Highpower International, Inc. (NASDAQ: HPJ),
a developer, manufacturer and marketer of nickel-metal hydride
(Ni-MH) and lithium-based rechargeable batteries and battery
solutions, today announced financial results for the third quarter
ended September 30, 2012.
Third Quarter 2012 Highlights
- Grew net sales by 13.4% year-over-year and 8.5% sequentially
for the third quarter of 2012 to $31.9 million
- Set record sales levels in both major battery segments --
Lithium battery net sales up 87.7% over the third quarter of 2011
and 22.4% sequentially; Ni-MH battery net sales up 9.1% over the
third quarter of 2011 and 0.9% sequentially
- Strong gross margin expansion to 23.9% in the third quarter of
2012 from 13.8% in the third quarter 2011
- Continued profitability; EPS attributable to Highpower
International of $0.05 for third quarter of 2012
Management Commentary
"Highpower experienced another healthy quarter of growth, marked
by increasing momentum in sales and profitability," said Mr. George
Pan, Chairman and Chief Executive Officer of Highpower
International. "Our lithium battery business achieved record levels
of sales and production, which was driven by increasing demand for
portable power devices and our higher-end battery product
offerings. Additionally, our Ni-MH business turned in a solid
performance with strong volumes and improved margins."
"Looking ahead, we are well positioned to continue to gain
market share through increased demand for our higher capacity
battery products, industry consolidation, and our diversified
international customer base. We see no signs of lithium battery
demand subsiding, given the expanding worldwide appetite for
portable devices such as smart phones, tablets, and energy storage
applications. We are also actively pursuing opportunities in the
electric transportation market, which we believe will provide
another avenue of growth for us in the years ahead," concluded Mr.
Pan.
Mr. Henry Sun, Chief Financial Officer of Highpower
International, added, "We are pleased to have delivered our second
straight quarter of profitability driven by robust margin
improvement. We are benefiting from our shift towards higher-end
products and a favorable commodity cost environment, as well as a
shift away from our lower margin New Materials Business. We expect
to continue to benefit from favorable commodity costs in the fourth
quarter and that our European business will stabilize. Moreover, we
look forward to launching a profitable battery and e-waste
recycling business in 2013."
Third Quarter 2012 Financial Results
Net sales for the third quarter ended September 30, 2012 totaled
$31.9 million, a year-over-year increase of 13.4% compared with
$28.1 million for the third quarter ended September 30, 2011 and a
sequential increase of 8.5% from the second quarter 2012. The
year-over-year increase in sales for the third quarter was
primarily due to strong year-over-year sales increases in both
lithium and Ni-MH battery segments, which was offset by a decline
in revenues in the New Materials segment as this business shifts to
a full recycling platform in 2013.
Third quarter 2012 gross profit increased to $7.6 million, as
compared with $3.9 million for the third quarter of 2011. Gross
profit margin was 23.9% for the third quarter of 2012, as compared
with 13.8% for the third quarter of 2011, or a 1,010 basis point
improvement. The year-over-year increase in gross profit margin for
the third quarter of 2012 was primarily due to higher sales
volumes, lower commodity costs, a greater percentage of higher-end
battery products, and a shift in our revenue mix away from the low
margin New Materials business.
R&D spending was $1.1 million for the third quarter of 2012,
as compared with $0.8 million for the comparable period in 2011,
due to expansion of our workforce to expand research and
development and management functions.
Selling and distribution costs were $1.4 million for third
quarter of 2012 as compared with $1.5 million for the comparable
period in 2011.
General and administrative expenses, including non-cash
stock-based compensation, were $4.0 million for the third quarter
of 2012, as compared with $2.2 million for the third quarter of
2011, with the increase resulting from our expanded infrastructure
required to support our growth as well as a $0.8 million increase
in bad debt expense.
Income from operations for the third quarter of 2012 was $1.0
million as compared with a loss from operations of ($0.8) million
for the third quarter of 2011.
Net income attributable to Highpower International (exclusive of
loss attributable to non-controlling interest) for the third
quarter of 2012 was $0.6 million, or $0.05 per diluted share, based
on 13.6 million weighted average shares outstanding. This compares
with a third quarter 2011 net loss attributable to Highpower
International (exclusive of loss attributable to non-controlling
interest) of ($0.6) million, or ($0.05) per diluted share, based on
13.6 million weighted average shares outstanding.
Balance Sheet
At September 30, 2012, Highpower International had cash, cash
equivalents and restricted cash totaling $27.8 million, total
assets of $111.3 million, and stockholders' equity of $30.2
million. Total debt was $47.9 million at September 30, 2012. Bank
credit facilities totaled $53.9 million, of which $19.9 million was
available at the end of the quarter.
Outlook
Based on our current expectations for global demand for the
rechargeable battery market in 2012 and our continued shift toward
higher-end products, we expect revenues from our battery business
to grow at least 15% over 2011 revenue levels. The revenue growth
in our Ni-MH and lithium businesses will be offset by the shift
away from our traditional New Materials business to a full scale
materials recycling business that will ramp up in 2013. We expect
to remain profitable for the fourth quarter of fiscal 2012.
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 877-941-8609 from the U.S. or 480-629-9835
from outside the U.S. and referencing the reservation code 4573488.
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 at www.highpowertech.com or
www.InvestorCalendar.com.
About Highpower International, Inc.
Highpower International was founded in 2001 and produces
Nickel-Metal Hydride (Ni-MH) and lithium-based rechargeable
batteries used in electric bikes, energy storage systems, power
tools, medical equipment, digital and electronic devices, personal
care products, and lighting. With over 3,000 employees and advanced
manufacturing facilities located in Shenzhen and Huizhou of China,
Highpower serves its customers around the world through continuous
research and development as well as its commitment to quality
products. As a company, Highpower International is committed to
clean technology, not only in the products it makes, but also in
the processes adopted to produce 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. Such risks and uncertainties include,
without limitation, the current economic downturn and uncertainty
in the European economy adversely affecting demand for the
Company's products; fluctuations in the cost of raw materials; the
Company's dependence on, or inability to attract additional, major
customers for a significant portion of its net sales; the Company's
ability to increase manufacturing capabilities to satisfy orders
from new customers; the Company's ability to maintain increased
margins; changes in the laws of the People's Republic of China that
affect the Company's operations; the devaluation of the U.S. Dollar
relative to the Renminbi; the Company's dependence on the growth in
demand for portable electronic devices and the success of
manufacturers of the end applications that use the Company's
battery products; the Company's responsiveness to competitive
market conditions; the Company's ability to successfully
manufacture its battery products in the time frame and amounts
expected; the market acceptance of the Company's lithium products;
the Company's ability to successfully develop products for and
penetrate the electric transportation market; the Company's ability
to continue R&D development to keep up with technological
changes; the Company's ability to successfully transition its New
Materials business into a full scale materials recycling business;
changes in foreign, political, social, business and economic
conditions that affect the Company's production capabilities or
demand for our products; and various other matters, many of which
are beyond the Company's control. For a more detailed 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 including
the Company's Form 10-K for the fiscal year ended December 31,
2011, its Form 10-Q reports for the quarters ended March 31, 2012
and June 30, 2012 filed with the SEC and its Form 10-Q report for
the quarter ended September 30, 2012 to be filed 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. Any
forward-looking statement made by us in this press release is based
only on information currently available to the Company and speaks
only as of the date on which it is made. The Company has no
obligation to update the forward-looking information contained in
this press release.
- financial tables to follow -
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
Three months ended Nine months ended
September 30, September 30,
------------------------ ------------------------
2012 2011 2012 2011
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
$ $ $ $
Net sales 31,868,046 28,091,330 81,848,511 84,750,150
Cost of sales (24,258,038) (24,212,746) (64,557,820) (72,105,177)
----------- ----------- ----------- -----------
Gross profit 7,610,008 3,878,584 17,290,691 12,644,973
Research and development
expenses (1,147,359) (823,735) (3,265,290) (2,302,163)
Selling and distribution
expenses (1,423,372) (1,498,955) (3,904,771) (3,654,303)
General and
administrative
expenses, including
stock-based compensation (4,035,269) (2,200,960) (8,313,737) (6,406,295)
Loss on exchange rate
difference (200,488) (186,879) (78,458) (657,581)
Gain (loss) on
derivative instruments 207,576 97,411 240,532 (136,786)
Equity loss in an
associate - (104,375) - (108,346)
----------- ----------- ----------- -----------
Total operation expenses (6,598,912) (4,717,493) (15,321,724) (13,265,474)
----------- ----------- ----------- -----------
Income (loss) from
operations 1,011,096 (838,909) 1,968,967 (620,501)
Other income 176,265 239,831 404,483 458,086
Interest expenses (63,935) (105,115) (377,376) (365,257)
----------- ----------- ----------- -----------
Income (loss) before
taxes 1,123,426 (704,193) 1,996,074 (527,672)
Income taxes (expense)
benefit (526,947) 73,683 (943,213) (69,095)
----------- ----------- ----------- -----------
Net income (loss) 596,479 (630,510) 1,052,861 (596,767)
----------- ----------- ----------- -----------
Less: net loss
attributable to non-
controlling interest (47,883) - (98,400) -
Net income (loss)
attributable to the
Company 644,362 (630,510) 1,151,261 (596,767)
----------- ----------- ----------- -----------
Comprehensive income
Net income (loss) 596,479 (630,510) 1,052,861 (596,767)
Foreign currency
translation gain 381,765 61,799 225,870 1,220,385
----------- ----------- ----------- -----------
Comprehensive income
(loss) 978,244 (568,711) 1,278,731 623,618
=========== =========== =========== ===========
Less: comprehensive loss
attributable to
non-controlling interest (38,561) - (107,010) -
Comprehensive income
(loss) attributable to
the Company 1,016,805 (568,711) 1,385,740 623,618
=========== =========== =========== ===========
Earnings (loss) per
share of common stock
attributable to the
Company
=========== =========== =========== ===========
- Basic and diluted 0.05 (0.05) 0.08 (0.04)
=========== =========== =========== ===========
Weighted average common
shares outstanding
- Basic and diluted 13,582,106 13,582,106 13,582,106 13,582,106
=========== =========== =========== ===========
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars)
September 30, December 31,
2012 2011
------------- -------------
(Unaudited)
$ $
ASSETS
Current Assets:
Cash and cash equivalents 5,500,805 5,175,623
Restricted cash 22,319,701 12,708,999
Accounts receivable, net 23,961,421 21,129,418
Notes receivable 1,243,819 515,107
Prepayments 3,628,248 4,251,723
Other receivables 811,909 1,041,614
Inventories 16,964,816 13,512,942
------------- -------------
Total Current Assets 74,430,719 58,335,426
------------- -------------
Property, plant and equipment, net 30,955,446 25,462,656
Land use rights, net 4,408,740 3,132,965
Intangible asset, net 712,500 750,000
Deferred tax assets 632,101 857,209
Foreign currency derivatives assets 113,402 15,653
------------- -------------
TOTAL ASSETS 111,252,908 88,553,909
============= =============
LIABILITIES AND EQUITY
LIABILITIES
Current Liabilities:
Accounts payable 25,371,520 22,153,822
Deferred revenue 655,446 -
Short-term loan 15,671,794 9,545,383
Notes payable 24,286,540 17,909,843
Letter of credit - 2,880,000
Other payables and accrued liabilities 5,349,133 6,941,063
Income taxes payable 875,054 411,536
Current portion of long-term loan 1,749,976 -
------------- -------------
Total Current Liabilities 73,959,463 59,841,647
------------- -------------
Long-term loan 6,204,461 -
TOTAL LIABILITIES 80,163,924 59,841,647
============= =============
COMMITMENTS AND CONTINGENCIES
HIGHPOWER INTERNATIONAL, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Stated in US Dollars)
September 30, 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 September 30,2012 and December
31, 2011) 1,358 1,358
Additional paid-in capital 5,976,696 5,831,237
Statutory and other reserves 2,726,390 2,726,390
Retained earnings 16,789,917 15,638,656
Accumulated other comprehensive income 4,749,100 4,514,621
------------- -------------
Total equity for the Company's stockholders 30,243,461 28,712,262
------------- -------------
Non-controlling interest 845,523 -
TOTAL EQUITY 31,088,984 28,712,262
============= =============
TOTAL LIABILITIES AND EQUITY 111,252,908 88,553,909
============= =============
HIGHPOWER INTERNATIONAL, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in US Dollars)
Nine months ended
September 30,
------------------------
2012 2011
----------- -----------
(Unaudited) (Unaudited)
$ $
Cash flows from operating activities
Net income (loss) 1,052,861 (596,767)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,668,979 1,349,240
Allowance for doubtful accounts 1,156,434 146,393
Loss (gain) on disposal of property, plant and
equipment 55,000 (7,462)
Equity loss in an associate - 108,346
Income on derivative instruments (97,029) (211,898)
Deferred income tax 225,862 (159,157)
Share based payment 145,459 612,057
Changes in operating assets and liabilities:
Accounts receivable (3,904,228) (1,839,396)
Notes receivable (722,104) (141,131)
Prepayments 629,689 (4,688,226)
Other receivable 231,388 212,606
Inventories (3,385,965) 1,518,693
Accounts payable 5,412,400 3,510,379
Deferred revenue 650,951 -
Other payables and accrued liabilities (1,602,391) 151,627
Income taxes payable 459,052 (1,041,362)
----------- -----------
Net cash flows provided by (used in) operating
activities 1,976,358 (1,076,058)
----------- -----------
Cash flows from investing activities
Acquisition of plant and equipment (9,626,668) (4,986,349)
Acquisition of land use right (1,323,559) -
----------- -----------
Net cash flows used in investing activities (10,950,227) (4,986,349)
----------- -----------
Cash flows from financing activities
Proceeds from short-term bank loans 9,866,422 12,708,732
Repayment of short-term bank loans (3,772,049) (7,305,110)
Proceeds from long-term bank loans 7,899,893 -
Proceeds from notes payable 33,555,477 24,638,742
Repayment of notes payable (27,278,534) (16,766,610)
Proceeds from letter of credit - 2,995,868
Repayment of letter of credit (2,880,000) (1,379,051)
Proceeds from non-controlling interest 947,987 -
Increase in restricted cash (9,495,213) (9,231,878)
----------- -----------
Net cash flows provided by financing activities 8,843,983 5,660,693
----------- -----------
Effect of foreign currency translation on cash and
cash equivalents 455,068 96,274
----------- -----------
Net increase (decrease) in cash and cash
equivalents 325,182 (305,440)
Cash and cash equivalents - beginning of period 5,175,623 8,490,629
----------- -----------
Cash and cash equivalents - end of period 5,500,805 8,185,189
=========== ===========
Supplemental disclosures for cash flow
information:
Cash paid for:
Income taxes 258,300 1,271,794
=========== ===========
Interest expenses 917,662 607,203
=========== ===========
Non-cash transactions
Accounts payable for construction in progress 2,285,517 -
=========== ===========
Financial Profiles, Inc. Tricia Ross +1-916-939-7285 Email
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