published: November 9, 2016
VANCOUVER, BC - Westport Fuel Systems Inc. (“Westport Fuel Systems”) (TSX:WPT / Nasdaq:WPRT) reported financial results for the third quarter ended September 30, 2016 and provided an update on operations. All figures are in U.S. dollars unless otherwise stated.
Total annual savings and synergies are being realized through a combination of restructuring and reductions in manufacturing costs and operating expenses with full synergies on track to be achieved by 2018.
The management team is currently assessing each business line against the company’s core strengths and capabilities; and evaluating its competitive and potential market positioning. Based on initial evaluation, certain divestiture decisions have been made and the full portfolio evaluation is moving forward.
The most significant actions taken this quarter include:
The company has engaged advisors to address debt financing alternatives, including the extension or refinancing of debt coming due in 2017. Furthermore, the company expects the sale of non-core assets to provide additional cash to the balance sheet. With a focus on inventory management, the company also expects to improve its working capital position and associated cash needs.
The Westport™ HPDI 2.0 program remains on schedule and on budget for commercial release of components to its launch original equipment manufacturer (“OEM”) partner in 2017. The program has been successfully meeting milestones and performance gates. The company continues to have discussions with multiple OEMs interested in pursuing Westport™ HPDI technology. Furthermore, a Westport™ HPDI 2.0 engine can offer an entirely renewable non-fossil fuel solution for the heavy-duty transportation sector.
“We have sold non-core assets and improved our working capital position through inventory reduction efforts this quarter,” stated Ashoka Achuthan, Chief Financial Officer of Westport Fuel Systems. “To strengthen our liquidity position, divestiture decisions have been made and we are continuing to align costs with revenue. We have engaged advisors to address debt financing alternatives so that we can continue pursuing our longer term strategies for growth and technical leadership,” said Achuthan.
“I am delighted to watch our teams around world come together and collaborate throughout our first quarter as a combined group,” said Nancy Gougarty, CEO of Westport Fuel Systems. “I continue to be impressed by the mix of talents, values, and cultures as a unified group, across all levels of the combined company. We are making progress on all 2016 key deliverables and we will continue to implement additional operational efficiencies, merger integration synergies, and working capital reductions. We have also implemented standardized supply chain and working capital processes that are already showing benefits which we expect will grow into 2017. Our portfolio review is moving forward and we are pleased with the strong interest from third parties for some of our non-core businesses. We will continue to work with urgency and take actions that will strengthen the balance sheet, but also result in a more focused and targeted company that can drive long-term profitability,” said Gougarty.
These financial highlights provide an analysis of the former Westport Innovations Inc. (“Westport”) and former Fuel Systems Solutions, Inc. (“Fuel Systems”) for comparative purposes.
|($ in millions, except per share amounts)
Note: Nine month amounts include four months of Fuel Systems’ results
|Three Months Ended September 30||Change
Better / (Worse)
|Nine Months Ended September 30||Change
Better / (Worse)
|Fuel Systems Revenues||$52.0||—||N/A||$72.8||—||N/A|
|Consolidated Gross Margin||$13.3||$0.8||N/A||$29.7||$15.0||N/A|
|Consolidated Gross Margin %||17.5%||3.6%||N/A||20.6%||19.2%||N/A|
|Westport Gross Margin||$2.9||$0.8||262.5%||$14.3||$15.0||(4.7)%|
|Westport Gross Margin %||12.0%||3.6%||N/A||19.9%||19.2%||N/A|
|Fuel Systems Gross Margin||$10.4||—||N/A||$15.4||—||N/A|
|Fuel Systems Gross Margin %||20.0%||—||N/A||21.2%||—||N/A|
|Consolidated Operating Expenses||$35.1||$26.7||N/A||$94.8||$78.7||N/A|
|Westport Operating Expenses
(Research and Development, General and Administrative and Sales and Marketing)
|Fuel Systems Operating Expenses||10.7||—||N/A||15.9||—||N/A|
|Income from Unconsolidated Joint Ventures||$2.6||$3.6||(27.8)||$6.0||$13.4||(55.2)%|
|Basic Net Income loss per Share||(0.30)||(0.58)||N/A||(0.62)||(1.17)||N/A|
|Cash and Short-term Investments Balance||$58.7||$42.1||39.4%||$58.7||$42.1||39.4%|
Cummins Westport Inc. Highlights
|Three Months Ended September 30||Change
Better / (Worse)
|Nine Months Ended September 30||Change
Better / (Worse)
|($ in millions, except unit amounts)||2016||2015||2016||2015|
|Gross Margin %||33.3%||31.1%||7.1%||31.2%||30.9%||1.0%|
|Segment Operating Income||7.9||12.2||(35.2)%||16.2||38.3||(57.7)%|
|Westport Fuel Systems' 50% Interest||$2.6||$3.5||(25.7)%||$5.8||$12.8||(54.7)%|
Management reviews the operational progress of its business units and investment programs over successive periods through the analysis of net income, EBITDA and Adjusted EBITDA. Management uses Adjusted EBITDA as a long-term indicator of operational performance since it ties closely to the business units’ ability to generate sustained cash flow. Westport Fuel Systems defines Adjusted EBITDA as net income (loss) attributed to the business unit or the consolidated company excluding expenses for (a) income taxes, (b) interest expense, net, (c) depreciation and amortization, (d) stock-based compensation, (e) unrealized foreign exchange gain or loss, (f) goodwill impairment, (g) inventory impairment from product line closure, (h) bargain purchase gain, (i) merger and financing costs, (j) amortization fair value inventory adjustment recorded on acquisition, (k) gain or loss on sale of investments, (l) gain or loss on disposal of assets, (m) restructuring, termination and other exit costs, and (n) other. Adjusted EBITDA includes the company's share of income from the joint ventures.
The term Adjusted EBITDA is not defined under U.S. generally accepted accounting principles ("U.S. GAAP") and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. Adjusted EBITDA has limitations as an analytical tool, and when assessing the company's operating performance, investors should not consider Adjusted EBITDA in isolation, or as a substitute for net loss or other consolidated statement of operations data prepared in accordance with U.S. GAAP. Among other things, Adjusted EBITDA does not reflect the company's actual cash expenditures. Other companies may calculate similar measures differently than Westport Fuel Systems, limiting their usefulness as comparative tools. The company compensates for these limitations by relying primarily on its GAAP results and using Adjusted EBITDA as supplemental information.
|($ in millions)||30-Sep-15||31-Dec-15||31-Mar-16||30-Jun-2016*||30-Sep-2016|
|Loss before Income Taxes||$ (37.2)||$ (23.9)||$(23.4)||$4.2)||$(32.1)|
|Interest Expense, Net||1.4||1.3||2.3||2.7||3.1|
|Depreciation and Amortization||3.3||3.3||3.1||3.7||5.2|
|Stock based compensation||3.3||3.5||4.0||2.3||2.9|
|Unrealized foreign exchange (gain) loss||(8.0)||0.5||1.3||4.1||(7.1)|
|Inventory impairment from product line closure||5.5||—||—||—||4.3|
|Bargain purchase gain||—||—||—||(42.9)||—|
|Merger and financing costs||3.2||1.3||2.1||4.5||0.4|
|Amortization fair value inventory adjustment recorded on acquisition||—||—||—||0.7||1.9|
|(Gain) loss on sale of investments||—||—||—||6.3||(3.9)|
|Loss on disposal of assets||—||0.8||—||—||—|
|Restructuring, termination and other exit costs||—||—||—||—||17.5|
|Total Adjusted EBITDA||$(9.8)||$(12.2)||$(10.6)||$(10.3)||$(7.6)|
*Note: Three months ended June 30, 2016 include only one month of Fuel Systems’ results
To view Westport Fuel Systems' full financials for the quarter ended September 30, 2016, please visit westport.com/company/investors/financial
Westport Fuel Systems is providing a conference call presentation as a guide to its financial information in a quick reference format and it should be read in conjunction with Westport Fuel Systems' interim financial report for the quarter ended September 30, 2016 and full financials for the year ended December 31, 2015.
Westport Fuel Systems has scheduled a conference call for today, Wednesday November 9, 2016 at 2:00 pm Pacific Time (5:00 pm Eastern Time) to discuss these results. The public is invited to listen to the conference call in real time by telephone or webcast. To access the conference call by telephone, please dial: 1-800-319-4610 (Canada & USA toll-free) or 604-638-5340. The live webcast of the conference call can be accessed through the Westport Fuel Systems website at westport.com/investors.
To access the conference call replay, please dial 1-855-669-9658 (Canada & USA toll-free) or 604-674-8052 using the pass code 0929. The replay will be available until November 16, 2016. Shortly after the conference call, the webcast will be archived on Westport Fuel Systems website and replay will be available in streaming audio and a downloadable MP3 file.
At Westport Fuel Systems, we are driving innovation to power a cleaner tomorrow. We are inventors, engineers, manufacturers and suppliers of advanced clean-burning fuel systems and components that can change the way the world moves. Our technology delivers performance, fuel efficiency and environmental benefits to address the challenges of global climate change and urban air quality. Headquartered in Vancouver, Canada, we serve our customers in more than 70 countries with leading global transportation brands. At Westport Fuel Systems, we think ahead. For more information, visit www.wfsinc.com.
This press release contains forward-looking statements, including statements regarding revenue and cash usage expectations, the effect of and timing of reorganization and restructuring of our business, the anticipated benefits of the merger with Fuel Systems, the timing and ability to recognize synergies as a result of the merger with Fuel Systems, future rationalization of operations and reduction of overhead expenses, continued research and development investment, future of our development programs (including those relating to the referenced HPDI program), timing for launch, delivery and completion of milestones related to the products referenced herein (including HPDI components), Westport Fuel Systems' expected actions, future sales of non-core assets and the benefits therefrom, the demand for our products, the future success of our business and technology strategies, investment in new product and technology development and otherwise, cash and capital requirements, intentions of partners and potential customers, the performance and competitiveness of Westport Fuel Systems' products and expansion of product coverage, future market opportunities, speed of adoption of natural gas for transportation and terms and timing of future agreements as well as Westport Fuel Systems management's response to any of the aforementioned factors. These statements are neither promises nor guarantees, but involve known and unknown risks and uncertainties and are based on both the views of management and assumptions that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activities, performance or achievements expressed in or implied by these forward looking statements. These risks and uncertainties include risks and assumptions related to our revenue growth, operating results, industry and products, the general economy, conditions of and access to the capital and debt markets, solvency, governmental policies and regulation, technology innovations, fluctuations in foreign exchange rates, operating expenses, the availability and price of natural gas, global government stimulus packages, the acceptance of and shift to natural gas vehicles, the relaxation or waiver of fuel emission standards, the inability of fleets to access capital or government funding to purchase natural gas vehicles, the development of competing technologies, our ability to adequately develop and deploy our technology, the actions and determinations of our joint venture and development partners, as well as other risk factors and assumptions that may affect our actual results, performance or achievements or financial position discussed in our most recent Annual Information Form and other filings with securities regulators. Readers should not place undue reliance on any such forward-looking statements, which speak only as of the date they were made. We disclaim any obligation to publicly update or revise such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in these forward looking statements except as required by National Instrument 51-102. The contents of any website, RSS feed or twitter account referenced in this press release are not incorporated by reference herein.
In accordance with the terms of the 50/50 Joint Venture Agreement between Cummins Inc. (NYSE:CMI) and Westport Fuel Systems Inc. (TSX:WPRT/NASDAQ:WPRT). The changes are effective as of January 1, 2018.
Order Fulfillment of Westport™ HPDI 2.0 + Strengthened Balance Sheet
To coincide with the disclosure, Westport Fuel Systems has also scheduled a conference call for Tuesday, November 14, 2017 at 2:00 pm Pacific Time (5:00 pm Eastern Time).
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