Pingtan Marine Enterprise Reports Unaudited Financial Results For Its Third Quarter And Nine-Months Ended September 30, 2013

Nov 14, 2013, 17:07 ET from Pingtan Marine Enterprise Ltd.

FUZHOU, China, Nov. 14, 2013 /PRNewswire/ -- Pingtan Marine Enterprise Ltd. (Nasdaq: PME), ("Pingtan," or the "Company") an integrated marine services company in the People's Republic of China (PRC), today announced its unaudited financial results for the third quarter and nine-months ended September 30, 2013.

Recent Business Development

The Company expanded its fleet from 40 to 86 vessels through a purchase transaction of 46 fishing trawlers for a total consideration of $410.1 million in June 2013. These vessels are fully licensed to fish in Indonesian waters, and have brought to the Company additional carrying capacity of approximately 45,000 to 50,000 tons starting in the third quarter of 2013.

In September 2013, The Company further increased its fleet to 106 vessels with the addition of 20 newly-built fishing vessels, which were initially ordered in September 2012. These vessels are fully licensed to fish in both Indian and Indonesian waters, and have been placed into the sea for testing for 3 - 6 months of run-in period. Each vessel is capable of harvesting 900 to 1,000 tons of fish at full operation.  At current prices and operating at full capacity, each vessel is expected to generate annual revenue of approximately $3 million with annual net income of approximately $800,000 to $1 million.

Update on Sale of Dredging Subsidiary (Discontinued operations)

The China Dredging Group ("CDGC") business was reported as a discontinued operation during the third quarter of 2013.

As previously announced in July 2013, the Company received an offer from the Chairman and CEO, Mr. Xinrong Zhuo, to acquire the business and operating assets of our wholly-owned dredging subsidiary, CDGC, and its PRC operating subsidiaries in exchange for (i) forgiveness of the Company's current $155.2 million 4% promissory note due on June 19, 2015; (ii) transfer to the Company of the 25-year exclusive operating rights for 20 new fishing vessels, with such rights appraised at $216.1 million by an independent, globally recognized appraiser, BMI Appraisals Limited; and (iii) forgiveness of the Company's current accounts due to CDGC with amount $172.1 million.

Subsequent to the receipt of the fairness opinion on the proposed transaction from independent financial advisor, Duff & Phelps LLC on October 28, 2013, the Board, excluding Mr. Zhuo, and the Company's Senior Officer, Mr. Bin Lin, due to their interest in the proposed transaction, approved moving forward with the transaction. The Board is evaluating any potential alternative proposals received during the 30 day period beginning October 28, 2013 and the transaction is expected to close during the fourth quarter of 2013. Assuming the proposed transaction closes, the Company will own or have exclusive operating rights to 126 fishing vessels and licenses.

Third Quarter 2013 Management Comments

Mr. Xinrong Zhuo, Chairman and CEO of the Company, commented, "We are pleased with our efforts in expanding our fishing business, as we reported improved sales and gross margin during the period.  This increased margin expansion was driven by our operations reaching a greater size and scale, which we believe will continue to improve as we grow.  Pingtan's operating costs are largely tied to volume, as our public company costs are relatively fixed, and our labor and overhead costs currently provide operating leverage to grow. Increasing our total volume is also important in our pricing negotiations with fuel providers, distributors and exporters, while also opening the possibility to sell to end markets directly.  We believe that the recent notification by the Ministry of Agriculture restricting the number of new fishing licenses operating in international waters will help provide an important barrier to entry by new competitors into our markets.  We are looking forward to beginning to report our results for entire quarterly period with all of our new vessels operating at full capacity, and will continue to keep our shareholders updated as Pingtan progresses in its plans."

Third Quarter 2013 Financial Highlights (A)

($ in millions, except per share data)

3 months ended

3 months ended

9 months ended

9 months ended

 September 30,

2013

September  30,

2012

September  30,

2013

September  30,

2012

Fishing (Continuing operations)

Recognized Revenue

$20.6

$13.2

$61.6

$39.0

Cost of Revenue

12.4

9.7

39.0

28.6

Gross Profit

8.2

3.5

22.6

10.4

Gross Profit Margin

39.6%

26.3%

36.8%

26.8%

Net Income from continuing operations

5.9

5.8

17.4

10.6

Basic and Diluted Weighted Average Shares Outstanding

79.1

79.1

79.1

79.1

EPS (from continuing operations)

0.08

0.07

0.22

0.13

Dredging Services (Discontinued operations)

Revenue

$54.3

$46.9

$131.6

$166.0

Net Income

 

 

12.4

17.4

39.5

60.8

EPS (from discontinued operations)

0.15

0.22

0.50

0.77

Balance Sheet Highlights (A)

9/30/2013

         12/31/2012

Cash and Cash Equivalents                                                

$10.8

$10.4

Total Current Assets

281.7

437.4

Total Assets

355.4

 

484.0

Total Current Liabilities

221.5

67.0

Total Long-term Debt

58.4

16.7

Total Liabilities

280.0

83.7

Shareholders' Equity

75.4

400.3

Total Liabilities and Shareholders' Equity

$355.4

$484.0

Book Value Per Share

$0.95

$5.06

(A)

Represents the consolidation retrospectively restated as if Pingtan Marine Enterprise Ltd. (formerly known as China Growth Equity Investment Ltd.) completed its merger with China Dredging Group Co., Ltd. and the share purchase of Merchant Supreme Co., Ltd. on January 1, 2012 rather than on February 25, 2013. Assets and liabilities of discontinued operations are   retrospectively restated as of December 31, 2012 after taking into account of the Group's plan to sell China Dredging Group Co., Ltd. and its subsidiaries to the Company's Chairman, CEO and major shareholder, Mr. Xinrong Zhuo.

Consolidated Financial and Operating Review

Revenues

Revenue from the fishing business, sales of frozen fish and other marine catches (continuing operations) for the three months ended September 30, 2013 increased by 56.7% to $20.6 million from $13.2 million for the same period in 2012. The increase was primarily due to an increase in sales volume as a result of the acquisition of 46 new fishing vessels in June 2013, which began operating in the third quarter of the year, and increased unit sales price and a change in the product mix of frozen fish and other marine products.

For the nine-months ended September 30, 2013, the Company increased revenue from its fishing business (continuing operations) by 57.9% to $61.6 million from $39.0 million in the nine months ended September 30, 2012, the increase was due to the same reason as described above.

Revenue from dredging services (discontinued operations) for the three months ended September 30, 2013 increased by 15.8% to $54.3 million from $46.9 million in the same period of 2012.  For the nine months ended September 30, 2013, revenue from dredging services (discontinued operations) decreased by 20.7% to $131.6 million from $166.0 million in the same period of 2012.

Gross Margin

The Company's gross margin for continuing operations increased to 39.6% in the three months ended September 30, 2013 from  26.3% in the same period of 2012. The increase was primarily due to increase in unit sales price and change in the product mix of frozen fish and other marine products.

Gross margin increased to 36.8% for the nine months ended September 30, 2013 from 26.8% in the same period of 2012. The increase was due to the same reason as described above.

The Company's gross margin for discontinued operations was 38.3% for the three months ended September 30, 2013, compare to 55.3% in the same period of 2012. The Company's gross margin for discontinued operations was 43.2% in the nine months ended September 30, 2013, compared to 53.9% in the same period of 2012.

Selling, General & Administrative Expenses

For the three months ended September 30, 2013, total selling, general and administrative expenses for continuing operations was $1.5 million, or 7.5% of revenue, compared to $0.4 million, or 2.7% of revenue, in the same period of 2012. The increase was primarily attributable to higher professional fees and administrative costs associated with the Company being a publicly listed company, as well as our expanded scale of operations.

For the nine months ended September 30, 2013, total selling, general and administrative expenses for continuing operations was $3.1 million, or 5.0% of revenue, compared to $1.2 million, or 3.0 % of revenue, in the same period of 2012. The increase was due to the same reason as described above.

Net Income From Continuing Operations

Net income from continuing operations for the three months ended September 30, 2013 was $5.9 million, or $0.08 per basic and diluted share, compared to $5.8 million, or $0.07 per basic and diluted share, in the same period of 2012. The slight increase was primarily due to a deferred government subsidy and the decrease in interest expense caused by the discontinued operation assuming the interest expenses from the notes payable. In the three months ended September 30, 2013 there was $0.2 million in subsidies received compared to $3.8 million in the same period of 2012. In October 2013, The Company was notified by the Fujian Provincial Government of the grant of a subsidy of $6.5 million, which will be subsequently received in 2013.

Net income excluding subsidy income for the three months ended September 30, 2013 increased by 190.0% to $5.8 million from $2.0 million in the same period of 2012.

Net income from continuing operations for the nine months ended September 30, 2013 was $17.4 million, or $0.22 per basic and diluted share, compared to $10.6 million, or $0.13 per basic and diluted share, in the same period of 2012. Net income was affected by the same reason as described above.

Net income, excluding subsidy income, for the nine months ended September 30, 2013 increased by 153.0% to $17.2 million from $6.8 million in the same period of 2012.

Net income from discontinued operations for the three months ended September 30, 2013 was $12.4 million, or $0.15 per basic and diluted share, compared to $17.4 million, or $0.22 per basic and diluted share, in the same period of 2012.

Net income from discontinued operations for the nine months ended September 30, 2013 was $39.5 million, or $0.50 per basic and diluted share, compared to $60.8 million, or $0.77 per basic and diluted share, in the same period of 2012.

About Pingtan Marine

Pingtan is a marine enterprises group, engaging in ocean fishing through its wholly-owned subsidiaries, Fujian Provincial Pingtan County Ocean Fishing Group Co., Ltd., or Pingtan Fishing.  Pingtan Fishing primarily engages in ocean fishing with many of its self-owned vessels operating within the Indian Exclusive Economic Zone and the Arafura Sea of Indonesia. Pingtan Fishing is a growing fishing company and provider of high quality seafood in the PRC.

Business Risks and Forward-Looking Statements

This press release may contain forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. Readers are cautioned that actual results could differ materially from those expressed in any forward-looking statements. In addition, please refer to the risk factors contained in Pingtan's SEC filings available at www.sec.gov, including Pingtan's most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q Definitive Proxy Statement and Form S 3. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. Pingtan undertakes no obligation to update or revise any forward-looking statements for any reason.

CONTACT:

Roy Yu

Chief Financial Officer

Pingtan Marine Enterprise Ltd.

Tel: +86 591 87271753

ryu@ptmarine.net

INVESTOR RELATIONS:

The Equity Group Inc.

In China

Adam Prior, Senior Vice President

Katherine Yao, Associate

(212) 836-9606

86 10 6587 6435

aprior@equityny.com

kyao@equityny.com

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(IN U.S. DOLLARS)

 

 For the Three Months Ended

September 30,

 For the Nine Months Ended

September 30,

2013

 2012 (A)

2013

 2012 (A)

Revenue

$    20,609,107

$  13,152,223

$    61,640,940

$    39,039,757

Cost of revenue

(12,446,879)

(9,693,182)

(38,974,488)

(28,572,398)

Gross profit

8,162,228

3,459,041

22,666,452

10,467,359

Selling and marketing expenses

(361,999)

(146,641)

(730,734)

(608,483)

General and administrative expenses

(1,178,035)

(209,633)

(2,345,569)

(578,544)

Operating income

6,622,194

3,102,767

19,590,149

9,280,332

Other income/(expense)

   Investment income

218

20

69,289

15,146

   Interest income

2,306

678

4,861

2,888

   Interest expenses

(1,049,041)

(1,079,474)

(2,444,782)

(2,438,124)

   Subsidy income

168,900

3,783,578

204,492

3,783,578

   Sundry income

8

-

2,021

-

   Gain/(Loss) on foreign

 exchange, net

194,433

(21,051)

(25,972)

(52,770)

Total other income/(expense)

(683,176)

2,683,751

(2,190,091)

1,310,718

Income from continuing operations

      before income taxes

5,939,018

5,786,518

17,400,058

10,591,050

Income tax expense

-

-

-

-

Net income from continuing operations

5,939,018

5,786,518

17,400,058

10,591,050

Net income from discontinued

      operations, net of taxes

12,362,523

17,375,250

39,461,777

60,773,049

Consolidated net income

$    18,301,541

$  23,161,768

$    56,861,835

$    71,364,099

Basic and diluted earnings per share

              - From continuing operations

$         0.08

$        0.07

$         0.22

$         0.13

              - From discontinued operations

0.15

0.22

0.50

0.77

            - Net income

$         0.23

$        0.29

$         0.72

$         0.90

Weighted average number of ordinary shares outstanding

               - Basic and diluted

79,055,053

79,055,053

79,055,053

79,055,053

 

(A)

 

Represents the consolidation retrospectively restated as if Pingtan Marine Enterprise Ltd. (formerly known as China Growth Equity

Investment Ltd.) completed its merger with China Dredging Group Co., Ltd. and the share purchase of Merchant Supreme Co., Ltd.

on January 1, 2012 rather than on February 25, 2013.

 

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN U.S. DOLLARS)

September 30, 2013

December 31, 2012

(Unaudited)

(A)

Assets

Current assets

          Cash

$      10,832,000

$    10,426,140

          Notes receivable (banker's acceptances)

             transferred from related parties

-

3,645,817

          Accounts receivable - third parties

10,252,829

11,478,436

          Other receivables

11,015

29,885

          Advance to related parties

-

49,802,821

          Prepaid expenses

4,932,497

410,966

          Inventories

5,427,251

194,331

          Assets of discontinued operations

250,209,548

361,460,444

Total current assets

281,665,140

437,448,840

Other assets

          Long-term investment

3,431,373

3,328,789

          Deposit on setting up of Joint Venture

-

6,090,302

          Property, plant and equipment, net

66,979,281

37,141,906

          Other receivables

3,283,333

-

Total other assets

73,693,987

46,560,997

Total assets

$     355,359,127

$  484,009,837

Liabilities and equity

Current liabilities

          Accounts payable - third parties

$           151,000

$          70,732

                                        - related parties

163,303

5,765,632

          Receipt in advance - third parties

476,399

-

                                         - related parties

-

12,681,102

          Short-term loans

22,363,811

25,169,260

          Long-term loans - current portion

11,413,399

8,094,308

          Accrued liabilities and other payables

3,684,872

1,033,784

          Advance from related parties

115,472

153,961

          Deferred income

1,714,706

-

          Liabilities of discontinued operations 

181,463,364

14,052,751

Total current liabilities

221,546,326

67,021,530

Other liabilities

          Long-term loans, net of current portion

58,431,373

16,689,321

Total other liabilities

58,431,373

16,689,321

Total liabilities

279,977,699

83,710,851

Shareholders' equity

          Ordinary shares, 225,000,000 shares authorized with $0.001 authorized

               with $0.001 per share; 79,055,053 shares issued and outstanding

               as of September 30, 2013 and December 31, 2012

79,055

79,055

           Additional paid-in capital

26,645,687

141,381,098

           Statutory reserves 

19,877,314

19,386,642

           Retained earnings

-

217,224,220

           Accumulated other comprehensive income

28,779,372

22,227,971

Total shareholders' equity

75,381,428

400,298,986

Total liabilities and shareholders' equity

$   355,359,127

$  484,009,837

(A)

Represents the consolidation retrospectively restated as if Pingtan Marine Enterprise Ltd. (formerly known as China Growth Equity

Investment Limited) completed its merger with China Dredging Group Co., Ltd. and the share purchase of Merchant Supreme Co., Ltd.

on January 1, 2012 rather than on February 25, 2013. Assets and liabilities of discontinued operations are retrospectively restated as of

December 31, 2012 after taking into account of the Group's plan to sell China Dredging Group Co., Ltd. and its subsidiaries to the

Company's Chairman, CEO and major shareholder, Mr. Xinrong Zhuo.

 

PINGTAN MARINE ENTERPRISE LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(IN U.S. DOLLARS)

 For the Nine Months Ended September 30, 

2013

2012 (A)

Cash flows from operating activities

Net income

$  56,861,835

$  71,364,099

Discontinued operations, net of tax

(39,461,777)

(60,773,049)

Income from continuing operations

17,400,058

10,591,050

Adjustments to reconcile net income to net

     cash provided by operating activities

     Depreciation of property, plant and equipment

2,268,063

2,596,876

     Short term investment income 

-

(15,868)

Changes in operating assets and liabilities

     Accounts receivable - third parties

1,568,675

(4,240,254)

                                       - related parties

-

4,586,762

     Other receivables

19,657

6,766,975

     Prepaid expenses

(4,479,159)

336,543

     Inventories

(5,191,641)

756,413

     Accounts payable - third parties

77,561

2,498,040

                                   - related parties 

494,616

3,443,700

     Receipt in advance - third parties

473,183

(382,150)

                                    - related parties

(12,983,365)

-

     Accrued liabilities and other payables

2,602,770

1,146,071

Net cash provided by operating activities from 

     continuing operations

2,250,418

28,084,158

Cash flows from investing activities

     Payment for long term investment 

-

(2,995,958)

     Proceeds from disposition of short-term investment

-

808,449

     Proceeds from deferred income 

6,224,357

-

     Purchase of property, plant and equipment

(216,850,307)

(6,574,964)

     Advance to related parties

(4,044,837)

(52,772,881)

Net cash used in investing activities from 

     continuing operations

(214,670,787)

(61,535,354)

Cash flows from financing activities

     Proceeds from short-term loans

43,439,587

51,478,882

     Repayment of short-term loans

(46,996,499)

(36,078,434)

     Proceeds from long-term loans

45,889,055

26,630,736

     Repayment of long-term loans

(1,890,743)

-

     Proceeds from additional paid in capital

-

13

     Advance from related parties, net of reception 

3,847,492

(10,222,164)

     in form of note receivable 

Net cash provided by financing activities from

     continuing operations 

44,288,892

31,809,033

Cash flow from discontinued operations

Net cash provided by operating activities from 

     discontinued operations

71,420,962

73,322,045

Net cash provided by investing activities from

     discontinued operations

7,624,250

23,934,193

Net cash (used in)/provided by financing activities from

     discontinued operations

(560,216)

168,559

Net cash provided by discontinued operations

78,484,996

97,424,797

Effect of exchange rate

1,977,422

732,443

Net (decrease)/increase in cash

(87,669,059)

96,515,077

Cash at the beginning of period (1)

175,488,715

114,204,340

Cash at the end of period (2)

$87,819,656

$210,719,417

Supplemental disclosure of cash flow information:

Cash paid:

     From discontinued operations

$12,814,679

$23,111,634

     Income tax paid

     From continuing operations

     Interest paid

$2,325,864

$2,559,454

Supplemental disclosure of non-cash transaction eliminated in above:

     Note payable – related party

$155,166,195

$                         -

     Purchase of property, plant and equipment

        by setting off advances to related parties

$54,882,642

$                         -

     Deposit on setting up Joint Venture netted of accounts

     payable - related parties

$6,090,302

$                         -

 

(1)

 

 

Includes cash and cash equivalents of discontinued operations of 165,062,575 and $112,409,544 at the beginning of the year in 2013

and 2012 respectively.

(2)

 

Includes cash and cash equivalents of discontinued operations of 76,987,656 and $210,552,835 at the nine months ended September

30, 2013 and 2012 respectively.

(A)

 

 

Represents the consolidation retrospectively restated as if Pingtan Marine Enterprise Ltd. (formerly known as China Growth Equity

Investment Limited) completed its merger with China Dredging Group Co., Ltd. and the share purchase of Merchant Supreme Co.,

Ltd. on January 1, 2012 rather than on February 25, 2013.

SOURCE Pingtan Marine Enterprise Ltd.