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Highpower International Inc. was founded in 2001 as a clean energy group dedicated to R&D, production and sales of rechargeable Ni-MH / Lithium batteries, power source and energy storage systems. In June 2008, Highpower listed in NASDAQ.

Highpower International Reports Financial Results for the Fourth Quarter and Year Ended December 31, 2014

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Record Annual Sales, Net Income Increased 89.7%, Lithium Battery Sales Increased 18.1%, Compared to Prior Year

SAN FRANCISCO and SHENZHEN, China, March 24, 2015 /PRNewswire/ -- Highpower International, Inc. (NASDAQ: HPJ), a developer, manufacturer, and marketer of lithium and nickel-metal hydride (Ni-MH) rechargeable batteries, and a battery management systems and battery recycling provider, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2014.

2014 Fiscal Year Operating and Financial Highlights (all results are compared to prior year period)

  • Net sales were $147.1 million, an increase of 10.7% compared to $132.8 million.
  • Lithium battery net sales increased 18.1% from $57.9 million to 68.4 million.
  • Gross margin was 20.5% compared to 19.9%.
  • Adjusted EBITDA increased 55.9% to $10.6 million, compared to $6.8 million; EBITDA increased 47.8% to $9.4 million, compared to $6.3 million.
  • Adjusted net income attributable to the Company increased 109.2% to $3.9 million, or $0.26 per diluted share, compared to $1.9 million, or $0.14 per share; Net income attributable to the company increased 89.7% to $2.8 million, or $0.18 per share, compared to $1.5 million or $0.11 per diluted share.
  • Major customer additions include Phillips, Sony, Costco, Timex, Acer and VTech.
  • Huizhou facility was successfully qualified by Samsung, and was certified as Sony's Green Partner.

Management Commentary

Mr. George Pan, Chairman and CEO of Highpower International, commented, "We are pleased to report record sales, and solid operating results in 2014, with considerable improvement on net income. We are very excited with the new world-class customers we have acquired during 2014, and the quality of these customers is a real reflection of Highpower's value to our investors and market influence around the world. In the meantime, we have advanced our R&D initiatives throughout the year to continuously improve our lithium batteries. In 2015, with the ramp-up of our Huizhou Lithium Battery facility, we are confident we will continue to monetize on the explosive demand for mobile devices with our valuable and long-term customer base. We plan to launch new product lines in the energy storage area, and progress in electrical transportation. We anticipate higher revenue growth and continued earnings improvement, and are committed to building a healthy business for sustainable growth."

2014 Fourth Quarter and Year-end Financial Review

Net Sales

Net sales for the fourth quarter ended December 31, 2014 were $35.3 million compared to $38.4 million for the same period in 2013. The decrease in net sales was mainly due to a $1.2 million increase in net sales of Ni-MH batteries, a $0.7 million increases from new material business, and a decline of $4.9 million in sales of Lithium batteries in comparison to the same period in 2013. The decrease was primarily attributable to the temporary delay in certain orders in the fourth quarter.

Net sales for FY 2014 were $147.1 million, compared to $132.8 million at December 31, 2013. The increase was due to a $10.5 million increase in net sales of lithium batteries, a $2.1 million increase in net sales of Ni-MH batteries, and a $1.7 million increase from new material business.

Gross Profit

For the fourth quarter ended December 31, 2014, the Company's gross profit was $7.1 million, as compared with $8.6 million for the same period in 2013.

Gross profit for the year end of 2014 increased to $30.2 million, as compared with $26.4 million at December 31, 2013. The increase was due to improved manufacturing efficiency along with the increase of production automation.

Gross Margin

Gross margin was 20.1% for the fourth quarter ended December 31, 2014, compared to 22.5% in 2013 fourth quarter.

For the year end of 2014, gross margin was 20.5%, as compared with 19.9% 2013. The increase was due to improved manufacturing efficiency along with the increase of production automation.

Net sales, cost of sales, and gross profit by segments is set out as follows:



Three months ended


For the years ended ,


December 31,

December 31,



2014


2013

Change in %

2014


2013

Change in %



(Unaudited)


(Unaudited)


(Audited)


(Audited)




$


$


$


$


Net sales










Ni-MH Batteries


17,861,942


16,690,430

7.02%

74,971,144


72,886,102

2.86%

Lithium Batteries


16,463,190


21,393,639

-23.05%

68,434,832


57,935,104

18.12%

New Materials


993,524


335,787

195.88%

3,682,190


2,028,616

81.51%

Total


35,318,656


38,419,856

-8.07%

147,088,166


132,849,822

10.72%











Cost of Sales










Ni-MH Batteries


14,188,788


13,639,607

4.03%

59,546,738


59,131,594

0.70%

Lithium Batteries


13,136,921


15,850,608

-17.12%

54,072,611


45,515,519

18.80%

New Materials


907,700


286,225

217.13%

3,318,014


1,818,667

82.44%

Total


28,233,409


29,776,440

-5.18%

116,937,363


106,465,780

9.84%





















Gross Profit    










Ni-MH Batteries


3,673,154


3,050,823

20.40%

15,424,406


13,754,508

12.14%

Lithium Batteries


3,326,269


5,543,031

-39.99%

14,362,221


12,419,585

15.64%

New Materials


85,824


49,562

73.16%

364,176


209,949

73.46%

Total


7,085,247


8,643,416

-18.03%

30,150,803


26,384,042

14.28%











Research and Development (R&D)

R&D spending was $1.9 million, or 5.3% of net sales, for the fourth quarter ended December 31, 2014, compared to $1.7 million, or 4.5% of net sales, for the same period in 2013.

R&D spending was $7.7 million, or 5.2% of the revenue for fiscal year 2014, as compared to $5.7 million, or 4.3% of the revenue in 2013. The increase of 35% in R&D spending was due to R&D activities in high end power batteries and systems in transportation and industrial energy storage areas, and the expansion of workforce to improve research in basic materials and electrochemical system to increase battery energy density.

Selling & Distribution

Selling and distribution expenses were $1.7 million, or 4.9% of net sales, for the fourth quarter ended December 31, 2014, as compared with $1.8 million, or 4.7% of net sales for the same period in 2013.

For fiscal year 2014, selling and distribution expenses were $6.6 million, or 4.5% of the revenue, compared to $6.2 million, or 4.7% of the revenue, at December 31, 2013. The increase was due to the expansion of the increased sales and marketing activities, including participation in industry trade shows and international travels to promote and sell products abroad.

General & Administrative

For the fourth quarter ended December 31, 2014, general and administrative expenses were $2.7 million, or 7.7% of net sales, in comparison to $3.7 million, or 9.7% of net sales, for the fourth quarter of 2013.

General and administrative expenses in fiscal year 2014 were $12.9 million, or 8.8% of the revenue, compared with $12.1 million, or 9.1% of the revenue, in 2013. The increase was mainly due to the increase of $859,137 in share based compensation.

Net Income

For the fourth quarter of 2014, net income attributable to the Company was $2.0 million, or $0.13 per diluted share based on 15.5 million weighted average diluted shares outstanding, compared to net income of $1.2 million, or $0.09 per diluted share based on 13.9 million weighted average diluted shares outstanding.

Net income attributable to the Company for the fiscal year 2014 was $2.8 million, or $0.18 per diluted share based on 15.2 million weighted average diluted shares outstanding, compared to net income of $1.5 million, or $0.11 per share based on 13.7 million, both basic and diluted, in the same period of 2013.

EBITDA

EBITDA for the fourth quarter ended December 31, 2014 increased 30.1% to $3.3 million from $2.5 million in the prior year period.

For fiscal year 2014, EBITDA increased 47.8% to $9.4 million from $6.3 million in 2013.

A table reconciling EBITDA, a non-GAAP (Generally Accepted Accounting Principles) 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)



12/31/2014

12/31/2013

(Audited)

(Audited)

Cash and Cash Equivalents



$14.6

$8.0

Total Current Assets



$89.2

$97.3

Total Assets



$146.2

$151.8

Total Current Liabilities



$101.4

$113.2

Total Liabilities



$104.4

$117.1

Shareholders' Equity



$41.8

$34.7

Total Liabilities and Shareholders' Equity



$146.2

$151.8

Book Value Per Share



$2.77

$2.48

Outlook for 2015

Mr. Pan continued, "We were particularly pleased to announce the multi-million dollar order for backup power products for smart phones in February, which is a rapidly growing segment of the consumer market. We feel Highpower is well-positioned for growth in the coming year due to the growing market need for our battery products in a wide array of customer applications. We intend to leverage our strong financial position and operating flexibility to meet the needs of our customer base."

Based on current expectations for global demand in the rechargeable battery market in 2014 and the continued shift toward mobile power sources, higher-value energy storage systems and transportation products, the Company expects 2015 revenues to be between $160 million to $170 million, and non-GAAP net income of between $5.0 million and $6.0 million, and net income of between $4.0 million and $5.0 million.

Conference Call Details

The Company announced that it will discuss financial results in a conference call on March 24, 2015 at 10:00 a.m. Eastern time / 7:00 a.m. Pacific time to discuss these results.

The dial-in numbers are:

Live Participant Dial In (Toll Free):                 877-407-3108
Live Participant Dial In (International):            201-493-6797

To listen to the live webcast, please go to at www.highpowertech.com and click on the conference call link, or go to: http://highpowertech.equisolvewebcast.com/q4-2014. This webcast will be archived and accessible through the Company's website for approximately 30 days following the call. The Company will also have an accompanying slide presentation available in PDF format on its homepage prior to the conference 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 10 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. Adjusted EBITDA and Non-GAAP (adjusted) net income exclude stock-based compensation expense. Adjusted EBITDA, as defined above, may not be similar to Adjusted EBITDA measures used by other companies. 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 these non-GAAP measures are useful to investors as they provide a basis for evaluating the Company's operating results in the ordinary course of its operations.

These non-GAAP measures are 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. These non-GAAP financial measures are reconciled in the accompanying tables to the most directly comparable measures 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. 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, including, without limitation, 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 portable electronic devices and energy storage systems and transportation products 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. 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.
Henry Sun
CFO
+86-755-8968-6521
ir@highpowertech.com

INVESTOR RELATIONS:
The Equity Group Inc.
In China
Katherine Yao, Associate
+86-10-6587-6435
kyao@equityny.com

In U.S.
Adam Prior, Senior Vice President
+1 (212) 836-9606
aprior@equityny.com


HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Stated in US Dollars except Number of Shares)



For three months ended December 31,


For the years ended December 31,



2014 Q4


2013 Q4


2014


2013



$


$


$


$










Net sales


35,318,656


38,419,856


147,088,166


132,849,822

Cost of sales


(28,233,409)


(29,776,440)


(116,937,363)


(106,465,780)

Gross profit


7,085,247


8,643,416


30,150,803


26,384,042










Research and development expenses


(1,864,656)


(1,726,327)


(7,709,618)


(5,711,269)

Selling and distribution expenses


(1,729,195)


(1,801,801)


(6,551,755)


(6,188,176)

General and administrative expenses


(2,714,540)


(3,716,995)


(12,893,378)


(12,092,708)

Foreign currency transaction gain (loss)


(60,426)


(178,259)


273,900


(552,669)

Gain (loss) on derivative instruments


1,943


58,906


(54,406)


326,222

Total operating expenses


(6,366,874)


(7,364,476)


(26,935,257)


(24,218,600)










Income from operations


718,373


1,278,940


3,215,546


2,165,442










Gain on change of fair value of warrant liability


1,318,065


-


106,278


-

Other income


214,025


561,845


1,707,516


1,538,518

Interest expenses


(310,078)


(501,037)


(1,838,155)


(1,647,155)

Income before taxes


1,940,385


1,339,748


3,191,185


2,056,805










Income taxes expenses


38,554


(138,664)


(590,318)


(718,016)

Net income


1,978,939


1,201,084


2,600,867


1,338,789










Less: net loss attributable to non-controlling interest


(22,781)


(7,497)


(152,369)


(112,429)

Net income attributable to the Company


2,001,720


1,208,581


2,753,236


1,451,218










Comprehensive income









Net income


1,978,939


1,201,084


2,600,867


1,338,789

Foreign currency translation gain (loss)


184,828


291,457


(156,926)


822,600

Comprehensive income


2,163,767


1,492,541


2,443,941


2,161,389










Less: comprehensive loss attributable to non-controlling interest


51,120


1,796


(89,093)


(88,824)

Comprehensive income attributable to the Company


2,112,647


1,490,745


2,533,034


2,250,213










Earnings per share of common stock attributable to the Company









- Basic


0.13


0.09


0.19


0.11

- Diluted


0.13


0.09


0.18


0.11










Weighted average number of common stock outstanding









- Basic


15,055,346


13,657,930


14,739,073


13,671,169

- Diluted


15,541,398


13,657,930


15,154,239


13,687,698










 


HIGHPOWER INTERNATIONAL, INC.AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars except Number of Shares)



December 31,


December 31,



2014


2013



$


$

ASSETS






Current Assets:






Cash and cash equivalents


14,611,892


7,973,459


Restricted cash


15,396,827


28,586,121


Accounts receivable, net


32,316,607


33,961,014


Notes receivable


621,110


1,014,891


Prepayments


3,283,520


4,969,743


Other receivables


665,828


1,063,656


Inventories


22,268,069


19,739,360








Total Current Assets


89,163,853


97,308,244








Property, plant and equipment, net


50,437,718


48,548,203


Land use right, net


4,305,317


4,421,415


Intangible asset, net


600,000


650,000


Deferred tax assets


1,647,184


802,225


Foreign currency derivatives assets


-


63,289






TOTAL ASSETS


146,154,072


151,793,376






LIABILITIES AND EQUITY
















Current Liabilities:






Accounts payable


44,562,647


40,026,698


Deferred income


1,887,409


675,521


Short-term loan


15,195,040


36,142,105


Notes payable


29,903,248


25,271,256


Other payables and accrued liabilities


5,896,547


7,801,431


Income taxes payable


1,968,656


1,279,658


Current portion of long-term loan


1,959,248


1,967,536








Total Current Liabilities


101,372,795


113,164,205








Warrant Liability


1,067,674


-


Long-term loan


1,959,247


3,935,071







TOTAL LIABILITIES


104,399,716


117,099,276






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, 15,084,746
shares issued and outstanding at December 31, 2014 and
13,978,106 shares issued and outstanding at December 31, 2013)


1,508


1,398


Additional paid-in capital


10,530,430


6,011,305


Statutory and other reserves


3,611,501


3,142,411


Retained earnings


20,675,021


18,390,875


Accumulated other comprehensive income


5,628,657


5,848,859






Total equity for the Company's stockholders


40,447,117


33,394,848






Non-controlling interest


1,307,239


1,299,252






TOTAL EQUITY


41,754,356


34,694,100






TOTAL LIABILITIES AND EQUITY


146,154,072


151,793,376

 


HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)


For the years ended December 31,


2014


2013


$


$

Cash flows from operating activities




Net income

2,600,867


1,338,789

Adjustments to reconcile net income to net cash provided
by operating activities:




Depreciation and amortization

4,201,533


2,523,583

Allowance for doubtful accounts

768


483,586

Loss on disposal of property, plant and equipment

227,264


263,454

Loss on derivative instruments

62,801


194,892

Deferred income tax

(845,068)


(23,410)

Share based payment

1,288,916


426,779

Gain on change of fair value of warrant liability

(106,278)


-

Changes in operating assets and liabilities:




Accounts receivable

1,472,589


(8,511,464)

Notes receivable

388,137


(605,229)

Prepayments

1,661,111


(1,656,526)

Other receivable

391,965


(239,801)

Inventories

(2,602,659)


(2,618,611)

Accounts payable

5,672,372


14,566,891

Deferred income

1,880,776


-

Other payables and accrued liabilities

(1,867,493)


3,178,758

Income taxes payable

691,949


72,509

Net cash flows provided by operating activities

15,119,550


9,394,200





Cash flows from investing activities




Acquisition of plant and equipment

(8,881,328)


(19,981,373)

Net cash flows used in investing activities

(8,881,328)


(19,981,373)





Cash flows from financing activities




Proceeds from short-term bank loans

20,346,228


34,088,599

Repayment of short-term bank loans

(41,122,204)


(18,770,730)

Repayment of long-term bank loans

(1,952,362)


(1,937,987)

Proceeds from notes payable

52,258,487


45,285,470

Repayment of notes payable

(47,536,694)


(46,960,375)

Proceeds from issuance of capital stock and warrants, net

4,633,164


-

Change in restricted cash

13,038,071


(350,756)

Net cash flows provided by (used in) financing activities

(335,310)


11,354,221

Effect of foreign currency translation on cash and cash
equivalents

735,521


579,077

Net increase in cash and cash equivalents

6,638,433


1,346,125

Cash and cash equivalents - beginning of year

7,973,459


6,627,334

Cash and cash equivalents - end of year

14,611,892


7,973,459





Supplemental disclosures for cash flow information:




Cash paid for:




Income taxes

743,437


668,917

Interest expenses

1,912,584


1,647,155

Non-cash transactions




Accounts payable for construction in progress

-


1,294,963

Reduction of property, plant and equipment cost by
realizing deferred income

672,675


-





 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

(Stated in US Dollars)

Reconciliation of Net Income to EBITDA


Three Months Ended December 31,



For the years ended December 31,


2014


2013



2014


2013


$


$



$


$

Net Income attributable to the Company

2,001,720


1,208,581



2,753,236


1,451,218

Non-GAAP Net Income (1)

907,602


1,479,008



3,935,874


1,880,997










Interest expenses, net

310,078


501,037



1,838,155


1,647,155

Income tax expenses

(38,554)


138,664



590,318


718,016

Depreciation and Amortization

1,029,754


690,987



4,191,138


2,523,583










EBITDA

3,302,998


2,539,269



9,372,847


6,339,972

Non-GAAP EBITDA(2)

2,208,880


2,809,696



10,555,485


6,769,751










(1) See table below for reconciliation of net income attributable to the Company to Non-GAAP net income attributable to the Company.

(2) Excludes share-based compensation expense as set forth in the following table.

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

(Stated in US Dollars)

Reconciliation of Net Income Attributable to the Company to Non-GAAP Net Income Attributable to the Company












Three months ended


For the years ended

December 31,

December 31,



2014


2013


2014


2013



$


$


$


$










Net income attributable to the Company


2,001,720


1,208,581


2,753,236


1,451,218

Stock-based compensation expense


223,947


270,427


1,288,916


429,779

Loss on change of fair value of warrant liability


(1,318,065)


-


(106,278)


-

Non-GAAP net income attributable to the Company


907,602


1,479,008


3,935,874


1,880,997










Basic net income per share of common stock attributable to the
Company


0.13


0.09


0.19


0.11

Stock-based compensation expense


0.01


0.02


0.09


0.03

Loss on change of fair value of warrant liability


(0.09)


-


(0.01)


-

Non-GAAP income per share of common stock attributable to the Company


0.05


0.11


0.27


0.14










Diluted net income per share of common stock attributable to the Company


0.13


0.09


0.18


0.11

Stock-based compensation expense


0.01


0.01


0.09


0.03

Loss on change of fair value of warrant liability


(0.08)


-


(0.01)


-

Non-GAAP income per share of common stock attributable to the Company


0.06


0.10


0.26


0.14










Weighted average number of common shares outstanding









-Basic


15,055,346


13,863,306


14,739,073


13,671,169

-Diluted


15,541,398


13,874,574


15,154,239


13,687,698










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SOURCE Highpower International, Inc.