Global Thermoelectric Announces Results of the Quarter Ending March 31, 2001
TSE STOCK SYMBOL: GLE
Web site: www.globalte.com
CALGARY, April 24 /CNW/ - Global Thermoelectric Inc., a leading developer
of solid oxide fuel cell (SOFC) technology, today announced operational and
financial results for its first quarter, the three-month period ending March
31, 2001.
Overview
In the last quarter, the Company's focus has been on prototype
development, partnerships and on developing volume production systems in the
Fuel Cell Pilot Production Plant. "I am pleased to report significant progress
on our major initiatives," said Jim Perry, Global's President and CEO.
"Several prototype systems are well underway and we expect to deliver a
residential unit to Enbridge Inc. for testing in the first half of 2001.
Business development activities have been stepped up and concentrated on the
U.S. Securing the right partners remains a high priority for Global," added
Mr. Perry.
Results of Operations --- Fuel Cell Division
In December 2000, the Company opened its 32,000 square foot Fuel Cell
Pilot Production Plant. The purpose of the plant was to take fuel cell
production out of the laboratory and into a volume-oriented environment. In
February of 2001 the plant demonstrated initial volume production of 250 cell
membranes per week. The cells produced were of a very high and consistent
quality and throughput times for the kiln were reduced by nearly 50%. Power
densities from these fuel cells improved approximately 10% over previously
published numbers. The Company's next goal is to demonstrate 1,000 cell
membranes per week by the end of this summer and then to further optimize
production to demonstrate a 2,500 cell membranes per week capability. In March
2001, the Company added a further 47,000 square foot facility to house fuel
cell development offices, laboratories and other testing facilities in
addition to new corporate offices.
Global expects to deliver a system to Enbridge Inc. for testing later in
2001. The Company is developing both residential and remote power systems
using different fuel cell processing technologies (steam and partial oxidation
reforming). Systems currently under development will range in size from 2 kW
to 5 kW with ultimate size to be determined by market research results. The
new residential prototype is physically smaller by approximately 30% over the
previous prototype. This has been accomplished by integrating the fuel cell
stack with fuel processing systems. Global's approach captures stack exhaust
gases and high-grade heat to support fuel processing and air pre-heating
resulting in a highly efficient system. When a Combined Heat and Power
application (such as heating domestic water) is added, Global's systems are
expected to achieve overall efficiencies of 75%-85%. With respect to
automotive applications, Global's fuel cell stacks were integrated with Delphi
Automotive Systems' Auxiliary Power Unit (APU) and demonstrated in a car in
February 2001. It is expected that activities under the purchase order
announced in August 1999 will be completed during the second quarter of 2001.
The prototypes currently under development also include new electronic
control systems and numerous innovations to reduce balance of plant component
costs. Cost reduction initiatives involving all aspects of the balance of
plant, such as electronics, gas manifolds, insulation, and heat exchangers
have been undertaken. The Company has also successfully incorporated
inexpensive mass-produced sensors and actuators from the automotive industry
into the prototypes.
Business development activities have stepped up in the past quarter. The
Company appointed a new Vice President, Business Development and has
significantly increased the size of its business development group. The
Company is seeking technology alliances, particularly with regard to balance
of plant components. The Company is also seeking business partnerships to help
secure market access for Global's fuel cell products. At the present time, our
emphasis is on securing access to U.S. markets. Global has received
significant interest from many different parties and expects that a more
in-depth interest will emerge during 2001 as the Company and its technology
become more widely known.
Ongoing efforts to protect the Company's intellectual property have
resulted in additional patent filings. To date, the Company has filed ten
patent applications.
Results of Operations --- Generators and Heaters Division
Delivery on the $19.4 million contract awarded to Global for
thermoelectric generators by the Gas Authority of India is nearing completion.
To date, generators have been commissioned and have received customer
acceptance at 58 of 66 sites along a new 1,200 kilometre pipeline in India.
The Company is actively marketing its generators in Latin America, Central
Asia and S.E. Asia as well as in North America. Heater production issues were
resolved and manufacturing resumed in the quarter for delivery of heaters to
the U.S. Army and other clients. Also, in the quarter the Company received its
first order for cargo bay heater kits. A total of 215 were shipped for
installation in trucks to be used by the U.S. Army in Alaska. These kits are
now standard equipment for U.S. Army trucks operating in arctic conditions.
Financial Results - Discussion and Analysis
To conform with U.S. generally accepted accounting principles (GAAP) and
industry practice in both the U.S. and Canada, the Company has changed its
method of accounting for research and product development costs and related
income tax assets. The Company has expensed research and product development
costs as incurred and has retroactively applied this policy to prior
comparative periods. In addition, the Company has not recognized the benefit
of investment tax credits and income tax deductions available for carry
forward in the current and prior periods.
Sales revenue for the three months ended March 31, 2001 was $8.3 million
compared to $13.3 million for the first quarter of the prior calendar year.
Strong thermoelectric generator sales in Canada and a number of large
international orders were realized in the current quarter. Revenue from
thermoelectric sales and service was $6.3 million compared to $10.7 million in
the comparative quarter of the prior year. The first quarter of 2000 included
$8.0 million in revenue from the Company's contract with the Gas Authority of
India. This contract is nearing completion with $0.4 million of revenue under
this contract recognized in the current quarter. Revenue from the Company's
heater product line was $2.0 million in the first quarter, compared to $2.6
million in the first quarter of 2000. The Company resumed production of its
A20 heater in February and has currently tooled up for production volumes of
approximately 200 heaters a month. The current quarter revenue includes the
sale of 215 cargo bay heater kits that facilitate installation of the
Company's heaters in the cargo bays of U.S. military trucks.
Gross profit was $3.0 million, or 36.1 percent of revenue in the quarter,
compared to $3.5 million or 26.4 percent of revenue for the quarter ended
March 31, 2000. Improved gross margins reflect updated pricing on new heater
orders and premium priced international orders in the thermoelectric generator
division.
The Company reported $1.9 million of investment income in the quarter
from cash and short-term investments, which totaled $130.1 million at March
31, 2001. Cash and short-term investments were $135.3 million at December 31,
2000.
Research and product development costs rose to $2.7 million in the
current quarter, of which fuel cell expenditures comprised $2.3 million. This
compares to research and product development costs of $0.9 million and $0.8
million respectively for the first quarter of 2000. The Company employed 83
people in its fuel cell division at March 31, 2001 compared to 27 people at
March 31, 2000.
Marketing expenses increased in total, and as a percentage of revenue, in
the current quarter as a result of agents' commissions on certain
international generator sales realized in the current period.
General and administrative expenses also increased to $1.3 million,
compared to $0.5 million in the first quarter of 2000. Additional personnel
required to manage our fuel cell divisional growth and the creation of a
business development group contributed to this increase. The Company now has
six people dedicated to its business development initiatives.
The Company realized $356,000 in foreign exchange gains in the quarter,
reflecting the continued softening of the Canadian dollar relative to its U.S.
dollar counterpart. The majority of the Company's international sales are
denominated in U.S. dollars.
Depreciation expense in the current quarter increased to $346,000,
compared to $150,000 in the first quarter of 2000, reflecting fuel cell
capital expenditures incurred over the prior year.
Despite a significant increase in fuel cell expenditures, the Company
generated net earnings of $231,000 ($0.00 per share) for the quarter ended
March 31, 2001, compared to net earnings of $1,661,000 ($0.08 per share) in
the same period of the prior year. The comparative period included income
realized from generator deliveries to India. Cash flow from operations, before
changes in non-cash working capital balances, decreased commensurately with
net earnings, to $0.6 million ($0.02 per share) in the current quarter from
$1.8 million ($0.08 per share) for the quarter ended March 31, 2000.
Capital expenditures increased to $2.9 million in the quarter from $0.2
million in the comparative quarter. Current quarter capital expenditures
included leasehold improvements related to the Company's new corporate offices
and expanded fuel cell research and development facilities.
As at April 24, 2001 the Company had 28,948,347 common shares and
1,110,003 stock options outstanding under the Company's Incentive Stock Option
Plan. In addition, preferred shares outstanding at April 24, 2001 are
convertible into 807,494 common shares of the Company.
Global Thermoelectric Inc. is a world leader in the development of solid
oxide fuel cell technology. The Calgary-based company is also the world's
largest manufacturer and distributor of thermoelectric generators for use in
remote locations, and produces advanced personnel heaters for use by the
defence industry. The Company is listed on the Toronto Stock Exchange (stock
symbol: GLE).
Attached: Financial Statements to March 31, 2001
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Global Thermoelectric Inc.
Balance Sheets
(000's of CDN dollars)
March 31, December 31,
2001 2000
(unaudited) (audited)
----------- ---------
Current Assets
Cash and cash equivalents $ 52,718 $ 4,580
Short-term investments 77,414 130,720
Accounts receivable 9,759 8,711
Inventory 8,260 8,113
Prepaid expenses 224 218
---------- ----------
Total Current Assets 148,375 152,342
Property and equipment - net 10,849 8,333
---------- ----------
Total Assets $159,224 $160,675
---------- ----------
---------- ----------
Current Liabilities
Accounts payable and accrued liabilities $ 6,336 $ 7,104
Income taxes payable 631 820
Deferred revenue 18 405
Current portion of obligations under
capital leases 244 249
---------- ----------
Total Current Liabilities 7,229 8,578
Obligations under capital leases 384 440
Research and development loan 190 190
---------- ----------
Total Liabilities 7,803 9,208
---------- ----------
Shareholders' equity
Share capital - net of issue costs 158,760 158,725
Contributed surplus 725 725
Accumulated deficit (8,064) (7,983)
---------- ----------
151,421 151,467
---------- ----------
Total Liabilities and Shareholders' equity $159,224 $160,675
---------- ----------
---------- ----------
Global Thermoelectric Inc.
Statements of Operations and Accumulated Deficit
For the three months ended March 31, 2001
(000's of CDN dollars except per share amounts)
Three months Three months
Ended Ended
Mar. 31, 2001 Mar. 31, 2000
(unaudited) (unaudited)
----------- -----------
(restated)
Revenue
Generators/Heaters $ 8,255 $ 13,288
Cost of goods sold 5,271 9,784
---------- ----------
Gross margin 2,984 3,504
Investment income 1,875 289
---------- ----------
4,859 3,793
---------- ----------
Expenses
Research and product development - net 2,735 890
Marketing 546 513
General and administrative 1,263 488
Interest on obligations under capital leases 14 23
Foreign exchange gain (356) (66)
Depreciation 346 150
---------- ----------
4,548 1,998
---------- ----------
Earnings before income taxes 311 1,795
Income taxes
Current 80 134
---------- ----------
Net earnings 231 1,661
---------- ----------
---------- ----------
Accumulated deficit, beginning of period (7,983) (6,823)
Dividends on preferred shares (312) -
---------- ----------
Accumulated deficit, end of period ($ 8,064) ($ 5,162)
---------- ----------
---------- ----------
Net earnings per common share $ 0.00 $ 0.08
Global Thermoelectric Inc.
Statements of Cash Flows
For the three months ended March 31, 2001
(000's of CDN dollars)
Three months Three months
Ended Ended
Mar. 31, 2001 Mar. 31, 2000
(unaudited) (unaudited)
----------- -----------
(restated)
Operating activities
Net earnings $ 231 $ 1,661
Add (deduct) non-cash items:
Depreciation 346 150
Loss on disposal of property and equipment 8 1
---------- ----------
Cash flow from operations 585 1,812
Net change in non-cash working
capital balances (2,857) 797
---------- ----------
(2,272) 2,609
---------- ----------
Financing activities
Repayment of obligations under capital leases (61) (91)
Share capital, net of issue costs 35 86
---------- ----------
(26) (5)
---------- ----------
Investing activities
Purchase of property and equipment (2,870) (216)
Proceeds on sale of property and equipment - 12
Proceeds (purchase) of short-term investments 53,306 -
---------- ----------
50,436 (204)
---------- ----------
Increase in cash and cash equivalents
during the period 48,138 2,400
Cash and cash equivalents,
beginning of period 4,580 21,890
---------- ----------
Cash and cash equivalents, end of period $ 52,718 $ 24,290
---------- ----------
---------- ----------
Supplemental cash flow information
Interest paid $ 15 $ 25
Income taxes paid - -
Global Thermoelectric Inc.
Operating Segment Information
For the three months ended March 31, 2001
(unaudited)
(000's of CDN dollars)
Generators/
Fuel Cells Heaters Corporate Total
Revenue - domestic $ - $ 2,420 $ - $ 2,420
- export - 5,835 - 5,835
-----------------------------------------------
- 8,255 - 8,255
Cost of goods sold - 5,271 - 5,271
-----------------------------------------------
- 2,984 - 2,984
Investment income - - 1,875 1,875
-----------------------------------------------
- 2,984 1,875 4,859
Expenses
Research and product
development - net 2,308 427 - 2,735
Marketing - 546 - 546
General and administrative - - 1,263 1,263
Interest on obligations
under capital leases - - 14 14
Foreign exchange gain - - (356) (356)
Depreciation 220 99 27 346
-----------------------------------------------
(Loss) earnings before
income taxes $ (2,528) $ 1,912 $ 927 $ 311
-----------------------------------------------
Capital asset
expenditures $ 2,446 $ 32 $ 392 $ 2,870
-----------------------------------------------
Total assets utilized in
the segment $ 7,974 $ 20,583 $130,667 $159,224
-----------------------------------------------
Global Thermoelectric Inc.
Operating Segment Information
For the three months ended March 31, 2000
(unaudited)
(000's of CDN dollars)
(restated)
Generators/
Fuel Cells Heaters Corporate Total
Revenue - domestic $ - $ 1,867 $ - $ 1,867
- export - 11,421 - 11,421
-----------------------------------------------
- 13,288 - 13,288
Cost of goods sold - 9,784 - 9,784
-----------------------------------------------
- 3,504 - 3,504
Investment income - - 289 289
-----------------------------------------------
- 3,504 289 3,793
Expenses
Research and product
development - net 796 94 - 890
Marketing - 513 - 513
General and administrative - - 488 488
Interest on obligations
under capital leases - - 23 23
Foreign exchange gain - - (66) (66)
Depreciation 37 101 12 150
-----------------------------------------------
(Loss) earnings before
income taxes $ (833) $ 2,796 $ (168) $ 1,795
-----------------------------------------------
Capital asset
expenditures $ 95 $ 102 $ 19 $ 216
-----------------------------------------------
Total assets utilized
in the segment $ 776 $ 16,250 $ 24,413 $ 41,439
-----------------------------------------------
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