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China BAK Reports First Quarter Fiscal Year 2010 Financial Results

2010-01-28 16:37 1104

SHENZHEN, China, Jan. 28 /PRNewswire-Asia/ -- China BAK Battery, Inc. ("China BAK", the "Company", or "we") (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 first quarter of fiscal year 2010 ("Q1 2010").

Recent Achievements and Highlights

-- Gross Margin rose to 19.0% because of improved production yields and

cost reduction;

-- BAK Tianjin won its first major contract for high power batteries for

electric buses;

-- We won a $27M bid to directly supply cell phone batteries to ZTE

Corporation ("ZTE") in the first half of 2010; and

-- Capital structure is strengthened by $20M registered direct offering

First Quarter FY10 Financial Results

Net revenues for the first quarter of FY10 were $50.2 million, down 12.7% from $57.6 million last quarter and down 26.2% from $68.1 million in the same quarter of last year.

Revenues from cylindrical cells used in notebook computers were $8.1 million, down 46.1% from $15.0 million last quarter and down 55.9% from $18.4 million in the same quarter of last year.

Revenues from prismatic products, including aluminum-case cells, steel-case cells and battery packs, which are used in mobile phones and certain personal electronic devices, were $38.8 million, up 3.3% from $37.5 million last quarter and down 15.1% from $45.7 million in 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 $3.2 million in the first quarter of FY10, down 35.3% from last quarter, and down 21.2% from the same quarter of last year.

Gross profit for the first quarter of FY10 was $9.6 million, up 18.1% from $8.1 million last quarter and down 9.8% from $10.6 million in the same quarter of last year. Gross margin was 19.0%, compared to 14.1% last quarter and 15.6% in the same quarter of last year. Improved production yield and cost reduction contributed to the rise in gross margin.

Operating expenses totaled $12.4 million or 24.8% of revenues in the first quarter of FY10, as compared to $9.0 million or 15.7% of revenues last quarter and $9.8 million or 14.4% of revenues in the same quarter of last year. Research and development expenses were $1.8 million or 3.5% of revenues, as compared to $1.6 million or 2.8% of revenues last quarter and $1.4 million or 2.1% of revenues in the same quarter of last year. Sales and marketing expenses were $2.0 million or 4.0% of revenues, as compared to $1.8 million, or 3.2% of revenues last quarter and $1.6 million or 2.3% of revenues in the first quarter of last year. General and administrative expenses were $8.6 million or 17.2% of revenues, as compared to $5.6 million or 9.7% of revenues last quarter and $6.8 million or 9.9% of revenues in the same quarter of last year.

Operating loss for the first quarter of FY10 was $2.9 million, as compared to operating loss of $0.9 million last quarter and operating income of $0.8 million in the same quarter of last year.

Net loss was $3.4 million in the first quarter of FY10, as compared to net loss of $1.4 million last quarter and net loss of $1.7 million in the same quarter of last year. Diluted earnings per share were negative $0.06 compared with negative $0.02 per diluted share last quarter and negative $0.03 per diluted share in the same quarter of last year.

For the first quarter of FY10, Days Sales Outstanding ("DSO") increased to 139 from 120 last quarter, and Days Sales of Inventory decreased to 162 from 116 last quarter.

Financial Condition

On December 31, 2009 China BAK had $18.3 million in cash and cash equivalents and negative $37.4 million in working capital, reflecting a current ratio of 0.85:1. Short-term bank loans and long-term bank loans totaled $171.9 million as compared to $194.8 million on September 30, 2009. Shareholders' equity totaled $173.9 million. China BAK had $152.5 million available for borrowing under its credit facilities.

Business Outlook

"Looking back at Q1 2010, we are glad to see that we have established ourselves as a strong competitor in the OEM domestic market by supplying batteries directly to branded mobile phone manufacturers. We have also made significant progress in the New Energy/Clean Tech sector. We believe that high power cells will become a significant revenue source in the near future," commented Mr. Xiangqian Li, CEO of China BAK.

"We are pleased to see a strong rebound in gross margin, but we also recognize the challenges ahead. We will continue to improve our operation and prepare for future growth," commented Tony Shen, CFO of China BAK.

Conference Call

China BAK will host a conference call at 8:00 a.m. ET on Thursday, January 28, 2010 to discuss results for the first quarter of FY10 ended December 31, 2009. Joining Xiangqian Li, China BAK's President and Chief Executive Officer on the call will be Tony Shen, Chief Financial Officer. To participate in the conference call, please dial the following number approximately fifteen minutes prior to the scheduled conference call time: 888-419-5570. International callers should dial (617) 896-9871. The pass code for the call is 819-291-86. If you are unable to participate in the call at this time, a replay will be available from 10:00 a.m. ET on Thursday, January 28, 2010 through 10:00 a.m. ET, Thursday, February 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 629-51-180. 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 the 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, shortly after the call a replay will be made available 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 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 3.0-million-square-foot facilities are located in Shenzhen and Tianjin, PRC, and have been recently expanded to produce new products.

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 Reports on Form 10-K for the fiscal years ended September 30, 2009 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

Condensed Interim Consolidated Statements of Operations and

Comprehensive Income/(Loss)

For the Three Months Ended December 31, 2009, September 30, 2009

and December 31, 2008

(Amounts in thousands, except per share data)

Three Months Ended

December 31, September 30, December 31,

2009 2009 2008

(Unaudited) (Unaudited) (Unaudited)

Net Revenues $50,228 $57,551 $68,090

Cost of revenues (40,668) (49,457) (57,497)

Gross profit 9,560 8,094 10,593

Operating expenses:

Research and

development costs (1,768) (1,629) (1,417)

Sales and marketing

expenses (2,028) (1,842) (1,599)

General and

administrative

expenses (8,637) (5,563) (6,760)

Total operating

expenses (12,433) (9,034) (9,776)

Operating (loss) / income (2,873) (940) 817

Finance costs, net (2,153) (2,255) (2,840)

Government grant income 355 244 102

Other income 7 717 6

Loss before income taxes (4,664) (2,234) (1,915)

Income tax benefit 1,272 874 176

Net loss $(3,392) $(1,360) $(1,739)

Other comprehensive income /

(loss)

- Foreign currency

translation adjustment (107) (112) 160

Comprehensive loss $(3,499) $(1,472) $(1,579)

Net loss per share:

Basic $(0.06) $(0.02) $(0.03)

Diluted $(0.06) $(0.02) $(0.03)

Weighted average shares

outstanding:

Basic 61,108 56,971 56,958

Diluted 61,108 56,971 56,958

China BAK Battery, Inc. and Subsidiaries

Condensed Interim Consolidated Balance Sheets

As of December 31, 2009 and September 30, 2009

(Amounts in thousands)

December 31, September 30,

2009 2009

(Unaudited) (Audited)

Assets

Current assets

Cash and cash equivalents $18,303 $30,678

Pledged deposits 19,040 31,115

Trade accounts receivable, net 74,080 83,292

Inventories 79,391 65,535

Prepayments and other receivables 12,820 4,632

Deferred tax assets 5,411 3,895

Assets held for sale 804 804

Total current assets 209,849 219,951

Property, plant and equipment, net 218,586 219,685

Lease prepayments, net 31,886 32,166

Intangible assets, net 224 239

Deferred tax assets 50 43

Total assets $460,595 $472,084

Liabilities

Current liabilities

Short-term bank loans $125,044 $139,159

Current maturities of long-term bank

loans 17,577 16,114

Accounts and bills payable 88,563 92,572

Accrued expenses and other payables 16,075 18,425

Total current liabilities 247,259 266,270

Long-term bank loans, less current

maturities 29,295 39,553

Deferred revenue 7,383 7,442

Other long-term payables 2,488 1,940

Deferred tax liabilities 308 278

Total liabilities 286,733 315,483

Commitments and contingencies

Shareholders' equity:

Ordinary shares US$ 0.001 par value;

100,000,000 authorized; 57,737,481

and 63,601,276 issued and outstanding

as of September 30, 2009 and

December 31, 2009, respectively 64 58

Donation Shares 14,102 14,102

Additional paid-in-capital 121,917 101,161

Statutory reserves 7,314 7,227

Retained earnings 9,848 13,328

Accumulated other comprehensive income 24,684 24,791

Less: Treasury shares (4,067) (4,066)

Total shareholders' equity 173,862 156,601

Total liabilities and shareholders'

equity $460,595 $472,084

China BAK Battery, Inc. and Subsidiaries

Condensed Interim Consolidated Statements of Cash Flows

For the Three Months Ended December 31, 2009, September 30, 2009

and December 31, 2008

(Amounts in thousands)

Three Months Ended

December 31, September 30, December 31,

2009 2009 2008

(Unaudited) (Unaudited) (Unaudited)

Cash flow from operating

activities

Net loss $(3,392) $(1,360) $(1,739)

Adjustments to reconcile net

loss to net cash provided

by / (used in) operating

activities:

Depreciation and amortization 4,193 1,328 3,627

Provision for doubtful debts 4,736 1,864 2,347

Provision for / (recovery of)

obsolete inventories (280) 1,059 (550)

Share-based compensation 1,145 1,622 818

Deferred income taxes (1,495) (1,020) (271)

Deferred revenue (59) (58) (58)

Exchange loss / (gain) (150) (458) 704

Loss on disposal of Property,

plant and equipment -- 6 --

Changes in operating assets

and liabilities:

Trade accounts receivable 4,475 (15,306) (956)

Inventories (13,573) (4,705) 1,279

Prepayments and other

receivables (8,197) 5,509 (5,602)

Accounts and bills

payable (4,795) 19,460 20,230

Accrued expenses and

other payables 131 (2,162) (499)

Net cash provided by / (used

in) operating activities $(17,261) $5,779 $19,330

Cash flow from investing

activities

Purchases of property, plant

and equipment (3,905) (6,807) (19,528)

Payment in lease prepayment -- -- (466)

Purchases of intangible

assets (1) (13) (58)

Proceeds from disposal of

property, plant and

equipment -- 10 --

Net cash used in investing

activities $(3,906) $(6,810) $(20,052)

Cash flow from financing

activities

Proceeds from borrowings 38,008 3,309 84,077

Repayment of borrowings (60,896) (22) (81,884)

Decrease / (increase) in

pledged deposits 12,071 (1,488) (1,664)

Proceeds from issuance of

capital stock, net 19,616 150 --

Net cash provided by

financing activities $8,799 $1,949 $529

Effect of exchange rate

changes on cash and cash

equivalents (7) 121 1,694

Net (decrease) / increase in

cash and cash equivalents (12,375) 1,039 1,502

Cash and cash equivalents at

the beginning of the period 30,678 29,639 35,707

Cash and cash equivalents at

the end of the period $18,303 $30,678 $37,209

Source: China BAK Battery, Inc.
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