omniture

Harbin Electric Announces Fourth Quarter and 2008 Annual Results

2009-03-13 18:00 3983

Annual Net Income up Fifty Percent on Eighty-Five Percent Rise in Sales

Fiscal Year 2008 Financial Highlights

-- Total revenues were $120.8 million, up 84.7% from $65.4 million in 2007

-- Net income was $25.4 million, up 50.2% from $16.9 million in 2007

-- Cash and cash equivalents were $48.4 million up from $45.5 million in

2007

-- Basic and diluted earnings per share were $1.25 and $1.19, respectively,

up from $0.99 and $0.91 in 2007

Fourth Quarter 2008 Financial Highlights

-- Total revenues were $34.7 million, up 80.1% from $19.3 million in the

fourth quarter of 2007

-- Net income was $6.0 million, up 44.6% from $4.2 million in the fourth

quarter of 2007

-- Basic and diluted earnings per share were $0.28 and $0.27, respectively,

up from $0.23 and $0.22 in the fourth quarter of 2007

HARBIN, China, March 13 /PRNewswire-Asia-FirstCall/ --Harbin Electric, Inc. (“Harbin Electric” or the “Company”) (Nasdaq: HRBN), a leading Chinese developer and manufacturer of a wide array of electric motors, today announced its fourth quarter and full year 2008 financial results.

Financial Summary for 2008 versus 2007

2008 2007 YoY%

Change

Revenue $120,820,302 $65,402,864 85.0%

Gross Profit $47,476,781 $32,434,977 46.4%

Gross Profit Margin 39.3% 49.6%

Operating Income $34,393,177 $23,711,292 45.1%

Operating Margin 28.5% 36.3%

Net Income $25,378,699 $16,902,684 50.2%

Net Profit Margin 21.0% 25.8%

Diluted EPS $1.19 $0.91 30.8%

Sales Distribution by Product Line and Percentage of International Sales

Percent of Total Revenues(%)

Product Line

2008 2007

Linear Motors and Integrated Systems 41% 56%

Specialty Micro-Motors 28% 28%

Rotary Motors 23% 0%

Others 8% 16%

Total 100% 100%

International Business 17% 12%

For the 2008 full year, revenues increased 85% to $120.8 million from $65.4 million in 2007. Excluding the acquisition of Weihai Hengda Electric Motor (Group) Co., Ltd. (“Hengda”) in July 2008, organic revenue increased to $93.2 million, a 43% increase from 2007. Strong sales growth also consisted of significant contribution from linear motors and its integrated application systems with sales up 36%, and automobile specialty micro-motors with an 87% sales increase year-over-year. The Company delivered 214 units of the tower-type oil pump, compared to 13 units in 2007, exceeding its target of 200 units for 2008.

Direct sales to international markets totaled $20.2 million in 2008, up 149% from the prior year and accounted for 17% of total sales in 2008, compared to 12% of total sales in 2007.

Total gross profit was $47.5 million in 2008 compared to $32.4 million in 2007, a 46% year-over-year increase due primarily to higher sales from existing products which generated 94% of total gross profit. Sales of rotary motors (Hengda, acquired in July 2008) contributed the rest.

Gross profit margin declined to 39.3% in 2008 from 49.6% in 2007 as a result of changes in the product mix as sales of lower-margin products, including industrial rotary motors and auto specialty micro-motors, increased. The gross margin for industrial rotary motor was negatively impacted by higher raw material prices in 2008 compared to 2007. Excluding the acquired business, the average gross profit margin was 47.8% for 2008.

Operating profit of $34.4 million was $10.7 million higher in 2008 than in 2007, with operating margins at 28.5% and 36.3%, respectively, for 2008 and 2007. The decline in operating margins was primarily driven by changes in product mix. Excluding the acquired business ($1.7 million), operating profit was $32.7 million with a 35.1% margin in 2008.

Selling, general and administrative expenses (SG&A) for the year-end 2008 totaled $11.9 million, up from $7.7 million in 2007. The overall increase on a year-to-year basis was the result of higher costs associated with increased sales activities and the addition of administrative costs from the newly acquired business (Hengda). Higher depreciation expense and increased auditing, consulting, and legal expense related to the acquisition and Sabanes-Oxley 404 compliance work as well as higher stock-based compensation expense also contributed to the increase. However, as a percentage of total sales, operating expenses declined year-over-year to 9.9% in 2008 from 11.7% in 2007.

The Company generated a record $25.4 million net income in 2008, compared to net income of $16.9 million in 2007. The acquisition of Hengda contributed $1.7 million to total net income. The income tax provision was $4.5 million in 2008 versus none in 2007, which has resulted in lower growth in net earnings in 2008 compared to previous periods. Diluted earnings per share were $1.19 for 2008, compared to $0.91 for 2007. Total weighted average diluted share count at the end of 2008 was 21.3 million compared to 18.6 million at the end of 2007 as 3.5 million common shares were issued in June 2008 to raise $49 million in additional capital.

Our liquidity position remains strong with $48.4 million in cash at the end of 2008, compared to $45.5 million at the end of 2007. Operating cash flow generated for the year was an all-time record $42.3 million.

Financial Summary for Fourth Quarter 2008 versus Fourth Quarter 2007

4Q08 4Q07 YoY%

Change

Revenue $34,743,375 $19,286,919 80.1%

Gross Profit $11,489,202 $9,294,988 23.6%

Gross Profit Margin 33.1% 48.2%

Operating Income $7,013,528 $5,984,361 17.2%

Operating Margin 20.2% 31.0%

Net Income $6,040,852 $4,178,243 44.6%

Net Profit Margin 17.4% 21.7%

Diluted EPS $0.27 $0.22 22.7%

Sales Distribution by Product Line and Percentage of International Sales

Percent of Total Revenues(%)

Product Line

4Q08 4Q07

Linear Motors and Integrated Systems 37% 55%

Specialty Micro-Motors 22% 32%

Rotary Motors 36% 0%

Others 5% 13%

Total 100% 100%

International Business 23% 14%

In the fourth quarter, total revenue increased 80% to $34.7 million compared to $19.3 million the year before, primarily as a result of the acquisition of the industrial rotary motor business in July 2008. Net income totaled $6.0 million ($0.27 per diluted share) in the quarter, up 45% from the net income of $4.2 million ($0.22 per diluted share) in 4Q2007. The higher net income was primarily attributable to the benefits of overall sales growth as well as lower interest expense and higher other income, partially offset by higher SG&A costs and the provision for income taxes that the Company began to pay in 2008.

Tianfu Yang, Harbin Electric Chairman and CEO, commented, “While the global economic meltdown negatively impacted our fourth quarter performance, 2008 was a successful year for the Company as demonstrated by our robust growth in revenues and net income, and strong liquidity position. Our strong results for the year testify to our strategic vision over the past years and reflect the resilience of our business model. The successful completion of Hengda acquisition broadened our product portfolio and increased our competitive advantage. We believe that it also paved the way for substantial market opportunities in the long-term.”

Looking ahead, Mr. Yang commented, “We continue to experience softer demand in some areas, particularly in the automobile specialty micro-motor business. We have also begun to see some demand improvement in our rotary motor products for agricultural applications, reflecting the impact of the initial phase of the Chinese government’s stimulus package. Overall in 2009, we expect that our linear motors for subway train cars, the start-up of the Shanghai facility, and volume growth in oil pumps as well as the government’s stimulus package, will drive sales and earnings growth over 2008. However, the size of this projected growth remains uncertain. We expect that these positive factors will begin to impact our business in the second half of the year.”

“Given the continued uncertainty associated with a possible further deterioration of global economic conditions, our priority is to maintain and strengthen our existing business and client base while we continue to pursue growth opportunities. Despite unprecedented economic uncertainty and the many challenges we are facing, we believe that we are well positioned to navigate these turbulent times and to achieve growth and build long-term value for our shareholders.”

Conference Call Details

The Company will host a conference call to discuss the fourth quarter and fiscal year 2008 financial results at 8:30 a.m. ET on Friday, March 13, 2009.

To participate in the conference call, please dial any of the following numbers:

USA: 1-800-603-1779

International: +1-706-643-7429

North China: 10-800-713-0924

South China: 10-800-130-0748

The conference ID for the call is 88782128.

A replay of the call will be available beginning at 10:00 a.m. ET on March 13, 2009 and will remain available through midnight on March 19, 2009.

To access the replay, please dial any of the following numbers:

USA: 1-800-642-1687

International: +1-706-645-9291

Passcode is 88782128.

This conference call will be broadcast live over the Internet. To listen to the live webcast, please go to http://www.harbinelectric.com and click on “Harbin Electric Q4 and Fiscal Year 2008 Financial Results Conference Call”. The replay of the webcast will be available for 30 days and will be archived on the Investor Kits page of the website after 30 days.

About Harbin Electric, Inc.:

Harbin Electric, headquartered in Harbin, China, is a leading developer and manufacturer of a wide array of electric motors with a focus on innovative, customized and value-added products. Its major product lines include linear motors, automobile specialty micro-motors, and industrial rotary motors. The Company’s products are purchased by a broad range of domestic and international customers, including those involved in oil services, factory automation, food processing, packaging, transportation, automobile, medical devices, machinery and tool manufacturing, petrochemical, as well as in the metallurgical and mining industries.

Harbin Electric has built a strong research and development capability by recruiting talent worldwide and through collaborations with top scientific institutions. The Company owns numerous patents in China and has developed award-winning products for its customers. Through its U.S. and China-based subsidiaries, the Company operates three manufacturing facilities in China located in Harbin, Weihai, and Shanghai with a total of approximately 2,000 employees. Each of the three manufacturing facilities is dedicated to a specific product line and is equipped with state-of-the-art production equipment and quality control systems.

As China continues to grow its industrial base, Harbin Electric aspires to be a pioneer in leading the industrialization and technology transformation of the Chinese manufacturing sector. To learn more about Harbin Electric, visit http://www.harbinelectric.com .

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-K for the year ended December 31, 2008. The Company does not undertake any obligation to update forward-looking statements contained in the 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 investor and media inquiries, please contact:

In China

Harbin Electric, Inc.

Tel: +86-451-8611-6757

Email: MainlandIR@Tech-full.com

In the U.S.

Christy Shue

Harbin Electric, Inc.

Executive VP, Finance & Investor Relations

Tel: +1-631-312-8612

Email: cshue@HarbinElectric.com

Kathy Li

Christensen Investor Relations

Tel: +1-212-618-1987

Email: kli@christensenir.com

HARBIN ELECTRIC, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2008 AND 2007

ASSETS

December 31, December 31,

2008 2007

CURRENT ASSETS:

Cash and cash equivalents $48,412,263 $45,533,893

Restricted cash 513,450 --

Notes receivable 1,451,977 --

Accounts receivable, net of

allowance for doubtful accounts

of $153,155 and $116,238 as of

December 31, 2008

and 2007, respectively 30,284,080 23,216,543

Inventories 21,960,084 2,570,929

Other receivables 248,552 326,639

Advances on inventory purchases 3,529,607 1,772,204

Total current assets 106,400,013 73,420,208

PLANT AND EQUIPMENT, net 94,931,999 23,858,035

OTHER ASSETS:

Debt issue costs, net of amortization 1,672,279 2,214,717

Advances on equipment purchases 10,416,187 24,328,386

Advances on intangible assets 1,892,430 1,384,710

Goodwill 12,273,778 --

Other intangible assets, net of

accumulated amortization 6,430,397 5,899,989

Other assets 471,220 397,263

Cross currency hedge receivable -- 145,945

Deposit in derivative hedge 1,000,000 1,000,000

Total other assets 34,156,291 35,371,010

Total assets $235,488,303 $132,649,253

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Notes payable - short term $1,026,900 $ --

Accounts payable 8,415,919 263,314

Short term loan - bank 4,180,950 --

Wages & benefit payable 1,565,360 6,947

Other payables & accrued Liabilities 1,224,432 1,456,271

Other payables - related party -- 45,491

Customer deposits 1,244,622 333,253

Taxes payable 2,096,521 839,299

Interest payable 800,954 1,122,000

Cross currency hedge payable 175,986 --

Total current liabilities 20,731,644 4,066,575

LONG TERM LIABILITIES:

Amounts due to original shareholder 733,500 --

Note payable, net of debt discount

of $12,389,135 and $16,878,269 as

of December 31, 2008 and

2007, respectively 33,610,866 33,121,731

Fair value of derivative instrument 5,762,958 10,844,372

Total liabilities 60,838,968 48,032,678

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY:

Common Stock, $0.00001 par value,

100,000,000 shares authorized,

22,102,078 and 18,143,156 shares

issued and outstanding as of

December 31, 2008 and

2007, respectively 220 181

Paid-in-capital 95,029,290 44,970,589

Retained earnings 52,100,479 32,281,312

Statutory reserves 14,573,994 9,014,462

Accumulated other comprehensive

income (loss) 12,945,352 (1,649,969)

Total shareholders’ equity 174,649,335 84,616,575

Total liabilities and

shareholders’ equity $235,488,303 $132,649,253

HARBIN ELECTRIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

For the Years ended December 31,

2008 2007

REVENUES $120,820,302 $65,402,864

COST OF SALES 73,343,521 32,967,887

GROSS PROFIT 47,476,781 32,434,977

RESEARCH AND DEVELOPMENT EXPENSE 1,170,169 1,064,074

SELLING, GENERAL AND ADMINISTRATIVE

EXPENSES 11,913,435 7,659,611

INCOME FROM OPERATIONS 34,393,177 23,711,292

OTHER EXPENSE (INCOME), NET

Other (income) expenses, net (1,575,224) 188,654

Interest expense, net 6,065,814 6,619,954

Change in fair value of warrant -- --

Total other expense, net 4,490,590 6,808,608

INCOME BEFORE PROVISION FOR INCOME TAXES 29,902,587 16,902,684

PROVISION FOR INCOME TAXES 4,523,888 --

NET INCOME 25,378,699 16,902,684

OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency translation adjustment 9,513,907 7,162,512

Change in fair value of derivative

instrument 5,081,414 (10,844,372)

COMPREHENSIVE INCOME $39,974,020 $13,220,824

Earnings per share

Basic $1.25 $0.99

Diluted $1.19 $0.91

Weighted average number of shares

Basic 20,235,877 17,082,300

Diluted 21,323,660 18,634,739

HARBIN ELECTRIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

2008 2007

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $25,378,699 $16,902,684

Adjustments to reconcile net income

to cash provided by (used in)

operating activities:

Depreciation 1,608,724 567,069

Amortization of intangible assets 1,032,674 510,023

Amortization of debt issuance costs 542,438 542,438

Amortization of debt discount 4,489,135 4,532,132

Loss (gain) on derivative instrument 541,018 (700,496)

Stock based compensation 1,782,454 1,584,234

Provision for (recovery of)

accounts receivable (1,899) 65,876

Change in operating assets and liabilities

Notes receivable (1,076,669) --

Accounts receivable (1,174,801) (12,197,768)

Inventories 9,605,737 (1,615,757)

Other receivables 1,313,578 (154,244)

Other receivables - related parties -- 46,216

Advances on inventory purchases (730,043) (844,177)

Other assets 8,920 (24,781)

Accounts payable 591,620 (1,302,212)

Other payables & accrued liabilities (1,258,756) 922,084

Other payables - related party (47,830) 43,689

Customer deposits (1,277,737) (7,848)

Taxes payable 1,298,829 234,702

Interest payable (321,046) --

Net cash provided by

operating activities 42,305,045 9,103,864

CASH FLOWS FROM INVESTING ACTIVITIES:

Cash acquired through acquisition 5,061,757 --

Payment for advances on intangible

assets (403,620) --

Payment for advances on equipment

purchases -- (23,315,185)

Purchase of intangible assets -- (1,117,024)

Additions to plant and equipment (16,035,159) (12,138,676)

Additions to CIP (16,386,519) --

Payment to original shareholders

for acquisition (53,335,500) --

Net cash used in investing

activities (81,099,041) (36,570,885)

CASH FLOWS FROM FINANCING ACTIVITIES:

Increase in restricted cash (504,525) --

Net proceeds from stock issuance

3.5 million shares 46,290,743 --

Proceeds received from conversion

of warrants and options 1,985,543 1,713,193

Deposit to secure investment in

cross currency hedge (1,000,000)

Proceeds from cross currency hedge 145,945 554,551

Payment of cross currency hedge (365,032) --

(Payment on) proceeds from notes payable (4,000,000) --

Decrease of notes payable-short term (3,315,450) --

Payment of short term loan (1,034,997) --

Net cash provided by

financing activities 39,202,227 1,267,744

EFFECTS OF EXCHANGE RATE CHANGE ON CASH 2,470,139 4,419,251

INCREASE (DECREASE) IN CASH 2,878,370 (21,780,026)

Cash and cash equivalents, beginning

of period 45,533,893 67,313,919

Cash and cash equivalents, end of period $48,412,263 $45,533,893

HARBIN ELECTRIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED DECEMBER 31, 2008 AND 2007

(Unaudited)

For the Three Months

Ended December 31,

2008 2007

REVENUES $34,743,375 $19,286,919

COST OF SALES 23,254,173 9,991,931

GROSS PROFIT 11,489,202 9,294,988

RESEARCH AND DEVELOPMENT EXPENSE 755,438 312,191

SELLING, GENERAL AND ADMINISTRATIVE

EXPENSES 3,720,236 2,998,436

INCOME FROM OPERATIONS 7,013,528 5,984,361

OTHER EXPENSE (INCOME), NET

Other (income) expenses, net (620,042) 974,834

Interest expense, net 529,760 906,582

Total other expense, net (90,282) 1,881,416

INCOME BEFORE PROVISION FOR INCOME TAXES 7,103,810 4,102,945

PROVISION FOR INCOME TAXES 1,062,958 (75,298)

NET INCOME 6,040,852 4,178,243

OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency translation

adjustment 758,126 3,206,476

Change in fair value of derivative

instrument 971,885 (3,796,966)

COMPREHENSIVE INCOME $7,770,863 $3,587,753

BASIC EARNINGS PER SHARE $0.28 $0.23

DILUTED EARNINGS PER SHARE $0.27 $0.22

Source: Harbin Electric, Inc.
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