New Energy Systems Group Reports 2010 Results; Revenues rise 259% to $94.7 Million, Adjusted EPS of $1.46 Beats Estimates

SHENZHEN, China, March 29, 2011 /PRNewswire-Asia-FirstCall/ -- New Energy Systems Group (NYSE Amex: NEWN) ("New Energy" or the "Company"), a vertically-integrated original design manufacturer and distributor of lithium ion ("li-ion") batteries and portable-power consumer products, today announced financial results for the fourth quarter and full year ended December 31, 2010.

Mr. Jack Yu, Chairman of New Energy stated, "2010 marked the first year our newly consolidated business with Anytone® portable power devices, NewPower li-ion batteries and our traditional E'Jenie battery components business. I am very pleased with the 2010 results achieved in all of our divisions and future prospects for our newly acquired solar business, KimFai. The focus of our business remains portable battery power devices for leading consumer electronic manufactures like Apple® and li-ion batteries sold primarily to manufactures of consumer electronic devices. We are well positioned to leverage each division's technology to achieve superior economies of scale. We will continue to prudently manage expenses across the Company and have begun plans to consolidate our battery components and battery manufacturing under one division.   We feel this will enable us to better manage resources while directing our R&D and sales teams to develop and market our higher margin Anytone® products for the fast-growing Chinese smartphone and mobile device market."

Revenues for the three months ended December 31, 2010 totaled at $22.4 million, an increase of 113% year over year. New Energy's portable power devices branded under Anytone® and MeePower® contributed $9.2 million, or 42% of sales.  In the fourth quarter of 2010, New Energy took measures to better segment its battery business by recording NewPower battery cell manufacturing revenues under the E'Jenie division.   Finished battery packs will remain the sole product and revenue source for NewPower's sales primarily to cell phone manufacturers.  Combined sales for both divisions were $10.1 million, or 45% of sales.  KimFai Solar, the Company's acquisition in November of 2010, contributed $3.1 million in sales in the fourth quarter, or 13% of sales.

Gross profit in the fourth quarter of 2010 was $6.4 million, an increase of 94% year-over-year.  Gross margin for the period was 28.4% Gross profit margins for Anytone® trend at 24-28%.  New Power lithium battery products track gross margins of 11-15% and E'Jenie gross profits are approximately 26-30%.

Operating expenses for the three months ended December 31, 2010 were $1.7 million representing 8% of sales.  The increase of the operating expenses was due to a slight increase in selling expenses and the non-cash value of amortization and stock based compensation associated with acquisitions.

Net income for the quarter was $3.6 million, an 80% increase from $2.0 million for the three months in 2009.  GAAP earnings per share were $0.26. Adjusted net income excluding non-cash charges was $4.5 million for the period with $0.35 in earnings per share, an increase of 30% and 13% respectively.  

Net revenue for the year ended December 31, 2010 increased 259% to $94.7 million compared to $26.4 million in 2009. The increase was primarily due to the acquisition of Anytone in December 2009 and the acquisition of NewPower in January of 2010, which contributed a total of $65.9 million in portable power devices, battery and battery cell sales. The acquisition of Kim Fai in November 2010 contributed $3.1 million in solar products sales. The integration of the KimFai Solar business into New Energy Systems Group is expected to contribute approximately $24.0 million in revenues in 2011 and also provide a platform for New Energy to research the integration of solar power into li-ion battery cells.  The Company believes the combination of these acquisitions has enabled the Company to become a fully integrated battery manufacturer, which will allow New Energy to optimize purchasing power, leverage fixed costs and improve margins.

Cost of sales for the year ended December 31, 2010 increased to $68.4 million, a 273% increase, mainly due to the relatively higher production costs.

Gross profits for 2010 were $26.2 million, an increase of 228%.  Increases in gross profits were mainly attributed to profits from the acquisitions of Anytone and New Power.  The overall gross profit margin was 27.7%, a slight decline compared to 30.3% in the same period of last year was mainly due to the higher raw material cost and Anytone® margins which trend at 24-28% depending on the products sold and volume-based pricing for distributors.

Selling expenses for the year ended December 31, 2010 increased 238% to $0.4 million representing 1% of net revenue. The increase from 2009 was a result of increased salaries of sales personnel, partially offset by decreased marketing expenses.  New Energy uses its distributors to market and advertise its products to their customer and end users at retail locations.

General and administrative expenses increased by 389% to $5.9 million or 6% of net revenue due to the increased expenses from the three newly-acquired subsidiaries. Excluding approximately $0.8 million of non-cash stock-based compensation expenses and $2.8 million of non-cash amortization expenses, operating income was $23.5 million for the full year 2010, representing 24.8% of sales.

Net income for the year ended December 31, 2010 was $15.2 million compared to $5.8 million for 2009, an increase of 162%. Earnings per share was $1.18 compared to $0.82 in 2009, based on 12.9 million and 7.2 million fully diluted shares outstanding, respectively. Adjusted for non-cash expenses, adjusted net income and earnings per share for 2010 were $18.8 million and $1.46, respectively.

Balance Sheet and Cash Flow Summary

As of December 31, 2010, cash and cash equivalents stood at $13.1 million, up from $4.6 million as of December 31, 2009; accounts receivable was $11.2 million, compared to $9.8 million as of December 31, 2009.  The Company had only $0.5 million of debt outstanding at December 31, 2010.  New Energy Systems generated $21.5 million of cash flow from operations during fiscal 2010 versus $4.6 million in the same period prior year.

2011 Guidance

Based on the strong demand across each of its businesses, Management has provided the following guidance for 2011:

Revenue: $130 to $135 million

Adjusted Net Income: $24.5 to $25.5 million

Adjusted EPS: $1.69 to $1.75  (Based on 14.5 million shares outstanding)

Use of Non-GAAP Financial Measures

GAAP results for the three months and nine months ended December 31, 2010 include non-cash charges related to amortization and stock-based compensation. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information excluding the impact of these items in this release. It is a departure of U.S. GAAP; however, the Company's management believes that this non-GAAP measure provides investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of the adjustments to GAAP results appears in the table accompanying this press release. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.

Adjusted Earnings Table

Due to the effects of non-cash expenses relating to amortization and stock-based compensation, New Energy reports GAAP and non-GAAP adjusted net income and earnings per share.  The Company believes non-GAAP adjusted income and non-GAAP adjusted earnings per share more properly reflect the performance of its operations.

Conference Call

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About New Energy Systems Group

New Energy Systems Group is a vertically integrated original design manufacturer and distributor of lithium ion batteries and portable power devices for mobile phones, laptops, digital cameras, MP3s and a variety of other consumer electronics. The Company's consumer products are sold under the Anytone® brand in China, and the company has begun expanding its international sales efforts. The fast pace of new mobile device introductions in China combined with a growing middle class make it fertile ground for New Energy's end-user consumer products, as well as its high powered, light weight lithium ion batteries. In addition to historically strong organic growth, New Energy is expected to benefit from economies of scale, broader distribution, and higher production capacity and higher profit margins. Additional information about the company is available at: www.newenergysystemsgroup.com.

Safe Harbor Statement

 Certain statements in this press release constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995.  These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

SOURCE New Energy Systems Group