Quantum Technologies Reports Decreased Revenue

Quantum Fuel Systems Technologies Worldwide, Inc. (Nasdaq: QTWW) reported decreased revenue for the quarter ending October 31, 2007.

The company develops and produces advanced propulsion systems, energy storage technologies, and alternative fuel vehicles and applications including hydrogen fuel cell, hybrid, and alternative fuel vehicles. 

The company says total revenue for the quarter was $26.0 million compared to $35.4 million a year ago. The company says decrease in consolidated net revenue is mainly due to a decline of $11.3 million in product revenues within its Tecstar Automotive Group segment, partially offset by a $1.0 million increase in revenues within the Quantum Fuel System segment.

The company’s consolidated operating loss decreased from $87.2 million to $11.1 million year to year. According to the company, the decline was primarily due to an impairment charge of long-lived assets of $71.7 million recognized in the second quarter of fiscal 2007. Excluding the impairment charge, the operating loss for the quarter decreased by $4.4 million from the previous year. 

Revenues for the Quantum Fuel Systems operating segment during the quarter were $6.2 million compared to $5.2 million, representing a 19% increase. The company says the increase is primarily due to higher development program revenues to support hybrid development programs, GM Fuel Cell Hybrid Equinox program and military and aerospace programs. The operating loss for the Quantum Fuel Systems operating segment was $2.0 million compared to an operating loss of $3.8 million the previous year. This decrease in operating loss was primarily a result of higher product margins and customer funded development programs covering a significant portion of research and development expenses.

The Company’s net loss decreased from $89.3 million, or $1.50 a share to $12.1 million, or $0.15 a share.

Automotive Group Troubles

On October 29, 2007 the company and its asset-based lender signed a term sheet that summarized the principal terms of a proposed sale of the entire Tecstar Automotive Group business segment to the lender. In connection with the signing of the term sheet, the company’s lender provided $5.0 million term loan to Tecstar Automotive Group, which was guaranteed by Quantum, and received a promissory note in return.

On December 13, 2007, the Company’s lender informed management that although it is not withdrawing at this time from the transaction contemplated by the term sheet, the lender does not intend to move forward with the transaction unless the company proposes an acceptable plan to further reduce the Tecstar business segment’s present cost structure. 

Quantum says it anticipates that any cost restructuring plan will be implemented either through negotiations with its creditors or by seeking the rights, remedies and protections available to the Tecstar business segment under the Bankruptcy laws. The company cannot provide any assurances that it will be able to develop a plan acceptable to the lender in a time frame acceptable to the company, if at all. Nor can the Company provide any assurances that the lender will proceed with the purchase of Tecstar even if a restructuring plan is developed and implemented. If a definitive agreement or other arrangement with the lender or another party, in connection with a restructure or reorganization, cannot be finalized in the near term, the company says it may need to liquidate the Tecstar Automotive Group operations. 

Alan P. Niedzwiecki, President and CEO, stated, "The sale, restructure or reorganization of Tecstar is obviously a major, strategic event for the company. The sale, or potential closure of Tecstar, will allow us to renew our focus on "green" vehicle technology and alternative and renewable energy. Although the recent developments related to the proposed sale of Tecstar are disappointing, we will be making definitive decisions on Tecstar in the immediate future."

Niedzwiecki continued, "The Quantum Fuel System operating segment showed improved results as a result of expanding programs and shipment of hydrogen fuel systems to General Motors under their recently unveiled Equinox Fuel Cell Hybrid Vehicle program. We are expecting continued growth in our Quantum Fuel System business based on programs under contract with our OEM customers, military and government agencies and Fisker Automotive.’

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About Quantum

Quantum Fuel Systems Technologies Worldwide, Inc., a fully integrated alternative energy company, is a leader in the development and production of advanced propulsion systems, energy storage technologies, and alternative fuel vehicles. Quantum’s portfolio of technologies includes advanced lithium-ion battery systems, electronic controls, hybrid electric drive systems, hydrogen storage and metering systems, and alternative fuel technologies that enable fuel efficient, low emission hybrid, plug-in hybrid electric, fuel cell, and alternative fuel vehicles. Quantum’s powertrain engineering, system integration, vehicle manufacturing, and assembly capabilities provide fast-to-market solutions to support the production of hybrid and plug-in hybrid, hydrogen-powered hybrid, fuel cell, alternative fuel, and specialty vehicles, as well as modular, transportable hydrogen refueling stations. Quantum’s customer base includes automotive OEMs, dealer networks, fleets, aerospace industry, military and other government entities, and other strategic alliance partners.