Railpower Reports 2007 Second Quarter Financial Results



    MONTREAL, Aug. 2 /CNW Telbec/ - 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-month and six-month periods ended June 30, 2007. (All dollar amounts are
in $CDN unless stated otherwise.)


    
    Highlights

    - Produced 41 and delivered 37 locomotives during the second quarter of
      2007;
    - Subsequent to quarter end, produced and shipped the final 33
      locomotives to Union Pacific;
    - Revenue increased to $37.3 million from $2.7 million in Q2 2006;
    - Recall of Green Goat series, with an estimated cost of $15 million for
      up-grading all 65 units;
    - Recorded a net loss of $33.7 million compared to a net loss of
      $15.2 million in 2006, including the cost of the recall;
    - Testing of "Eco Crane(TM)" showed 74% fuel saving;
    - Order from Norfolk Southern for 2 new multi-genset yard locomotives.
    

    "We are pleased to confirm that we have successfully completed our
contract with Union Pacific. 36 Road Switcher units were delivered to Union
Pacific during the quarter and the remaining 33 units were delivered or
shipped in July," stated José Mathieu, President and CEO of Railpower. "The
completion of the Union Pacific order, our largest order to date, is a
significant achievement as it not only demonstrates our ability to meet our
clients' requirements but will also increase product recognition and market
acceptance."
    "During the quarter, with the safety of our customers as our top
priority, we had to recall all 65 units of our Green Goat series, our initial
product line," added José Mathieu. "We remain committed to having our
customers resume normal operations as soon as possible and will begin
refitting work on the third generation of Green Goats in August. We are
already in the process of firming up target dates with our customers for the
units to be back in service."
    Railpower estimates the overall cost of refitting 25 locomotives
belonging to its third generation of Green Goats at approximately $2 million
while preliminary estimates for the Green Goat Generation I and II and Green
Kids series approximate $13 million. As a result, the Company recorded a
charge of $15 million in the quarter as a provision for the costs in
association with the Green Goat recall.

    Financial Results

    For the second quarter of 2007, revenue rose to $37.3 million, compared
to $2.7 million in the second quarter of 2006 as a result of a significant
increase in the sale of locomotives. During the quarter, Railpower sold
37 locomotives compared to three locomotives delivered in the second quarter
of 2006.
    Railpower's order book stood at 43 firm orders for locomotives or kits
and three firm orders for cranes at June 30, 2007. Subsequent to the end of
the quarter, the Company shipped the final 33 locomotives to its largest
client, Union Pacific.
    For the first half of 2007, revenue increased to $62.4 million compared
to $5.0 million in the first half of 2006. The Company delivered 61 units in
the first six months of 2007 compared to 6 units delivered in the
corresponding period of 2006.
    Cost of goods sold ("COGS") in the second quarter were $45.8 million
compared to $4.9 million in the second quarter of 2006. COGS for the first six
months of 2007 were $72.3 million compared to $8.9 million in 2006. The
increase in COGS in the quarter and for the first six months of 2007 is a
result of the higher number of locomotives produced during the period.
    Operating expenses, including engineering and research and development
("R&D"), general and administrative ("G&A"), selling and service related
expenses, for the second quarter of 2007 totalled $6.8 million, compared to
operating expenses of $7.5 million for the second quarter of 2006. Operating
expenses for the first half of 2007 were $14.1 million compared to
$14.5 million in 2006.
    Net loss for the second quarter of 2007 was $33.7 million, or ($0.38) per
basic share, compared to a net loss of $15.2 million, or ($0.28) per basic
share for the corresponding period a year ago. The increase in net loss is
mainly the result of an increase in the provision for warranty following the
recall in June 2007 of the Green Goat locomotives amounting to $15 million,
additional material costs including inefficiencies, scrap and obsolescence in
the amount of $5.6 million and a foreign exchange loss of approximately
$3.1 million compared to a gain of $0.3 million for the corresponding period
in 2006. These increases were offset by a $5.7 million provision for contract
losses recorded in the same quarter last year.
    Net loss for the first half of 2007 was $ $42.2 million, or ($0.52) per
basic share, compared to a net loss of $23.9 million, or ($0.44) per basic
share in the same period a year ago, for the same reasons as described above.
    As at June 30, 2007, the Company had working capital of $7.2 million,
including cash and cash equivalents of $1.8 million, compared to working
capital of $19.6 million, including cash and cash equivalents of $1.1 million
at December 31, 2006. The recall of the Green Goat series has put a
significant strain on the Company's liquidity. As such, the Company is
actively seeking additional financing to ensure adequate funding to convert
the Green Goats, deliver the Northern Southern order, continue the sale of its
multi-genset locomotives and pursue the ongoing development of its
multi-genset locomotives product line and hybrid gantry cranes to be utilized
at dock facilities around the world.

    Operational Highlights

    During the quarter, Railpower focused its efforts on the execution of its
largest order and delivered 36 locomotives to Union Pacific. Union Pacific
permitted the Company to continue its deliveries past June 15th, 2007.
Locomotives which have already been placed in service are performing well.
    Testing of Railpower's first Eco Crane(TM) hybrid power plant installed
on a 60-ton rubber tyred gantry crane was completed during the quarter and
achieved a 74% fuel saving during these first active duty tests, a performance
never accomplished before using alternative approaches. The two remaining
prototypes ordered by Terminal Systems Inc. are expected to be completed by
year-end. This product represents a significant potential for new business
opportunities in the coming years.
    In April 2007, the Company received an order from Norfolk Southern for
two kits to assemble multi-genset yard switching locomotives. In addition, in
July 2007, Norfolk Southern ordered one kit to assemble a six-axle road
switching locomotive.
    On May 9th 2007, the Environment Protection Agency ('EPA') in the United
States awarded Railpower the 'Clean Air Excellence Award' recognizing
outstanding and innovative efforts to achieve cleaner air. Railpower was
selected among 77 nominees in its category.

    Subsequent Events & Outlook

    As expected, Railpower delivered the last of the 98 locomotives to Union
Pacific during the month of July. The current order book does not allow for
continuous production and as a result, the Company will reduce its overhead
costs and focus on marketing and development projects.
    A demonstration program with a multi-genset road switcher began in May.
This unit, currently operating in-service on CSX, is committed full time to
demonstrations with potential customers. All of them show strong potential for
2007 orders/2008 sales.
    Railpower is also continuing its search for a suitable manufacturing site
as it believes that operating a leased or its own facility will improve its
competitive position.
    As mentioned previously, the Company is actively seeking additional
financing to ensure there are adequate funds to convert the Green Goats and to
achieve its business plans. The Company is looking at all financing sources
and has begun discussions with potential lenders, investors and governments in
order to obtain subsidies, loan guarantees and other forms of financing. There
is however no assurance that any of these discussions will result in a
positive outcome. The Company's priorities for the remainder of the year are
to secure such additional financing and to secure new orders.
    Railpower's consolidated financial statements and Management's Discussion
and Analysis ('MD&A') as at June 30, 2007, were prepared in accordance with
Canadian generally accepted accounting principles and are presented in
Canadian dollars, except where indicated otherwise. The full statements and
MD&A will be filed on SEDAR (www.sedar.com) and, be available via Railpower's
website (www.railpower.com) later 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. 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 August 12, 2007 by calling
416-640-1917 or 1-877-289-8525 reference number 21242760 followed by the
number sign.

    About Railpower

    Railpower Technologies (TSX: P) 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
Montreal, Quebec. It U.S. office is located in Erie, Pennsylvania.
(www.railpower.com)

    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,
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,
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 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: Mr. José Mathieu, President and CEO, Railpower
Technologies Corp., (450) 678-5277, ext. 501, Toll free: 1-866-678-5277,
jmathieu@railpower.com

Organization Profile

RAILPOWER TECHNOLOGIES CORP.

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