Ballard Power Systems, Inc. (Ballard) has reported total revenues of $59.6 million for the year-end 2008, down 9%, compared with the total revenues of $65.5 million in the previous year-end. It also reported a net income of $34.1 million, or $0.40 per share, for the year-end 2008, compared with the net loss of $57.3 million, or $0.50 loss per share, in the previous year-end.
Fourth Quarter 2008 Highlights
Shipments were 802 fuel cell products, representing growth of 140% from the same quarter in 2007.
Revenue was $18.9 million, a decrease of 6% from the prior year’s quarter. On a pro forma basis adjusting for automotive engineering development, revenue increased 61%.
Operating cash consumption was $8.5 million, a 31% decline from fourth quarter of 2007.
A high volume supply agreement with ACME was announced on October 21, 2008, with units to be deployed primarily for telecom backup power applications in India, subject to product acceptance in fourth quarter.
The Notice to Proceed was received for delivery of 20 fuel cell buses for B.C. Transit’s 2010 Olympic fuel cell bus fleet.
A non-dilutive financing transaction with Superior Plus Income Fund closed on December 31, 2008 with net proceeds of $34 million.
Full Year 2008 Highlights:
Shipments were 1,855 fuel cell products, exceeding guidance.
Operating cash consumption(1) met guidance at $29.3 million, down 23% from 2007.
Operating expenses, excluding depreciation and amortization, reduced $29.3 million, to $57.2 million.
Normalized net loss1 was $60.0 million or ($0.71) per share, representing a $7.7 million increase from 2007 driven by decreases in foreign exchange gains and investment income, totaling $18.6 million.
Cash reserves of $85.4 million.
Full Year 2008 Financial Results
In 2008, revenues were $59.6 million, representing a 9% decline from $65.5 million in 2007 and meeting the revised guidance range of $58 to $64 million. However, adjusting for light-duty automotive engineering development revenue of $1.6 million in 2008 and $15.8 million in 2007, which relates to the business sold to AFCC, pro forma revenues increased $8.2 million, or 17%, compared to 2007.
Product and service revenues totaled $52.7 million, up $9.4 million, or 22% compared with 2007. An $8.8 million increase in product revenues to $38.2 million was driven by higher shipments of bus, material handling, light-duty automotive and backup power fuel cell products, partly offset by lower shipments of residential cogeneration and material products. The decline in residential cogeneration product sales was anticipated due to the introduction in 2008 of a new lower cost product combined with the delivery of fuel cell membrane electrode assemblies instead of fuel cell stacks, as the fuel cell stacks are now assembled in Japan by Ballard’s joint venture, EBARA BALLARD. The reduction in carbon fiber products was due to the effects of a labor strike that affected a main customer in the first half of 2008 and the unprecedented weakness in the US automotive industry. Service revenues increased $0.5 million due to new testing and engineering services provided to AFCC, offset by a decline in field service for fuel cell buses.
Engineering development revenue totaled $6.9 million, a decline of $15.3 million from 2007 mainly due to the elimination of automotive fuel cell program work subsequent to the closing of the automotive transaction on January 31, 2008.
Lower gross margins were driven by larger reductions in warranty provisions for 2007 compared to 2008, more aggressive product pricing and enhanced warranty coverage on material handling products in order to encourage market adoption, declines in field service revenues for fuel cell buses, declines in service revenue and higher program expenditures on Power Generation non-recurring engineering government contracts, and lower volumes of carbon fiber products due to the effects of a labor strike affectingf a key customer and the slow down in the US automotive industry. These declines were only partially offset by increased margins as a result of new testing and engineering services provided to AFCC and the commencement of shipments of fuel cell bus modules related to the B.C. Transit 2010 Olympic fuel cell bus project.
Operating expenses reduced $29.3 million, mainly due to lower research and development expenses on automotive fuel cell programs as a result of the automotive transaction.
Net income for 2008 includes a gain on sale of assets of $96.8 million resulting from the automotive transaction, partially offset by the write-down of a non-core investment of $3.0 million.
Normalized net loss increased to $60.0 million, or ($0.71) per share, representing a $7.7 million increase compared with $52.2 million or ($0.46) per share in 2007. This increase in normalized net loss is primarily a result of non-operating items, including decreases in foreign exchange gains of $12.4 million and decreases in investment income of $6.2 million. Decreases in product and service gross margins and engineering development revenues were more than offset by decreases in operating expenses and depreciation and amortization.
Operating cash consumption for 2008 reduced 23% to $29.3 million, compared to $38.2 million for 2007, meeting our guidance range of $20 million to $30 million. This $8.9 million improvement was driven mainly by lower working capital requirements, low operating expenses and lower capital expenditures partially offset by lower foreign exchange gains of $12.4 million, a decline in investment income of $6.2 million and lower product and service gross margins and engineering development revenues.
Ballard had a strong fourth quarter and solid financial results for the full year, said John Sheridan, president and chief executive officer. We grew revenues 17% on a pro forma basis, reduced operating cash consumption by 23% and ended the year with $85.4 million in cash reserves. As a result, we believe we are well positioned to execute our growth plan, although the challenges are heightened by the macro-economic conditions.