Railpower Technologies (RLPHQ)

[kermit42]

Thanks for starting this thread! I'll check 'em out!

I've just done a quick glance so far. The website looks great (I like that they include the O/S, not too many companies do that).

Do you have any idea what caused that PPS crash a couple weeks ago?


Edit: never mind, I see the financial report. It doesn't seem bad, more like they have a temporary cash flow problem, but I guess it was enough under expectations that it scared a lot of people.


NEWS RELEASE TSX Symbol: P
Railpower reports 2006 third quarter financial results and steps
to improve liquidity
MONTREAL, Quebec, November 14, 2006 – Railpower Technologies Corp.
(“Railpower” or the “Company”) (TSX: P), a leader in specialized energy technology
systems for the transportation industry, today reported its financial results for the
three and nine-month periods ended September 30, 2006. (All dollar amounts are in
$CDN unless stated otherwise.)
Q3 2006 Highlights
• Cash and cash equivalents amounted to $9.1 million as of September 30,
2006 compared to $37.3 million as of June 30, 2006
• No asset-based financing agreement was reached during the third quarter of
2006 creating a liquidity problem, as discussed below
• Following the end of the quarter, the Company entered into an agreement
with a major customer to accelerate payment terms to address the liquidity
issue
• Cost reduction plan initiated along with key employees retention program
• Operating loss of $12.0 million for the third quarter compared to $15.2 million
for the second quarter of 2006. The improvement in the operation loss is due
to a provision for future contract losses of $5.7 million that had been recorded
in the second quarter of 2006 partially offset by an increase of $1.3 million in
warranty expenses mainly due to warranty extensions
• Sales for the third quarter amounted to $9.3 million compared to $2.7 million
for the second quarter of 2006. 11 units were delivered during the last quarter
compared to 3 in the previous quarter
• Production put on hold on another major contract pending renegotiation of
the contract terms
Liquidity issues
As of September 30th, 2006, the Company had cash and cash equivalents of $ 9.1
million, compared to $76.8 million as at December 31, 2005 and $37.4 million as at
June 30, 2006. This decrease is due to an increase in the inventory which has
reached the level of $50.6 million and the timing of payments from customers which
in most cases occurs after delivery. The Company has not yet been able to secure
the previously announced asset based financing required during the fourth quarter
of 2006 to continue to fund its operations. See Note 2 of the Financial Statements
for a discussion of the ability of the Company to operate as a going concern.
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The Company has reached an agreement with a major customer in order to
accelerate the contract payment terms which is expected to provide sufficient
liquidity to allow the Company to fund its operations until March 2007. The
agreement is subject to certain conditions. Early payments shall apply to the
remanufactured locomotives as long as Railpower meets its delivery schedule and
the delivered locomotives perform in service. Early payments will be made as long
as no other financing is put in place. However, it may be suspended should the
Company fail to obtain the Environment Protection Agency (EPA) certification for its
road switcher locomotives by January 15th, 2007. In such eventuality, the customer
is also entitled to end the contract and get a full refund of the purchase price of the
locomotives already delivered. The emissions testing will begin on November 20,
2006 and should it proceed as planned, the Company expects to meet the criteria to
enable it to obtain the certification on time. In the meantime, deliveries proceed as
planned as the Company has obtained a waiver from the EPA permitting it to deliver
up to 30 locomotives prior to certification. Based on that exemption, three
locomotives have already been delivered. The on-going production plan calls for
deliveries of 3 units per week increasing to 4 at the beginning of 2007 in order to
complete the program as per the contract in June 2007.
During the third quarter, management put on hold the execution of a major contract
in connection with the on-going negotiations with the client. The extraordinary
technical requirements under this contract cannot be met given the current state of
the technology. This contract has already caused and is expected to cause the
Company significant losses which represent the majority of the provision for contract
losses shown on the balance sheet in the amount of $21.2 million. There is no
assurance that the current discussions will result in more favorable terms. Should
the current negotiations fail or the Company be unable to perform the contract due
to its financial difficulties, management believes that there is a risk of a potential
claim from the customer, as described in Note 8 of the Financial Statements.
The Company is continuing to search for other sources of financing to improve its
cash flow and be able to fund its operations in 2007. The Company and its Board of
Directors are fully engaged in looking at various financing strategies. However, at
the present time, there can be no assurance that additional financing will be
obtained.
In order to address its liquidity issues, Railpower has also decided to put in place a
cost reduction plan which includes, among other things, the elimination of certain
employment positions in various Company facilities. It is expected that the
measures taken by this cost reduction plan will allow the Company to reduce
overhead costs by approximately $10 million annually. These measures are
expected to have no impact on the manufacturing activities and deliveries related to
the current order book. The Company has also put in place a retention plan in favor
of certain key employees as an incentive to remain with the Company as its success
will depend upon the ability to retain qualified personnel. Pursuant to such plan,
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amounts up to $2.0 million in the aggregate may be paid until June 30, 2007 to
these key employees. This amount is accounted for in the cost reduction program
described above.
“The objective behind these difficult but necessary measures is to lower our
operating costs as much as possible in light of our current level of available cash.
The Company is currently facing serious liquidity issues and we are hopeful that
these measures will facilitate our discussions with lenders, suppliers and potential
investors” noted José Mathieu, the President and Chief Executive Officer of the
Company.
“We continue to work on orders from other customers for whom 18 units are at
various stages of production. Despite the current financial situation, we are in
discussions with several Class 1 railroads with respect to their strategic plans for
their low horsepower locomotive fleets. The customers are eager to test the
Company RP-series demonstration unit starting in December 2006. We have
submitted proposals for approximately 120 units to class I railroads and some
industrial and overseas potential customers and are hoping to generate new orders
in the following two quarters” added Mr. Mathieu.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Press Release may contain projections and
“forward-looking statements” within the meaning of that phrase under Canadian and
U.S. securities laws. When used in this document, the words “may”, “would”,
“could”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” and similar
expressions may be used to identify forward-looking statements. Those statements
reflect our current views with respect to future events or conditions, including
prospective results of operations, financial position, predictions of future actions or
plans or strategies. Certain material factors and assumptions were applied in
drawing our conclusions and making those forward looking statements. By their
nature, those statements reflect management’s current views, beliefs and
assumptions and are subject to certain risks, uncertainties, known and unknown,
and assumptions, including, without limitation, the ability to access the capital
required to fund our activities, prompt payment by our major customer for
remanufactured locomotives as per the agreed to accelerated payment terms, the
ability to achieve the anticipated overhead cost reductions, the ability to retain our
employees, the outcome of the negotiation with another significant customer of new
terms and conditions of an agreement under which the Company has discontinued
the production of locomotives, product development or manufacturing delays,
changing environmental regulations, the ability to attract and retain business
partners, the acceptance of our existing and new products, future levels of
government funding, the need to obtain and maintain proprietary rights over our
technology, competition from other technologies, the ability to access the capital
required for research, product development, operations and marketing, the need to
generate positive cash flow in the foreseeable future, changes in energy prices and
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currency levels. Many factors could cause our actual results, performance or
achievements to be materially different from any future results, performance or
achievements that may be expressed or implied by these forward-looking
statements. Should one or more of these risks or uncertainties materialize, or
should the assumptions underlying our projections or forward-looking statements
prove incorrect, our actual results may vary materially from those described in this
report as intended, planned, anticipated, believed, estimated, or expected. We do
not intend and do not assume any obligation to update these forward-looking
statements whether as a result of new information, plans, events or otherwise.
Contacts:
José Mathieu
Chief Executive Officer
Tel: [phone] (501)
Toll Free: 1-866-678-5277
Email: [e-mail]
Lorraine Potvin
Chief Financial Officer
Tel: [phone] (516)
Toll Free: 1-866-678-5277
Email: [e-mail]