SHENZHEN, China, July 28 /Xinhua-PRNewswire-FirstCall/ -- China BAK Battery, Inc. ("China BAK", or "BAK") , one of the largest lithium-ion battery cell manufacturers in the world, as measured by production output, today announced its financial results for the third quarter of fiscal year 2008 ("FY08").
Recent Achievements and Highlights -- Achieved a new record revenue of $68.5 million in the traditionally slow quarter, over 30% increase as compared to last quarter, as sales of prismatic cells and cylindrical cells maintained continuous strong growth; -- Revenue from cylindrical cells, used in laptop computers, increased to $13.6 million, more than doubled from last quarter's levels and now accounts for 20% of our total revenues; started shipment of cylindrical cells to a well-known Taiwan-based notebook maker, ASUS Tek Computer Inc via pack assembling companies since May 2008. -- Narrower loss as compared to last quarter; gross margin starting to improve, reflecting results from sales price increase and cost-cutting efforts; -- Obtained final approval from Shenzhen Municipal Government regarding the land use rights of BAK Industrial Park; -- BAK International (Tianjin) Limited obtained a 4-year long-term loan of RMB 160 million from Agricultural Bank of China, which will fund operation in the Tianjin facilities commencing in or about October 2008; -- Continued to gain major customers for our prismatic cells and polymer cells, including Foxconn Technology Group, the largest manufacturing services provider in the world, and Sandisk, the largest supplier of innovative flash memory data storage products in the world. Third Quarter FY08 Financial Results
Net revenues for the third quarter of FY08 were $68.5 million, up 33.4% from $51.3 million last quarter, and up 132.3% from $29.5 million in the same quarter of fiscal year 2007 ("FY07").
Revenues from prismatic cells, including aluminum-case cells, steel-case cells and battery packs, were $52.3 million, up 22.5% from $42.7 million last quarter and up 113.9% from $24.5 million in the third quarter of FY07. Revenues from aluminum-case cells were $33.8 million, up 11.5% from $30.3 million last quarter and up 129.4% from $14.7 million in the third quarter of FY07. Revenues from steel case cells were $10.0 million, up 70.5% from $5.9 million last quarter, and up 90.5% from $5.3 million in the third quarter of FY07. Revenues from battery packs were $8.5 million, up 29.8% from $6.6 million last quarter and up 90.2% from $4.5 million in the third quarter of FY07.
Revenues from cylindrical cells, used in notebook computers, were $13.6 million, up 103.1% from $6.7 million last quarter and up 1,297.9% from the third quarter of FY07.
Revenues from lithium polymer cells, used in personal electronic devices such as PDAs, MP3 players and Bluetooth devices, were $2.5 million in the third quarter of FY08, up 33.1% from last quarter, and up 182.0% from the same quarter of FY07.
Gross profit for the third quarter of FY08 was $8.4 million, up 114.7% from $3.9 million last quarter and up 66.0% from $5.1 million in the third quarter of FY07. Gross margin was 12.3%, compared to 7.6% last quarter and 17.2% in the third quarter of FY07. The increase in gross profit compared to last quarter was attributable to the increase in sales volume and rising in average selling price, which outweighed the effect of average price increase in raw materials.
Operating expenses totaled $8.4 million or 12.3% of revenues in the third quarter of FY08, as compared to $7.6 million or 14.8% of revenues last quarter and $6.5 million or 22.0% of revenues in the same quarter of last year. Research and development expenses were $1.9 million or 2.7% of revenues, as compared to $1.4 million or 2.7% of revenues last quarter and $1.1 million or 3.8% of revenues in the same quarter of last year. Sales and marketing expenses were $1.5 million or 2.2% of revenues, as compared to $1.4 million, or 2.7% of revenues last quarter and $1.2 million or 4.0% of revenues in the third quarter of last year. General and administrative expenses were $5.1 million or 7.4% of revenues, as compared to $4.8 million or 9.4% of revenues last quarter and $4.2 million or 14.2% of revenues in the same quarter of last year.
Operating loss for the third quarter of FY08 was $36,000, as compared to operating loss of $3.7 million last quarter and operating loss of $1.4 million in the same quarter of last year.
Net loss was $2.3 million in the third quarter of FY08, as compared to net loss of $6.2 million last quarter and net loss of $2.7 million in the same quarter of last year. Diluted earnings per share were negative $0.04 compared with negative $0.12 per diluted share last quarter and negative $0.05 per diluted share in the same quarter of last year.
Financial Condition
At June 30, 2008, China BAK had $30.2 million in cash and a negative working capital of $2.5 million, reflecting a current ratio of 0.99:1. Total debt at quarter end, including short-term bank loans, long-term bank loans and bills payable, was $187.2 million and stockholders' equity totaled $147.9 million. China BAK had $121.8 million available for borrowing under its credit facilities.
Business Outlook
"Looking at the third quarter of fiscal 2008, we are pleased to see record revenue, improved gross margin and narrower loss, and the continuous expansion of our customer base. We also obtained final approval on the land use rights of BAK Industrial Park, which removed the last major uncertainty in our growth path. We're confident that we will achieve our FY08 revenue target of $210 million, and expect to expand our product offerings with the Tianjin facilities put into operation in or about October 2008," commented Mr. Xiangqian Li, CEO of China BAK.
Conference Call
China BAK will host a conference call at 9:00 p.m. ET on Monday, July 28, 2008 to discuss results for the third quarter of FY08 ended June 30, 2008. 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 approximately fifteen 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 750-388-92. If you are unable to participate in the call at this time, a replay will be available from 11:00 p.m. ET on Monday, July 28, 2008 through 11:00 p.m. ET Tuesday, August 12, 2008. To access the replay, please dial (888) 286-8010. International callers should dial (617) 801-6888. The pass code for the replay is 124-850-92. 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 (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 Reports on Form 10-K for the fiscal years ended September 30, 2006 and 2007, as well as China BAK's Quarterly Reports on Form 10-Q for FY08, 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 and Nine Months Ended June 30, 2007 and 2008 (Unaudited) (Amounts in thousands, except per share data) Three Months Ended Nine Months Ended June 30, June 30, 2007 2008 2007 2008 Net Revenues $29,477 $68,486 $102,088 $172,609 Cost of revenues (24,414) (60,082) (82,682) (153,184) Gross profit 5,063 8,404 19,406 19,425 Operating expenses: Research and development costs (1,118) (1,855) (2,684) (4,564) Sales and marketing expenses (1,165) (1,484) (3,272) (4,235) General and administrative expenses (4,189) (5,101) (9,301) (14,162) Total operating expenses (6,472) (8,440) (15,257) (22,961) Operating income / (loss) (1,409) (36) 4,149 (3,536) Finance costs, net (1,070) (2,735) (3,135) (7,377) Government grant income 339 762 1,377 Other income / (expense) (91) 113 (161) 74 Income / (loss) before income taxes (2,570) (2,319) 1,615 (9,462) Income taxes (expenses) / benefit (120) 31 (282) 50 Net income / (loss) $(2,690) $(2,288) $1,333 $(9,412) Other comprehensive income -- Foreign currency translation adjustment 1,942 3,886 4,636 14,020 Comprehensive (loss) / income $(748) $1,598 $5,969 $4,608 Net income / (loss) per share: Basic $0.05 $(0.04) $(0.03) $(0.18) Diluted $0.05 $(0.04) $(0.03) $(0.18) Weighted average shares outstanding: Basic 48,893 52,382 48,890 51,610 Diluted 48,893 52,382 49,283 51,610 China BAK Battery Inc. and Subsidiaries Consolidated Balance Sheets As of September 30, 2007 and June 30, 2008 (Amounts in thousands) September 30, June 30, 2007 2008 (Unaudited) Assets Current assets Cash and cash equivalents $14,197 $30,244 Pledged deposits 4,595 6,331 Trade accounts receivable, net 63,151 85,101 Inventories 59,827 68,191 Prepayments and other receivables 1,656 8,965 Deferred tax assets 503 1,285 Total current assets 143,929 200,117 Property, plant and equipment, net 145,123 182,593 Lease prepayments, net 17,884 31,502 Intangible assets, net 121 162 Deferred tax assets 172 -- Total assets $307,229 $414,374 Liabilities Current liabilities Short-term bank loans $89,871 $111,531 Current maturities of long-term bank loans -- 8,747 Accounts and bills payable 45,589 59,534 Accrued expenses and other payables 15,466 22,816 Total current liabilities 150,926 202,628 Long-term bank loans, less current maturities 29,291 55,401 Deferred income -- 7,824 Deferred tax liabilities 280 642 Total liabilities 180,497 266,495 Commitments and contingencies Shareholders' equity: Ordinary shares US$ 0.001 par value; 100,000,000 authorized; 49,250,853 and 53,223,633 issued and outstanding as of September 30, 2007 and June 30, 2008, respectively 49 53 Donation Shares 1 14,102 Additional paid-in-capital 74,311 80,811 Statutory reserves 6,427 6,520 Retained earnings 36,060 26,555 Accumulated other comprehensive income 9,885 23,905 Less: Treasury shares -- (4,067) Total shareholders' equity 126,732 147,879 Total liabilities and shareholders' equity $307,229 $414,374 China BAK Battery Inc. and Subsidiaries Consolidated Statements of Cash Flows For the nine months ended June 30, 2007 and 2008 (Unaudited) (Amounts in thousands) Nine months ended June 30, 2007 2008 Cash flow from operating activities Net income / (loss) $1,333 $(9,412) Adjustments to reconcile net income / (loss) to net cash provided by / (used in) operating activities: Depreciation and amortization 6,594 9,362 Addition of bad debt expense(Recovery) 1,366 2,187 Provision for obsolete inventories -- 114 Share-based compensation 1,624 2,534 Deferred income taxes 14 (201) Exchange loss -- 1,508 Loss on disposal of PPE -- 190 Changes in operating assets and liabilities: Trade accounts receivable 12,895 (17,102) Inventories (13,015) (2,599) Prepayments and other receivables (193) (6,388) Accounts and bills payable (2,073) 8,739 Accrued expenses and other payables (875) 1,912 Net cash provided by / (used in) operating activities $7,670 $(9,156) Cash flow from investing activities Purchases property, plant and equipment (38,601) (30,903) Payment of lease prepayment (14,372) (11,145) Purchases of intangible assets (34) (101) Proceeds from disposal of PPE -- 321 Government grants received -- 7,469 Net cash used in investing activities $(53,006) $(34,359) Cash flow from financing activities Proceeds from borrowings 101,961 119,697 Repayment of borrowings (79,049) (76,550) (Increase)/ decrease in pledged deposits 9,746 (1,241) Proceeds from issuance of capital stock -- 14,006 Net cash provided by financing activities $32,658 $55,912 Effect of exchange rate changes on cash and cash equivalents 524 3,651 Net (decrease) / increase in cash and cash equivalents (12,155) 16,048 Cash and cash equivalents at the beginning of year 21,100 14,196 Cash and cash equivalents at the end of year $8,945 $30,244
