Highpower International, Inc. (NASDAQ: HPJ),
a developer, manufacturer and marketer of nickel-metal hydride
(Ni-MH) and lithium-ion (Li-ion) batteries and related products,
today announced financial results for the second quarter ended June
30, 2011.
Business Highlights
- Grew net sales by 10% sequentially for the second quarter of
2011 to $29.7 million from $26.9 million in the first quarter
2011
- Strong second quarter growth in Li-ion battery segment with an
increase of 48% in net sales over the second quarter of 2010 and
sequential increase of 55% over the first quarter 2011
- Improved gross margins sequentially to 16% in the second
quarter of 2011 from 14.8% in the first quarter 2011
- Announced corporate share repurchase program of up to $5
million of shares outstanding
"We had a strong quarter in terms of overall revenue growth,
which was driven by global demand for our cleaner energy
lithium-ion batteries, a segment that notably reached a record
level during the second quarter," said Mr. George Pan, Chairman and
Chief Executive Officer of Highpower International. "During the
second quarter, we also continued to navigate an unfavorable raw
materials pricing environment."
"Despite the temporary setbacks on profitability, we have
continued to position Highpower for future, sustainable growth in
2012 through strategic investments in our R&D, salesforce and
capacity. In addition, we announced a share repurchase program
during the quarter, which reflects our confidence and commitment to
our business and our shareholders," concluded Mr. Pan.
Mr. Henry Sun, Chief Financial Officer of Highpower
International added, "While we are seeing some macro signs that
point to uncertainty about consumer demand and the overall health
of the global economy, we expect to benefit from lower commodity
prices if recent trends continue. Moreover, we continue to actively
work with our customers on our pricing programs. At this time, we
believe that our profitability will improve in the second half of
2011 relative to the first half of this year."
Second Quarter 2011 Financial Results
Net sales for the second quarter ended June 30, 2011 totaled
$29.7 million, a year-over-year increase of 2.5% compared with
$29.0 million for the second quarter ended June 30, 2010, and up
sequentially 10% from $27.0 million in the first quarter of 2011.
The increase in sales for the second quarter was primarily driven
by increased demand for our Li-ion batteries.
Second quarter 2011 gross profit decreased to $4.8 million, as
compared with $5.4 million for the second quarter 2010. Gross
profit margin was 16.0% for the second quarter 2011, as compared
with 18.6% for the second quarter 2010. Gross profit margin
increased sequentially from 14.8% in the first quarter 2011. The
year-over-year decrease in gross profit margin for the second
quarter 2011 was primarily due to a rise in raw materials prices,
primarily for nickel and rare earth materials.
Selling and distribution costs, including stock-based
compensation, were $1.0 million for the second quarter 2011, as
compared with $1.1 million for the comparable period in 2010.
General and administrative expenses, including stock-based
compensation, were $2.1 million, or 7.1% of net sales, for the
second quarter 2011, as compared to $1.8 million, or 6.1% of net
sales, for the second quarter 2010. The increase was primarily due
to increased spending on senior and mid-level management staffing
and increased investment in our management information systems,
both of which are required to support the growth of our
business.
Income from operations for the second quarter of 2011 was $0.3
million, as compared with income from operations of $1.9 million
for the second quarter of 2010. Also included in these results were
non-cash stock-based compensation expenses of $49,000 and $7,000
for the 2011 and 2010 quarters, respectively.
Net income for the second quarter of 2011 was $0.1 million, or
$0.01 per diluted share, based on 13.8 million weighted average
shares outstanding. This compares with second quarter 2010 net
income of $1.6 million, or $0.12 per diluted share, based on 13.7
million weighted average shares outstanding. As previously
mentioned, the 2011 second quarter's results were negatively
impacted mainly by commodity prices and the timing of pricing
increases to customers.
Balance Sheet
At June 30, 2011, Highpower International had cash, cash
equivalents and restricted cash totaling $18.7 million, total
assets of $80.9 million, working capital of $8.5 million and
stockholders' equity of $28.8 million. Bank credit facilities
totaled $80.0 million at June 30, 2011, of which $35.6 million was
utilized and $44.4 million was available as unused credit.
Outlook
Based on our current expectations for global demand for the
rechargeable battery market in 2011, the outlook for our key raw
material input prices and our planned increased investment in sales
and marketing and research and development, we are updating our
financial guidance for 2011. We expect net sales to be between $120
million and $125 million. We expect net income to be in the range
of $2 million to $3 million.
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 877-941-0844 from the U.S. or 480-629-9835
from outside the U.S. and referencing the reservation code 4463189.
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, Inc. develops, manufactures and markets
powerful, efficient, and environmental rechargeable nickel-metal
hydride (Ni-MH) and lithium-ion (Li-ion) batteries and related
products for use in a variety of devices and equipment including
wireless communications, electronics, lighting, backup power,
electric tools, and transportation, etc. Highpower International's
products are distributed worldwide to markets in the Americas,
Europe, China, and Southeast Asia. For more information, visit
http://www.highpowertech.com
To be added to the Company's email distribution for future news
releases, please send your request to HPJ@finprofiles.com. Company
news can also be found at
http://www.highpowertech.com/InvestorNews.aspx?type=FinancialRelease
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 tables to follow --
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
As of June 30, 2011 and June 30, 2010 (Unaudited)
(Stated in US Dollars)
Three months ended Six months ended
June 30 June 30
------------------------ ------------------------
2011 2010 2011 2010
$ $ $ $
Net sales 29,708,154 28,978,114 56,658,820 49,201,486
Cost of sales (24,942,124) (23,578,703) (47,892,431) (39,555,745)
----------- ----------- ----------- -----------
Gross profit 4,766,030 5,399,411 8,766,389 9,645,741
Research and development
costs (873,383) (467,987) (1,508,461) (808,811)
Selling and distributing
costs (980,663) (1,121,484) (2,166,813) (1,884,639)
General and
administrative costs,
including stock-based
compensation (2,098,497) (1,758,799) (4,163,837) (2,929,723)
Loss on exchange rate
difference (297,768) (130,130) (470,703) (152,484)
Loss on financial
instruments (244,013) - (694,604) -
Share of loss of an
associate (2,199) - (3,971) -
----------- ----------- ----------- -----------
Income from operations 269,507 1,921,011 (242,000) 3,870,084
Other income 176,222 126,026 408,770 203,400
Interest expenses (233,677) (101,111) (386,314) (167,444)
Other expenses - - (23,964) -
----------- ----------- ----------- -----------
Income before taxes 212,052 1,945,926 (243,508) 3,906,040
Income taxes (137,017) (360,579) (142,778) (739,993)
----------- ----------- ----------- -----------
Net income for the
period 75,035 1,585,347 (386,286) 3,166,047
Other comprehensive
income
- Foreign currency
translation gain 3,015 (7,898) (15,768) (23,495)
- Cash flow hedge 290,290 (2,515) 293,857 2
----------- ----------- ----------- -----------
Comprehensive income 368,340 1,574,934 (108,197) 3,142,554
=========== =========== =========== ===========
Earnings per share of
common stock
- Basic 0.01 0.12 (0.03) 0.23
=========== =========== =========== ===========
- Diluted 0.01 0.12 (0.03) 0.23
=========== =========== =========== ===========
Weighted average number
of common stock
- Basic 13,582,106 13,582,106 13,582,106 13,582,106
=========== =========== =========== ===========
- Diluted 13,817,981 13,732,096 13,817,981 13,732,096
=========== =========== =========== ===========
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2011 and December 31, 2010 (Unaudited)
(Stated in US Dollars)
As of
-------------------------------
June 30, December 31,
2011 2010
ASSETS
Current Assets:
Cash and cash equivalents 7,523,000 8,490,629
Restricted cash 11,211,994 6,044,960
Accounts receivable 21,475,717 20,846,540
Notes receivable 807,078 256,574
Prepaid expenses and other receivables 7,109,918 3,231,211
Inventories 12,501,199 13,447,432
--------------- ---------------
Total Current Assets 60,628,906 52,317,346
=============== ===============
Plant and equipment, net 16,297,018 13,652,254
Leasehold land, net 3,089,698 3,022,293
Intangible asset, net 775,000 800,000
Investment in an associate 99,151 103,123
Investment securities 55,698 53,904
--------------- ---------------
TOTAL ASSETS 80,945,471 69,948,920
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Non-trading foreign currency derivatives
liabilities - 77,699
Accounts payable 11,406,634 13,407,204
Other payables and accrued liabilities 4,999,285 4,983,269
Income taxes payable 91,690 1,164,007
Bank borrowings 35,624,129 22,539,032
--------------- ---------------
Total Current Liabilities 52,121,738 42,171,211
=============== ===============
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' 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
Issued and outstanding: 2011-13,582,106
shares (2010-13,582,106 shares) 1,358 1,358
Additional paid-in capital 5,457,498 5,180,318
Accumulated other comprehensive income 3,337,023 2,475,749
Retained earnings 20,027,854 20,120,284
--------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 28,823,733 27,777,709
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 80,945,471 69,948,920
=============== ===============
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
As of June 30, 2011 and June 30, 2010 (Unaudited)
(Stated in US Dollars)
Six months ended June 30,
----------------------------
2011 2010
$ $
Cash flows from operating activities
Net (loss)/income (386,286) 3,166,047
Adjustments to reconcile net income to net
cash provided by operating activities :
Amortization of intangible asset 25,000 25,000
Amortization of leasehold land 33,223 31,853
Depreciation 825,008 674,296
Loss on disposal of plant and equipment 6,636 48,381
Loss on financial instruments 694,604 -
Share based payment 277,180 80,372
Bad debt written off 56,821 5,626
Changes in operating assets and liabilities :
(Increase) decrease in -
Accounts receivable (629,177) (4,604,365)
Notes receivable (550,505) (266,209)
Prepaid expenses and other receivables (3,878,708) (1,979,423)
Inventories 946,233 (4,385,862)
Increase (decrease) in -
Accounts payable (2,000,570) 9,837,912
Other payables and accrued liabilities 60,682 893,755
Income taxes payable (1,072,317) (286,852)
------------- -------------
Net cash flows (used in)/provided by operating
activities (5,592,176) 3,240,531
------------- -------------
Cash flows from investing activities
Acquisition of plant and equipment (2,930,714) (2,563,278)
Sale proceeds of plant and equipment - (142,515)
------------- -------------
Net cash flows used in investing activities (2,930,714) (2,705,793)
------------- -------------
Cash flows from financing activities
Proceeds from new short-term bank loans 12,595,292 4,803,830
Repayment of short-term bank loans (8,422,290)
Repayment of other secured loans - (3,437,764)
Net (repayment) advancement of other bank
borrowings 8,161,654
Increase in restricted cash (5,167,034) (1,206,238)
------------- -------------
Net cash flows provided by financing
activities 7,167,622 159,828
------------- -------------
Net increase in cash and cash equivalents (1,355,268) 694,566
Effect of foreign currency translation on cash
and
cash equivalents 387,639 (113,627)
Cash and cash equivalents - beginning of
period 8,490,629 2,967,586
------------- -------------
Cash and cash equivalents - end of period 7,523,000 3,548,525
============= =============
Supplemental disclosures for cash flow
information :
Cash paid for :
Interest 386,314 167,445
============= =============
Financial Profiles, Inc. Tricia Ross +1-916-939-7285 Email
Contact
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