China BAK Battery, Inc., a global manufacturer of lithium-based battery cells, announced its financial results for the second quarter of fiscal year 2012 ended March 31, 2012 ("Q2 2012").
Second Quarter Fiscal Year 2012 Highlights
"Historically, our second fiscal quarter is a slow quarter partly due to the Chinese New Year holidays, which significantly reduce overall sales volume. In addition, the continued weakness in the global economy and the slowdown in the replacement market also impacted our business. At the same time, we are pleased with the growth in revenue from our high-power lithium battery cells, which are supplied to EV customers," commented Mr. Xiangqian Li, Chairman, President and CEO of China BAK.
Second Quarter Fiscal Year 2012 Results
Net revenue for the three months ended March 31, 2012, decreased 54.3% to $32.8 million, from $71.8 million in the previous quarter and decreased 29.8% year-over-year from $46.7 million in the second quarter of fiscal 2011. The decline in revenue was largely due to reduced demand for the Company's prismatic cells and cylindrical cells.
Revenues from prismatic products, including aluminum-case cells and battery packs, which are used in mobile phones and certain personal electronic devices, were $20.5 million, down 62.8% from $55.1 million in the previous quarter and down 29.5% from $29.0 million in the second quarter of fiscal 2011.
Revenues from cylindrical cells, used in notebook computers, certain electronic devices and electric vehicles, were $7.6 million, down 41.3% from $13.0 million in the previous quarter and down 49.9% from $15.2 million in the second quarter of fiscal 2011.
Revenues from lithium polymer cells, used in personal electronic devices such as PDAs, MP3 players and Bluetooth devices, were $2.3 million, down 11.0% from $2.6 million in the previous quarter and up 39.7% from $1.7 million in the second quarter of fiscal 2011.
Revenues from high-power lithium battery cells, used in electric bicycles, other electric vehicles, power tools, and uninterruptible power supplies, and other applications, were $2.3 million, up 121% from $1.1 million in the previous quarter and up 197.3% from $0.8 million in the second quarter of fiscal 2011.
Gross loss for the second quarter of fiscal year 2012 was $3.9 million, compared to gross profit of $14.0 million in the previous quarter and gross profit of $4.4 million in the second quarter of fiscal 2011. The weakness in gross profit was largely due to a decrease in prismatic and cylindrical sales volume during the three months ended March 31, 2012, and a significant write down of obsolete inventory over the three months ended March 31, 2012.
Operating expenses totaled $10.7 million, or 32.7% of revenue, in the second quarter, down 8.4% from $11.7 million, or 16.3% of revenue, in the previous quarter, and up 70.6% from $6.3 million, or 13.4% of revenue, in the second quarter of fiscal 2011. Operating expenses in the second quarter of fiscal 2012 include no impairment charge, compared with an impairment charge of $2.7 million in the previous quarter, and no impairment charge in the second quarter of fiscal 2011. Research and development expenses were $1.8 million, or 5.6% of revenue, up 48.6% from $1.2 million, or 1.7% of revenue in the previous quarter, and down 4.3% from $1.9 million, or 4.1% of revenue, in the second quarter of fiscal 2011. Sales and marketing expenses were $1.8 million, or 5.3% of revenue, down 10.5% from $2.0 million, or 2.7% of revenue, in the previous quarter, and down 20.3% from $2.2 million, or 4.7% of revenue, in the second quarter of fiscal 2011. General and administrative (G&A) expenses were $7.1 million, or 21.7% of revenue, up 22.9% from $5.8 million, or 8.1% of revenue, in the previous quarter, and significantly up from $2.1 million, or 4.6% of revenue, in the second quarter of fiscal 2011. The significant increase in G&A expenses year-over-year was mainly due to increase in provision for bad debt expenses following an assessment of account collectability in the second quarter of 2012.
Operating loss was $14.6 million compared to operating income of $2.3 million in the previous quarter and operating loss of $1.8 million in the second quarter of fiscal 2011.
Net loss was $15.6 million, or diluted loss per share of $0.25, in the second quarter of fiscal 2012 compared to net loss of $1.8 million, or diluted loss per share of $0.03, in the previous quarter and net loss of $4.1 million, or diluted loss per share of $0.06, in the second quarter of fiscal 2011.
Financial Condition
On March 31, 2012, China BAK had $16.7 million in cash and cash equivalents. For the second quarter of fiscal year 2012, Days Sales Outstanding (DSO) increased to 275 days from 124 days last quarter and Days Sales of Inventory increased to 144 days from 96 days last quarter. Short-term bank loans and long-term bank loans totaled $164.5 million as compared to $178.2 million on December 31, 2011. Shareholders' equity totaled $120.2 million. China BAK had $47.4 million available for borrowing under its credit facilities. The Company generated $9.1 million from cash flow from operating activities in the second quarter of fiscal 2012.
Business Outlook
"Over the next few quarters, we expect our earnings performance to improve as we continue to transition from the replacement market to the OEM market. We have cooperative relationships with major tier 1 OEM customers in China and anticipate our revenues will recover as we expand in the OEM market. We were pleased that our high-power lithium ion battery cells reached record quarterly revenues nearly 200% higher than in the same quarter last year, and we expect that our cooperative relationship with Chery Automobile, among others, will contribute to greater earnings in this sector. We also expect our ongoing upgrades to our polymer cell production lines will further our transition toward servicing and generating profits from China's growing smartphone and tablet computer battery cell markets," commented Mr. Xiangqian Li, Chairman, President and CEO of China BAK.
Conference Call
China BAK will host a conference call at 8:00 a.m. ET on Monday, May 7, 2012 to discuss results for the second quarter of fiscal year 2012 ended March 31, 2012. To participate in the conference call, please dial the following number approximately fifteen minutes prior to the scheduled conference call time: 877-847-0047 or 212-444-0113. International callers should dial 852-3006-8101. The pass code for the call is 673-355. If you are unable to participate in the call at this time, a replay will be available from 11:00 a.m. ET on Monday, May 7, 2012 through 11:00 a.m. ET, Monday, May 21, 2012. To access the replay, please dial 866-572-7808. International callers should dial (852) 3012-8000. The pass code for the replay is 673-355. The conference call will be broadcast live over the Internet and can be accessed by all interested parties on the China BAK website at //www.bak.com.cn/webcast.aspx. To listen to the live webcast, please go to 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, after the call a replay will be available on China BAK's website for a period of one year.