westport Research Inc., providing the Company with access to over $32 million in new financing.

Q1 FY2007 Business Highlights

- BTIC Westport Joint Venture established - Westport and Beijing Tianhai Industry Co. Ltd. ("BTIC") of Beijing, China completed the formation of a 50:50 owned, independent joint venture company to be headquartered in Beijing. BTIC Westport will market liquefied natural gas (LNG) fuel tanks designed by Westport for vehicles and produced in BTIC's new Beijing cryogenic facility. The joint venture will sell tanks for installation on any vehicle, regardless of the natural gas engine manufacturer. Through the 50:50 joint venture agreement and related license and supply agreements, BTIC and Westport will share equally in the profits on products developed and sold by the joint venture. Product sales are forecast to begin this fiscal year.

- Exclusive LNG pump supply agreement with Cryostar SAS - Westport licensed its LNG automotive pump technology on an exclusive basis to Cryostar for use in the heavy-duty automotive market, and has agreed to source all HPDI LNG fuel pumps for the heavy duty automotive market from Cryostar. Cryostar will also have the right to manufacture and sell pumps incorporating Westport's LNG pump technology, to other customers.

- San Pedro Ports Clean Air Action Plan - the Ports of Los Angeles and Long Beach California jointly issued the San Pedro Bay Ports Clean Air Action Plan, a comprehensive five year plan aimed at significantly reducing the health risks posed by air pollution from port-related activities including trucks, ships, trains, terminal equipment and harbour craft. The Plan included specific actions related to significantly reducing the emissions of the approximately 41,000 heavy-duty trucks that service both ports.

- John Fox and Kenneth Socha, both of Perseus, L.L.C., were elected to the Westport Board of Directors on July 20, 2006.

"CWI has continued to perform profitably to expectations, and the Westport team is focused on ensuring all resources, including people, partners and systems, are in place to secure and support the expected commercial delivery demands for HPDI heavy-duty LNG trucks," stated Michael Gallagher, President and Chief Operating Officer of Westport. "We are gearing up to deliver between 100 and 125 heavy duty LNG trucks in the next several months and we are prepared. Beyond that, as indicated by recent release of the Los Angeles and Long Beach Ports' Clean Air Action Plan, we are also preparing for significantly higher potential demand over the next few years. We intend to build our supply chain and partner relationships to provide high-quality and high performance products to satisfy the prospective customers in this large emerging market opportunity. By forming an LNG tank joint venture with BTIC and signing an exclusive LNG pump supply agreement with Cyrostar SAS, we have secured long term partner relationships to strengthen these two critical components of our supply chain and have ensured production readiness of those technologies for the mass market."

First Quarter Fiscal Year 2007 Financial Results

Westport's consolidated revenues in the first quarter of fiscal 2007 ended June 30, 2006 were $10.6 million, compared to $10.5 million for the same period in fiscal 2006. Net loss for the quarter was $5.4 million ($0.07 per share) compared to $6.2 million ($0.08 per share) for the same period in fiscal 2006. Cummins Westport Inc. continued to perform well, contributing $0.8 million in the quarter.

The $0.8 million improvement in net loss was attributable primarily to increased gross margins of $4.0 million compared to $2.7 million in the same period last year and $0.7 million in lower depreciation and amortization offset by a $1.1 million increase in net research and development expenses. Research and development expenses, net of government funding, increased primarily because of higher spending associated with preparing heavy duty on- and off-engine systems for commercialization and lower government funding with Westport's Contribution Agreement with Technology Partnerships Canada ("TPC") having expired at the end of March 31, 2006. Westport and TPC are in discussions to extend the agreement and the Company continues to make progress claims. However, no further funding will be recognized until a signed extension is in place.

Cash used in operations before changes in working capital was $3.7 million compared to $3.0 million in the same period in the prior year as a result of the lower government funding.

Cash and short term investments as of June 30, 2006 totaled $8.8 million. During the quarter, the Company entered into two separate transactions to position itself for the commercialization of its products in key markets around the world. It secured a strategic investment from Perseus, L.L.C., and announced a non-dilutive reorganization and partial sale of one of its wholly owned subsidiaries, Westport Research Inc. ("Research") to Matco Capital Ltd. Westport received $5.5 million from Perseus prior to June 30 and the balance of the first tranche of $8.3 million on July 14th. The second tranche of $8.3 million to be used for new business ventures was also approved at the Company's Annual General Meeting on July 20, 2006 and may be triggered 180 days from approval if certain business milestones are met. As part of its agreement with Matco, the Company has substantially completed its reorganization of Research and anticipates disposing of 45% of the reorganized subsidiary to Matco for approximately $4.0 million. In addition, Matco will facilitate the establishment of a non-recourse loan for a minimum $7 million. The transaction was expected to close on or before July 31, 2006 but has been extended by mutual agreement to allow for finalizing the credit facility.

Results Conference Call

Westport has scheduled a conference call for today, Thursday, August 3, 2006 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: 1-888-802-8578 (North America Toll-Free) or 1-973-633-1010 (Toll-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 complete Q1 FY2007 financials and Management's Discussion & Analysis, 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 alternative fuel power 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 Cryostar, Cummins, Ford, 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. BTIC Westport Inc., Westport's joint venture with Beijing Tianhai Industry Co. Ltd., manufactures and sells liquefied natural gas (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.



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

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June 30, March 31,
2006 2006
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(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 195,300 $ 1,045,752
Short-term investments 8,560,220 6,786,182
Accounts receivable 6,105,748 6,136,760
Inventory 560,231 852,945
Prepaid expenses 628,362 721,583
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16,049,861 15,543,222

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

Equipment, furniture and
leasehold improvements 34,035,497 33,840,134
Accumulated depreciation (30,162,696) (29,879,961)
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3,872,801 3,960,173

Intellectual property 4,321,394 4,321,394
Accumulated amortization (3,494,045) (3,458,171)
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827,349 863,223

Deferred financing costs 428,001 -
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$ 30,311,888 $ 29,500,494
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $ 3,670,735 $ 3,270,553
Deferred revenue 973,634 1,425,328
Demand instalment loan 2,206,676 2,506,935
Current portion of other
long-term obligations 170,256 169,227
Current portion of warranty
liability 2,969,273 3,117,881
Current portion of financial
instruments 4,083,115 4,100,060
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14,073,689 14,589,984

Long-term debt 3,026,592 -

Other long-term obligations 783,571 844,990

Warranty liability 2,472,944 2,652,221

Joint Venture Partner's share of
net assets of joint venture 2,425,880 1,661,664

Shareholders' equity:
Share capital:
Authorised:
Unlimited common shares,
no par value
Unlimited preferred shares in
series, no par value
Issued:
74,949,385 (2006 - 74,391,779)
common shares 231,990,192 231,180,069
Other equity instruments 4,655,611 2,359,483
Additional paid in capital 4,861,352 4,770,252
Deficit (233,977,943) (228,558,169)
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7,529,212 9,751,635
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$ 30,311,888 $ 29,500,494
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WESTPORT INNOVATIONS INC.
Consolidated Statements of Operations and Deficit
(Expressed in Canadian dollars)


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Three months ended
June 30
--------------------------------
2006 2005
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(Unaudited) (Unaudited)

Product revenue $ 7,643,553 $ 7,006,265
Parts revenue 2,978,034 3,507,517
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10,621,587 10,513,782

Cost of revenues and expenses:
Cost of revenue 6,584,777 7,804,192
Research and development 5,997,601 4,927,170
General and administrative 1,415,309 1,541,931
Sales and marketing 1,004,790 1,298,160
Foreign exchange (gain) loss (81,432) 80,473
Depreciation and amortization 324,991 1,074,398
Bank charges and interest 104,162 49,468
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15,350,198 16,775,792
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Loss before undernoted (4,728,611) (6,262,010)

Interest, investment and other income 73,053 115,862

Joint Venture Partner's share of
income from joint venture (764,216) (66,435)
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Loss for the period (5,419,774) (6,212,583)

Deficit, beginning of period (228,558,169) (211,698,004)
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Deficit, end of period $ (233,977,943) $ (217,910,587)
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Basic and diluted loss per share $ 0.07 $ 0.08

Weighted average common shares
outstanding 74,635,499 74,036,488

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

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Three months ended
June 30
--------------------------------
2006 2005
--------------------------------------------------------------------
(Unaudited) (Unaudited)
Cash provided by (used in):

Operations:
Loss for the period $ (5,419,774) $ (6,212,583)
Items not involving cash:
Depreciation and amortization 324,991 1,074,398
Stock-based compensation expense 353,849 1,798,286
Accretion of TPC warrants 285,714 285,714
Change in deferred lease
inducements (41,019) (30,913)
Joint Venture Partner's share
of income from joint venture 764,216 66,435
Interest on long-term debt and
amortization of discount 46,860 -
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(3,685,163) (3,018,663)
Change in non-cash operating
working capital:
Accounts receivable 31,012 (1,034,859)
Inventory 292,714 166,784
Prepaid expenses 93,221 159,016
Accounts payable and accrued
liabilities 400,182 (1,721,372)
Deferred revenue (451,694) (100,102)
Warranty liability (327,884) 211,420
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(3,647,612) (5,337,776)
Investments:
Purchase of equipment, furniture
and leasehold improvements (201,748) (84,762)
Short-term investments, net (1,774,038) 5,801,438
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(1,975,786) 5,716,676
Financing:
Share issue costs (2,423) -
Repayment of demand instalment loan (300,259) (238,509)
Repayment of long term-debt and
other long-term obligations (19,371) (39,019)
Issuance of convertible notes 5,523,000 -
Finance costs incurred (428,001) -
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4,772,946 (277,528)
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Increase (decrease) in cash and
cash equivalents (850,452) 101,372

Cash and cash equivalents,
beginning of period 1,045,752 319,806
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Cash and cash equivalents,
end of period $ 195,300 $ 421,178
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Supplementary information

Interest paid $ 45,212 $ 26,206
Non-cash transactions:
Shares issued on exercise of
performance share units 509,889 600,939
Issue of shares for settlement
of financial instruments 302,660 -

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