OAK PARK, Michigan, November 9, 2010 /PRNewswire/ -- Azure Dynamics Corporation (Azure or the Company), the fast growing hybrid electric and electric power train innovator for the commercial truck market, today reported its third quarter financial results for the period ending September 30, 2010. The Company also provided an update on product development activities.
Although revenues for the quarter were at the lower-end of our expectations, we continue to expect sales on the Balance(TM) Hybrid Electric product for 2010 to hit our targets, said Scott T. Harrison, Azure Dynamics' chief executive officer. Sales were impacted by the transition to the Johnson Controls-Saft battery pack to ensure the Balance(TM) Hybrid Electric product included the latest lithium-ion technology as well as the other engineering updates aimed at improving reliability, durability and efficiency. This new battery pack was the single largest contributor to our previously stated - and now implemented - product cost reduction plan for the Balance(TM) Hybrid Electric, which will strengthen gross margins going forward. We are now well positioned to achieve record revenues in the fourth quarter led by our substantially lower cost Balance(TM) Hybrid Electric product.
The real story for the third quarter is the continuing tireless contributions from our dedicated, professional and committed employee team, continued Harrison. This effort was led by our strong engineering and operational staff whose efforts to advance our technology portfolio while reducing costs contributed directly to gross margin improvement, improved product performance and bottom line results.
The Transit Connect Electric continued to charge towards its official manufacturing launch scheduled for April, 2011, added Harrison. Since announcing the Transit Connect Electric LEAD customer program in March, 2010, six of the 10 LEAD customers in North America have placed orders totaling more than 90 units, in line with our initial expectations for the 10 LEAD customers. We expect the remaining four LEAD customers to place orders during the fourth quarter. In addition, the product was successfully introduced to the European market with a well publicized appearance at the Hanover, Germany auto show. The European launch is expected to occur in second quarter of 2011.
In October, 2010, the Company obtained a $4 million credit facility to provide an additional source to help fund working capital requirements. We are pleased to complete this financing with competitive terms that reflect our solid product portfolio and expected future growth, concluded Harrison.
Third Quarter 2010 Highlights
- Since Q2, 2010, several marquee fleets have joined the Azure Transit Connect Electric LEAD customer program with Xcel Energy, New York Power Authority, Southern California Edison and Johnson Controls Inc. all participating. As these companies show, LEAD customers are not simply early adopters, but rather literal leaders in the advancement of electric mobility in North America. It is especially noteworthy that major energy producers have placed volume orders because these new Azure partners are crucial in building the charging infrastructure required to support electric vehicles in increasing numbers. - Subsequent to the quarter end, Canada Post was named as the first LEAD customer in Canada. - The Transit Connect Electric participated in Ford Motor Company's Charging Into the Future Electric Vehicle tour, a multi-city tour designed to promote electric vehicles and educate consumers about what to expect from electrified automobiles. - The Transit Connect Electric was showcased to a variety of U.S. federal agencies for demonstration drives in Washington D.C. Specifically, the Transit Connect Electric visited the Department of Justice, Department of Energy, EERE, Clean Cities Coalition, the Department of Defense, the United States Postal Service and several congressional staffs where the vehicle was seen and driven by a host of decision-makers. - Azure's Force Drive(TM) technology made international news by powering the winning entry in the prestigious 2010 X Prize competition. The competition, designed to inspire a new generation of super efficient vehicles, required each entrant to perform in an intense multi-stage competition. Li-Ion Motors' Wave II, featuring Force Drive(TM), earned first place in the highly competitive Alternative Side-by-Side Class. - The Transit Connect Electric was a headliner at the CALSTART Hybrid Truck User Forum (HTUF) conference in Dearborn, Michigan, an event co-sponsored by Azure and Johnson Controls. - Michigan's Governor Granholm visited Azure's Oak Park headquarters for a well publicized Transit Connect Electric event that included speakers from Ford, JCI and AM General. State leadership from the Michigan Economic Development Council and the state's Battery Team were in attendance. Governor Granholm drove the Transit Connect Electric a few weeks later at the Business of Plugging In conference in Detroit.
Revenue for the third quarter of 2010 totaled $1.8 million compared to $3.2 million in the third quarter of 2009. For the nine months ended September 30, 2010, revenue totaled $8.5 million compared to $5.0 million in the same period a year ago. Net loss for the third quarter of 2010 was $6.4 million, or $(0.01) per share, compared to a loss of $5.7 million or $(0.01) per share in the third quarter of 2009. Net loss for the nine months ended September 30, 2010 was $17.4 million, or $(0.03) per share, compared to a loss of $19.8 million or $(0.05) per share in the same period a year ago.
Before contributions, the Company's engineering, operations and product development expenses for the quarter totaled $6.7 million (including $3.8 million in product development costs), compared to $3.4 million for the same period in 2009 (including $1.2 million in product development costs). For the first nine months of 2010, the Company's engineering and RD expenses totaled $17.3 million (including $9.6 million in product development costs), compared to $10.4 million in the same period of 2009 (including $3.2 million in product development expenses).
As of September 30, 2010, the Company's net cash and cash equivalents totaled $25.3 million, and working capital totaled $21.7 million, compared to cash and cash equivalents of $6.5 million, and working capital of $11.1 million, as of September 30, 2009.
Third Quarter Product Development Updates
Balance(TM) Hybrid Electric
- The lithium battery design validation testing progressed on new released production level battery packs - MY10.5 stripped chassis were produced in the third quarter and will go into service in October following the completion of the final lithium battery validation tests - The shuttle bus MY10.5 variant was released to production within the quarter - Design validation testing of the production intent new belt starter-generator system continued in the quarter and a production intent prototype MY 11 Balance Hybrid vehicle was produced during the quarter at Ultilimaster - Design released JCS lithium battery service hardware drawings for prior model year Balance Hybrid vehicles. The service release fulfills Azure's objective to make the new battery technology backwards compatible so that existing customers will be able to upgrade to the latest battery technology.
Balance Plug-In Hybrid Electric (PHEV)
- During the third quarter the Company initiated the development of a Plug-In Hybrid variant of the Balance E450 - Plug-In battery pack requirements were completed and the PHEV battery design was initiated, leveraging design work already completed on the Transit Connect Electric battery - The preliminary PHEV component packaging design has been completed and parts have been ordered to commence the first development vehicle build
Transit Connect Electric:
- Within the third quarter AZD completed the validation prototype vehicle builds and commenced testing including accelerated durability at Ford's Michigan Proving Grounds and FMVSS brakes certification testing - The crash certification vehicles were delivered and are being prepared for final certification tests - Airbag development testing progressed during the quarter and will be finalized in October for final certification tests - The first tooling tryout vehicle build was completed at AM General in September as the manufacturing line was set up for the pre-production build of customer units in the fourth quarter - With respect to the European design, the VP level design was released within the quarter and the initial vehicles prepared for builds - The Company reviewed potential manufacturing partner sites in Europe within the quarter and prepared preliminary marketing, sales and service plans
Low Emission Electric Power (LEEP(TM)):
- The company continued to produce LEEP(TM) Freeze systems to fulfill customer orders for Kidron - Delivered four additional LEEP(TM) Lift systems to Altec for further trials
Force Drive(TM) Electric Components:
- The Company continued to progress on performance and specification upgrades to its inverters - Validation prototype builds were completed for the European variant of the liquid-cooled inverter for the Transit Connect Electric and the validation testing commenced including component and vehicle level EMI performance testing - An upgraded drive inverter software feature release was completed in the quarter implementing improvements for Transit Connect Electric production - The Company started the pre-production build for the Transit Connect Electric liquid-cooled drive inverters
Sales and Marketing Highlights:
- On October 22, Azure announced the appointment of John Formisano to its Board of Directors. Formisano recently retired from Federal Express Corporation where he served as Vice President - Global Vehicles. Formisano is also Chairman of the Board of CALSTART. - On October 7, Azure and Ford announced that New York Power Authority (NYPA), the nation's largest state public power organization, was added to the LEAD customer program for the innovative Ford Transit Connect Electric van. - On October 6, Azure announced the sale of 10 Balance(TM) Hybrid Electric trucks to TruGreen, the nation's largest lawn care provider and operator of one of the country's largest private vehicle fleets. - On September 29, Azure Dynamics and Ford Motor Company announced that Southern California Edison (SCE) was the newest addition to the Ford Transit Connect Electric LEAD customer program with a 20 unit order. SCE is one of the nation's largest electric utilities and operates one of the world's most sophisticated fleets of alternative powered vehicles. - On September 22, Johnson Controls, already an Azure Dynamics partner in vehicle development, was added to the LEAD customer program with a 20 unit order. - On September 8, Xcel Energy and a coalition of its customers were selected to be among the first in the country to receive the all-electric Ford Transit Connect Electric commercial van. As part of the Lead Customer program, Xcel Energy will receive a total of 13 vans.
We anticipate a continued, albeit gradual, economic recovery for the commercial businesses that we sell to, said Harrison. These fleets need replacement vehicles and are increasingly looking towards the type of efficient and eco-friendly product Azure provides. Government stimulus programs add further incentive for fleets to purchase advanced energy solutions now. With our technological and cost advancements in the third quarter, Azure is better prepared than ever to meet this added demand with quality products that can be produced and sold at a profit.
Azure will host a conference call to discuss third quarter 2010 earnings today, Tuesday, November 9th at 5:00 p.m. eastern time. Interested listeners can access the call toll free at 1-800-786-7015 and should call in at least fifteen minutes before the scheduled start time.
About Azure Dynamics
Azure Dynamics Corporation is a world leader in the development and production of hybrid electric and electric components and powertrain systems for commercial vehicles. Azure is strategically targeting the commercial delivery vehicle and shuttle bus markets and is currently working internationally with a variety of partners and customers. The Company is committed to providing customers and partners with innovative, cost-efficient, and environmentally-friendly energy management solutions. For more information please visit http://www.azuredynamics.com.
The TSX Exchange does not accept responsibility for the adequacy or accuracy of this release.
This press release contains forward-looking statements related to Azure's financial and other projections, expected future plans, events, financial and operating results, objectives and performance, as well as underlying assumptions, all of which involve risks and uncertainties. When used in this press release, the words believe, anticipate, intend, estimate, expect, project and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These statements reflect management's current beliefs and are based on information currently available to Azure's management and are subject to certain risks, uncertainties and assumptions. Actual results may differ materially from management expectations as projected in such forward-looking statements for a variety of reasons and no assurances can be given as to actual future results, performance or prospects. Factors that may cause such differences include, but are not limited to: the early stage of development of the Company; a lack of product revenues and a history of losses; the need for additional financing; uncertainty as to commercial viability; uncertainty as to product development and commercialization milestones being met; uncertainty as to the market for the Company's products and unproved acceptance of the Company's technologies; competition; uncertainty as to target markets; dependence upon third parties; changes in environmental policies; uncertainty as to patent and proprietary rights; availability of management and key personnel; available regulatory approvals; and conflicts of interest by directors and officers of the Company. More detailed information about these and other factors that could affect Azure's operations or financial results are included in Azure's filings with Canadian securities regulatory authorities. Azure does not assume any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Because of these risks, uncertainties and assumptions, readers should not place undue emphasis on Azure's forward-looking statements.
Azure Dynamics Corporation Consolidated Balance Sheets (Stated in thousands of Canadian dollars, except per share amounts and number of shares) September 30 December 31 2010 2009 As at (unaudited) (audited) $ $ ASSETS Current Cash and cash equivalents 24,259 33,588 Accounts receivable 1,375 2,632 Inventory (Note 3) 8,677 5,215 Prepaid expenses 1,092 974 35,403 42,409 Restricted cash 1,032 1,041 Property and equipment 5,513 5,277 Other assets 122 - Intangible assets 5,888 6,755 Goodwill 2,932 2,932 50,890 58,414 LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued 13,333 9,837 liabilities Customer deposits deferred 176 746 revenue Current portion of notes payable 67 66 Current portion of obligations 92 99 under capital leases 13,668 10,748 Long-term Obligations under capital leases 117 117 Customer deposits deferred 594 644 revenue Notes payable 1,962 2,055 16,341 13,564 Shareholders' equity Share capital (Note 4) 208,574 202,250 Contributed surplus (Note 4) 7,880 7,139 Deficit (181,905) (164,539) 34,549 44,850 50,890 58,414 Nature of operations and going concern (Note 1) Commitments (Note 6) Subsequent Events (Note 8) Approved on behalf of the Board: signed D. Campbell Deacon Director D. Campbell Deacon signed James C. Gouin Director James C. Gouin Azure Dynamics Corporation Consolidated Statements of Operations, Comprehensive Loss, and Deficit (Stated in thousands of Canadian dollars, except per share amounts and number of shares) For the three months ended For the nine months ended September 30 September 30 (unaudited) (unaudited) 2010 2009 2010 2009 $ $ $ $ Revenues 1,830 3,168 8,545 4,969 Cost of sales 1,968 3,529 8,551 7,039 Gross margin (138) (361) (6) (2,070) Expenses Engineering, research, development and related costs, net 4,002 3,395 9,520 10,509 Selling and marketing 553 519 1,641 1,504 General and administrative 2,030 1,859 6,585 6,005 Total expenses 6,585 5,773 17,746 18,018 Loss from operations (6,723) (6,134) (17,752) (20,088) Interest and other income, net 136 136 408 423 Interest expense (23) (26) (73) (85) Other income/(expense) - 24 - (594) Foreign currency gains 189 308 51 569 Net loss and comprehensive loss for the period (6,421) (5,692) (17,366) (19,775) Deficit, beginning of period (175,484) (150,814) (164,539) (136,731) Deficit, end of period 181,905 (156,506) (181,905) (156,506) Loss per share - basic and diluted (0.01) (0.01) (0.03) (0.05) Weighted average number of shares - basic and diluted 626,739,390 410,241,505 613,434,616 389,787,339 Azure Dynamics Corporation Consolidated Statements of Cash Flows (Stated in thousands of Canadian dollars, except per share amounts and number of shares) For the three months ended For the nine months ended September 30 September 30 (unaudited) (unaudited) 2010 2009 2010 2009 $ $ $ $ Cash flows from operating activities Net loss for the period (6,421) (5,692) (17,366) (19,775) Adjustments for: Amortization of property and equipment 269 254 758 789 Amortization of intangible assets 328 354 982 1,056 Unrealized foreign currency gains (219) (279) (156) (362) Stock option compensation expense 110 69 579 332 Deferred share units compensation expense 63 64 179 186 (5,870) (5,230) (15,024) (17,774) Changes in non-cash working capital items (1,169) (1,193) 658 248 Total cash flows from operating activities (7,039) (6,423) (14,366) (17,526) Cash flows from financing activities Issuance of common shares (net of costs) 13 9,395 6,305 9,395 Principal payments on notes payable (16) (17) (49) (53) Repayment of obligations under capital lease (36) (36) (130) (131) Other assets (122) - (122) - Total cash flows from financing activities (161) 9,342 6,004 9,211 Cash flows from investing activities Acquisition of property and equipment (333) (67) (868) (103) Acquisition of intangible assets (46) (35) (114) (160) Sale of property and equipment - - - 35 Changes in restricted cash (1) 35 (13) 97 Total cash flows from investing activities (380) (67) (995) (131) Increase/(Decrease) in cash and cash equivalents (7,580) 2,852 (9,357) (8,446) Exchange impact on cash held in foreign currency 20 2 28 (60) Cash and cash equivalents, beginning of period 31,819 2,443 33,588 13,803 Cash and cash equivalents, end of period 24,259 5,297 24,259 5,297 Supplemental cash flow information Cash paid for interest 23 26 73 85 Cash paid for taxes - - 13 - Non cash investing and financing activities: Vehicles and equipment acquired under capital lease - 24 126 24
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SOURCE: Azure Dynamics Corporation