CPQQ China Power Equipment Inc (CE)

XI'AN, China, Nov. 14, 2013 /PRNewswire/ -- China Power Equipment, Inc. ("China Power Equipment" or the "Company," OTCBB: CPQQ), a manufacturer of a new generation of energy saving amorphous alloy transformer cores and transformers in China, today announced its financial results for the third quarter ended September 30, 2013.

Third Quarter Highlights:

• Revenues decreased 14.5% to $ 9.13 million year over year, while increased 2.78% quarter over quarter
• Net income decreased 22% to $1.63 million year over year, while increased 17.4% quarter over quarter, with $0.07 in diluted EPS

"During the reporting quarter, we are pleased to see that we maintained good operating margin and net profit margin sequentially, compared to the last quarter, thanks to continuously efficient cost control measures, as well as a jump of more than 8 times in cash flow generation from operating activities following an efficient financial management," said Mr. Song Yongxing, Chairman, CEO, and President of China Power Equipment.  "The decrease of our net sales for the quarter was largely due to the delay of the execution of parts of the amorphous ally transformers orders with some oil fields."

"Driven by rising emphasis of energy saving initiatives by social awareness and the governments as well as fast increasing energy price, the demand for energy saving solutions is significantly growing, including both domestic and international markets. We will continue our focus on the specialty customer market for amorphous alloy transformers, and actively develop overseas energy saving market to help us continue to grow." concluded Mr. Song.

Total revenues decreased $1.55 million or 14.5% to $ 9.13 million, compared to the same period of 2012. The decrease in the quarter was primarily due to the lower average selling prices of amorphous alloy cores and fewer units of amorphous alloy transformers sold, partly offset by higher average unit prices of amorphous alloy transformers.  Net revenues generated by sales of amorphous alloy cores decreased 3.5% to $ 7.12 million for the quarter, representing 78% of sales. Net revenues generated by sales of amorphous alloy transformers decreased 39.1% to $ 2.01 million for the quarter, representing 22 % of sales.

Gross profit for the quarter was $2.26 million, representing a decrease of approximately 20.6% compared to the same period of 2012. The decreases of gross profit were primarily due to the lower sales from amorphous alloy cores and transformers. The consolidated gross profit margin (gross profit as a percent of total revenues) decreased 1.9 percentage points to 24.8% in the third quarter of 2013 from 26.7% in the third quarter of 2012. This was mainly due to the lower gross profit margin of amorphous alloy cores caused by its average selling prices decreased to a greater extent than the average cost of its primary raw material.

Selling, general, and administrative ("SG&A") expenses totaled $0.32 million for the three months ended September 30, 2013, a decrease of approximately 10.3% from the same period in 2012,  The lower SG&A expenses in dollars in the third quarter of 2013 were primarily due to a decrease in administrative facility expense, stock-based compensation and professional fee.

Net income for the third quarter ended September 30, 2013 was $21.63 million, a decrease of 22% versus the same period of 2012, primarily due to the lower gross profit, offset by lower SG&A expenses, higher other income and lower income taxes.

Earnings per share based on 23.8 million fully-diluted shares decreased 22.2% to $0.07.

Nine Month Results

*Earnings per share are based on weighted average fully diluted shares outstanding of 23.7 million and 23.7 million in the first nine months of 2013 and 2012, respectively. All numbers are rounded to nearest $ 1 million, excluding EPS and percentages.

Total net revenues decreased $2.56 million or 9.3% during the nine months ended September 30, 2013, compared to the same periods of 2012. Net revenues generated by sales of amorphous alloy cores decreased 6.1% to $18.6 million during the period and accounted for 74.8% of total sales. Net revenues generated by sales of amorphous alloy transformers decreased 17.7% to $6.27 million and comprised of 25.2% of sales for the period. Net revenues decreased primarily as a result of the lower average selling prices of amorphous alloy cores and transformers and fewer units of amorphous alloy transformers sold.

Gross profits for the first nine months of 2013 were $ 6.17 million, a decrease of 14.2% versus the same period last year. Gross profit margin for the period for amorphous alloy cores decreased 2.3 percentage points to 24.5%, while gross profit margin for amorphous alloy transformers increased 1 percentage points to 25.7%.

SG&A expenses for the first nine months of 2013 decreased 10.7% to $1.24 million compared to the same period of last year and represented 5% of total net revenues.

Net income for the first nine months of 2013 was $4.08 million, a decrease of 15.5%, versus the same period of last year and earnings per share were $0.17 based on 23.7 million fully-diluted shares.

Financial Condition

Cash and cash equivalents were $31.98 million at September 30, 2013 compared to $21.98 million at December 31, 2012. Working capital increased to $37.52 million at September 30, 2013 from $31.63 million at the end of 2012. Accounts receivable balance was $6.12 million at September 30, 2013, compared to $ 10.19 million at the end of 2012. Accounts payable balance was $ 3.15 million, increased from $1.89 million.

For the nine months ended September 30, 2013, net cash provided by operating activities was $9.35 million.  This was primarily due to net income of $4.08 million, adjusted by non-cash related expenses including depreciation and amortization of $ 0.94 million and stock-based compensation of $3,816, then increased by favorable changes in working capital of $4.32 million. The favorable changes in working capital mainly resulted from a decrease in accounts receivable of $4.20 million as some prior period accounts receivable got collected and an increase in account payable of $1.21 million, partly offset by an increase in inventory of $ 0.73 million and a decrease in other payables and advance from customers of $ 0.5 million.    

About China Power Equipment, Inc.

China Power Equipment, Inc. designs, manufactures, and distributes amorphous alloy transformer cores and amorphous core step-down transformers in China. The Company currently manufactures 59 different products, primarily amorphous alloy cores and amorphous alloy core transformers.

Safe Harbor Statement

Certain statements in this release concerning our future growth prospects are forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. These forward-looking statements can be identified by terminology such as "anticipates," "believes," "could," "estimates," "expects," "future," "intends," "plans," "should," "will," and similar statements.

The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding the success of the company's investments, risks and uncertainties regarding fluctuations in earnings, its ability to sustain its previous levels of profitability including on account of its ability to manage growth, intense competition, wage and inflation increases in China, its ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, its ability to successfully complete and integrate potential acquisitions, withdrawal of governmental fiscal incentives, political instability and regional conflicts, and legal restrictions on raising capital or acquiring companies outside China.

Additional risks that could affect the company's future operating results are more fully described in its filings with U.S. Securities and Exchange Commission. These filings are available at www.sec.gov and at www.chinapower-equipment.com.

The company may, from time to time, make additional written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on forms 10-K, 10-Q, and 8-K, in its annual report to shareholders, in news releases and other written materials, and in oral statements made by its officers, directors, or employees to third parties. The company does not undertake to update any forward-looking statements that may be made from time to time by or on its behalf, except as required under law.

For more information about China Power Equipment, please visit its website at www.chinapower-equipment.com.

For more information, please contact:

COMPANY:
Ms. Nicole Chen (English and Chinese)
Vice President of Finance
China Power Equipment, Inc.
Telephone: +86 (29) 6261 9758
Mobile: +86 186 1633 1170
Email: xa-fj@xa-fj.com

SOURCE China Power Equipment, Inc.