Highpower Reports Third Quarter 2011 Financial Results
New York, USA & Shenzhen, China – November 14, 2011 – Highpower International, Inc. (NasdaqGM: HPJ), a developer, manufacturer and marketer of nickel-metal hydride (Ni-MH) and lithium batteries and related products, today announced financial results for the third quarter ended September 30, 2011.
Business Highlights
? Net sales were $28.1 million for the third quarter of 2011, an increase of 1% over the third quarter of 2010; net sales for the nine months ended September 30, 2011 were $84.8 million, an increase of 10% over the first nine months of 2010
? Lithium battery net sales were $6.1 million for the third quarter of 2011, an increase of 33% over the third quarter of 2010; lithium-ion battery net sales for the nine months ended September 30, 2011 were $15.9 million, an increase of 43% over the first nine months of 2010
? Marcum Bernstein & Pinchuk (MarcumBP) engaged as Highpower’s new independent registered public accounting firm
Management Commentary
“We were pleased with the performance of our lithium-ion business during the quarter as this segment continued to show strong sales and volume traction, resulting in lithium battery revenues being up 43% year-to-date,” said Mr. George Pan, Chairman and Chief Executive Officer of Highpower International. “Highpower’s lithium battery business line, which produces cleaner, greener, rechargeable batteries, is a key area of focus for our management team. We believe opportunities in the lithium battery space will serve as a major growth catalyst for our business in 2012 and beyond. As a trend, more and more customers are demanding higher capacity and cleaner battery options and we are clearly making strong inroads in capturing market share.”
“Although our lithium battery segment has strengthened, we have faced a tough global macro operating environment this year, which has certainly impacted our Ni-MH segment growth and profitability. Despite the lower sales volume and increasing raw material and labor costs, we remain committed to our mission of creating a world-class, international clean battery company. To that end, we are expanding our global sales team to pursue growth opportunities in both our Ni-MH and lithium segments. These investments today in our business, staffing, and infrastructure, will position us for growth, profitability, and increased shareholder returns in 2012,” concluded Mr. Pan.
Mr. Henry Sun, Chief Financial Officer of Highpower International, added, “Through the first nine months, we have faced headwinds from uncertain global demand, raw material price swings and pricing pressure. We continue to work with our major customers on price increases to reflect our existing cost structure, as well as our supply chain to secure longer-term contracts and we expect much of this margin pressure to be alleviated in the next few quarters. In addition, we have focused on reorganizing our management structure and have dedicated more attention on employee training to enhance efficiency.”
Third Quarter 2011 Financial Results
Net sales for the third quarter ended September 30, 2011 totaled $28.1 million, a year-over-year increase of 1% compared with $27.8 million for the third quarter ended September 30, 2010. The slight increase in sales for the third quarter was primarily due to an increase in both unit volume and average selling price of our lithium battery units, but was offset by a decrease in the number of Ni-MH battery units sold. In addition, our new materials business had revenues of $3.8 million for the third quarter of 2011, an increase of $1.1 million over the prior year period.
Third quarter 2011 gross profit decreased to $3.9 million, as compared with $5.9 million for the third quarter of 2010. Gross profit margin was 13.8% for the third quarter 2011, as compared with 21.1% for the third quarter of 2010. The year-over-year decrease in gross profit margin for the third quarter of 2011 was primarily due to a rise in raw materials prices, primarily for nickel and rare earth materials and the resulting increase in cost of sales for our Ni-MH and to a lesser extent our lithium batteries. In addition, the increase in revenues in our materials business, which has lower gross profit margins than our other business segments, contributed to the lower overall gross profit margin for the quarter.
Selling and distribution costs, including non-cash stock-based compensation, were $1.5 million for the third quarter of 2011, as compared with $1.1 million for the comparable period in 2010.
General and administrative expenses, including non-cash stock-based compensation, were $2.2 million, or 8.0% of net sales, for the third quarter of 2011, as compared to $2.2 million, or 7.8% of net sales, for the third quarter of 2010.
Loss from operations for the third quarter of 2011 was $839,000, as compared with income from operations of $1.7 million for the third quarter of 2010. Included in these results were non-cash stock-based compensation expenses of $335,000 and $17,000, respectively.
Net loss for the third quarter of 2011 was $665,000, or ($0.05) per diluted share, based on 13.6 million weighted average shares outstanding. This compares with third quarter 2010 GAAP net income of $1.4 million, or $0.11 per diluted share, based on 13.7 million weighted average shares outstanding.
Net loss for the nine months ended September 30, 2011 was $415,000 or ($0.03) per diluted share, based on 13.6 million weighted average shares outstanding. Included in this loss was $612,000 of non-cash stock-based compensation.
Balance Sheet
At September 30, 2011, Highpower International had cash, cash equivalents and restricted cash totaling $23.8 million, total assets of $90.9 million, and stockholders’ equity of $29.2 million. Bank credit facilities totaled $89.9 million at September 30, 2011, of which $38.6 million was utilized and $51.3 million was available as unused credit.
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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 $110 million and $120 million. We expect net income to be approximately break-even on a GAAP basis, which includes non-cash stock-based compensation expenses.
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 888-549-7750 from the U.S. or 480-629-9722 from outside the U.S. and referencing the reservation code 4485472. 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 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:.
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:/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.
Highpower International, Inc.
Vickie Hawes
Corporate Communications Manager
IR@highpowertech.com
Financial Profiles, Inc.
Tricia Ross
+1-916-939-7285
HPJ@finprofiles.com