SOURCE: Hong Kong Highpower Technology

Hong Kong Highpower Technology

March 30, 2010 07:00 ET

Hong Kong Highpower Technology Reports Fourth Quarter and Full Year 2009 Financial Results

NEW YORK, NY and SHENZHEN, CHINA--(Marketwire - March 30, 2010) - Hong Kong Highpower Technology, 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 fourth quarter and year ended December 31, 2009.

Business Highlights

--  Generated gross margin improvement to 21% in 2009 compared to 17% for
    2008;
--  Earned net income of $0.33 per diluted share for 2009, a 122% increase
    over 2008;
--  Continued production ramp of Li-ion batteries to average monthly
    production rate in excess of 800,000 units for fourth quarter 2009, a
    100% increase in production over the same period in 2008;
--  Debt-to-capital ratio remained healthy consistent with prior quarter.

"Despite the global financial crisis, we exceeded our operating and financial targets in 2009," said Mr. George Pan, Chairman and Chief Executive Officer of Hong Kong Highpower Technology. "We more than doubled our net income in 2009 and significantly increased our gross profit and margins in the face of a still fragile economy. Our focus on cost containment efforts and execution proved invaluable in helping us weather the most severe economic crisis in recent history."

"As we look forward, we believe we are well positioned within our industry to capitalize on growth opportunities with well over 10% share of the global Ni-MH battery market and excellent and stable customer relationships. We anticipate demand for our products will continue to increase in 2010 over last year's levels as the remaining effects of the recession appear to be fading away."

Mr. Henry Ngan, Chief Financial Officer of Hong Kong Highpower Technology added, "We are pleased with our 2009 financial results as we achieved both record profitability and unit volumes sold. We have also created healthy shareholder value for our investors and look forward to continuing these trends."

Full Year 2009 Financial Results

Net sales for the year ended December 31, 2009 totaled $70.3 million, a year-over-year decrease of 6% compared with $75.0 million for the year ended December 31, 2008. The year-over-year decrease was due to lower average selling prices and partially offset by an increase in unit volume sold.

Gross profit for 2009 increased 18% to $15.0 million, compared with $12.8 million for 2008. Gross margin was 21% for 2009, compared with 17% for 2008. The year-over-year improvement in gross margin is attributable to implemented manufacturing efficiencies and a decrease in the average per unit cost of goods sold.

Selling and distribution costs were $2.4 million for 2009, unchanged from 2008.

General and administrative expenses, including stock-based compensation, were $6.4 million or 9.1% of net sales for 2009, compared to $6.1 million or 8.1% of net sales for 2008.

The Company reported a loss on the exchange rate difference between the U.S. Dollar ("USD") and the Renminbi ("RMB") of $60,300 for 2009 compared with $1.2 million for 2008.

The Company recorded a provision for income taxes of $1.1 million for 2009 compared with $529,000 for 2008.

Net income increased 122% to $4.4 million, or $0.33 per diluted share, for the year ended December 31, 2009, based on 13.6 million weighted average shares outstanding. This compares with 2008 net income of $2.0 million, or $0.15 per diluted share, for the year ended December 31, 2008, based on 13.2 million weighted average shares outstanding.

Fourth Quarter 2009 Financial Results

Net sales for the fourth quarter ended December 31, 2009 totaled $22.5 million, a year-over-year increase of 27% compared with $17.7 million for the fourth quarter ended December 31, 2008. The increase in sales for the fourth quarter was primarily due to increased orders from customers.

Fourth quarter 2009 gross profit increased 37% to $4.3 million, compared with $3.2 million for the fourth quarter 2008. Gross margin was 19% for the fourth quarter 2009, compared with 18% for the fourth quarter 2008. The year-over-year increase in gross profit for the fourth quarter 2009 was primarily due to a decrease in the average per unit cost of goods sold and growth in volume of units sold.

Selling and distribution costs were $476,000 for the fourth quarter 2009, compared with $655,000 for the comparable period in 2008.

General and administrative expenses, including stock-based compensation, were $2.8 million or 12% of net sales for the fourth quarter 2009, compared to $1.8 million, or 10% of net sales for the fourth quarter 2008.

The Company recorded a provision for income taxes of $229,000 for the fourth quarter 2009, compared with provisions for income taxes of $262,000 for the fourth quarter 2008.

Net income for the fourth quarter of 2009 was $638,000 or $0.05 per diluted share, based on 13.6 million weighted average shares outstanding. This compares with fourth quarter 2008 net income of $303,000, or $0.02 per diluted share, based on 13.7 million weighted average shares outstanding, which resulted in an increase in diluted EPS of 150% year-over-year.

Balance Sheet

At December 31, 2009, Hong Kong Highpower Technology had cash and cash equivalents and restricted cash totaling $8.4 million, total assets of $51.1 million, working capital of $7.0 million and stockholders' equity of $21.2 million. Bank credit facilities totaled $27.0 million at December 31, 2009, of which $12.2 million was available as unused credit.

Conference Call and Webcast

Management of Hong Kong Highpower Technology will host a conference call today, Tuesday, March 30, 2010 at 8:00 a.m. Pacific time/11:00 a.m. Eastern time to discuss fourth quarter and year-end 2009 financial results and answer questions.

Individuals interested in participating in the conference call may do so by dialing 888-799-5026 from the U.S. or 973-409-9693 from outside the U.S and referencing the reservation code 64574530. 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.haopengbattery.com or www.InvestorCalendar.com.

A telephone replay will be available for 48 hours following the conclusion of the call by dialing 800-642-1687 from the U.S., or 706-645-9291 from outside the U.S., and entering reservation code 64574530. A webcast replay will be available for one year.

About Hong Kong Highpower Technology, Inc.

Hong Kong Highpower Technology develops, manufactures and markets rechargeable nickel metal hydride (Ni-MH) and lithium-ion (Li-ion) batteries and related products for use in a variety of electronic devices. The majority of Hong Kong Highpower Technology's products are distributed worldwide to markets in the United States, Europe, China, Hong Kong, Southeast Asia and Taiwan. For more information, visit www.haopengbattery.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://ir.haopengbattery.com/en/introduce028.html.

Forward Looking Statement

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.



        HONG KONG HIGHPOWER TECHNOLOGY, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF OPERATIONS
                       (Stated in US Dollars)

                                                 Years Ended December 31,
                                                --------------------------
                                                        2009          2008
                                                           $             $

Net sales                                         70,331,277    75,004,242
Cost of sales                                    (55,299,955)  (62,238,982)
                                                ------------  ------------

Gross profit                                      15,031,322    12,765,260
Depreciation                                        (270,078)     (194,496)
Selling and distribution costs                    (2,354,967)   (2,416,220)
General and administrative costs including
 stock-based compensation                         (6,404,724)   (6,097,580)
Loss on exchange rate difference                     (60,294)   (1,182,076)
Fees and costs related to reorganization                   -             -
                                                ------------  ------------

Income from operations                             5,941,259     2,874,888
Change in fair value of currency forwards           (117,171)      115,568
Change in fair value of warrants                           -      (276,000)
Other income                                         509,294       463,142
Interest expense                                    (527,940)     (642,161)
Other expenses                                      (214,092)            -
                                                ------------  ------------

Income before taxes                                5,591,350     2,535,437
Income taxes                                      (1,147,804)     (528,950)
                                                ------------  ------------

Net income                                         4,443,546     2,006,487
                                                ============  ============

Net Income per common share
 - Basic                                                0.33          0.15
                                                ============  ============

 - Diluted                                              0.33          0.15
                                                ============  ============

Weighted average common shares outstanding
 - Basic                                          13,608,265    13,205,599
                                                ============  ============

 - Diluted                                        13,667,697    13,233,353
                                                ============  ============




        HONG KONG HIGHPOWER TECHNOLOGY, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS
                       (Stated in US Dollars)


                                                      At December 31,
                                                 --------------------------
                                                         2009          2008
                                                            $             $
ASSETS
  Current Assets:
    Cash and cash equivalents                       2,967,586     4,175,780
    Restricted cash                                 5,478,418     4,845,478
    Accounts receivable                            14,896,503     8,765,593
    Notes receivable                                  596,795       429,815
    Prepaid expenses and other receivables          2,366,734     1,732,709
    Deferred charges - Stock-based compensation             -       216,667
    Inventories                                    10,633,566    11,208,697
                                                 ------------  ------------

  Total Current Assets                             36,939,602    31,374,739
  Deferred tax assets                                       -       104,556
  Plant and equipment, net                         10,284,873     7,778,477
 Leasehold land                                     3,019,509     3,050,510
 Intangible asset, net                                850,000       900,000
  Investment securities                                52,732             -
  Currency forward                                          -       116,157
                                                 ------------  ------------

TOTAL ASSETS                                       51,146,716    43,324,439
                                                 ============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
  Current Liabilities :
    Non-trading foreign currency derivatives
     liabilities                                       11,041       293,830
    Accounts payable                               10,738,714     8,306,123
    Other payables and accrued liabilities          3,563,308     3,139,275
    Income taxes payable                              876,739       476,330
    Bank borrowings                                14,787,714    14,829,228
                                                 ------------  ------------

  Total Current Liabilities                        29,977,516    27,044,786
                                                 ------------  ------------

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: 2009 - 13,582,106
     shares (2008 - 13,562,596 shares)                  1,358         1,356
    Additional paid-in capital                      5,065,426     5,048,194
    Accumulated other comprehensive income          2,023,858     1,595,091
    Retained earnings                              14,078,558     9,635,012
                                                 ------------  ------------

TOTAL STOCKHOLDERS' EQUITY                         21,169,200    16,279,653
                                                 ------------  ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY         51,146,716    43,324,439
                                                 ============  ============




          HONG KONG HIGHPOWER TECHNOLOGY, INC. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENT OF OPERATIONS
                        (Stated in US Dollars)

                                                     Three months ended
                                                         December 31,
                                                      2009         2008
                                                            $            $

Net Sales                                          22,519,839   17,677,732
  Cost of Sales                                   (18,179,460) (14,507,445)
                                                  -----------  -----------
Gross Profit                                        4,340,379    3,170,287
  Depreciation                                       (100,769)     (64,048)
  Selling and  Distribution Cost                     (475,966)    (654,834)
  General and administrative costs including
   stock-based compensation                        (2,791,070)  (1,841,112)
  Loss on exchange rate difference                      2,108     (187,091)
  Fees and costs related to reorganization                  -            -
                                                  -----------  -----------

Income from operations                                974,682      423,202
  Change in fair value of currency forwards               (65)      86,466
  Change in fair value of warrants                          -            -
  Other Income                                        130,862      137,309
  Interest Expense                                   (248,318)     (82,331)
  Other expenses                                        9,871
                                                  -----------  -----------

Income before taxes                                   867,032      564,646
  Income Taxes                                       (228,784)    (262,089)

                                                  -----------  -----------
Net Income                                            638,248      302,557
                                                  ===========  ===========

Net Income per common share
 - Basic                                                 0.05         0.02
                                                  ===========  ===========

 - Diluted                                               0.05         0.02
                                                  ===========  ===========

Weighted average common shares outstanding
 - Basic                                           13,566,601   13,711,011
                                                  ===========  ===========

 - Diluted                                         13,632,069   13,708,139
                                                  ===========  ===========

Contact Information

  • Media and Investor Inquiries:
    Henry H. Ngan
    Chief Financial Officer
    +1-917-887-0614
    Email Contact

    Financial Profiles, Inc.
    Tricia Ross
    (310) 277-4711
    Email Contact