SOURCE: Highpower International

Highpower International

March 25, 2014 08:30 ET

Highpower International, Inc. Reports Fourth Quarter and Full Year 2013 Financial Results

Record FY 2013 Revenues of $133 Million as Lithium Battery Net Sales Were up 52.6% Over FY 2012; Q4 Net Revenues up 24.7% YoY to $38.4 Million While Net Income Grew 114% YoY to $1.2 Million; Issues FY 2014 Guidance Range -- Revenues of $150 to $170 Million and Net Income of $2.5 Million to $4 Million

SAN FRANCISCO, CA and SHENZHEN, CHINA--(Marketwired - Mar 25, 2014) - Highpower International, Inc. (NASDAQ: HPJ), a developer, manufacturer, and marketer of nickel-metal hydride (Ni-MH) and lithium rechargeable batteries, and a battery management systems and battery recycling provider, today announced financial results for the fourth quarter and year-ended ended December 31, 2013.

Fourth Quarter 2013 Highlights

  • Net sales increased 24.7% to $38.4 million in the fourth quarter of 2013 over the fourth quarter of 2012
  • Continued strong performance in lithium battery segment -- lithium battery net sales up 79.2% in the fourth quarter of 2013 over the fourth quarter of 2012; total lithium battery pieces sold increased 31.0%; and a 54.4% increase in volume per ampere hour
  • Healthy gross margin of 22.5%, up 170 basis points in the fourth quarter of 2013 over the fourth quarter of 2012 and 390 basis points sequentially
  • Net income of $1.21 million, or $0.09 per diluted share, a 114% increase from $0.57 million, or $0.04 per diluted share, in the fourth quarter of 2012

Fiscal Year 2013 Highlights

  • Net sales increased 17.9% year-over-year to $132.8 million
  • Sustained growth in lithium battery segment -- lithium battery net sales up 52.6% in fiscal year 2013 over fiscal year 2012; total lithium battery pieces sold increased 31.7%; and a 49.6% increase in volume per ampere hour
  • Gross margin of 19.9%, down from 21.0% in fiscal year 2012
  • Net income of $1.5 million, or $0.11 per diluted share, down from $1.7 million, or $0.13 per diluted share, in fiscal year 2012

Management Commentary

"The fourth quarter of 2013 was a quarter of extraordinary growth and development for Highpower," stated Mr. George Pan, Chairman and Chief Executive Officer of Highpower International. "We are excited to end the year on such an exceptional note having once again achieved record revenues in our lithium battery segment and overall record revenues for Highpower. Our lithium battery business, including the increased capacity from our newly opened facility in Huizhou, and our recently announced first major order in the electrical vehicle market, gives us tremendous momentum and increased brand recognition, positioning us well for a strong 2014."

"Several key end markets that we serve with our batteries -- mobile and portable devices, and electric vehicles -- show no signs of slowing and we expect increased demand for our products throughout 2014. We remain committed to our pioneering efforts in the battery recycling space and are very excited about our new recycling facility planned to come online in the second quarter of 2014. Some of our existing large customers, as well as potential customers in the pipeline, are attracted to our recycling initiatives. This recycling platform helps serve as a key differentiator for us to win additional business in the future. Being on the forefront of this trend makes sense from both a business and environmental perspective, especially over the next few years when increasing amounts of complex energy storage system and electric vehicle batteries need to be disposed of," concluded Mr. Pan.

"We delivered strong revenue growth, healthy gross margins, improved management efficiency, and profitability in the fourth quarter," said Mr. Henry Sun, Chief Financial Officer of Highpower International. "In 2014, we expect these positive trends to continue, which we believe will translate into strong top and bottom line growth for the full year. We are planning for lower capital expenditures in 2014 and will continue to invest in R&D to improve our overall technical capabilities and sustainable core competencies. In addition, the percentage of operating expenses as a percentage of sales is expected to be lower in fiscal 2014."

Fourth Quarter 2013 Financial Results

Net sales for the fourth quarter ended December 31, 2013 totaled $38.4 million, a year-over-year increase of 24.7% compared with $30.8 million for the fourth quarter ended December 31, 2012. The increase in sales for the fourth quarter was due to a $9.5 million increase in net sales of our lithium batteries which more than offset a $0.7 million decrease in net sales of our Ni-MH batteries. The increase in the volume of lithium batteries sold during the fourth quarter of 2013 was primarily attributable to growth in global customer demand and increased competitiveness of our products. While we experienced an increase in the number of Ni-MH battery units sold in the fourth quarter of 2013, our average selling prices declined at a slightly greater rate due to our marketing strategy to stay competitive under conditions of weaker commodity markets that persisted throughout 2013.

Fourth quarter 2013 gross profit increased to $8.6 million, as compared with $6.4 million for the fourth quarter of 2012. Gross profit margin was 22.5% for the fourth quarter of 2013, as compared with 20.8% for the fourth quarter of 2012. The year-over-year increase in gross profit margin for the fourth quarter of 2013 was primarily attributable to the increased volume of high end lithium batteries sold, combined with higher average selling prices for those batteries, offset by a decline in gross margin for our Ni-MH batteries.

R&D spending was $1.7 million for the fourth quarter of 2013, as compared with $1.3 million for the comparable period in 2012, reflecting our ongoing commitment to R&D activities and the expansion of our workforce in research of basic materials and electrochemical platforms, and development of complex battery management systems.

Selling and distribution expenses were $1.8 million for the fourth quarter of 2013, as compared with $1.4 million for the comparable period in 2012. The year-over-year increase in selling and distribution expenses was due to increased sales and marketing activities, participation in industry trade shows, and international travel to promote and sell our products globally.

General and administrative expenses were $3.7 million for the fourth quarter of 2013, as compared with $3.2 million for the fourth quarter of 2012. The increase was primarily due to our increased management staff headcount to support the growth of our business.

Net income attributable to the company for the fourth quarter of 2013 was $1,208,581, or $0.09 per diluted share, based on 13.9 million weighted average shares outstanding. This compares with fourth quarter 2012 net income of $565,761 or $0.04 per diluted share, based on 13.6 million weighted average shares outstanding.

Full Year 2013 Financial Results

Net sales for the year ended December 31, 2013 totaled $132.8 million, a year-over-year increase of 17.9% compared with $112.6 million for the year ended December 31, 2012. The year-over-year increase was primarily due to a $20.0 million increase in net sales of our lithium batteries and a $1.1 million increase in net sales of our Ni-MH batteries. The increase in the number of Ni-MH battery units sold in 2013 was primarily attributable to increased orders from our new customers and the increase in the volume of lithium batteries sold in 2013 was primarily attributable to growth in global demand.

Gross profit for 2013 increased to $26.4 million, as compared with $23.7 million for 2012. Gross profit margin was 19.9% for 2013, as compared with 21.0% for 2012. The year-over-year decrease in gross profit margin for 2013 was primarily attributable to decreases in the average selling price of Ni-MH batteries sold and an increase in labor costs for the comparable period.

R&D spending was $5.7 million for 2013, as compared with $4.6 million for 2012, reflecting our ongoing commitment to R&D activities and the expansion of our workforce in research of basic materials and electrochemical platforms, and development of complex battery management systems.

Selling and distribution expenses were $6.2 million for 2013, as compared with $5.3 million for 2012. The year-over-year increase in selling and distribution expenses was due to increased sales and marketing activities, participation in industry trade shows, and international travel to promote and sell our products globally.

General and administrative expenses were $12.1 million for 2013, as compared with $11.5 million for 2012. The increase was primarily due to our increased management staff headcount to support the growth of our business.

Net income attributable to the company for 2013 was $1,451,218, or $0.11 per diluted share, based on 13.7 million weighted average shares outstanding. This compares with 2012 net income of $1,717,022 or $0.13 per diluted share, based on 13.6 million weighted average shares outstanding.

Balance Sheet

As of December 31, 2013, Highpower International had cash, cash equivalents and restricted cash totaling $36.6 million, total assets of $151.8 million, and stockholders' equity of $34.7 million. Bank credit facilities totaled $74.6 million at December 31, 2013, of which $45.3 million was utilized and $29.3 million was available as unused credit.

Outlook

Based on our current expectations for global demand for the rechargeable and recycling battery markets in 2014 and our continued shift toward mobile power sources, higher-value energy storage systems and transportation products, we are issuing 2014 guidance of revenues to range between $150 million to $170 million and net income to range between $2.5 million to $4 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 877-941-9205 from the U.S. or 480-629-9771 from outside the U.S. and referencing the reservation code 4674450. 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 high-quality Nickel-Metal Hydride (Ni-MH) and lithium-based rechargeable batteries used in a wide range of applications such as electric buses, bikes, energy storage systems, power tools, medical equipment, digital and electronic devices, personal care products, and lighting, etc. With advanced manufacturing facilities located in Shenzhen, Huizhou, and Ganzhou of China, Highpower is committed to clean technology, not only in the products it makes, but also in the processes of production. The majority of Highpower International's products are distributed to worldwide markets mainly 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 and involve risks and uncertainties, including, without limitation, an economic downturn and uncertainty in the economy adversely affecting demand for our products; fluctuations in the cost of raw materials; our dependence on, or inability to attract additional, major customers for a significant portion of our net sales; our ability to increase manufacturing capabilities to satisfy orders from new customers; our ability to maintain increased margins; changes in the laws of the PRC that affect our operations;; our ability to control operating expenses and costs related to our operations; the devaluation of the U.S. Dollar relative to the Renminbi; our dependence on the growth in demand for portable electronic devices and the success of manufacturers of the end applications that use our battery products; our responsiveness to competitive market conditions; our ability to successfully manufacture our products in the time frame and amounts expected; the market acceptance of our battery products, including our lithium products; our ability to successfully develop products for and penetrate the electric transportation market; our ability to continue R&D development to keep up with technological changes; our exposure to product liability, safety, and defect claims; rising labor costs, volatile metal prices, and inflation; our ability to pay our existing bank facilities and debt obligations; changes in foreign, political, social, business and economic conditions that affect our production capabilities or demand for our products; and various other matters, many of which are beyond our control. 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  
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)  
(Stated in US Dollars except Number of Shares)  
   
    Three months ended
December 31,
    For the year ended
December 31,
 
    2013     2012     2013     2012  
                         
Net sales   38,419,856     30,800,194     132,849,822     112,648,705  
Cost of sales   (29,776,440 )   (24,384,461 )   (106,465,780 )   (88,942,281 )
Gross profit   8,643,416     6,415,733     26,384,042     23,706,424  
                         
Research and development expenses   (1,726,327 )   (1,345,764 )   (5,711,269 )   (4,611,054 )
Selling and distribution expenses   (1,801,801 )   (1,442,921 )   (6,188,176 )   (5,347,692 )
General and administrative expenses, including share-based compensation   (3,716,995 )   (3,164,804 )   (12,092,708 )   (11,478,541 )
Loss on exchange rate difference   (178,259 )   (142,139 )   (552,669 )   (220,597 )
Gain on derivative instruments   58,906     490,059     326,222     730,591  
Total operation expenses   (7,364,476 )   (5,605,569 )   (24,218,600 )   (20,927,293 )
                         
Income from operations   1,278,940     810,164     2,165,442     2,779,131  
                         
Other income   561,845     226,359     1,538,518     630,842  
Interest expenses   (501,037 )   (327,842 )   (1,647,155 )   (705,218 )
                         
Income before taxes   1,339,748     708,681     2,056,805     2,704,755  
                         
Income taxes expense   (138,664 )   (189,127 )   (718,016 )   (1,132,340 )
Net income   1,201,084     519,554     1,338,789     1,572,415  
                         
Less: net loss attributable to non-controlling interest   (7,497 )   (46,207 )   (112,429 )   (144,607 )
Net income attributable to the Company   1,208,581     565,761     1,451,218     1,717,022  
                         
Comprehensive income                        
Net income   1,201,084     519,554     1,338,789     1,572,415  
Foreign currency translation gain   291,457     307,048     822,600     532,918  
Comprehensive income   1,492,541     826,602     2,161,389     2,105,333  
                         
Less: comprehensive loss attributable to non-controlling interest   1,796     (39,922 )   (88,824 )   (146,932 )
Comprehensive income attributable to the Company   1,490,745     866,524     2,250,213     2,252,265  
                         
Earnings per share of common stock attributable to the Company                        
  - Basic   0.09     0.04     0.11     0.13  
  - Diluted   0.09     0.04     0.11     0.13  
                         
Weighted average common shares outstanding                        
  - Basic   13,863,306     13,582,106     13,671,169     13,582,106  
  - Diluted   13,874,574     13,582,106     13,687,698     13,582,106  
                         
                         
 
 
HIGHPOWER INTERNATIONAL, INC.AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars except Number of Shares)
 
    December 31,   December 31,
    2013   2012
ASSETS        
    Current Assets:        
    Cash and cash equivalents   7,973,459   6,627,334
    Restricted cash   28,586,121   27,695,569
    Accounts receivable, net   33,961,014   25,323,899
    Notes receivable   1,014,891   392,242
    Prepayments   4,969,743   3,223,795
    Other receivables   1,063,656   802,907
    Inventories   19,739,360   16,719,807
             
    Total Current Assets   97,308,244   80,785,553
             
    Property, plant and equipment, net   48,548,203   33,462,369
  Land use right, net   4,421,415   4,423,348
    Intangible asset, net   650,000   700,000
    Deferred tax assets   802,225   762,954
    Foreign currency derivatives assets   63,289   255,508
         
TOTAL ASSETS   151,793,376   120,389,732
         
LIABILITIES AND EQUITY        
         
LIABILITIES        
    Current Liabilities:        
    Accounts payable   40,026,698   27,509,195
    Deferred revenue   675,521   661,178
    Short-term loan   36,142,105   20,478,604
    Notes payable   25,271,256   26,397,200
    Other payables and accrued liabilities   7,801,431   4,485,918
    Income taxes payable   1,279,658   1,180,469
    Current portion of long-term loan   1,967,536   1,925,762
             
    Total Current Liabilities   113,164,205   82,638,326
             
    Long-term loan   3,935,071   5,777,286
         
TOTAL LIABILITIES   117,099,276   88,415,612
         
COMMITMENTS AND CONTINGENCIES        
         
         
 
 
HIGHPOWER INTERNATIONAL, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Stated in US Dollars except Number of Shares)
 
    December 31,   December 31,
    2012   2011
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, 13,978,106shares issued and outstanding at December 31, 2013 and 13,582,106 shares outstanding at December 31, 2012)   1,398   1,358
  Additional paid-in capital   6,011,305   6,035,230
  Statutory and other reserves   3,142,411   2,790,484
  Retained earnings   18,390,875   17,291,584
  Accumulated other comprehensive income   5,848,859   5,049,864
         
Total Equity for the Company's Stockholders   33,394,848   31,168,520
         
  Non-controlling interest   1,299,252   805,600
         
TOTAL EQUTIY   34,694,100   31,974,120
         
TOTAL LIABILITIES AND EQUITY   151,793,376   120,389,732
         
         
   
   
HIGHPOWER INTERNATIONAL, INC AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Stated in US Dollars)  
   
    For the year ended December 31,  
    2013     2012  
Cash flows from operating activities            
  Net income   1,338,789     1,572,415  
  Adjustments to reconcile net income to net cash provided by operating activities:            
    Depreciation and amortization   2,523,583     2,090,403  
    Allowance for doubtful accounts   483,586     1,744,655  
    Loss on disposal of property, plant and equipment   263,454     71,473  
    Loss (gain) on derivative instruments   194,892     (236,709 )
    Deferred income tax   (23,410 )   102,614  
    Share-based payment   426,779     203,993  
  Changes in operating assets and liabilities:            
    Accounts receivable   (8,511,464 )   (5,650,965 )
    Notes receivable   (605,229 )   127,414  
    Prepayments   (1,656,526 )   1,063,693  
    Other receivables   (239,801 )   248,026  
    Inventories   (2,618,611 )   (3,020,127 )
    Accounts payable   14,566,891     6,624,896  
    Deferred revenue   -     653,015  
    Other payables and accrued liabilities   3,178,758     (2,503,482 )
    Income taxes payable   72,509     754,589  
Net cash flows provided by operating activities   9,394,200     3,845,903  
             
Cash flows from investing activities            
  Acquisition of plant and equipment   (19,981,373 )   (11,646,583 )
  Acquisition of land use right   -     (1,327,754 )
Net cash flows used in investing activities   (19,981,373 )   (12,974,337 )
             
Cash flows from financing activities            
  Proceeds from short-term bank loans   34,088,599     14,627,171  
  Repayment of short-term bank loans   (18,770,730 )   (3,776,533 )
  Proceeds from notes payable   45,285,470     46,359,978  
  Repayment of notes payable   (46,960,375 )   (38,188,330 )
  Repayment of letter credit   -     (2,880,000 )
  Proceeds from long-term bank loans   -     7,924,935  
  Repayment of long-term bank loans   (1,937,987 )   (316,997 )
  Capital contribution from non-controlling interest   -     950,992  
  Increase in restricted cash   (350,756 )   (14,696,735 )
Net cash flows provided by financing activities   11,354,221     10,004,481  
Effect of foreign currency translation on cash and cash equivalents   579,077     575,664  
Net increase in cash and cash equivalents   1,346,125     1,451,711  
Cash and cash equivalents - beginning of year   6,627,334     5,175,623  
Cash and cash equivalents - end of year   7,973,459     6,627,334  
             
Supplemental disclosures for cash flow information:            
  Cash paid for:            
    Income taxes   668,917     275,136  
    Interest expenses   1,647,155     1,247,217  
               
  Non-cash transactions            
    Accounts payable for construction in progress   1,294,963     3,767,497  
             
             

Contact Information

  • Financial Profiles, Inc.
    Tricia Ross
    +1-310-622-8226
    Email Contact