"In the fourth quarter we saw product and service revenues increase 24%, a result of increased shipments of fuel cell products. Operating cash consumption for the quarter was on track, bringing full-year cash consumption in at the low end of our guidance," said John Sheridan, Ballard's President and Chief Executive Officer. "With cash reserves of $187 million, we have sufficient cash reserves to meet our planned growth and development activities into 2010."

2006 Q4 financial highlights:

- Revenues from continuing operations of $16.5 million, a 10% increase over $15.0 million for the same period in 2005

- Product and service revenues from continuing operations of $11.7 million increased $2.3 million (24%) year over prior year quarter due to increased shipments of automotive and materials handling fuel cell products, and increased service revenues

- Engineering development revenue from continuing operations of $4.8 million decreased $0.7 million (13%) from the prior year period due to the timing of development program milestones

- Excluding special one-time items, normalized net loss(1) was $14.1 million ($0.12 per share), an increase of 8% over $13.1 million ($0.12 per share) for the same period in 2005, primarily due to foreign exchange and lower margins, partially offset by reduced operating expenses

Note: The results of Ballard's electric drive operations have been reported as discontinued operations in the financial statements. Ballard's prior years' financial results have been restated accordingly.

2006 Q4 operating highlights:

Product Shipments

Residential cogeneration market: Ballard shipped 105 Mark1030 fuel cell products in the quarter, bringing full year shipments to 315 units. Ballard's order backlog for this product stands at 65 units at the end of 2006. As a result, Ballard beat its target of shipping or booking orders for 280 Mark1030 fuel cell products in 2006.

Materials handling market: Ballard shipped 47 Mark9 SSL(TM) fuel cell products in the quarter, bringing full year shipments to 147 units. In the quarter, Ballard signed a two-year supply agreement with General Hydrogen for 2,900 units, which it will ship in 2007 and 2008. As a result, Ballard beat its target of shipping or booking orders for 300 Mark9 SSL(TM) fuel cell products in 2006.

Product and Technology Development

In the quarter, Ballard advanced development of both its Mark 1100 automotive fuel cell and its Mark 1030 V3 residential cogeneration fuel cell products. The company met its 2006 target of delivering prototypes of both products for customer testing and integration activities.

Sale of Electric Drive Operations

On December 20, 2006, Ballard announced an agreement to sell its Dearborn, Michigan-based electric drive operations to Siemens VDO Automotive Corporation. These operations are not core to Ballard's fuel cell stack business, and this technology application has limited revenue potential and high cash requirements. The sale will generate net proceeds of approximately $4 million, before purchase price adjustments. As a result of the transaction, Ballard will incur an estimated net loss (primarily a write-down of goodwill) of $108 million. This has been recorded as an estimated net loss of $111 million in 2006 and an offsetting estimated net gain of $3 million in 2007, as a result of pension and post-retirement health benefit plan curtailments. The results of Ballard's electric drive operations have been reported as discontinued operations in the financial statements. The transaction closed on February 15, 2007.

2006 Financial Results

Ballard's revenues from continuing operations in the fourth quarter and fiscal year ended December 31, 2006 were $16.5 million and $49.8 million respectively, compared to $15.0 million and $42.2 million for the same periods in 2005. Product and service revenues for the fourth quarter of 2006 were $11.7 million, an increase of $2.3 million, or 24%, from the fourth quarter of 2005, driven by increased automotive and materials handling product revenues and automotive service revenues. Engineering development revenue for the fourth quarter of 2006 was $4.8 million, a decrease of $0.7 million, or 13%, from the same period in 2005, due to timing of development program milestones.

For the year ended December 31, 2006, annual engineering development revenue increased $5.2 million to $13.3 million, or 63%, and product and service revenue increased $2.4 million to $36.5 million, or 7%, compared to the same period last year. The year over year increase in engineering development revenue related to the increase in activity in 2006 in Ballard's automotive and residential cogeneration fuel cell development programs and resulted from work performed and achievement of the milestones under these development programs. Product and service revenue increased in 2006 compared to 2005 mainly due to an increase in service revenue of $5.2 million driven by contracts to provide field service for fuel cell powered buses in Europe, China and Australia. Offsetting the increase in service revenue was a $2.8 million overall decline in product revenue, mainly as a result of the 2005 sale of Ballard Power Systems AG ("BPSAG"), which contributed $6.1 million of automotive systems product revenue during the same period in 2005. Removing the impact of the sale of BPSAG, 2006 annual product revenues improved by $3.4 million, or 16.4%, over 2005, mainly as a result of increased shipments of fuel cells to automotive, materials handling and residential cogeneration customers.

Revenue generated by both continuing and discontinued operations totaled $62.0 million for 2006, an increase of $8.3 million, or 15%, from $53.7 million in 2005.

Net loss for the fourth quarter of 2006 was $128.7 million ($1.13 per share), compared to $16.1 million ($0.14 per share) for the fourth quarter of 2005, primarily due to a $111 million write-down of goodwill and capital assets resulting from the agreement to sell Ballard's electric drive operations. Net loss for the year ended December 31, 2006 was $181.1 million ($1.60 per share), compared to $87.0 million ($0.73 per share) in 2005. The loss for the full year of 2006 includes the write-down discussed above for a total loss from discontinued operations of $124.1 million, compared to a loss from discontinued operations of $24.0 million for 2005. In addition, the annual net loss for 2005 was positively impacted by an $18.3 million gain relating to the sale of BPSAG.

--------------------------------------------------------------------------
Normalized Net Loss(1)      Three months ended                  Year ended
                                   December 31                 December 31
                                          2005                        2005
                            2006      RESTATED          2006      RESTATED
--------------------------------------------------------------------------
Reported net loss     $ (128,748)    $ (16,146)   $ (181,137)    $ (86,983)
Gain on sale
 of assets                     -      &nbbsp;   (513)            -       (118,294)
Loss from
 discontinued
 operations              114,623         3,522       124,143        23,993
--------------------------------------------------------------------------
Normalized net loss   $  (14,125)    $ (13,137)   $  (56,994)    $ (81,284)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Normalized net loss
 per share            $    (0.12)    $   (0.12)   $    (0.50)    $   (0.68)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
 

Adjusting for items that are unusual in nature, the normalized net loss(1) for the quarter and year ended December 31, 2006 was $14.1 million, ($0.12 per share) and $57.0 million ($0.50 per share) respectively, compared to $13.1 million ($0.12 per share) and $81.3 million ($0.68 per share) for the same periods in 2005. The quarterly normalized net loss for 2006 increased over 2005 due to higher foreign exchange losses and lower gross margins, partly offset by lower operating expenses and lower depreciation and amortization. The normalized net loss for the year ended 2006 decreased from 2005 due to improvements in product and service margins, increased engineering development revenues, and declines in operating expenses and depreciation and amortization.

Operating cash consumption(2) for the quarter and year ended December 31, 2006 was $20.6 million and $51.4 million respectively, compared to $5.8 million and $83.3 million for the same periods in 2005.
Mentioned  Last  Change
BLD  4.98  (Unchanged)
BLDP  6.19  (Unchanged)

Fourth quarter year over year operating cash consumption increased as expected, driven by increased working capital requirements, slightly higher capital expenditures and higher research and development costs. Annually, higher product and service margins and engineering development revenues, reduced operating expenses and lower working capital requirements were partially offset by higher outflows for capital additions over the prior year.

Ballard's cash, cash equivalents and short-term investments at December 31, 2006 totaled $187.1 million compared to $233.0 million for the same date in 2005.

For a more detailed discussion of Ballard's 2006 fourth quarter and full year financial results, please see the company's financial statements and Management's Discussion & Analysis, which are available at www.ballard.com, www.sedar.com and www.sec.gov/edgar.shtml.

Selected Consolidated Financial Information
(expressed in thousands of U.S. dollars except for per share amount and
 number of shares)
--------------------------------------------------------------------------
                            Three months ended                  Year ended
                                   December 31                 December 31
                                          2005                        2005
                            2006      RESTATED          2006      RESTATED
--------------------------------------------------------------------------
Revenues:
Product and service
 revenue              $   11,679     $   9,415    $   36,535     $  34,117
Engineering
 development revenue       4,791         5,538        13,288         8,131
Total revenues            16,470        14,953        49,823        42,248
                     ------------------------------------------------------
Cost of revenues
 and expenses:
Cost of product and
 service revenues          9,056         5,581        21,206        25,948
Research and product
 development              12,775        12,979        52,274        64,891
General and
 administrative            3,547         3,994        13,262        15,461
Marketing and
 business development      1,706         1,534         7,226         6,241
Depreciation and
 amortization              3,397         4,416        16,391        18,033
                     ------------------------------------------------------
Total cost of
 revenues and
 expenses                 30,481        28,504       110,359       130,574
                     ------------------------------------------------------
Loss before
 undernoted              (14,011)      (13,551)      (60,536)      (88,326)
Investment and
 other income                964         2,181         9,932        11,223
Gain (loss) on
 disposal and
write-down of
long-lived assets            (79)           78          (778)         (238)
Gain on sale
 of assets                     -      &nbbsp;    513             -      &nbbsp; 18,294
Equity in loss of
 associated companies     (1,031)       (1,780)       (7,029)       (3,738)
                     ------------------------------------------------------
Loss before income
 taxes                   (14,157)      (12,559)      (58,411)      (62,785)
Income taxes
 (recovery)                  (32)           65        (1,417)          205
                     ------------------------------------------------------
Loss from continuing
 operations              (14,125)      (12,624)      (56,994)      (62,990)
Loss from
 discontinued
 operations             (114,623)       (3,522)     (124,143)      (23,993)
                     ------------------------------------------------------
Net loss for period   $ (128,748)    $ (16,146)   $ (181,137)    $ (86,983)
                     ------------------------------------------------------
                     ------------------------------------------------------
Basic loss per share
 - continuing
 operations            $   (0.12)    $   (0.11)   $    (0.50)    $   (0.53)
Basic loss per share
 - discontinued
 operations            $   (1.01)    $   (0.03)   $    (1.10)    $   (0.20)
                     ------------------------------------------------------
Basic loss per share   $   (1.13)    $   (0.14)   $    (1.60)    $   (0.73)
                     ------------------------------------------------------
                     ------------------------------------------------------
Weighted average
 number of common
 shares outstanding  114,212,575   112,725,393   113,390,728   119,701,260
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Cash used by
 operations           $   17,048     $   2,618    $   42,670     $  76,729
Capital expenditures       3,544         3,159         8,735         6,613
                     ------------------------------------------------------
Operating cash
 consumption(2)       $   20,592     $   5,777    $   51,405     $  83,342
--------------------------------------------------------------------------
--------------------------------------------------------------------------
                                                 December 31,  December 31,
                                                        2006          2005
                                                 -------------------------
Total cash, cash equivalents and
 short term investments                           $  187,072     $ 233,033
--------------------------------------------------------------------------
--------------------------------------------------------------------------
 

Ballard has filed its financial statements and MD&A with the appropriate Canadian and U.S. securities regulators. These documents are available at www.sedar.com and www.sec.gov/edgar.shtml. They are also available on Ballard's website at www.ballard.com.

Conference Call Details

Ballard will hold a conference call at 8:00 a.m. PST (11:00 a.m. EST) Thursday, February 22, 2007 to discuss details regarding the company's 2006 fourth quarter and full year performance. Access to the call may be obtained by calling the operator at 604.638.5340 before the scheduled start time. A playback version of the call will be available for 24 hours after the call at 604.638.6010. The confirmation number to access the playback is 2369#. The audio web cast and PowerPoint presentation can be accessed on Ballard's web site at www.ballard.com/be_an_investor/confcalls_webcasts and will be archived for replay for two weeks.

About Ballard Power Systems

Ballard Power Systems is recognized as a world leader in the design, development, manufacture and sale of zero-emission proton exchange membrane fuel cells. Ballard's mission is to make fuel cells a commercial reality. To learn more about what Ballard is doing with Power to Change the World®, visit www.ballard.com.