New Energy Systems Group Reports Record Revenue and EPS for the First Quarter of 2010
NEW YORK and SHENZHEN, China, May 14 /PRNewswire-Asia-FirstCall/ -- New Energy Systems Group (OTC Bulletin Board: NEWN) ("New Energy" or the "Company"), a vertically integrated original design manufacturer and distributor of lithium ion batteries and backup power systems, today announced financial results for the quarter ended March 31, 2010.
First Quarter 2010 Highlights:
-- Revenue increased 753% to approximately $22.5 million
-- Gross profit increased 801% to approximately $6.4 million
-- GAAP EPS increased 235% to $0.30 per diluted share
-- Adjusted EPS increased 297% to $0.37 per diluted share
-- Generated $6.6 million of cash flow from operations
-- Reaffirms 2010 adjusted EPS guidance of $1.23 per diluted share
Mr. Nian Chen, New Energy's new Chief Executive Officer, commented, "We are extremely pleased with our first quarter 2010 results, which is the first quarter that includes the full impact of the recent Anytone and NewPower acquisitions. Our strong results this quarter reflect not only rapid organic growth within each of our businesses, but also the successful integration and benefits of these accretive acquisitions which significantly transformed our company. Specifically, Anytone brings significant R&D capabilities and expands our offering to include higher margin end-user branded products. NewPower provides us a captive source for battery components that enables us to keep costs below our competitors' and improve margins in our direct-to-consumer and finished battery distribution businesses. Given the positive trends in the consumer electronics market, we continue to see increasing demand for our products. We are well positioned to capitalize on this demand due to our reputation for producing high quality and innovative products. We continue to generate strong free cash flow, have a solid balance sheet, and have unused manufacturing capacity, which will allow us to continue growing without incurring significant capital expenditures."
Mr. Chen continued, "We remain confident that our adjusted 2010 net income will be at least $15.6 million, or $1.23 per diluted share, based on approximately 12.6 million fully diluted shares. This would represent approximately 38% growth in adjusted diluted EPS, despite the fact that our 2010 effective tax rate will be approximately 22% for 2010 versus approximately 12% for 2009. We are very excited about the outlook for the company and look forward to keeping our shareholders updated on our progress."
Revenue for the three months ended March 31, 2010, was approximately $22.5 million as compared to $2.6 million for the three months ended March 31, 2009, an increase of 753%. Sales in the battery segment, which includes the newly acquired Anytone and NewPower businesses, grew 993% to $19.4 million in the first quarter of 2010 compared to approximately $1.8 million in the first quarter of 2009. Sales in the battery shell and cover segment grew 256% to approximately $3.1 million in the first quarter of 2010, compared to $857,662 in the first quarter of 2009. Anytone, which was acquired in December 2009, contributed revenue of approximately $10.3 million in the first quarter of 2010. NewPower, which was acquired on January 12, 2010, contributed approximately $7.7 million of revenue in the first quarter of 2010. On a standalone basis, sales for Anytone and NewPower in the first quarter of 2010 increased 72% and 31%, respectively, compared to the same period last year prior to the acquisitions. Excluding the contributions from Anytone and NewPower, revenue in the battery segment increased approximately 70% compared to the first quarter of 2009.
Gross profit was approximately $6.4 million, or 28.6% of total revenue, for the three months ended March 31, 2010, as compared to $713,380, or 27.1% of total revenue, for the three months ended March 31, 2009. The improvement reflects increased sales in each of the segments, including the battery shell and cover segment, which has higher gross margins.
Operating income was approximately $4.9 million for the three months ended March 31, 2010, as compared to $594,194 for the three months ended March 31, 2009. For the first quarter of 2010, general and administrative expenses included $696,777 in non-cash amortization expense and $251,507 in non-cash stock compensation expense, compared to $28,104 of non-cash amortization expense and zero non-cash stock compensation expense for the first quarter of 2009. Operating income excluding these non-cash items was approximately $5.9 million for the three months ended March 31, 2010, as compared to $622,298 for the three months ended March 31, 2009.
Net income for the three months ended March 31, 2010, was approximately $3.8 million, or $0.30 per diluted share, compared to net income of $504,282, or $0.09 per diluted share, for the three months ended March 31, 2009. Excluding non-cash stock-based compensation expense and amortization expense, adjusted net income, was approximately $4.7 million, or $0.37 per diluted share, for the three months ended March 31, 2010, as compared to $532,386, or $0.09 per diluted share, for the three months ended March 31, 2009 (see table below for reconciliation to net income).
As of March 31, 2010, the Company had cash and cash equivalents of approximately $8.5 million. Included in the Company's accounts payables is an approximately $4.0 million liability, which is scheduled to be paid in cash by June 30, 2010, as a final payment related to the Anytone acquisition which was completed in December 2009.
Table 1: Reconciliation of Q1 2010 and 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 three months ended March 31, 20010 and March 31, 2009.
Three Months Ended
March 31,
2010 2009
Net income $3,781,866 $504,282
Add back: non-cash, stock based
compensation expense $251,507 $--
Add back: amortization expense $696,777 $28,104
Adjusted net income $4,730,150 $532,386
Reported net income per diluted share $0.30 $0.09
Adjusted net income per diluted share $0.37 $0.09
Conference Call
New Energy Systems Group will also host a conference call at 8:00 a.m. Eastern Time on Friday, May 14, 2010. During the call, Mr. Weihe Yu, Chairman, Mr. Nian Chen, New Energy's new 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 for seven calendar days through midnight Friday, May 21, 2010, by calling (877) 660-6853 (U.S. callers) or (201) 612-7415 (international callers) and entering account #286 and conference ID #350737. 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
This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary and affiliated companies. These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (www.sec.gov). All forward-looking statements attributable to the Company or to persons acting on its behalf are expressly qualified in their entirety by these factors other than as required under the securities laws. The Company does not assume a duty to update these forward- looking statements.
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
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2010 2009
(Unaudited)
Current assets
Cash and cash equivalents $8,530,867 $3,651,990
Accounts receivable 10,943,006 9,776,041
Inventory 1,590,613 502,702
Prepaid expenses 437,155 262,380
Other receivables 37,637 3,470,903
Total current assets 21,539,278 17,664,016
Plant, property & equipment,
net 967,008 699,790
Other assets
Goodwill 28,008,679 19,244,036
Intangible assets, net 22,085,159 15,772,344
Total other assets 50,093,838 35,016,380
Total assets $72,600,124 $53,380,186
Current liabilities
Accounts payable and accrued
expenses $10,459,721 $9,095,623
Taxes payable 1,275,302 762,430
Loan payable to related party 527,372 527,225
Deferred revenue 629,917 --
Total current liabilities 12,892,312 10,385,278
Deferred tax liability 4,268,755 3,001,584
Total Liabilities 17,161,067 13,386,862
Stockholders' equity
Preferred stock, $.001 par
value, 7,575,757 shares
authorized, issued and
outstanding 7,576 7,576
Common stock, $.001 par value,
140,000,000 shares authorized,
11,863,390 issued and
outstanding 11,863 11,863
Additional paid in capital 53,656,188 42,165,283
Statutory reserve 2,070,081 2,070,081
Other comprehensive income 1,230,196 1,225,986
Retained earnings (Accumulated
deficit) 742,896 (3,038,972)
Less: Deferred compensation (2,279,743) (2,448,493)
Total stockholders' equity 55,439,057 39,993,324
Total liabilities and
stockholders' equity $72,600,124 $53,380,186
NEW ENERGY SYSTEMS GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended March 31,
2010 2009
Revenue, net
Battery $19,399,150 $1,774,458
Battery shell and cover 3,053,513 857,662
Total revenue 22,452,663 2,632,120
Cost of sales
Battery 14,073,985 1,190,843
Battery shell and cover 1,953,393 727,897
Total cost of revenue 16,027,378 1,918,740
Gross profit 6,425,285 713,380
Operating expenses
Selling expenses 125,974 18,139
General and administrative
expenses 1,374,155 101,047
Total operating
expenses 1,500,129 119,186
Income from operations 4,925,156 594,194
Other expenses
Other income 8,287 2,898
Interest income (expense) 21,289 (31,042)
Total other expenses 29,576 (28,144)
Income before income taxes 4,954,732 566,050
Provision for income taxes (1,172,866) (61,768)
Net income 3,781,866 504,282
Other comprehensive income
Foreign currency
translation 4,210 (14,628)
Comprehensive income $3,786,076 $489,654
Net income per share
Basic $0.32 $0.09
Diluted $0.30 $0.09
Weighted average number of shares
outstanding:
Basic 11,863,390 5,646,063
Diluted 12,623,895 5,646,063
NEW ENERGY SYSTEMS GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $3,781,866 $504,282
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Depreciation and amortization 760,851 81,896
Deferred tax liability (134,717) --
Deferred compensation expense 168,750 --
Loss on disposal of subsidiary 121 --
(Increase) / decrease in
current assets:
Accounts receivable 1,646,089 4,690,324
Inventory (847,367) 471,307
Other receivables 433,887 --
Increase/(Decrease) in current
liabilities:
Accounts payable and accrued
expenses (96,097) (2,217,830)
Taxes payable 875,670 (325,160)
Net cash provided by operating
activities 6,589,053 3,204,819
CASH FLOWS FROM INVESTING
ACTIVITIES
Cash acquired in acquisition of
NewPower 24,550 --
Proceeds from sale of property
and equipment 66 --
Acquisition of property and
equipment (3,844) --
Net cash used in investing
activities 20,772 --
CASH FLOWS FROM FINANCING
ACTIVITIES
Repayment of acquisition
liability (1,000,000) --
Loan from (repayment to)
related party (732,397) 19,550
Net cash provided by (used in)
financing activities (1,732,397) 19,550
Effect of exchange rate changes
on cash and cash equivalents 1,449 (29,286)
Net increase in cash and cash
equivalents 4,878,877 3,195,083
Cash and cash equivalents,
beginning balance 3,651,990 6,969,454
Cash and cash equivalents,
ending balance $8,530,867 $10,164,537
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Income tax payments $556,427 $61,768
Interest payments $0 $35,085
SOURCE New Energy Systems Group
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