XI'AN, China, Nov. 17 /PRNewswire-Asia-FirstCall/ -- China Power Equipment,
Inc. ("China Power Equipment," 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, reported dramatically higher revenues and
net income for the three months ended September 30, 2009.
Third Quarter 2009 Highlights
-- Net revenues increased 252% to $7.89 million in the third quarter 2009
from $2.24 million in the third quarter 2008.
-- Gross profit increased 280% to $1.96 million in the third quarter 2009
from $0.52 million in the third quarter 2008.
-- Net income increased 516% to $1.41 million in the third quarter 2009
from $0.23 million in the third quarter 2008.
-- Diluted earnings per share increased 350% to $ 0.09 per share in the
third quarter 2009 from $ 0.02 per share in the third quarter 2008.
Net revenues were $7.89 million in the third quarter 2009, up 252% from
$2.24 million in the third quarter 2008. Net income was $1.41 million in the
third quarter 2009, up 516% from $0.23 million in the third quarter 2008.
Diluted earnings per share were $0.09 per share in the third quarter 2009, up
350% from $0.02 per share in third quarter 2008.
Net revenues were $16.48 million in the nine months ended September 30,
2009, up 142% from $6.81 million in the nine months ended September 30, 2008.
Net income was $3.05 million in the nine months ended September 30, 2009, up
175% from $1.11 million in the nine months ended September 30, 2008. Diluted
earnings per share were $0.20 per share in the nine months ended September 30,
2009, up 186% from $0.07 per share in nine months ended September 30, 2008.
Mr. Yong Xing Song, Chairman of the Board of China Power Equipment, said,
"The third quarter 2009 was a dramatic improvement in our financial
performance over the third quarter 2008, led by amorphous alloy transformer
cores that were up 322 percent in revenues and up 354 percent in gross profit
from the third quarter 2008. Amorphous alloy transformers in the third quarter
were up 159 percent in revenues and up 169 percent in gross profit from the
third quarter 2008. To help fulfill the large increase in our customers'
orders, we contracted out some production to a manufacturer for whom we
provide technical support.
"Our revenues from silicon steel cores and transformer declined because we
have exited that product line to focus on amorphous alloy products as our
major product lines and are no longer actively marketing steel core products.
"In addition to higher revenues, our expenses remained under good control
and our interest expense was lower, so our net income increased 516 percent to
$1.41 million in the third quarter compared with the third quarter 2008.
"We have funded our recent operations mainly through cash generated from
operations. We believe our existing cash and cash equivalents will be
sufficient to maintain our operations at the present level for at least the
next 12 months."
The Chinese government has mandated that in the next few years, China's
traditional steel core electric transformers will be gradually replaced by
amorphous alloy transformers, because they are far more energy efficient.
For example, a typical amorphous alloy core transformer consumes 150 watts
to operate, which is 77.6 percent less electricity than a comparable silicon
steel core transformer, which requires 670 watts to operate.
Since an amorphous alloy transformer consumes less electricity, it reduces
the need to generate electricity. In turn, less coal is burned to provide the
same net electricity to the consumers. The result is lower air pollution. To
illustrate the pollution reduction, it is estimated that compared to a silicon
steel core transformer with the same capacity, each amorphous alloy core
transformer reduces pollutants from coal combustion each year by 3,972
kilograms of carbon dioxide, 120 kilograms of sulfur dioxide, and 60 kilograms
of nitrous oxide each year. Both transformers in this comparison are assumed
to be operating at 315 kilovolt-amperes while stepping down 10,000 volts to
220 volts, which is the consumer voltage in China.
Mr. Song continued, "China is upgrading to amorphous alloy electric
transformers in urban areas, as well as selecting them as it extends and
improves electric service in rural regions. As a result, the demand for China
Power Equipment's amorphous alloy products is expected to continue to
increase."
China Power Equipment, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Revenues, net $7,893,399 $2,239,265 $16,484,070 $6,805,514
Cost of goods sold (5,931,174) (1,722,363) (12,594,625) (5,034,438)
Gross profit 1,962,225 516,902 3,889,445 1,771,076
Operating expenses:
Selling, general and
administrative expenses 318,471 191,336 743,688 527,129
Stock-based compensation 10,887 -- 10,887 --
Total operating expenses 329,358 191,336 754,575 527,129
Net income (loss) from
operations 1,632,867 325,566 3,134,870 1,243,947
Other income (expenses):
Gain on investment 8,827 9,356 60,200 71,609
Other income 20,465 69,754 371,346 83,690
Interest income 31 999 5,846 3,231
Interest expense -- (42,577) (117) (65,879)
Foreign exchange loss -- -- -- (2,712)
Total other income 29,323 37,532 437,275 89,939
Net income before income
taxes 1,662,190 363,098 3,572,145 1,333,886
Income taxes 250,864 133,953 526,436 226,621
Net income $1,411,326 $229,145 $3,045,709 $1,107,265
Earnings per share-
basic $0.09 $0.02 $0.20 $0.10
Earnings per share-
diluted $0.09 $0.02 $0.20 $0.07
Weighted average common
shares outstanding:
Basic 14,908,313 10,886,413 14,908,313 10,881,652
Diluted 14,908,313 14,908,313 14,908,313 14,903,552
The accompanying notes are an integral part of these financial statements.
China Power Equipment, Inc.
Consolidated Balance Sheets
September 30, December 31,
2009 2008
(Unaudited)
Assets
Current assets
Cash $1,754,576 $1,071,038
Accounts receivable, net 3,107,758 2,013,305
Advances to suppliers 115,925 771,407
Inventory, net 627,574 461,634
Prepaid expenses and other
receivables 321,105 257,700
Total current assets 5,926,938 4,575,084
Related party receivables 22,879 97,248
Property, plant, and equipment, net 3,868,178 3,116,422
Intangible assets, net 409,941 220,742
Long-term investment 253,334 236,384
Deposit on contract rights 1,316,251 1,313,064
Deposit for purchase of equipment 767,813 --
Prepaid capital lease 112,851 116,694
Total assets $12,678,185 $9,675,638
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $545,483 $710,480
Accrued liabilities and other
payables 409,529 409,040
Advances from customers 32,758 142,156
Lease payable-- current portion 1,949 1,944
Note payable 58,500 58,358
Value-added tax payable 118,916 64,686
Income taxes payable 379,613 235,262
Related party payable 1,170 1,167
Total current liabilities 1,547,918 1,623,093
Long-term liabilities
Lease payable- noncurrent portion 117,612 117,327
Total long-term liabilities 117,612 117,327
Shareholders' equity
Preferred stock: par value $0.001 per
share, 10,000,000 shares authorized;
none issued and outstanding at
September 30, 2009 and December 31,
2008 -- --
Common stock: par value $0.001 per
share, 100,000,000 shares
authorized; 14,908,313 shares issued
and outstanding at September 30,
2009 and December 31, 2008 14,908 14,908
Additional paid-in capital 7,186,928 7,176,041
Statutory surplus reserve fund 202,665 202,665
Retained earnings (Accumulated
deficit) 2,582,738 (462,971)
Accumulated other comprehensive
income 1,025,416 1,004,575
Total shareholders' equity 11,012,655 7,935,218
Total liabilities and shareholders'
equity $12,678,185 $9,675,638
The accompanying notes are an integral part of these financial statements.
China Power Equipment, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
2009 2008
Cash Flows from Operating Activities
Net income $3,045,709 $1,107,265
Adjustments to reconcile net income
to net cash:
Depreciation expense 150,202 152,912
Amortization expense 30,692 24,654
Stock-based compensation 10,887 --
Provision of bad debts -- 51,778
Gain on investment (60,200) (71,609)
Changes in operating assets and
liabilities:
Accounts receivable (1,089,566) 298,076
Advances to suppliers 657,035 80,416
Inventory (164,502) (397,721)
Prepaid expenses and other
receivables (62,763) 15,952
Accounts payable (166,641) (179,271)
Accrued expenses and other payables (567) (289,664)
Value added tax payable 54,115 (114,327)
Income taxes payable 143,776 62,790
Advances from customers (109,599) 140,440
Net cash provided by (used in)
operating activities 2,438,578 881,691
Cash Flows from Investing Activities
Acquisitions of property, plant, and
equipment (17,681) (49,214)
Addition in construction in progress (872,341) --
Acquisitions of intangible assets (219,301) --
Deposit for purchase of equipment (767,420) --
Repayment from related parties 74,582 119,612
Dividend from equity interest
subsidiary 43,860 --
Net cash provided by (used in)
investing activities (1,758,301) 70,398
Cash Flows from Financing Activities
Repayment to related parties -- (217,942)
Repayment to short-term loans -- (1,116,312)
Net cash provided by (used in)
financing activities -- (1,334,254)
Effect of exchange rate changes on
cash and cash equivalents: 3,261 98,199
Increase (decrease) in cash and cash
equivalents 683,538 (283,966)
Cash and cash equivalents, beginning
of period 1,071,038 1,073,895
Cash and cash equivalents, end of
period $1,754,576 $789,929
Supplemental disclosure of cash flow
information
Interest paid in cash $117 $112,051
Income taxes paid in cash $382,660 $166,386
Non-cash investing and financing
activities:
Issuance of stocks for advance from
investor -- $100,000
Dividend receivable from equity
interest subsidiary -- $72,962
Reclass long-term investment to
advance to suppliers -- $718,100
The accompanying notes are an integral part of these financial statements.
About China Power Equipment, Inc.
China Power Equipment, Inc., through its wholly-owned subsidiary, Xi'an
Amorphous Zhongxi Co., Ltd., has developed a proprietary patented technology
to produce a new generation of energy saving transformers and transformer
cores. The company currently manufactures 59 different products, primarily
amorphous transformers in four product series that are sold throughout China.
The company was formed in 2006 as a U.S. corporation, and in November 2006,
created a Chinese subsidiary that was granted a license as a privately held
wholly owned foreign enterprise by the Chinese government.
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 http://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.
Tel: +1-866-374-1957 (in the USA)
Email: xa-fj@xa-fj.com
Christensen
Mr. Yuanyuan Chen (English and Chinese)
Mobile: +86-139-2337-7882 (in Beijing)
Email: ychen@christensenir.com
Mr. Tom Myers (English)
Mobile: +86-139-1141-3520 (in Beijing)
Email: tmyers@christensenir.com
Ms. Kathy Li (English and Chinese)
Tel: +1-212-618-1978 (in the USA)
Email: kli@christensenir.com
SOURCE China Power Equipment, Inc.
