Hydrogenics Corporation (Nasdaq:HYGSD) (TSX:HYG) ("Hydrogenics" or
the "Company"), a leading developer and manufacturer of hydrogen
generation and fuel cell products, today reported fourth quarter
and 2009 results. Results are reported in U.S. dollars and are
prepared in accordance with Canadian generally accepted accounting
principles.
Highlights
Completed transaction with the trustees of Algonquin Power
Income Fund, generating gross proceeds of $10.4 million prior to
transaction costs.
Subsequent to year-end, completed a $5.0 million registered
direct equity offering with two institutional investors.
Revenues were $4.2 million and $18.8 million for the three and
twelve months ended December 31, 2009 (versus $8.9 million and
$39.3 million for the three and twelve months ended December 31,
2008), reflecting longer order delivery times and lower order
intake in the Company's OnSite Generation business unit, partially
offset by higher revenues in the Power Systems business unit.
Gross margin was 16% and 20% for the three and twelve months
ended December 31, 2009 (versus 29% and 20% for the three and
twelve months ended December 31, 2008) largely due to lower
overhead absorption.
Net profit was $6.1 million and negative $9.4 million for the
three months and twelve months ended December 31, 2009 (versus a
net loss of $2.0 million and $14.3 million for the three and twelve
months ended December 31, 2008), largely due to a $10.4 million
gain in the fourth quarter of 2009 in connection with the
transaction with the trustees of Algonquin Power Income Fund.
Cash and cash equivalents, restricted cash and short-term
investments were $11.0 million as of December 31, 2009, a $3.7
million sequential quarterly increase from the third quarter of
2009, reflecting proceeds of $10.4 million from the transaction
with the trustees of Algonquin Power Income Fund, before
transaction costs, partially offset by: (i) a $4.0 million EBITDA
loss; (ii) $0.6 million of capital expenditures; and (iii) a $2.2
million decrease in non-cash working capital.
Order backlog as of December 31, 2009 was $19.7 million, the
substantial majority of which, based on customer requirement, is
anticipated to be delivered and recognized as revenue in 2010.
"As expected, the fourth quarter of 2009 saw an increase in both
our revenue and backlog, as the Company continued to see a renewal
in our traditional end markets," said Daryl Wilson, President and
Chief Executive Officer. "We have also been pleased by many
recently announced developments including our partnership with
Rosetti Marino and our work with the Canadian Space
Agency. Even as some projects have taken longer to announce
than we anticipated, our bidding activity remains robust, and we
are pursuing RFPs worth, in aggregate, over $100
million. These projects include large scale renewable energy
storage systems and new fuel cell power module
applications. While we cannot always determine the timing of
such opportunities, we remain optimistic about the outlook for
2010."
Results for the fourth quarter of 2009 compared to the fourth
quarter of 2008
Revenues decreased $4.6 million, or 52%, reflecting a $6.0
million decrease in revenues in our OnSite Generation business unit
as a result of delayed project deliveries and timing of customer
payments, partially offset by a $1.4 million increase in Power
Systems revenues.
Gross profit, expressed as a percentage of revenues, was 16%
(29% in the fourth quarter of 2008) reflecting lower revenues in
our OnSite Generation business unit translating into lower overhead
absorption, partially offset by higher gross margins in our Power
Systems business unit as a result of product mix.
Cash operating costs, a non-GAAP measure, defined as selling,
general and administrative expenses, and research and product
development expenses, net, less stock-based compensation expense,
were $4.6 million, a 4% increase from $4.4 million in the fourth
quarter of 2008. Cash operating costs for the fourth quarter
of 2009 include: (i) $0.4 million of severance and business
streamlining related expenses; (ii) $0.3 million of expenses in
connection with the Algonquin Power Income Fund transaction; and
(iii) $0.2 million of costs associated with the preparation of our
base shelf prospectus.
Net profit was $6.1 million for the three months ended December
31, 2009 compared to a net loss of $2.0 million in the fourth
quarter of 2008 largely due to recording a gain of $10.4 million in
connection with the transaction with Algonquin Power Income Fund
completed on October 27, 2009.
Results for the year ended December 31, 2009 compared to the
year ended December 31, 2008
Revenues, exclusive of our Test Systems business unit, decreased
$18.0 million or 49%, reflecting an $18.9 million decrease in
revenues in our OnSite Generation business unit due to lower order
intake and longer delivery times as a result of weaker economic
conditions and timing of customer payments, which adversely
affected our ability to deliver product and recognize revenues.
Gross profit, expressed as a percentage of revenues, was 20%,
consistent with 2008.
Cash operating costs were $21.8 million, a 1% increase from
$21.6 million in 2008. Cash operating costs for the year ended
December 31, 2009 include: (i) $3.3 million of expenses associated
with our transaction with the trustees of Algonquin Power Income
Fund; (ii) $1.0 million of costs related to business streamlining
initiatives; (iii) $0.5 million of costs associated with deferred
compensation arrangements indexed to our share price; and (iv) $0.6
million of costs attributable to our Test Systems business
unit.
Net loss was $9.4 million for the year ended December 31, 2009,
a decrease of $4.8 million or 33% from $14.3 million in 2008. Prior
to reflecting the $10.4 million gain reported on the transaction
with the trustees of Algonquin Power Income Fund, net loss was
$19.7 million.
Liquidity
Cash and cash equivalents, restricted cash and short-term
investments were $11.0 million as of December 31, 2009, a $3.7
million sequential quarterly increase from the third quarter of
2009 reflecting gross proceeds of $10.4 million from our
transaction with Algonquin Power Income Fund, net of transaction
costs, partially offset by: (i) a $4.0 million EBITDA loss; (ii)
$0.6 million of capital expenditures; and (iii) a $2.1 million
decrease in non-cash working capital.
Order backlog
Order backlog as of December 31, 2009 was $19.7 million, as
follows (in $ millions):
Sept. 30, 2009
Backlog
Orders
Received
Orders
Delivered
Dec. 31, 2009
Backlog
OnSite Generation
$ 14.8
$ 3.7
$ 2.1
$ 16.4
Power Systems
4.3
1.1
2.1
3.3
Total
$ 19.1
$ 4.8
$ 4.2
$ 19.7
Conference Call Details
Hydrogenics will host a conference call at 10:00 a.m. Eastern
today, March 26, 2010 to review the fourth quarter and year ended
December 31, 2009 results. During the call, Daryl Wilson,
President and Chief Executive Officer, and Lawrence Davis, Chief
Financial Officer, will review the company's financial
results. The telephone number for the conference call is
877-307-1373 or, for international callers, 678-224-7873. A live
webcast of the call will also be available on the company's
website, www.hydrogenics.com.
The webcast will be archived on the site, and investors will be
able to access an encore recording of the conference call for one
week by calling 706-645-9291, conference ID #58880253. The encore
recording will be available two hours after the conference call has
concluded.
Hydrogenics has filed its annual report on Form 20-F with the
U.S. Securities and Exchange Commission and with the Canadian
securities regulatory authorities. Copies of the annual report on
Form 20-F may be obtained at the U.S. Securities and Exchange
Commission's website, www.sec.gov, at the Canadian Securities
Administrators' website, www.sedar.com or on the company's website,
www.hydrogenics.com. Shareholders may receive a hard copy of the
annual report on Form 20-F free of charge by contacting
Hydrogenics.
ABOUT HYDROGENICS
Hydrogenics Corporation (www.hydrogenics.com) is a globally
recognized developer and provider of hydrogen generation and fuel
cell products and services, serving the growing industrial and
clean energy markets of today and tomorrow. Based in Mississauga,
Ontario, Canada, Hydrogenics has operations in North America and
Europe.
This release contains forward-looking statements within the
meaning of the "safe harbour" provisions of the U.S. Private
Securities Litigation Reform Act of 1995, and under applicable
Canadian securities law. These statements are based on management's
current expectations and actual results may differ from these
forward-looking statements due to numerous factors, including: our
inability to increase our revenues or raise additional funding to
continue operations, execute our business plan, or to grow our
business; inability to address a sustained or broad economic
recession, and its impact on our business, results of operations
and consolidated financial condition; our limited operating
history; inability to implement our business strategy; inability to
obtain shareholder approval to allow an adjustment to the exercise
price of our series B warrants; unfavourable outcome of our
litigation with Alpha Capital Anstalt; fluctuations in our
quarterly results; failure to maintain our customer base that
generates the majority of our revenues; currency fluctuations;
failure to maintain sufficient insurance coverage; changes in value
of our identifiable intangible assets and goodwill; failure of a
significant market to develop our products; failure of hydrogen
being readily available on a cost-effective basis; changes in
government policies and regulations; failure of uniform codes and
standards for hydrogen fuelled vehicles and related infrastructure
to develop; failure to compete with other developers and
manufacturers of products in our industry; failure to compete with
developers and manufacturers of traditional and alternative
technologies; failure to develop partnerships with original
equipment manufacturers, governments, systems integrators and other
third parties; inability to obtain sufficient materials and
components for our products from suppliers; failure to manage
expansion of our operations; failure to manage foreign sales and
operations; failure to recruit, train and retain key management
personnel; inability to integrate acquisitions; failure to develop
adequate manufacturing processes and capabilities; failure to
complete the development of commercially viable products; failure
to produce cost-competitive products; failure or delay in field
testing of our products; failure to produce products free of
defects or errors; inability to adapt to technological advances or
new codes and standards; failure to protect our intellectual
property; our involvement in intellectual property litigation;
exposure to product liability claims; failure to meet the listing
requirements of Nasdaq; failure to meet rules regarding passive
foreign investment companies; actions of our significant and
principal shareholders; dilution as a result of significant
issuances of our common shares and preferred shares; inability of
US investors to enforce US civil liability judgments against us;
volatility of our common share price; and dilution as a result of
the exercise of options. Readers should not place undue reliance on
Hydrogenics' forward-looking statements. Investors are encouraged
to review the section captioned "Risk Factors" in Hydrogenics'
regulatory filings with the Canadian securities regulatory
authorities and the United States Securities and Exchange
Commission for a more complete discussion of factors that could
affect Hydrogenics' future performance. Furthermore, the
forward-looking statements contained herein are made as of the date
of this release, and 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, unless otherwise required by law. The forward-looking
statements contained in this release are expressly qualified by
this.
Hydrogenics Corporation
Consolidated Balance Sheets
(in thousands of US dollars)
December 31
2009
December 31
2008
Assets
Current assets
Cash and cash equivalents
$ 9,159
$ 21,601
Restricted cash
1,603
1,130
Accounts receivable
3,685
3,974
Grants receivable
490
505
Inventories
11,746
10,101
Prepaid expenses
1,270
1,161
27,953
38,472
Restricted cash
240
--
Property, plant and equipment
3,169
4,082
Goodwill
5,446
5,025
$ 36,808
$ 47,579
Liabilities
Current liabilities
Accounts payable and accrued liabilities
$ 14,782
$ 17,298
Unearned revenue
4,546
4,785
19,328
22,083
Deferred research and development grants
--
13
19,328
22,096
Shareholders' Equity
Common shares
307,038
307,000
Contributed surplus
16,713
16,300
Deficit
(300,795)
(291,420)
Accumulated other comprehensive loss
(5,446)
(6,397)
Total deficit and accumulated other comprehensive loss
(306,271)
(297,817)
17,480
25,483
$ 36,808
$ 47,579
Hydrogenics Corporation
Consolidated Statements of Operations
(in thousands of US dollars, except for share and per share
amounts)
(unaudited)
Three months ended
December 31
Twelve months ended
December 31
2009
2008
2009
2008
Revenues
$ 4,207
$ 8,855
$ 18,841
$ 39,340
Cost of revenues
3,542
6,287
15,113
31,446
665
2,568
3,728
7,894
Operating expenses
Selling, general and administrative
4,003
2,831
16,995
15,022
Research and product development
720
1,741
5,219
7,296
Impairment of property, plant and equipment
317
--
317
--
Amortization of property, plant and equipment
241
155
984
855
Amortization of intangible assets
--
61
--
249
5,281
4,788
23,515
23,422
Loss from operations
(4,616)
(2,220)
(19,787)
(15,528)
Other income (expenses)
Sale of asset
--
44
--
44
Provincial capital tax
(1)
--
(154)
170
Interest
84
151
169
923
Loss on disposal of assets
(14)
--
(14)
--
Foreign currency gains
230
71
40
188
299
266
41
1,325
Loss before income taxes
(4,317)
(1,954)
(19,746)
(14,203)
Current income tax (recovery)
(10,388)
(4)
(10,371)
116
Net profit (loss) for the period
$ 6,071
$ (1,950)
$ (9,375)
$ (14,319)
Net profit (loss) per share
Basic and diluted
$ 1.64
$ (0.53)
$ (2.54)
$ (3.89)
Weighted average number of common shares
outstanding
3,699,795
3,696,227
3,697,740
3,683,226
Hydrogenics Corporation
Consolidated Statements of Cash Flows
(in thousands of US dollars)
(unaudited)
Three months ended
December 31
Twelve months ended
December 31
2009
2008
2009
2008
Cash and cash equivalents provided by (used in) Operating
activities
Net profit (loss) for the period
$ 6,071
$ (1,950)
$ (9,375)
$ (14,319)
Items not affecting cash
Amortization of property, plant and equipment
583
406
1,326
1,106
Amortization of intangible assets
--
61
--
249
Gain on sale of assets
--
(44)
--
(44)
Loss on disposal of assets
14
--
14
--
Impairment of capital assets
317
--
317
--
Unrealized foreign exchange losses (gains)
(420)
594
(148)
695
Stock-based compensation expense
92
127
413
694
Net change in non-cash working capital
(2,414)
882
(3,632)
4,817
(4,243)
76
(11,085)
(6,802)
Investing activities
Decrease in short-term investments
--
--
--
15,032
Decrease (increase) in restricted cash
(289)
4,233
(713)
(1,130)
Proceeds from sale of assets
--
44
--
44
Purchase of property, plant and equipment
(596)
(555)
(752)
(885)
(885)
3,722
(1,465)
13,061
Financing activities
Repayment of long-term debt
--
--
--
(11)
Deferred research and development grants
--
(96)
70
(235)
Common shares issued, net of issuance costs
23
--
38
128
23
(96)
108
(118)
Increase (decrease) in cash and cash equivalents during the
period
3,381
3,702
(12,442)
6,141
Cash and cash equivalents – Beginning of period
5,778
17,899
21,601
15,460
Cash and cash equivalents – End of period
$ 9,159
$ 21,601
$ 9,159
$ 21,601
CONTACT: Hydrogenics Corporation
Lawrence Davis, Chief Financial Officer
(905) 361-3633
investors@hydrogenics.com
Darrow Associates
Investor Relations Contact:
Chris Witty
(646) 438-9385
cwitty@darrowir.com
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