Azure Dynamics Announces Third Quarter 2010 Results
By Azure Dynamics Corporation, PRNEMonday, November 8, 2010
OAK PARK, Michigan, November 9, 2010 - Azure Dynamics Corporation (TSX: AZD)(OTC: AZDDF) ("Azure" or the
"Company"), the fast growing hybrid electric and electric power train
innovator for the commercial truck market, today reported its third quarter
financial results for the period ending September 30, 2010. The Company also
provided an update on product development activities.
"Although revenues for the quarter were at the lower-end of our
expectations, we continue to expect sales on the Balance(TM) Hybrid Electric
product for 2010 to hit our targets," said Scott T. Harrison, Azure Dynamics'
chief executive officer. "Sales were impacted by the transition to the
Johnson Controls-Saft battery pack to ensure the Balance(TM) Hybrid Electric
product included the latest lithium-ion technology as well as the other
engineering updates aimed at improving reliability, durability and
efficiency. This new battery pack was the single largest contributor to our
previously stated - and now implemented - product cost reduction plan for the
Balance(TM) Hybrid Electric, which will strengthen gross margins going
forward. We are now well positioned to achieve record revenues in the
fourth quarter led by our substantially lower cost Balance(TM) Hybrid
Electric product."
"The real story for the third quarter is the continuing tireless
contributions from our dedicated, professional and committed employee team,"
continued Harrison. "This effort was led by our strong engineering and
operational staff whose efforts to advance our technology portfolio while
reducing costs contributed directly to gross margin improvement, improved
product performance and bottom line results."
"The Transit Connect Electric continued to charge towards its official
manufacturing launch scheduled for April, 2011," added Harrison. "Since
announcing the Transit Connect Electric LEAD customer program in March, 2010,
six of the 10 LEAD customers in North America have placed orders totaling
more than 90 units, in line with our initial expectations for the 10 LEAD
customers. We expect the remaining four LEAD customers to place orders during
the fourth quarter. In addition, the product was successfully introduced to
the European market with a well publicized appearance at the Hanover, Germany
auto show. The European launch is expected to occur in second quarter of
2011."
In October, 2010, the Company obtained a $4 million credit facility to
provide an additional source to help fund working capital requirements. "We
are pleased to complete this financing with competitive terms that reflect
our solid product portfolio and expected future growth," concluded Harrison.
Third Quarter 2010 Highlights
- Since Q2, 2010, several marquee fleets have joined the Azure Transit
Connect Electric LEAD customer program with Xcel Energy, New York Power
Authority, Southern California Edison and Johnson Controls Inc. all
participating. As these companies show, LEAD customers are not simply
early adopters, but rather literal leaders in the advancement of electric
mobility in North America. It is especially noteworthy that major energy
producers have placed volume orders because these new Azure partners are
crucial in building the charging infrastructure required to support
electric vehicles in increasing numbers.
- Subsequent to the quarter end, Canada Post was named as the first LEAD
customer in Canada.
- The Transit Connect Electric participated in Ford Motor Company's
"Charging Into the Future Electric Vehicle tour," a multi-city tour
designed to promote electric vehicles and educate consumers about what
to expect from electrified automobiles.
- The Transit Connect Electric was showcased to a variety of U.S. federal
agencies for demonstration drives in Washington D.C. Specifically, the
Transit Connect Electric visited the Department of Justice, Department of
Energy, EERE, Clean Cities Coalition, the Department of Defense, the
United States Postal Service and several congressional staffs where the
vehicle was seen and driven by a host of decision-makers.
- Azure's Force Drive(TM) technology made international news by powering
the winning entry in the prestigious 2010 "X Prize" competition. The
competition, designed to inspire a new generation of super efficient
vehicles, required each entrant to perform in an intense multi-stage
competition. Li-Ion Motors' Wave II, featuring Force Drive(TM), earned
first place in the highly competitive Alternative Side-by-Side Class.
- The Transit Connect Electric was a headliner at the CALSTART Hybrid
Truck User Forum (HTUF) conference in Dearborn, Michigan, an event
co-sponsored by Azure and Johnson Controls.
- Michigan's Governor Granholm visited Azure's Oak Park headquarters for
a well publicized Transit Connect Electric event that included speakers
from Ford, JCI and AM General. State leadership from the Michigan
Economic Development Council and the state's Battery Team were in
attendance. Governor Granholm drove the Transit Connect Electric a few
weeks later at the "Business of Plugging In" conference in Detroit.
Financial Results
Revenue for the third quarter of 2010 totaled $1.8 million compared to
$3.2 million in the third quarter of 2009. For the nine months ended
September 30, 2010, revenue totaled $8.5 million compared to $5.0 million in
the same period a year ago. Net loss for the third quarter of 2010 was $6.4
million, or $(0.01) per share, compared to a loss of $5.7 million or $(0.01)
per share in the third quarter of 2009. Net loss for the nine months ended
September 30, 2010 was $17.4 million, or $(0.03) per share, compared to a
loss of $19.8 million or $(0.05) per share in the same period a year ago.
Before contributions, the Company's engineering, operations and product
development expenses for the quarter totaled $6.7 million (including $3.8
million in product development costs), compared to $3.4 million for the same
period in 2009 (including $1.2 million in product development costs). For the
first nine months of 2010, the Company's engineering and R&D expenses totaled
$17.3 million (including $9.6 million in product development costs), compared
to $10.4 million in the same period of 2009 (including $3.2 million in
product development expenses).
As of September 30, 2010, the Company's net cash and cash equivalents
totaled $25.3 million, and working capital totaled $21.7 million, compared to
cash and cash equivalents of $6.5 million, and working capital of $11.1
million, as of September 30, 2009.
Third Quarter Product Development Updates
Balance(TM) Hybrid Electric
- The lithium battery design validation testing progressed on new
released production level battery packs
- MY10.5 stripped chassis were produced in the third quarter and will go
into service in October following the completion of the final lithium
battery validation tests
- The shuttle bus MY10.5 variant was released to production within the
quarter
- Design validation testing of the production intent new belt
starter-generator system continued in the quarter and a production intent
prototype MY 11 Balance Hybrid vehicle was produced during the quarter at
Ultilimaster
- Design released JCS lithium battery service hardware drawings for prior
model year Balance Hybrid vehicles. The service release fulfills Azure's
objective to make the new battery technology backwards compatible so that
existing customers will be able to upgrade to the latest battery
technology.
Balance Plug-In Hybrid Electric (PHEV)
- During the third quarter the Company initiated the development of a
Plug-In Hybrid variant of the Balance E450
- Plug-In battery pack requirements were completed and the PHEV battery
design was initiated, leveraging design work already completed on the
Transit Connect Electric battery
- The preliminary PHEV component packaging design has been completed and
parts have been ordered to commence the first development vehicle build
Transit Connect Electric:
- Within the third quarter AZD completed the validation prototype vehicle
builds and commenced testing including accelerated durability at Ford's
Michigan Proving Grounds and FMVSS brakes certification testing
- The crash certification vehicles were delivered and are being prepared
for final certification tests
- Airbag development testing progressed during the quarter and will be
finalized in October for final certification tests
- The first tooling tryout vehicle build was completed at AM General in
September as the manufacturing line was set up for the pre-production
build of customer units in the fourth quarter
- With respect to the European design, the VP level design was released
within the quarter and the initial vehicles prepared for builds
- The Company reviewed potential manufacturing partner sites in Europe
within the quarter and prepared preliminary marketing, sales and service
plans
Low Emission Electric Power (LEEP(TM)):
- The company continued to produce LEEP(TM) Freeze systems to fulfill
customer orders for Kidron
- Delivered four additional LEEP(TM) Lift systems to Altec for further
trials
Force Drive(TM) Electric Components:
- The Company continued to progress on performance and specification
upgrades to its inverters
- Validation prototype builds were completed for the European variant of
the liquid-cooled inverter for the Transit Connect Electric and the
validation testing commenced including component and vehicle level EMI
performance testing
- An upgraded drive inverter software feature release was completed in
the quarter implementing improvements for Transit Connect Electric
production
- The Company started the pre-production build for the Transit Connect
Electric liquid-cooled drive inverters
Sales and Marketing Highlights:
- On October 22, Azure announced the appointment of John Formisano to its
Board of Directors. Formisano recently retired from Federal Express
Corporation where he served as Vice President - Global Vehicles.
Formisano is also Chairman of the Board of CALSTART.
- On October 7, Azure and Ford announced that New York Power Authority
(NYPA), the nation's largest state public power organization, was added
to the LEAD customer program for the innovative Ford Transit Connect
Electric van.
- On October 6, Azure announced the sale of 10 Balance(TM) Hybrid
Electric trucks to TruGreen, the nation's largest lawn care provider and
operator of one of the country's largest private vehicle fleets.
- On September 29, Azure Dynamics and Ford Motor Company announced that
Southern California Edison (SCE) was the newest addition to the Ford
Transit Connect Electric LEAD customer program with a 20 unit order. SCE
is one of the nation's largest electric utilities and operates one of the
world's most sophisticated fleets of alternative powered vehicles.
- On September 22, Johnson Controls, already an Azure Dynamics partner in
vehicle development, was added to the LEAD customer program with a 20
unit order.
- On September 8, Xcel Energy and a coalition of its customers were
selected to be among the first in the country to receive the all-electric
Ford Transit Connect Electric commercial van. As part of the Lead
Customer program, Xcel Energy will receive a total of 13 vans.
Conclusion:
"We anticipate a continued, albeit gradual, economic recovery for the
commercial businesses that we sell to," said Harrison. "These fleets need
replacement vehicles and are increasingly looking towards the type of
efficient and eco-friendly product Azure provides. Government stimulus
programs add further incentive for fleets to purchase advanced energy
solutions now. With our technological and cost advancements in the third
quarter, Azure is better prepared than ever to meet this added demand with
quality products that can be produced and sold at a profit."
The Company's fiscal 2010 third quarter financial statements and MD&A are
available at www.sedar.com or on the Company's website at
www.azuredynamics.com.
Azure will host a conference call to discuss third quarter 2010 earnings
today, Tuesday, November 9th at 5:00 p.m. eastern time. Interested listeners
can access the call toll free at 1-800-786-7015 and should call in at least
fifteen minutes before the scheduled start time.
About Azure Dynamics
Azure Dynamics Corporation (TSX: AZD)(OTC: AZDDF) is a world leader in
the development and production of hybrid electric and electric components and
powertrain systems for commercial vehicles. Azure is strategically targeting
the commercial delivery vehicle and shuttle bus markets and is currently
working internationally with a variety of partners and customers. The Company
is committed to providing customers and partners with innovative,
cost-efficient, and environmentally-friendly energy management solutions. For
more information please visit www.azuredynamics.com.
The TSX Exchange does not accept responsibility for the adequacy or
accuracy of this release.
Forward-looking Statements
This press release contains forward-looking statements related to Azure's
financial and other projections, expected future plans, events, financial and
operating results, objectives and performance, as well as underlying
assumptions, all of which involve risks and uncertainties. When used in this
press release, the words "believe", "anticipate", "intend", "estimate",
"expect", "project" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements
contain such words. These statements reflect management's current beliefs and
are based on information currently available to Azure's management and are
subject to certain risks, uncertainties and assumptions. Actual results may
differ materially from management expectations as projected in such
forward-looking statements for a variety of reasons and no assurances can be
given as to actual future results, performance or prospects. Factors that may
cause such differences include, but are not limited to: the early stage of
development of the Company; a lack of product revenues and a history of
losses; the need for additional financing; uncertainty as to commercial
viability; uncertainty as to product development and commercialization
milestones being met; uncertainty as to the market for the Company's products
and unproved acceptance of the Company's technologies; competition;
uncertainty as to target markets; dependence upon third parties; changes in
environmental policies; uncertainty as to patent and proprietary rights;
availability of management and key personnel; available regulatory approvals;
and conflicts of interest by directors and officers of the Company. More
detailed information about these and other factors that could affect Azure's
operations or financial results are included in Azure's filings with Canadian
securities regulatory authorities. Azure does not assume any obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by law. Because
of these risks, uncertainties and assumptions, readers should not place undue
emphasis on Azure's forward-looking statements.
Azure Dynamics Corporation
Consolidated Balance Sheets
(Stated in thousands of Canadian dollars, except per share amounts and
number of shares)
September 30 December 31
2010 2009
As at (unaudited) (audited)
$ $
ASSETS
Current
Cash and cash equivalents 24,259 33,588
Accounts receivable 1,375 2,632
Inventory (Note 3) 8,677 5,215
Prepaid expenses 1,092 974
35,403 42,409
Restricted cash 1,032 1,041
Property and equipment 5,513 5,277
Other assets 122 -
Intangible assets 5,888 6,755
Goodwill 2,932 2,932
50,890 58,414
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued 13,333 9,837
liabilities
Customer deposits & deferred 176 746
revenue
Current portion of notes payable 67 66
Current portion of obligations 92 99
under capital leases
13,668 10,748
Long-term
Obligations under capital leases 117 117
Customer deposits & deferred 594 644
revenue
Notes payable 1,962 2,055
16,341 13,564
Shareholders' equity
Share capital (Note 4) 208,574 202,250
Contributed surplus (Note 4) 7,880 7,139
Deficit (181,905) (164,539)
34,549 44,850
50,890 58,414
Nature of operations and going concern (Note 1)
Commitments (Note 6)
Subsequent Events (Note 
Approved on behalf of the Board:
"signed D. Campbell Deacon" Director
D. Campbell Deacon
"signed James C. Gouin" Director
James C. Gouin
Azure Dynamics Corporation
Consolidated Statements of Operations, Comprehensive Loss, and Deficit
(Stated in thousands of Canadian dollars, except per share amounts and
number of shares)
For the three months ended For the nine months ended
September 30 September 30
(unaudited) (unaudited)
2010 2009 2010 2009
$ $ $ $
Revenues 1,830 3,168 8,545 4,969
Cost of sales 1,968 3,529 8,551 7,039
Gross margin (138) (361) (6) (2,070)
Expenses
Engineering, research,
development and related
costs, net 4,002 3,395 9,520 10,509
Selling and marketing 553 519 1,641 1,504
General and
administrative 2,030 1,859 6,585 6,005
Total expenses 6,585 5,773 17,746 18,018
Loss from operations (6,723) (6,134) (17,752) (20,088)
Interest and other
income, net 136 136 408 423
Interest expense (23) (26) (73) (85)
Other income/(expense) - 24 - (594)
Foreign currency gains 189 308 51 569
Net loss and comprehensive
loss for the period (6,421) (5,692) (17,366) (19,775)
Deficit, beginning of
period (175,484) (150,814) (164,539) (136,731)
Deficit, end of period 181,905 (156,506) (181,905) (156,506)
Loss per share - basic
and diluted (0.01) (0.01) (0.03) (0.05)
Weighted average number
of shares - basic and
diluted 626,739,390 410,241,505 613,434,616 389,787,339
Azure Dynamics Corporation
Consolidated Statements of Cash Flows
(Stated in thousands of Canadian dollars, except per share amounts and
number of shares)
For the three months ended For the nine months ended
September 30 September 30
(unaudited) (unaudited)
2010 2009 2010 2009
$ $ $ $
Cash flows from
operating activities
Net loss for the
period (6,421) (5,692) (17,366) (19,775)
Adjustments for:
Amortization of
property and equipment 269 254 758 789
Amortization of
intangible assets 328 354 982 1,056
Unrealized foreign
currency gains (219) (279) (156) (362)
Stock option
compensation expense 110 69 579 332
Deferred share units
compensation expense 63 64 179 186
(5,870) (5,230) (15,024) (17,774)
Changes in non-cash
working capital
items (1,169) (1,193) 658 248
Total cash flows
from operating
activities (7,039) (6,423) (14,366) (17,526)
Cash flows from
financing activities
Issuance of common
shares (net of costs) 13 9,395 6,305 9,395
Principal payments
on notes payable (16) (17) (49) (53)
Repayment of obligations
under capital lease (36) (36) (130) (131)
Other assets (122) - (122) -
Total cash flows from
financing activities (161) 9,342 6,004 9,211
Cash flows from
investing activities
Acquisition of property
and equipment (333) (67) (868) (103)
Acquisition of
intangible assets (46) (35) (114) (160)
Sale of property and
equipment - - - 35
Changes in restricted
cash (1) 35 (13) 97
Total cash flows from
investing activities (380) (67) (995) (131)
Increase/(Decrease) in
cash and cash
equivalents (7,580) 2,852 (9,357) (8,446)
Exchange impact on
cash held in foreign
currency 20 2 28 (60)
Cash and cash
equivalents, beginning
of period 31,819 2,443 33,588 13,803
Cash and cash
equivalents, end
of period 24,259 5,297 24,259 5,297
Supplemental cash
flow information
Cash paid for
interest 23 26 73 85
Cash paid for taxes - - 13 -
Non cash investing and
financing activities:
Vehicles and equipment
acquired under capital
lease - 24 126 24
For further information:
Juris Pagrabs, Vice President, Investor Relations, +1(248)298-2403 ext
7570 Email: jpagrabs@azuredynamics.com
Pat Liebler, Liebler Group, +1(313)832-4376
Email: pat@lieblergroup.com
(AZD. AZDDF)
Juris Pagrabs, Vice President, Investor Relations, +1(248)298-2403 ext 7570 Email: jpagrabs at azuredynamics.com, Pat Liebler, Liebler Group, +1(313)832-4376
Email: pat at lieblergroup.com
Tags: Azure Dynamics Corporation, Michigan, November 9, Oak park
