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

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) -- 03/25/14 --
  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 custom
ers 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         For the year ended    
                              December 31,               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 
                                                   ===========  =========== 

  
Financial Profiles, Inc.
Tricia Ross 
+1-310-622-8226
HPJ@finprofiles.com 
 
 
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