China Power Equipment Reports Higher Revenues and Net Income
XI'AN, China, March 31 /PRNewswire-Asia-FirstCall/ -- China Power Equipment, Inc. ("China Power Equipment" or the "Company") (OTC Bulletin Board: CPQQ), the manufacturer of a new generation of energy saving electric transformers and transformer cores in the People's Republic of China, today reported higher revenues and net income for the year ended December 31, 2009.
Year 2009 Highlights
-- Net revenues increased 154.0% to $23.87 million in 2009 from $9.39
million in 2008.
-- Gross profit increased 143.1% to $5.70 million in 2009 from $2.34
million in 2008.
-- Net income increased 190.0% to $4.22 million in 2009 from $1.46 million
in 2008.
-- Diluted earnings per common share decreased 357.1% to $(0.32) per share
in 2009 from $(0.07) per share in 2008, mainly due to a deemed dividend
from the beneficial conversion feature of preferred stock and higher
average common shares outstanding.
Net revenues increased $14.47 million or 154.0 percent to $23.87 million for the year ended December 31, 2009 from $9.39 million in the year 2008, mainly due to higher volumes of amorphous alloy cores and transformers sold. Net income increased $2.76 million or 190.0 percent to $4.22 million in 2009 from $1.46 million in 2008, mainly due to the higher revenues and continuing good control of expenses. Diluted earnings per share decreased 357.1 percent to $(0.32) per common share in 2009 from $(0.07) per share in 2008, mainly due to a deemed dividend from the beneficial conversion feature of preferred stock and higher average common shares outstanding that increased 35.1 percent in 2009 from 2008.
Mr. Yong Xing Song, Chairman of the Board of China Power Equipment, said, "Our strong increases in revenues and net income for the year 2009 reflect the high demand in the Chinese market for our energy-efficient amorphous alloy electric transformer equipment."
Looking at the company's products, revenues from amorphous alloy cores were up $10.84 million or 202.1 percent to $16.21 million in 2009 from $5.37 million in 2008. Revenues from amorphous alloy transformers were up $4.05 million or 115.4 percent to $7.56 million in 2009 from $3.51 million in 2008. Revenues from traditional silicon steel transformers and cores were down $0.42 million or (81.1) percent to $0.10 million in 2009 from $0.52 million in 2008 because the Company exited that business entirely in 2009.
To help fulfill the large increase in customers' orders for amorphous alloy transformers and cores, the Company subcontracted out some of the production to another manufacturer in 2009.
Operating expenses remained under good control, with its gross profit margin declining just 1 percentage point to 23.9 percent in 2009 from 24.9 percent in 2008 on somewhat higher prices for its primary raw material. The Company's operating profit margin increased to 18.9 percent in 2009 from 16.7 percent in 2008.
Total other income increased $0.32 million or 197.4 percent to $0.48 million in 2009 from $0.16 million in 2008, mainly due to higher consulting income for technical support work performed in 2009 that was not offered in 2008 and due to lower interest expense on lower average borrowings in 2009 compared with 2008. The Company's effective income tax rate was down a little to 15.3 percent in 2009 from 15.7 percent in 2008.
As a result, China Power Equipment's net income increased $2.76 million or 190.0 percent to $4.22 million in 2009 from $1.46 million in 2008. Its net profit margin improved to 17.68 percent in 2009 from 15.50 percent in 2008.
Net cash flow provided by operating activities was $5.38 million in 2009, net cash flow used in investing activities was $(2.51) million, mostly in support of capacity expansion, and net cash flow provided from financing activities was $4.94 million, with nearly all of that provided by the net proceeds the Company received from issuing preferred stock in 2009. Adding in a small cash flow benefit due to foreign currency exchange rate changes, China Power Equipment's net cash flow in 2009 resulted in a net increase in cash of $7.81 million. The Company's cash outstanding on December 31, 2009 was $8.88 million.
The Company's debt leverage at yearend 2009 was very modest at 0.3 percent, since it had only one small interest-bearing note payable.
Mr. Song continued, "I believe our results in 2009 represent a very good performance in a very high growth year. With our good cash position, internal cash generation, modest debt leverage, and financing flexibility, we believe we have sufficient financial strength to continue to invest in new product development, capacity expansion, and working capital to support good sales growth in our amorphous alloy cores and amorphous alloy transformers."
Mr. Song continued, "We expect that a new source of amorphous alloy strip will soon be available from Beijing Advanced Technology & Science Materials Co., Ltd. ("AT&M"). We have signed an agreement with AT&M in which we have been given priority to purchase amorphous alloy strip products.
"In September 2009, AT&M completed their test production of amorphous alloy strip, using their facility that has an annual capacity of 10,000 metric tons. We have used some of AT&M's test strip to manufacture test cores and transformers and are pleased to be the first company to do so. Our test cores and transformers are permitting electric power grid organizations and other transformer makers to test and to validate that our cores and transformers using AT&M's amorphous alloy will perform as expected, are essentially equivalent in quality and performance to production that uses Hitachi's amorphous alloy, and are qualified for production purchases. We believe that this second source for amorphous alloy strip, when approved for production, is likely to help alleviate the raw material constraint that has been a concern in the global transformer industry. AT&M's alloy is likely to be quite cost competitive and may accelerate the use of amorphous alloy transformers by China's electric power grid companies."
Mr. Song concluded, "China's economic outlook continues to be encouraging, and China's adoption of amorphous alloy electric transformers in both urban and rural areas appears to be increasing at an increasing rate. As a result, we believe that the high demand for amorphous alloy cores and transformers should continue for several years."
Financial statements follow.
China Power Equipment, Inc.
Consolidated Statements of Operations
Year Ended December 31,
2009 2008
Revenue, net $23,866,239 $9,394,491
Cost of goods sold (18,167,768) (7,050,739)
Gross profit 5,698,471 2,343,752
Operating expenses:
Selling, general, and administrative
expenses 1,170,932 779,350
Stock-based compensation 25,697 --
Total operating expenses 1,196,629 779,350
Net income from operations 4,501,842 1,564,402
Other income (expenses)
Gain on investment 89,755 67,505
Other income 393,224 279,436
Interest income 12,902 3,119
Interest expense (14,268) (188,110)
Total other income 481,613 161,950
Net income before income taxes 4,983,455 1,726,352
Income taxes 763,455 270,559
Net income $4,220,000 $1,455,793
Deemed dividend from beneficial
conversion feature of preferred
stocks (9,045,005) (2,193,483)
Net loss applicable to common
shareholders $(4,825,005) $(737,690)
Loss per share - basic $(0.32) $(0.07)
Loss per share - diluted $(0.32) $(0.07)
Weighted average common shares
outstanding:
Basic 14,908,313 11,036,692
Diluted 14,908,313 11,036,692
The accompanying notes are an integral part of these consolidated
financial statements.
China Power Equipment, Inc.
Consolidated Balance Sheets
December 31, December 31,
2009 2008
Assets
Current Assets
Cash $8,883,188 $1,071,038
Accounts receivable, net 1,949,818 2,013,305
Advance to suppliers -- 771,407
Inventory, net (Note 3) 363,312 461,634
Prepaid expenses and other
receivables 220,939 257,700
Total Current Assets 11,417,257 4,575,084
Related party receivables (Note 11) 731 97,248
Property, plant and equipment, net
(Note 4) 4,593,068 3,116,422
Intangible assets, net (Note 6) 391,513 220,742
Long-term investment (Note 5) 282,897 236,384
Deposit on contract rights (Note 12) 1,316,328 1,313,064
Deposit for purchase of equipment 767,858 --
Prepaid capital lease (Note 9) 111,482 116,694
Total Assets $18,881,134 $9,675,638
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $549,065 $710,480
Accrued liabilities and other
payables 395,486 409,040
Advance from customers 32,760 142,156
Lease payable - current portion (Note 9) 2,156 1,944
Note payable (Note 8) 58,503 58,358
Value-added tax payable 219,398 64,686
Income taxes payable (Note 7) 365,751 235,262
Related party payable (Note 11) 1,170 1,167
Total Current Liabilities 1,624,289 1,623,093
Long-term Liabilities
Lease payable - non current portion
(Note 9) 115,463 117,327
Total Long-term Liabilities 115,463 117,327
Stockholders' Equity
Series B convertible preferred stock,
$0.001 par value, 5,000,000 shares
authorized,
4,166,667 shares and Nil issued and
outstanding at December 31, 2009 and
2008 4,167 --
Common stock: par value $0.001 per
share, 100,000,000 shares
authorized;
14,908,313 shares issued and
outstanding at December 31, 2009 and
2008 14,908 14,908
Additional paid-in capital 21,182,026 7,176,041
Statutory surplus reserve fund (Note
10) 642,819 202,665
Retained earnings (Accumulated
deficit) (5,728,130) (462,971)
Accumulated other comprehensive
income 1,025,592 1,004,575
Total stockholders' equity 17,141,382 7,935,218
Total Liabilities and Stockholders'
Equity $18,881,134 $9,675,638
The accompanying notes are an integral part of these consolidated
financial statements.
China Power Equipment, Inc.
Consolidated Statements of Cash Flows
Year Ended December 31,
2009 2008
Cash Flows from Operating Activities
Net income $4,220,000 $1,455,793
Adjustments to reconcile net income
to net cash:
Depreciation and amortization
expense 249,592 232,607
Stock-based compensation 25,697 --
Provision of bad debts 90,594 40,467
Provision of impairment loss of
advance to suppliers -- 107,885
Gain on investment (89,755) (67,505)
Changes in operating assets and
liabilities:
Accounts receivable (22,138) (210,710)
Advance to suppliers 772,909 83,518
Inventory 99,416 (92,297)
Prepaid expenses and other
receivables 37,380 17,051
Accounts payable (163,094) (442,875)
Accrued expenses and other payables (14,558) (39,973)
VAT tax payable 154,468 (36,449)
Income taxes payable 129,834 105,293
Advance from customers (109,690) (17,473)
Net cash provided by (used in)
operating activities 5,380,655 1,135,332
Cash Flows from Investing Activities
Acquisitions of property, plant, and
equipment (18,422) (49,266)
Addition in construction in progress (1,620,844) --
Acquisitions of intangible assets (219,270) --
Deposit for purchase of equipment (767,445) --
Repayment from related parties 72,913 65,724
Dividend from equity interest
subsidiary 43,854 71,816
Net cash provided by (used in)
investing activities (2,509,214) 88,274
Cash Flows from Financing Activities
Principal payments on capital lease (1,948) (1,731)
Repayment to related parties -- (186,575)
Proceeds from issuing preferred
stock 4,939,450 --
Repayment to short-term loans -- (1,098,783)
Net cash provided by (used in)
financing activities 4,937,502 (1,287,089)
Effect of exchange rate changes on
cash and cash equivalents: 3,207 60,626
Increase (decrease) in cash and cash
equivalents 7,812,150 (2,857)
Cash and cash equivalents, beginning
of period 1,071,038 1,073,895
Cash and cash equivalents, end of
period $8,883,188 $1,071,038
Supplemental disclosure of cash flow
information
Interest paid in cash $14,268 $188,110
Income taxes paid in cash $633,621 $165,265
Non-cash investing and financing
activities:
Issuance of stocks for advance from
investor $-- $100,000
Reclass long-term investment to
advance to suppliers $-- $706,823
Conversion of preferred stock to
common stock $-- $93
Construction in progress in lieu of
repayment from related party $23,794 $--
The accompanying notes are an integral part of these consolidated
financial statements."
China Power Equipment, Inc.
Consolidated Statements Of Stockholders' Equity
Additional
Preferred Stock Capital Stock Paid-in
Shares Amount Shares Amount Capital
BALANCE, JANUARY 1,
2008 92,500 $93 10,451,613 $10,452 $4,886,921
Conversion of
Series A preferred
stock (92,500) (93) 4,021,900 4,022 (3,929)
Deemed dividend on
preferred stock -- -- -- -- 2,193,483
Issuance of common
stock -- -- 434,800 434 99,566
Transfer to
statutory reserve -- -- -- -- --
Comprehensive
income:
Net income -- -- -- -- --
Foreign currency
translation
adjustment -- -- -- -- --
Total comprehensive
income
BALANCE, DECEMBER 31,
2008 -- -- 14,908,313 14,908 7,176,041
Issuance of
preferred stock 4,166,667 4,167 -- -- 4,935,283
Deemed dividend on
preferred stock -- -- -- -- 9,045,005
Stock-Based
Compensation -- -- -- -- 25,697
Transfer to
statutory reserve -- -- -- -- --
Comprehensive
income:
Net income -- -- -- -- --
Foreign currency
translation
adjustment -- -- -- -- --
Total comprehensive
income
BALANCE, DECEMBER 31,
2009 4,166,667 $4,167 14,908,313 $14,908 $21,182,026
China Power Equipment, Inc.
Consolidated Statements Of Stockholders' Equity
Accumulated
Retained Other
Statutory Earnings Compre- Total
Surplus (Accumulated hensive Stockholders'
Reserve deficit) Income (Loss) Equity
BALANCE, JANUARY 1, 2008 $38,629 $438,755 $585,381 $5,960,231
Conversion of Series A
preferred stock -- -- -- --
Deemed dividend on
preferred stock -- (2,193,483) -- --
Issuance of common stock -- -- -- 100,000
Transfer to statutory
reserve 164,036 (164,036) -- --
Comprehensive income:
Net income -- 1,455,793 -- 1,455,793
Foreign currency
translation adjustment -- -- 419,194 419,194
Total comprehensive
income 1,874,987
BALANCE, DECEMBER 31,
2008 202,665 (462,971) 1,004,575 7,935,218
Issuance of preferred
stock -- -- -- 4,939,450
Deemed dividend on
preferred stock -- (9,045,005) -- --
Stock-Based Compensation -- -- -- 25,697
Transfer to statutory
reserve 440,154 (440,154) -- --
Comprehensive income:
Net income -- 4,220,000 -- 4,220,000
Foreign currency
translation adjustment -- -- 21,017 21,017
Total comprehensive
income 4,241,017
BALANCE, DECEMBER 31, 2009 $642,819 $(5,728,130) $1,025,592 $17,141,382
The accompanying notes are an integral part of these consolidated
financial statements.
About China Power Equipment, Inc.
China Power Equipment, Inc., is a U.S. corporation, which through its wholly-owned subsidiary, An Sen (Xi'an) Power Science & Technology Co., Ltd. and its affiliated operating company, Xi'an Amorphous Zhongxi Co., Ltd., designs, manufactures, and distributes amorphous alloy transformer cores and amorphous alloy core electricity transformers in the People's Republic of China. The company currently manufactures 59 different products, primarily amorphous alloy cores and amorphous alloy core transformers.
Safe harbor
Certain statements in this release concerning our future growth prospects are forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements.
The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding the success of our investments, risks and uncertainties regarding fluctuations in earnings, our ability to sustain our previous levels of profitability including on account of our ability to manage growth, intense competition, wage increases in China, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, our ability to successfully complete and integrate potential acquisitions, withdrawal of governmental fiscal incentives, political instability and regional conflicts and legal restrictions on raising capital or acquiring companies outside China.
Additional risks that could affect our future operating results are more fully described in our filings with United States Securities and Exchange Commission. These filings are available at www.sec.gov.
We may, from time to time, make additional written and oral forward- looking statements, including statements contained in our filings with the Securities and Exchange Commission and our reports to shareholders. We do not undertake to update any forward-looking statements that may be made from time to time by or on our behalf.
For more information on China Power Equipment please visit our website at http://www.chinapower-equipment.com .
For more information, please contact:
China Power Equipment, Inc.
Phone: +1-646-623-6999 in the USA
Email: [email protected]
or
Christensen
Mr. Yuanyuan Chen (English and Chinese)
Mobile: +86-139-2337-7882 in Beijing
Email: [email protected]
Mr. Tom Myers (English)
Mobile: +86-139-1141-3520 in Beijing
Email: [email protected]
Ms. Kathy Li (English and Chinese)
Telephone +1-212-618-1978 in the USA
Email: [email protected]
SOURCE China Power Equipment, Inc.
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