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ALTERNATIVE FUEL SYSTEMS INC.
Quotes and Charts
ATF. (TSX)
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Attention Business/Financial Editors:
AFS Announces First Quarter Results
CALGARY, May 16 /CNW/ - Alternative Fuel Systems Inc. ("AFS" or the
"Company") (TSE:ATF) is pleased to announce the financial results for the
first quarter ended March 31, 2002 and provide an update on operating
activities.
Highlights
- AFS recorded revenue of $1,028,000 during the first quarter on sales of
natural gas engine management systems, components and engineering
services. Sales were primarily to auto and engine manufacturers in
Europe and Iran and to a large conversion outfitter in Mexico City.
- Based on current orders on hand, AFS estimates it will be in a position
to generate second quarter revenues in line with those recorded in the
first quarter. Current backlog consists primarily of orders for the
Falcon pressure regulator and Sparrow engine management systems.
- The Company reported negative EBITDA of $531,000 during the first
quarter. This translates into an average monthly net "burn rate" of
$177,000, a 54% improvement over the average monthly net burn rate of
$383,000 recorded for the year of 2001. AFS exited the first quarter
with cash and short-term investments of $4.6 million and an additional
$1.7 million in non-cash working capital. AFS continues to focus on
optimizing operating costs and preserving capital.
- During the quarter, AFS commenced development of two new products,
which are targeted to fill market gaps identified by our customers. The
new natural gas injector and "lean-burn" engine management system are
complementary to our current product line and are planned to be
commercialized before the end of this year. A portion of the lean-burn
system development project has been approved to receive government
funding. A prototype version of this system will initially be developed
for a Cummins L10 engine provided by a California customer.
- In April, AFS installed state-of-the-art emissions measurement
equipment in its engine testing facility. This equipment will allow
AFS' research and engineering team to measure engine emissions more
accurately, which will significantly improve our research and customer
service capabilities.
"Given our first quarter revenues and orders on hand for the second
quarter, we are targeting to make 2002 our best revenue year ever", commented
President and CEO, John Webb. "During the first quarter we visited all of our
major customers to review their product and service requirements. We continue
to focus on strengthening relationships with existing clients while
identifying new sales opportunities".
Financial Review - Discussion and Analysis
The following statement of operations provides unaudited results for the
first quarter ended March 31, 2002 and the comparable period in the prior
year.
<<
Amounts in 000's of Cdn. $
(except per share data
and No. of shares) Three months ended Three months ended
March 31, 2002 March 31, 2001
(Unaudited) (Unaudited)
------------------------------------------------------------------------
Revenue $1,028 $1,131
Cost of Revenue 581 695
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Gross Margin 447 436
Interest and other income 55 167
------- -------
502 603
------- -------
Operating and administrative expenses:
Engineering, R&D 342 393
General and administrative 528 584
Sales and marketing 108 209
Repayment (receipt) of research Assistance - (74)
Depreciation and amortization 230 143
Interest 11 1
------- -------
1,219 1,256
------- -------
Net loss (717) (653)
------- -------
Net loss per share ($0.01) ($0.01)
Number of shares o/s - end of period 49,429,441 49,429,441
>>
Revenue in the first quarter of 2002 amounted to $1,028,000 and was
comprised of sales of natural gas engine management systems ($213,000),
components ($773,000) and engineering services ($42,000). System sales were
primarily to Ecomex, a large conversion outfitter in Mexico City, under an
ongoing product supply agreement. Component sales included sales of the Falcon
pressure regulator to several European customers combined with sales of the
newly developed, integrated throttle body to IDEM of Iran.
Revenue in the prior year's first quarter amounted to $1,131,000 and
consisted of a shipment of engine management systems to IDEM of Iran
($847,000) with the remainder comprised of component sales.
Average gross margins of 43% or $447,000 were realized in the current
quarter as compared to margins of 39% or $436,000 recorded in 2001. The
increased margin percentage reflected a higher-margin sales mix.
Interest and other income dropped from $167,000 in 2001 to $55,000 in the
current quarter reflecting a decrease in the Company's cash position. AFS
exited the first quarter with cash and short-term investments of $4.6 million.
Total operating and administrative expenses amounted to $978,000 in the
current quarter (an average of $326,000 per month) as compared to $1,112,000
in the prior year first quarter (an average of $371,000 per month). Cost
cutting measures implemented at the end of 2001 contributed to net savings
realized in all expense categories. These measures included the reduction of
non-strategic research initiatives, pay cuts for senior employees and the
sublease of 20% of the space in the new facility. The average monthly
operating and administrative expenses for the full 2001 year were $465,000.
Sales and marketing costs were further reduced from the prior period due
to a decrease in trade show and promotion costs. In the prior year first
quarter, AFS initiated an aggressive marketing campaign, which involved
attendance at a number of industry trade shows and the preparation of
promotional materials for the Company's products and services. This campaign
laid the groundwork for sales of our current product lines. Although the
Company did not attend any trade shows in the first quarter of 2002, we plan
on attending strategic shows later this year. These include the European
Natural Gas Vehicle Association trade show in Nice, France and an
international natural gas vehicle conference and exhibition in Washington,
D.C. Going forward, the sales team will be focused on marketing the new
natural gas injector and lean-burn system while continuing to sell our
existing products.
The repayment/receipt of research assistance netted to zero in the first
quarter as assistance received offset repayments made. In the first quarter of
2002, AFS commenced repaying government funding received in prior years for
the Company's "Reverse Flow Catalytic Converter" program. In the second
quarter of this year, AFS will start receiving government funding (which is
non-repayable) for a portion of its lean-burn system development program.
Depreciation and amortization expense of $230,000 in 2002 exceeded the
2001 expense of $143,000. This reflects the substantial investment made by the
Company in the new facility that became operational in mid-2001.
The loss for the three-month period ended March 31, 2002 was $717,000
($0.01 per share) as compared to a loss for the comparable three-month period
in the prior year of $653,000 ($0.01 per share). Earnings before interest,
taxes, depreciation and amortization ("EBITDA") was negative $531,000 for the
current quarter, a $145,000 improvement over the same period in the prior
year.
The Company incurred $100,000 in capital expenditures in the first
quarter of 2002 which related primarily to the natural gas injector
development program and costs associated with upgrading the engine testing
facility. In the prior year first quarter, the Company incurred $496,000 in
capital expenditures which related mainly to infrastructure and equipment
costs for AFS' new facility.
Planned New Products and Projects
Based on AFS' market driven focus, we have commenced development of two
new products to fill market gaps identified by our customers. The new natural
gas injector is targeted to enhance the durability, reliability and cost
effectiveness of natural gas fueling systems. By combining high flow rates
with fast responses, this injector aims to offer superior fuel metering
accuracy while better tolerating oils and impurities common to compressed
natural gas and the dry operating environment associated with liquefied
natural gas. Prototype injectors are currently undergoing rigorous testing at
our facility and will be sent to select auto and engine manufactures and
conversion specialists for additional field and laboratory testing.
AFS' new lean-burn engine management system aims to achieve higher
thermal efficiencies and reduced emissions. Lean-burn refers to a combustion
process whereby excess volumes of air are drawn into the internal combustion
engine over what is required to chemically burn the fuel. Operating with
excess air provides potentially significant reductions of carbon dioxide
emissions compared to diesel and gasoline engines. AFS has commenced the
development of this system on a re-engineered Cummins L10 diesel engine
provided by a California customer.
AFS has identified an emerging opportunity to demonstrate the ultra-low
emission potential of dynamically combining natural gas and hydrogen. Our
Dynamic Hydrogen Multifuel ("DHM") technology is patent-pending and we are
discussing with government, industry and institutions on how to fully exploit
this opportunity.
Corporate
AFS is pleased that the Honorable Dr. Harvie Andre, Len Bolger and Allan
Amey have agreed to stand for election as new directors at this year's annual
shareholder's meeting to be held in June. Their respective business and
government backgrounds (which were provided in the Company's May 13, 2002
press release) will further strengthen the Company's Board.
Walter Brooks and Hugh Planche will not be standing for re-election at
this year's annual meeting. AFS wishes to thank these two gentlemen for their
contributions as directors over the past several years. During this time they
played an important role in the transition and growth of the Company.
During April, the Toronto Stock Exchange ("TSE") approved the extension
and re-pricing of certain common share purchase warrants (the "Warrants")
previously issued by the Company. In conjunction with a special warrant
financing completed in October 2000, AFS issued 3,504,533 Warrants with an
exercise price of $1.80 and an expiry date of April 12, 2002. With respect to
3,471,200 of these Warrants, the TSE has approved an extension of the expiry
date to December 2, 2002 and a re-pricing of the exercise price to $1.00. The
remaining 33,333 Warrants are not eligible for extension or re-pricing as
these are held by insiders of the Company.
Under the terms of the TSE's approval, the expiry date of these Warrants
will be accelerated to 30 days immediately following the period in which the
ten day weighted average traded price of the Company's common shares exceeds
$1.25 per share.
Outlook
The alternative fuels industry is receiving an increased amount of global
attention due primarily to the emergence of several key developments. These
include a growing recognition of global warming and its effects, the growing
realization of the effects of harmful emissions from engines powered by
traditional liquid fuels, and the initiation of government incentives and
policies in various regions (including the U.S. and the European Union) to
reduce dependence on imported oil. Natural gas is well positioned to become a
popular alternative fuel given its compelling economics and well developed
pipeline infrastructure. AFS is poised to benefit from the significant growth
predicted for the natural gas vehicle market.
AFS is continuing to focus on sales of its existing products and
development of new products for which market demand exists. Our team is fully
committed to realizing market potential while building long-term shareholder
value.
AFS is a Canadian environmental technology company providing innovative
and cost-effective solutions to the growing global problem of harmful exhaust
emissions from internal combustion engines. AFS has commercialized electronic
engine management systems enabling diesel and gasoline engines to operate on
cleaner burning natural gas. AFS' natural gas systems and components are
installed worldwide in new vehicles manufactured by Original Equipment
Manufacturers ("OEMs"), or retrofitted in existing fleets. AFS is
headquartered in Calgary, Canada and trades on the Toronto Stock Exchange
under the trading symbol ATF.
Forward-looking statements - this news release may contain
forward-looking statements about AFS' business, marketing and product
development plans based on the current expectations of management.
AFS cautions investors that any forward-looking statements are subject to
various risks, uncertainties and other factors that could cause the Company's
actual results to differ materially from those expressed in, or implied by
forward looking statements. These risks, uncertainties and other factors
include, without limitation, uncertainty related to the Company's ability to
successfully implement its business strategy; the risk that product
development projects may not be completed successfully or in a timely manner;
the ability of the Company to successfully negotiate and execute definitive
agreements with its customers; the development of competing technologies and
the possibility of increased competition; fluctuating energy prices;
uncertainties involving government policies and government regulations
affecting the Company's business.
Visit our website at: www.afsglobal.com
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For further information: please contact: Richard Rysak, Director,
Investor Relations, Phone: (403) 516-6625, Fax: (403) 237-7441, Email:
investor@afsglobal.com
To request a free copy of this organization's annual report, please go to
newswire.ca and click on reports@cnw.
ALTERNATIVE FUEL SYSTEMS INC. has 59 releases in this database.
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