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China Ritar Power Announces First Quarter Fiscal 2009 Results

SHENZHEN, China, May 18 /PRNewswire-Asia-FirstCall/ -- China Ritar Power Corp. (OTC Bulletin Board: CRTP) ('China Ritar' or the 'Company'), a leading Chinese manufacturer of lead acid batteries, today reported its fiscal 2009 first quarter results for the period ended 31 March, 2009.

    First Quarter 2009 Highlights
    -- Revenue was $17.5 million, down 9% year-over-year
    -- Sales volume increased 21% year-over-year
    -- Gross profit was $3.3 million with 18.8% gross margin
    -- Net income increased 3% year-over-year to $0.53 million
    -- Fully diluted earnings per share were $0.03

"During the first quarter, our sales volume increased 21% over the first quarter in fiscal 2008 as a result of continued growth in the renewable energy sector," Mr. Jiada Hu, China Ritar's Chairman and Chief Executive Officer commented. "Moreover, we continued to ramp up production at our new facilities in Hengyang Industrial Park for our battery and lead plate production. Lead plates represented approximately 70.2% of the cost of our batteries for the quarter. As we increase the volume of lead plates manufactured internally, we expect to realize an improvement in our gross margins by 3%-5% over the next few years."

Revenue in the first quarter of 2009 was $17.5 million, down 9% from revenue of $19.3 million in the first quarter of 2008. The decrease in revenue was mainly attributable to a decline in the average selling price (ASP) as a result of approximately 40% drop in the price of lead. The decline in ASP was offset by a 21% increase in sales volume. Moreover, the first quarter is typically the Company's slowest quarter as a result of a slowdown in customers' orders due to the Chinese New Year holiday. Batteries used for telecom, uninterruptible power supply (UPS), renewable energy storage and light electronic vehicles (LEV) accounted for 33%, 31%, 25% and 11% of total sales of the first quarter of 2009, respectively. International sales represented 73% of total sales with domestic sales representing the balance of 27%.

Gross profit for the quarter decreased 18.3% to $3.3 million from $4.0 million in the same period of 2008. Gross margin for first quarter of 2009 was 18.8% compared to 21.0% in the first quarter of 2008. The decline in gross margin was mainly the result of a sales promotion offered to current customers during the quarter and the increased overhead cost at the Hengyang factory. China Ritar's long-term gross margin target is 20.5%.

Operating expenses were $2.5 million or 14.3% of sales, compared to $2.7 million or 14.1% of sales in the first quarter of 2008. Adjusting for $0.96 million in non-cash, stock-based compensation recognized under salaries in the first quarter of 2008, non-GAAP operating expenses were $1.7 million or 9.0% of sales. The non-cash, stock-based compensation relates to the release of shares of the Company's common stock to the Company's CEO from escrow pursuant to a make good agreement to meet the net income target for 2008 of $8.2 million entered into by the Company in connection with its private placement financing in February 2007. The increase in operating expenses is primarily due to an increase in sales commission which represented 4.3% of total sales compared to 0.9% of total sales in the first quarter of 2008. The increase in sales commission is due to increased marketing efforts.

Operating income for the first quarter was $0.79 million compared to $1.3 million in the first quarter of 2008. Adjusting for the previously mentioned non-cash, stock-based compensation, non-GAAP operating income was $2.3 million in the first quarter of 2008.

Net income was $0.54 million in the first quarter of 2009 for fully diluted earnings per share of $0.03 compared to $0.53 million in net income and fully diluted earnings per share of $0.03 in the first quarter of 2008. Excluding the non-cash, stock-based compensation, non-GAAP net income for the first quarter of 2008 was $1.5 million. Non-GAAP fully diluted earnings per share for the first quarter of 2008 were $0.08.

Financial Condition

As of March 31, 2009, China Ritar had $11.8 million in cash and equivalents and restricted cash, $24.0 million in working capital and $30 million in total liabilities. Net cash provided by operating activities for the period was $1.7 million. Shareholders' equity stood at $35.0 million, up from $34.4 million at year end 2008.

Business Outlook

In 2008, China Ritar completed its new manufacturing complex in Hengyang City, Hunan Province. The complex has five lead acid battery production lines with designed production capacity of approximately 1.25 million kilowatt-hours and a lead plate production line with designed annual production capacity of 15,000 tons, per eight hour shift. The battery production lines are currently operating at approximately 60% utilization rate and are expected to reach 80% to 85% by the second or third quarter of 2009. With 19 production lines in operation, the Company believes that it has sufficient capacity to support its growth plans for 2009 and does not have plans for any capital expenditures at this time.

China Ritar has qualified to be a battery supplier for China's build out of the country's 3G mobile telecommunications networks and is in the final stage of the contract biding process. The Company expects the biding process will be completed by mid-June.

"We are very excited about the growth prospects for 2009, specifically in the domestic market as the Chinese government has committed significant resources to the advancement of its telecommunication and renewable energy industries," Mr. Hu commented. "While demand for our lead acid batteries used for telecommunication and renewable energy applications remains healthy in both international and domestic markets, we are concentrating the majority of our marketing efforts on the domestic market which is expected to increase to about 40% of total sales by the end of the year."

Conference Call

China Ritar will host a conference call at 9:00 am EDT on Monday, May 18, 2009 to discuss the first quarter fiscal 2009 results. To participate in the conference call, please dial the following number fifteen minutes prior to the scheduled conference call time: 888-419-5570. International callers should dial 617-896-9871. The pass code for the call is 647 125 73. If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Monday, May 18, 2009 at 11:00 AM EDT. To access the replay, dial 888-286-8010, international callers should dial 617-801-6888. The conference pass code is 659 756 30. This conference call will be broadcast live over the Internet and can be accessed by all interested parties by clicking on http://ir.ritarpower.com/en/ . Please access the link 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, a 90-day replay will be available shortly after the call by accessing the same link.

Use of Non-GAAP Financial Measures

To supplement China Ritar's condensed consolidated financial statements presented on a GAAP basis, China Ritar is providing certain income statement information that is not calculated according to GAAP. China Ritar believes that its non-GAAP disclosures are useful in evaluating its operating results as this information supplies the user with another view of the matching of costs and expenses. A reconciliation of the adjustments to GAAP results for the three month periods ended March 31, 2008 is included below. The non-GAAP information presented is supplemental and is not purported to be a substitute for information prepared in accordance with GAAP.

Non-GAAP financial results for the three month periods ended March 31, 2008 discussed in this release reflect operating results excluding the impact of the non-cash, stock-based compensation recognized under salaries in relation to the release of shares of the Company's common stock to the Company's CEO from escrow pursuant to a make good agreement to meet the net income target for 2008 of $8.2 million entered into by the Company in connection with its private placement financing in February 2007.

About China Ritar Corp.

China Ritar designs, develops, manufactures and markets environmentally friendly, lead acid batteries with a wide range of capacities and applications, including telecommunications, Uninterruptible power supply (UPS) devices, light electrical vehicles (LEV), and renewable energy systems (solar and wind power). China Ritar sells, markets and services six series and 197 models of Ritar-branded, cadmium-free valve-regulated lead-acid (VRLA) batteries. Products are sold worldwide with sales in 81 countries including China, India, and numerous markets in Europe and the Americas. Additional information can be found at the Company's website http://www.ritarpower.com .

Safe Harbor Statement

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release and oral statements made by China Ritar on its conference call in relation to this release, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included herein are forward-looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You 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 and available from the Securities and Exchange Commission. All forward-looking statements attributable to the Company or 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.

                       -- FINANCIAL TABLES TO FOLLOW --


                                          Three Months Ended March 31,
                                                  (Unaudited)
                                     2009(000)     %       2008(000)     %
    Revenue by Product
    UPS                                5,434      31%        6,739      35%
    Telecom                            5,785      33%        8,086      42%
    LEV                                1,928      11%        2,503      13%
    Renewable Energy Storage           4,382      25%        1,925      10%
    Total Revenue                     17,531     100%       19,255     100%



                   CHINA RITAR POWER CORP. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENT OF INCOME
                                 (Unaudited)

                                               Three Months Ended March 31,
                                               2009       2008        2008
                                               GAAP     NON-GAAP      GAAP

    Revenue                                $17,530,804 $19,254,556 $19,254,556

    Cost of sales
                                            14,236,015  15,220,717  15,220,717
    Gross profit                             3,294,789   4,033,839   4,033,839

    Operating expenses
    Salaries                                   463,634     247,503   1,210,853
    Sales commission                           749,224     179,150     179,150
    Shipping and handling cost                 297,096     289,055     289,055
    Other selling, general and
     administrative expenses                   995,326   1,026,587   1,026,587
    Total Expenses                           2,505,280   1,742,295   2,705,645

    Operating profit                           789,509   2,291,544   1,328,194

    Other income and (expenses)
    Interest income                             58,154      45,782      45,782
    Other income                                 2,540          --          --
    Interest Expense                          (147,424)   (142,234)   (142,234)
    Foreign currency exchange loss             (49,810)   (306,261)   (306,261)
    Other expenses                              (1,663)       (726)       (726)

    Other (expenses)                          (138,203)   (403,439)   (403,439)

    Income before income taxes and
     non-controlling interests                 651,306   1,888,105     924,755

    Income taxes                              (117,047)   (404,900)   (404,900)
    Net income                                 534,259   1,483,205     519,855
    Net loss attributable to non-controlling
     interest                                    7,694      14,236      14,236
    Net income attributable to China Ritar
     Power Corp. shareholders                  541,953   1,497,441     534,091
    Earnings per share:
    - Basic                                      $0.03       $0.08       $0.03
    - Diluted                                    $0.03       $0.08       $0.03

    Weighted average number of shares
     outstanding:
    - Basic                                 19,133,154  19,114,390  19,114,390
    - Diluted                               19,133,154  19,525,797  19,525,797



                   CHINA RITAR POWER CORP. AND SUBSIDIARIES
                RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
                  FOR THE THREE MONTHS ENDED MARCH 31, 2008

                                                        Three months ended
    Adjusted Net income                                   March 31, 2008
    Net Income (Loss) and Diluted EPS                 Net Income   Diluted EPS
    Adjusted Amount Non-GAAP                           1,497,441        0.08
    Adjustments
      Non-cash compensation adjustment (1)               963,350        0.05
    Amount per consolidated statement of operations      534,091        0.03

    (1) Non cash compensation expense in connection with the release from
        escrow to certain employees of shares of common stock that had been
        deposited into escrow to certain China Ritar employees in connection
        with the Company's private placement in February 2007



                   CHINA RITAR POWER CORP. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS

                                             As of March 31, As of December 31,
                   ASSETS                         2009              2008
                                              (Unaudited)         (Audited)
    Current assets:
    Cash and cash equivalents            $       8,696,963    $      8,300,472
    Accounts receivable, net of
     allowances of $1,311,511 and
     $1,311,759                                 16,532,716          20,015,989
    Inventory                                   16,366,159          14,578,230
    Advance to suppliers                         1,420,309           1,340,107
    Other current assets                         4,131,664           3,564,793
    Restricted cash                              3,058,963           4,387,679
    Total current assets                        50,206,774          52,187,270

    Non-current assets:
    Property, plant and equipment, net          10,735,355          10,905,369
    Construction in progress                     3,425,036           3,089,854
    Intangible assets, net                          12,920              17,088
    Land use right                                 474,181             476,687
    Rental and utility deposits                     82,785              82,801
    Total assets                         $      64,937,051    $     66,759,069

              LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
    Accounts payable                     $      12,445,038    $     13,483,218
    Income and other taxes payable               2,808,951           2,941,267
    Accrued salaries                               364,639             447,022
    Bills payable                                5,201,738           4,321,915
    Derivative instruments                         213,856             236,898
    Other current liabilities                    2,854,944           2,808,483
    Current portion of long term loans             877,719             877,886
    Short-term loans                             1,483,758           3,596,955

    Total current liabilities                   26,250,643          28,713,644

    Long-term liabilities:
    Long-term loans                              3,657,163           3,657,859
    Total liabilities                           29,907,806          32,371,503

    Stockholders' equity:
    Preferred stock, $.001 par value,
     10,000,000 shares authorized, no
     shares issued and outstanding                      --                  --
    Common stock at $.001 par value;
     authorized 100,000,000 shares
     authorized, 19,134,992 shares
     issued and outstanding                         19,135              19,135
    Additional paid-in capital                  19,222,727          19,222,727
    Retained earnings                           12,595,158          12,053,205
    Accumulated other comprehensive
     income                                      3,199,920           3,092,499
        Total China Ritar shareholders'
         equity                                 35,036,940          34,387,566
    Non-controlling interest                        (7,695)                 --

    Total equity                         $      35,029,245    $     34,387,566

    Total liabilities and stockholders'
     equity                              $      64,937,051    $     66,759,069



                   CHINA RITAR POWER CORP. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Unaudited)

                                                   For the Three Months Ended
                                                           March 31,
                                                       2009           2008
    Operating activities
    Net income                                       $541,953       $534,091
    Adjustments to reconcile net income from
     operations to net cash used in operating
     activities:
    Depreciation of property, plant and
     equipment                                        324,251        189,596
    Amortization of intangible assets and land
     use right                                          3,592             --
    Allowance of bad debts                                 --         11,985
    Gain on disposal                                     (365)            --
    Stock-based compensation - make good
     provision                                             --        963,350
    Allowance for inventory valuation and slow
     moving items                                          --         18,993
    Unrealized loss on derivative instruments         (22,992)            --
    Non-controlling interests                          (7,694)       (14,236)
    Changes in operating working capital
     items:
    Accounts receivable                             3,478,753     (1,702,569)
    Inventory                                      (1,790,335)    (1,906,722)
    Advance to suppliers                                   --      2,233,541
    Other current assets                             (567,432)      (145,011)
    Accounts payable                               (1,035,407)      (640,889)
    Income and other tax payable                     (131,730)      (162,787)
    Accrued salaries                                  (82,281)      (136,874)
    Bills payable                                     880,465     (1,804,702)
    Other current liabilities                         123,431        397,779
    Net cash provided by (used in) operating
     activities                                     1,714,209     (2,164,455)

    Investing activities
    Loan to related parties                                --         (4,566)
    Purchase of property, plant and equipment        (496,069)    (1,243,342)
    Sales proceeds of disposal of fixed assets          4,388             --
    Net cash used in investing activities            (491,681)    (1,247,908)

    Financing activities
    Proceeds from other loan borrowings                    --        130,649
    Proceeds from bank borrowings                   1,626,177      1,290,457
    Repayment of bank borrowings                   (3,738,257)            --
    Restricted cash                                 1,327,610      1,624,452
    Net cash provided by financing activities        (784,470)     3,045,558

    Effect of exchange rate changes in cash           (41,567)       190,483
    Net increase (decrease) in cash and cash
     equivalents                                      396,491       (176,322)
    Cash and cash equivalents, beginning of
     period                                         8,300,472      4,775,562
    Cash and cash equivalents, end of period       $8,696,963     $4,599,240



    For more information, please contact:

    Elite IR
     John Marco, Partner
     Tel:   +1-310-819-2948
     Email: [email protected]

    Elite IR
     Leslie J. Richardson, Partner
     Tel:   +852-3183-0283
     Email: [email protected]

SOURCE China Ritar Power Corp.

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