Ballard Announces 2006 Second Quarter Financial Results

July 27, 2006 by Jeff Shepard

Ballard Power Systems Inc. announced its operating and financial results for the quarter ended June 30, 2006. Ballard's revenues for the three months ended June 30, 2006 were $15.1 million, compared to $9.0 million for the same period in 2005.

During the second quarter of 2006, engineering development revenue increased $4.3 million and product and service revenues increased $1.8 million, or 21%, compared to the same quarter last year. The increase in engineering development revenue resulted from work performed and achievement of the milestones under the next generation automotive fuel cell and electric drive development programs and the 1kW residential cogeneration fuel cell development program. Product and service revenue totaled $10.8 million for the current year quarter, with product revenues of $6.5 million and service revenues of $4.3 million, compared to product revenues of $6.3 million and service revenues of $2.7 million in the second quarter of 2005. The service revenue increase of $1.6 million was primarily driven by Ballard's contract to provide field service for fuel cell powered buses in Europe and non-recurring engineering activities for Power Generation customers. While overall product revenues for the quarter were up only 3%, normalizing for discontinued products of automotive fuel cell systems and electronic power converters, product sales this quarter compared to the same quarter last year were up $1.9 million dollars, or 41%, driven by higher stack sales to the automotive, residential co-generation and forklift markets. Ballard continues to expect revenues for 2006 to be in the range of $55 to 65 million.

Ballad's net loss for the three months ended June 30, 2006 was $17.3 million, or ($0.15) per share, compared with a net loss of $29.5 million, or ($0.24) per share for the same period in 2005. The lower net loss quarter over quarter resulted from a $4.3 million increase in engineering development revenues, a $2.0 million improvement in product and service margins and a $6.0 million decline in operating expenses and depreciation and amortization. Ballard's improved margins were driven by increased service revenues. The decrease in operating expenses was due to the company's sale of Ballard Power Systems AG (BPSAG), which accounted for $6.5 million of the reduction, and cost reduction initiatives that were implemented in late 2005. These reductions were partially offset by increases in research and development expenditures for fuel cell related activities. Operating cash consumption for the three months ended June 30, 2006 decreased 72% to $8.1 million, compared to $28.7 million in 2005. The decrease in operating cash consumption was driven by lower losses and working capital requirements. Ballard continues to expect operating cash consumption for 2006 to be in the range of $50 to 65 million. Based on the company's improved operating performance for the first half of 2006, Ballard now expects its operating cash consumption for 2006 will be in the lower end of this range.

"Our re-positioning of Ballard over the past year, with a sharper focus on our core fuel cell business and greater emphasis on nearer term commercial opportunities, has enabled key progress, evident in our results in the second quarter," said John Sheridan, Ballard's President and CEO.