Quantum Technologies: Financial Results
Irvine, California,- Quantum Fuel Systems Technologies Worldwide, Inc., a leader in the development and production of hybrid propulsion and natural gas vehicle systems and other alternative energy technologies and applications including hybrid, plug-in hybrid, and hydrogen and owner of a portfolio of renewable energy farm projects, today reported its unaudited results for the eight month period ended December 31, 2011. On January 13, 2012, the Company changed its fiscal year end from April 30 to December 31 which was effective as of December 31, 2011. The results reported for the eight months represent the transition period between May 1, 2011 and December 31, 2011.
Eight Month Operating Results
For the eight month period ended December 31, 2011, revenues reached $24.5 million, an increase of $14.0 million, or 133%, from $10.5 million in the eight month period ended December 31, 2010. The increase in revenues was primarily due to increased product shipments to Fisker Automotive of components related to our Q-Drive TM hybrid drive system. During the eight month period ended December 31, 2011, the Company realized a $6.2 million improvement in operating performance as compared to the prior year period; however, due primarily to the recognition during the eight month period ended December 31, 2011 of non-cash impairment charges to goodwill, intangible assets and other long lived assets totaling approximately $27.2 million and the recognition of a charge of $1.7 million related to a facility exit obligation, our overall operating loss for the eight month period increased $22.7 million, from $12.7 million in the prior eight month period, to $35.4 million in the current period. Due to a decline in our market capitalization that occurred late in the 2011 calendar year, we initiated a detailed assessment of the fair value of our Electric Drive & Fuel Systems reporting unit and determined the carrying value exceeded its fair value and, as a result, concluded the fair value of the reporting unit no longer supported the full carrying amount of its goodwill. As a result, although our assessment has not yet been finalized, we recognized an estimated impairment charge of $18.0 million at December 31, 2011. During the eight month period ended December 31, 2011, we also had a $7.5 million write-down of intangible assets and goodwill at Schneider Power that was recognized at October 31, 2011 and $1.7 million in write-downs of assets associated with a planned solar module manufacturing line and certain other investments, of which $1.0 million was recognized at July 31, 2011 and $0.7 million was recognized at December 31, 2011.
Revenues for our Electric Drive & Fuel Systems segment increased $14.3 million from $10.0 million in the eight month period ended December 31, 2010, to $24.3 million in the eight month period ended December 31, 2011. Revenue from product sales for this segment increased $13.0 million during this period, from $1.9 million to $14.9 million, due to increased product shipments to Fisker Automotive and increased shipments of high pressure fuel storage systems for natural gas applications. Contract revenue for this segment increased $1.3 million, or 16%, from $8.1 million in the eight month period ended December 31, 2010, to $9.4 million in the current year eight month period. Contract revenue is derived primarily from system development, application engineering and qualification testing of our products and systems under funded contracts with OEMs and other customers. Exclusive of the goodwill impairment charge of $18.0 million, this segment had $1.0 million in operating income during the eight month period ended December 31, 2011, compared to a $5.7 million operating loss during the same period in the prior year. The significant improvement in operating performance was primarily due to the higher revenues and improved product margins during the current eight month period.
Revenues for our Renewable Energy segment include energy sales related to Schneider Power's Providence Bay wind farm and revenue from construction management services on other projects. Revenues for this segment were $0.2 million for eight month period ended December 31, 2011, compared to $0.5 million in the same prior year period. The operating loss for this segment was $9.0 million in the eight month period ended December 31, 2011, compared to a loss of $1.0 million in the same prior year period. The operating loss for this segment for the eight month period ended December 31, 2011 included impairment charges of $7.5 million that were recorded at October 31, 2011, of which $5.0 million was to reduce the carrying value of the intangible asset associated with Schneider Power's renewable energy project portfolio and $2.5 million was to fully write-off goodwill allocated to the Renewable Energy segment. The impairment charges were the result of industry wide factors and cancellations or delays in the development of certain of Schneider Power's renewable energy projects caused by our inability to access sufficient capital to advance the development of such projects.
Our Corporate segment represents the general and administrative expenses that indirectly support our Electric Drive and Fuel Systems and Renewable Energy operating segments and consists primarily of personnel costs, share-based compensation costs, and general and administrative costs for executives, finance, legal, human resources, investor relations and the board of directors. Losses for this segment increased by $3.4 million, from $6.0 million in the eight month period ended December 31, 2010, to $9.4 million in the eight month period ended December 31, 2011. The increase was primarily the result of the $1.7 million facility exit charge and the $1.7 million impairment charge related to write-downs of assets associated with a planned solar module manufacturing line and certain other investments. Company-wide share-based compensation expense was $0.7 million and depreciation and amortization expense was $1.1 million in the eight month period ended December 31, 2011.
During the eight month period ended December 31, 2011, cash used in operations improved by $1.0 million, from $10.5 million used in the eight month period ended December 31, 2010, to $9.5 million used in the eight month period ended December 31, 2011.
During the eight month period ended December 31, 2011, we recognized a $1.1 million loss in equity in earnings of affiliates, primarily related to our equity share in losses of our German affiliate, Asola.
Our financial statements include fair value adjustments for the bifurcation of the derivative liabilities associated with embedded features contained within certain debt obligations and warrant contracts. Fair value adjustments of the derivative instruments, which are recorded as non-cash unrealized gains or losses, amounted to a $4.6 million gain in the eight month period ended December 31, 2011, compared to a $8.2 million gain in the eight month period ended December 31, 2010. The share price of our common stock is the primary underlying variable that impacts the value of the derivative instruments. Additional factors include the volatility of our stock price, our credit rating, discount rates, and stated interest rates.
Our overall net loss for the eight month period ended December 31, 2011 was $38.5 million, compared to a net loss of $6.5 million for the eight month period ended December 31, 2010. The increase in net loss was primarily due to the $27.2 million of impairment charges and the $3.6 million decline in the amount of gain from the fair value adjustments to our derivative instruments.
Alan P. Niedzwiecki, President and CEO, stated, "This transitional eight month reporting period provides financial results through December 31, 2011, and enables the Company to begin reporting financial results on a calendar year basis. We are excited with the year over year revenue growth in the business during this respective period and the approximately $34 million in revenues recognized for the twelve months of calendar year 2011. We anticipate that revenues will be higher during calendar 2012 compared to calendar year 2011, and anticipate we will realize improved operating performance as a result of this expanding revenue base."
Quantum Fuel Systems Technologies Worldwide, Inc.
Condensed Consolidated Financial Information
Eight Months Ended
Statements of Operations:
Net product sales
Costs and expenses:
Cost of product sales
Research and development
Selling, general and administrative
Amortization and impairment of long-lived assets
Total costs and expenses
Interest expense, net
Fair value adjustments of derivative instruments, net
Loss on modification of debt and derivative instruments, net
Gain on settlement of debt and derivative instruments, net
Equity in earnings (losses) of affiliates, net
Loss from operations before income tax expense
Income tax benefit (expense)
Net loss attributable to stockholders
Net loss per share - basic and diluted
Weighted average shares outstanding -
basic and diluted
Cash Flow Information:
Depreciation, amortization and impairment of long-lived assets
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
The 2010 eight month period is shown for comparative purposes and has been prepared on a pro forma and unaudited basis and includes certain estimates.
The 2011 eight month period represents the transition period between the closing of the Company's most recent fiscal year of April 30, 2011 and the opening date of the Company's newly selected calendar year reporting period of January 1, 2012.
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