FOR IMMEDIATE RELEASE
Highpower International, Inc. Reports First Quarter 2012 Financial Results
New York, USA & Shenzhen, China– May 11, 2012 – Highpower International, Inc. (NasdaqGM: HPJ), a developer, manufacturer and marketer of nickel-metal hydride (Ni-MH) andlithium rechargeable batteries and battery solutions, today announced financial results for the first quarter ended March 31, 2012.
First Quarter 2012 Highlights
| · | Breakeven EPS for the first quarter of 2012 |
| | | |
| · | Sustained growth in lithium battery segment – lithium battery net sales up 40% in the first quarter of 2012 over the first quarter of 2011; total lithium battery pieces sold increased 30%; and a 42% increase in volume per ampere hour |
| | | |
| · | Reaffirms 2012 guidance of year-over-year revenue growth of 15% to 25% |
Management Commentary
“Lithium batteries continued to be a bright spot for us in the first quarter, with volumes up over 40% from last year’s first quarter based on strong demand for our products in a number of end markets, particularly in e-bikes and scooters, which will remain a focus for the rest of the year,” said Mr. George Pan, Chairman and Chief Executive Officer of Highpower International. “We are well positioned to meet this demand in these high growth markets and look forward to another year of solid growth in our lithium battery business.”
Mr. Henry Sun, Chief Financial Officer of Highpower International, added, “We are pleased with the improvements we saw on the profitability front this quarter, ending the first quarter breakeven. Traditionally the first quarter has always been our slowest quarter due to the Chinese New Year. However, in addition to normal seasonality, one of our nickel metal hydride (Ni-MH) customers underwent an inventory readjustment during the first quarter, resulting in lower overall Ni-MH revenues. We also continued to shift our Materials business to a full-scale, more profitable e-waste and recycling model, which had a negative impact on our revenue.”
“We are confident that our Ni-MH business will see a recovery in the second quarter. Moreover, our lithium business is well positioned to continue to show excellent growth and the investments we are making in our full-scale recycling program will be a strong contributor to our profitability in the future,” concluded Mr. Sun.
First Quarter 2012 Financial Results
Net sales for the first quarter ended March 31, 2012 totaled $20.6 million, a year-over-year decrease of 24% compared with $27.0 million for the first quarter ended March 31, 2011. The decrease in sales for the first quarter was primarily due to a decrease in the number of Ni-MH battery units sold due to a customer inventory readjustment and a decline in revenues in the Materials segment as this business shifts to a full recycling platform.
First quarter 2012 gross profit decreased to $3.7 million, as compared with $4.0 million for the first quarter of 2011. Gross profit margin was 17.8% for the first quarter of 2012, as compared with 14.8% for the first quarter of 2011, or a 298 basis point increase. The year-over-year increase in gross profit margin for the first quarter of 2012 was primarily due to a shift in our revenue mix away from the low margin Materials business, which represented 2% of total revenue in the first quarter of 2012 as compared with 26% in the first quarter of 2011. Gross profit margins for our NiMH and lithium batteries were down modestly from the previous year as a result of higher labor costs.
R&D spending was $0.9 million for the first quarter of 2012, as compared with $0.6 million for the comparable period in 2011, reflecting our continued increased investments in new product research.
Selling and distribution costs were$1.2 millionfor both the first quarter of 2012 and 2011.
General and administrative expenses, including non-cash stock-based compensation, were $2.0 million for the first quarter of 2012, as compared with $2.1 million for the first quarter of 2011.
Loss from operations for the first quarter of 2012 was $0.1 million as compared with loss from operations of $0.5 million for the first quarter of 2011.
Net income attributable to Highpower International (exclusive of loss attributable to non-controlling interest) for the first quarter of 2012 was $3,185, or $0.00 per diluted share, based on 13.6 million weighted average shares outstanding. This compares with first quarter 2011 net loss of $394,668, or ($0.03) per diluted share, based on 13.6 million weighted average shares outstanding.
Balance Sheet
At March 31, 2012, Highpower International had cash, cash equivalents and restricted cash totaling $29.7 million, total assets of $99.5 million, and stockholders’ equity of $28.9 million. Bank credit facilities totaled $57.4 million at March 31, 2012, of which $40.5 million was utilized and $16.9 million was available as unused credit.
Outlook
Based on our current expectations for global demand for the rechargeable battery market in 2012 and our continued shift toward higher-value energy storage systems and transportation products, we reaffirm that we expect revenues to grow between 15% and 25% over 2011 revenue levels.
Conference Call and Webcast
The Company will host a conference call today at 7:00 a.m. Pacific time/10:00 a.m. Eastern time to discuss these results and answer questions.
Individuals interested in participating in the conference call may do so by dialing 800-762-8779 from the U.S. or 480-629-9645from outside the U.S. and referencing the reservation code 4536828. Those interested in listening to the conference call live via the Internet may do so by visiting the Investor Relations section of the Company's Web site atwww.highpowertech.comorwww.InvestorCalendar.com.
About Highpower International, Inc.
Highpower International was founded in 2001 and produces rechargeable batteries using Ni-MH and lithium technologies. With over 2,600 employees and prominent international customers, Highpower is committed to expanding its market through continuous research and development as well as increased vertical integration efforts. As a company, Highpower International is committed to clean technology, not only in the products it makes, but also in the processes used to make them. The majority of Highpower International's products are distributed worldwide to markets in the United States, Europe, China and Southeast Asia.
Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995 that are not historical facts. These statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “project,” “plan,” “seek,” “intend,” or “anticipate” or the negative thereof or comparable terminology, and include discussions of strategy, and statements about industry trends and the Company's future performance, operations and products. Such statements involve known and unknown risks, uncertainties and other factors that could cause the Company's actual results to differ materially from the results expressed or implied by such statements. For a discussion of these and other risks and uncertainties see "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's public filings with the SEC. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The Company has no obligation to update the forward-looking information contained in this press release.
Financial Profiles, Inc.
Tricia Ross
+1-916-939-7285
HPJ@finprofiles.com
– financial tables to follow –
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in US Dollars)
| | | For the three months ended
March 31, | |
| | | 2012 | | | 2011 | |
| | | (Unaudited) | | | (Unaudited) | |
| | | $ | | | $ | |
| | | | | | | | | |
| Net sales | | | 20,602,783 | | | | 26,950,666 | |
| Cost of sales | | | (16,930,524 | ) | | | (22,950,308 | ) |
| | | | | | | | | |
| Gross profit | | | 3,672,259 | | | | 4,000,358 | |
| Research and development costs | | | (884,346 | ) | | | (605,044 | ) |
| Selling and distributing costs | | | (1,198,900 | ) | | | (1,174,685 | ) |
| General and administrative costs, including stock-based compensation | | | (2,014,485 | ) | | | (2,106,838 | ) |
| Loss on exchange rate difference | | | (31,330 | ) | | | (172,936 | ) |
| Gain/(Loss) on derivative instruments | | | 337,103 | | | | (390,576 | ) |
| Equity loss in an associate | | | - | | | | (1,772 | ) |
| | | | 3,791,958 | | | | 4,451,821 | |
| Loss from operations | | | (119,699 | ) | | | (451,493 | ) |
| Other income | | | 167,033 | | | | 152,136 | |
| Interest expenses | | | (12,318 | ) | | | (89,550 | ) |
| | | | | | | | | |
| (Loss) income before taxes | | | 35,016 | | | | (388,907 | ) |
| Income taxes expenses | | | (53,325 | ) | | | (5,761 | ) |
| | | | | | | | | |
| Net (Loss) Income before non-controlling interest | | | (18,309 | ) | | | (394,668 | ) |
| Less: income attributable to non-controlling interest | | | (21,494 | ) | | | - | |
| Net income attributable to Highpower international | | | 3,185 | | | | (394,668 | ) |
| | | | | | | | | |
| comprehensive income (loss) | | | | | | | | |
| Net loss | | | (18,309 | ) | | | (394,668 | ) |
| Foreign currency translation gain (loss) | | | 144,905 | | | | (18,783 | ) |
| Comprehensive income (loss) | | | 126,596 | | | | (413,451 | ) |
| | | | | | | | | |
| Less: comprehensive income attributable to noncontrolling interest | | | (21,452 | ) | | | - | |
| Comprehensive income (loss) attributable to the Company | | | 148,048 | | | | (413,451 | ) |
| | | | | | | | | |
| Earnings (loss) per share of common stock attributable to the company | | | | | | | | |
| - Basic and diluted | | | - | | | | (0.03 | ) |
| | | | | | | | | |
| Weighted average number of common stock | | | | | | | | |
| - Basic and diluted | | | 13,582,106 | | | | 13,582,106 | |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars)
| | | March 31, | | | December 31, | |
| | | 2012 | | | 2011 | |
| | | (Unaudited) | | | | |
| | | $ | | | $ | |
| ASSETS | | | | | | | | |
| Current Assets: | | | | | | | | |
| Cash and cash equivalents | | | 15,471,978 | | | | 5,175,623 | |
| Restricted cash | | | 14,250,014 | | | | 12,708,999 | |
| Accounts receivable, net | | | 19,007,781 | | | | 21,129,418 | |
| Notes receivable | | | 363,134 | | | | 515,107 | |
| Prepayments | | | 3,534,141 | | | | 4,251,723 | |
| Other receivable | | | 801,174 | | | | 1,041,614 | |
| Inventories | | | 12,804,687 | | | | 13,512,942 | |
| | | | | | | | | |
| Total Current Assets | | | 66,232,909 | | | | 58,335,426 | |
| | | | | | | | | |
| Property, plant and equipment, net | | | 26,862,126 | | | | 25,462,656 | |
| Leasehold land, net | | | 4,449,009 | | | | 3,132,965 | |
| Intangible asset, net | | | 737,500 | | | | 750,000 | |
| Deferred tax assets | | | 901,023 | | | | 857,209 | |
| Foreign currency derivatives assets | | | 286,214 | | | | 15,653 | |
| | | | | | | | | |
| TOTAL ASSETS | | | 99,468,781 | | | | 88,553,909 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
| | | | | | | | | |
| LIABILITIES | | | | | | | | |
| Current Liabilities: | | | | | | | | |
| Accounts payable | | | 17,438,345 | | | | 22,153,822 | |
| Notes payable | | | 20,544,078 | | | | 17,909,843 | |
| Letter of credit | | | 2,880,000 | | | | 2,880,000 | |
| Other payables and accrued liabilities | | | 7,609,813 | | | | 6.941,063 | |
| Income taxes payable | | | 492,316 | | | | 411,536 | |
| Short-term loan | | | 12,729,762 | | | | 9,545,383 | |
| | | | | | | | | |
| Total Current Liabilities | | | 61,694,314 | | | | 59,841,647 | |
| | | | | | | | | |
| Long-term loan | | | 7,941,550 | | | | - | |
| | | | | | | | | |
| Total Liabilities | | | 69,635,864 | | | | 59,841,647 | |
Highpower International, Inc.
HIGHPOWER INTERNATIONAL, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Stated in US Dollars)
| | | March 31, | | | December 31, | |
| | | 2012 | | | 2011 | |
| | | (Unaudited) | | | | |
| | | $ | | | $ | |
| EQUITY | | | | | | | | |
| Stockholder’s equity | | | | | | | | |
| Preferred Stock | | | | | | | | |
| (Par value: $0.0001, Authorized: 10,000,000 shares, Issued and | | | | | | | | |
| Outstanding: none) | | | | | | | | |
| | | | | | | | | |
| Common stock | | | | | | | | |
| (Par value : $0.0001, Authorized: 100,000,000 shares, 13,582,106 | | | | | | | | |
| Shares issued and outstanding at March 31, 2012) | | | 1,358 | | | | 1,358 | |
| Additional paid-in capital | | | 5,872,309 | | | | 5,831,237 | |
| Statutory and other reserves | | | 2,726,390 | | | | 2,726,390 | |
| Retained earnings | | | 15,641,841 | | | | 15,638,656 | |
| Accumulated other comprehensive income | | | 4,659,484 | | | | 4,514,621 | |
| | | | | | | | | |
| TOTAL STOCKHOLDERS’ EQUITY | | | 28,901,382 | | | | 28,712,262 | |
| | | | | | | | | |
| Non-controlling interest | | | 931,535 | | | | - | |
| | | | | | | | | |
| TOTAL EQUITY | | | 29,832,917 | | | | 28,712,262 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | | | 99,468,781 | | | | 88,553,909 | |
HIGHPOWER INTERNATIONAL, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in US Dollars)
| | | For the three months ended
March 31, | |
| | | 2012 | | | 2011 | |
| | | (Unaudited) | | | (Unaudited) | |
| | | $ | | | $ | |
| Cash flows from operating activities | | | | | | | | |
| Net (loss)/income | | | (18,309 | ) | | | (394,668 | ) |
| Adjustments to reconcile net income to net cash provided by operating activities : | | | | | | | | |
| Depreciation and amortization | | | 493,486 | | | | 444,860 | |
| Allowance provided (reversed) for doubtful accounts | | | 20,203 | | | | 1,017 | |
| Allowance provided for inventory obsolescence | | | 105,749 | | | | 42,878 | |
| Loss on disposal of property, plant and equipment | | | 131 | | | | 1,201 | |
| Loss on exchange rate difference | | | 31,330 | | | | 172,936 | |
| Equity loss in an associate | | | - | | | | 1,772 | |
| (Gain) loss on derivative instruments | | | (337,103 | ) | | | 390,576 | |
| Deferred income tax | | | (42,523 | ) | | | - | |
| Share based payment | | | 41,073 | | | | 228,621 | |
| Changes in operating assets and liabilities : | | | | | | | | |
| Accounts receivable | | | 2,144,199 | | | | 529,090 | |
| Notes receivable | | | 152,459 | | | | (941,247 | ) |
| Prepayments | | | 780,082 | | | | (2,179,270 | ) |
| Other receivable | | | 241,553 | | | | (23,125 | ) |
| Inventories | | | 621,565 | | | | 1,895,913 | |
| Accounts payable | | | (2,882,177 | ) | | | 1,271,830 | |
| Other payables and accrued liabilities | | | 657,272 | | | | 446,366 | |
| Income taxes payable | | | 79,995 | | | | (16,189 | ) |
| Net cash flows (used in)/provided by operating activities | | | 2,088,985 | | | | 1,872,561 | |
| | | | | | | | | |
| Cash flows from investing activities | | | | | | | | |
| Acquisition of plant and equipment | | | (3,542,211 | ) | | | (1,045,693 | ) |
| Acquisition of land use right | | | (1,327,923 | ) | | | - | |
| Net cash flows used in investing activities | | | (4,870,134 | ) | | | (1,045,693 | ) |
| | | | | | | | | |
| Cash flows from financing activities | | | | | | | | |
| Proceeds from short-term bank loans | | | 3,176,620 | | | | 4,042,044 | |
| Repayment of short-term bank loans | | | - | | | | (4,340,759 | ) |
| Proceeds from long-term bank loans | | | 7,925,940 | | | | - | |
| Proceeds from notes payable | | | 8,367,572 | | | | 6,546,482 | |
| Repayment of notes payable | | | (5,698,187 | ) | | | (8,225,803 | ) |
| Proceeds from letter credit | | | - | | | | 2,631,936 | |
| Proceeds from noncontrolling interest | | | 951,113 | | | | - | |
| Increase in restricted cash | | | (1,525,001 | ) | | | (591,387 | ) |
| Net cash flows provided by financing activities | | | 13,198,057 | | | | 62,513 | |
| Effect of foreign currency translation on cash and cash equivalents | | | (120,553 | ) | | | (218,717 | ) |
| Net(decrease) increase in cash and cash equivalents | | | 10,296,355 | | | | 670,604 | |
| Cash and cash equivalents - beginning of period | | | 5,175,623 | | | | 8,490,629 | |
| Cash and cash equivalents - end of period | | | 15,471,978 | | | | 9,161,233 | |
| Supplemental disclosures for cash flow information : | | | | | | | | |
| Cash paid for : | | | | | | | | |
| Income taxes | | | 15,854 | | | | 15,422 | |
| Interest expenses | | | 219,867 | | | | 152,636 | |
| Non-cash transactions | | | | | | | | |
| Change of accounts payable for construction in progress | | | 1,857,764 | | | | - | |
