1Q07 Revenues Increase 54% to $13.6 Million, Diluted EPS of $0.19
HARBIN, China, May 16 /Xinhua-PRNewswire/ -- Harbin Electric, Inc.
(Nasdaq: HRBN) a developer and manufacturer of customized linear motors and
other special electric motors, today announced financial results for the first
quarter ended March 31, 2007.
Sales for the first quarter of 2007 increased 54% to $13.6 compared to
$8.8 million in the prior year period primarily as a result of increased sales
of linear motor and special motor products to the Company's existing customer
base. Gross profit in the first quarter increased 60.4% to $6.9 million
compared to $4.3 million in the prior year period due to the Company's sales
level increase and improved mix of product sales. Gross margin, as a
percentage of revenues, was 50.3% for the three months ended March 31, 2007
compared to 48.1% for the three months ended March 31, 2006. This change
reflects a more favorable mix of products shipped in the first quarter of 2007
versus the corresponding period in 2006.
First quarter 2007 total operating expenses, which consist of costs
associated with sales and marketing, research and development expenditures,
general administrative costs, and amounts to account for stock based
compensation, increased to $1.8 million, or 12.7% of sales, compared to $1.1
million, or 12.6% of sales, for the prior year period. The increase this
period is due to the Company's efforts to support increased revenue levels and
related sales activity and additional stock based compensation expense. Stock
compensation expense measured in accordance with SFAS No.123-R, totaled
approximately $0.246 million or $0.01 per diluted share in the three month
period ended March 31, 2007.
Non-cash amortization expense of the debt discount increased to $1.13
million, or $0.06 per diluted share, during the quarter ended March 31, 2007
compared to $0 during the quarter ended March 31, 2006. The increase for the
period was attributable to amortization of debt discount for the $50 million
notes issued on August 30, 2006. As of March 31, 2007, the unamortized debt
discount totaled $20,277,368. The Company expects the non-cash interest
expense associated with the unamortized debt discount for the remaining three
quarters of fiscal 2007 will be approximately $1.13 million per quarter
respectively. Net Interest expenses for the three month period ended March 31,
2007 were $0.597 million.
The Company's net income was $3.4 million, or $0.19 per diluted share, for
the three month period ended March 31, 2007, compared to $3.8 million, or
$0.23 per diluted share, for the three month period ended March 31, 2006. The
decreased net margin level for the three month period 2007 is primarily
attributed to interest expense and amortization of the debt discount.
Excluding the $0.06 non-cash charge related to the amortization expense of the
debt discount, diluted earnings per share would have been $0.25.
"The first quarter was a strong start to 2007 for Harbin Electric as we
continued our momentum from 2006," commented Tianfu Yang, Chairman and CEO of
Harbin Electric Inc. "We are very happy with our financial performance as the
company reports continued high levels of sales growth. Sales growth was
primarily driven by sales of electric motors in domestic China and we continue
to experience contributions from new international relationships. Gross
margins increased as a result of sales of new, higher margin products sold
during the quarter as our current sales initiatives are continuing to attract
profitable long-term customers. Profitability was somewhat impacted due to
debt service and non-cash amortization of our debt discount for the $50
million notes issued on August 30, 2006. With a higher share count and debt
service, earnings were solid during the first quarter.
Mr. Yang continued, "Additionally, we were very pleased to have
successfully listed our common stock on the NASDAQ Global Market in the first
quarter. This listing is an important milestone for our company as it further
enhances Harbin Electric's commitment to excellence as we continue to expand
our presence internationally."
Mr. Yang concluded, "We recently announced the formation of a new
subsidiary in the US. The new subsidiary is jointly staffed with world-class
US based engineers and Harbin personnel. They will focus on expanding our
Company's capability into the automation controllers market. Our view is that
automation controllers together with our motor technology will enable us to
build a leadership position in the industrial motor marketplace. We hope to
continue our progress during 2007 as we enter new markets and develop many new
product introductions in the industrial motor marketplace."
About Harbin Electric, Inc.
Harbin Electric, Inc. designs, develops and manufactures linear motors and
special electric motors. With proprietary technology and core patents, the
Company builds a wide array of customized linear motors and other special
motor for a variety of applications and industries. The Company currently
designs and supplies its motor products and systems to numerous end users
throughout the Chinese domestic market, as well as, to other industrial OEM
customers overseas. Industry applications for linear motors include oilfield
services, conveyor systems, factory automation, packaging equipment, as well
as mass transportation systems. The Company is based in Harbin, China along
with its wholly owned subsidiaries. The Company has approximately 275
employees with approximately 270,000 square feet of state-of-the-art
manufacturing space. For further information, please see our filings with the
Securities and Exchange Commission ( http://www.sec.gov ).
Safe Harbor Statement
The actual results of Harbin Electric, Inc. could differ materially from
those described in this press release. Detailed information regarding factors
that may cause actual results to differ materially from the results expressed
or implied by statements in this press release may be found in the Company's
periodic filings with the U.S. Securities and Exchange Commission, including
the factors described in the section entitled "Risk Factors" in its annual
report on Form 10-QSB for the quarter ended March 31, 2007. The Company does
not undertake any obligation to update forward-looking statements contained in
this press release. This press release contains forward-looking information
about the Company that is intended to be covered by the safe harbor for
forward-looking statements provided by the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are statements that are not
historical facts. 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, and include discussions of strategy, and statements
about industry trends and the Company's future performance, operations and
products.
For more information, please contact:
Barry L. Raeburn
EVP Finance & Corporate Development
Tel: +1-215-854-8104
Email: info@HarbinElectric.com
Integrated Corporate Relations
Investors: Bill Zima or Ashley Ammon
Media: Brian Ruby
Tel: +1-203-682-8200
HARBIN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2007 AND DECEMBER 31, 2006
A S S E T S
March 31, December 31,
2007 2006
UNAUDITED
CURRENT ASSETS:
Cash $ 56,967,862 $ 67,313,919
Accounts receivable, net of
allowance for doubtful accounts of
$45,004 and $44,552 as of March 31,
2007 and December 31, 2006,
respectively 9,389,005 8,827,799
Inventories 887,522 583,287
Other receivables 191,393 27,991
Other receivables - related parties 51,800 44,998
Advances on inventory purchases 1,537,630 834,590
Total current assets 69,025,212 77,632,584
PLANT AND EQUIPMENT, net 9,494,133 9,219,534
OTHER ASSETS:
Debt issue costs, net of amortization 2,634,046 2,757,155
Advances on equipment purchases 12,522,108 -
Advance on intangible assets 2,266,597 2,585,977
Intangible assets, net of accumulated
amortization 836,546 640,337
Other assets 272,628 123,234
Total other assets 18,531,925 6,106,703
Total assets $ 97,051,270 $ 92,958,821
L I A B I L I T I E S A N D S H A R E H O L D E R S' E Q U I T Y
CURRENT LIABILITIES:
Accounts payable $ 171,409 $ 258,911
Other payables 409,587 406,520
Accrued liabilities 123,289 107,263
Customer deposits 331,010 319,261
Taxes payable 339,830 556,943
Interest payable - 1,122,000
Total current liabilities 1,375,125 2,770,898
NOTES PAYABLE, net of debt discount
$20,277,368 and $21,410,401 as of
March 31, 2007 and December 31, 2006,
respectively 29,722,632 28,589,599
WARRANT LIABILITIES - 16,568,080
Total liabilities 31,097,757 47,928,577
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY:
Common Stock, $0.00001 par value,
100,000,000 shares authorized,
16,600,451 shares issued and
outstanding 166 166
Paid-in-capital 35,419,635 12,252,064
Retained earnings 23,273,438 26,222,408
Statutory reserves 4,523,715 4,523,715
Accumulated other comprehensive income 2,736,559 2,031,891
Total shareholders' equity 65,953,513 45,030,244
Total liabilities and
shareholders' equity $ 97,051,270 $ 92,958,821
HARBIN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
(UNAUDITED)
FOR THE THREE MONTHS
ENDED MARCH 31,
2007 2006
REVENUES $ 13,626,214 $ 8,878,658
COST OF SALES 6,768,286 4,604,922
GROSS PROFIT 6,857,928 4,273,736
RESEARCH AND DEVELOPMENT EXPENSE 217,840 322,589
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,514,463 794,176
INCOME FROM OPERATIONS 5,125,625 3,156,971
Other (income), net (2,456) (54,062)
Non-operating (income) (6,321) -
Realized (gain) loss on sale of
marketable securities - (571,143)
Amortization expense of debt discount 1,133,033 -
Interest expense (income), net 597,306 (12,321)
OTHER EXPENSE (INCOME), NET 1,721,562 (637,526)
INCOME BEFORE PROVISION FOR INCOME TAXES 3,404,063 3,794,497
PROVISION FOR INCOME TAXES - -
NET INCOME 3,404,063 3,794,497
OTHER COMPREHENSIVE INCOME
Unrealized loss on marketable
securities - 587,171
Foreign currency translation adjustment 704,668 241,743
COMPREHENSIVE (LOSS) INCOME $ 4,108,731 $ 3,449,069
BASIC WEIGHTED AVERAGE NUMBER OF SHARES 16,600,451 16,600,451
BASIC EARNING PER SHARE $ 0.21 $ 0.23
DILUTED WEIGHTED AVERAGE NUMBER OF SHARES 18,016,627 16,700,451
DILUTED EARNING PER SHARE $ 0.19 $ 0.23
The notes which accompany the report on Form 10-QSB for the quarter ended
March 31, 2007 are an integral part of these unaudited consolidated financial
statements.
