Hong Kong Highpower Technology, Inc. (NYSE Amex: HPJ), a developer,
manufacturer and marketer of nickel-metal hydride (Ni-MH) and
lithium-ion (Li-ion) rechargeable batteries and related products,
today announced financial results for the first quarter ended March
31, 2009.
Business Highlights
-- Generated gross margin of 21.2% on net sales of $11.3 million for
first quarter 2009;
-- Earned net income of $0.03 per diluted share for first quarter 2009;
-- Maintained a healthy capital structure for ongoing growth initiatives
and expansion plans;
-- Strengthened financial position by reducing inventory levels and bank
debt;
-- Increased Li-ion average monthly production rate to 500,000 units for
the first quarter of 2009; and
-- Continued construction of new Ni-MH facility in Huizhou, Guangdong
Province, PRC.
"As expected, our first quarter sales were impacted by the
global economic recession, which resulted in decreased product
orders and unit prices from our customers," said George Pan,
Chairman and Chief Executive Officer of Hong Kong Highpower
Technology. "However, we were able to maintain our margins due to
our modern manufacturing processes, low cost operating structure,
and our proactive steps to control expenses. We intend to achieve
further cost savings with the construction of our new Ni-MH
facility which will provide for greater efficiencies and lower
per-unit cost of production. We were also able to successfully
reduce our inventory levels and bank debt to further strengthen our
financial position."
"We are maintaining excellent relationships with our customers
and we continue to be a supplier of choice given our broad offering
of high quality products, attractive pricing, and our ability to
respond quickly to customer demands. We are well positioned for the
economic recovery and have ample liquidity to fund our growth
initiatives."
First Quarter 2009 Financial Results
Net sales for the first quarter ended March 31, 2009 decreased
36.5% to $11.3 million, compared to $17.8 million for the first
quarter ended March 31, 2008. On a sequential basis, first quarter
net sales decreased by 36.2% compared to $17.7 million for the
fourth quarter of 2008. The year-over-year decrease was largely due
to a 22% decrease in the number of battery units sold and a 19%
decrease in the average selling price of battery units. The 19%
decrease in the average selling price of our battery units was due
to a decrease in the cost of nickel during the three months ending
March 31, 2009 compared to the comparable period in 2008.
Gross profit for the first quarter ended March 31, 2009
decreased 11.1% to $2.4 million, compared to $2.7 million for the
first quarter ended March 31, 2008. On a sequential basis, first
quarter gross profit decreased 25%, compared with $3.2 million for
the fourth quarter 2008. Gross margin was 21.2% for the first
quarter ended March 31, 2009, compared to 15.2% for the first
quarter ended March 31, 2008, and 17.9% for the fourth quarter
2008. The improvement in gross margin in each period reflects the
decline in the market cost of nickel since September 2007 as well
as production efficiencies.
Selling and distribution costs were $531,000 for the first
quarter ended March 31, 2009, compared to $414,000 for the
comparable period in 2008 and $655,000 for the fourth quarter 2008.
The increase in year-over-year selling and distribution costs in
the first quarter 2009 was primarily due to expansion of the
Company's sales force.
General and administrative expenses, including stock-based
compensation, were $1.1 million or 9.8% of net sales for the first
quarter ended March 31, 2009, compared to $770,000, or 4.3% of net
sales for the first quarter 2008, and $1.8 million or 10.4% of net
sales for the fourth quarter 2008. The year-over-year increase as a
percentage of net sales was due to increased labor costs, costs
associated with the Company's continuing obligations as a public
company as a result of its public offering in June 2008, and
stock-based compensation expenses.
The Company reported a loss on the exchange rate difference
between the U.S. Dollar ("USD") and the Renminbi ("RMB") of $33,000
for the first quarter ended March 31, 2009. This compares with
losses on the exchange rate difference of $505,000 and $187,000 for
the first quarter 2008 and the fourth quarter 2008,
respectively.
The Company recorded a provision for income taxes of $161,000
for the first quarter ended March 31, 2009, compared with
provisions for income taxes of $167,000 for the first quarter 2008
and $262,000 for the fourth quarter 2008.
Net income for the first quarter of 2009 was $403,000, or $0.03
per diluted share, based on 13.6 million weighted average shares
outstanding. This compares with first quarter 2008 net income of
$730,000, or $0.06 per diluted share, based on 14.8 million
weighted average shares outstanding, and fourth quarter 2008 net
income of $303,000, or $0.02 per diluted share, based on 13.7
million weighted average shares outstanding.
Non-GAAP Financial Results
EBITDA for the first quarter ended March 31, 2009 totaled
$870,473, compared with $1,271,252 for the first quarter 2008 and
$1,011,257 for the fourth quarter 2008. The year-over-year decrease
was due to the decrease in the number of battery units sold and
increased general and administrative and stock-based compensation
expense.
Hong Kong Highpower Technology considers and uses EBITDA, a
financial measure not in accordance with U.S. generally accepted
accounting principles ("U.S. GAAP"), as a supplemental measure of
its operating performance. The Company defines EBITDA as net income
(loss) before net interest expense, provision (benefit) for income
taxes, and depreciation and amortization. The Company believes the
use of EBITDA facilitates the use by investors of operating
performance comparisons from period to period and company to
company by backing out potential differences caused by variations
in such items as the book amortization of intangible assets
(affecting relative amortization expense), the age and book value
of facilities and equipment (affecting relative depreciation
expense), and capital structure (affecting relative interest
expense). EBITDA is calculated as follows for the periods
presented:
Three Months Ended
------------------
March 31 December 31
-------- -----------
2009 2008 2008
$ $ $
--------- --------- ---------
Net income (loss) 402,966 730,327 302,557
Interest expense 41,120 206,750 82,331
Income taxes 161,067 166,880 262,089
Depreciation 237,217 154,795 289,841
Amortization 28,103 12,500 74,439
EBITDA 870,473 1,271,252 1,011,257
--------- --------- ---------
Balance Sheet
At March 31, 2009, Hong Kong Highpower Technology had cash and
cash equivalents and restricted cash totaling $8.7 million, total
assets of $39.9 million, working capital of $4.5 million and
stockholders' equity of $16.7 million. Bank credit facilities
totaled $23.2 million at March 31, 2009, of which $11.7 million was
available as unused credit.
Conference Call and Webcast
Management of Hong Kong Highpower Technology will host a
conference call today, Tuesday, May 12, 2009 at 6:00 a.m. Pacific
time/9:00 a.m. Eastern time to discuss first quarter 2009 financial
results and answer questions.
Individuals interested in participating in the conference call
may do so by dialing 800-891-5765 from the U.S., or 702-696-4830
from outside the U.S. Those interested in listening to the
conference call live via the Internet may do so by visiting the
Investor Relations section of the Company's Web site at
www.haopengbattery.com.
A telephone replay will be available for 48 hours following the
conclusion of the call by dialing 800-642-1687 from the U.S., or
706-645-9291 from outside the U.S., and entering reservation code
99079370. A webcast replay will be available for one year.
Upcoming Conference - China Rising Investment Conference in NY,
May 18, 2009
Henry Ngan, Chief Financial Officer of Hong Kong Highpower, will
present at the upcoming China Rising Investment Conference in New
York, NY on May 18, 2009. The presentation will take place at
2:00PM (EDT), Track 3 and a webcast of the presentation will be
available at http://www.chinarisingconference.com/webcast.html. A
webcast replay will be available for one year.
About Hong Kong Highpower Technology, Inc.
Hong Kong Highpower Technology develops, manufactures and
markets rechargeable nickel metal hydride (Ni-MH) and lithium-ion
(Li-ion) batteries and related products for use in a variety of
electronic devices. The majority of Hong Kong Highpower
Technology's products are distributed worldwide to markets in the
United States, Europe, China, Hong Kong, Southeast Asia and Taiwan.
For more information, visit www.haopengbattery.com.
To be added to the Company's email distribution for future news
releases, please send your request to HPJ@finprofiles.com. Company
news can also be found at
http://hpj.client.shareholder.com/releases.cfm.
Forward-Looking Statement
This press release contains "forward-looking statements" within
the meaning of the "safe-harbor" provisions of the Private
Securities Litigation Reform Act of 1995 that are not historical
facts. These statements can be identified by the use of
forward-looking terminology such as "believe," "expect," "may,"
"will," "should," "project," "plan," "seek," "intend," or
"anticipate" or the negative thereof or comparable terminology, and
include discussions of strategy, and statements about industry
trends and the Company's future performance, operations and
products. Such statements involve known and unknown risks,
uncertainties and other factors that could cause the Company's
actual results to differ materially from the results expressed or
implied by such statements. For a discussion of these and other
risks and uncertainties see "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's public filings with the SEC. Although
the Company believes that the expectations reflected in such
forward-looking statements are reasonable, there can be no
assurance that such expectations will prove to be correct. The
Company has no obligation to update the forward-looking information
contained in this press release.
- financial tables to follow -
HONG KONG HIGHPOWER TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in US Dollars)
Three months ended
March 31,
------------------------
2009 2008
(Unaudited) (Unaudited)
Net sales 11,309,805 17,831,562
Cost of sales (8,913,709) (15,123,264)
----------- -----------
Gross profit 2,396,096 2,708,298
Depreciation (51,114) (49,371)
Selling and distribution costs (531,349) (414,023)
General and administrative costs including
stock-based compensation (1,102,922) (769,696)
Loss on exchange rate difference (32,724) (504,887)
----------- -----------
Income from operations 677,987 970,321
Change in fair value of currency forwards (88,113) 29,102
Other income 66,815 104,534
Interest expenses (41,120) (206,750)
Other expenses (51,536) -
----------- -----------
Income before income taxes 564,033 897,207
Income taxes (161,067) (166,880)
----------- -----------
Net income 402,966 730,327
Other comprehensive income
- Foreign currency translation gain 35,849 232,085
----------- -----------
Comprehensive income 438,815 962,412
=========== ===========
Income per common share
- Basic and diluted 0.03 0.06
=========== ===========
Weighted average common shares outstanding
- Basic and diluted 13,562,596 14,798,846
=========== ===========
HONG KONG HIGHPOWER TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL POSITION
(Stated in US Dollars)
As of
--------------------------
March 31, December 31,
2009 2008
(Unaudited) (Audited)
ASSETS
Current Assets:
Cash and cash equivalents 3,432,997 4,175,780
Restricted cash 5,303,892 4,845,478
Accounts receivable 7,265,693 8,765,593
Notes receivable 110,777 429,815
Prepaid expenses and other receivables 3,230,124 1,732,709
Deferred charges - Stock-based compensation 86,667 216,667
Inventories 8,283,889 11,208,697
------------ ------------
Total Current Assets 27,714,039 31,374,739
Deferred tax assets 113,707 104,556
Plant and equipment, net 8,116,214 7,778,477
Leasehold land, net 3,034,729 3,050,510
Intangible asset, net 887,500 900,000
Currency forward 28,346 116,157
------------ ------------
TOTAL ASSETS 39,894,535 43,324,439
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Non-trading foreign currency derivatives
liabilities 225,235 293,830
Accounts payable 7,315,493 8,306,123
Other payables and accrued liabilities 3,510,373 3,139,275
Income taxes payable 632,183 476,330
Bank borrowings 11,492,783 14,829,228
------------ ------------
Total Current Liabilities 23,176,067 27,044,786
------------ ------------
HONG KONG HIGHPOWER TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL POSITION (CONTINUED)
(Stated in US Dollars)
As of
--------------------------
March 31, December 31,
2009 2008
(Unaudited) (Audited)
STOCKHOLDERS' EQUITY
Preferred Stock
Par value: $0.0001
Authorized: 10,000,000 shares
Issued and outstanding: none - -
Common stock
Par value: $0.0001
Authorized: 100,000,000 shares
Issued and outstanding: 2009 -- 13,562,596
shares (2008 -- 13,562,596 shares) 1,356 1,356
Additional paid-in capital 5,048,194 5,048,194
Accumulated other comprehensive income 1,630,940 1,595,091
Retained earnings 10,037,978 9,635,012
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 16,718,468 16,279,653
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 39,894,535 43,324,439
============ ============
Media and Investor Inquiries: Henry H. Ngan Chief Financial
Officer +1-917-887-0614 Email Contact Financial Profiles, Inc.
Tricia Ross (310) 277-4711 Email Contact
Hong Kong Highpower Technology, Inc. (AMEX:HPJ)
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