Exhibit 99.1

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Highpower International Reports Unaudited Second Quarter First Half 2017 Financial Results

 

SAN DIEGO, CALIFORNIA and SHENZHEN, China, August 10, 2017 /PRNewswire/ -- Highpower International, Inc. (NASDAQ: HPJ) ("Highpower" or the "Company"), a developer, manufacturer, and marketer of lithium ion and nickel-metal hydride (Ni-MH) rechargeable batteries, battery management systems, and a provider of battery recycling, today announced its financial results for the second quarter ended June 30, 2017.

 

Second Quarter 2017 Highlights

·Net sales for the second quarter of 2017 increased by 40.7% to $51.7 million from $36.7 million in the prior year period.
·Gross profit for the second quarter of 2017 increased by 57.9% to $12.1 million from $7.6 million in the prior year period
·EBITDA for the second quarter of 2017 increased by 67.1% to $6.5 million from $3.9 million in the prior year period.
·Net income attributable to the Company for the second quarter of 2017 was $4.4 million, or $0.28 per diluted share, as compared to $2.1 million, or $0.14 per diluted share, in the prior year period.

 

Mr. George Pan, Chairman and CEO of Highpower International, commented, “We are extremely pleased to deliver yet another quarter of strong top- and bottom-line results in the second quarter of 2017. Our lithium ion battery and battery solution business continued to enjoy healthy growth, driven by continued high demand for energy storage systems, smart wearable devices, and other digital products. Our gross margins performed well as we continued to benefit from efficiencies of scale, and we continued to invest in areas that are critical to our business.

 

As we enter the second half of 2017, we expect a stronger cash position and reasonable growth given our much higher baseline. We believe that the cash received from the previously announced equity transfer of our Yipeng ownership will help us expand our production capacity and research and development efforts. We also look forward to seeing the financial benefits of the previously announced partnerships for supplying batteries to industry-leading smart vacuum brands as well as supplying PHEV and EV to Yipeng. We will continue to drive our business forward by focusing on strategic partnerships. We are well-positioned to take advantage of strong growth opportunities and expand current partnerships with leading brands.”

 

Second Quarter and First Half 2017 Financial Results

 

Net Sales

 

Net sales for the second quarter of 2017 increased by 40.7% to $51.7 million from $36.7 million in the prior year period, primarily attributable to the substantial growth in revenue from the Lithium and New Materials segments, driven by increased demand in consumer products including portable power stations, digital products, smart wearable devices, and notebooks.

 

 

 

 

Net sales increased 42.1% to $93.6 million in the first half of 2017 as compared to $65.8 million for the first half in 2016. The increase was driven by higher sales volume and revenue from the Lithium and New Materials segments.

 

Gross Profit

 

Gross profit for the second quarter of 2017 increased by 57.9% to $12.1 million from $7.6 million in the prior year period, primarily attributable to a higher margin product mix and efficiencies gained from economies of scale. Gross margin for the second quarter of 2017 increased to 23.3% from 20.8% in the prior year period.

 

Gross profit for the first half of 2017 increased 62.8% to $22.0 million from $13.5 million in prior year period. Gross margin was 23.5% and 20.5% for first half 2017 and 2016, respectively.

 

Operating Expenses

 

·Research and development (R&D) expenses for the second quarter of 2017 were $2.1 million as compared to $2.0 million in the prior year period.


Research and development expenses were $4.0 million, or 4.2% of net sales, for the first half of 2017 as compared to $3.7 million, or 5.6% of net sales, for the first half of 2016.

 

·Selling and distribution expenses for the second quarter of 2017 were $1.7 million as compared to $1.5 million in the prior year period. As a percentage of net sales, selling and distribution expenses decreased to 3.3% from 4.2% in the prior year period, primarily attributable to the Company’s customer base optimization efforts.


Selling and distribution expenses were $3.4 million, or 3.6% of net sales, for the first half of 2017 as compared with $3.1 million, or 4.7% of net sales, for the first half of 2016.

 

·General and administrative expenses for the second quarter of 2017 were $3.0 million as compared to $3.2 million in the prior year period. As a percentage of net sales, general and administrative expenses decreased to 5.8% from 8.8% in the prior year period.


General and administrative expenses were $6.1 million, or 6.5% of net sales, for the first half of 2017 as compared with $6.3 million, or 9.6% of net sales, for the six months ended June 30, 2016.

 

Net Income

 

Net income attributable to the Company for the second quarter of 2017 increased to $4.4 million from $2.1 million in the prior year period. Net income attributable to the Company per diluted share for the second quarter of 2017 increased to $0.28 from $0.14 in the prior year period.

 

For the quarter ended June 30, 2017 and 2016, the Company's weighted average diluted shares outstanding used in computing diluted share was 15,479,357 and 15,102,877, respectively.

 

 

 

 

Net income attributable to the Company for the first half of 2017 increased to $6.9 million from $1.7 million in the prior year period. Net income attributable to the Company per diluted share for the first half of 2017 increased to $0.45 from $0.11 in the prior year period.

 

For the six months ended June 30, 2017 and 2016, the Company's weighted average diluted shares outstanding used in computing diluted share was 15,304,773 and 15,103,886, respectively.

 

EBITDA

 

EBITDA for the second quarter of 2017 increased by 67.1% to $6.5 million from $3.9 million in the prior year period. EBITDA for the first half of 2017 increased by 124.9% to $11.5 million from $5.1 million in the prior year period.

 

A table reconciling EBITDA, a non-GAAP financial measure, to the appropriate GAAP measure is included with the Company's financial information below.

 

Balance Sheet Highlights        
($ in millions, except per share data)  June 30,   December 31, 
   2017   2016 
   (Unaudited)     
   $   $ 
Cash  $19.3   $9.3 
Total Current Assets  $126.0   $104.5 
Total Assets  $188.2   $163.3 
           
Total Current Liabilities  $133.6   $118.0 
Total Liabilities  $133.6   $118.0 
Total Equity  $54.5   $45.3 
Total Liabilities and Equity  $188.2   $163.3 
Book Value Per Share  $3.55   $3.00 

 

Ganzhou Highpower

Shenzhen Highpower Technology Co., Ltd (“Shenzhen Highpower”), Xiamen Tungsten Co. Ltd. (SHA: 600549) (“Tungsten”), and other minority shareholders of Ganzhou Highpower Technology Co., Ltd. (“Ganzhou Highpower”) have been in discussions regarding, and Tungsten recently announced that its board of directors has approved, a proposed investment of RMB 78.8 million (or approximately $11.8 million) in exchange for the acquisition of 47% ownership of Ganzhou Highpower, the Company’s majority-owned subsidiary. Shenzhen Highpower would not be transferring any of its equity ownership of Ganzhou Highpower and it would not receive any of the consideration, which would be given directly to Ganzhou Highpower. The proposed transaction is subject to approval by Highpower’s board of directors and execution of a definitive binding agreement and related documentation, satisfaction of conditions included therein, and other customary approvals and conditions. As a result of this transaction, if consummated, Shenzhen Highpower’s ownership of Ganzhou Highpower would decrease from 70% to 31.3%. There can be no assurance that a definitive agreement will be entered into or that the proposed transaction will be consummated. Further, readers are cautioned that the terms of the proposed transaction described herein, including the consideration to be issued therein, are non-binding.

 

 

 

 

Conference Call Details

The Company will hold a conference call on Thursday, Aug 10, 2017 at 10:00 am Eastern Time or 10:00 pm Beijing Time to discuss the financial results. Participants may access the call by dialing the following numbers:

 

United States: 877-407-3108

International: 201-493-6797

 

To listen to the live webcast, please go to www.highpowertech.com and click on the conference call link, or go to http://highpowertech.equisolvewebcast.com/q2-2017. This webcast will be archived and accessible through the Company's website for approximately 30 days following the call.

 

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. Highpower's target customers are Fortune 500 companies and top 20 companies in each vertical segment. 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.

 

Use of Non-GAAP Measures

The Company has supplemented its reported GAAP (generally accepted accounting principles) financial information with non-GAAP measures. EBITDA was derived by taking earnings before interest expense (net), taxes, depreciation and amortization. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. The Company believes this non-GAAP measure is useful to investors as it provides a basis for evaluating the Company's operating results in the ordinary course of its operations. This non-GAAP measure is not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with its results of operations as determined in accordance with U.S. GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with, and not in lieu of, the corresponding GAAP measures. EBITDA is reconciled in the table below to the most directly comparable measure as reported in accordance with GAAP.

 

 

 

 

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. Such forward-looking statements include the proposed transaction regarding Ganzhou Highpower, approval by Highpower’s board and Highpower’s resulting equity ownership, Highpower’s cash position and growth, production capacity, research and development efforts, strategic partnerships and business and financial expectations. 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. 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, including, without limitation, the occurrence of any event, change or other circumstances that could give rise to the terms of the proposed Ganzhou Highpower not hereafter being approved by Highpower’s board or memorialized in a definitive agreement; inability to successfully expand our production capacity; 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; our dependence on the growth in demand for smart wearable devices and energy storage systems, and other digital products and the success of manufacturers of the end applications that use our battery products; lower than expected sales of batteries to producers of smart vacuum 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 solutions, including our lithium ion batteries; and our ability to continue R&D development to keep up with technological changes. 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.

 

CONTACT:

 

Highpower International, Inc.

Sunny Pan

Chief Financial Officer

Tel: +86-755-8968-6521

Email: ir@highpowertech.com

 

Yuanmei Ma

Investor Relations Manager

Tel: +1-909-214-2482

Email: ir@highpowertech.com

 

ICR, Inc.

Rose Zu

Tel: +1-646-931-0303

Email: ir@highpowertech.com

 

 

 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

 

  

June 30,

2017

   December 31, 2016 
   (Unaudited)     
   $   $ 
ASSETS          
Current Assets:          
Cash   19,325,657    9,324,393 
Restricted cash   15,918,318    11,213,640 
Accounts receivable, net   42,737,207    46,280,769 
Amount due from Yipeng   2,465,325    7,517,250 
Notes receivable   2,192,197    1,093,730 
Prepayments and other receivables   10,922,029    6,899,872 
Inventories   32,488,267    22,207,333 
           
Total Current Assets   126,049,000    104,536,987 
           
Property, plant and equipment, net   46,167,556    43,504,991 
Land use right, net   3,670,645    3,622,435 
Other assets   475,000    500,000 
Deferred tax assets   1,248,226    1,477,761 
Long-term investment   10,540,473    9,689,576 
           
TOTAL ASSETS   188,150,900    163,331,750 
           
LIABILITIES AND EQUITY          
           
LIABILITIES          
Current Liabilities:          
Accounts payable   49,132,387    49,463,901 
Deferred income   892,154    761,491 
Short-term loans   19,329,517    18,776,080 
Non-financial institution borrowings   11,804,285    3,741,115 
Notes payable   41,373,724    30,658,000 
Amount due to Yipeng   62,204    1,522,313 
Other payables and accrued liabilities   9,249,029    11,148,556 
Income taxes payable   1,782,786    1,963,298 
           
Total Current Liabilities   133,626,086    118,034,754 
           
Warrant Liability   -    259 
           
TOTAL LIABILITIES   133,626,086    118,035,013 
           
COMMITMENTS AND CONTINGENCIES   -    - 

 

 

 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

 

  

June 30,

2017

   December 31, 2016 
   (Unaudited)     
   $   $ 
EQUITY          
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, 15,356,560 shares issued and outstanding at June 30, 2017 and 15,114,991 shares issued and outstanding at December 31, 2016)   1,536    1,511 
Additional paid-in capital   12,249,531    11,580,934 
Statutory and other reserves   4,992,463    4,992,463 
Retained earnings   36,172,954    29,266,068 
Accumulated other comprehensive income (loss)   600,641    (873,582)
           
Total equity attributable to the stockholders of Highpower International Inc.   54,017,125    44,967,394 
           
Non-controlling interest   507,689    329,343 
           
TOTAL EQUITY   54,524,814    45,296,737 
           
TOTAL LIABILITIES AND EQUITY   188,150,900    163,331,750 

 

 

 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Stated in US Dollars)

 

  

Three months ended

June 30,

  

Six months ended

June 30,

 
   2017   2016   2017   2016 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
   $   $   $   $ 
Net sales   51,699,930    36,732,310    93,566,778    65,829,365 
Cost of sales   (39,628,164)   (29,088,639)   (71,560,178)   (52,308,655)
Gross profit   12,071,766    7,643,671    22,006,600    13,520,710 
                     
Research and development expenses   (2,137,286)   (2,035,886)   (3,951,216)   (3,658,769)
Selling and distribution expenses   (1,722,910)   (1,539,395)   (3,361,223)   (3,074,431)
General and administrative expenses   (3,016,401)   (3,248,899)   (6,074,963)   (6,318,613)
Foreign currency transaction (loss) gain   (514,624)   600,313    (828,502)   509,877 
Total operating expenses   (7,391,221)   (6,223,867)   (14,215,904)   (12,541,936)
                     
Income from operations   4,680,545    1,419,804    7,790,696    978,774 
                     
Changes in fair value of warrant liability   31,811    7,077    259    126,546 
Other income   276,365    1,055,947    854,458    1,211,875 
Equity in (loss) earnings of investee   (41,607)   -    105,325    - 
Gain on dilution in equity method investee   491,325    -    491,325    - 
Interest expenses   (380,531)   (435,402)   (983,848)   (710,394)
Income before taxes   5,057,908    2,047,426    8,258,215    1,606,801 
                     
Income taxes expenses   (595,708)   (174,313)   (1,183,473)   (209,817)
Net income   4,462,200    1,873,113    7,074,742    1,396,984 
                     
Less: net income (loss) attributable to non-controlling interest   90,963    (178,669)   167,856    (312,190)
Net income attributable to the Company   4,371,237    2,051,782    6,906,886    1,709,174 
                     
Comprehensive income (loss)                    
Net income   4,462,200    1,873,113    7,074,742    1,396,984 
Foreign currency translation gain (loss)   1,508,714    (1,964,424)   1,484,713    (1,714,278)
Comprehensive income (loss)   5,970,914    (91,311)   8,559,455    (317,294)
                     
Less: comprehensive income (loss) attributable to non-controlling interest   98,795    (197,060)   178,346    (325,882)
Comprehensive income attributable to the Company   5,872,119    105,749    8,381,109    8,588 
                     
Earnings per share of common stock attributable to the Company                    
- Basic   0.29    0.14    0.45    0.11 
- Diluted   0.28    0.14    0.45    0.11 
                     
Weighted average number of common stock outstanding                    
- Basic   15,317,101    15,101,679    15,218,820    15,101,679 
- Diluted   15,479,357    15,102,877    15,304,773    15,103,886 

 

 

 

 

Reconciliation of Net Income to EBITDA

 

  

Three months ended

June 30,

  

Six months ended

June 30,

 
   2017   2016   2017   2016 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
   $   $   $   $ 
Net income attributable to the Company   4,371,237    2,051,782    6,906,886    1,709,174 
                     
Interest expenses   380,531    435,402    983,848    710,394 
Income taxes expenses   595,708    174,313    1,183,473    209,817 
Depreciation and Amortization   1,155,648    1,229,817    2,429,982    2,486,196 
                     
EBITDA   6,503,124    3,891,314    11,504,189    5,115,581 

  

 

 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

 

   Six months ended June 30, 
   2017   2016 
   (Unaudited)   (Unaudited) 
   $   $ 
Cash flows from operating activities          
Net income   7,074,742    1,396,984 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   2,429,982    2,486,196 
Allowance for doubtful accounts   17,994    4,837 
Loss on disposal of property, plant and equipment   25,218    95,368 
Deferred income tax   263,673    (64,671)
Equity in earnings of investee   (105,325)   - 
Gain on dilution in equity method investee   (491,325)   - 
Share based compensation   44,815    205,969 
Changes in fair value of warrant liability   (259)   (126,546)
Changes in operating assets and liabilities:          
Accounts receivable   4,390,991    3,216,097 
Notes receivable   (1,057,366)   1,051,486 
Prepayments and other receivables   (3,799,960)   (770,029)
Amount due from Yipeng   5,178,499    (2,187,784)
Amount due to Yipeng   (1,480,335)   774,545 
Inventories   (9,595,161)   (1,735,486)
Accounts payable   (494,812)   (2,843,233)
Deferred income   109,892    (75,912)
Other payables and accrued liabilities   (2,145,295)   349,026 
Income taxes payable   (227,668)   (499,161)
Net cash flows provided by operating activities   138,300    1,277,686 
           
Cash flows from investing activities          
Acquisitions of plant and equipment   (5,199,130)   (4,415,690)
Proceeds from investment   -    (764,409)
Net cash flows used in investing activities   (5,199,130)   (5,180,099)
           
Cash flows from financing activities          
Proceeds from short-term loans   2,916,017    1,452,377 
Repayment of short-term loans   (2,841,696)   - 
Repayment of long-term loans   -    (917,291)
Proceeds from non-financial institution borrowings   10,200,959    4,586,455 
Repayment of non-financial institution borrowings   (2,331,648)   - 
Proceeds from notes payable   40,861,835    29,485,540 
Repayment of notes payable   (31,049,819)   (30,313,965)
Proceeds from exercise of employee options   623,806    - 
Change in restricted cash   (4,364,417)   1,531,837 
Net cash flows provided by financing activities   14,015,037    5,824,953 
Effect of foreign currency translation on cash   1,047,057    (973,532)
Net increase in cash   10,001,264    949,008 
Cash - beginning of period   9,324,393    5,849,967 
Cash - end of period   19,325,657    6,798,975 
           
Supplemental disclosures for cash flow information:          
Cash paid for:          
Income taxes   1,147,467    773,650 
Interest expenses   948,831    710,394 
Non-cash transactions          
Offset of deferred income related to government grant and property, plant and equipment   85,571    26,988