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     
Press spacebar to pause and continue. Press esc to stop.