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

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/highpower-international-reports-financial-results-for-the-fourth-quarter-and-year-ended-december-31-2014-300055008.html