China BAK Reports Third Quarter Fiscal Year 2010 Financial Results
SHENZHEN, China, July 28 /PRNewswire-Asia-FirstCall/ -- China BAK Battery, Inc. ("China BAK", the "Company", or "we") (Nasdaq: CBAK), a leading global manufacturer of lithium-based battery cells, today announced its financial results for the third quarter of fiscal year 2010 ("Q3 2010").
Recent Achievements and Highlights
-- Increased revenues 31.0% year-over-year and 16.1% sequentially (Q3 2010
compared to Q2 2010);
-- Doubled revenues from high power batteries sequentially in Q3 2010 due
to robust demand for batteries used in electric buses and electric
vehicles;
-- Reported positive operating cash flow of $8.2 million after two
quarters of negative operating cash flows, reflecting progress in the
Company's new turn-around plan;
-- Reduced debt exposure with repayment of around $18 million of bank
loans and implemented efficient capital expenditure controls expected
to reduce expenditures by 20% for the whole year;
-- Decreased Days Sales Outstanding to 125 days from 141 days last quarter
and decreased Days Sales of Inventory to 106 days from 169 days in the
previous quarter.
-- On May 14, 2010, the US District Court for the Northern District of
Texas issued an order dismissing the Company without prejudice from a
federal patent infringement suit against A123Systems that had been
filed in 2006.
-- China BAK's Tianjin facility successfully completed ISO/TS16949
certification in May 2010.
During the quarter ended June 30, 2010, the Company recorded $14.5 million in non-cash expenses following a strategic review of its operations. The Company has presented non-GAAP gross profit, operating income, net income and diluted earnings per share excluding the impact of non-cash expenses on its financial results for the three months ended June 30, 2010, March 31, 2010 and June 30, 2009. A reconciliation of these non-GAAP measures to the corresponding GAAP measure is provided in Table 4 below. The Company uses the non-GAAP information in its internal performance measures to analyze performance between periods, develop internal projections and measure management performance. The Company believes the non-GAAP results provide investors with a measurement of operating results, which are comparable with subsequent periods.
Third Quarter Fiscal Year 2010 Financial Results
Net revenues for the third quarter were $58.6 million, up 16.1% from $50.4 million last quarter and up 31.0% from $44.7 million for the same period in fiscal 2009.
Revenues from prismatic products, including aluminum-case cells and battery packs, which are used in mobile phones and certain personal electronic devices, were $42.8 million, up 22.4% from $35.0 million last quarter and up 51.7% from $28.2 million for the same period in fiscal 2009.
Revenues from cylindrical cells used in notebook computers were $12.8 million, down 4.6% from $13.4 million sequentially and up 0.6% from $12.7 million for the same period in fiscal 2009.
Revenues from lithium polymer cells, used in personal electronic devices such as PDAs, MP3 players and Bluetooth devices, were $2.3 million, up 32.4% from last quarter and down 32.1% from the same period in fiscal 2009.
Revenues from high-power lithium battery cells, used in electric bicycles, power tools, uninterruptible power supplies, and other applications manufactured at the Company's Tianjin facility, were $0.7 million, nearly doubled from last quarter and up more than seven times the revenue from the same period in fiscal 2009.
Gross loss for the third quarter of fiscal year 2010 was $1.2 million compared to gross profit of $5.0 million, or 11.3% of net revenues, for the same period in fiscal year 2009. The decline in gross profit was a result of the Company's adoption of a competitive pricing strategy for its cylindrical cells to gain increased market share in the OEM market and sales of slow-moving inventory at discount to increase operating cash flow. Furthermore, the Company recorded a provision for obsolete inventory of $5.6 million. Excluding the impact of this non-cash expense, non-GAAP gross profit for the third fiscal quarter was $4.4 million, down 20.2% from non-GAAP gross profit of $5.5 million in the same period a year ago.
Operating expenses totaled $17.2 million, or 29.4% of revenue, in the third quarter compared to $8.2 million, or 16.2% of revenue, in the last quarter and $8.6 million, or 19.3% of revenue, in the third quarter of fiscal 2009. Operating expenses in the third quarter of fiscal 2010 include an impairment charge of $5.1 million and a provision for doubtful debts of $3.4 million, compared with $0.9 million in the last quarter and $2.5 million in the third quarter of fiscal 2009. Research and development expenses were $2.1 million, or 3.6% of revenue, as compared to $1.6 million, or 3.2% of revenue in the last quarter and $1.5 million, or 3.3% of revenue in the same quarter of fiscal 2009. Sales and marketing expenses were $2.6 million, or 4.4% of revenue compared to $1.7 million, or 3.4% of revenue in the last quarter and $1.6 million, or 3.5% of revenue in the same quarter of fiscal 2009. General and administrative expenses were $7.4 million, or 12.7% of revenue compared to $4.8 million, or 9.6% of revenue in the last quarter and $5.5 million or 12.4% of revenue in the same quarter of fiscal 2009.
Operating loss for the third quarter was $18.4 million compared to operating income of $0.9 million in the last quarter and operating loss of $3.6 million in the same quarter of fiscal 2009. Excluding the impact of non-cash expenses, including provisions for doubtful debts, obsolete inventories and impairment charges related to strategic review of business operations, non-GAAP operating loss was $3.9 million in the third quarter of fiscal 2010 compared to non-GAAP operating income of $2.7 million in the last quarter and non-GAAP operating loss of $37,000 in the same period a year ago.
Net loss was $18.3 million, or diluted loss per share of $0.29, in the third quarter of fiscal 2010 compared to net loss of $2.6 million, or diluted loss per share of $0.04, in the last quarter and net loss of $5.2 million, or diluted loss per share of $0.09, in the same quarter of fiscal 2009. Excluding the impact of non-cash expenses, including provisions for doubtful debts, obsolete inventories and impairment charges related to strategic review of business operations, non-GAAP net loss for the third quarter of fiscal 2010 was $3.8 million, or a loss of $0.06 per diluted share, compared to non-GAAP net loss of $686,000 in the previous quarter, or a loss of $0.01 per diluted share, and non-GAAP net loss of $1.6 million, or a loss of $0.03 in the same period a year ago.
Financial Condition
On June 30, 2010 China BAK had $24.9 million in cash and cash equivalents. For the third quarter of fiscal year 2010, Days Sales Outstanding decreased to 125 days from 141 days last quarter and Days Sales of Inventory decreased to 106 days from 169 days last quarter. Short-term bank loans and long-term bank loans totaled $180.2 million as compared to $198.3 million on March 31, 2010. Shareholders' equity totaled $155.4 million. China BAK had $66.2 million available for borrowing under its credit facilities. The Company generated $8.2 million from cash flow from operating activities in the third quarter of fiscal 2010.
Business Outlook
"Over the past four years we have invested heavily in strengthening our manufacturing and R&D capacity. As a result, we now have the production lines necessary to support our future development in the electric vehicle (EV) battery market and in the consumer electronic battery market. Despite the impact of severe price competition in cylindrical battery cells for laptop computer batteries on our short-term profitability, we made good progress penetrating other high-gross margin markets, such as electric vehicle and power tool applications," commented Mr. Xiangqian Li, CEO of China BAK.
"We have already received orders from Taiwan's Yulon-motor along with increased order flow from domestic motor manufacturers and we anticipate sales of batteries used in electric buses and electric vehicles to accelerate in the next quarter. We are optimistic that we are starting to enter a growth phase and expect to see strong top line growth and improvements in bottom line in the next few quarters," Mr. Li concluded.
"We began implementing our turn around plan in late May 2010, and we have already made improvements in operating efficiency, cash flow and leverage. We continue to direct our efforts in these areas in order to return the Company to growth and profitability with lower leverage. We are confident that our gross margin will recover to a double-digit level with our cost control measures and reduced inventories," commented Jun Zou, CFO of China BAK.
Conference Call
China BAK will host a conference call at 9:30 p.m. ET on Wednesday, July 28, 2010 to discuss results for the third quarter of Fiscal Year 2010 ended June 30, 2010. Joining Xiangqian Li, China BAK's President and Chief Executive Officer on the call will be Jun Zou, Chief Financial Officer. To participate in the conference call, please dial the following number approximately fifteen minutes prior to the scheduled conference call time: 866-800-8648. International callers should dial (617) 614-2702. The pass code for the call is 158-23-930. If you are unable to participate in the call at this time, a replay will be available from 11:30 p.m. ET on Wednesday, July 28, 2010 through 11:30 p.m. ET, Wednesday, August 11, 2010. To access the replay, please dial 888-286-8010. International callers should dial (617) 801-6888. The pass code for the replay is 656-08-015. The conference call will be broadcast live over the Internet and can be accessed by all interested parties on the China BAK website at http://www.bak.com.cn/ . To listen to the live webcast, please go to China BAK's website at least fifteen minutes prior to the start of the call to register, download and install any necessary audio software. For those unable to participate during the live broadcast, after the call a replay will be available on China BAK's website for a period of one year.
About China BAK Battery Inc.
China BAK Battery, Inc. (NASDAQ: CBAK) is a leading global manufacturer of lithium-based battery cells. The Company produces battery cells that are the principal component of rechargeable batteries commonly used in cellular phones, notebook computers and portable consumer electronics such as digital media devices, portable media players, portable audio players, portable gaming devices, and PDAs. China BAK Battery, Inc.'s production facilities, located in Shenzhen and Tianjin, PRC, cover over three million square feet and have been recently expanded to support the production of larger batteries for various types of vehicles. For more information regarding China BAK Battery, Inc., please visit http://www.bak.com.cn .
Safe Harbor Statement
This press release contains forward-looking statements, which are subject to change. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All "forward-looking statements" relating to the business of China BAK Battery, Inc. and its subsidiary companies, which can be identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties which could cause actual results to differ. These factors include but are not limited to: risks related to China BAK's business and risks related to operating in China. Please refer to China BAK's Annual Report on Form 10-K for the fiscal year ended September 30, 2009, as well as China BAK's Quarterly Reports on Form 10-Q that have been filed since the date of such annual report, for specific details on risk factors. Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. China BAK's actual results could differ materially from those contained in the forward-looking statements. China BAK undertakes no obligation to revise or update its forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.
For more information, please contact:
Mr. Jun Zou
China BAK Battery, Inc.
Chief Financial Officer
Email: [email protected]
Tracy Li
China BAK Battery, Inc.
Investor Relations Manager
Phone: +86-755-8977-0093
Email: [email protected]
Ms. Elaine Ketchmere,
CCG Investor Relations
VP of Financial Writing
Phone: +1-310-954-1345
Email: [email protected]
- Financial Tables Follow -
Table 1
China BAK Battery, Inc. and Subsidiaries
Condensed Interim Consolidated Statements of Operations and
Comprehensive Loss
For the Three Months Ended June 30, 2010, March 31, 2010 and June 30, 2009
(Amounts in thousands, except per share data)
Three Months Ended
June 30, 2010 March 31, 2010 June 30, 2009
(Unaudited) (Unaudited) (Unaudited)
Net Revenues $58,557 $50,424 $44,689
Cost of revenues (59,764) (41,421) (39,641)
Gross profit / (loss) (1,207) 9,003 5,048
Operating expenses:
Research and development
expenses (2,129) (1,625) (1,472)
Sales and marketing
expenses (2,587) (1,706) (1,581)
General and administrative
expenses (7,429) (4,819) (5,551)
Impairment charge (5,058) -- --
Total operating expenses (17,203) (8,150) (8,604)
Operating (loss) / income (18,410) 853 (3,556)
Finance costs, net (2,022) (2,190) (1,897)
Government grant income 58 79 222
Other income / (expense) 107 (145) (353)
Loss before income taxes (20,267) (1,403) (5,584)
Income tax benefit /
(expense) 2,004 (1,147) 413
Net loss $(18,263) $(2,550) $(5,171)
Other comprehensive income /
(loss)
- Foreign currency
translation
adjustment 1,298 (164) (141)
Comprehensive loss $(16,965) $(2,714) $(5,312)
Net loss per share:
Basic $(0.29) $(0.04) $(0.09)
Diluted $(0.29) $(0.04) $(0.09)
Weighted average shares
outstanding:
Basic 62,888 62,882 56,967
Diluted 62,888 62,882 56,967
Table 2
China BAK Battery, Inc. and Subsidiaries
Condensed Interim Consolidated Balance Sheets
As of June 30, 2010 and September 30, 2009
(Amounts in thousands)
June 30, September 30,
2010 2009
(Unaudited) (Audited)
Assets
Current assets
Cash and cash equivalents $24,875 $30,678
Pledged deposits 9,295 31,115
Trade accounts receivable, net 79,629 83,292
Inventories 64,799 65,535
Prepayments and other receivables 5,600 4,632
Deferred tax assets 8,151 3,895
Assets held for sale 800 804
Total current assets 193,149 219,951
Property, plant and equipment, net 224,012 219,685
Lease prepayments, net 31,606 32,166
Intangible assets, net 202 239
Deferred tax assets 54 43
Total assets $449,023 $472,084
Liabilities
Current liabilities
Short-term bank loans $138,944 $139,159
Current maturities of long-term bank
loans 11,797 16,114
Accounts and bills payable 80,258 92,572
Accrued expenses and other payables 21,236 18,425
Total current liabilities 252,235 266,270
Long-term bank loans, less current
maturities 29,493 39,553
Deferred revenue 7,314 7,442
Other long-term payables 3,382 1,940
Deferred tax liabilities 1,201 278
Total liabilities 293,625 315,483
Commitments and contingencies
Shareholders' equity:
Ordinary shares US$ 0.001 par value;
100,000,000 authorized; 57,737,481 and
63,608,776 issued and outstanding as of
September 30, 2009 and June 30, 2010,
respectively 64 58
Donation Shares 14,102 14,102
Additional paid-in-capital 123,131 101,161
Statutory reserves 7,315 7,227
Retained earnings (10,964) 13,328
Accumulated other comprehensive income 25,817 24,791
Less: Treasury shares (4,067) (4,066)
Total shareholders' equity 155,398 156,601
Total liabilities and shareholders'
equity $449,023 $472,084
Table 3
China BAK Battery, Inc. and Subsidiaries
Condensed Interim Consolidated Statements of Cash Flows
For the Three Months Ended June 30, 2010, March 31, 2010 and June 30, 2009
(Amounts in thousands)
Three Months Ended
June 30, March 31, June 30,
2010 2010 2009
(Unaudited) (Unaudited) (Unaudited)
Cash flow from operating
activities
Net loss $(18,263) $(2,550) $(5,171)
Adjustments to reconcile net
loss to net cash (used in) /
provided by operating activities:
Depreciation and amortization 4,469 4,600 3,983
Provision for doubtful debts 3,447 921 2,539
Provision for obsolete
inventories 5,574 142 426
Impairment charge 5,058 -- --
Share-based compensation 415 800 554
Deferred income taxes (2,004) 200 (713)
Deferred revenue (58) (58) (58)
Exchange loss / (gain) 558 416 (346)
Changes in operating assets
and liabilities:
Trade accounts receivable 1,545 (10,399) 1,735
Inventories 5,843 3,475 (4,545)
Prepayments and other
receivables 1,954 4,754 3,141
Accounts and bills
payable 1,111 (7,593) 4,014
Accrued expenses and
other payables (1,443) 3,774 (399)
Net cash provided by / (used
in) operating activities $8,206 $(1,518) $5,160
Cash flow from investing
activities
Purchases of property, plant
and equipment (12,530) (3,804) (1,766)
Purchases of intangible
assets (12) -- (49)
Net cash used in investing
activities $(12,542) $(3,804) $(1,815)
Cash flow from financing
activities
Proceeds from borrowings 47,073 100,894 38,457
Repayment of borrowings (66,303) (74,555) (19,802)
Decrease / (increase) in
pledged deposits 8,795 1,018 (17,656)
Net cash (used in) / provided
by financing activities $(10,435) $27,357 $999
Effect of exchange rate
changes on cash and cash
equivalents 2 (694) (80)
Net (decrease) / increase in
cash and cash equivalents (14,769) 21,341 4,264
Cash and cash equivalents at
the beginning of the period 39,644 18,303 25,375
Cash and cash equivalents at
the end of the period $24,875 $39,644 $29,639
Table 4(i)
China BAK Battery, Inc. and subsidiaries
Reconciliation of non-GAAP to GAAP measures
For the For the For the
quarter quarter quarter
ended ended ended
June 30, March 31, June 30,
2010 2010 2009
Gross Profit as reported under GAAP (1,207,145) 9,002,755 5,047,796
Add: Provision for obsolete
inventories 5,573,979 142,130 425,929
Non-GAAP Gross Profit 4,366,834 9,144,885 5,473,725
Operating Income (Loss) as reported
under GAAP (18,410,448) 853,268 (3,556,284)
Add: Provision for doubtful debts 3,447,312 921,213 2,538,670
Add: Provision for obsolete
inventories 5,573,979 142,130 425,929
Add: Share-based compensation costs 414,912 799,675 553,848
Add: Impairment charge 5,057,745 -- --
Non-GAAP Operating Income (Loss) (3,916,500) 2,716,286 (37,837)
Net Income (Loss) as reported
under GAAP (18,262,965) (2,549,811) (5,171,027)
Add: Provision for doubtful debts 3,447,312 921,213 2,538,670
Add: Provision for obsolete
inventories 5,573,979 142,130 425,929
Add: Share-based compensation costs 414,912 799,675 553,848
Add: Impairment charge 5,057,745 -- --
Non-GAAP Net Income (Loss) (3,769,017) (686,793) (1,652,580)
Diluted Earnings (Loss) Per Share
reported under GAAP ($0.29) ($0.04) ($0.09)
Add: Provision for doubtful debts $0.05 $0.02 $0.04
Add: Provision for obsolete
inventories $0.09 $0.00 $0.01
Add: Share-based compensation costs $0.01 $0.01 $0.01
Add: Impairment charge $0.08 $0.00 $0.00
Non-GAAP Diluted (Loss) Earnings
Per Share ($0.06) ($0.01) ($0.03)
Diluted weighted average number of
common stock outstanding 62,887,664 62,881,663 56,966,619
(i) Note: This earnings release includes financial information that excludes the impact of the specified non-cash expenses set forth above, a financial measure not permitted under US GAAP. For purposes of Regulation G, a non.GAAP financial measure is a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet, or statement of cash flows (or equivalent statements) of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States. Pursuant to the requirements of Regulation G, the Company has provided the table above which includes a reconciliation of gross profit, operating income (loss), net income (loss), and diluted earnings (loss) per share excluding the impact of the non-cash expense items indicated in the above table, to the figures as reported under GAAP. The Company uses the non-GAAP information in its internal performance measures to analyze performance between periods, develop internal projections and measure management performance. The Company's management believes that the presentation of this non-GAAP financial information provides useful information regarding the Company's results of operations because it assists in measuring operating results, which are comparable with subsequent periods.
SOURCE China BAK Battery, Inc.
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