China TMK Battery Systems Reports First Quarter 2010 Financial Results
China TMK Battery Systems Inc. announced financial results for the three month period ended March 31, 2010. For the first quarter of 2010, sales revenue increased 34.0% to $13.3 million, from $9.9 million in the first quarter of 2009. The increase in revenue was due mainly to increased demand for TMK’s products, from both existing and new customers and as a result of expanded marketing efforts.
International sales comprised 3.0% sales while 97% of sales emanated from China. TMK currently has a maximum capacity of 200,000 battery cells per day, with monthly output of 1,500,000 pieces, and is currently operating above 95% capacity. The company plans to increase its production capacity by adding two additional Ni-MH production lines providing additional capacity of 110,000 units per day, with operations starting in July 2010.
Total cost of sales increased by $2.6 million, or 34.7%, to $10.1 million for the first quarter of 2010, compared to $7.5 million in the same period last year. The increase was primarily a result of the increase in sales and was relatively consistent with the increase in sales revenue.
The company’s gross profit increased $0.8 million, or 31.0%, to $3.2 million in the three months ended March 31, 2010 compared to $2.4 million in first-quarter 2009, with gross margin of 23.8% compared to 24.4% for the respective periods. The decrease in gross margin is mainly due to increased production costs.
Operating expenses for the first quarter of 2010 were approximately $2.2 million in comparison to $0.6 million in the first quarter of 2009. The increase was mainly due to a one-time merger cost of approximately $1.8 million in the first quarter of 2010, reflected primarily in higher general and administrative expenses which were $1.8 million in the first quarter of 2010 as compared to $0.3 million in the same period last year. Selling expenses were $0.2 million, as compared to $0.2 million in the respective periods. Adjusted income from operations was $2.7 million for the first quarter of 2010, an increase of 50.3% from $1.8 million in the same period last year. Operating margin was 20.2% for the first quarter 2010, compared to 18.0% in the equivalent quarter last year.
Net income for the company in the first quarter of 2010 was approximately $0.3 million, a decrease of $1.0 million, or 80.6%, from $1.3 million in the equivalent quarter last year. The decrease was due to the one-time merger cost of approximately $1.8 million in the first quarter of 2010. Diluted net income per share for the first quarter of 2010 was $.01 based on 26.8 million weighted average shares outstanding, as compared to diluted net income per share of $.05 for the first quarter of 2009, based on 25.2 million weighted average shares outstanding. Excluding the one-time merger cost of approximately $1.8 million, adjusted net income for the first quarter of 2010 was $2.0 million, or $.07 per diluted share.
"During the first quarter of 2010 we continued to receive customer orders in excess of our capacity as demand continues to be driven by rapid growth in consumer products which utilize environmentally friendly rechargeable batteries," stated Henian Wu, Chairman and President of the company. "This $5 billion plus market worldwide for Ni-MH batteries contributed to our robust revenue and earnings growth during the quarter. To capitalize on this growth opportunity and to gain further market share in 2010, we are increasing our production capacity to accommodate new products, such as intelligent battery solutions, which provide controlled back-up power and address new market verticals, such as traffic technology and the telecommunication infrastructure grid. In addition, we have entered into an MOU to purchase a manufacturer of lithium ion batteries as we prepare to launch new products addressing the cellular phone, electronic device and electric vehicle markets."
