A123 Systems (Nasdaq:AONE), a developer and manufacturer of advanced Nanophosphate^® lithium iron phosphate batteries and systems, today announced financial results for the first quarter ended March 31, 2012.

"Our first quarter results were consistent with our revised expectations as reported last week. Revenue for the first quarter was impacted by our campaign to replace prismatic products in the field that may be defective and the temporary shutdown of our facility in Livonia, Mich," stated David Vieau, CEO of A123 Systems. "Since announcing the field campaign, we believe we have identified and corrected the root cause of the defective cells. We are gradually restarting production in a controlled manner consistent with our commitment to improve our manufacturing processes and quality, and have started shipping replacement products to impacted customers. Our customers have been generally supportive during this process, and we continue to work with them during this challenging period."

"We intend to provide customers affected by the campaign with replacement products as quickly as possible. With our systematic approach to ramping production volumes and anticipated customer demand, we expect to be capacity constrained over the next several quarters," Vieau added. "Due to the limitations with respect to our manufacturing ramp, we anticipate that revenue in 2012 will be below our prior expectations and consistent with those communicated last week. Our customer pipeline continues to be strong in all our target markets."

Financial Highlights

Revenue:Total revenue for the first quarter of 2012 was $10.9 million, a decrease of 40% from $18.1 million in the first quarter of 2011. Within total revenue, product revenue was $7.3 million, a 53% decrease from $15.5 million in the first quarter of 2011, and services revenue was $3.6 million, compared to $2.6 million in the first quarter of 2011.

Gross Profit/(Loss):Gross loss was ($90.8) million in the first quarter of 2012, compared to a gross loss of ($15.5) million in the first quarter of 2011.

Net Income/(Loss):Net loss was ($125.0) million, or ($0.87) per common share, based on 143.4 million weighted average common shares outstanding in the first quarter of 2012. This compared to a net loss of ($53.6) million in the first quarter of 2011, or ($0.51) per common share, based on 105.5 million weighted average common shares outstanding.

Adjusted EBITDA:Adjusted EBITDA, a non-GAAP financial measure, was a loss of ($120.0) million in the first quarter of 2012, compared to ($45.4) million in the first quarter of 2011. 

A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included at the end of this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

Cash:A123 Systems had cash and cash equivalents of $113.1 million as of March 31, 2012. This balance does not reflect proceeds expected from our private offering of convertible notes and warrants announced on May 11, 2012. Cash and cash equivalents were $186.9 million as of December 31, 2011. 

Other First Quarter and Recent Business Highlights

Product Revenue Mix:During the first quarter of 2012, transportation revenue was $4.5 million and commercial revenue was $2.8 million. This compares to transportation revenue of $12.3 million and commercial revenue of $3.1 million in the first quarter of 2011. Grid revenue was not material, as anticipated, in the first quarter of 2012 or the first quarter of 2011.

Product Shipments:During the first quarter of 2012, product shipments were 10.0 million watt hours compared to 14.3 million watt hours in the first quarter of 2011.

Financial and Business Metric Summary 

Non-GAAP Financial Measures 

This press release contains a non-GAAP financial measure under the rules of the U.S. Securities and Exchange Commission for adjusted EBITDA. This non-GAAP information supplements and is not intended to represent a measure of performance in accordance with disclosures required by generally accepted accounting principles. Non-GAAP financial measures are used internally to manage the business, such as in establishing an annual operating budget. Non-GAAP financial measures are used by A123 Systems management in its operating and financial decision-making because management believes these measures reflect ongoing business in a manner that allows meaningful period-to-period comparisons. Accordingly, A123 Systems believes it is useful for investors and others to review both GAAP and non-GAAP measures in order to (a) understand and evaluate current operating performance and future prospects in the same manner as management does and (b) compare in a consistent manner the company's current financial results with past financial results. The primary limitations associated with the use of non-GAAP financial measures are that these measures may not be directly comparable to the amounts reported by other companies and they do not include all items of income and expense that affect operations. A123 Systems management compensates for these limitations by considering the company's financial results and outlook as determined in accordance with GAAP and by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in the tables attached to this press release.

A123 Systems defines "Adjusted EBITDA" as operating loss plus depreciation and amortization of tangible and intangible assets, which includes impairment charges, and stock-based compensation expense.