Westport Innovations Inc.

Westport Innovations Inc.

June 08, 2007 09:01 ET

Westport Reports Fourth Quarter & Fiscal 2007 Financial Results

Fiscal 2007 Revenues Increase 39% - Net Loss Improves 33%

VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 8, 2007) - Westport Innovations Inc. (TSX:WPT), a global leader in gaseous-fuelled power technologies, today reported financial results for the fourth quarter and fiscal year ended March 31, 2007 (FY2007), and provided an update on operations.

"Fiscal 2007 saw the achievement of several important milestones in the development of Westport's long term strategy," said David Demers, Westport's Chief Executive Officer. "Our first commercial joint venture, Cummins Westport Inc., generated significant profit contributions as a result of strong global growth and a scalable, low-cost business model. Westport's second major commercial program, LNG systems for heavy-duty trucks, saw the public release of the Ports of Los Angeles and Long Beach Clean Air Action Plan to put 5,300 LNG trucks on the road over the next four years, providing a substantial market foundation for product launch in 2007. We also entered into new alliances and supply relationships during the year to improve our product offerings, lower costs, and increase our potential market reach. In addition, we completed two major financial transactions raising $33 million in capital, and negotiated a two year extension to our TPC agreement to support our strategic plan. We look forward to continued strong growth in the future."

Fourth Quarter Fiscal 2007 Financial and Business Highlights

- Consolidated quarterly revenues set a second consecutive record, at $19.3 million compared to $12.2 million for the fourth quarter of fiscal 2006, and compared to $16.8 million for Q3 FY2007.

- Fourth quarter FY2007 net income of $1.7 million ($0.02 earnings per share) compared to a net loss of $3.7 million ($0.05 loss per share) for fourth quarter of fiscal year 2006. The $5.4 million improvement was primarily the result of a $4.2 million gain recognized on the dilution of our interest in Westport Research Inc. (WRI) and future tax benefits recognized by CWI.

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

- The Ports of Los Angeles and Long Beach, California (the Ports) issued their first request for proposals under their Clean Air Action Plan with funding available for up to 150 new LNG trucks. In their responses, Port operators requested funding for a total of 170 trucks.

- Cummins Westport (CWI) joint venture recorded its 10th consecutive quarter of profitability, earning a record US$4.4 million during the quarter before taxes. Profitable since its reorganization in December 2003, CWI also recognized a net future tax benefit of US$2.8 million in the quarter for total contribution of US$7.2 million after taxes.

- Agreement with Industry Canada's Industrial Technologies Office (formerly Technology Partnerships Canada, or TPC) extended by two years, resulting in recognition of $2.2 million in funding claims for FY2007, deferral of the commencement of the royalty period resulting in the reversal of royalty amounts of $1 million accrued in previous quarters, and making estimated funding of $1.2 million available for fiscal year 2008.

- Perseus, L.L.C. second tranche of convertible notes and associated warrants issued in January 2007 for proceeds of $8.3 million, following on from the first Perseus investment of $13.8 million in June 2006.

- Cash, cash equivalents and short term investments at March 31, 2007 was $23.1 million, compared to $7.8 million a year ago.

- Subsequent to the year end, Clean Energy Fuels of Seal Beach, California completed its initial public offering (IPO) and listed its shares on the NASDAQ exchange with the symbol "CLNE". Westport holds approximately 2.1 million shares of CLNE with a value of US$12 per share as of the date of the IPO.

Full Year Fiscal 2007 Financial & Business Highlights

- Over 2,000 units delivered in fiscal 2007.

- Consolidated annual revenues increased 39% to $60.5 million in fiscal 2007 compared to $43.6 million for fiscal 2006. Since fiscal 2005, consolidated annual revenue has grown by more than 33% per year compounded. During FY2007, the Deloitte Fast 50 program recognized Westport as the fastest growing technology company in Canada and also the second fastest in North America, as measured by five year revenue growth.

- Gross margin increased 48% to $22.1 million in fiscal 2007 compared to $14.9 million for fiscal 2006.

- Annual net loss decreased to $11.3 million ($0.15 per share) in fiscal 2007 compared to $16.9 million ($0.23 per share) for fiscal 2006. Included in the fiscal 2007 annual net loss is an $8.1 million gain recognized on the partial disposition and reorganization of WRI, which resulted in cash proceeds raised of $11.5 million.

- Westport's 50% share of CWI net contribution before taxes was up 175% from $1.6 million to $4.4 million and up 280% including tax recovery.

- U.S. Environmental Protection Agency (EPA) and California Air Resources Board (CARB) certified Westport's 2006 model year LNG system for heavy-duty trucks.

- Westport's joint venture with Beijing Tianhai Industry Co. Ltd. (BTIC) to produce LNG storage tanks at BTIC's facilities in Beijing has been approved by the Chinese government. LNG tank production at BTIC started and tanks are now being delivered to Westport truck customers in California.

- Award of AUD1.36 million (C$1.27 million) received from the Australian government for a project to demonstrate and evaluate the use of Westport LNG heavy-duty highway trucks in Australia.

- Cummins Westport received the first orders for its advanced technology ISL G engine from Sacramento Regional Transit District and the Orange County Transportation Authority.

Fourth Quarter & Fiscal Year 2007 Financial Results in Detail

Westport's revenues in the fourth quarter and fiscal year ended March 31, 2007 were $19.3 million and $60.5 million respectively, compared to $12.2 million and $43.6 million for the same periods in fiscal 2006. The 39% increase in annual revenues was primarily due to increased CWI engine shipments (up 50%) and the delivery of our first LNG systems for heavy-duty trucks. Product sales growth was offset by a 5% decrease in the US dollar exchange rate. In US dollar terms, revenue growth was 44%.

Gross margin percentages improved from 34% to 37% in the year principally due to stronger sales of larger engines and stronger product quality results, with warranty claims experience better than expected at CWI.

Westport recorded its first quarterly profit of $1.7 million ($0.02 earnings per share) during the fourth quarter of fiscal 2007 compared to a net loss of $3.7 million ($0.05 loss per share) for the fourth quarter of fiscal 2006. Several non-cash items, including non-recurring items, affected profitability. In the quarter, Westport recorded a $4.2 million gain on the dilution of its interest in WRI from 55% to 16% and CWI recognized $3.5 million in future income tax benefits.

Annual net loss decreased 33% to $11.3 million ($0.15 per share) in fiscal 2007 compared to $16.9 million ($0.23 per share) for fiscal 2006. Although the fiscal year results showed strong growth in gross margin contribution, operating results were also affected by increased investment in product development and marketing during the year as both CWI and Westport prepared to launch major new products in 2007. Research and development expenses increased by $5 million compared to fiscal 2006, partly as a result of sharply lower government funding during the year. For the full year, Westport recognized $8.1 million on the partial sale and reorganization of WRI. Interest and amortization of discount expense associated with the convertible notes issued to Perseus was $1.7 million in the year.

Cash provided from operations before changes in working capital in the fourth quarter was $0.6 million compared to $2 million cash used in the same period last year. For the fiscal year ended March 31, 2007, cash used in operations before changes in working capital was $11.3 million, up from $8.7 million in FY2006. Cash used for working capital purposes increased by $3.1 million in the year due to increases in accounts receivable and inventory (primarily a build up of LNG truck components), offset by an increase in accounts payable. Cash and short term investments as of March 31, 2007 totalled $23.1 million.

During the fiscal year, two separate transactions, the Perseus investment and the reorganization and partial sale of WRI, were completed to position ourselves for the commercialization of products in key markets around the world. These transactions raised over $33 million.

Cummins Westport Inc. (CWI) Business Unit Highlights

CWI, a 50:50 global joint venture between Westport and Cummins Inc., continues to maintain its industry-leading position in product performance, reliability, and customer service for mid-range on-highway natural gas and liquefied petroleum gas (LPG) engines. For the fiscal year ended March 31, 2007 in US dollars, CWI revenues grew 42.5% to US$50.9 million, and pre-tax earnings grew 173% to US$7.7 million as a result of strong growth in product sales around the world. During fiscal 2007, CWI substantially completed work on the ISL G, due for commercial launch this month. The ISL G is a next generation natural gas engine that meets U.S. EPA nitrogen oxide (NOx) emission regulations for 2010, with over 80% lower NOx than current natural gas engines, 34% more torque at idle, and improved fuel economy.

Westport Global Heavy Duty Business Unit Highlights

A central pillar of Westport's strategy is to diversify its revenue base with new products that allow major sectors of the engine market to have the option to use cleaner, economical natural gas as fuel without compromising performance and reliability. After extensive development and field trials, Westport introduced its first commercial LNG heavy-duty truck product based on the industry-leading Cummins ISX 15-litre engine in a Kenworth truck chassis.

Westport's immediate market focus is the south-western United States and Australia, where LNG infrastructure and fuel partnerships are established and there is increasing demand for alternative fuel trucks operating from central locations, such as ports and goods distribution centres. In addition to the recently disclosed commitment from the South Coast Air Quality Management District (SCAQMD) to fund the immediate integration of 20 LNG trucks into service at the Ports, Westport has confirmed orders for 22 LNG systems with customers including Pacific Gas & Electric, Los Angeles World Airports, Prometheus Energy, the City of Los Angeles, and Clean Energy Fuels.

In November 2006, the San Pedro Bay Ports Clean Air Action Plan was approved by both Ports. One of the major goals of the five year Clean Air Action Plan is to reduce emissions of particulate matter and NOx from trucks and drayage equipment servicing the Ports. The plan announced the intention to deploy over 5,300 LNG trucks at the Ports by 2011. On February 2, 2007, the Port of Los Angeles issued the first US$22 million RFP to purchase and integrate LNG-powered trucks into truck fleets involved in Port drayage. Financial incentives will be for up to $144,000 per truck. The Ports' LNG truck program's primary purpose is to provide financial incentives to fleets servicing the Ports to purchase LNG trucks, and to develop LNG fuelling and maintenance infrastructure for LNG trucks entering Port service.

Australia is the second major market focus for Westport's Heavy Duty Business Unit. In fiscal 2007, Westport received an award of AUD1.36 million (C$1.27 million) from the Australian government's Alternative Fuels Conversion Programme (AFCP) for a project to demonstrate and evaluate the use of LNG as a fuel for heavy-duty highway trucks in Australia. The AFCP is an Australian government funding programme which aims to reduce greenhouse gas (GHG) emissions from heavy commercial vehicles such as buses and trucks. Westport's heavy-duty LNG trucks have demonstrated significant reductions in GHG emissions compared to diesel in previous demonstrations. If the Australian demonstration program yields the expected results, Westport plans to launch a commercial version of this product in the first half of 2008.

Corporate Development and Technology Groups

Westport's Corporate Development group, led by Nicholas Sonntag, focuses on developing emerging opportunities and market creation activities around the world. The group is tasked with developing new paths to market through OEM and other strategic relationships, identifying licensing opportunities for non-core technologies, and capturing value through the supply chain.

Westport's Technology and Engineering group, led by Westport's Chief Technology Officer, Dr. Patric Ouellette, is focused on maintaining Westport's leadership in combustion technology, fuels management and storage, and mapping the future direction of Westport's product development work. As of March 31, 2007, Westport held 41 issued U.S. patents and 2 allowed U.S. patents, in addition to corresponding issued patents or pending patent applications in countries other than the United States.

Results Conference Call

Westport has scheduled a conference call for today, Friday, June 8, 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 FY2007 financials, please point your browser to the following link: http://www.westport.com/investor/financial.php.

2007 Annual Meeting of Shareholders

The Westport 2007 Annual Meeting of Shareholders will be held on Thursday, July 19, 2007 at 2:00 PM (Pacific Time) at the Delta Vancouver Airport Hotel, 3500 Cessna Drive, Richmond, British Columbia.

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. www.westport.com

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 Balance Sheets
(Expressed in Canadian dollars)

March 31, 2007 and 2006

2007 2006


Current assets:
Cash and cash equivalents $ 1,702,350 $ 1,045,752
Short-term investments 21,378,852 6,786,182
Accounts receivable 10,880,580 6,136,760
Inventories 2,815,993 852,945
Prepaid expenses 783,297 721,583
Current portion of future income tax
asset 1,778,400 -
39,339,472 15,543,222

Long-term investments 13,114,807 9,133,876

Equipment, furniture and leasehold
improvements 3,862,870 3,960,173

Intellectual property 718,913 863,223

Deferred charges 920,163 -

Future income tax asset 1,677,244 -

$ 59,633,469 $ 29,500,494

Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable and accrued liabilities $ 6,030,223 $ 3,270,553
Deferred revenue 364,884 1,425,328
Demand instalment loan 1,612,917 2,506,935
Current portion of long-term debt 6,816,418 169,227
Current portion of warranty liability 3,823,758 3,117,881
Current portion of financial instruments - 4,100,060
18,648,200 14,589,984

Warranty liability 3,147,381 2,652,221

Financial instruments 4,000,000 -

Long-term debt 13,780,832 150,433

Other long-term obligations 1,719,534 694,557

Joint Venture Partner's share of net
assets from joint venture 7,719,001 1,661,664

Shareholders' equity:
Share capital:
Unlimited common shares, no par value
Unlimited preferred shares in series, no
par value
75,686,085 (2006 - 74,391,779) common
shares 232,830,193 231,180,069
Other equity instruments 12,352,113 2,359,483
Additional paid in capital 5,300,955 4,770,252
Deficit (239,864,740) (228,558,169)
10,618,521 9,751,635

$ 59,633,469 $ 29,500,494

Consolidated Statements of Operations and Deficit
(Expressed in Canadian dollars)

Years ended March 31, 2007 and 2006

2007 2006

Product revenue $ 47,195,072 $ 29,932,153
Parts revenue 13,285,360 13,620,224
60,480,432 43,552,377

Cost of revenue and expenses:
Cost of revenue 38,381,347 28,642,133
Research and development 21,890,956 16,938,502
General and administrative 6,881,529 4,866,227
Sales and marketing 7,077,471 5,849,127
Foreign exchange gain (102,416) (92,591)
Depreciation and amortization 1,409,741 2,752,409
Bank charges, interest and other 408,172 313,896
75,946,800 59,269,703

Loss before undernoted (15,466,368) (15,717,326)

Interest on long-term debt and
amortization of discount (1,718,400) -
Interest and other income 763,614 449,955
Gain on sale of interest in subsidiary 8,120,485 -

Loss before income taxes and Joint Venture
Partner's share of income from joint
venture (8,300,669) (15,267,371)

Income tax recovery (expense):
Current (404,208) -
Future 3,455,644 -
3,051,436 -

Loss before Joint Venture Partner's share
of income from joint venture (5,249,233) (15,267,371)

Joint Venture Partner's share of net income
from joint venture (6,057,338) (1,592,794)

Loss for the year (11,306,571) (16,860,165)

Deficit, beginning of year (228,558,169) (211,698,004)

Deficit, end of year $ (239,864,740) $ (228,558,169)

Basic and diluted loss per share $ (0.15) $ (0.23)

Weighted average common shares outstanding 75,174,826 74,228,495

Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)

Years ended March 31, 2007 and 2006

2007 2006

Cash flows from operations:
Loss for the year $ (11,306,571) $ (16,860,165)
Items not involving cash:
Depreciation and amortization 1,409,741 2,752,409
Stock-based compensation expense 2,089,656 2,933,842
Accretion of TPC warrants 571,428 1,142,857
Future income tax recovery (3,455,644) -
Change in deferred lease inducements (164,077) (153,971)
Gain on sale and dilution of interest
in subsidiary (8,120,485) -
Joint Venture Partner's share of net income
from joint venture 6,057,338 1,592,794
Interest on long-term debt and
amortization of discount 1,663,077 -
Other (69,497) (69,113)
(11,325,034) (8,661,347)

Changes in non-cash operating working
Accounts receivable (4,743,820) (96,734)
Inventories (1,963,048) 628,568
Prepaid expenses (61,714) (169,352)
Accounts payable and accrued liabilities 2,352,935 (1,196,108)
Deferred revenue 128,610 (1,213,988)
Warranty liability 1,201,037 (958,751)
(14,411,034) (11,667,712)

Cash flows from investments:
Purchase of equipment, furniture and
leasehold improvements (1,174,626) (396,106)
Proceeds on disposition of equipment,
furniture and leasehold improvements 11,946 92,854
Proceeds on sale (used in purchase) of
short-term investments, net (14,592,670) 13,184,695
Purchase of long-term investments (51,000) -
Proceeds on disposition of long-term
investments 605,000 -
Proceeds from sale of interest in
subsidiary 4,197,875 -
Transaction costs incurred (764,185) -
(11,767,660) 12,881,443

Cash flows from financing:
Issue of demand instalment loan - 1,235,000
Repayment of demand instalment loan (894,018) (980,785)
Increase in bank loan 7,346,280 -
Repayment of bank loan (605,000) -
Repayment of other long-term debt (184,560) (742,000)
Issuance of convertible notes 22,092,000 -
Finance costs incurred (914,567) -
Share issue costs (4,843) -
26,835,292 (487,785)

Increase in cash and cash equivalents 656,598 725,946

Cash and cash equivalents, beginning of
year 1,045,752 319,806

Cash and cash equivalents, end of year $ 1,702,350 $ 1,045,752

Supplementary information:
Interest paid $ 379,060 $ 221,736
Non-cash transactions:
Purchase of equipment, furniture and
leasehold improvements by assumption
of capital lease obligation - 260,149
Shares issued on exercise of performance
share units 555,089 801,135
Shares issued for settlement of financial
instruments 601,993 -
Shares issued for settlement of accrued
interest on convertible notes 497,885 -

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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