Hydrogenics Reports Fourth Quarter and Full Year 2002 Results
TORONTO, Feb 12, 2003 --
Hydrogenics Corporation (Nasdaq: HYGS; TSX: HYG), a designer and manufacturer of fuel cell technology, today announced its un-audited financial results for the fourth quarter and year ended December 31, 2002 and highlights of its recent corporate activity. All results are reported in U.S. dollars. Conference call details are provided below.
Hydrogenics'fourth quarter 2002 revenues increased 82 percent to $5.8 million, compared with $3.2 million for fourth quarter 2001. Net loss for the fourth quarter 2002 was $5.1 million, or $0.11 per share, compared with a net loss of $3.8 million, or $0.08 per share, for the fourth quarter 2001. Excluding $3.8 million in non-cash amortization of intangibles, net loss for the fourth quarter 2002 was $1.3 million, or $0.03 per share. Excluding $3.5 million in non-cash amortization of intangibles, net loss for the fourth quarter 2001 was $0.3 million or $0.01 per share.
For the full year 2002, revenues increased 114 percent to $15.8 million compared with $7.4 million for 2001. Net loss for 2002 was $20.6 million, or $0.43 per share compared with a net loss of $2.8 million, or $0.07 per share, for 2001. Excluding $15.2 million in non-cash amortization of intangibles, net loss for 2002 was $5.4 million, or $0.11 per share. Excluding the $3.5 million in non-cash amortization of intangibles, net income for 2001 was $0.6 million, or $0.02 per share.
'This was truly an exceptional year for Hydrogenics. We are particularly pleased with our achievements in 2002. Our record revenues, for the quarter and full year, puts us at the high end of the annual guidance established one year ago,'said Hydrogenics President and CEO Pierre Rivard. 'With over $5 million in gross profit, it is clear that we have realized commercial sustainability and that profitability is within reach. By targeting premium markets for our power products and focusing aggressively on product cost reduction we are proving that there is a growing commercial market for fuel cells. In addition to achieving our financial targets, we have taken bold steps to strengthen our business on all fronts. We completed two acquisitions, broadened our geographic footprint, added new customers, introduced innovative products, and expanded our order backlog to record levels. It is truly an exciting time for our Company and for our industry.'
Gross profit for the fourth quarter 2002 was 34 percent of revenues, or $2.0 million, compared with 34 percent of revenues, or $1.1 million, for the comparable period in 2001. Gross profit for the full year 2002 was 32 percent of revenues, or $5.1 million, compared with 33 percent of revenues, or $2.5 million, for the comparable period in 2001.
Foreign currency translation had a nominal impact on fourth quarter 2002. Foreign currency gains contributed $0.5 million, or $0.01 per share, towards net income for 2002 compared with $3.0 million, or $0.08 per share, for 2001.
2002 ACCOMPLISHMENTS
Hydrogenics established specific corporate goals in 2002. These goals included:
1) maintaining commercial sustainability; 2) focusing on strategic alliances; 3) delivering commercial fuel cell products; and, 4) extending global reach. Hydrogenics achieved definitive success in all of its 2002 goals:
Commercial Sustainability -- More than doubled 2002 revenues for the year compared with the prior year and more than doubled gross profit to $5.1 million. Held the growth in selling, general and administrative (SG&A) and gross research and development (R&D) expenses, on a combined basis, to only 38 percent, thereby realizing substantial productivity gains. Factoring in $0.5 million in government grants received -- which are recorded as an offset to the gross R&D, not as revenues - operating loss excluding non-cash charges was $5.3 million resulting in a full year 'cash burn'of only $5.8 million. As revenues and gross profits continue to expand, and as governmental support for fuel cell R&D continues to strengthen, the prospect for positive cash flow from operations is very real. The Company ended 2002 with $60 million in cash and short term deposits to fund future fuel cell initiatives, and a record level of approximately $15 million in confirmed orders.
Strategic Alliances -- Partnered with John Deere's ePower group to design and deliver a new configuration of our power module, HyPM-LP2 ,within a six month time frame, culminating in John Deere's introduction of a fuel cell- powered Commercial Work Vehicle. John Deere and Hydrogenics cooperated in joint marketing activities at the EVAA trade show in Florida this past December. Announced a contract with the Canadian Government to lead a group of industry partners in the development of a hybrid fuel cell bus, which will incorporate Hydrogenics'HyPM-LP2 power module and proprietary vehicle-to-grid technology. Announced an agreement with Dow Corning to jointly commercialize an innovative manufacturing process for sealing fuel cell stacks, electrolyzers and membrane electrode assemblies. Participated with General Motors in the successful demonstration of our regenerative fuel cell auxiliary power unit (APU), HyPORT-E, in a communications module on the back of a GM hybrid-diesel truck developed for the United States military.
Commercial Fuel Cell Products -- Unveiled the Company's second generation power module in April 2002 and a new configuration of the HyPM power module in December 2002, demonstrating substantial design advances and cost reductions with each iteration. Continued to capture existing commercial opportunities ahead of a mass-market adoption of fuel cell technology by:
-- securing multiple new and repeat orders in Asia and Europe following the introduction of our 2002 series of test equipment which incorporated many industry leading advances; -- delivering a fuel cell module to AeroVironment for a specialty aerospace application; -- installing and successfully demonstrating the HyUPS unit at a cell tower site in Northern California, under both real and simulated electrical black-out conditions; -- delivering a HyPM-LP2 power module to John Deere for integration in a premium application Commercial Work Vehicle; and -- designing, delivering and demonstrating the HyPORT-E 5kW regenerative fuel cell APU to the U.S. military.
Global Reach -- Expanded our global reach by adding new test equipment customers in Germany, France, China and the Netherlands. In April 2002, completed the acquisition of EnKat GmbH, in Germany. Subsequent to year-end, acquired Greenlight Power Technologies in British Columbia, Canada. Combined, the Company now has an installed base of over 350 test stations worldwide across approximately 50 customer sites. The sale of FCATS to four different customers in China signals potential and strategic opportunities in the promising, fast-growing Chinese market.
FUEL CELL TECHNOLOGY ADVANCEMENTS
Power Modules -- Building on the success of the second generation HyPM(TM) power module introduced in April 2002, the Company undertook a complete re-design resulting in a new low profile, low pressure 20 kW power module, referred to as HyPM-LP2. The new power module demonstrates further advancements in performance, durability, reliability and modularity. Using only ten discrete components or subassemblies, the product displays a simple elegance and is particularly well positioned to undergo substantial cost reductions -- moving the Company closer to fuel cell commercialization. Work is now underway on the development of a 10kW and a 60kW model of the HyPM-LP2.
Auxiliary Power Units (APU) -- The Company delivered its HyPORT-E regenerative APU under contract with the U.S. military. The unit was integrated into the back of a GM military vehicle prototype and successfully demonstrated at a major media event in early January 2003. The HyPORT-E incorporates Hydrogenics'proprietary fuel cell and PEM electroyzer technology. Hydrogenics is designing a second generation APU and expects to introduce the new system by mid-year.
Core Technology -- With access to certain GM stack technology available only for certain defined applications, Hydrogenics has continued to invest in its own fuel cell stack technology. Hydrogenics'stack technology was deployed successfully in the John Deere power module as well as the APU for the U.S. military. Building a power module that can utilize either a Hydrogenics or a GM stack provides Hydrogenics with increased product and market flexibility. In conjunction with Dow Corning, a leading developer and manufacturer of silicone-based materials, the Company developed an innovative and cost-effective manufacturing process for sealing fuel cell stacks and electrolyzers. This patent-pending automated 'Seal-in-Place'(TM) process injects silicone materials into an unsealed, assembled stack, a process that substantially reduces stack assembly time and labor costs, resulting in improved reliability and stack performance.
GREENLIGHT ACQUISITION
On January 7, 2003 Hydrogenics completed the acquisition of Greenlight Power Technologies Inc. (Greenlight), its principal competitor in the fuel cell test business, in a transaction valued at approximately $19 million. Under the terms of the transaction, Greenlight shareholders received a cash consideration of approximately $2.25 million and 4.3 million Hydrogenics' common shares, representing approximately 8 percent of Hydrogenics' outstanding common shares.
The acquisition will enable Hydrogenics to consolidate its industry- leading position in the fuel cell testing business, while creating additional capacity and aligning dedicated resources to its fast-growing fuel cell power products business.
HYDROGENICS 2003 GOALS
Building on its achievements in 2002, the Company has set the following new goals for 2003:
1) Commercial Sustainability -- Become the first fuel cell company to achieve breakeven operating cash flow 2) Strategic Alliances -- Partner with industry leaders to access funding, technology and market opportunities 3) Commercial Fuel Cell Products -- Drive cost reductions in parts, material and labor -- Deliver prototypes for field testing in multiple premium power markets -- Develop modular architecture to accommodate a wider array of applications and power ranges -- Launch next generation test and diagnostic product line 4) Global Reach -- Expand customer base in all regions for fuel cell test and power products
OUTLOOK
Building on $15.8 million in 2002 revenues and on approximately $15 million of confirmed orders, Hydrogenics expects:
-- revenues in the range of $30 million to $32 million; -- restructuring costs related to the Greenlight integration of approximately $2 million related to severance, relocation and moving inventory; -- combined gross profits and government grants of approximately $11 million to $13 million; -- combined SG&A and gross R&D of approximately $12 million to $13 million; -- operating income excluding restructuring costs and non-cash depreciation and amortization in the range of ($1) million to $1 million.
The anticipated year over year doubling of revenues in 2003 will be driven by sales growth in both test and power products. The growth in test and power products will be somewhat offset by an anticipated decline of approximately 30 percent from GM engineering services revenues.
'With the acquisition of Greenlight completed and integration efforts well underway, we are excited about our prospects for 2003 and beyond,'stated Mr. Rivard. 'The recent announcements about substantial fuel cell technology funding from President George W. Bush and the Department of Energy (DOE) in the U.S. are particularly encouraging for our sector, both from a financial stimulus perspective and as validation that fuel cell technology is poised for commercial introduction. We anticipate that both our test station and power module businesses will benefit from the heightened interest from governments and from the military.'
'The strength of our 2002 financial performance, combined with our exciting product portfolio, gives us confidence that our capabilities are well aligned with the emerging government spending programs,'added Mr. Rivard. 'We are excited to start the new year with additional resources and capacity, provided through Greenlight, to execute our strategic growth plan and meet the growing demands for fuel cell test equipment and power products. In short, we enter 2003 with tremendous momentum, poised and well-positioned to realize our goal to become the first fuel cell company to achieve profitability.'
CONFERENCE CALL DETAILS
The company will hold a conference call with senior management to discuss the financial results in detail at 10:30 a.m. Eastern Time / 7:30 a.m. Pacific Time on February 12, 2003. To access the conference call participants should dial (719) 457-2662. A live Webcast of the conference call will be available on the Company's Web site at hydrogenics.com. Please visit the website at least 15 minutes early to register for the teleconference Webcast and download any necessary software. A replay of the call will be available from February 12, 2003 at 2:00 p.m. Eastern Time through February 26, 2003. To access the telephone replay participants should dial (719) 457-0820. The access code for the replay is 396745. A replay of the Webcast will also be available following the conference call on the Web site.
ABOUT HYDROGENICS
Hydrogenics Corporation (http://www.hydrogenics.com) is a designer and developer fuel cell systems for transportation, stationary and portable power applications. The Company is a leader in fuel cell balance-of-plant and operating system technology and is applying this extensive knowledge and expertise to the development and manufacture of fuel cell power modules and fully integrated power generators. Hydrogenics'95,000 square foot headquarters and R&D facility is located in Mississauga, Ontario, Canada. The Company's test system division, Greenlight Power Technologies, is located in Vancouver, British Columbia (Canada). Hydrogenics also has operations in Japan, the United States, and Germany.
This release contains forward-looking statements within the meaning of the 'safe harbor'provisions of the U.S. Private Securities Litigation Reform Law of 1995. These statements are based on management's current expectations or changes in the competitive environment adversely affecting the products, markets, revenues or margins of Hydrogenics'business. Readers should not place undue reliance on Hydrogenics'forward-looking statements. Investors are encouraged to review the section captioned 'Risk Factors'in Hydrogenics' Form 20F filed with the Securities and Exchange Commission on June 26, 2002 for a more complete discussion of factors that could affect Hydrogenics' future performance. Hydrogenics undertakes no obligations to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release. |
