ZHENGZHOU, China, May 8, 2012 /PRNewswire-Asia-FirstCall/
-- China Valves Technology, Inc. (NASDAQ: CVVT) ("China
Valves" or the "Company"), a leading Chinese metal valve
manufacturer, today announced its financial results for the three
and six months ended March 31, 2012.
The results are unaudited and subject to change.
Unaudited Results for the Three Months Ended
March 31, 2012
For the quarter ended March 31,
2012, the Company's total revenue was $38.4 million, down 8.4% from $42.0 million in the same quarter last year. The
year-over-year decline in revenue was largely attributable to lower
budget and delay in projects of the Company's large customers which
resulted in weak demand for the Company's products.
Mr. Jianbao Wang, Chief Executive Officer of China Valves,
commented, "We experienced a weak quarter due to unfavorable
economic conditions and tight liquidity conditions that inhibited
capital projects. Despite these challenges, we remain confident in
our ability to achieve our guidance for fiscal year 2012."
Gross profit for the quarter was $14.1
million, down 19.6% from $17.5
million for the same period of 2011. Gross margin was 36.6%
for the quarter compared to 41.7% for the same period in 2011. The
decrease in gross margin was mainly attributable to higher labor
and raw material costs and increase in sales of lower margin medium
to low pressure valves.
Selling expenses were $2.6 million
compared to $2.3 million in the same
quarter of 2011, an increase of approximately 13.5%. The increase
in selling expenses was mainly due to higher promotion expenses
incurred during the quarter.
General and administrative expenses were $7.9 million compared to $6.0 million for the same period in 2011, an
increase of $1.9 million, or
approximately 32.9%. The increase was mainly due to increase in
reserves for bad debt allowance of $3.5
million during the second quarter following a management's
periodic review of account receivables.
Income tax expense was $1.7
million, compared to $2.5
million for the same period in 2011. The decrease was
primarily due to lower profits in the current quarter. The
effective tax rate was 49.3% for the three-month ended March 31, 2012, compared with 24.5% for the same
quarter in 2011. The increase was mainly due to the account
receivable allowance accrued which cannot be deductible according
to PRC tax law.
Net income for the three months ended March 31, 2012 was $1.8
million, compared to $7.6
million for the same quarter in 2011. Diluted earnings per
share were $0.05, compared to diluted
earnings per share of $0.21 for the
same period in 2011.
Unaudited Results for the Six Months Ended
March 31, 2012
For the six months ended March 31,
2012, the Company's total revenue was $94.1 million, down 0.2% from revenue of
$94.3 million for the six months
ended March 31, 2011. Gross profit
was $34.4 million, down 4.4% from
gross profit of $36.0 million for the
six months ended March 31, 2011.
Gross margin was 36.5%, compared to 38.1% for the six months ended
March 31, 2011. Net income was
$10.0 million, or $0.28 per diluted share, compared to $14.0 million, or $0.40 per diluted share, for the same period a
year ago.
Financial Condition
As of March 31, 2012, China Valves
had $11.1 million in cash and cash
equivalents, $141.7 million in
working capital and a current ratio of 3.1 times. Accounts
receivable was $152.7 million as of
March 31, 2012 compared to
$124.5 million as of September 30, 2011, while long term retainage was
$4.5 million as of March 31, 2012 compared to $5.7 million as of September 30, 2011. Days Sales Outstanding for
the six months ended March 31, 2012
were 265 compared to 201 for the same period a year ago.
The Company had no long-term debt on its balance sheet as of
March 31, 2012. Shareholders' equity
was $245.6 million as of March 31, 2012, compared to $232.0 million as of September 30, 2011.
Net cash used in operating activities was $18.6 million in the six months ended
March 31, 2012, compared with net
cash provided by operating activities of $3.9 million for the same period in 2011. The
decrease was primarily attributable to the increase in accounts
receivable.
Net cash used in investing activities was $1.1 million in the six months ended March 31, 2012, compared with $1.5 million in the six month ended March 31, 2011. The net cash used in investing
activities during the period ended March 31,
2012 was primarily used for the purchase of equipment,
software and payments made for construction in progress.
Net cash provided by financing activities was $2.4 million in the six months ended March 31, 2012, compared with $12.9 million for the same period in 2011 as the
Company paid $1.9 million deposit for
notes payables in 2012.
Business Outlook
China Valves reiterates its guidance for fiscal year of 2012,
expecting to achieve top-line growth in the low teens and expecting
gross margins to fluctuate in the range of 35% to 37% depending on
shifts in product mix. It should be noted that these estimates are
based on current conditions and are subject to revision based on
the uncertainty in the global economy and range of potential policy
responses and monetary actions by China's central government.
"In the second half of fiscal 2012, we will continue to focus on
generating more sales and collecting account receivable. We expect
to achieve significant revenue growth in the second half of fiscal
2012 compared to the first half. We are in negotiations to secure a
longer term credit facility which would also help us with
fluctuations in the payment cycle of our larger, state-owned
enterprise customers. We continue to work towards building a
dominant position in China's
highly fragmented industrial valve industry and create sustainable
value for our shareholders," said Mr. Wang.
Conference Call
The Company will host a conference call at 8:30 a.m. Eastern Time on Tuesday, May 8, 2012 to discuss its financial
results for the three and six months ended March 31, 2012. To participate in this live
conference call, callers from United
States should call 1 866 242 1388. Callers from China should call 400 698 8166. Callers from
other countries should call +61 2 8823 6760. The Conference Pass
Code is 79152654.
If you are unable to participate in the call at this time, a
replay will be available for seven days starting on Tuesday, May 8, 2012 at 11:00 a.m. Eastern Time. To access the replay,
callers from United States should
call 1 866 214 5335. Callers from China should call 400 692 0026. Callers from
other countries should call +61 2 8235 5000. The Conference Pass
Code is 79152654.
About China Valves Technology, Inc.
China Valves Technology, Inc. through its subsidiaries,
Zhengzhou City ZD Valve Co, Ltd., Henan Kaifeng High Pressure Valve
Co., Ltd., Taizhou Taide Valve Co., Ltd., Yangzhou Rock Valve Lock
Technology Co., Ltd., China Valve Technology (Changsha) Valve Co., Ltd. and Shanghai Pudong
Hanwei Valve Co., Ltd., is engaged in the development,
manufacturing and sale of high-quality metal valves for the
electricity, petroleum, chemical, water, gas and metallurgy
industries. The Company has one of the best known brand names in
China's valve industry, and its
history can be traced back to 1959 when it was formed as a
state-owned enterprise. The Company develops valve products through
extensive research and development and owns a number of patents. It
enjoys significant domestic market share and exports to
Asia and Europe. For more information, visit
http://www.cvalve.com.
Safe Harbor Statements
Any statements set forth above that are not historical facts
are forward-looking statements that involve risks and uncertainties
that could cause actual results to differ materially from those in
the forward-looking statements. Such factors include, but are not
limited to, the Company's ability to develop and market new
products, the ability to access capital for expansion, the ability
to acquire other companies, changes from anticipated levels of
sales, changes in national or regional economic and competitive
conditions, changes in relationships with customers, changes in
principal product profits and other factors detailed from time to
time in the Company's filings with the United States Securities and
Exchange Commission and other regulatory authorities. The Company
undertakes no obligation to update or revise to the public any
forward-looking statements, whether as a result of new information,
future events or otherwise. This press release was developed by
China Valves, and is intended solely for informational purposes and
is not to be construed as an offer or solicitation of an offer to
buy or sell the Company's stock. This press release is based upon
information available to the public, as well as other information
from sources which management believes to be reliable, but it is
not guaranteed by China Valves to be accurate, nor does China
Valves purport it to be complete. Opinions expressed herein are
those of management as of the date of publication and are subject
to change without notice.
China Valves Technology, Inc.
Gang Wei, CFO
Tel: +86-371-8601-8777
E-mail: ir@cvalve.com
http://www.cvalve.com
CCG Investor Relations
Crocker Coulson, President
Tel: +1 646-213-1915
E-mail: crocker.coulson@ccgir.com
http://www.ccgirasia.com
CHINA
VALVES TECHNOLOGY INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
OTHER COMPREHENSIVE INCOME
|
(Amounts in U.S. dollars)
|
|
|
|
Three
months ended March 31,
|
|
|
Six
months ended March 31,
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
(unaudited)
|
|
|
(unaudited and
unreviewed)
|
|
|
(unaudited)
|
|
|
(unaudited and
unreviewed)
|
Sales
|
$
|
38,395,870
|
|
$
|
41,825,806
|
|
$
|
94,062,843
|
|
$
|
93,536,188
|
Sales –
related parties
|
|
16,979
|
|
|
127,775
|
|
|
68,928
|
|
|
746,568
|
Total
sales
|
|
38,412,849
|
|
|
41,953,581
|
|
|
94,131,771
|
|
|
94,282,756
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
(24,338,612)
|
|
|
(24,450,331)
|
|
|
(59,772,511)
|
|
|
(58,332,576)
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
14,074,237
|
|
|
17,503,250
|
|
|
34,359,260
|
|
|
35,950,180
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
(2,603,717)
|
|
|
(2,294,616)
|
|
|
(6,380,848)
|
|
|
(6,058,068)
|
General
and administrative expenses
|
|
(7,925,419)
|
|
|
(5,963,702)
|
|
|
(13,796,361)
|
|
|
(12,497,733)
|
Research
and development expenses
|
|
(162,180)
|
|
|
(59,078)
|
|
|
(269,240)
|
|
|
(106,075)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
(10,691,316)
|
|
|
(8,317,396)
|
|
|
(20,446,449)
|
|
|
(18,661,876)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
3,382,921
|
|
|
9,185,854
|
|
|
13,912,811
|
|
|
17,288,304
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
Other
income, net
|
|
231,978
|
|
|
(3,102)
|
|
|
372,653
|
|
|
175,592
|
Gain from
acquisition
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,698,642
|
Interest
and finance expense, net
|
|
(122,081)
|
|
|
(57,670)
|
|
|
(212,722)
|
|
|
(76,378)
|
Change in
fair value of warrant liabilities
|
|
-
|
|
|
912,207
|
|
|
|
|
|
389,490
|
Total
other income, net
|
|
109,897
|
|
|
851,435
|
|
|
159,931
|
|
|
3,187,346
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
before income taxes
|
|
3,492,818
|
|
|
10,037,289
|
|
|
14,072,742
|
|
|
20,475,650
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
(1,722,182
)
|
|
|
(2,467,843)
|
|
|
(4,102,848)
|
|
|
(6,498,045)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
after income taxes
|
|
1,770,636
|
|
|
7,569,446
|
|
|
9,969,894
|
|
|
13,977,605
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
1,648,731
|
|
|
645,910
|
|
|
2,887,894
|
|
|
3,127,346
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
$
|
3,419,367
|
|
$
|
8,215,356
|
|
|
12,857,788
|
|
|
17,104,951
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares
|
|
36,083,940
|
|
|
35,623,376
|
|
|
35,976,211
|
|
|
35,132,917
|
Earnings
per share
|
$
|
0.05
|
|
$
|
0.21
|
|
|
0.28
|
|
|
0.40
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted average number of shares
|
|
36,083,940
|
|
|
35,678,277
|
|
|
35,976,211
|
|
|
35,216,138
|
Earnings
per share
|
$
|
0.05
|
|
$
|
0.21
|
|
|
0.28
|
|
|
0.40
|
CHINA
VALVES TECHNOLOGY INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED BALANCE
SHEETS
|
(Amounts in U.S. dollars)
|
|
|
|
March 31, 2012
|
|
|
September 30, 2011
|
ASSETS
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and
cash equivalents
|
$
|
11,060,540
|
|
$
|
28,076,692
|
Restricted
cash
|
|
4,044,152
|
|
|
2,344,276
|
Notes
receivable
|
|
1,058,666
|
|
|
1,465,369
|
Accounts
receivable, net of allowance
for doubtful accounts of $8,134,227
and
$4,052,398 as of March 31, 2012 and
September 30, 2011, respectively
|
|
152,665,973
|
|
|
124,514,274
|
Other
receivables
|
|
7,746,257
|
|
|
5,106,572
|
Inventories, net of allowance of$1,959,843
and $ 2,394,319 as of March 31, 2012
and September 30, 2011, respectively
|
|
28,050,218
|
|
|
23,868,885
|
Advances
on inventory purchases
|
|
4,169,883
|
|
|
2,421,390
|
Advances
on inventory purchase - related party
|
|
-
|
|
|
1,552,123
|
Prepaid
expenses and other current assets
|
|
98,658
|
|
|
79,295
|
Total
current assets
|
|
208,894,347
|
|
|
189,428,876
|
Property,
plant and equipment, net
|
|
39,267,005
|
|
|
40,192,636
|
Accounts
receivable - retainage, long term
|
|
4,484,135
|
|
|
5,724,024
|
Goodwill
|
|
34,415,741
|
|
|
33,976,186
|
Intangible
assets, net
|
|
23,003,465
|
|
|
22,914,008
|
Other
investments, cost
|
|
825,610
|
|
|
815,066
|
Other
non-current assets
|
|
14,302
|
|
|
395,514
|
Deferred
tax assets
|
|
1,885,817
|
|
|
-
|
Total
assets
|
$
|
312,790,422
|
|
$
|
293,446,310
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable – trade
|
$
|
25,067,784
|
|
$
|
24,575,461
|
Accounts
payable - related parties
|
|
-
|
|
|
786,471
|
Short-term
loans
|
|
8,182,314
|
|
|
6,513,810
|
Other
payables
|
|
3,280,532
|
|
|
5,287,964
|
Other
payables - related parties
|
|
1,030,121
|
|
|
94,226
|
Notes
payable
|
|
3,010,044
|
|
|
469,200
|
Accrued
liabilities
|
|
5,173,615
|
|
|
4,091,998
|
Customer
deposits
|
|
13,221,098
|
|
|
11,139,936
|
Income and
other taxes payable
|
|
8,241,407
|
|
|
8,462,128
|
Total
current liabilities
|
|
67,206,915
|
|
|
61,421,194
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
-
|
|
|
|
|
|
|
Shareholders' Equity:
|
|
|
|
|
|
Common
stock, $0.001 par value;
300,000,000 shares authorized;
36,119,654 and 35,869,654 shares
issued and outstanding as of March
31, 2012 and September 30, 2011,
respectively
|
|
36,119
|
|
|
35,869
|
Additional
paid-in capital
|
|
107,208,452
|
|
|
106,508,099
|
Statutory
reserves
|
|
11,460,305
|
|
|
11,224,490
|
Retained
earnings
|
|
105,305,580
|
|
|
95,571,501
|
Accumulated other comprehensive income
|
|
21,573,051
|
|
|
18,685,157
|
Total
shareholders' equity
|
|
245,583,507
|
|
|
232,025,116
|
|
|
|
|
|
|
Total
liabilities and shareholders' equity
|
$
|
312,790,422
|
|
$
|
293,446,310
|
CHINA
VALVES TECHNOLOGY INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
|
|
|
Six
months ended March 31,
|
|
|
2012
(unaudited)
|
|
|
2011
(unaudited
and unreviewed)
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
Net income
|
$
|
9,969,894
|
|
$
|
13,977,605
|
Adjustments to reconcile net income to net cash
provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization expenses
|
|
2,994,782
|
|
|
3,238,022
|
Allowance for doubtful accounts
|
|
4,020,804
|
|
|
1,049,806
|
Gain on acquisition
|
|
-
|
|
|
(2,698,642)
|
Loss on disposal of fixed assets
|
|
(12,068)
|
|
|
6,798
|
Stock-based compensation
|
|
700,603
|
|
|
41,282
|
Change in fair value of warrant
liabilities
|
|
-
|
|
|
(389,490)
|
Deferred tax assets
|
|
(1,881,792)
|
|
|
-
|
|
|
|
|
|
|
Change in operating assets and
liabilities:
|
|
|
|
|
|
Restricted cash due to sales covenant
|
|
-
|
|
|
(95,775)
|
Notes receivable
|
|
424,753
|
|
|
(294,546)
|
Accounts receivable-trade and retainage, short
term
|
|
(30,505,000)
|
|
|
(16,385,371)
|
Accounts receivable - related parties
|
|
-
|
|
|
(402,794)
|
Other receivables
|
|
(2,568,982)
|
|
|
60,663
|
Other receivables-related party
|
|
-
|
|
|
(171,194)
|
Prepaid expenses and other current assets
|
|
81,101
|
|
|
2,401,668
|
Inventories, net
|
|
(3,864,272
)
|
|
|
3,563,801
|
Advances on inventory purchases
|
|
(1,713,502)
|
|
|
(1,935,805)
|
Advances on inventory purchases-related
party
|
|
1,568,847
|
|
|
(560,961)
|
Accounts receivable - retainage, long term
|
|
1,311,137
|
|
|
(3,899,147)
|
Accounts payable-trade
|
|
174,014
|
|
|
3,570,702
|
Accounts payable-trade- related parties
|
|
(794,945)
|
|
|
1,499,948
|
|
|
|
|
|
-
|
Other payables
|
|
(2,019,904)
|
|
|
3,024,468
|
Other payables - related parties
|
|
915,115
|
|
|
(57,264)
|
Accrued liabilities
|
|
1,041,463
|
|
|
(53,355)
|
Customer deposits
|
|
1,932,910
|
|
|
(151,841)
|
Taxes payable
|
|
(326,947)
|
|
|
(1,414,144)
|
Net cash provided by(used in) operating
activities
|
|
(18,551,989)
|
|
|
3,924,434
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of intangible assets
|
|
(208,852)
|
|
|
(369,275)
|
Cash proceeds from sale of equipment
|
|
61,175
|
|
|
-
|
Purchases of equipment
|
|
(947,081)
|
|
|
(1,123,082)
|
|
|
|
|
|
|
Net cash
used in investing activities
|
|
(1,094,758)
|
|
|
(1,492,357)
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
Restricted cash
|
|
(1,665,984)
|
|
|
159,331
|
Short term notes payable
|
|
2,529,364
|
|
|
|
Cash proceeds from public offering and warrants
exercised
|
|
-
|
|
|
9,391,482
|
Net proceeds from short-term loan - banks and
others
|
|
1,580,853
|
|
|
3,614,497
|
Repayments of notes payables
|
|
-
|
|
|
(297,700)
|
Net cash provided by financing activities
|
|
2,444,233
|
|
|
12,867,610
|
Effects of
foreign currency translation
|
|
186,363
|
|
|
514,939
|
Net
increase(decrease) in cash and cash equivalents
|
|
(17,016,152)
|
|
|
15,814,626
|
Cash and
cash equivalents, beginning of period
|
|
28,076,692
|
|
|
8,387,646
|
Cash and
cash equivalents, ending of period
|
$
|
11,060,540
|
|
$
|
24,202,272
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
|
|
|
|
|
|
Cash paid for interest
|
$
|
212,722
|
|
$
|
134,585
|
Cash paid for income taxes
|
$
|
4,476,715
|
|
$
|
12,117,336
|
|
|
|
|
|
|
|
SOURCE China Valves Technology, Inc.