Railpower Reports 2007 Fourth Quarter and Year End Financial Results



    TSX Symbol: P

    BROSSARD, QC, March 25 /CNW Telbec/ - Railpower Technologies Corp.
("Railpower" or the "Corporation") (TSX: P), a leader in specialized energy
technology systems for the transportation industry, today reported its
financial results for the three and twelve-month periods ended December 31,
2007. (All dollar amounts are in $CDN unless stated otherwise.)

    
    2007 SUMMARY

    - Entered into a subscription agreement pursuant to which the Corporation
      agreed to sell to Ontario Teachers' Pension Plan Board ("OTPPB"), by
      way of a private placement, a $35 million unsecured convertible
      debenture; this transaction closed post year end on January 4, 2008
    - Produced 97 locomotives and kits and delivered 94 locomotives and kits
      to Class I Railroads during the year, including 91 locomotives to Union
      Pacific, thus completing the largest order ever awarded for road
      switching multi genset locomotives, a new product
    - Produced and delivered its first Eco-Crane(TM), a hybrid diesel
      electric power rubber crane, commonly used in major port which
      accomplished 74% fuel savings
    - Completed an equity financing raising gross proceeds of $34.5 million
      in the first quarter of 2007
    - Recalled the Green Goat(R) series yard switching locomotives, the
      initial Corporation's product, with an estimated cost of $15.5 million
      for up-grading all 59 units belonging to customers
    - Received new orders for 8 locomotives and kits, including four
      locomotives from Union Pacific and three kits from Norfolk Southern
    - As of December 31, 2007, the Corporation had firm orders for
      14 locomotives or kits and two Eco-Cranes(TM) from various clients
      including new orders mentioned above
    - On May 9, 2007, the Environment Protection Agency ('EPA') in the United
      States awarded the Corporation the 'Clean Air Excellence Award',
      choosing Railpower among 77 nominees in that category
    - Increased revenue for the year to $95.8 million from $25.6 million in
      2006
    - Recorded a net loss of $69.6 million compared to $41.5 million last
      year

    "2007 was a turning point for Railpower. By completing the Union Pacific
order in less than 24 months, we demonstrated our capability to meet our
customers' requirements and exceed the standard of the industry in terms of
design and manufacturing rapidity. This tremendous achievement is a
cornerstone in building our reputation and positioning us for future orders,"
said José Mathieu, President and CEO of Railpower. "In terms of product
developments, with the experience gained from our road switchers' fleet of
105 locomotives now in service, we refined our design and launched a complete
modular product line. Union Pacific and Norfolk Southern already took
advantage of that offering and ordered various models such as two genset
four-axle and three genset six-axle locomotives. With this new technological
platform on hand and the investment of OTPPB, we believe we now have the
necessary base to consolidate our leadership in the lower horsepower
locomotive market in North America." added Mr. Mathieu.

    FINANCIAL OVERVIEW

    During the year, the Corporation completed the execution of its biggest
order and delivered 91 locomotives to Union Pacific. As a result, the
Corporation recorded revenues of $95.8 million, the highest level of revenues
since the incorporation of the Corporation. However, the Corporation did not
generate profit on this order as the selling price was below the costs. The
Corporation recorded a loss of $69.6 million which resulted mainly from the
following:

    - The recall of the Green Goat(R) series of yard switching locomotives at
      a cost of $15.5 million and the related impairment charge on capital
      assets and leased locomotives of $4.0 million;
    - Overhead, including manufacturing expenses in the amount of
      $32.0 million, a level necessary in order to execute our contractual
      commitments, continue our marketing, research and development
      activities necessary to ensure the Corporation's future;
    - An exchange loss of $5.2 million due to a rapid increase in the
      Canadian dollar value;
    - An unusual level of scrap and obsolescence in inventory due to the
      recall of the Green Goat(R) series and the high number of modifications
      associated with the production of a new product.
    

    The Corporation's profitability is expected to improve due to its
increased ability to accurately estimate costs which is expected to enhance
its ability to sell its products profitably. The Corporation is also taking
measures in order to reduce costs by implementing a manufacturing system in
the coming months and optimizing its supply chain.

    DETAILED FINANCIAL RESULTS

    For the year ended December 31, 2007, revenue increased to $95.8 million
compared to $25.6 million last year. Increased revenue in the year resulted
from the delivery of 94 locomotives and kits and 1 Eco-Crane(TM) compared to
28 locomotives and kits in 2006. For the fourth quarter of 2007, revenues are
nil as no new deliveries occurred compared to 11 deliveries resulting in
$11.3 million in the fourth quarter of 2006. As at December 31, 2007, the
Corporation had firm orders for 14 locomotives or kits and 2 cranes compared
to an order book of 108 at the end of 2006.
    For the year ended on December 31, 2007, the gross margin totaled
($15.3) million compared to ($14.2) million in 2006. The increase in the
negative margin is mainly the result of additional material costs, including
scrap, obsolescence and consumables amounting to $10.9 million for 2007,
compared to $3.5 million in 2006, offset by a reduction of $6.9 million in
contract losses. Gross margin in the fourth quarter of 2007 totaled
($2.5) million compared to ($7.6) million in the fourth quarter of 2006. This
decrease is mainly explained by a contract loss of $5.8 million recorded in
the fourth quarter of 2006 offset by an increase of the unallocated
manufacturing overhead expenses of $1.3 million in the corresponding period in
2007.
    Operating expenses for the year ended December 31, 2007 totaled
$27.5 million compared to $29.7 million for the year ended December 31, 2006.
Decreased operating expenses are mainly explained by a reduction in salaries,
consulting and travel. Operating expenses for the fourth quarter of 2007
totaled $7.3 million, compared to $6.9 million for the fourth quarter of 2006.
    Net loss for the year ended December 31, 2007 was $69.6 million, or
($0.81) per share compared to a net loss of $41.5 million, or ($0.76) per
share in 2006. This increase in the loss is mainly explained by a warranty
expense of $15.5 million following the recall of the Green Goat(R) series, an
increase of foreign exchange loss of $5.6 million, a reduction of the
provision for contract recovery of $3.6 million, an impairment charge on
capital assets and leased locomotives of $5.0 million and a reduction of the
interest income of $1.2 million partially offset by a reduction of
$2.2 million in operating expenses. Net loss for the fourth quarter of 2007
was $15.0 million, or ($0.17) per share, compared to a net loss of
$5.8 million, or ($0.11) per share for 2006. Despite the decrease of
$5.2 million in the negative gross margin, the increase of the loss is
explained by a recovery of a contract loss of $10.4 million recorded in the
fourth quarter of 2006 following the cancellation of a contract, an impairment
charge on capital assets and leased locomotives of $2.0 million recorded in
2007, and an increase of the warranty expenses of $1.5 million in the fourth
quarter of 2007 compared to the same period in 2006.
    After the end of the year, the Corporation issued the $35 million
unsecured convertible debenture to OTPPB in connection with the private
placement by OTPPB. The debenture has a maturity date of five years from its
date of issuance and an interest coupon of 5% per annum, payable semi-annually
in either cash or common shares at the discretion of the Corporation. The
principal amount of the debenture is convertible, at the election of the
holder, in whole or in part, into either common shares or Class A convertible
restricted voting shares, at a conversion ratio of $0.30 per share,
representing up to 116,666,667 shares. The private placement was approved at a
special meeting of shareholders held on December 18th, 2007 and the
transaction closed post year end, on January 4th, 2008.
    This new injection of capital will support the business commitments and
growth of the Corporation. Management is actively seeking debt financing to
sustain its operating activities. The Corporation's ability to continue as a
going concern is dependent on obtaining the aforementioned debt financing and
improving its profitability.

    Railpower's consolidated financial statements and Management's Discussion
and Analysis ("MD&A") as at December 31, 2007 are presented in Canadian
dollars, except where indicated otherwise. Railpower's consolidated financial
results as at December 31, 2007, are prepared in accordance with Canadian
generally accepted accounting principles. The full financial statements and
MD&A will be filed on SEDAR (www.sedar.com) today and will be available on
Railpower's website (www.railpower.com) today.

    OUTLOOK

    For 2008, the Corporation will focus its efforts in securing new orders,
completing the execution of the current orders and managing the Green Goat(R)
recall. It will streamline processes for greater savings and efficiency,
optimize the mix of in-sourcing and outsourcing for better quality at the
lowest cost, and improve the supply chain by seeking long-term partners.

    Notice of Conference Call and Webcast

    José Mathieu, President and CEO of Railpower, will host a conference call
tomorrow at 9:00 am (EST) to review the financial results. All interested
parties are invited to participate. The telephone numbers to access the
conference call are 416-644-3421 or 1-800-595-8550 (toll free). A live audio
webcast of the call will be available at www.railpower.com or www.newswire.ca.
A taped replay of the conference call will also be available until Wednesday,
April 2, 2008. by calling 416-640-1917 or 1-877-289-8525 (toll free) reference
number 21266753#.

    About Railpower

    Railpower (TSX: P), (www.railpower.com) is engaged in the development,
construction, marketing and sales of specialized, patented, environmentally
friendly technology systems for the transportation and related industries.
Railpower's technologies significantly reduce fuel usage, operating and
maintenance costs, and emissions. While Railpower's origins are in the
transportation industry, its technologies have broad potential and
applications in other markets and industries. Railpower is headquartered in
Brossard, Quebec. Its U.S. office is located in Erie, Pennsylvania.

    Caution regarding forward-looking statements

    Certain statements contained in this release contain forward-looking
statements. 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,
and predictions of future actions, 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 and uncertainties, known and unknown, including, without limitation, the
ability to secure new orders, the ability to retain our employees, product
development or manufacturing delays, the ability of our current manufacturing
supplier to meet our production demands in terms of quantity, quality and
costs, our ability to reach a satisfactory agreement with another supplier if
necessary or to build, rent or buy a manufacturing facility, 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 or new competitors, 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, potential legal liability related to the recall of our
Green Goat(R) locomotives, changes in energy prices and 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.
    %SEDAR: 00016554EF




For further information:

For further information: Kamila Wirpszo, Vice-President, General Counsel
and Corporate Secretary, Railpower Technologies Corp., (450) 678-5277 ext.
518, Toll Free: 1-866-678-5277, kwirpszo@railpower.com; Lorraine Potvin,
Vice-President, Chief Financial Officer, Railpower Technologies Corp., (450)
678-5277 ext. 516, Toll Free: 1-866-678-5277, lpotvin@railpower.com

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RAILPOWER TECHNOLOGIES CORP.

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