omniture

China Electric Motor Announces Results for the First Quarter of Fiscal Year 2010

2010-05-14 18:47 1621

Total revenue and net income results for the first quarter in line with previously issued guidance

SHENZHEN, China, May 14 /PRNewswire-Asia/ -- China Electric Motor, Inc. (Nasdaq: CELM, "China Electric" or "the Company"), a Delaware corporation and China-based company that engages in the design, production, marketing and sale of micro-motor products through its subsidiary Shenzhen YuePengCheng Motor Co., Ltd. ("Shenzhen YPC"), today announced its financial results for the first quarter ended March 31, 2010.

(Logo: http://www.prnasia.com/sa/2010/03/31/20100331524605.jpg )

First Quarter 2010 Financial Highlights

-- Total revenue increased by 13.9% year-over-year to $21.5 million,

compared to $18.9 million in the first quarter of 2009.

-- 63.5% of revenue was from sales to original equipment manufacturers

("OEMs").

-- Gross profit increased by 16.0% year-over-year to $6.2 million versus

$5.4 million in the first quarter of 2009.

-- Operating income was $3.9 million, a 3.4% increase over operating

income of $3.8 million in the first quarter of 2009.

-- Net income was $3.0 million, compared to net income of $3.0 million in

the first quarter of 2009.

-- Basic and diluted earnings per share were $0.16 based on 17,977,374 and

18,046,653 weighted average shares outstanding, respectively, versus

basic and diluted earnings per share of $0.27 in the first quarter of

2009, based on 11,069,260 weighted average shares outstanding.

Mr. Yue Wang, Chief Executive Officer of China Electric, said, "Our first quarter results were in line with guidance and demonstrate progress on our strategy to grow revenue and income by focusing on higher margin sales and initiatives to grow our customer base. While we did sell a higher volume of our lower-priced products in the quarter, the average selling price increased compared to last year. Sales to OEMs continued to grow as a percentage of sales, contributing to margin expansion. This quarter, G&A expenses were exceptionally high due to expenses related to our IPO, and we expect this line item to decrease as the year continues.

"We are confirming our full year guidance as we are confident in our ability to produce micro-motor products that continue to meet growing customer demand in China and internationally."

First Quarter 2010 Financial Results

Revenues

Total revenues for the first quarter 2010 increased year-over-year by 13.9% to $21.5 million, due in large part to an increase in the average selling price of units sold during the period. However, the Company's sales mix changed during the period, whereby the Company sold a higher volume of its lower-priced products than its higher-priced products, which include its numerical control motor products.

63.5% of first quarter 2010 revenue was from OEM customers, versus 54.3% in the same period last year. As a percentage of total revenue, sales of the Home Appliance, Auto Part and Digital Motor product series in the first quarter of 2010 were 67.3%, 20.9% and 11.8%, respectively, compared to 67.5%, 21.5% and 11.1%, respectively, in the first quarter of 2009. Roughly 59.4% of first quarter 2010 sales were to customers in China, versus 55.6% in the same period last year.

Cost of Goods Sold

Cost of goods sold in the first quarter 2010 increased year-over-year by $1.8 million, or 13.0%, to $15.3 million. The change in cost of goods sold was driven primarily by an increase in the prices of raw materials, particularly lacquered wire, and an increase in production of units with a higher selling price.

Gross Profit and Gross Margin

Gross profit for the first quarter of 2010 increased year-over-year by 16.0% to $6.2 million versus $5.4 million in the same period last year. Gross margin for the first quarter 2010 was 28.9%, up from 28.3% in the first quarter 2009. This increase in gross margin versus last quarter was due to an increase in sales of the Company's higher selling price products.

Operating Expenses

Research and development ("R&D") expenses for the first quarter 2010 increased year-over-year by 5.3% to $0.4 million, or 1.8% of revenues, compared to $0.4 million, or 2.0% of revenues, in the comparable period in 2009. The R&D expenses in the first quarter were focused on new product initiatives.

Selling expenses for the first quarter 2010 increased year-over-year by 6.0% to $0.9 million, compared to $0.9 million in the first quarter 2009. The slight change was primarily a result of increased sales activity. As a percentage of revenues, first quarter 2010 selling expenses were relatively stable at 4.4%, compared to 4.7% in the first quarter 2009.

General and administrative ("G&A") expenses for the first quarter 2010 increased year-over-year to $0.9 million, compared to $0.3 million in the first quarter 2009. As a percentage of revenues, first quarter 2010 G&A expenses increased to 4.2% from 1.7% in the first quarter of 2009, largely due to increases in professional and office expenses. Following the Company's initial public offering in the first quarter of 2010, it expects the level of G&A expenses to increase as a result of the additional professional fees that it will occur; however, it expects G&A expenses for the each of the second through fourth quarters of the year to be less than were incurred in the first.

Accordingly, total operating expenses for the first quarter 2010 increased year-over-year by 46.3%, to $2.3 million.

Earnings

Operating income for the first quarter 2010 was $3.9 million, compared to $3.8 million in the first quarter of 2009.

Net income in the first quarter 2010 was $3.0 million, compared to a net income of $3.0 million for the first quarter of 2009.

Basic and diluted earnings per share for the first quarter 2010 were $0.16, based on 17,977,374 and 18,046,653 weighted average shares outstanding, respectively, versus basic and diluted earnings per share of $0.27 in the first quarter of 2009, based on 11,069,260 weighted average shares outstanding.

Balance Sheet

Cash and cash equivalents were $33.4 million as of March 31, 2010, compared to $10.6 million as of December 31, 2009, primarily attributable to the increase of funds from the Company's private placement.

Total accounts receivable as of March 31, 2010 were $9.6 million, compared to $8.5 million as of December 31, 2009. Inventories as of March 31, 2010 amounted to $5.6 million, compared to $7.2 million as of December 31, 2009.

Business Outlook

The Company believes that strong gross domestic product growth in China and recovering export markets, combined with rising disposable income and the extension of the Chinese government's stimulus package relating to subsidies for home appliance and vehicle purchases will continue to support increased demand for micro-motor products. The Company's goal is to become a global leader in the development and manufacture of micro-motor products. R&D investments are focused on products that address industry trends to reduce noise, vibration and energy consumption. China Electric continues its initiatives to increase higher-margin direct sales to domestic OEMs as a proportion of total revenue and has devoted resources to increase brand awareness and product recognition and heighten customer loyalty.

Guidance for Second Quarter and Fiscal Year 2010

As of May 13, 2010, the Company reports that there are 2.4 million AC motor units with an average selling price of $3.25 in the backlog; these products are mainly used for home appliance motors.

Management estimates that revenue for the second quarter of 2010 will be in the range of $20.0 million to $23.3 million. Management expects net income for the second quarter of 2010 to be in the range of $3.0 million to $3.5 million. Management estimates that basic and diluted earnings per share for the second quarter of 2010 will be between $0.141 and $0.165, based on 21,244,743 shares outstanding (on a fully diluted basis).

Management confirms that it expects revenue for fiscal year 2010 to be in the range of $110 million to $120 million and net income for fiscal 2010 to be in the range of $17.1 million and $19.8 million.

The construction of new equipment, which will be capable of producing 24 million units annually at full capacity, is continuing on schedule and the testing process has begun. Management expects the new facility to be fully operational by the end of June. The Company estimates that the capital expenditure allocated to the project is in the approximate range of $8 million to $10 million.

Conference Call and Webcast

China Electric senior management will host a conference call at 7:00 am (Pacific) / 10:00 am (Eastern) / 10:00 pm (Beijing/Hong Kong) on Friday, May 14, 2010 to discuss its 2010 first quarter financial results and recent business activity. To access the live teleconference, please dial +1 866 730 5763 (US) or +1 857 350 1587 (International), and enter the passcode 55295362. Please dial in approximately 10 minutes before the scheduled time of the call.

A replay of the conference call will be available from 1:00 pm (Eastern) on Friday, May 14, 2010, by dialing +1 888 286 8010 (US) or +1 617 801 6888 (International) and entering the passcode 70590756.

A live webcast of the conference call and replay will also be available on the investor relations page of the Company's website at: http://szmotor.investorroom.com .

About China Electric Motor, Inc.

China Electric Motor, Inc. (Nasdaq: CELM) is a China-based company that engages in the design, production, marketing and sale of micro-motor products through its subsidiary Shenzhen YPC. The Company's products are incorporated into consumer electronics, automobiles, power tools, toys and household appliances, and are sold under its "Sunna" brandname. The Company provides micro-motor products that meet the growing demand for efficient, quiet and compact motors from manufacturers of consumer electronics, automobiles, power tools, toys and household appliances. China Electric Motor, Inc. sells its products directly to original equipment manufacturers and to distributors and resellers both domestically in the People's Republic of China and internationally to customers in Korea and Hong Kong. The Company's manufacturing facilities are located in Shenzhen, Guangdong.

Forward-looking Statements

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain of the statements made in the press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding the progress of new product development. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including our ability to maintain and increase revenues and sales of our products, our ability to develop and market new products, our strategic investments and acquisitions, compliances and changes in the laws of the People's Republic of China (the "PRC") that affect our operations, and vulnerability of our business to general economic downturn, especially in the PRC, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.

For more information, please contact:

Investor Contacts:

Dexter Fong

China Electric Motor, Inc.

Tel: +86-755-8278-6083

Email: dexterfong@gmail.com

Simon Ze

China Electric Motor, Inc.

Tel: +86-755-8257-7750

Email: ze_simon@hotmail.com

Investor Relations (HK):

Ruby Yim

Taylor Rafferty

Tel: +852-3196-3712

Email: ChinaElectricMotor@Taylor-Rafferty.com

Investor Relations (US):

Delia Cannan

Taylor Rafferty

Tel: +1-212-889-4350

Email: ChinaElectricMotor@Taylor-Rafferty.com

Media Contact:

Jason Marshall

Taylor Rafferty

Tel: +1-212-889-4350

Email: ChinaElectricMotor@Taylor-Rafferty.com

- FINANCIAL TABLES TO FOLLOW -

China Electric Motor, Inc. and Subsidiaries

Consolidated Balance Sheets

(In U.S. Dollars)

March 31, December 31,

2010 2009

(Unaudited)

Assets

Current Assets

Cash and cash equivalents 33,361,523 10,633,518

Accounts receivable, net 9,635,130 8,526,451

Due from director 1,020,416 --

Taxes recoverable 33,083 --

Inventories, net 5,613,509 7,194,656

Total current assets 49,663,661 26,354,625

Property and equipment, net 10,096,923 7,936,284

Total Assets 59,760,584 34,290,909

Liabilities and Shareholders'

Equity

Current Liabilities

Accounts payable 1,971,331 2,217,702

Accrued liabilities and other

payable 547,735 463,185

Various taxes payable -- 28,962

Wages payable 415,377 465,119

Corporate tax payable 958,196 878,305

Due to related party -- 1,581,376

Due to affiliated companies -- 334,977

Total current liabilities 3,892,639 5,969,626

Total Liabilities 3,892,639 5,969,626

Commitments and Contingencies

Shareholders' Equity

Preferred stock, $0.0001 par

value, 10,000,000 shares

authorized, none issued

Common stock, $0.0001 par

value, 100,000,000 shares

authorized, 20,744,743 and

14,083,030 shares issued

and outstanding at March 31,

2010 and December 31, 2009,

respectively. 2,074 1,408

Additional paid-in capital 28,625,293 3,899,125

Accumulated other comprehensive

income 746,996 889,668

Statutory surplus reserve fund 1,177,075 1,177,075

Retained earnings

(unrestricted) 25,316,507 22,354,007

Total Shareholders' Equity 55,867,945 28,321,283

Total Shareholders' Liabilities &

Equity 59,760,584 34,290,909

China Electric Motor, Inc. and Subsidiaries

Consolidated Statements of Operations

(In U.S. Dollars)

(Unaudited)

For Three Months Ended

March 31,

2010 2009

Revenue $21,511,319 $18,893,146

Other Sales --

Cost of Goods Sold (15,299,520) (13,539,505)

Gross Profit 6,211,799 5,353,641

Selling Expenses 937,116 883,870

Other Operating Expenses

Research and development 388,291 368,580

Depreciation 4,638 5,421

Loss on disposal of assets 65,006 --

Other general and

administrative 907,225 315,384

Total operating expenses 2,302,276 1,573,255

Income from operations 3,909,523 3,780,386

Other income (expenses)

Interest income 13,597 6,037

Imputed interest -- (16,971)

Total other income (expenses) 13,597 (10,934)

Income (loss) before income

taxes 3,923,120 3,769,452

Income taxes (960,620) (757,309)

Net income $2,962,500 $3,012,143

Basic earnings per share $0.16 $0.27

Weighed-average shares

outstanding, Basic 17,977,374 11,069,260

Diluted earnings per share $0.16 $0.27

Weighed-average shares

outstanding, Diluted 18,046,653 11,069,260

China Electric Motor, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Decrease) Increase in Cash

(In U.S. Dollars)

(Unaudited)

For Three Months Ended

March 31,

2010 2009

Cash Flows From Operating Activities

Net Income (loss) $2,962,500 $3,012,143

Adjustments to reconcile net

income to net cash provided by

operating activities:

Loss on disposal of assets 65,006 --

Imputed interest expense -- 16,971

Depreciation 203,294 148,826

Changes in operating assets and

liabilities:

(Increase) decrease in:

Accounts receivable, net (1,108,679) (2,089,282)

Inventories, net 1,581,147 (157,024)

Taxes recoverable (33,083)

Prepaid expenses and other

receivables -- 13,283

Increase (decrease) in:

Accounts payable (246,370) 619,737

Accrued liabilities and other

payable 84,550 --

Various taxes payable (28,962) (113,189)

Wages payable (49,742) 71,476

Corporate tax payable 79,891 287,874

Net cash provided by (used in)

operating activities 3,509,552 1,810,815

Cash Flows From Investing Activities

Purchases of property and

equipment (2,703,203) (62,120)

Proceeds from disposal of fixed

assets 274,264 --

Additional payment to related

parties (1,654,976) (121,897)

Net cash used in investing

activities (4,083,914) (184,017)

Cash Flows From Financing Activities

Net proceeds from issuance of

shares 23,444,943 --

Proceeds from exercise of

warrants 97 --

Net cash provided by (used in)

financing activities 23,445,040 --

Effect of exchange rate changes

on cash (142,672) 66,826

Net increase (decrease) in cash and

cash equivalents 22,728,006 1,693,624

Cash and cash equivalents, beginning

of period 10,633,518 2,655,808

Cash and cash equivalents, end of

period $33,361,524 $4,349,432

Supplemental disclosure information:

Interest expense paid $-- $--

Income taxes paid $880,406 $1,226,684

Source: China Electric Motor, Inc.
Related Stocks:
NASDAQ:CELM
collection