New Energy Systems Group Reports Record 2009 Results
GAAP Net Income of $5.8 Million or $0.82 per Diluted Share
2009 Adjusted Net Income of $6.4 Million or $0.89 per Diluted Share
Reaffirms 2010 Adjusted EPS Guidance of $1.23, Representing 38% Projected EPS Growth
NEW YORK and SHENZHEN, China, April 15 /PRNewswire-Asia-FirstCall/ -- New Energy Systems Group (OTC Bulletin Board: NEWN), a vertically integrated original design manufacturer and distributor of lithium ion batteries and backup power systems, today announced financial results for the full year ended December 31, 2009.
Full Year 2009 Highlights:
-- Revenue increased 33.8% to $26.4 million
-- Gross margin improved 156 basis points to 30.5%
-- GAAP net income, including certain non-cash items, increased 31.1% to
$5.8 million, or $0.82 per diluted share
-- Adjusted net income of $6.4 million, or $0.89 per diluted share,
excluding $251,507 of non-cash stock compensation expense and $275,000
of amortization expense
-- Ended year with $3.7 million of cash following a $3 million prepayment
in 2009 for the NewPower acquisition that closed after the year end
Mr. Fushun Li, Chief Executive Officer, commented, "We are extremely pleased with our results for 2009, which were in line with our expectations. Moreover, we view 2009 as a transitional year since late in the year we announced two large and highly accretive acquisitions that dramatically changed our business and whose contributions are largely not reflected in our 2009 results. For the full year, New Energy Systems Group reported revenue of $26.4 million versus $19.7 million in 2008 achieving top-line growth of approximately 34%. At the same time, gross margins improved over 156 basis points to 30.5% as a result of an improved product mix. Our 2009 GAAP net income was $5.8 million, however, this figure includes certain non-cash expenses for stock compensation and amortization, so we are also providing our adjusted net income figures which we believe more accurately reflect our overall profitability. Our 2009 adjusted net income was $6.4 million or $0.89 per fully diluted share. We expect our revenue, adjusted net income and adjusted EPS all to increase significantly in 2010 as a result of growth in our legacy business as well as the inclusion of New Power's and Anytone's growing operations. We currently have a healthy balance sheet and excess manufacturing capacity so we do not need to raise additional equity to achieve our 2010 earnings guidance.
"In 2009 we experienced strong battery segment growth of 35% with revenue rising to $19.9 million compared to $14.8 million in 2008. We also experienced solid battery shell and cover segment growth of 30%, with revenue rising to $6.5 million. This growth in both of our business segments is due to strong demand from our growing end markets. It also reflects the success of the first step in our vertical integration strategy, initiated in the second half of 2008, to expand from battery shell and cover manufacturing into full battery assembly and distribution."
Commenting on the recent acquisitions, Mr. Li noted, "We moved to implement the second phase of our vertical integration strategy in late 2009 by acquiring Anytone and NewPower. I am pleased to report the integration of the two acquisitions is progressing seamlessly. In December 2009, we completed the acquisition of Anytone, a leading manufacturer of backup power systems, which provides us with the ability to touch the end-user customer in China with branded products, thus broadening our product offering and expanding our distribution channels. Anytone's significant R&D capabilities and its ability to rapidly innovate to meet changing needs in the marketplace help position us to rapidly gain market share in the direct-to-consumer market. In January 2010 we completed the acquisition of NewPower. NewPower, a Chinese manufacturer of lithium ion batteries, is a captive source for components for finished battery products that will enable us to keep costs below competitors' and improve margins in our own finished battery distribution business."
2010 Guidance and Objectives
Mr. Li continued, "We are encouraged by both the near- and long-term outlook for the business. With an addressable lithium ion battery market exceeding $4 billion in China alone, we will continue to benefit from underlying strong demand in China coupled with significant global growth potential. As we head into 2010, we are now focused on growing the combined businesses and executing on an international expansion strategy that includes expanding into major markets outside China. We expect to benefit from an improving cost position, increased revenue from each of our segments, improving gross margins and significant operating leverage. We continue to expect that our adjusted 2010 net income will be at least $15.6 million, or $1.23 per diluted share, based on 12.6 million projected fully diluted shares. This would represent approximately 38% growth in adjusted diluted EPS. We are also making progress on our previously announced plans to uplist to a senior national exchange and will keep investors updated regarding our progress."
Table 1: Reconciliation of 2009 Reported Net Income and Adjusted Net Income and Net Income per Diluted Share:
The Company defines adjusted net income as earnings before non-cash compensation and amortization expense. Adjusted net income is not a measure of performance calculated in accordance with accounting principles generally accepted in the United States ("GAAP"), and should not be considered in isolation of, or as a substitute for, earnings as an indicator of operating performance or cash flows from operating activities as a measure of liquidity. The Company believes the presentation of adjusted net income is relevant and useful by enhancing the readers' ability to understand the Company's operating performance. The Company's management utilizes adjusted net income as a means to measure performance. The Company's measurements of adjusted net income may not be comparable to similar titled measures reported by other companies. The table below reconciles adjusted net income, a non-GAAP measure, to net income for the twelve months ended December 31, 2009.
($ in MM. except per share amounts)
2009A
Net income $5.84
Add back: non-cash, stock based
compensation expense $0.25
Add back: amortization expense $0.28
Adjusted net income $6.36
Reported net income per diluted share $0.82
Adjusted net income per diluted share $0.89
Revenue increased 33.8% to $26.4 million for the twelve months ended December 31, 2009, as compared to $19.7 million in 2008. Revenue consisted of $19.9 million in battery revenue and $6.5 million in battery shell and cover revenue, as compared to $14.7 million and $5 million, respectively, in 2008. The improvement in revenue reflects a full year of revenue from the battery distribution business initiated in the second half of 2008 and increased demand for battery shells and caps. Revenue in 2009 also includes 24 days of revenue, or $3.4 million, from Anytone following completion of the acquisition on December 7, 2009, and does not include any revenue contribution from NewPower, which was acquired on January 13, 2010.
Gross profit for 2009 was $8.0 million, or 30.5% of net revenue, as compared to $5.7 million, or 28.9% of net revenue, for 2008. The improvement in both gross profit and gross margin was primarily due to the Company's increased revenues from the battery segment. Compared to the existing battery shell and cover business, the battery segment generates higher gross margins due to the lower cost of sales.
In 2009, general and administrative expense included $251,507 of non-cash, stock-based compensation expense and $275,000 of non-cash amortization expense. Operating income was $6.7 million for 2009, as compared to $5 million for 2008.
For 2009, GAAP net income rose 31.1% to $5.8 million, or $0.82 per diluted share, from $4.5 million, or $0.72 per diluted share, in 2008. Excluding non-cash stock-based compensation expense and amortization expense, adjusted net income for 2009 was $6.4 million, or $0.89 per diluted share.
As of December 31, 2009, New Energy Systems Group had cash and cash equivalents of $3.7 million following a $3.0 million cash prepayment in 2009 related to the 2010 NewPower acquisition. In addition, included in the Company's accounts payables is a $5 million liability, which is scheduled to be paid in cash by June 30, 2010, as a final payment related to the acquisition of Anytone which was completed in December 2009.
Conference Call
New Energy Systems Group will also host a conference call at 8:00 a.m. Eastern Time on Friday, April 16, 2010. During the call, Mr. Fushun Li, Chief Executive Officer and Mr. Junfeng Chen, Chief Financial Officer will discuss the Company's quarterly performance and financial results.
The telephone number for the conference call is (877) 407-8033 (U.S. callers) or (201) 689-8033 (international callers). A live webcast of the call will also be available on the Company's website http://www.newenergysystemsgroup.com . To listen to the live call online, please visit the site at least 10 minutes early to register, download and install any necessary audio software.
The webcast will be archived on the website and investors will be able to access an encore recording of the conference call through midnight Friday April 23, 2010 by calling (877) 660-6853 (U.S. callers) or (201) 612-7415 (international callers) and entering account #286 and conference ID #349256. The encore recording will be available two hours after the conference call has concluded.
About New Energy Systems Group
New Energy Systems Group, is a vertically integrated original design manufacturer and distributor of lithium ion batteries and backup power systems for mobile phones, laptops, digital cameras, MP3s and a variety of other portable electronics. The company's end-user 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, greater production capacity and higher profit margins in 2010. Additional information about the company is available at: http://www.newenergysystemsgroup.com .
Forward Looking Statements
Except for the historical information, the matters discussed in this news release may contain forward-looking statements, including, but not limited to, factors relating to future results. These forward-looking statements may involve a number of risks and uncertainties. Actual results may differ materially based on a number of factors, including, but not limited to, uncertainties in product demand, risks related to doing business in China, the impact of competitive products and pricing, changing economic conditions around the world, release and sales of new products and other risk factors detailed in the Company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q and other filings with the U.S. Securities and Exchange Commission.
For more information, please contact:
Crescendo Communications, LLC
David Waldman or John Quirk
Tel: +1-212-671-1020
Email: [email protected]
(tables to follow)
NEW ENERGY SYSTEMS GROUP AND SUBSIDIARIES
(FORMERLY, CHINA DIGITAL COMMUNICATION GROUP AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS
ASSETS December 31, 2009 December 31, 2008
Current assets
Cash and equivalents $3,651,990 $6,969,454
Accounts receivable 9,776,041 7,407,371
Inventory 502,702 759,477
Prepaid expenses 262,379 --
Other receivables 433,804 --
Total current assets 14,626,916 15,136,302
Plant, property & equipment, net 699,790 859,232
Other assets
Prepayment for Newpower acquisition* 2,999,473 --
Deposits 37,626 --
Goodwill 19,244,036 --
Intangible assets, net 15,772,344 880,920
Total other assets 38,053,479 880,920
Total assets $53,380,185 $16,876,454
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $9,095,623 $3,467,324
Taxes payable 762,430 399,519
Loan payable -- 2,200,500
Loan payable to related party 527,225 174,600
Total current liabilities 10,385,278 6,241,943
Deferred tax liability 3,001,584 --
Total Liabilities 13,386,862 6,241,943
Stockholders' equity
Preferred stock, $.001 par value,
7,575,757 shares authorized,
7,575,757 shares issued and
outstanding 7,576 7,576
Common stock, $.001 par value,
140,000,000 shares authorized,
11,863,390 and 5,446,105
shares issued and outstanding at
December 31, 2009 and 2008,
respectively 11,863 5,446
Additional paid in capital 42,165,281 16,999,362
Statutory reserve 2,070,081 593,445
Other comprehensive income 1,225,986 1,144,170
Accumulated deficit (3,038,971) (8,115,488)
Less: deferred compensation (2,448,493) --
Total stockholders' equity 39,993,323 10,634,511
Total liabilities and stockholders'
equity $53,380,185 $16,876,454
*Acquisition closed Jan 13, 2010
NEW ENERGY SYSTEMS GROUP AND SUBSIDIARIES
(FORMERLY, CHINA DIGITAL COMMUNICATION GROUP AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Year Ended Year Ended
December 31, 2009 December 31, 2008
Revenue, net
Battery $19,918,846 $14,748,595
Battery shell and cover 6,457,044 4,967,813
Total revenue 26,375,890 19,716,408
Cost of sales
Battery 13,735,160 9,851,127
Battery shell and cover 4,596,379 4,158,868
Total cost of revenue 18,331,539 14,009,995
Gross profit 8,044,351 5,706,413
Operating expenses
Selling expenses 124,845 135,456
General and administrative
expenses 1,213,783 586,433
Total operating
expenses 1,338,628 721,889
Income from operations 6,705,723 4,984,524
Other expenses
Miscellaneous expense (5,794) (40,257)
Interest expense (49,436) (38,525)
Total other expenses (55,230) (78,782)
Income before income taxes 6,650,493 4,905,742
Provision for income taxes (813,098) (454,670)
Net income 5,837,395 4,451,072
Other comprehensive income
Foreign currency
translation 81,816 289,772
Comprehensive income $5,919,211 $4,740,844
Net income per share
Basic $0.91 $0.82
Diluted $0.82 $0.72
Weighted average number of shares
outstanding:
Basic 6,393,067 5,446,105
Diluted 7,150,642 6,203,638
NEW ENERGY SYSTEMS GROUP AND SUBSIDIARIES
(FORMERLY, CHINA DIGITAL COMMUNICATION GROUP AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended Year ended
December 31, December 31,
2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $5,837,395 $4,451,072
Adjustments to reconcile net
income to net cash
provided by operating activities:
Depreciation and amortization 468,514 308,786
Deferred tax liability (31,916) --
Non-cash, stock compensation 251,507 --
Loss on disposal of subsidiary 7,794 --
(Increase) / decrease in current
assets:
Accounts receivable (1,730,909) (7,011,157)
Inventory 2,572,107 186,132
Other receivable 1,670 --
Prepaid expenses -- 1,726
Deposits -- 8,530
Increase/(Decrease) in current
liabilities:
Accounts payable and accrued
expenses (3,326,375) 2,654,437
Taxes payable 515,157 585,006
Net cash provided by operating
activities 4,564,944 1,184,532
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Anytone (5,000,000) --
Cash acquired in acquisition 2,401,140 --
Prepayment for Newpower
acquisition (2,998,244) --
Acquisition of property &
equipment (1,068) (6,025)
Net cash used in investing
activities (5,598,172) (6,025)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on loan payable (2,195,872) --
Receivables from related party (74,857) --
Proceed from loan payable -- 2,162,250
Net cash provided by (used in)
financing activities (2,270,729) 2,162,250
Effect of exchange rate changes
on cash and cash equivalents (13,507) (165,429)
Net (decrease) increase in cash
and equivalents (3,317,464) 3,175,328
Cash and equivalents, beginning
balance 6,969,454 3,794,126
Cash and equivalents, ending
balance $3,651,990 $6,969,454
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Income tax payments $748,306 $454,670
Interest payments $91,260 $38,525
SOURCE New Energy Systems Group
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