Railpower Reports 2008 Second Quarter Financial Results



    TSX Symbol: P

    BROSSARD, QC, Aug. 12 /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 six month periods ended June 30, 2008.
(All dollar amounts are in $CDN unless stated otherwise.)

    Q2 2008 Summary

    
    - Announced the construction of an assembly plant in
      Saint-Jean-sur-Richelieu, Quebec; it is expected to be operational in
      the first quarter of 2009;
    - Closed a $20 million private placement with Ontario Teachers' Pension
      Plan Board ("OTPPB") on June 27th, 2008; the proceeds are to be used
      for the construction of the plant, of 2 demonstration locomotives and
      for working capital purposes;
    - Produced and delivered 3 six-axle road switcher locomotives to Union
      Pacific and 2 Eco-Cranes to Terminal Systems Inc.;
    - Progressed in the implementation of Enterprise Resource Planning
      ("ERP") and Product Data Management ("PDM") systems to improve the
      operational efficiency;
    - Recorded a net loss of $7.6 million compared to a net loss of
      $34.0 million for the three months ended June 30th, 2007;
    - Subsequent to the end of the quarter, on July 31, 2008, obtained an
      order from Virginia International Terminal (VIT) for two multi-genset,
      four-axle RP20BD locomotives and one hybrid GG20B locomotive.
    

    "The last quarter was marked by important milestones in the evolution of
Railpower: the launch of the construction of our plant and securing of its
financing. Thanks to our partner, OTPPB and our shareholders who voted
massively in favor of the project and the related financing, Railpower will
own a world class manufacturing facility enabling it to meet the expectedly
increasing demand for its high efficiency locomotives. We are pleased to
report that the construction is progressing according to the schedule and that
the plant will be operational as early as the first quarter of 2009" said
Mr. José Mathieu, President and CEO of Railpower.

    BUSINESS OVERVIEW

    During the quarter, the Corporation recorded revenues of $4.8 million,
compared to $37.3 million in the corresponding period last year when it was
executing its largest order in history. The new orders were profitable but the
level of revenues received during the quarter was insufficient to cover all
the expenses.
    The Corporation continues to focus on securing new orders and preparing
for its growth by building the new assembly plant and implementing powerful
information systems to increase its operational efficiency as well as on
optimizing its supply chain to improve profitability.

    DETAILED FINANCIAL RESULTS

    For the quarter ended June 30, 2008, revenue decreased from $37.3 million
in the corresponding period last year to $4.8 million. The decrease is due to
a lower level of sales with 3 locomotives and 2 Eco-Cranes delivered during
the quarter, compared to 37 locomotives and kits for the same period last
year. For the first half of 2008, revenue decreased to $8.1 million from
$62.4 million in the first half of 2007. The Corporation delivered
6 locomotives and kits and 2 Eco-Cranes in the first half of 2008 compared to
61 locomotives and kits in the corresponding period in 2007.
    The gross margin totaled ($1.0) million in the second quarter compared to
($8.6) million in the corresponding period in 2007. The gross margin for the
first six months of 2008 was ($1.8) million compared to ($9.9) million in
2007. The improvement of the gross margin for the three and six month periods
is mainly explained by the reduction of material cost, including
inefficiencies and scrap and obsolescence, due to an expense of $5.6 million
recorded in this regard in the same period ended June 30, 2007.
    Operating expenses for the quarter ended June 30, 2008 totaled
$5.4 million compared to $7.1 million for the corresponding period in 2007.
Operating expenses for the first half of 2008 were $11.0 million compared to
$14.3 million in the corresponding period in 2007.
    Net loss for the second quarter of 2008 was $7.6 million, or $0.08 per
basic share, compared to a net loss of $34 million, or $0.38 per basic share
for the same period last year. This decrease in the net loss is mainly
explained by an improvement of the gross margin for an amount of $7.5 million,
a non-recurring expense of $12 million recorded in June 2007 following the
recall of 59 Green Goat yard switcher locomotives, an impairment charge on the
demonstration, service and leased locomotives of $3 million recorded in June
2007, and a reduction of the foreign exchange loss of $3.1 million in 2008.
    Net loss for the first half of 2008 was $15.2 million, or $0.17 per basic
share, compared to a net loss of $42.4 million, or $0.52 per basic share, in
the corresponding period in 2007. This decrease of the net loss is mainly
explained by the same elements as for the second quarter.
    On June 27th, 2008, the Corporation issued a $20 million secured
convertible debenture to Ontario Teachers' Pension Plan ("OTPPB") in
connection with the private placement by OTPPB. The debenture has a maturity
date on January 4th, 2013 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 $0.40
per share, representing up to 50,000,000 shares. This debenture will be
transferable following the second anniversary of its issuance. The private
placement was approved at the Annual and Special Meeting of shareholders held
on June 26th, 2008. The initial debenture of $35 million has also been amended
and is now secured and transferable after following the second anniversary of
its issuance.
    This new injection of capital will finance the construction of the
manufacturing facility, will allow the Corporation to build additional
demonstration locomotives and meet the working capital needs. Management is
actively seeking new financing to sustain its operating activities. The
Corporation's ability to continue as a going concern is dependent on obtaining
new orders, the aforementioned financing and improving its profitability.
    Railpower's consolidated financial statements and Management's Discussion
and Analysis ("MD&A") as at June 30, 2008 are presented in Canadian dollars,
except where indicated otherwise. Railpower's consolidated financial results
as at June 30, 2008 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.

    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 416-644-3427 or 1-800-588-4942 (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,
August 20, 2008 by calling 416-640-1917 or 1-877-289-8525 (toll free)
reference number 21279788#.

    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 construct our manufacturing facility on time and within the
forecasted budget, 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. Unless otherwise required by law, we do not intend or
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

Organization Profile

RAILPOWER TECHNOLOGIES CORP.

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