Westport Innovations Inc.
TSX : WPT

Westport Innovations Inc.

November 02, 2006 09:01 ET

Westport Reports Second Quarter Fiscal 2007 Financial Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Nov. 2, 2006) - Westport Innovations Inc. (TSX:WPT), a global leader in gaseous-fuelled power technologies, today reported financial results for the second quarter of fiscal year 2007 ended September 30, 2006 (Q2 FY2007), and provided an update on operations.

Financial Highlights

- Consolidated total revenues increased 12% to $13.7 million in Q2 FY2007 from $12.2 million in Q2 FY2006. Consolidated product revenues increased 14% to $10.3 million in Q2 FY2007 compared to $9.1 million for Q2 FY2006.

- Net loss improved 45% to $1.8 million ($0.03 per share) in Q2 FY2007 from $3.3 million ($0.05 per share) in Q2 FY2006, primarily due to the sale of 45% of Westport Research Inc. to Matco Capital Limited for $3.9 million, net of expenses.

- Consolidated gross margins were 35% for Q2 FY2007.

- Cash used in operations before changes in working capital increased to $3.8 million compared to $1.5 million for the same period last year primarily due to the completion of government funded research and development activities, increased spending related to the U.S. launch of our HPDI system for the heavy-duty truck market, and expansion into Australia and China. Proceeds from the sale of Westport Research Inc. are included as an investing activity.

- Cash, cash equivalents and short-term investments of $24.6 million at September 30, 2006, up from $7.8 million as at March 31, 2006.

Q2 FY2007 Business Highlights

- Cummins Westport (CWI) - CWI continues to experience substantial growth in its business and profits. CWI has begun shipping the B Gas International (BGI) engine kits to Dongfeng Cummins Engine Company's facilities located in Xiangfan, China for assembly in China. CWI also recorded the first commercial sale of its industry-leading ISL G engine to Sacramento Regional Transit. The ISL G will meet U.S. 2010 emission standards in 2007 while improving both performance and fuel economy.

- U.S. HPDI Heavy Duty Trucks - Interest in Westport's HPDI Heavy Duty LNG trucks continues to build in southern California. Westport received its first commercial orders from a wide range of customers, including Los Angeles International Airport (LAX), Prometheus Energy, Pacific Gas and Electric (PG&E) and Clean Energy with deliveries expected during this quarter (Q3 fiscal 2007).

- BTIC Westport - HPDI LNG tanks are coming off the assembly line at BTIC's Beijing cryogenic facility for delivery to Westport's first HPDI heavy duty truck customers in southern California.

- Australia - Westport and its prospective Australian partners are reviewing the business model for the mine truck development programme. Current efforts are focused on the development of on-road heavy duty vehicles using HPDI. The Australia market presents a significant opportunity for on- and off-road applications due to the low cost of natural gas compared to diesel.

- Westport Asia - Nicholas Sonntag appointed President of Westport Asia. Mr. Sonntag brings over 35 years of experience in international engineering and sustainable development including extensive experience in China.

- Awards - Westport named fastest growing technology company in Canada and second fastest growing in North America by Deloitte & Touche's Fast 50/500 program.

"Our progress towards profitability over the past few quarters is apparent. Continued growth at Cummins Westport is delivering strong financial contributions and we are ready with several new products that will enhance our competitive position and market opportunities. We have taken the first commercial orders for our latest products, the ISL G within CWI and our heavy-duty LNG truck systems," stated David Demers, CEO of Westport. "Our cash position is excellent, and we remain confident that market demand for our products will continue to grow in the context of high and volatile energy prices, and increasing concerns about urban pollution and climate change."

Second Quarter Fiscal Year 2007 Financial Results

Westport's consolidated revenues in the three months ended September 30, 2006 were $13.7million, compared to $12.2 million for the same period in fiscal 2006. Net loss for the quarter was $1.8 million ($0.03 per share) compared to $3.3 million ($0.05 per share) for the same period in fiscal 2006. Cummins Westport Inc. continued to perform well, contributing $0.7 million in the quarter.

The $1.5 million improvement in net loss was due primarily to the $3.9 million net gain on the sale of 45% of Westport Research Inc ("WRI"), which is now a holding company for future investment purposes with no significant assets or liabilities, to Matco Capital Limited. Westport retains 55% of WRI. Offsetting the gain was an increase in interest and accretion expense arising from the convertible notes issued to Perseus L.L.C. ($0.5 million) and decreased government funding.

For the six months ended September 30, 2006, our net loss was $7.3 million ($0.10 per share) on revenues of $24.3 million compared to $9.5 million net loss ($0.13 per share) and $22.7 million revenues for the same period in fiscal 2006. In the six months ended September 30, 2006, CWI contributed $1.5 million in positive contribution to Westport's overall results, up $0.6 million from this period last year. Cash used in operations before changes in working capital was $7.4 million compared to $4.5 million in the same period in the prior year as a result of lower government funding and greater investment in business development activities. Cash and short term investments as of September 30, 2006 totalled $24.6 million.

Results Conference Call

Westport has scheduled a conference call for today, Thursday, November 2, 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: 1-877-427-0628 (North America Toll-Free) or 1-973-582-2844 (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 Q2 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)

--------------------------------------------------------------------------
September 30, March 31,
2006 2006
--------------------------------------------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 644,001 $ 1,045,752
Short-term investments 23,939,665 6,786,182
Accounts receivable 7,163,730 6,136,760
Inventory 813,331 852,945
Prepaid expenses 995,405 721,583
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33,556,132 15,543,222

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

Equipment, furniture and leasehold
improvements 34,310,199 33,840,134
Accumulated depreciation (30,451,275) (29,879,961)
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3,858,924 3,960,173

Intellectual property 4,321,394 4,321,394
Accumulated amortization (3,530,732) (3,458,171)
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790,662 863,223

Deferred charges 939,194 -
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$ 48,278,788 $ 29,500,494
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 5,550,408 $ 3,270,553
Deferred revenue 1,675,389 1,425,328
Demand instalment loan 1,906,417 2,506,935
Current portion of other long-term
obligations 172,107 169,227
Current portion of warranty liability 2,928,416 3,117,881
Current portion of financial instruments 4,000,000 4,100,060
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16,232,737 14,589,984

Long-term debt 15,301,966 -

Other long-term obligations 722,858 844,990

Warranty liability 2,819,168 2,652,221

Joint Venture Partner's share of net
assets of joint venture 3,122,022 1,661,664

Shareholders' equity:
Share capital:
Authorised:
Unlimited common shares, no par value
Unlimited preferred shares in series,
no par value
Issued:
75,264,565 (2006 - 74,391,779)
common shares 232,287,107 231,180,069
Other equity instruments 8,560,765 2,359,483
Additional paid in capital 5,049,776 4,770,252
Deficit (235,817,611) (228,558,169)
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10,080,037 9,751,635
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$ 48,278,788 $ 29,500,494
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WESTPORT INNOVATIONS INC.
Consolidated Statements of Operations and Deficit
(Expressed in Canadian dollars)

Three months ended Six months ended
September 30 September 30
---------------------------- ----------------------------
2006 2005 2006 2005
--------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Product revenue $ 10,327,073 $ 9,094,348 $ 17,970,626 $ 16,100,613
Parts revenue 3,400,593 3,134,237 6,378,627 6,641,754
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13,727,666 12,228,585 24,349,253 22,742,367

Cost of revenue
and expenses:
Cost of revenue 8,951,480 7,933,715 15,536,257 15,737,907
Research and
development 5,733,567 4,077,639 11,731,168 9,004,809
General and
administrative 1,475,305 907,696 2,890,614 2,449,627
Sales and
marketing 1,952,921 1,496,357 2,957,711 2,794,517
Foreign exchange
gain (73,215) (124,217) (154,647) (43,744)
Depreciation and
amortization 331,830 578,000 656,821 1,652,398
Bank charges
and interest 117,479 64,807 174,781 114,275
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18,489,367 14,933,997 33,792,705 31,709,789
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Loss before
undernoted (4,761,701) (2,705,412) (9,443,452) (8,967,422)

Interest on
long-term debt
and amortization
of discount (459,496) - (506,356) -

Interest, investment
and other income 186,295 134,775 259,348 250,637

Gain on sale of
interest in
subsidiary 3,891,376 - 3,891,376 -

Joint Venture
Partner's share
of income from
joint venture (696,142) (758,117) (1,460,358) (824,552)
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Loss for the
period (1,839,668) (3,328,754) (7,259,442) (9,541,337)

Deficit,
beginning of
period (233,977,943) (217,910,587) (228,558,169) (211,698,004)
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Deficit,
end of
period $(235,817,611) $(221,239,341) $(235,817,611) $(221,239,341)
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Basic and
diluted loss
per share $ 0.03 $ 0.05 $ 0.10 $ 0.13

Weighted average
common shares
outstanding 75,196,048 74,272,651 74,917,305 74,155,215
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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
---------------------------- ----------------------------
2006 2005 2006 2005
--------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Cash provided
by (used in):

Operations:
Loss for the
period $ (1,839,668) $ (3,328,754) $ (7,259,442) $ (9,541,337)
Items not
involving cash:
Depreciation
and
amortization 331,830 578,000 656,821 1,652,398
Stock based
compensation
expense 278,677 349,037 632,526 2,147,323
Accretion of
TPC warrants 285,714 285,714 571,428 571,428
Change in
deferred lease
inducements (41,020) (41,019) (82,039) (71,932)
Gain on sale
of interest
in subsidiary (3,891,376) - (3,891,376) -
Joint Venture
Partner's share
of income from
joint venture 696,142 758,117 1,460,358 824,552
Interest on
long-term debt
and amortization
of discount 459,496 - 506,356 -
Other (39,977) (63,945) (39,977) (63,945)
------------------------------------------------------------------------
(3,760,182) (1,462,850) (7,445,345) (4,481,513)

Change in
non-cash
operating
working capital:
Accounts
receivable (1,057,982) (792,332) (1,026,970) (1,827,191)
Inventory (253,100) 67,270 39,614 234,054
Prepaid expenses (367,043) (286,671) (273,822) (127,655)
Accounts payable
and accrued
liabilities 1,879,673 267,931 2,279,855 (1,453,441)
Deferred revenue 701,755 160,742 250,061 60,640
Warranty
liability 305,367 106,055 (22,518) 317,475
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(2,551,512) (1,939,855) (6,199,125) (7,277,631)

Investments:
Purchase of
equipment,
furniture, and
leasehold
improvements (281,263) (79,239) (483,010) (164,001)
Proceeds on
disposition of
equipment,
furniture, and
leasehold
improvements 2,878 85,687 2,878 85,687
Purchase of
short-term
investments,
net (15,379,445) 2,276,458 (17,153,483) 8,077,896
Net proceeds
from sale of
interest in
subsidiary 3,891,376 - 3,891,376 -
Deferred
transaction
costs (375,066) - (375,066) -
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(12,141,520) 2,282,906 (14,117,305) 7,999,582

Financing:
Share issue costs (2,419) - (4,842) -
Repayment of
demand
instalment
loan (300,259) (238,509) (600,518) (477,018)
Repayment of
long-term debt
obligations (20,722) (38,865) (40,093) (77,884)
Increase
(repayment)
of bank loan 7,346,280 - 7,346,280 -
Issuance of
convertible
notes 8,284,500 - 13,807,500 -
Finance costs
incurred (165,647) - (593,648) -
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15,141,733 (277,374) 19,914,679 (554,902)
--------------------------------------------------------------------------
Increase (decrease)
in cash and
cash equivalents 448,701 65,677 (401,751) 167,049
Cash and cash
equivalents,
beginning of
period 195,300 421,178 1,045,752 319,806
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Cash and cash
equivalents,
end of period $ 644,001 $ 486,855 $ 644,001 $ 486,855
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Supplementary information

Interest paid $ 62,669 $ 44,705 $ 107,881 $ 70,911
Non-cash
transactions:
Shares issued on
exercise of
performance
share units - - 509,889 600,939
Issue of shares
for settlement
of financial
instruments 299,333 - 601,993 -
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