UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): August 13, 2018

 

HIGHPOWER INTERNATIONAL, INC.

_____________________________________________________

(Exact name of registrant as specified in its charter)

  

Delaware 001-34098 20-4062622
(State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification No.)

 

Building A1, Luoshan Industrial Zone, Shanxia, Pinghu, Longgang, Shenzhen, Guangdong, 518111, China

(Address, including zip code, of principal executive offices)

 

Registrant’s telephone number, including area code (86) 755-89686238

 

 

(Former name or former address, if changed since last report.) 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 

 

Item 2.02 Results of Operations and Financial Condition.

 

On August 13, 2018, Highpower International, Inc. (the “Company”) issued a press release announcing financial results for the quarter ended June 30, 2018. A copy of the press release is attached hereto as Exhibit 99.1 and the information therein is incorporated herein by reference.

 

Item 7.01 Regulation FD Disclosure.

 

The information under Item 2.02 above is incorporated herein by reference. 

 

The information reported under Items 2.02 and 7.01 in this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, is being "furnished" and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

 

Item 9.01 Financial Statements and Exhibits

 

(d)Exhibits

 

Exhibit No. Description
99.1 Press Release dated August 13, 2018.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: August 13, 2018 Highpower International, Inc.
   
  /s/ Shengbin (Sunny) Pan
  By:  Shengbin (Sunny) Pan
  Its: Chief Financial Officer

 

 

 

 

EXHIBIT INDEX

 

Exhibit No.

 

 

Description
99.1   Press Release dated August 13, 2018.

 

 

 

Exhibit 99.1

 

 

Highpower International Reports Unaudited Second Quarter and First Half 2018 Financial Results

 

SAN DIEGO, CALIFORNIA and SHENZHEN, China, August 13, 2018 /PRNewswire/ -- Highpower International, Inc. (NASDAQ: HPJ) ("Highpower" or the "Company"), a developer, manufacturer, and marketer of lithium ion and nickel-metal hydride (Ni-MH) rechargeable batteries, battery management systems, and a provider of battery recycling, today announced its financial results for the second quarter ended June 30, 2018.

 

Second Quarter 2018 Highlights (all results compared to prior year period)

 

·Net sales for the second quarter of 2018 increased by 25.6% to $64.9 million from $51.7 million. Excluding the impact of Ganzhou Highpower Technology Co., Ltd. ("GZ Highpower"), net sales increased 32.8% to $64.9 million from $48.9 million.
·Lithium business net sales increased 31.1% to $48.5 million from $37.0 million.
·Gross margin decreased to 17.4% of net sales compared to 23.3%. Excluding GZ Highpower, gross margin was 17.4% compared to 23.2%.
·Net income attributable to the Company decreased 37.9% to net income of $2.7 million, or $0.17 per diluted share, compared to net income attributable to the Company of $4.4 million, or $0.28 per diluted share. Excluding GZ Highpower, net income attributable to the Company was $2.7 million compared to net income attributable to the Company of $4.2 million.

 

Mr. George Pan, Chairman and CEO of Highpower International, commented, “We are pleased to exceed our top-line guidance for the quarter, driven by growth in both our lithium and Ni-MH businesses. New and existing customers in the high-end consumer product, industrial application, and artificial intelligence product industries in particular grew our lithium business. In addition, our Ni-MH business benefited from increased demand generated by the trend of consumer electronics providers switching from one-time-use batteries to re-chargeable batteries.

 

“We will continue to drive our business forward in the second half of the year by producing higher quality and safer battery products and services to grow Top-line sales. At the same time, we will manage our prices, operations, and customer expectations to maintain a balance between growth and margins. We remain optimistic about the growth of our industry and our ability to be a leading provider of clean, safe, and efficient power solutions to meet society's needs,” Mr. Pan concluded.

 

 

 

 

Second Quarter and First Half 2018 Financial Results

 

Net Sales

 

Net sales for the second quarter of 2018 increased 25.6% to $64.9 million from $51.7 million in the prior year period. The increase was driven by sales of the Company’s lithium business, which grew 31.1%, or $11.5 million, during the quarter. In addition, sales in the Ni-MH business grew 39.3%, or $4.6 million, year over year. Excluding the impact of GZ Highpower, net sales increased 32.8% to $64.9 million from $48.9 million.

 

Net sales increased 22.6% to $114.7 million in the first half of 2018 compared to $93.6 million in the first half of 2017. Excluding the impact of GZ Highpower, net sales increased 28.9% to $114.7 million in the first half of 2018.

 

Gross Profit

 

Gross profit for the second quarter of 2018 decreased 6.3% to $11.3 million from $12.1 million in the prior year period due to high raw material prices. Gross margin for the second quarter of 2018 was 17.4% compared to 23.3% in the prior year period. Excluding GZ Highpower, gross margin was 17.4% compared to 23.2%.

 

Gross profit for the first half of 2018 decreased 14.2% to $18.9 million from $22.0 million in the prior year period. Gross margin was 16.5% and 23.5% for first half of 2018 and 2017, respectively. Excluding GZ Highpower, gross margin for the first half of 2018 was 16.5% compared to 23.2% in the prior year period.

 

Operating Expenses

 

·Research and development (R&D) expenses for the second quarter of 2018 were $3.6 million compared to $2.1 million in the prior year period. As a percentage of net sales, R&D expenses increased to 5.5% from 4.1% in the prior year period due to the Company’s continued investments in R&D.

 

Research and development expenses were $6.2 million, or 5.4% of net sales, for the first half of 2018 compared to $4.0 million, or 4.2% of net sales, for the first half of 2017.

 

·Selling and distribution expenses for the second quarter of 2018 were $2.1 million compared to $1.7 million in the prior year period. As a percentage of net sales, selling and distribution expenses remained at 3.3% compared to the prior year period.

 

Selling and distribution expenses were $4.1 million, or 3.6% of net sales, for the first half of 2018 compared to $3.4 million, or 3.6% of net sales, for the first half of 2017.

 

·General and administrative expenses for the second quarter of 2018 were $3.9 million compared to $3.0 million in the prior year period. As a percentage of net sales, general and administrative expenses increased to 6.0% from 5.8% in the prior year period.

 

General and administrative expenses were $8.0 million, or 7.0% of net sales, for the first half of 2018 compared to $6.1 million, or 6.5% of net sales, for the first half of 2017. The increase was due to the increase of payroll related and amortization of share-based compensation.

 

 

 

 

Net Income

 

Net income attributable to the Company for the second quarter of 2018 was $2.7 million compared to $4.4 million in the prior period. Net income attributable to the Company per diluted share for the second quarter of 2018 was $0.17 compared to $0.28 in the prior year period. Excluding GZ Highpower, net income attributable to the Company was $2.7 million compared to $4.2 million in the prior year period.

 

For the second quarter of 2018, the Company's weighted average diluted shares outstanding used in computing diluted share was 15,629,413.

 

Net income attributable to the Company for the first half of 2018 decreased to $1.6 million from $7.0 million in the prior year period. Net income attributable to the Company per diluted share for the first half of 2018 decreased to $0.10 from $0.45 in the prior year period. Excluding GZ Highpower, net income attributable to the Company for the first half of 2018 was $1.6 million compared to $6.5 million in the prior year period.

 

For the first half of 2018 and 2017, the Company's weighted average diluted shares outstanding used in computing diluted share was 15,619,771 and 15,304,773, respectively.

 

EBITDA

 

EBITDA for the second quarter of 2018 decreased 23.7% to $5.0 million from $6.5 million in the prior year period. EBITDA for the first half of 2018 decreased by 51.7% to $5.6 million from $11.5 million in the prior year period.

 

A table reconciling EBITDA to the appropriate GAAP measure is included with the Company's financial information below.

 

Balance Sheet Highlights        
  June 30,   December 31, 
($ in millions, except per share data)  2018   2017 
    (Unaudited)      
    $    $ 
Cash  $7.3   $14.5 
Total Current Assets  $187.6   $156.0 
Total Assets  $255.0   $220.3 
           
Total Current Liabilities  $186.8   $152.3 
Total Liabilities  $186.8   $153.1 
Total Equity  $68.2   $67.2 
Total Liabilities and Equity  $255.0   $220.3 
Book Value Per Share  $4.38   $4.33 

 

Financial Outlook

 

For the third quarter of 2018, the Company expects net revenues to grow around 30% year over year. Gross margin is expected to be similar or better than that of the second quarter of 2018.

 

 

 

 

Conference Call Details

The Company will hold a conference call on August 13, 2018 at 10:00 am Eastern Time or 10:00 pm Beijing Time to discuss the financial results. Participants may access the call by dialing the following numbers:

 

United States: 877-407-3108

International: 201-493-6797

 

To listen to the live webcast, please go to www.highpowertech.com and click on the conference call link, or go to https://78449.themediaframe.com/dataconf/productusers/hpj/mediaframe/26046/indexl.html. This webcast will be archived and accessible through the Company's website for approximately 30 days following the call.

 

About Highpower International, Inc.

Highpower International was founded in 2001 and produces high-quality Nickel-Metal Hydride (Ni-MH) and lithium-based rechargeable batteries used in a wide range of applications such as electric buses, bikes, energy storage systems, power tools, medical equipment, digital and electronic devices, personal care products, and lighting, etc. Highpower's target customers are Fortune 500 companies and top 20 companies in each vertical segment. With advanced manufacturing facilities located in Shenzhen, Huizhou, and Ganzhou of China, Highpower is committed to clean technology, not only in the products it makes, but also in the processes of production. The majority of Highpower International's products are distributed to worldwide markets mainly in the United States, Europe, China and Southeast Asia.

 

Use of Non-GAAP Measures

The Company has supplemented its reported GAAP (generally accepted accounting principles) financial information with non-GAAP measures. EBITDA was derived by taking earnings before interest expense (net), taxes, depreciation and amortization. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. The Company believes this non-GAAP measure is useful to investors as it provides a basis for evaluating the Company's operating results in the ordinary course of its operations. This non-GAAP measure is not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with its results of operations as determined in accordance with U.S. GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with, and not in lieu of, the corresponding GAAP measures. EBITDA is reconciled in the accompanying table to the most directly comparable measure as reported in accordance with GAAP.

 

 

 

 

Forward Looking Statements

This press release contains "forward-looking statements" within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995 that are not historical facts. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements involve known and unknown risks, uncertainties and other factors that could cause the Company's actual results to differ materially from the results expressed or implied by such statements, including, without limitation, fluctuations in the cost of raw materials; our dependence on, or inability to attract additional, major customers for a significant portion of our net sales; our ability to increase manufacturing capabilities to satisfy orders from new customers; our ability to maintain increased margins; our dependence on the growth in demand for smart wearable devices and energy storage systems, and other digital products and the success of manufacturers of the end applications that use our battery products; our responsiveness to competitive market conditions; our ability to successfully manufacture our products in the time frame and amounts expected; the market acceptance of our battery solutions, including our lithium ion batteries; and our ability to continue R&D development to keep up with technological changes. For a discussion of these and other risks and uncertainties see "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's public filings with the SEC. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The Company has no obligation to update the forward-looking information contained in this press release.

 

CONTACT:

 

Highpower International, Inc.

Sunny Pan

Chief Financial Officer

Tel: +86-755-8968-6521

Email: ir@highpowertech.com

 

Yuanmei Ma

Investor Relations Manager

Tel: +1-909-214-2482

Email: yuanmei@highpowertech.com

 

ICR, Inc.

Rose Zu

Tel: +1-646-931-0303

Email: ir@highpowertech.com

 

 

 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

   June 30,   December 31, 
   2018   2017 
    (Unaudited)      
    $    $ 
ASSETS          
Current Assets:          
Cash   7,280,576    14,502,171 
Restricted cash   30,159,389    25,953,946 
Accounts receivable, net   61,440,575    58,252,999 
Amount due from a related party   432,320    1,165,838 
Notes receivable   1,611,947    2,606,517 
Advances to suppliers   8,031,483    6,050,531 
Prepayments and other receivables   9,401,564    4,268,527 
Foreign exchange derivative assets   -    236,436 
Inventories   69,200,672    42,946,644 
           
Total Current Assets   187,558,526    155,983,609 
           
Property, plant and equipment, net   48,135,151    46,520,776 
Long-term prepayments   3,992,080    3,715,445 
Land use rights, net   2,564,161    2,639,631 
Other assets   747,186    748,431 
Deferred tax assets, net   1,219,521    750,267 
Long-term investments   10,790,882    9,906,379 
           
TOTAL ASSETS   255,007,507    220,264,538 
           
LIABILITIES AND EQUITY          
           
LIABILITIES          
Current Liabilities:          
Accounts payable   80,534,723    60,368,012 
Deferred government grant   758,059    309,638 
Short-term loans   25,080,521    10,128,646 
Non-financial institution borrowings   9,069,335    10,756,158 
Notes payable   51,710,779    54,859,478 
Foreign exchange derivative liabilities   689,790    - 
Amount due to a related party   423,236    - 
Other payables and accrued liabilities   15,338,570    12,243,345 
Income taxes payable   3,225,973    3,609,391 
           
Total Current Liabilities   186,830,986    152,274,668 
           
Income taxes payable, noncurrent   -    777,685 
           
TOTAL LIABILITIES   186,830,986    153,052,353 
           
COMMITMENTS AND CONTINGENCIES   -    - 

 

 

 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

 

   June 30,   December 31, 
   2018   2017 
    (Unaudited)      
    $    $ 
EQUITY          
Stockholders’ equity          
Preferred stock          
(Par value: $0.0001, Authorized: 10,000,000 shares, Issued and outstanding: none)   -    - 
Common stock          
(Par value: $0.0001, Authorized: 100,000,000 shares, 15,559,658 shares issued and outstanding at June 30, 2018 and 15,509,658 at December 31, 2017, respectively)   1,556    1,551 
Additional paid-in capital   13,410,368    12,709,756 
Statutory and other reserves   6,549,815    6,549,815 
Retained earnings   46,076,947    44,481,568 
Accumulated other comprehensive income   2,137,835    3,469,495 
           
TOTAL EQUITY   68,176,521    67,212,185 
           
TOTAL LIABILITIES AND EQUITY   255,007,507    220,264,538 

 

 

 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Stated in US Dollars)

 

   Three months ended June 30,   Six months ended June 30, 
   2018   2017   2018   2017 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
    $    $    $    $ 
Net sales   64,923,960    51,699,930    114,707,413    93,566,778 
Cost of sales   (53,614,034)   (39,628,164)   (95,831,160)   (71,560,178)
Gross profit   11,309,926    12,071,766    18,876,253    22,006,600 
                     
Research and development expenses   (3,592,760)   (2,137,286)   (6,154,597)   (3,951,216)
Selling and distribution expenses   (2,121,650)   (1,722,910)   (4,096,746)   (3,361,223)
General and administrative expenses   (3,910,188)   (3,016,401)   (8,024,998)   (6,074,963)
Foreign currency transaction gain (loss)   1,670,932    (514,624)   656,239    (828,502)
Total operating expenses   (7,953,666)   (7,391,221)   (17,620,102)   (14,215,904)
                     
Income from operations   3,356,260    4,680,545    1,256,151    7,790,696 
                     
Changes in fair value of warrant liability   -    31,811    -    259 
Changes in fair value of foreign exchange derivative assets (liabilities)   (1,125,140)   -    (421,425)   - 
Government grants   988,679    209,297    1,318,499    558,812 
Other income   56,581    67,068    80,142    295,646 
Equity in earnings (loss) of investees   160,070    (41,607)   316,320    105,325 
Gain on dilution in equity method investee   -    491,325    -    491,325 
Interest expenses   (312,814)   (380,531)   (554,666)   (983,848)
Income before taxes   3,123,636    5,057,908    1,995,021    8,258,215 
                     
Income taxes expenses   (409,321)   (595,708)   (399,642)   (1,183,473)
Net income   2,714,315    4,462,200    1,595,379    7,074,742 
                     
Less: net income attributable to non-controlling interest   -    90,963    -    167,856 
Net income attributable to the Company   2,714,315    4,371,237    1,595,379    6,906,886 
                     
Comprehensive income                    
Net income   2,714,315    4,462,200    1,595,379    7,074,742 
Foreign currency translation (loss) gain   (4,168,216)   1,508,714    (1,331,660)   1,484,713 
Comprehensive (loss) income   (1,453,901)   5,970,914    263,719    8,559,455 
                     
Less: comprehensive income attributable to non-controlling interest   -    98,795    -    178,346 
Comprehensive (loss) income attributable to the Company   (1,453,901)   5,872,119    263,719    8,381,109 
                     
Earnings per share of common stock attributable to the Company                    
- Basic   0.17    0.29    0.10    0.45 
- Diluted   0.17    0.28    0.10    0.45 
                     
Weighted average number of common stock outstanding                    
- Basic   15,556,361    15,317,101    15,533,139    15,218,820 
- Diluted   15,629,413    15,479,357    15,619,771    15,304,773 

 

 

 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

 

   Six Months Ended June 30, 
   2018   2017 
   (Unaudited)   (Unaudited) 
    $    $ 
Cash flows from operating activities          
Net income   1,595,379    7,074,742 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:          
Depreciation and amortization   3,003,872    2,429,982 
(Reversal) allowance for doubtful accounts   (472,799)   17,994 
Loss on disposal of property, plant and equipment   159,458    25,218 
Deferred tax   (498,878)   263,673 
Changes in fair value of foreign exchange derivative assets (liabilities)   955,790    - 
Equity in earnings of investees   (316,320)   (105,325)
Gain on dilution in equity method investee   -    (491,325)
Share based compensation   488,117    44,815 
Changes in fair value of warrant liability   -    (259)
Changes in operating assets and liabilities:          
Accounts receivable   (3,877,577)   4,390,991 
Notes receivable   986,591    (1,057,366)
Advances to suppliers   (2,154,883)   - 
Prepayments and other receivables   (4,921,059)   (3,799,960)
Amount due from a related party   740,408    5,178,499 
Amount due to a related party   -    (1,480,335)
Inventories   (27,915,901)   (9,595,161)
Accounts payable   21,683,401    (494,812)
Deferred government grant   469,895    109,892 
Other payables and accrued liabilities   3,578,815    (2,145,295)
Income taxes payable   (1,140,753)   (227,668)
Net cash flows (used in) provided by operating activities   (7,636,444)   138,300 
           
Cash flows from investing activities          
Acquisitions of property, plant and equipment   (5,681,723)   (5,199,130)
Payment for long-term investment   (328,927)   - 
Net cash flows used in investing activities   (6,010,650)   (5,199,130)
           
Cash flows from financing activities          
Proceeds from short-term loans   15,664,587    2,916,017 
Repayments of short-term loans   -    (2,841,696)
Proceeds from non-financial institution borrowings   -    10,200,959 
Repayments of non-financial institution borrowings   (1,566,318)   (2,331,648)
Proceeds from notes payable   53,584,205    40,861,835 
Repayments of notes payable   (55,920,682)   (31,049,819)
Proceeds from exercise of employee options   -    623,806 
Net cash flows provided by financing activities   11,761,792    18,379,454 
Effect of foreign currency translation on cash and restricted cash   (1,130,850)   1,387,318 
Net (decrease) increase in cash and restricted cash   (3,016,152)   14,705,942 
Cash and restricted cash - beginning of period   40,456,117    20,538,033 
Cash and restricted cash - end of period   37,439,965    35,243,975 
           
Supplemental disclosures for cash flow information:          
Cash paid for:          
Income taxes   2,039,273    1,147,467 
Interest expenses   1,002,653    948,831 
Non-cash transactions          
Shares issued for legal case settlement   212,500    - 
Offset of deferred income related to government grant and property, plant and equipment   -    85,571 

 

 

 

 


Reconciliation of Net Income (loss) to EBITDA        

 

   Three months ended June 30,   Six months ended June 30, 
   2018   2017   2018   2017 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
    $    $    $    $ 
Net income attributable to the Company   2,714,315    4,371,237    1,595,379    6,906,886 
                     
Interest expenses   312,814    380,531    554,666    983,848 
Income taxes expenses   409,321    595,708    399,642    1,183,473 
Depreciation and Amortization   1,528,644    1,155,648    3,003,872    2,429,982 
                     
EBITDA   4,965,094    6,503,124    5,553,559    11,504,189