4Q06 Revenues Increase 66.9% to $12.0 Million
Fiscal 2006 Revenues Increase 70.9% to $40.4 million
HARBIN, China, March 8 /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
fourth quarter and fiscal year ended December 31, 2006.
Sales for the fourth quarter increased 66.9% to $12.0 compared to $7.2
million in the prior year period. Gross profit increased 71.3% to $5.8
million compared to $3.4 million in the prior year. Gross margin increased
130 basis points to 48.2%.
Fourth quarter operating profit increased 63.0% to $4.4 million compared
to $2.7 million. Operating margin decreased 90 basis points to 36.7% compared
to 37.6% in the prior year period. Fourth quarter operating expenses increased
to 11.5% of sales compared to 9.4% in 2005. The increase in operating expense
was primarily a result of business expansion initiatives. Operating Expense as
a percent of sales has returned to a more normal range when compared to the
third quarter of 2006.
For the 2006 fiscal year, total sales increased 70.9% to $40.4 million
compared to the $23.6 million reported for fiscal 2005. Industrial electric
linear motors, special motors and motor systems products continued to comprise
significantly all of the Company's total product sales in both comparable
periods. Over 50% of the year over year growth in sales was driven by new
customer activity.
Gross profit increased 70.1% to $19.7 million in 2006 compared to $11.6
million in 2005. Gross profit margin remained steady at 48.6% in 2006 compared
to 48.9% in 2005.
Fiscal 2006 operating profit rose 40.4% to $14.0 million in 2006 compared
to $10.0 million in 2005. Operating margin for 2006 decreased to 34.1% from
42.1% in 2005 due to the increase in operating expenses. Total operating
expenses increased to 14.0% of sales in 2006 compared to 6.7% in 2005. The
increase in operating expenses during 2006 was largely due to businesses
expansion, increased spending on R&D, FAS 123(R) non cash stock compensation
expense, and advisory fees in connection with the Company's August 2006 debt
fundraising. Stock compensation expense totalled approximately $918,088, or
$0.05 per diluted share, in the year ended December 31, 2006.
Net Income for 2006 increased to $18.4 million, or $1.01 per diluted
share, compared to $10.0 million, or $0.67 per diluted share, for 2005. This
increase was driven mainly by increased operating income and the non cash
gain of $6.4 million, or $0.35 per diluted share, included for the change in
fair value of warrants.
Our total fully diluted share count at the end of 2006 was 18,306,569
compared to 15,143,891 at the end of 2005. The increase was driven by warrants
granted to investors and options granted to employees during 2006.
Highlights for the Fiscal Year 2006 include:
-- Entering into a joint research and development agreement
with the Institute of Electrical Engineering of the Chinese
Academy of Sciences ("IEECAS") to produce a train and
system to be tested at the Beijing Airport railway line in
the People's Republic of China by the end of 2008;
-- Closing of a US$50.0 million debt financing with Citadel
Equity Fund Ltd. and Merrill Lynch International;
-- Strengthening of our Board of Directors by adding 3 new
independent board members;
-- Commenced construction of new manufacturing facility in the
Shanghai Zhuqiao Airport Industrial Zone focused on
automobile market.
Tianfu Yang, Chairman and CEO of Harbin Electric commented, "Fiscal 2006
was an exciting and productive year for our company with the continuation of
strong sales growth and expanded corporate development programs, receiving the
investment and sponsorship from well respected international financial leaders, the signing the IEECAS development relationship, and the planning
for our entry into the automotive component supply industry with the initial
construction of our new plant facility near the Shanghai Automotive District."
"We were pleased with our financial performance in the fourth quarter and
all of fiscal 2006" Mr. Yang continued. "Subsequent to the end of the year, we
have achieved several notable goals for our business, which we believe have
strengthened our business position. We obtained a listing of our common stock
on the NASDAQ Global Market. Additionally, we are proud to have accomplished
each of the covenant requirements contained in our recent debt fundraising,
including the NASDAQ listing, the hiring of a senior financial officer, and
the appointment of a top 15 ranked independent auditor."
Mr. Yang concluded, "As we advance into fiscal 2007, we intend to
strengthen our design and development capabilities, expand our capacity into
other attractive market segments, and leverage our customer relationships into
new opportunities in the global marketplace. We believe these initiatives
will enable us to further our development as an internationally competitive
leader in the industrial motor marketplace."
The Company ended fiscal 2006 with $67.3 million in cash, as compared with
$5.8 million for the corresponding period in 2005. The increased cash position
was mainly due the net funds raised through its financing in August 2006. Cash
flow from our operations during fiscal 2006 was $16.9 million compared to
$876,000 in 2005. These annual results can be seen in greater detail in the
Company's SEC Form 10-KSB filed for its fiscal year ended December 31, 2006
with the Securities and Exchange Commission (www.sec.gov) on March 7, 2007.
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 270
employees with approximately 200,000 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 December 31, 2006. 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.
(Financial tables to follow)
HARBIN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2006 AND DECEMBER 31, 2005
ASSETS
2006 2005
CURRENT ASSETS:
Cash $ 67,313,919 $ 5,739,019
Marketable securities -- 1,005,772
Accounts receivable, net of
allowance for doubtful
accounts of $44,552 and
$29,248 as of December 31,
2006 and December 31, 2005,
respectively 8,827,799 5,842,840
Inventories 583,287 1,343,031
Other receivables 27,991 --
Other receivables - related
parties 44,998 --
Advances on inventory
purchases 834,590 2,746,431
Total current assets 77,632,584 16,677,093
PLANT AND EQUIPMENT, net 9,219,534 7,438,197
OTHER ASSETS:
Debt issuance costs, net of
amortization 2,757,155 --
Advance on intangible assets 2,585,977 --
Intangible assets, net of
accumulated amortization 640,337 679,866
Other assets 123,234 --
Total other assets 6,106,703 679,866
Total assets $ 92,958,821 $ 24,795,156
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 258,911 $ 189,029
Other payables 406,520 --
Accrued liabilities 107,263 --
Customer deposits 319,261 3,208
Taxes payable 556,943 --
Interest payable 1,122,000 --
Total current liabilities 2,770,898 192,237
NOTES PAYABLE, net of debt discount
of $21,410,401 28,589,599 --
WARRANT LIABILITIES 16,568,080 --
Total liabilities 47,928,577 192,237
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 12,252,064 11,297,676
Retained earnings 26,222,408 10,460,887
Statutory reserves 4,523,715 1,846,724
Accumulated other
comprehensive income 2,031,891 997,466
Total shareholders'
equity 45,030,244 24,602,919
Total liabilities and
shareholders' equity $ 92,958,821 $ 24,795,156
The accompany notes are integral part of these consolidated statements.
HARBIN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
2006 2005
REVENUES $ 40,415,777 $ 23,643,664
COST OF SALES 20,754,282 12,083,957
GROSS PROFIT 19,661,495 11,559,707
RESEARCH AND DEVELOPMENT EXPENSE 1,491,316 750,000
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 4,175,944 845,443
INCOME FROM OPERATIONS 13,994,235 9,964,264
Other expense, net 5,196 --
Non-operating income 89,864 --
Non-operating expense (130,638) --
Gain on sale of marketable
securities 577,071 --
Interest (expense) income, net (2,450,248) 35,894
OTHER (EXPENSE) INCOME, NET (1,908,755) 35,894
CHANGE IN FAIR VALUE OF WARRANTS 6,353,032 --
INCOME BEFORE PROVISION FOR INCOME
TAXES 18,438,512 10,000,158
PROVISION FOR INCOME TAXES -- --
NET INCOME 18,438,512 10,000,158
OTHER COMPREHENSIVE INCOME:
Unrealized gain (loss) on
marketable securities -- 587,171
Foreign currency translation
adjustment 1,034,425 512,540
COMPREHENSIVE INCOME $ 19,472,937 $ 11,099,869
BASIC WEIGHTED AVERAGE NUMBER OF
SHARES 16,600,451 14,934,667
BASIC EARNING PER SHARE $1.11 $0.67
DILUTED WEIGHTED AVERAGE NUMBER OF
SHARES 18,306,569 15,143,891
DILUTED EARNING PER SHARE $ 1.01 $ 0.66
The accompany notes are integral part of these consolidated statements.
HARBIN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 18,438,512 $ 10,000,158
Adjustments to reconcile net
income to cash provided by
(used in) operating activities:
Depreciation 373,539 303,514
Amortization of
intangible assets 93,889 52,899
Amortization of debt
issuance cost 197,470 --
Amortization of debt
discount 1,510,711 --
Loss on disposal of
equipment (1,945) --
Bad debt expense 14,020 28,823
Realized gain on sale of
marketable securities (577,071) --
Change in fair value of
warrants (6,353,032) --
Stock based compensation 918,088 --
(Increase) decrease in assets:
Accounts receivable (2,961,574) (5,751,214)
Inventories 788,713 (1,049,840)
Other receivables 72,579 --
Other receivables -
related parties 86,538 --
Advances on inventory
purchases 1,959,588 (2,698,103)
Other assets (130,972) 52,382
Increase (decrease) in
liabilities:
Accounts payable 148,908 (42,745)
Other payables 401,533 --
Accrued liabilities 49,118 (19,605)
Customer deposits 309,462 --
Interest payable 1,122,000
Other liabilities 7,590 --
Net cash provided by
operating activities 16,913,268 876,269
CASH FLOWS FROM INVESTING ACTIVITIES:
Advance on intangible assets (2,549,389) --
Additions to intangible assets (1,444,350) (269,624)
Additions to property and equipment (1,579,273) (2,288,245)
Proceeds from sale of marketable
securities 1,093,165 --
Net cash used in
investing activities (4,479,847) (2,557,869)
CASH FLOWS FINANCING ACTIVITIES:
Net proceeds from debt issued 47,045,375 --
Net proceeds from issuance of shares -- 4,800,000
Repayments by related party -- 208,015
Capital contribution 36,300 --
Net cash provided by
financing activities 47,081,675 5,008,015
EFFECTS OF EXCHANGE RATE CHANGE IN CASH 2,059,804 201,801
INCREASE IN CASH 61,574,900 3,528,216
CASH, beginning of year 5,739,019 2,210,803
CASH, end of year $ 67,313,919 $ 5,739,019
The accompany notes are integral part of these consolidated statements.
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
