After Hours and Pre-Market Movers

[JoeHall]

CPQQ earnings

China Power Equipment Reports Higher Revenues and Net Income
Last update: 3/31/2010 7:30:00 AM
XI'AN, China, March 31, 2010 /PRNewswire via COMTEX/ -- China Power Equipment, Inc. ("China Power Equipment" or the "Company") (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 .
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 .

For more information, please contact: China Power Equipment, Inc. Phone: [phone] in the USA Email: [e-mail] or Christensen Mr. Yuanyuan Chen (English and Chinese) Mobile: [phone] in Beijing Email: [e-mail] Mr. Tom Myers (English) Mobile: [phone] in Beijing Email: [e-mail] Ms. Kathy Li (English and Chinese) Telephone [phone] in the USA Email: [e-mail]

SOURCE China Power Equipment, Inc.
Copyright (C) 2010 PR Newswire. All rights reserved