15.11.06

15.11.2006: Meldung: Hydrogenics Corp.: Third Quarter 2006 Results

Hydrogenics Reports Third Quarter 2006 Results
Monday November 13, 6:00 am ET

Resumption of Production in OnSite Generation Business Unit

MISSISSAUGA, ONTARIO----Nov 13, 2006 -- Hydrogenics Corporation, a leading developer and manufacturer of hydrogen and fuel cell products, is reporting third quarter and nine-month unaudited results. Results are reported in U.S. dollars and are prepared in accordance with Canadian generally accepted accounting principles.

"During the third quarter, we delivered on a number of key initiatives providing the basis to move forward with confidence and focus," said Pierre Rivard, President and Chief Executive Officer of Hydrogenics Corporation. "On the operational side, we resolved the substantial majority of supply chain and component quality issues identified earlier in the year in our Belgian-based OnSite Generation business. We are now initiating product deliveries on a case by case basis and anticipate returning to historical levels by the first quarter of 2007, assuming no further issues are identified. On the business development side, we completed a number of initiatives with the highlight being the signing of a three-year manufacturing and supply agreement with American Power Conversion (APC) (NASDAQ:APCC - News), with a commitment to deliver up to 500 HyPM® XR 12 kW Fuel Cell Power Modules for integration into APC"s backup power solutions. Additionally, we also announced plans to bolster our management team by bringing in a new Chief Executive Officer at which time I will assume a new role, as Hydrogenics" Executive Chair," said Rivard.

"In the third quarter, we commenced a comprehensive assessment of our business and operating plans. As a result of this assessment and changes in strategy, we revised our previous estimates of the growth and development of our Onsite Generation business. In addition, we determined that the revenues of the Test Systems business would be lower than previously anticipated as a result of slower adoption of fuel cell technology in end user markets. Due to the significance of these changes, we recorded $79.9 million of impairment charges relating to our OnSite Generation and Test Systems businesses," added Rivard.

Results for the third quarter of 2006 compared to the third quarter of 2005

- Revenues were $9.0 million, a 15% decrease from $10.5 million, primarily due to the previously announced production delays in our OnSite Generation business unit.

- Gross profit, expressed as a percentage of revenues, was 6% (15% in 2005) and reflects higher margin deliveries in the Power Systems business unit offset by lower margins and higher overhead absorption in our OnSite Generation business unit.

- Cash operating costs, a non-GAAP measure1, defined as selling, general and administrative and research and product development expenses, excluding stock-based compensation, were $9.3 million, a 33% increase from $7.0 million reflecting $1.3 million of severance costs, including deferred compensation arrangements with certain executives, higher costs to achieve Sarbanes-Oxley Act compliance, a weakening of the U.S. dollar relative to the Canadian dollar, and other non-routine costs.

- Net loss was $90.7 million, an increase from $7.5 million of which $79.9 million is attributable to the impairment of intangible assets and goodwill.

Results for the third quarter of 2006 compared to the second quarter of 2006

- Revenues were $9.0 million, a 67% increase from $5.4 million, attributable to increased product deliveries in our OnSite Generation business unit.

- Gross profit, expressed as a percentage of revenues, was 6%, up from negative 15% due to $1.8 million of additional warranty reserves recorded in the second quarter in our OnSite Generation business unit.

- Cash operating costs were $9.3 million, an increase of 15% reflecting $1.3 million of severance costs, including deferred compensation arrangements with certain executives.

- Net loss was $90.7 million, an increase of $83.2 million, of which $79.9 million is attributable to the impairment of intangible assets and goodwill.

Results for the nine months ended September 30, 2006 compared to the nine months ended September 30, 2005

- Revenues were $20.5 million, a 27% decrease, due to production delays in our OnSite Generation group.

1 Cash operating costs is a non-GAAP measure used to assist in assessing Hydrogenics" financial performance. A description of this non-GAAP measure follows.

- Gross profit, expressed as a percentage of revenues, was 4%, a decrease of 9% due to the provision of additional warranty reserves and the adverse impact of production delays in our OnSite Generation business unit noted above.

- Cash operating costs were $24.7 million, an increase of $1.3 million, or 5%, compared with the nine months ended September 30, 2005 reflecting severance costs, higher costs to achieve Sarbanes-Oxley Act compliance, and a weakening of the U.S. dollar relative to the Canadian dollar and the other non routine costs.

- Net loss was $108.7 million, an increase from $28.2 million, of which $79.9 million is attributable to the impairment of intangible assets and goodwill.

Liquidity

We had $66.6 million in cash and cash equivalents and short-term investments as at September 30, 2006. The $6.5 million sequential quarterly decrease in cash and cash equivalents and short-term investments is attributable to: (i) $6.0 million net cash outflows from operations; and (ii) $0.5 million of capital expenditures.

Order backlog

Our order backlog as at September 30, 2006 was $29.4 million, as follows:



Q2 Orders Product/Services Q3
Backlog Received Delivered Backlog
-------------------------------------------
OnSite Generation $ 17.9 $ 1.9 $ 5.0 $ 14.8
Power Systems 9.0 1.8 1.9 8.91
Test Systems 4.6 3.2 2.1 5.7
-------------------------------------------
$ 31.5 $ 6.9 $ 9.0 $ 29.4
-------------------------------------------

We expect to deliver, and recognize as revenue in 2006, approximately one-third of our September 30, 2006 order backlog in each of our Power Systems and Test Systems business units and approximately one-quarter of our September 30, 2006 order backlog in our OnSite Generation business unit as we re-establish production activities in that business unit. The balance of our September 30, 2006 order backlog is anticipated to be delivered and recognized as revenue in 2007.

This section contains certain forward-looking statements. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. Please refer to the caution regarding forward-looking statements contained in this press release and the discussion of risks and uncertainties in our 2005 Annual Report.

Third Quarter Highlights

Progress on markets:

OnSite Generation

- We delivered 7 hydrogen generation units.

- We continued to pursue a number of compelling business opportunities and secured $1.9 million of new orders for a variety of applications for delivery in 2007.

Power Systems

- We delivered 14 Fuel Cell Power Modules (totalling 196 kW).

- We signed a three-year manufacturing and supply agreement with APC for up to 500 HyPM XR fuel cell power modules.

- We secured $1.8 million of new orders, including four orders for power modules to be installed in battery-dominant hybrid buses and electric vehicle projects in Europe.

Test Systems

- We delivered 11 test stations including initial delivery of our next generation solid oxide and direct methanol fuel cell test equipment.

- We secured $3.2 million of new orders, including repeat orders from Japanese, Asian, North American and European customers, demonstrating strong customer satisfaction.

- We secured orders from two new customers with global activities.

Progress on products and technology:

- We continue to advance next generation products with optimized durability, reliability, and reduced costs for release in November at the Fuel Cell Seminar.

- We completed the design of our S-4000 electrolyzer and commenced assembly of an alpha prototype.

- We continue research and development efforts to develop advanced test station software tools.

CONFERENCE CALL DETAILS

We will hold a conference call to review our results on November 13, 2006 at 10:30 a.m. (EST). To participate in this conference call, please dial (416) 695-9753 approximately ten minutes before the call. Alternatively, a live webcast of our conference call will be available on our website at www.hydrogenics.com. Please visit our website at least fifteen minutes early to register and download any necessary software. Should you be unable to participate, a replay, as well as a podcast link, will also be available on our website.

ABOUT HYDROGENICS

Hydrogenics Corporation (www.hydrogenics.com) is a globally recognized developer and provider of hydrogen 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, Europe and Asia.

NON-GAAP MEASURES

Hydrogenics uses several non-GAAP measures to assist in assessing its financial performance. Cash operating costs are defined as the sum of selling, general and administrative costs and research and product development expenditures less stock-based compensation expenses. This is a non-GAAP measure and may not be comparable to similar measures used by other companies.



Contact:

Contacts:
Hydrogenics Corporation, Investor Contact:
Lawrence Davis
Chief Financial Officer
+1 (905) 361-3633
Email: investors@hydrogenics.com

Hydrogenics Corporation, Media Contact:
Jane Dalziel
+1 (905) 361-3639
Email: media@hydrogenics.com
Website: http://www.hydrogenics.com


Source: Hydrogenics Corporation
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