Revenues Up 44 Percent and Net Income Up 24 Percent Year Over Year
Highlights:
-- Total revenues for the quarter were $14 million, up 44%
compared to $9.7 million in the second quarter of 2006
-- Second quarter 2007 net income was $4.6 million, up 24%
compared to $3.7 million in the second quarter of 2006
-- Diluted earnings per share were $0.24 for the quarter, up 14%
compared to $0.21 for the same quarter of last year
HARBIN, China, Aug. 14 /Xinhua-PRNewswire-FirstCall/ -- Harbin Electric, Inc. (or "the Company", Nasdaq: HRBN), a technology-oriented market leader in product development and integrated production tailored to customer applications in linear motors, motor/controller automation systems, specialty micro-motors for automobile interior applications and other specialty micro-motors, today reported its financial results for the second quarter ended June 30, 2007.
Quarterly Key Figures
Three Months Ended
30-Jun-07 30-Jun-06 YoY%
Change
Revenues $13,989,693 $9,711,345 44 %
Gross Profit $7,220,370 $4,800,792 50 %
Gross Profit Margin 52 % 49 %
Net Income $4,556,156 $3,677,745 24 %
Net Income Margin 33 % 38 %
Diluted EPS $0.24 $0.21 14 %
Total revenues in the second quarter of 2007 were $14 million, a 44% increase compared to $9.7 million in the same quarter of 2006, driven by continued growth in sales of industrial linear motors and special motors to existing customers.
Gross profit margin as a percentage of revenues was 52% for the quarter compared to 49% for the same period last year. The higher gross profit margin was due to increases in product sales and a more favorable mix of products shipped in the second quarter of 2007 compared to the corresponding period of 2006.
The Company generated net income of $4.6 million in the quarter, representing an increase of 24% compared with net income of $3.7 million in the same quarter in the prior year. The year-over-year improvement was primarily driven by increases in product sales, government grants, and interest income from bank deposits and from an interest rate swap, and was partially offset by higher SG&A expenses, amortization expenses of debt discount and interest expenses on the $50 million notes issued in August 2006. The higher SG&A expenses in this period were due to increased sales efforts as well as higher stock based compensation expenses.
Non-cash amortization expenses of the debt discount for the quarter were $1.13 million. There were no such expenses in the same quarter of the previous year. This non-operating charge reduced second quarter earnings by $0.06 per diluted share. This expense was due to amortization of debt discount for the $50 million notes issued on August 30, 2006. As of June 30, 2007, the unamortized debt discount totaled $19.14 million. Excluding this non-cash item, second quarter earnings per diluted share would have been $0.30.
Net earnings per diluted share were $0.24 for the quarter versus $0.21 for the same quarter of last year, an increase of 14%.
Six Month Period Key Figures
Six Months Ended
30-Jun-07 30-Jun-06 YoY%
Change
Revenues $27,615,907 $18,590,003 49 %
Gross Profit $14,078,298 $9,074,527 55 %
Gross Profit Margin 51 % 49 %
Net Income $7,960,219 $7,472,241 7 %
Net Income Margin 29 % 40 %
Diluted EPS $0.42 $0.43 -2 %
For the six months ended June 30, 2007, the Company generated net revenues of $27.6 million versus $18.6 million for the six months ended June 30, 2006, representing a 49% year-over-year growth driven by increased sales to existing customers. A slightly higher gross profit margin year-over-year reflects a more favorable mix of products shipped in the first and second quarters of 2007 compared to the corresponding period in 2006.
The Company’s net income was $8 million for the six month period ended June 30, 2007, a 7% increase compared to $7.5 million for the same period of the prior year, primarily due to higher sales which contributed $5 million to the Company’s gross profit for the period, and was partially offset by higher SG&A expenses, amortization expenses of debt discount and interest expenses.
Net earnings per diluted share were $0.42 for the six month period ended June 30, 2007 compared to $0.43 for the same period of last year. Non-cash amortization expenses of the debt discount for the six month period ended June 30, 2007 totaled $2.27 million and reduced earnings for the six month period by $0.12 per diluted share, while there were no amortization expenses of the debt discount for the same period of last year.
“I am very pleased with our solid second quarter results,” said Harbin Electric Chairman and Chief Executive Officer Tianfu Yang. “We continued to see year-over-year growth driven by sales to existing customers, demonstrating the strength of our ongoing customer relationships.”
“During the quarter, we announced the formation of a subsidiary in the U.S., Advanced Automation Group, LLC. We are joined by top-notch researchers and engineers in the U.S. to build this subsidiary into Harbin Electric’s research and development center that will be specialized in industrial automation controller technology,” Mr. Yang added. “Through this newly formed subsidiary, we believe that we can capitalize on the U.S.-based world class development expertise and a China-based electric motor manufacturing capability, expand our business into the industrial automation controller market, and enhance Harbin Electric’s existing R&D assets. We expect that this project will also provide us greater reach into the U.S. and international markets.”
Mr. Yang continued, “We recently also completed our strategic acquisition of Harbin Taifu Auto Electric Co. Ltd., a manufacturer of specialty micro-motors for automobile interior applications. Its current production facility located in Harbin, China has the capacity to produce 2,400,000 motor units annually. I am excited about the Company’s growth potential as we further expand our business in specialty micro-motors with a focus on supplying the fast growing Chinese automobile industry and capturing the potential of the international auto markets with companies that increasingly source auto parts from China. The construction of our new manufacturing facility in Shanghai is ongoing and we look forward to the integration of the new business into the Shanghai facility.”
Looking forward, Mr. Yang commented, “We are executing our business growth strategies according to plan. We are very confident in our ability to continuously deliver solid results for the reminder of the year.”
About Harbin Electric, Inc.
Harbin Electric, headquartered in Harbin, China, is the market leader in linear motors, motor/controller automation systems, specialty micro-motors for automobile interior applications, and other specialty micro-motors and is the first and currently the only Chinese company to provide product development and integrated production tailored to customer applications. The Company is highly technology-oriented with a focus on innovation, creativity, and value-added products and is environmentally conscious and socially responsible. It provides its customers with energy efficient products and its employees with friendly working and living conditions, competitive compensation, and reasonable work schedules. One of the Company’s greatest assets is its strong R&D capability achieved by recruiting talent worldwide and through collaboration with top scientific institutions. Its ISO certified manufacturing facility is equipped with state-of-the-art production lines and quality control systems to ensure product quality. Driven by advantages in closer customer relationships, better understanding of local markets and customer needs, and lower production cost, the Company is able to outperform its competition, which is mainly foreign, and has steadily improved its competitive position in the domestic linear motor market. With fast economic growth in China and favorable government policies, Harbin Electric has formulated and is in execution of a multi-faceted growth strategy to expand the business into the linear motor systems for urban mass transportation and rotary motors with a clear focus on providing high-end, energy efficient products. 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 quarterly report on Form 10-QSB for the quarter ended June 30, 2007. 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.
HARBIN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2007 AND DECEMBER 31, 2006
ASSETS
JUNE 30, DECEMBER 31,
2007 2006
UNAUDITED
CURRENT ASSETS:
Cash $62,700,593 $67,313,919
Accounts receivable, net of
allowance for doubtful
accounts of $45,699
and $44,552 as of
June 30, 2007 and
December 31, 2006,
respectively 10,546,850 8,827,799
Inventories 1,391,605 583,287
Other receivables 100,769 27,991
Other receivables - related
parties -- 44,998
Advances on inventory
purchases 2,527,626 834,590
Total current
assets 77,267,443 77,632,584
PLANT AND EQUIPMENT, net 10,233,847 9,219,534
OTHER ASSETS:
Debt issue costs, net of
amortization 2,510,937 2,757,155
Advances on equipment
purchases 11,913,900 --
Advances on intangible
assets 2,134,625 2,585,977
Intangible assets, net of
accumulated amortization 825,433 640,337
Other assets 174,168 123,234
Investment in derivative
hedge 1,004,401 --
Total other assets 18,563,464 6,106,703
Total assets $106,064,754 $92,958,821
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $183,333 $258,911
Other payables 468,371 406,520
Other payables - related
party 35,613 --
Accrued liabilities 165,950 107,263
Customer deposits 330,214 319,261
Taxes payable 499,981 556,943
Interest payable 1,122,000 1,122,000
Total current
liabilities 2,805,462 2,770,898
NOTES PAYABLE, net of debt discount
$19,144,335 and $21,410,401 as of
June 30, 2007 and December
31, 2006, respectively 30,855,665 28,589,599
CROSS CURRENCY HEDGE PAYABLE 3,945,951 --
WARRANT LIABILITIES -- 16,568,080
Total
liabilities 37,607,078 47,928,577
COMMITMENTS AND CONTINGENCIES -- --
SHAREHOLDERS’ EQUITY:
Common Stock, $0.00001 par
value, 100,000,000 shares
authorized,16,602,951 shares
issued and outstanding 166 166
Paid-in-capital 35,674,843 12,252,064
Retained earnings 27,829,594 26,222,408
Statutory reserves 4,523,715 4,523,715
Accumulated other
comprehensive income 429,358 2,031,891
Total
shareholders’
equity 68,457,676 45,030,244
Total
liabilities
and
shareholders’
equity $106,064,754 $92,958,821
HARBIN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
(UNAUDITED)
FOR THE SIX MONTHS
ENDED JUNE 30,
2007 2006
REVENUES $27,615,907 $18,590,003
COST OF SALES 13,537,609 9,515,476
GROSS PROFIT 14,078,298 9,074,527
RESEARCH AND DEVELOPMENT EXPENSE 453,359 826,754
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,960,321 1,430,853
INCOME FROM OPERATIONS 10,664,618 6,816,920
Other (income)
expense, net -9,310 -53,148
Non-operating
(income) -763,408 --
Realized (gain)
on sale of
marketable
securities -- -571,143
Amortization
expense of debt
discount 2,266,066 --
Gain on cross
currency hedge -297,637 --
Interest expense
(income), net 1,508,688 -31,030
OTHER EXPENSE (INCOME), NET 2,704,399 -655,321
INCOME BEFORE PROVISION FOR
INCOME TAXES 7,960,219 7,472,241
PROVISION FOR INCOME TAXES -- --
NET INCOME 7,960,219 7,472,241
OTHER COMPREHENSIVE LOSS -1,602,533 -264,816
COMPREHENSIVE INCOME $6,357,686 $7,207,425
BASIC WEIGHTED AVERAGE NUMBER OF
SHARES 16,600,507 16,600,451
BASIC EARNING PER SHARE $0.48 $0.45
DILUTED WEIGHTED AVERAGE NUMBER
OF SHARES 18,739,186 17,245,535
DILUTED EARNING PER SHARE $0.42 $0.43
HARBIN ELECTRIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
(UNAUDITED)
FOR THE THREE MONTHS
ENDED JUNE 30,
2007 2006
REVENUES $13,989,693 $9,711,345
COST OF SALES 6,769,323 4,910,553
GROSS PROFIT 7,220,370 4,800,792
RESEARCH AND DEVELOPMENT EXPENSE 235,519 504,165
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,445,858 636,677
INCOME FROM OPERATIONS 5,538,993 3,659,950
Other (income)
expense, net -6,854 914
Non-operating
(income) -757,087 --
Realized (gain)
on sale of
marketable
securities -- --
Amortization
expense of debt
discount 1,133,033 --
Gain on cross
currency hedge -297,637 --
Interest expense
(income), net 911,382 -18,709
OTHER EXPENSE (INCOME), NET 982,837 -17,795
INCOME BEFORE PROVISION FOR
INCOME TAXES 4,556,156 3,677,745
PROVISION FOR INCOME TAXES -- --
NET INCOME 4,556,156 3,677,745
OTHER COMPREHENSIVE LOSS -2,307,201 -1,093,730
COMPREHENSIVE INCOME $2,248,955 $2,584,015
BASIC WEIGHTED AVERAGE NUMBER OF
SHARES 16,600,562 16,600,451
BASIC EARNING PER SHARE $0.27 $0.22
DILUTED WEIGHTED AVERAGE NUMBER
OF SHARES 18,740,981 17,350,758
DILUTED EARNING PER SHARE $0.24 $0.21
For more information, please contact:
Harbin Electric, Inc.
Tel: +1-215-854-8104
Email: info@HarbinElectric.com
cQuest, a Christensen Affiliate
Christy Shue
Tel: +1-917-576-2209
Email: cshue@ChristensenIR.com
