Global Thermoelectric Inc. Announces First Quarter Results
TSE STOCK SYMBOL: GLE
Web site:www.globalte.com
CALGARY, April 30 /CNW/ - Global Thermoelectric Inc. ("Global" or the
"Company"), a leading developer of solid oxide fuel cell ("SOFC") products,
today announced operational and financial results for the first quarter ended
March 31, 2002.
The Company will host a conference call to discuss the results of the
first quarter ended March 31, 2002 on Wednesday, May 1, 2002 at 3:15 MT
(5:15 ET). Access to the call may be obtained by calling 1-888-571-5411 or may
be accessed via the Company's web site at www.globalte.com. Global's
conference call will be archived for 30 days on our web site or may be
accessed for 7 days following the call at 1-877-289-8525, pass code 184839 No.
Results of Operations
---------------------
Global's system development and prototyping program is progressing and
yielding valuable data that will be incorporated in future designs.
Prototyping involves the development and laboratory testing of modified or
upgraded systems to determine optimal solutions. During the quarter, following
extensive in-house testing by Global, an improved natural gas prototype system
was delivered and tested in Enbridge's facilities. The testing of this unit
yielded results that were significantly better than those recorded in 2001
with Enbridge and demonstrated that substantial progress was achieved in
system development.
The Company is currently assembling additional systems which are expected
to be completed in the coming month. This new generation of prototype features
a significantly improved approach to system configuration, packaging and
electronic controls. Photographs of the new systems will be made available on
Global's web site (www.globalte.com) over the coming weeks. All new systems
are designed to operate on natural gas and are expected to provide up to 2 kW
net AC power. Prototyping is planned to be ongoing throughout 2002 and the
performance of Global's prototypes is expected to vary from system to system
based on design considerations and test requirements. The objective of this
process is to develop a stable and optimal platform suitable for field
testing.
Global's optimization of fuel cell membrane manufacturing processes
continues to achieve significant progress. The Company's most advanced
membrane production process involves simultaneous co-firing of all three
layers of the cell membrane. This process reduces production time by over 50%
and overall labour and material costs by 30%. Cell membrane testing to date
has confirmed that the new cell performance meets or exceeds the standard
established by previous cells. All cells are now individually bar coded and
tracked to measure ongoing performance and create a performance database.
In the first quarter, the Company announced that Memorandums of
Understanding ("MOUs") were signed with the Bonneville Power Administration
("Bonneville") of Portland, Oregon and Superior Propane ("Superior") of
Calgary, Alberta. Both MOUs expand Global's network of potential development
and distribution partnerships in North America. Bonneville is a key player in
the U.S. Northwest supplying approximately 46% of the electrical power in the
region. Superior is Canada's largest national propane distribution company.
The Company's approach with potential distribution partners is to
structure collaboration around specific product groupings with a single set of
deliverables and timelines to market. This approach allows Global to maintain
a high degree of continuity across its product portfolio and to reduce time to
market, development risk and cost. The MOUs that have been signed are at
various stages of progression towards establishing the working relationships
that Global is seeking.
The Company continues to seek patent protection for its inventions and to
date Global has filed 40 patent applications on 13 separate inventions. The
Company recently received a Notice of Allowance from the U.S. Patent and
Trademark Office advising Global that a patent is expected to be issued in
respect to Global's cell membrane composition. The patent is expected to be
issued within several months.
The Company has set challenging objectives for our existing
thermoelectric generator business in 2002. The generator division is exploring
opportunities for growth that will position Global as a provider of innovative
power solutions. Accordingly, the division is seeking ways of leveraging its
extensive international sales and distribution network to deliver a broader
range of power related products and services. To this end, Global has added a
Director, Business Development to the staff of the generator division to
refine the Company's generator strategy and to explore opportunities, which
may include acquisitions or other business combinations.
Financial Results --- Discussion and Analysis
---------------------------------------------
Revenue from thermoelectric generator sales and service for the quarter
ended March 31, 2002 was $4.5 million compared to $6.3 million for the first
quarter of 2001. The decrease in sales was mainly attributable to a delay in
securing anticipated international orders and slower demand in western Canada
due to the decrease in natural gas activity levels.
As a result of the reduction in revenue, the gross margin from continuing
operations was $1.6 million, or 35.0 percent of revenue in the quarter,
compared to $2.2 million or 35.1 percent of revenue for the quarter ended
March 31, 2001. The Company was successful in maintaining its gross margin
percentages in the wake of a weaker market for its products.
The Company reported $0.7 million of investment income in the quarter
from cash and short-term investments, compared to $1.9 million in the first
quarter of 2001. The reduction in investment income parallels the reduction in
interest rates on the Company's conservative money market investments, and to
a lesser extent, a decrease in the Company's cash and short-term investment
reserves.
As anticipated, research, engineering and development costs rose to
$6.1 million, of which fuel cell expenditures comprised $5.8 million. This
compares to research, engineering and development costs of $2.8 million,
including $2.5 million of fuel cell expenditures in the first quarter of 2001.
The Company increased its personnel count in the fuel cell division to 171
people at March 31, 2002 compared to 83 employees at March 31, 2001. Including
support and ancillary personnel, Global currently has approximately 190
personnel employed in or supporting its fuel cell initiatives. Increased
prototype building and testing activities also contributed to the higher fuel
cell expenditures in the quarter.
Marketing expenses were relatively consistent with the previous year,
despite the reduction in quarterly revenue. The Company focuses a significant
portion of its marketing activities on international markets, the benefits of
which typically have longer time horizons.
General and administrative expenses increased $0.3 million to
$1.1 million in the current quarter, reflective of additional systems and
infrastructure required to support the growth of the Company's fuel cell
division.
Business development expenses were $0.3 million in the quarter, rising
slightly over the comparable quarter of the prior year. The Company's
expenditures in this area are expected to increase as it pursues additional
alliance opportunities and continues to negotiate definitive agreements
related to its existing alliances. The Company also expects to incur expenses
related to its efforts to strategically expand its thermoelectric generator
business.
Depreciation expense increased to $0.7 million compared to $0.3 million
in the first quarter of 2001. Capital expenditures in the fuel cell division
over the past year accounted for the increase in year-over-year depreciation
expenses.
The Company continues to work with the Gas Authority of India to obtain
release of the $2.0 million holdback on Global's previously completed contract
along the Jamnagar-Loni pipeline. This amount, or any portion thereof, will be
reported as revenue when received.
The planned increase in fuel cell research and product development
expenditures together with lower sales in Global's generator division
contributed to a net loss from continuing operations of $6.4 million ($0.23
per share) for the quarter ended March 31, 2002, compared to a net loss from
continuing operations of $0.2 million ($0.02 per share) for the quarter ended
March 31, 2001.
On August 24, 2001, the Company announced that it had closed the sale of
its military heater division. Reported as discontinued operations, this
division reported income of $0.4 million in the quarter ended March 31, 2001,
resulting in net income, after discontinued operations of $0.2 million ($0.00
per share). There was no income or loss to report from discontinued operations
in the current quarter.
Capital resources and liquidity
At March 31, 2002 the Company had cash and short-term investments of
$113.7 million compared to $121.1 million at December 31, 2001. Short-term
investments are defined as investments maturing (or expected to be held)
longer than three months from the initial date of purchase. The Company
adheres to a conservative investment strategy with its cash and short-term
investments, limiting its investments to Canadian government and bank
securities and high-grade commercial paper.
The Company believes it has sufficient cash reserves to fund its fuel
cell commercialization initiatives for at least the next two years.
Investing Activities
Capital expenditures were $0.8 million in the current quarter, compared
to $2.9 million in the first quarter of 2001. Unlike the comparative quarter,
no significant expenditures were incurred in pilot production equipment and
facilities. The Company has substantially completed the construction and
tooling of its pilot production facilities, with additional capital investment
in the remainder of the year focused on improved cell membrane manufacturing
technologies and test stand equipment.
Forward-looking statements
--------------------------
This news release contains forward-looking statements about the Company,
the development of its technologies, and the establishment of its strategic
business relationships. Forward-looking statements are statements that are not
historical facts and are generally, but not always, identified by the words
"expects", "anticipates", "believes", "intends", "estimates", "projects" and
similar expressions, or that events or conditions "will", "may", "could" or
"should" occur.
These forward-looking statements are subject to various risks,
uncertainties and other factors that could cause the Company's actual results
or achievements to differ materially from those expressed in or implied by
forward looking statements. These risks, uncertainties and other factors
include, without limitation, uncertainty as to the Company's ability to
successfully implement its business strategy; the risk that development
projects will not be completed successfully or in a timely manner; a
dependence on the contributions and performance of the Company's major
alliance partners; the ability of the Company to successfully negotiate and
execute definitive agreements governing its relationships with its major
alliance partners; 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; and other factors identified in the Company's Annual
Information Form and other reports filed with securities commissions in Canada
and available at www.sedar.com.
Forward-looking statements are based on the beliefs, opinions and
expectations of the Company's management at the time they are made, and the
Company does not assume any obligation to update its forward-looking
statements if those beliefs, opinions or expectations, or other circumstances
should change.
Global Thermoelectric Inc. is a world leader in the development of SOFC
products. The Company is also the world's largest manufacturer and distributor
of thermoelectric power generators for use in remote locations. Global is
developing SOFC products that can easily, cleanly and economically obtain
hydrogen from hydrocarbon fuels. The Company is prototyping residential and
remote power systems to be fuelled by natural gas or propane. Global is listed
on The Toronto Stock Exchange (stock symbol: GLE).
Statements to March 31, 2002 are attached to this news release.
<<
GLOBAL THERMOELECTRIC INC.
CONSOLIDATED BALANCE SHEETS
(Amounts expressed in thousands of Canadian dollars)
March 31, December 31,
2002 2001
(unaudited) (audited)
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ASSETS
Current
Cash and cash equivalents $ 71,402 $ 83,370
Short-term investments 42,323 37,694
Accounts receivable 4,520 5,155
Inventory 4,112 4,220
Prepaid expenses 1,176 570
Current assets of discontinued operations - 502
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123,533 131,511
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Capital assets - net 15,428 15,286
Investment 52 52
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$ 139,013 $ 146,849
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 5,480 $ 6,485
Income taxes payable 217 269
Current portion of obligations under capital
leases 261 233
Current liabilities of discontinued operations 142 183
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6,100 7,170
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Research and development loan 200 200
Obligations under capital leases 122 207
Shareholders' equity
Share capital - net of issue costs 158,839 158,821
Contributed surplus 725 725
Accumulated deficit (26,973) (20,274)
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132,591 139,272
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$ 139,013 $ 146,849
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>>
GLOBAL THERMOELECTRIC INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(Amounts expressed in thousands of Canadian dollars, except per
common share amounts)
<<
Three months Three months
ended March 31, ended March 31,
2002 2001
(unaudited) (unaudited)
-------------------------------------------------------------------------
Revenue $ 4,468 $ 6,298
Cost of goods sold 2,902 4,085
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Gross margin 1,566 2,213
Investment income 665 1,875
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2,231 4,088
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Expenses
Research, engineering and development - net 6,080 2,752
Marketing 448 456
Business development 336 287
General and administrative 1,051 754
Interest on obligations under capital leases 9 14
Foreign exchange loss (gain) 21 (356)
Depreciation 655 318
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Loss from continuing operations before
income taxes (6,369) (137)
Income taxes
Current 18 77
-------------------------------------------------------------------------
Net loss from continuing operations (6,387) (214)
Net earnings from discontinued operations,
net of income tax - 445
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Net (loss) earnings (6,387) 231
Accumulated deficit, beginning of period (20,274) (7,983)
Dividends on preferred shares (312) (312)
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Accumulated deficit, end of period $ (26,973) $ (8,064)
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Basic and diluted net loss per common
share from continuing operations $ (0.23) $ (0.02)
Basic and diluted net earnings per common
share from discontinued operations 0.00 0.02
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Basic and diluted net (loss) earnings
per common share $ (0.23) $ 0.00
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Weighted average number of common shares
outstanding during the period 29,030 28,928
Common shares outstanding at April 30, 2002 29,033
Diluted shares outstanding at April 30, 2002 31,711
GLOBAL THERMOELECTRIC INC.
CONSOLIDATED STATEMENTS OF CASHFLOWS
(Amounts expressed in thousands of Canadian dollars)
Three months Three months
ended March 31, ended March 31,
2002 2001
(unaudited) (unaudited)
-------------------------------------------------------------------------
Operating activities
Net loss from continuing operations $ (6,387) $ (214)
Add (deduct) non-cash items:
Depreciation 655 318
Loss on disposal of capital assets 2 8
Net change in non-cash working capital
balances (216) (393)
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(5,946) (281)
-------------------------------------------------------------------------
Financing activities
Repayment of obligations under capital leases (57) (61)
Proceeds on issuance of share capital, net
of issue costs 18 35
Preferred share dividends (312) (312)
Net change in non-cash working capital
balances 312 (2)
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(39) (340)
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Investing activities
Purchase of capital assets (799) (2,870)
(Purchase) proceeds of short-term
investments (4,629) 53,306
Cash flow from discontinued operations 461 (1,677)
Net change in non-cash working capital
balances (1,016) -
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(5,983) 48,759
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(Decrease) increase in cash and cash
equivalents during the period (11,968) 48,138
Cash and cash equivalents, beginning of
period 83,370 4,580
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Cash and cash equivalents, end of period $ 71,402 $ 52,718
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Other supplemental financial information
In addition to cash and cash equivalents, the Company holds highly liquid
short-term investments as follows:
Three months Three months
ended March 31, ended March 31,
2002 2001
(unaudited) (unaudited)
-------------------------------------------------------------------------
Cash and cash equivalents $ 71,402 $ 52,718
Short-term investments 42,323 77,414
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Total $ 113,725 $ 130,132
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GLOBAL THERMOELECTRIC INC.
OPERATING SEGMENT INFORMATION
(Amounts expressed in thousands of Canadian dollars)
Quarter ended March 31, 2002 - unaudited
------------------------------------------------
Fuel Cells Generators Corporate Total
-------------------------------------------------------------------------
Revenue - Domestic $ - $ 2,080 $ - $ 2,080
- Export - 2,388 - 2,388
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- 4,468 - 4,468
Cost of goods sold - 2,902 - 2,902
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Gross margin - 1,566 - 1,566
Investment income - - 665 665
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- 1,566 665 2,231
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Expenses
Research, engineering
and development - net 5,813 267 - 6,080
Marketing - 448 - 448
Business development 287 49 - 336
General and administrative 129 146 776 1,051
Interest on obligations
under capital leases - - 9 9
Foreign exchange loss - - 21 21
Depreciation 489 107 59 655
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(Loss) earnings from
continuing operations before
income taxes $ (6,718) $ 549 $ (200) $ (6,369)
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Capital asset expenditures $ 724 $ 23 $ 52 $ 799
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Total assets utilized in
the segment $ 13,336 $ 10,201 $ 115,476 $ 139,013
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Quarter ended March 31, 2001 - unaudited
------------------------------------------------
Fuel Cells Generators Corporate Total
-------------------------------------------------------------------------
Revenue - Domestic $ - $ 2,420 $ - $ 2,420
- Export - 3,878 - 3,878
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- 6,298 - 6,298
Cost of goods sold - 4,085 - 4,085
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Gross margin - 2,213 - 2,213
Investment income - - 1,875 1,875
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- 2,213 1,875 4,088
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Expenses
Research, engineering and
development - net 2,493 259 - 2,752
Marketing - 456 - 456
Business development 287 - - 287
General and administrative 44 98 612 754
Interest on obligations
under capital leases - - 14 14
Foreign exchange gain - - (356) (356)
Depreciation 220 71 27 318
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(Loss) earnings from
continuing operations before
income taxes $ (3,044) $ 1,329 $ 1,578 $ (137)
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Capital asset expenditures $ 2,446 $ 32 $ 392 $ 2,870
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Total assets utilized in
the segment $ 7,974 $ 13,995 $ 130,667 $ 152,636
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%SEDAR: 00002531E
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