Hydrogenics Corporation (Toronto:HYG.TO; NasdaqGM:HYGS), a developer and manufacturer of hydrogen and fuel cell products, reported fourth quarter and fiscal 2006 results in U.S. dollars.
“Our year came to a close with positive signs, including the resumption of OnSite Generation deliveries following the production delays reported earlier in 2006,” said Daryl Wilson, President and CEO. “Unfortunately, these production delays, caused by supply chain and component quality issues in this business unit, adversely impacted our results for the year.”
“Today we announce a streamlining of our organization and our plans for the company. With disciplined execution, we commit to deliver meaningfully improved financial performance. Our goal is to reduce our cash consumption by at least one third on an annualized basis. We will differentiate ourselves by delivering hydrogen products to world class customers at margin,” added Wilson.
The Corporation has begun restructuring to reduce its overall cost structure, the majority of which is anticipated to be effected by March 31, 2007. 50 full-time equivalent positions will be cut; the company will incur a one-time pre-tax charge of approximately $2.1 million primarily in the three months ended March 31, 2007. These workforce reductions represent $4.0 million of annualized cost savings.
Q4 Revenues were $9.5 million, a 4% increase over the fourth quarter of 2005. Gross profit, expressed as a percentage of revenues, was negative 1% (negative 4% in 2005) and reflects higher margin deliveries in the Power Systems business unit offset by lower revenues and gross margin in the OnSite Generation business unit.
Cash operating costs, a non-GAAP measure, defined as selling, general and administrative, and research and product development expenses less stock-based compensation expenses, were $10.8 million, a 64% increase reflecting costs relating to Sarbanes-Oxley Act compliance, severance costs and higher research and product development, net of third party funding.
Net loss was $22.1 million compared to $9.1 million in 2005, an increase of $13.0 million, of which $10.9 million is attributed to an impairment of intangible assets and goodwill relating to the OnSite Generation business unit recognized in the fourth quarter of 2006.
2006 revenues were $30.1 million, a 19% decrease, due primarily to production delays in the OnSite Generation group. Gross profit, expressed as a percentage of revenues, was 2%, a decrease from 9%.
Cash operating costs were $35.5 million, a 15% increase due to consulting costs related to business strategy matters, Sarbanes-Oxley Act compliance, severance, deferred compensation costs and increased research and product development costs.
Net loss was $130.8 million, an increase of $93.4 million, primarily as a result of $90.8 million of impairment charges relating to intangible assets and goodwill.
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