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Ballard Reports First Quarter 2008 Results
April 28, 2008 - Vancouver, Canada – Ballard Power Systems (TSX: BLD; NASDAQ: BLDP), a global leader in the
design, development and manufacture of zero-emission hydrogen fuel cells, announced its results for
the first quarter ended March 31, 2008 today. All amounts are in U.S. dollars, unless otherwise
noted.
"With our progress over the past two years we have established a strong foundation on which to
accelerate the market adoption of clean energy fuel cell products", said John Sheridan, Ballard’s
President and CEO. "This progress is evidenced by our strong first quarter results, with product
shipment growth of 125%, an 18% revenue increase, a 43% improvement in operating cash
consumption and announcements of new business relationships with H2 Logic, New Flyer, IdaTech
and The Raymond Corporation."
FINANCIAL HIGHLIGHTS FOR FIRST QUARTER 2008
- Revenue was $16.0 million in the first quarter, representing growth of $2.4 million or 18%
over the same quarter last year (2007Q1: $13.6 million). On a proforma basis, excluding
automotive-related engineering development revenue following the company’s automotive
transaction, which closed on January 31, 2008, revenue growth was 27% compared to the
same quarter last year.
- Operating cash consumption1 was $9.2 million in the first quarter, which is a 43% reduction
from the first quarter of 2007 (2007Q1: $16.1 million).
- Net income in the first quarter was $81.0 million or $0.87 per share, compared to a net loss
of ($14.3) million or ($0.12) per share in Q1 2007. This was positively impacted by a $96.9
million gain from the automotive transaction. Normalized net loss1 was ($15.9) million or
($0.17) per share, a 9% increase from ($14.5) million or ($0.13) per share in the same
quarter last year, primarily due to higher foreign exchange losses of $1.9 million and lower
investment income of $1.2 million.
- Cash reserves were $75.4 million on March 31, 2008 (2007Q4: $145.6 million). As part of the
automotive transaction, $60 million was invested in AFCC Automotive Fuel Cell Cooperation
Corp. (AFCC) on closing. The company believes current cash reserves are sufficient to meet
the company’s planned growth and development activities to the end of 2010, without
considering any possible proceeds from monetizing its interest in AFCC.
- Total product shipments were 284 units in the first quarter, which is 125% higher than total
product shipments of 126 units in Q1 2007.
Ballard confirmed its full year guidance for 2008:
- Revenue: $65-75 million - growth of up to 15% over 2007.
- Operating cash consumption: $20-30 million - reduction of up to 48% from 2007.
- Total product shipments: in excess of 1,700 units – more than double the 2007 level.
OPERATIONAL HIGHLIGHTS FOR FIRST QUARTER 2008
Materials Handling
Ballard shipped 57 fuel cell products in the first quarter to the materials handling market, which
represents an increase compared to the 3 fuel cell products shipped in Q1 2007.
During the quarter, Ballard announced a two-year supply agreement with Danish systems integrator
H2 Logic A/S to supply fuel cells for products targeting the materials handling market. H2 Logic will
purchase Mark9 SSL™ and Mark1020 ACS™ fuel cell products from Ballard and integrate these into
fuel cell systems for various materials handling vehicles.
Ballard’s Mark9 SSL™ fuel cell product will also be deployed commercially in a Bridgestone Firestone
forklift fleet at a South Carolina tire plant, as recently announced by Ballard’s customer, Plug Power.
In April, Ballard announced a joint development agreement with The Raymond Corporation for
development of a prototype forklift truck using Ballard’s next-generation Mark9 SSL™ fuel cell
product. Raymond has been engaged since January 2007 in a program to verify the benefits of fuel
cells for materials handling. A successful prototype may represent the first step toward the design
and manufacture of purpose-built fuel cell forklift trucks for use in warehouses and distribution
centers.
Backup Power
Ballard shipped 96 fuel cell products in the first quarter to the backup power market, which
represents an increase compared to the 7 fuel cell products shipped in Q1 2007.
The majority of backup power shipments throughout the year are expected to go to Dantherm Power
A/S. Dantherm continues to focus its European fuel cell activities on extended backup power for
emergency service wireless networks, which is required for compliance with new Tetra network
standards in the EU.
Ballard and IdaTech plc signed a three-year supply agreement in March 2008 under which IdaTech
will integrate Ballard’s Mark1020 ACS™ fuel cell product into IdaTech’s 250 watt iGen™ methanolfueled
power supply system. The agreement will generate approximately 100 fuel cell product
shipments in the first 12-months, with the potential for more than 1,000 units over the full term of
the agreement, all to be used with IdaTech’s methanol fuel reforming technology.
In April 2008 Ballard announced a supply agreement with German systems integrator Heliocentris
Fuel Cells AG, under which Ballard will supply Mark1020 ACS™ fuel cell products for integration by
Heliocentris into systems for sale to educational institutions as well as for specialized commercial and
industrial use.
Residential Cogeneration
In 2008, Ballard’s focus in this market segment is on the successful launch in Japan of the nextgeneration
V3 residential cogeneration system and on confirming its reliability in the field. The
completion of the development program for this system has been delayed several months, however,
customer feedback from the testing of the system has been positive. The delay will limit the volume
of potential shipments this year, but is not expected to have any material impact on the company’s
revenue for 2008 nor any significant longer term volume impact. As a result of the delay, the
number of units allocated to Ballard’s Japanese joint venture company, Ebara Ballard Corporation,
under the Japanese Government’s Large Scale Monitoring Program (LSMP) has been reduced to 154 units from 271 units in 2007. The Japanese Ministry of Energy, Trade and Industry has reaffirmed its
support of the LSMP through its announcement of a 20% increase in volume allocations for the 2008
residential fuel cell cogeneration program.
Ballard shipped 49 fuel cell products in the first quarter in residential cogeneration, which represents
a decrease of 31% from the 71 units shipped in Q1 2007.
Supporting Business Segments
Automotive
At Ballard’s January 25, 2008 Special Shareholder Meeting, 97.8% of shares voted were “in favour”
of the sale of the company’s automotive fuel cell assets to Daimler AG and Ford Motor Company.
Ballard subsequently closed its automotive transaction on January 31 as planned. This transaction
addressed the realities of the high cost and long timeline for automotive fuel cell commercialization.
Ballard recorded a gain of $96.9 million from the transaction in the first quarter. For a full
description of the transaction, please refer to the company’s Management Information Circular
dated December 13, 2007.
Ballard’s business activities in the automotive segment include the design, development,
manufacture, sale and service of fuel cell products for the bus market, contract manufacturing of
light-duty automotive fuel cell products, and testing, engineering and manufacturing services
provided to AFCC. During the quarter, automotive revenue, including buses, AFCC and other
automotive-related activities increased to $8.6 million, which was $2.9 million or 51% higher than
the same period in 2007. The increase is due primarily to higher light-duty automotive and fuel cell
bus product shipments.
In February Ballard announced a five-year agreement with New Flyer Industries to supply fuel cell
modules for use in New Flyer midi-size buses. As part of this agreement, the companies will also
combine efforts toward the joint preparation of bids for transit agency bus applications utilizing
smaller, midi-size buses, with an initial focus on the Canadian market.
Carbon Fiber Materials
Material products revenues were $2.9 million, a decrease of $1.2 million or 29% compared to the
same period in 2007. The decrease is primarily due to lower volumes resulting from a labor strike
affecting a key customer. This is not expected to have a material impact on carbon fiber materials
full-year revenues.
FINANCIAL RESULTS: FIRST QUARTER 2008
Our revenues for the three months ended March 31, 2008, increased 18% to $16.0 million,
compared to $13.6 million for the same period in 2007. Product and service revenues increased
$3.0 million, or 31%, and engineering development revenue decreased $0.6 million, or 14%,
compared to the same quarter last year. Product and service revenues totaled $12.7 million with
product revenues of $9.5 million and service revenues of $3.2 million, compared to product revenues of $6.9 million and service revenues of $2.8 million in the first quarter of 2007. The
increase in product revenues of $2.6 million was driven by higher shipments of automotive,
materials handling and backup power fuel cell products partially offset by lower carbon fiber and
residential cogeneration products. The increase in service revenues of $0.4 million is primarily due
to testing and engineering services provided to AFCC partially offset by a decline in field service for
fuel cell buses. The decline in field service revenues for fuel cell buses is as expected, as fewer fuel
cell buses remain in operation. Engineering development revenue of $3.4 million resulted from
work performed and achievement of the milestones under the 1kW residential cogeneration fuel
cell development program and from automotive fuel cell program work prior to the closing of the
automotive transaction.
We recorded net income for the three months ended March 31, 2008 of $81.0 million, or $0.87 per
share, compared with a net loss of $14.3 million, or ($0.12) per share, in the first quarter of 2007.
Net income includes a gain on sale of assets of $96.9 million related to the automotive transaction.
Adjusting for items unusual in nature such as this, normalized net loss1 for the three months ended
March 31, 2008 was $15.9 million, or ($0.17) per share, compared to $14.5 million, or ($0.13) per
share for the first quarter of 2007. The primary reasons for the $1.4 million higher normalized net
loss were increases in foreign exchange losses of $1.9 million and decreases in investment income of
$1.2 million. Decreases in product and service gross margins of $1.1 million and engineering
development revenues of $0.6 million were offset by decreases in operating expenses of $1.5 million
and depreciation and amortization of $2.1 million. Lower gross margins were driven by larger
reductions in warranty provisions for 2007 compared to 2008 combined with decreased volumes of
carbon fiber products due to a labor strike affecting a key customer. The decline in operating
expenses was driven by lower research and development expenses on automotive fuel cell programs
as a result of the automotive transaction partially offset by the effect of a stronger Canadian dollar,
relative to the U.S. dollar. On a per share basis, normalized net loss increased to ($0.17) per share
in the first quarter of 2008 from ($0.13) per share in the first quarter of 2007, due primarily to the
30% reduction in the number of common shares outstanding on January 31, 2008 as a result of the
closing of the automotive transaction.
Operating cash consumption1 for the three months ended March 31, 2008 decreased 43% to $9.2
million, compared to $16.1 million for the corresponding period in 2007. The $6.9 million
improvement in operating cash consumption1 was driven primarily by lower working capital
requirements and lower operating expenses partially offset by foreign exchange losses and a decline
in investment income.
For a more detailed discussion of Ballard Power Systems’ first quarter 2008 results, please see the
company’s financial statements and management’s discussion & analysis, which are available at
www.ballard.com, www.sedar.com and www.sec.gov/edgar.shtml
Also click here to view the PDF version of the Ballard Power Systems’ first quarter 2008 results
CONFERENCE CALL: FIRST QUARTER 2008
Ballard will hold a conference call to discuss its first quarter 2008 results on Tuesday, April 29th 2008
at 8:00 a.m. PT (11:00 a.m. ET). On April 29th, 2008, access to the live call will be on telephone
number (604) 638-5340. A link to the simultaneous audio web cast will also be available on the
homepage of Ballard’s website at www.ballard.com. Following the call, a recording will be available
for 24 hours immediately afterwards at (604) 638-9010 (Confirmation Number: 6325#). The audio
web cast with slides will be posted and archived by the end of the day on April 29th, 2008 in the
News and Events section of Ballard’s website.
ABOUT BALLARD POWER SYSTEMS
Ballard Power Systems (TSX: BLD; NASDAQ: BLDP) is recognized as a world leader in the design,
development, manufacture and sale of zero-emission hydrogen fuel cells. Ballard’s mission is to
accelerate fuel cell market adoption. To learn more about what Ballard is doing with Power to
Change the World®, visit www.ballard.com .
For further information, or to arrange an interview with a Ballard spokesperson, please call Guy
McAree at 604-454-0900. Ballard, the Ballard logo, Power to Change the World and Mark9 SSL are
registered trademarks of Ballard Power Systems Inc.
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This release contains forward-looking statements that are based on the beliefs and assumptions of
Ballard’s management and reflect Ballard’s current expectations as contemplated under section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act
of 1934, as amended. Such assumptions relate to our financial forecasts and expectations
regarding our product development efforts, manufacturing capacity, and market demand. These
statements involve risks and uncertainties that may cause our actual results to be materially
different, including, without limitation, the rate of mass adoption of our products, product
development delays, changing environmental regulations, our ability to attract and retain business
partners and customers, our access to funding, increased competition, our ability to protect our
intellectual property, changes in our customers’ requirements, and our ability to provide the capital
required for product development, operations and marketing. Readers should not place undue
reliance on Ballard’s forward-looking statements and Ballard assumes no obligation to update or
release any revisions to these forward looking statements. For a detailed discussion of the risk
factors that could affect Ballard’s future performance, please refer to our most recent Annual
Information Form.
Endnotes:
1 - Operating cash consumption and normalized net loss are Non-GAAP measures. We use certain Non-GAAP measures to
assist in assessing our financial performance and liquidity. Non-GAAP measures do not have any standardized meaning
prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. See
the Non-GAAP Measures section of Management’s Discussion and Analysis for a description of these Non-GAAP measures
and reconciliations to financial statement line items.
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