SHENZHEN, China, Dec. 13 /Xinhua-PRNewswire/ -- China BAK Battery, Inc. ("China BAK", or "BAK") (Nasdaq: CBAK), one of the largest lithium-ion battery cell manufacturers in the world, as measured by production output, today announced its financial results for the fourth quarter and fiscal year ended September 30, 2007 ("FY07").
Recent Achievements and Highlights
-- Revenue increased by 48.5% from last quarter due to increased sales
to China OEM customers;
-- Product mix further improved with higher-margin aluminum case cells
now accounting for 60% of revenue; and sales of aluminum case cells
and lithium polymer cells grew by 77.5% and 206.6% from last quarter,
respectively;
-- Signed a non-binding Letter of Intent with Hewlett-Packard Company
("HP"), under which both parties will work together in a set time
frame to reach a definitive agreement for BAK to supply lithium ion
battery cells to HP; subsequently in the first quarter of fiscal
2008, our batteries have passed all safety, reliability and
performance tests by HP designated battery pack manufacturers; and
-- We're awarded "China Top Brand" by the General Administration of
Quality Supervision, Inspection and Quarantine of the People's
Republic of China, which is valid for three years. It further
solidifies our product quality, awareness and our leading position in
the industry in China. Those selected as "China Top Brand" are exempt
from all kinds of quality checks conducted by different departments
in different regions as well as customs inspections at exports. They
are also automatically classified as priority products for protection
against counterfeiting.
The Fourth Quarter of FY07 Financial Results
Net revenues for the fourth quarter of FY07 were $43.8 million, down 5.1% from $46.1 million in the same quarter of FY06, but up 48.5% from $29.5 million for the third quarter of FY07. Revenues from steel case cells were $7.0 million, up 32.8% from $5.3 million last quarter, and down 62.8% from $18.8 million in the same quarter of last year. Revenues from aluminum-case cells were $26.1 million, up 77.5% from $14.7 million last quarter and 63.3% from $16.0 million in the same period of last year.
In other products, revenues from battery packs were $3.6 million, down 19.9% from $4.5 million last quarter, but up 122.2% from $1.6 million in the same quarter of last year. Revenues from high-power lithium-ion cells were $3.2 million, up 0.4% from $3.1 million last quarter, and down 63.2% from $8.6 million in the same quarter of last year. Revenues from cylindrical cells, used in notebook computers, were $1.2 million, up 19.4% from last quarter and up 127.7% from the same quarter of last year. Revenues from lithium polymer cells, used in personal electronic devices such as PDAs, MP3 players and Bluetooth devices, were $2.7 million, up 206.6% from last quarter and up 328.3% from the same quarter of last year.
Gross profit for the fourth quarter of FY07 was $6.2 million, up 22.5% from $5.1 million last quarter and down 47.5% from $11.8 million in the same quarter of last year. Gross margin was 14.2%, compared to 17.2% last quarter and 25.6% in the same quarter of last year. The decrease of gross margin was primarily due to increased cost of raw materials, especially lithium cobalt dioxide.
Operating expenses totaled $5.8 million or 13.2% of revenues, as compared to $6.5 million or 22.0% of revenues last quarter and $5.9 million or 12.9% of revenues in the same quarter of last year. Research and development expenses were $1.3 million or 2.9% of revenues, as compared to $1.1 million or 3.8% of revenues last quarter and $1.5 million or 3.3% of revenues in the same quarter of last year. Sales and marketing expenses were $1.4 million or 3.3% of revenues, as compared to $1.2 million, or 4.0% of revenues last quarter and $1.5 million or 3.3% of revenues in the same quarter of last year. General and administrative expenses were $3.1 million or 7.0% of revenues, as compared to $4.2 million or 14.2% of revenues last quarter and $2.9 million or 6.3% of revenues in the same quarter last year.
Operating income for the fourth quarter of FY07 was $0.4 million, as compared to operating loss of $1.4 million last quarter and operating income of $5.9 million in the same quarter of last year. Operating margin was 1.0%, as compared to negative 4.8% last quarter and 12.8% in the same quarter of last year.
Net loss was $0.8 million in the fourth quarter of FY07, as compared to net loss of $2.7 million last quarter and net income of $4.7 million in the same quarter of last year. Diluted earnings per share were negative $0.02 compared with negative $0.05 per diluted share last quarter and $0.41 per diluted share in the same quarter of last year.
FY07 Financial Results
For FY07, net revenues increased to $145.9 million as compared to $143.8 million for FY06, an increase of $2.1 million or 1.4%; gross profit was $25.6 million or 17.6% of net revenues, down 35.4% from $39.6 million or 27.6% of net revenues for FY06; and net income was $0.5 million as compared to $20.2 million for FY06.
The year to year reduction in gross profit and net income is due to a significant increase in the purchase cost of raw materials, especially lithium cobalt dioxide, and significantly increased depreciation charges with the completion of two new production lines in FY07. The completion of these production lines represents a major step in China BAK's continued progress in transitioning from the Chinese secondary market to the international OEM market.
Financial Condition
At September 30, 2007, China BAK had $14.2 million in cash and a negative working capital of $7.0 million, reflecting a current ratio of 0.95:1. At quarter end total debt, including short-term bank loans, bills payable and long-term debt stood at $143.0 million and stockholders' equity totaled $126.7 million. China BAK had $105.3 million available for borrowing under its credit facilities.
Business Outlook
"Looking ahead at fiscal 2008, we anticipate strong growth in sales of our cylindrical and polymer cells, and steady growth in our aluminum-case cells. Our reputation for high quality and product safety will continue to be a competitive advantage as we look forward to manufacturing more products for international tier-1 OEMs. We believe we can achieve revenue target of $210 million, which has been communicated to the investment community at various conferences," commented Mr. Xiangqian Li, CEO of China BAK.
Conference Call
China BAK will host a conference call at 8:00 p.m. ET on Thursday, December 13, 2007, to discuss results for the fourth quarter of fiscal 2007 ended September 30, 2007. Joining Xiangqian Li, China BAK's President and Chief Executive Officer on the call will be Tony Shen, Chief Financial Officer and Dr. Huanyu Mao, Chief Operating Officer and Chief Technology Officer. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (888) 482-0024. International callers should dial (617) 801-9702. The pass code for the call is 12789205. If you are unable to participate in the call at this time, a replay will be available on Friday, December 14, at 7:00 p.m. ET, through Friday, December 28, at 7:00 p.m. ET. To access the replay, please dial (888) 286-8010. International callers should dial (617) 801-6888 and enter the conference ID number 73798676. This 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 the China BAK 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, a replay will be available shortly after the call on China BAK's website for 90 days.
About China BAK Battery, Inc.
China BAK Battery, Inc. is one of the largest manufacturers of lithium-based battery cells in the world, as measured by production output. It produces battery cells that are the principal component of rechargeable batteries commonly used in cellular phones, notebook computers, cordless power tools and portable consumer electronics, such as digital media devices, portable media players, portable audio players, portable gaming devices and PDAs (Personal Digital Assistants). China BAK Battery, Inc.'s 1.9 million square foot facilities are located in Shenzhen, PRC, and have been recently expanded to produce new products. China BAK Battery, Inc. is the largest manufacturer of lithium-ion battery cells for China's cellular phone replacement battery market.
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, 2006, as well as China BAK's Quarterly Reports on Form 10-Q for FY07, 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.
-Financial Tables Follow-
China BAK Battery, Inc. and subsidiaries
Consolidated Statements of Operations and Comprehensive Income
For the Three Months and Fiscal Years Ended September 30, 2006 and 2007
(Amounts in thousands, except per share data)
Three Months Ended Years Ended
September 30, September 30,
2006 2007 2006 2007
(unaudited)(unaudited)
Net Revenues $46,108 $43,772 $143,829 $145,861
Cost of revenues (34,292) (37,571) (104,196)(120,255)
Gross profit 11,816 6,201 39,633 25,606
Operating expenses:
Research and development costs (1,499) (1,274) (2,935) (3,957)
Sales and marketing expenses (1,512) (1,424) (5,055) (4,696)
General and administrative
expenses (2,921) (3,070) (9,071) 12,372)
Total operating expenses (5,932) (5,768) (17,061) (21,025)
Operating income 5,884 433 22,572 4,581
Finance costs, net (895) (2,089) (1,888) (5,225)
Gain on trading securities -- -- 279 --
Government grant income -- 1,035 -- 1,034
Other expenses (166) (706) (205) (103)
Income / (loss) before income taxes 4,823 (1,327) 20,758 287
Income taxes (expenses) / benefit (81) 477 (593) 196
Net income / (loss) $4,742 ($850) $20,165 $483
Other comprehensive income / (loss) 1,193 1,800 2,443 6,436
- Foreign currency translation
adjustment
Comprehensive income $5,935 $950 $22,608 $6,919
Net income / (loss) per share:
Basic $0.10 ($0.02) $0.41 $0.01
Diluted $0.10 ($0.02) $0.41 $0.01
Weighted average shares outstanding:
Basic 48,879 49,245 48,880 48,979
Diluted 49,076 49,245 48,913 49,442
China BAK Battery, Inc. and subsidiaries
Consolidated Balance Sheets
As of September 30, 2006 and 2007
(Amounts in thousands)
As of September 30
2006 2007
Assets
Current assets
Cash and cash equivalents $21,100 $14,197
Pledged deposits 12,972 4,595
Trade accounts receivable, net 64,332 63,151
Inventories 47,389 59,827
Deferred tax assets -- 503
Prepayments and other receivables 1,134 1,656
Total current assets 146,927 143,929
Property, plant and equipment, net 109,406 145,123
Lease prepayments, net 3,161 17,884
Intangible assets, net 75 121
Deferred tax assets 86 172
Total assets $259,655 $307,229
Liabilities
Current liabilities
Short-term bank loans $67,900 $89,871
Accounts and bills payable 48,316 45,589
Accrued expenses and other payables 25,881 15,466
Share-based payment liabilities 3,625 --
Total current liabilities 145,722 150,926
Long-term bank loans -- 29,291
Deferred tax liabilities 305 280
Total liabilities 146,027 180,497
Commitments and contingencies
Shareholders' equity:
Ordinary shares US$ 0.001 par value;
100,000,000 authorized; 48,885,896
and 49,250,853 issued and outstanding
as of September 30, 2006 and 2007 49 49
Additional paid-in-capital 68,127 74,311
Statutory reserves 5,792 6,427
Retained earnings 36,212 36,060
Accumulated other comprehensive
income 3,448 9,885
Total shareholders' equity 113,628 126,732
Total liabilities and shareholders'
equity $259,655 $307,229
China BAK Battery, Inc. and subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended September 30, 2006 and 2007
(Amounts in thousands, except per share data)
Years Ended September 30,
2006 2007
Cash flow from operating activities
Net income $20,165 $483
Adjustments to reconcile net income
to net cash provided by / (used in)
operating activities:
Depreciation and amortization 5,816 8,912
Provision for / (recovery of)
doubtful debts (556) 1,825
Provision for obsolete inventories -- 1,639
Share-based compensation 4,336 2,559
Deferred income taxes 73 (610)
Changes in operating assets and
liabilities:
Trade accounts receivable (19,938) 2,617
Inventories (25,693) (11,307)
Prepayments and other receivables 456 (219)
Accounts and bills payable 4,274 (3,038)
Accrued expenses and other
payables 5,382 124
Net cash provided by / (used in)
operating activities ($5,685) $2,985
Cash flow from investing activities
Purchases property, plant and
equipment (41,382) (48,793)
Addition in lease prepayment -- (17,042)
Purchases of intangible assets (34) (60)
Net cash used in investing activities ($41,416) ($65,895)
Cash flow from financing activities
Proceeds from borrowings 99,036 157,532
Repayment of borrowings (70,681) (111,115)
Decrease in pledged deposits 6,420 8,827
Amounts received from related parties 272 --
Net cash provided by financing
activities $35,047 $55,244
Effect of exchange rate changes on
cash and cash equivalents 98 763
Net decrease in cash and cash
Equivalents (11,956) (6,903)
Cash and cash equivalents at the
beginning of year 33,056 21,100
Cash and cash equivalents at the
end of year $21,100 $14,197
