In the news release, "Hong Kong Highpower Technology Reports Second
Quarter 2009 Financial Results," issued earlier today by Hong Kong
Highpower Technology (NYSE Amex: HPJ), we are advised by the
company that there have been changes to the EBITDA figures in the
third "Business Highlight" bullet as well as the "Non-GAAP
Financial Results" text and table. Complete corrected text and
tables follow.
Hong Kong Highpower Technology Reports Second Quarter 2009
Financial Results
HONG KONG and SAN JOSE, CA -- August 10, 2009 -- Hong Hong Kong
Highpower Technology, Inc. (NYSE Amex: HPJ), a leading 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 second quarter ended June
30, 2009.
Business Highlights
-- Earned net income of $0.07 per diluted share for second quarter 2009,
a 40% increase year-over-year, and 133% increase sequentially;
-- Generated gross margin of 20% on net sales of $15.4 million for second
quarter 2009;
-- EBITDA increased 28% over year ago, and rose 54% sequentially, to $1.5
million;
-- Significant improvement in debt-to-capital ratio resulting in stronger
capital structure;
-- Inventory reduced 61% from the year-ago quarter greatly decreasing
inventory carry exposure.
"Despite the lingering effects of the global economic recession
on sales, we are pleased to deliver solid results in the second
quarter," said George Pan, Chairman and Chief Executive Officer of
Hong Kong Highpower Technology. "We produced an increase in both
our gross margin level and our profitability, while at the same
time continued to generate healthy cash flow from operations and
significantly improved our debt-to-capital ratio by reducing bank
debt to strengthen our capital structure.
"The Company's new lithium-ion battery products division -- a
major strategic initiative launched in late 2008 continued to
progress well -- with an average monthly production of 600,000
pieces in the second quarter. We are confident this new product
line holds great growth potential.
"We believe the worst effects from the global financial crisis
on our business are now behind us," Mr. Pan said. "Sales are up
36.6% over our first quarter 2009, and we are seeing encouraging
signs heading into the third quarter with positive July sales
trends. In addition, the cost control measures that we have
implemented over the past six months will enable us to gain
efficiency and emerge an even stronger company over time."
"Organically, our business is supported in part by the recovery
of the world's economies. We are well positioned to capitalize on
our growth initiatives and capture a growing share of the
rechargeable battery market," Mr. Pan concluded.
Second Quarter 2009 Financial Results
Net sales for the second quarter ended June 30, 2009 decreased
18.8% to $15.4 million, compared to $19 million for the second
quarter ended June 30, 2008. On a sequential basis, second quarter
net sales increased by 36% compared to $11.3 million for the first
quarter of 2009. The year-over-year decrease was largely due to a
decrease in demand as a result of global recessionary
conditions.
Gross profit for the second quarter ended June 30, 2009
decreased 8.9% to $3.1 million, compared to $3.4 million for the
second quarter ended June 30, 2008. On a sequential basis, second
quarter gross profit increased 28.3%, compared to $2.4 million for
the first quarter 2009. Gross margin was 19.9% for the second
quarter ended June 30, 2009, compared to 17.7% for the second
quarter ended June 30, 2008, and 21.2% for the first quarter 2009.
The year-over-year improvement in gross margin is primarily due to
a decrease in the average per unit cost of goods sold during the
comparable periods.
Selling and distribution costs were $580,000 for the second
quarter ended June 30, 2009, compared to $548,000 for the
comparable period in 2008 and $531,000 for the first quarter
2009.
General and administrative expenses, including stock-based
compensation, were $1.0 million or 6.8% of net sales for the second
quarter ended June 30, 2009, compared to $1.6 million, or 8.3% of
net sales for the second quarter 2008, and $1.1 million or 9.8% of
net sales for the first quarter 2009. The year-over-year decrease
was primarily due to enhanced expense control and a decrease in
personnel and labor costs, for the three months ended June 30, 2009
over the comparable period in 2008. The Company reported a loss on
the exchange rate difference between the U.S. Dollar ("USD") and
the Renminbi ("RMB") of $23,000 for the second quarter ended June
30, 2009. This compares with losses on the exchange rate difference
of $331,000 and $33,000 for the second quarter 2008 and the first
quarter 2009, respectively.
The Company recorded a provision for income taxes of $229,000
for the second quarter ended June 30, 2009, compared with
provisions for income taxes of $64,000 for the second quarter 2008
and $161,000 for the first quarter 2009.
Net income for the second quarter of 2009 was $969,000, or $0.07
per diluted share, based on 13.8 million weighted average shares
outstanding. This compares with second quarter 2008 net income of
$684,000, or $0.05 per diluted share, based on 12.9 million
weighted average shares outstanding, and first quarter 2009 net
income of $403,000, or $0.03 per diluted share, based on 13.6
million weighted average shares outstanding.
Non-GAAP Financial Results
EBITDA for the second quarter ended June 30, 2009 totaled
$1,538,306, compared with $1,204,869 for the second quarter 2008
and $1,001,527 for the first quarter 2009. The significant
year-over-year and sequential increases in EBITDA were primarily
due to enhanced expense control and higher net income.
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
---------------------------------
June 30 March 31
---------------------- ---------
2009 2008 2009
$ $ $
---------- ---------- ---------
Net income (loss) 968,656 684,247 402,966
Interest expense 39,377 194,047 41,120
Income taxes 228,752 64,298 161,067
Depreciation 186,790 190,879 237,217
Amortization 114,731 71,398 159,157
EBITDA 1,538,306 1,204,869 1,001,527
Balance Sheet
At June 30, 2009, Hong Kong Highpower Technology had cash and
cash equivalents and restricted cash totaling $5.4 million, total
assets of $40.1 million, working capital of $5.1 million and
stockholders' equity of $18.1 million. Bank credit facilities
totaled $23.2 million at June 30, 2009, of which $17.6 million was
available as unused credit. Hong Kong Highpower Technology's
current debt-to-capital ratio is 23.7% as of June 30, 2009, which
is a significant improvement from 40.7% from March 31, 2009.
Conference Call and Webcast
Management of Hong Kong Highpower Technology will host a
conference call today, Monday, August 10, 2009 at 8:00 a.m. Pacific
time/11:00 a.m. Eastern time to discuss second 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 or www.InvestorCalendar.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
22915900. A webcast replay will be available for one year.
Hong Kong Highpower Technology, Inc. 2009 Annual Shareholder
Meeting
The 2009 annual shareholder meeting will be held on August 20th,
2009 at 10:00 a.m. China Standard Time. The meeting will be held at
our headquarters in Pinghu, Longang, Shenzhen A1/A2 Lusoshan
Industrial Zone, Guangdong 51811, People's Republic of China.
Upcoming Conference - Rodman & Renshaw
Henry Ngan, Chief Financial Officer of Hong Kong Highpower, will
present at the upcoming Rodman & Renshaw Conference in New
York, NY on September 9-11, 2009.
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://ir.haopengbattery.com/en/introduce028.html.
Media and Investor Inquiries:
Henry H. Ngan
Chief Financial Officer
+1-917-887-0614
ir@highpowerbatteries.com
Financial Profiles, Inc.
Tricia Ross
(310) 277-4711
HPJ@finprofiles.com
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.
HONG KONG HIGHPOWER TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Stated in US Dollars)
Three months ended Six months ended
June 30, June 30,
-------------------------- -------------------------
2009 2008 2009 2008
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
$ $ $ $
Net sales 15,445,484 19,021,476 26,755,289 36,853,038
Cost of sales (12,371,676) (15,646,609) (21,285,385) (30,769,873)
------------ ------------ ------------ -----------
Gross profit 3,073,808 3,374,867 5,469,904 6,083,165
Depreciation (68,075) (31,285) (119,189) (80,656)
Selling and
distributing costs (580,458) (547,697) (1,111,807) (961,720)
General and
administrative
costs, including
stock-based
compensation (1,046,340) (1,571,405) (2,149,262) (2,341,101)
Loss on exchange rate
difference (22,865) (330,788) (55,589) (835,675)
------------ ------------ ------------ -----------
Income from
operations 1,356,070 893,692 2,034,057 1,864,013
Change in fair value
of currency forwards (21,510) - (109,623) 29,102
Change in fair value
of warrants - (71,250) - (71,250)
Other income 21,774 120,120 88,589 224,654
Interest expenses (39,377) (194,017) (80,497) (400,767)
Other expenses (119,549) - (171,085) -
------------ ------------ ------------ -----------
Income before taxes 1,197,408 748,545 1,761,441 1,645,752
Income taxes (228,752) (64,298) (389,819) (231,178)
------------ ------------ ------------ -----------
Net income for the
period 968,656 684,247 1,371,622 1,414,574
Other comprehensive
income
- Foreign currency
translation gain 456,215 516,654 492,064 748,739
------------ ------------ ------------ -----------
Comprehensive income 1,424,871 1,200,901 1,863,686 2,163,313
============ ============ ============ ===========
Earnings per share of
common stock
- Basic and
diluted 0.07 0.05 0.10 0.11
============ ============ ============ ===========
- Diluted 0.07 0.05 0.10 0.11
============ ============ ============ ===========
Weighted average
number of common
stock
- Basic 13,762,217 12,899,560 13,651,389 12,849,203
============ ============ ============ ===========
- Dilutive 13,812,547 12,906,483 13,703,889 12,852,665
============ ============ ============ ===========
HONG KONG HIGHPOWER TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars)
As of
----------------------------
June 30, December 31,
2009 2008
(Unaudited) (Audited)
$ $
ASSETS
Current Assets:
Cash and cash equivalents 1,321,072 4,175,780
Restricted cash 4,119,107 4,845,478
Accounts receivable 9,723,528 8,765,593
Notes receivable 577,699 429,815
Prepaid expenses and other
receivables 3,513,894 1,732,709
Deferred charges - Stock-based
compensation - 216,667
Inventories 7,870,800 11,208,697
----------- ------------
Total Current Assets 27,126,100 31,374,739
Deferred tax assets 124,365 104,556
Plant and equipment, net 9,014,536 7,778,477
Leasehold land, net 3,018,289 3,050,510
Intangible asset, net 875,000 900,000
Currency forward 7,333 116,157
----------- ------------
TOTAL ASSETS 40,165,623 43,324,439
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Non-trading foreign currency
derivatives liabilities 65,487 293,830
Accounts payable 9,243,613 8,306,123
Other payables and accrued
liabilities 6,735,102 3,139,275
Income taxes payable 333,799 476,330
Bank borrowings 5,644,282 14,829,228
----------- ------------
Total Current Liabilities 22,022,283 27,044,786
----------- ------------
COMMITMENTS AND CONTINGENCIES
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 2,087,155 1,595,091
Retained earnings 11,006,635 9,635,012
----------- ------------
TOTAL STOCKHOLDERS' EQUITY 18,143,340 16,279,653
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 40,165,623 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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