Company Continues to Focus on Building a Solid Foundation for EV Sales in China
JINHUA, CHINA – August 15, 2011 – (Motor Sports Newswire) – Kandi Technologies, Corp. (NASDAQ: KNDI), a leading Chinese supplier of off-road vehicles and developer of pure electric vehicles (EV), today reported improved financial results for the second quarter and six months ended June 30, 2011, highlighted by double-digit growth in operating income and adjusted net income (described below) on modest revenue growth.
Second quarter 2011 financial highlights:
- Revenues increased 2.3%, to $10.1 million, from $9.9 million a year earlier, reflecting continued strong growth in go-kart sales. Sequentially, sales were up 22% compared to the first quarter of 2011
- Operating income increased to $0.8 million, up 18.4% from $0.7 million in the second quarter of 2010
- Net income more than tripled to $3.6 million, or $0.13 per diluted share, compared to net income of $1.2 million, or $0.05 per diluted share in the same period last year. The non-GAAP adjusted net income (described below) grew by 24.6% as compared to the second quarter of 2010
- Working capital surplus of $23.0 million at quarter-end, improved from working capital surplus of $18.5 million at the end of 2010
- Cash, cash equivalents and restricted cash totaled $36.1 million at quarter-end, which equates to $1.26 per fully diluted share, a 43.7% increase from $25.2 million at the end of 2010
“While our primary focus in the second quarter continued to be building a strong base for future EV sales in China, we benefitted from strong sales in our legacy go-kart business, as well as stronger ATV sales through the first six months,” said Mr. Xiaoming Hu, CEO and Chairman of the Board of Kandi Technologies. “Net income and sales in the period advanced strongly on a sequential basis and, in the case of net income, on a year-over-year basis as well. While unit volume remained low, we also realized higher per unit revenue in our super mini-car business. Our successful financing last year greatly strengthened our balance sheet and cash position, which will permit us to grow our EV business in China as the pace of infrastructure development advances. Over the past few months, we have greatly solidified our positions in Jinhua and Hangzhou, where we made significant progress in strengthening our relationship with State Grid to create the infrastructure needed to foster widespread adoption and use of EVs in China. We continue to believe the anticipated success in these cities will serve as models for many other cities and regions in China. We are committed to our technology and continue to invest in developing the products that will provide efficient, low-cost new energy transportation to the growing Chinese market.”
To support its ongoing development efforts, Kandi continued to invest in research and development to improve existing products and foster new products. During the quarter, the Company invested $0.6 million in research and development, an increase of 43.5% from the second quarter of 2010. Over the first six months, research and development increased 46.1%, to nearly $1.1 million when compared to the comparable period of 2010.
“With respect to EV sales globally, we are taking a long-term view of our markets, establishing the infrastructure needed to meet current and future demand,” said Mr. Hu. “With this in mind, we have invested in our production facilities to increase overall capacity”
Second Quarter 2011 Results
The modest increase in second-quarter revenues reflected significant increases in sales of go-karts, which nearly doubled to $6.2 million. The second quarter gross profit was $2.3 million in 2011, as compared to $2.4 million in the second quarter of 2010, while gross margin decreased to 23.1%, from 23.7% in the prior year, primarily as a result of a shift in product mix during the quarter. The Company’s operating income was $0.8 million in 2011, compared to $0.7 million in the second quarter of 2010. Year-to-date operating income more than doubled to $1.7 million from $0.7 million in the prior year first half.
The Company’s net income totaled $3.6 million for the quarter, or $0.13 per fully diluted share, as compared with net income of $1.2 million, or $0.05 per fully diluted share, for the same period of 2010. Without the convertible notes, warrant and option-related charges, non-GAAP adjusted net income increased 24.6% to $1.3 million, compared to $1.1 million in the same period of 2010. In the first six months of 2011, reported net income including changes in fair value was $9.6 million or $0.33 per diluted share. Excluding these items, non-GAAP adjusted net income was $2.0 million or $0.07 per share on 28.8 million fully diluted shares
Building the Foundation for EV Leadership
As previously reported, in the second quarter of 2011 the Company made significant additional progress in building the foundation for future EV sales. Of note, the Company:
- Received formal provincial government approval of RMB 15 million ($2.3 million U.S.) annual subsidy on the Company’s application for a new energy vehicle pilot program in Jinhua City. Together with the Jinhua city government subsidy, a total of RMB 30 million ($4.6 million U.S.) per year in government subsidies to residents is available for the purchase Kandi clean energy vehicles through 2012
- Hosted a visit from Mr. Liang Nie, general manager of Dayou Technology Development Company, the State Grid subsidiary responsible for the development and operation of battery charging and changing facilities in the city of Hangzhou
- Displayed a variety of EVs at the 13th Zhejiang Investment and Trade Fair and the 10th China International Consumer Goods Fair, which were held in Ningbo
- Signed a strategic cooperation agreement with State Grid affiliate Hangzhou Electric Vehicle Service Co., Ltd., for the launch of a 20,000 pure EV pilot program for Hangzhou residents through the end of 2012
In addition, the Company took steps to strengthen corporate governance and build shareholder value by:
- Improving the quality and independence of the Company’s Board of Directors and improving internal control with the naming of a new independent board member and engaging a “big four” professional firm
- Obtaining Board approval of a $5 million share repurchase program over the following 18 months
Stronger Second Half EV Sales
“Kandi continues its progress toward becoming a leader in the pure EV market in China,” said Mr. Hu. “Given our strategic relationships and investments, we believe Kandi is well positioned to anticipate growing demand for EVs. That said, we recognize that the organic development of markets for these emerging technologies will take time. As a result, we expect sales to grow modestly over the near term.”
About Kandi Technologies, Corp.
Kandi Technologies, Corp. (NASDAQ: KNDI) is a manufacturer and exporter of a variety of vehicles in China, making it a world leader in the production of popular off-road vehicles (ORVs). It also ranks among the leading manufacturers in China of all-terrain vehicles (ATVs), specialized utility vehicles (UTVs), and a recently introduced second-generation high mileage, two-seat three-wheeled motorcycle. Another major company focus has been on the manufacture and sale of the COCO electric vehicle (EV), a highly economical, beautifully designed, all-electric super mini-car for neighborhood driving and commuting. The convertible and hardtop models of the COCO EV are available in the United States and other countries, while the Chinese government has approved the sale of Kandi EVs in China since 2010. The Company’s products can be viewed at http://www.kandivehicle.com and its IR website is http://www.kanditechnology.com.
Information Regarding Forward-Looking Statements
The foregoing press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These include statements about the Company’s expectations, beliefs, intentions or strategies for the future, which the Company indicates by words or phrases such as “anticipate,” “expect,” “intend,” “plan,” “will,” “we believe,” “our company believes,” “management believes” and similar language. These forward-looking statements are based on the Company’s current expectations and are subject to certain risks, uncertainties and assumptions. The Company’s actual results may differ materially from results anticipated in these forward-looking statements. The Company bases its forward-looking statements on information currently available, and it assumes no obligation to update them. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements.
Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
|KANDI TECHNOLOGIES, CORP.|
|CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND|
|COMPREHENSIVE INCOME (LOSS)|
|Three Months Ended||Six Months Ended|
|June 30, 2011||June 30, 2010||June 30, 2011||June 30, 2010|
|COST OF GOODS SOLD||(7,795,987||)||(7,559,235||)||(14,076,060||)||(13,963,654||)|
|Research and development||574,588||400,370||1,086,540||743,768|
|Selling and distribution expenses||92,679||89,685||149,615||942,013|
|General and administrative expenses||827,529||1,147,061||1,501,396||1,797,872|
|INCOME (LOSS) FROM OPERATIONS||846,919||715,533||1,665,597||718,917|
|Interest income (expense), net||275,466||(671,945||)||(21,804||)||(1,442,536||)|
|Change in fair value of financial instruments||2,367,594||1,213,169||7,752,772||1,775,809|
|Investment (loss) income||(8,490||)||–||(7,267||)|
|Other income, net||53,526||10,801||167,232||57,859|
|INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES||3,808,154||1,313,508||9,837,248||1,185,838|
|INCOME TAX (EXPENSE) BENEFIT||(186,811||)||(124,741||)||(277,505||)||(175,056||)|
|NET INCOME (LOSS)||3,621,343||1,188,767||9,559,743||1,010,782|
|ADJUSTED NET INCOME (NON-GAAP)||1,317,286||1,057,242||1,974,364||1,655,193|
|WEIGHTED AVERAGE SHARES OUTSTANDING BASIC||27,440,878||20,866,109||27,431,851||20,424,671|
|WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED||28,578,592||24,677,264||28,786,145||22,004,992|
|NET INCOME (LOSS) PER SHARE, BASIC||$||0.13||$||0.06||$||0.35||$||0.05|
|NET INCOME (LOSS) PER SHARE, DILUTED||$||0.13||$||0.05||$||0.33||$||0.05|
|ADJUSTED NET INCOME PER SHARE, DILUTED||$||0.05||$||0.04||$||0.07||$||0.08|
Kandi Technologies, Corp.
Chairman and CEO
Executive Vice President of Finance
Jeff Lambert, Mike Houston
Lambert, Edwards & Associates