Business Highlights:
Sales declined in the first quarter as a result of several factors including project delays in some key retrofit opportunities and the overall economic downturn which continued to decimate the automotive industry and the transportation industry in general.
Frost & Sullivan gave Clean Diesel its Excellence in Technology Award in Class 6-8 Truck Emission Reduction Technologies for developing and making available a comprehensive portfolio of EGR/SGR solutions that help diesel commercial trucks deliver peak efficiency and meet EPA emissions regulations.
Clean Diesel’s new focus on the off-road markets for fuel economy and emissions reduction continues to gain traction. Increased penetration into the regional rail, marine and mining sectors is a direct result of the Company’s structural changes and a more strategic approach to the business via Clean Diesel’s new Systems Group.
Management’s Comments:
Michael Asmussen, Clean Diesel’s chief executive officer and president said, The world-wide economic downturn in combination with delays in key retrofit projects produced disappointing first quarter results. While disappointed, we are by no means discouraged as we believe that the extensive strategic and structural changes we made in the first quarter will be the foundation for long-term success. We received positive endorsement of our actions in the form of the Frost & Sullivan Excellence in Technology Award for Emission Reduction Technologies. As we continue the process of restructuring and refocusing our Company, the new strategies, focus and process-based tools now at our disposal will help grow and diversify our business so that we are better able to withstand future economic downturns and capitalize on opportunities when the markets rebound.”
In similar fashion, recent public policy events indicate that our decision to more actively pursue the retrofit market is sound. Increasing awareness of the negative environmental impact of CO2 and black carbon bode well for future retrofit market growth. The EPA has added black carbon to its list of dangerous pollutants, noting that it is dangerous to human health and is the second most important global warming agent after CO2. Congress, in turn, instructed the EPA to study its effect and identify reduction technologies. The fact that more than 40 million diesel engines exist in this country is key to this movement as diesel engine emissions are responsible for 50% of U.S. black carbon production. Asmussen concluded, In sum, as the core market drivers increase demand for products based on our intellectual property, we believe our revitalized business model and corporate structure should enable us to capitalize on appropriate business opportunities and increase shareholder value for Clean Diesel.
Financial Results:
The comparative period in 2008 corresponded with the completion of the London Low Emission Zone July 2008 compliance deadline and postponements in the implementation of other programs for which the company’s customers apply its technologies. Operating expenses for the first quarter of 2009 included severance charges totaling $510,000 to be paid in monthly installments until September 2010 and $206,000 non-cash charges for the fair value of stock options compared to $530,000 non-cash charges in the first quarter of 2008.
