Quantum Technologies Reports 2012 Second Quarter Financial Results
Press Release: Quantum Fuel Systems Technologies Worldwide, Inc. – 8 hours ago
IRVINE, Calif., Aug. 9, 2012 /PRNewswire/ -- Quantum Fuel Systems Technologies Worldwide, Inc. (QTWW), a global leader in alternative fuel systems and clean propulsion technologies for automotive applications, including natural gas, hybrid/electric and hydrogen systems, today reported its results for the second quarter of 2012. Conference call information is provided below.
2012 Second Quarter and Six Months Operating Results
For the second quarter of 2012, consolidated revenues decreased $1.7 million, or 23%, from $7.3 million in the second quarter of 2011, to $5.6 million in the second quarter of 2012. For the first six months of 2012, consolidated revenues decreased $2.4 million, or 17%, from $14.0 million in 2011, to $11.6 million in 2012. The decrease in revenue is primarily due to lower contract revenues recognized in 2012, partially offset by increased shipments of compressed natural gas (CNG) fuel storage systems.
Our consolidated operating loss for the second quarter increased $2.0 million, or 47%, from $4.3 million in the second quarter of 2011, to $6.3 million in the second quarter of 2012, and our consolidated operating loss for the first six months of 2012 increased $2.0 million, or 23%, from $8.7 million in 2011, to $10.7 million in 2012.
Electric Drive & Fuel Systems Segment
Product revenue for our Electric Drive & Fuel Systems segment for the second quarter of 2012 increased $1.2 million, or 40%, from $3.0 million in the second quarter of 2011, to $4.2 million in the second quarter of 2012, and for the first six months of 2012 increased $3.2 million, or 71%, from $4.5 million in 2011 to $7.7 million in 2012. The higher product revenues are primarily due to increased shipments of our light-weight CNG fuel storage systems, which were partially offset by a decline in component shipments to Fisker Automotive related to our Q-Drive ® hybrid drive system. Product revenues from CNG storage systems increased $3.1 million, or 178%, during the first six months of 2012 as compared to the prior year six month period.
Contract revenue for the Electric Drive & Fuel Systems segment for the second quarter of 2012 decreased $3.0 million, or 71%, from $4.2 million in the second quarter of 2011, to $1.2 million in the second quarter of 2012, and for the first six months of 2012 decreased $5.8 million, or 62%, from $9.4 million in 2011, to $3.6 million in 2012. Contract revenue is derived primarily from system development, application engineering and qualification testing of our products and systems under funded contracts with automotive OEMs and other customers. The higher amount of contract revenue recognized in the 2011 periods was mainly due to the level of pre-production engineering services that we provided to Fisker Automotive during the first six months of 2011 prior to its production launch of the Fisker Karma vehicle, which occurred during the second half of the 2011 calendar year.
Overall revenue for this segment for the second quarter of 2012 decreased $1.8 million, or 25%, from $7.2 million in the second quarter of 2011, to $5.4 million in the second quarter of 2012, and for the first six months in 2012 decreased $2.5 million, or 18%, from $13.8 million in 2011, to $11.3 million in 2012.
This segment had operating losses of $2.2 million and $3.8 million in the second quarter and first six months of 2012, respectively, compared to operating incomes of $0.4 million and $0.1 million in the second quarter and first six months of 2011, respectively.
The decline in operating income for the segment was partially due to an increase in expenses associated with our internally funded engineering programs. The expense for these programs increased $1.1 million in the second quarter of 2012, or 92%, from $1.2 million in the second quarter of 2011, to $2.3 in the second quarter of 2012, and increased $2.0 million in the first six months of 2012, or 80%, from $2.5 million in 2011, to $4.5 million in 2012. Our internally funded research effort includes hybrid control strategies and proprietary software designed to precisely control hybrid propulsion and vehicle performance along with hydrogen storage, injection and regulation programs. The increase during the 2012 periods is primarily due to increased engineering activities related to our F-150 PHEV program under which we are integrating our hybrid propulsion system into a Ford F-150 truck platform.
Renewable Energy Segment
Revenues for our Renewable Energy segment primarily reflect energy sales related to Schneider Power's two operational wind farms located in Ontario, Canada; the 1.6 megawatt Providence Bay Wind Farm and the newly completed 10.0 megawatt Zephyr Wind Farm. The Zephyr Wind Farm was acquired by Schneider Power on April 20, 2011 and began the initial ramp up of its energy generation capabilities on or about the acquisition date. Revenues from this segment in 2011 also include construction management services on other projects.
Revenues for this segment increased by $0.1 million in the second quarter of 2012, from $0.1 million in the 2011 period, to $0.2 million in the 2012 period, and increased $0.1 million in the first six months of 2012, from $0.2 million in the 2011 period, to $0.3 million in the 2012 period.
Operating losses for this segment were $0.4 million and $0.7 million in the second quarter and first six months of 2012, respectively, compared to operating losses of $0.7 million and $2.3 million in the second quarter and first six months of 2011, respectively. The operating loss for the prior year's first six months included a $1.0 million impairment charge due to the abandonment of the Spring Bay Wind Farm construction project in January 2011.
Corporate Segment
Our Corporate segment represents the general and administrative expenses that indirectly support our Electric Drive & 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.
Corporate segment expenses decreased $0.4 million, or 10%, from $4.1 million in the second quarter of 2011, to $3.7 million in the second quarter of 2012, and decreased $0.4 million, or 6%, in the first six months of 2012, from $6.5 million in 2011, to $6.1 million in 2012.
Included in the second quarter of 2012 was a net charge of $1.0 million associated with separation agreements executed in connection with the May 10, 2012 resignations of our former President and Chief Executive Officer and our former Executive Chairman of the Board. The charge primarily represents the sum of post-employment scheduled cash payments of $1.4 million to the former executives, as partially offset by the reversal of unvested stock-based awards forfeited and cancelled benefits as a result of their resignations. As of June 30, 2012, $0.9 million of the obligations remained outstanding and are scheduled to be paid in installments through November 2012. Also included in the second quarter of 2012 is a charge of $0.5 million for the impairment of solar related assets. Included in the prior year second quarter is a charge of $1.7 million recognized as of June 30, 2011 in connection with our sublease of a facility located in Lake Forest, California.
Non-Reporting Segment Results
Interest expense, net of interest income, amounted to $0.9 million in the second quarter of 2012, as compared to $0.6 million recognized in the second quarter of 2011, and amounted to $4.2 million for the first six months in 2012, as compared to $1.4 million in the first six months of 2011. The increase in expense during the 2012 periods is primarily related to higher effective interest rates associated with issuances of subordinated debt obligations over the course of the 2011 calendar year, which by the nature of equity-linked characteristics (e.g. warrants and debt principal conversion features), accelerated maturities and/or other contractual provisions associated with the issuance of the obligations, resulted in the recognition of a significant amount of non-cash interest charges in the second quarter and first six months of 2012.
Our consolidated 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 gain of less than $0.1 million in the second quarter of 2012, compared to a gain of $0.7 million in the second quarter of 2011, and amounted to a gain of $0.1 million for the first six months of 2012, compared to a gain of $4.1 million for the first six months of 2011. The share price of our common stock is the primary underlying variable that impacts the value of the derivative instruments. The gains recognized in the 2011 and 2012 periods were primarily attributable to the decrease in our common stock share price during the respective periods.
We recognize gains or losses on modifications of debt and derivative instruments when modifications are considered to be substantial. Reflected in our consolidated financial statements is a gain of $0.3 million recognized in the second quarter of 2012 in connection with the exchange of certain unsecured convertible notes and warrants issued in October and November 2011 for new unsecured non-convertible bridge notes and warrants issued in June 2012. In January 2011, we also modified debt instruments held by our former senior lender and other investors and recognized a combined loss of $1.5 million in the first quarter of 2011 that is included in the amount reported for the first six months of 2011.
During the six month period ended June 30, 2012, we settled a total of $1.3 million of principal due under a promissory note we refer to as "the Consent Fee Term Note" by the issuance of shares of our common stock. As a result of the in-kind debt settlements, we recognized a net charge of $0.1 million, which represented the difference between the fair values of the shares issued and the debt settled. During the six month period in 2011, we recognized net loss on settlements of debt and derivative instruments of $1.5 million, which primarily represented a charge associated with the cancellation of principal due under a non-revolving line of credit with the former senior lender in exchange for the issuance of shares of our common stock and warrants in connection with a private placement offering that closed on February 18, 2011.
We recognize our share of equity in earnings or losses of our affiliates, primarily related to our equity investment in losses of Asola, our German affiliate. During the second quarter and first six months of 2012, we recognized net equity losses of $0.2 million and $0.3 million, respectively, as compared to net equity losses of $0.4 million and $0.8 million, respectively, for the second quarter and first six months of 2011.
Our consolidated net loss for the second quarter of 2012 was $7.1 million, compared to a net loss of $4.3 million in the second quarter of 2011, and our consolidated net loss for the first six months of 2012 was $14.9 million, compared to a net loss of $9.6 million for the first six months of 2011.
Brian Olson, Chief Executive Officer, stated, "We are pleased with the substantial growth in CNG storage system revenues during the quarter and the first half of calendar 2012. We are experiencing strong demand for our advanced storage technologies and believe CNG systems will be the main growth driver in our business over the foreseeable future." Olson continued, "We have tripled our tank production capacity over the past several months and have plans to continue the expansion in order to meet the growing demand within the alternative fuel system industry." Olson further stated, "On the cost side, we have made significant reductions in our cost structure and expect the cost savings to begin materializing during the second half of this calendar year with the full effect being realized in 2013."
SummaryofQUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC. - Yahoo!Finance
