EX-99.1 2 v123739_ex99-1.htm
cbak

PRESS RELEASE

China BAK Reports Third Quarter Fiscal 2008 Financial Results

Shenzhen, China – July 28, 2008 – 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 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.

China BAK Battery Inc.
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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.

China BAK Battery Inc.
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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.
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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 June 30,
  
Nine Months Ended 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.
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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.
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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
  

China BAK Battery Inc.
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