| A-Power Energy Generation Systems, Ltd. |
| 44 Jingxing North Street, Tiexi District, Shenyang, Liaoning, China 110021, telephone +86 24 8561 7888 |
| |
FOR IMMEDIATE RELEASE
A-Power Reports Third Quarter 2010 Financial Results
SHENYANG, China, December 1, 2010 /PRNewswire-Asia-FirstCall/ — A-Power Energy Generation Systems, Ltd. (NASDAQ: APWR) ("A-Power" or "the Company"), a leading provider of distributed power generation systems in China and a fast-growing manufacturer of wind turbines, today announced unaudited interim consolidated financial results for the third quarter ended September 30, 2010.
Third quarter 2010 financial highlights
| · | Revenues decreased 40.7% to $57.3 million from $96.6 million in the third quarter 2009. |
| · | Gross profit decreased 2.5% to $12.3 million in the third quarter from $12.6 million in the third quarter 2009. |
| · | Gross profit margin was 21.5% in the third quarter compared to 13.1% in the third quarter 2009. |
| · | Income from operations decreased 63.2% to $3.4 million in the third quarter from $9.4 million in the third quarter 2009. |
| · | Net loss attributable to A-Power was $(1.0) million in the third quarter compared with a net loss of $(0.6) million in the third quarter 2009. |
| · | Net loss per diluted common share was $(0.02) in both the third quarter 2010 and third quarter 2009 on 34.0% higher weighted average common shares outstanding in the third quarter 2010 than in the prior third quarter. |
| · | Guidance for the year 2010 has been revised downward to revenues of $310 million and net income of $50 million due to lower-than-expected wind turbine sales. |
Mr. Jinxiang Lu, A-Power's Chairman and CEO said, “A-Power’s results in the third quarter were less than we hoped we would achieve. The shortfall was due mainly to lower revenues in our Distributed power generation segment because of the timing of work under contracts, and to less-than-planned sales in our Wind power segment. Although Wind power achieved revenues of $15.5 million in the third quarter, we had assumed we would be able to book revenues from a major customer, Spinning Star LLC. However to date, Spinning Star has been unable to secure the expected construction financing for its wind farm project in Texas.
“We believe our strategy to benefit from alternative power generation, in the forms of distributed power, wind power, and photovoltaic solar power, continues to be valid for the Company’s long-term success and is in the best interests of our shareholders. Our design, engineering, suppliers, and operations are all in very good shape and remain competitive in the marketplace.
| A-Power Energy Generation Systems, Ltd. |
| 44 Jingxing North Street, Tiexi District, Shenyang, Liaoning, China 110021, telephone +86 24 8561 7888 |
| |
“Recently, we have won a major new contract in our Distributed power business for the engineering, procurement, and construction of four hydropower plants over a period of six years, to be located in the Jilin province of China. The project is expected to generate RMB 1.87 billion (about $279 million) over project’s anticipated six year life.
“We are very aware of our responsibility to shareholders and are doing everything possible to simultaneously expand our businesses and protect our assets in the most prudent of ways.
“We hope to see greater predictability in financing for our customers in 2011 and the years ahead.”
Third quarter 2010 financial results
Revenues in the 2010 third quarter decreased 40.7% or $39.3 million to $57.3 million in the third quarter 2010 from $96.6 million in the third quarter 2009. The decrease was primarily due to the decrease of $65.2 million in the Distributed power segment, partly offset by an increase of $15.5 million in the Wind power segment in the third quarter 2010 (the Wind power segment had no revenues in the third quarter 2009), an increase of $9.6 million in the Other construction segment, and revenue of $0.9 million in the newly established Solar power segment. The lower revenues in Distributed power segment were mainly due to fewer projects constructed in the third quarter of 2010 than the third quarter of 2009. Please see our financial statement of segment information below for more results by segment.
Gross profit in the third quarter decreased $0.3 million or 2.5% to $12.3 million in the third quarter 2010 from $12.6 million in the third quarter 2009. The gross profit margin, defined as gross profit divided by revenues, was 21.5% in the third quarter, up from 13.1% in the third quarter of 2009. The improvement in gross margin was due mainly to an increase in revenue in the Wind power segment in the third quarter 2010, which had a gross margin during the quarter of 32.4%, compared with no revenue in the Wind power segment in the third quarter of 2009.
Selling, general, and administrative expenses in the third quarter increased $5.6 million or 172.2% to $8.9 million compared with $3.3 million in the third quarter 2009. The increase was mainly due the acquisitions of Evatech Co. Ltd. ("Evatech") and Hallys Corporation (“Hallys”) in 2010 that added $3.9 million in selling, general, and administrative expenses in the third quarter 2010 ($2.7 million in excess of revenues from these subsidiaries), and due to higher costs in the Distributed power and Wind power segments to further develop the businesses, and higher costs in the Wind power segment associated with the higher sales achieved. As a percentage of revenues, selling, general, and administrative expenses were 15.5% in the third quarter 2010 compared with 3.4% in the third quarter 2009.
| A-Power Energy Generation Systems, Ltd. |
| 44 Jingxing North Street, Tiexi District, Shenyang, Liaoning, China 110021, telephone +86 24 8561 7888 |
| |
Operating income was $3.4 million or 5.9% of revenues in the third quarter of 2010 compared with $9.4 million or 9.7% of revenues in the third quarter 2009. The decreases were primarily due to higher selling, general, and administrative expenses associated with the Evatech and Hallys operations acquired in 2010, which, as noted above, were higher than revenues realized by them.
Net loss attributable to A-Power Energy Generation Systems, Ltd., increased $(0.4) million or 66.7% to $(1.0) million, or $(0.02) per diluted common share, in the third quarter 2010 from $(0.6) million, or $(0.02) per common diluted share, in the third quarter 2009.
Non-GAAP net income, declined $7.5 million or 76.1% to $2.4 million in the third quarter 2010 from $9.9 million in the third quarter 2009.
Weighted average common shares outstanding on a diluted basis in the third quarter 2010 were 46.3 million shares, an increase of 34.0%, compared with 34.6 million shares in the third quarter 2009.
Please refer to the tables below for a financial review of our third quarter 2010 results and the reconciliation of our non-GAAP measure to the most comparable GAAP measure.
Balance sheet
As of September 30, 2010, the Company had cash and cash equivalents (excluding restricted cash) of $168.2 million compared with $166.5 million at December 31, 2009. Prepayments, deposits, and other receivables from customers were $83.5 million on September 30 compared with $52.5 million on December 31, 2009. Bank loans outstanding on September 30 totaled were $59.7 million compared with $19.9 million on December 31. Working capital (defined as current assets minus current liabilities) increased by approximately $38.0 million in the 2010 third quarter to $184.9 million at September 30 compared with $146.9 million on December 31. Total stockholders' equity rose $109.9 million to $362.5 million at September 30, 2010 from $252.6 million at December 31, 2009.
Liquidity and cash flow
At September 30, 2010, we had cash and cash equivalents of $168.2 million and working capital of approximately $184.9 million. Working capital is defined as current assets minus current liabilities.
| A-Power Energy Generation Systems, Ltd. |
| 44 Jingxing North Street, Tiexi District, Shenyang, Liaoning, China 110021, telephone +86 24 8561 7888 |
| |
Cash flow used in operating activities was $(25.8) million in the nine months ended September 30, 2010 compared with cash provided by operating activities of $18.9 million in the first nine months of 2009. Cash used in investing activities was $(92.4) million in the first nine months of 2010 compared with $(27.4) million in the first nine months of 2009. Cash provided by financing activities was $119.1 million in the first nine months of 2010 compared with $54.7 million in first nine months of 2009. Including the effect of exchange rate changes on cash, the net increase in cash and cash equivalents was $1.8 million in the first nine months of 2010 compared with $46.2 million in the first nine months of 2009.
Recent developments and updates
Hydropower engineering, procurement, and construction contract
In September, the Company signed a three-phase, six-year RMB 1.87 billion (approximately $279 million) engineering, procurement, and construction contract with Baishan Long Run Water Conservancy in Baishan city, Jilin province of China. A-Power will be responsible for all the planning, engineering, and construction within the hydropower stations, the building and repairing of access roads to the facilities, and the construction of the power stations' auxiliary projects, including office buildings, staff apartments, and hotels. Phase one requires completion of a 12.8 megawatt water control project. Phase two includes the design and construction of a 64 megawatt hydropower facility over the Hun river. The third phase includes the design and construction of two 16 megawatt hydropower facilities over the Baijianghe river. The Company expects to recognize revenues from this contract using the percentage of competition method of accounting over the anticipated six years of the project’s life.
Reduction of interest in Shenyang Power Group
In October 2010, the Company sold a portion of its shares of Shenyang Power Group (“SPG”), representing 42.5% of SPG’s share capital, to three unaffiliated purchasers, Liaoning Northern Electrical Energy Construction Limited, Liaoning Northern Electrical Pipeline Construction Limited, and Liaoning Hi-tech Furnace Construction Insulation Antisepsis Construction Limited. The sale reduced the Company’s ownership of SPG’s share capital from 62% to 19.5%. The consideration for the sale consisted of the purchasers’ assumption of a total of RMB 425 million (approximately $62.5 million) of the Company’s indebtedness to SPG representing advances to the Company by Shenyang Power Group. The Company did not receive any cash in the transaction.
The Company will furnish to the Securities and Exchange Commission, under cover of a Form 6-K, unaudited pro forma condensed consolidated financial statements for the Company, giving effect to the sale of 42.5% of the share capital of SPG and reduction of the Company’s interest in SPG to 19.5%.
The Company reduced its interest in SPG so as to surrender effective control of SPG with a view to facilitating recognition of revenues attributable to projects in which SPG invests. The sale has been completed and the Company is currently taking care of the daily management of the operation. The Company will account for its remaining investment in SPG using the equity method of accounting. Additional information regarding the reduction in interest will be included in the pro forma financial statements to be furnished by the Company.
| A-Power Energy Generation Systems, Ltd. |
| 44 Jingxing North Street, Tiexi District, Shenyang, Liaoning, China 110021, telephone +86 24 8561 7888 |
| |
Gearbox joint venture with General Electric
The Company is conducting negotiations with GE (China) Co. Ltd ("GE China") to acquire GE China's interest in GE Drivetrain Technologies (Shenyang) Co., Ltd., a joint venture between an affiliate of the Company and GE China formed in March 2009 to manufacture and distribute wind turbine gearboxes in China, and to terminate the related gearbox supply agreement between an affiliate of the Company and GE Transportation, a unit of the General Electric Company.
The transactions with GE China and GE Transportation are subject to agreement on mutually beneficial terms and execution of definitive documents, and there can be no assurance that the transactions will be implemented. The Company will issue an update about its discussions with GE China at an appropriate time.
Wind power – China
As noted above, the Company recognized revenues from the sale of four wind turbines to a third-party purchaser in China during the third quarter 2010.
Wind power – United States – Spinning Star
To date, the Company has not received a binding purchase order for turbines from Spinning Star Energy LLC ("Spinning Star"), the joint venture enterprise owned by United States Renewable Energy Group Wind Partners I, LLC (“USREG Wind”) and SPG developing the proposed 615 megawatt Texas wind farm project (the "Project"). Spinning Star has not been able to secure the debt or equity financing that would allow it to make requisite payments to us under such a purchase order. In addition, we have not reached agreement with Spinning Star as to price and other commercial terms for the sale of turbines (assuming Spinning Star otherwise had funds available to pay for turbines).
Spinning Star has applied for a loan from the U.S. Department of Energy ("DOE"), which has approved Part I of such application. Funding for the Project from the DOE (which would be considered after submission of Part II of the application ) is not a certainty. The application process requires information that is not presently available and involves a number of steps which may not be timely achieved and securing funding is competitive in nature and at DOE’s discretion.
| A-Power Energy Generation Systems, Ltd. |
| 44 Jingxing North Street, Tiexi District, Shenyang, Liaoning, China 110021, telephone +86 24 8561 7888 |
| |
If Spinning Star is unable to obtain funding from the DOE or from other public or private financing sources for the Project, Spinning Star will not be able to acquire our wind turbines, proceed with construction and commercial operation of the Project, or obtain the benefits of U.S. Treasury Department tax credits or tax credit cash grants that may be available for constructed U.S. renewable energy generation projects.
Under Spinning Star’s organizational documents, if construction financing for the Project has not been arranged by December 31, 2010, each member of Spinning Star has the right to require the dissolution and liquidation of Spinning Star. In our view, it is not likely that Spinning Star will be able to arrange the requisite construction financing by December 31, 2010, in which event each of USREG Wind and SPG would then accordingly have the right to elect to dissolve Spinning Star, although neither party has expressed to us an intention to do so.
Wind power – other U.S. opportunities
We are in discussions with several different wind energy project developers in the United States who have expressed interest in acquiring turbines from us and jointly investing in wind project developments with us. As of the date hereof, we do not however, have any binding letters of intent or firm orders from any purchasers of turbines in the United States.
Other developments
In July, we entered into a strategic partnership with Baoding Huide Wind Power Engineering Co. Ltd., that will seek to align A-Power's brands, marketing initiatives, and developing presence in the U.S. with the production and technology of Baoding Huide's assets. Baoding Huide is a renewable energy company primarily focused on the development, manufacture, and sales of 2.0 megawatt wind turbines and various design parts of wind power equipment in China.
In July, we renewed our license agreement with German wind technology company, Fuhrländer AG, for the right to manufacture, sell, operate, and service 2.7 megawatt wind turbines using Fuhrländer's F2500 technology throughout China.
Effective September 30, 2010, Mr. Morris Li, Ph.D., was named to the position of Vice President of Solar Research and Development. Dr. Li will contribute to the Company's proprietary photovoltaic cell production business and has more than 13 years of semiconductor industry experience.
| A-Power Energy Generation Systems, Ltd. |
| 44 Jingxing North Street, Tiexi District, Shenyang, Liaoning, China 110021, telephone +86 24 8561 7888 |
| |
Business outlook and guidance
In light of the general softness in the wind energy business and, in particular, the lack of turbines purchases from Spinning Star and the consequent impact of these factors on the near-term demand for A-Power’s wind turbines, the Company has reduced its guidance for the full year 2010. It now expects revenues of $310 million (reduced from $500 million) and net income of $50 million (reduced from $60 million).
Conference call
A-Power's management will host a conference call to discuss its third quarter financial results on December 1, 2010 at 8:00 a.m. Eastern Standard Time (New York).
To access the conference call, please dial one of the telephone numbers shown below.
In the United States, please dial toll-free to 1-800-706-7749 and use the pass code APWR.
In other international locations, please dial +1-617-614-3474 and use the pass code APWR.
In Hong Kong, please dial toll-free to 800 963 844 and use the pass code APWR.
In mainland China please dial (China Mobile) 400 881 1629 or (China Netcom) 1080 0852 1490 or (China Telecom) 1080 0130 0399 / 1080 0152 1490 and use the pass code APWR.
To access the live webcast and the online archive of the conference call, please visit the investor relations section of A-Power’s website or link to http://phx.corporate-ir.net/playerlink.zhtml?c=193273&s=wm&e=3529784
A telephone replay of the call will be available shortly after the conference call through December 8, 2010 in the U.S. by dialing 1-888-286-8010 and using the pass code 5128 2585. International listeners for the replay should call +1-617-801-6888 and use the pass code 5128 2585.
About A-Power
A-Power Energy Generation Systems, Ltd. ("A-Power"), through its China-based operating subsidiaries, is a leading provider of distributed power generation systems in China and is expanding into the production of alternative power generation systems. Focusing on energy-efficient and environmentally friendly distributed power generation projects of 25 to 400 megawatts, A-Power also operates one of the largest wind turbine manufacturing facilities in China. A-Power acquired Evatech Co. Ltd., a designer and manufacturer of industrial equipment for amorphous-silicon photovoltaic panels, in January 2010, and acquired Hallys Corporation in May 2010.
In addition to the establishment of strategic relationships with some of the world's leading wind energy design and engineering companies, A-Power has formed joint research programs with Tsinghua University and the China Academy of Sciences to develop and commercialize other renewable energy technologies.
| A-Power Energy Generation Systems, Ltd. |
| 44 Jingxing North Street, Tiexi District, Shenyang, Liaoning, China 110021, telephone +86 24 8561 7888 |
| |
For more information, please visit http://www.apowerenergy.com.
Safe harbor statement
This news release may contain forward-looking statements. Any such statement is made within the 'safe harbor' provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "anticipates," "believes," "expects," "estimates," "future," "intends," "may," "plans," "will," and other similar statements. Statements that are not historical facts, including statements relating to anticipated future earnings, margins, and other operating results, future growth, construction plans and anticipated capacities, production schedules and entry into expanded markets are forward-looking statements. Such forward-looking statements, based upon the current beliefs and expectations of our management, are subject to risks and uncertainties, which could cause actual results to differ materially from the forward-looking statements, including but not limited to, the risk that: inclement weather conditions could adversely affect our operating results in particular quarters and/or fiscal years; we may experience construction, manufacturing and development delays on our projects which could adversely affect our financial condition and operating results; our limited operating history and recent entrance into new lines of business and jurisdictional markets may make it difficult for you to evaluate our business and future prospects; we may not be able to successfully develop our business in new jurisdictional markets, which would have a negative impact on the results of our operations derived from such new jurisdictional markets; our customers may not be able to obtain the financing required for these projects, and thus, we may not be able to derive revenues from such agreements, as well as other relevant risks detailed in our filings with the Securities and Exchange Commission, including those set forth in our annual report filed on Form 20-F for the fiscal year ended December 31, 2009. The information set forth herein should be read in light of such risks. We assume no obligation to update the information contained in this press release, except as required under law.
For more information, please contact:
A-Power Energy Generation Systems, Ltd.
John S. Lin
Chief Operating Officer
Email: john@apowerenergy.com
Christensen
Patty Bruner
Mobile: +1 480 332 6397
Email: pbruner@ChristensenIR.com
Tom Myers
Mobile: +86 139 1141 3520
Email: tmyers@ChristensenIR.com
Financial statements follow.
| A-Power Energy Generation Systems, Ltd. |
| 44 Jingxing North Street, Tiexi District, Shenyang, Liaoning, China 110021, telephone +86 24 8561 7888 |
| |
Unaudited Interim Condensed Consolidated Statements of Income
| | | Three months ended | | | Nine months ended | |
| U.S. dollars in thousands, except per share amounts | | September 30, | | | September 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| Revenues | | $ | 57,329 | | | $ | 96,647 | | | $ | 199,474 | | | $ | 185,364 | |
| Cost of sales and business taxes | | | 45,024 | | | | 84,029 | | | | 165,791 | | | | 161,133 | |
| Gross profit | | | 12,305 | | | | 12,618 | | | | 33,683 | | | | 24,231 | |
| Expenses | | | | | | | | | | | | | | | | |
| Selling, general, and administrative expenses | | | 8,859 | | | | 3,254 | | | | 26,497 | | | | 8,808 | |
| Income from operations | | | 3,446 | | | | 9,364 | | | | 7,186 | | | | 15,423 | |
| | | | | | | | | | | | | | | | | |
| Other income (expenses) | | | | | | | | | | | | | | | | |
| Interest income | | | 61 | | | | 89 | | | | 103 | | | | 157 | |
| Finance costs | | | (727 | ) | | | (177 | ) | | | (1,895 | ) | | | (197 | ) |
| Gain on acquisition of Evatech | | | - | | | | - | | | | 11,981 | | | | - | |
| Other income | | | 775 | | | | 127 | | | | 2,239 | | | | 344 | |
| Accretion expense on convertible notes | | | - | | | | (1,034 | ) | | | - | | | | (1,167 | ) |
| Change in fair value of warrants | | | (2,868 | ) | | | (2,958 | ) | | | 23,974 | | | | (2,334 | ) |
| Change in fair value of embedded derivative - convertible notes | | | - | | | | (6,028 | ) | | | - | | | | (4,758 | ) |
| Total other income (expenses) | | | (2,759 | ) | | | (9,981 | ) | | | 36,402 | | | | (7,955 | ) |
| Income before provision for income taxes | | | 687 | | | | (617 | ) | | | 43,588 | | | | 7,468 | |
| Provision for income taxes | | | 2,284 | | | | 31 | | | | 4,741 | | | | 179 | |
| Net income (loss) | | | (1,597 | ) | | | (648 | ) | | | 38,847 | | | | 7,289 | |
| Net loss (income) in subsidiaries attributable to noncontrolling interest | | | 588 | | | | 25 | | | | 1,090 | | | | (95 | ) |
| Net income (loss) attributable to A-Power Energy Generation Systems, Ltd. | | $ | (1,009 | ) | | $ | (623 | ) | | $ | 39,937 | | | $ | 7,194 | |
| | | | | | | | | | | | | | | | | |
| Earnings per share attributable to A-Power | | | | | | | | | | | | | | | | |
| Basic | | $ | (0.02 | ) | | $ | (0.02 | ) | | $ | 0.88 | | | $ | 0.21 | |
| Diluted | | $ | (0.02 | ) | | $ | (0.02 | ) | | $ | 0.86 | | | $ | 0.21 | |
| | | | | | | | | | | | | | | | | |
| Weighted average number of common shares outstanding | | | | | | | | | | | | | | | | |
| Basic | | | 46,287,551 | | | | 34,554,764 | | | | 45,251,702 | | | | 33,992,652 | |
| Diluted | | | 46,287,551 | | | | 34,554,764 | | | | 46,175,050 | | | | 34,846,786 | |
A-Power Energy Generation Systems, Ltd. and Subsidiaries
Unaudited Interim Condensed Consolidated Statements of Comprehensive Income
| | | Three months ended | | | Nine months ended | |
| US dollars in thousands | | September 30, | | | September 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| Net income (loss) | | $ | (1,597 | ) | | $ | (648 | ) | | $ | 38,847 | | | $ | 7,289 | |
| Other comprehensive income (loss) | | | | | | | | | | | | | | | | |
| Gain (loss) in foreign exchange translation | | | 6,287 | | | | 103 | | | | 8,907 | | | | (119 | ) |
| Comprehensive income | | | 4,690 | | | | (545 | ) | | | 47,754 | | | | 7,170 | |
| Comprehensive loss (income) attributable to noncontrolling interest | | | 25 | | | | 25 | | | | 254 | | | | (95 | ) |
| Comprehensive income attributable to A-Power Energy Generation Systems, Ltd. | | $ | 4,715 | | | $ | (520 | ) | | $ | 48,008 | | | $ | 7,075 | |
| A-Power Energy Generation Systems, Ltd. |
| 44 Jingxing North Street, Tiexi District, Shenyang, Liaoning, China 110021, telephone +86 24 8561 7888 |
| |
A-Power Energy Generation Systems, Ltd. and Subsidiaries
Segment information
| | | Three months ended | | | Nine months ended | |
| U.S. dollars in thousands, except per share amounts | | September 30, | | | September 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| Distributed power | | | | | | | | | | | | |
| Revenues from external customers | | $ | 25,715 | | | $ | 90,936 | | | $ | 156,212 | | | $ | 175,062 | |
| Intersegment revenue | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Segment net income (loss) | | $ | 5,493 | | | $ | 11,247 | | | $ | 20,957 | | | $ | 20,855 | |
| Segment assets at September 30 | | $ | 409,439 | | | $ | 381,303 | | | $ | 409,439 | | | $ | 381,303 | |
| | | | | | | | | | | | | | | | | |
| Wind power | | | | | | | | | | | | | | | | |
| Revenues from external customers | | $ | 15,479 | | | $ | - | | | $ | 16,896 | | | $ | - | |
| Intersegment revenue | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Segment net income (loss) | | $ | 2,682 | | | $ | (257 | ) | | $ | 1,203 | | | $ | (687 | ) |
| Segment assets at September 30 | | $ | 235,761 | | | $ | 209,142 | | | $ | 235,761 | | | $ | 209,142 | |
| | | | | | | | | | | | | | | | | |
| Solar power | | | | | | | | | | | | | | | | |
| Revenues from external customers | | $ | 855 | | | $ | - | | | $ | 3,244 | | | $ | - | |
| Intersegment revenue | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Segment net income (loss) | | $ | (4,721 | ) | | $ | - | | | $ | (9,217 | ) | | $ | - | |
| Segment assets at September 30 | | $ | 103,474 | | | $ | - | | | $ | 103,474 | | | $ | - | |
| | | | | | | | | | | | | | | | | |
| Other construction | | | | | | | | | | | | | | | | |
| Revenues from external customers | | $ | 15,280 | | | $ | 5,711 | | | $ | 23,122 | | | $ | 10,302 | |
| Intersegment revenue | | $ | - | | | $ | 1,495 | | | $ | - | | | $ | 3,367 | |
| Segment net income (loss) | | $ | (4,463 | ) | | $ | (11,613 | ) | | $ | 15,013 | | | $ | (12,686 | ) |
| Segment assets at September 30 | | $ | 219,993 | | | $ | 340,564 | | | $ | 219,993 | | | $ | 340,564 | |
| | | | | | | | | | | | | | | | | |
| Eliminations | | | | | | | | | | | | | | | | |
| Revenues from external customers | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Intersegment revenue | | $ | - | | | $ | (1,495 | ) | | $ | - | | | $ | (3,367 | ) |
| Segment net income (loss) | | $ | - | | | $ | - | | | $ | 11,981 | | | $ | (288 | ) |
| Segment assets at September 30 | | $ | (416,297 | ) | | $ | (575,652 | ) | | $ | (416,297 | ) | | $ | (575,652 | ) |
| | | | | | | | | | | | | | | | | |
| Segment totals | | | | | | | | | | | | | | | | |
| Revenues from external customers | | $ | 57,329 | | | $ | 96,647 | | | $ | 199,474 | | | $ | 185,364 | |
| Intersegment revenue | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Segment net income (loss) | | $ | (1,009 | ) | | $ | (623 | ) | | $ | 39,937 | | | $ | 7,194 | |
| Segment assets at September 30 | | $ | 552,370 | | | $ | 355,357 | | | $ | 552,370 | | | $ | 355,357 | |
| A-Power Energy Generation Systems, Ltd. |
| 44 Jingxing North Street, Tiexi District, Shenyang, Liaoning, China 110021, telephone +86 24 8561 7888 |
| |
A-Power Energy Generation Systems, Ltd. and Subsidiaries
Interim Condensed Consolidated Balance Sheets
| | | September 30, | | | December 31, | |
| U.S. dollars in thousands | | 2010 | | | 2009 | |
| | | (Unaudited) | | | (Audited) | |
| Assets | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | | $ | 168,244 | | | $ | 166,476 | |
| Restricted cash | | | 53,702 | | | | 13,399 | |
| Short-term investment | | | 75 | | | | - | |
| Accounts receivable, net of allowance for doubtful accounts of $nil (2009: $nil) | | | 43,581 | | | | 12,463 | |
| Prepayments, deposits, other receivables | | | 74,761 | | | | 43,847 | |
| | | 4,005 | | | | 2,967 | |
| Inventories | | | 22,048 | | | | 10,327 | |
| Due from related parties | | | 23 | | | | 105 | |
| Total current assets | | | 366,439 | | | | 249,584 | |
| | | | | | | | | |
| Accounts receivable, net of allowance for doubtful accounts of $Nil (2009: $nil) | | | 1,923 | | | | 5,738 | |
| Long-term prepayments, deposits, other receivables | | | 8,763 | | | | 8,605 | |
| Property, plant, and equipment, net accumulated depreciation of $6,068 (2009: $1,912) | | | 75,270 | | | | 58,617 | |
| Goodwill | | | 2,029 | | | | - | |
| Intangible assets, net of accumulated depreciation of $2,416 (2009: $169) | | | 50,183 | | | | 22,412 | |
| Deposits on intangible assets | | | 2,175 | | | | 5,657 | |
| Deferred income tax assets | | | 4,143 | | | | 2,321 | |
| Long-term investments | | | 41,445 | | | | 2,423 | |
| Total assets | | $ | 552,370 | | | $ | 355,357 | |
| | | | | | | | | |
| Liabilities and Stockholders' Equity | | | | | | | | |
| Current liabilities | | | | | | | | |
| Short-term bank loans | | $ | 58,038 | | | $ | 19,852 | |
| Accounts payable | | | 34,222 | | | | 15,415 | |
| Notes payable | | | 5,369 | | | | - | |
| Other payables and accrued liabilities | | | 32,788 | | | | 24,619 | |
| Customer deposits | | | 22,220 | | | | 9,994 | |
| Billings in excess of costs and estimated earnings on uncompleted projects | | | 1,861 | | | | 4,887 | |
| Unearned revenue | | | 2 | | | | 1,419 | |
| Due to related parties | | | 2,285 | | | | 4,158 | |
| Income and other taxes payable | | | 5,365 | | | | 4,078 | |
| Fair value of forward contracts | | | 757 | | | | 516 | |
| Warrants liability | | | 18,277 | | | | 17,750 | |
| Current portion of long-term bank loans | | | 329 | | | | - | |
| Total current liabilities | | | 181,513 | | | | 102,688 | |
| Deferred income tax liabilities | | | 5,907 | | | | 31 | |
| Long-term bank loans | | | 1,337 | | | | - | |
| Retirement benefit obligations | | | 1,097 | | | | - | |
| Total liabilities | | | 189,854 | | | | 102,719 | |
| | | | | | | | | |
| Stockholders' equity | | | | | | | | |
| Common shares, 150,000,000 authorized with par value of $0.0001 per share, 46,363,638 shares issued (2009: 39,585,706 issued) | | | 5 | | | | 4 | |
| Additional paid-in capital | | | 258,939 | | | | 203,491 | |
| Accumulated other comprehensive income | | | 15,366 | | | | 6,459 | |
| Statutory reserves | | | 4,197 | | | | 4,155 | |
| Retained earnings (deficit) | | | 38,244 | | | | (1,651 | ) |
| Total A-Power Energy Generation Systems, Ltd. stockholders' equity | | | 316,751 | | | | 212,458 | |
| Noncontrolling interest | | | 45,765 | | | | 40,180 | |
| Total stockholders' equity | | | 362,516 | | | | 252,638 | |
| Total liabilities and stockholders' equity | | $ | 552,370 | | | $ | 355,357 | |
| A-Power Energy Generation Systems, Ltd. |
| 44 Jingxing North Street, Tiexi District, Shenyang, Liaoning, China 110021, telephone +86 24 8561 7888 |
| |
A-Power Energy Generation Systems, Ltd., and Subsidiaries
Unaudited Interim Condensed Consolidated Statements of Cash Flows
| U.S. dollars in thousands | | Nine months ended September 30, | |
| | | 2010 | | | 2009 | |
| Cash flows from operating activities | | | | | | |
| Net income | | $ | 38,847 | | | $ | 7,289 | |
| Items not affecting cash: | | | | | | | | |
| Stock-based compensation | | | 1,493 | | | | 892 | |
| Depreciation and amortization | | | 6,261 | | | | 698 | |
| Future income tax recovery | | | (362 | ) | | | - | |
| Amortization of deferred financing costs | | | 115 | | | | 129 | |
| Change in fair value of warrants | | | (23,973 | ) | | | 2,334 | |
| Change in fair value of embedded derivatives | | | - | | | | 4,759 | |
| Accretion expenses on convertible notes | | | - | | | | 1,167 | |
| Loss recognized from GE Joint Venture | | | 91 | | | | - | |
| Change in fair value of derivatives | | | 218 | | | | - | |
| Gain on acquisition of Evatech | | | (11,981 | ) | | | - | |
| Change in fair value of investments | | | 69 | | | | - | |
| Gains on disposition of property, plant, and equipment | | | - | | | | (42 | ) |
| Foreign exchange gain | | | (274 | ) | | | - | |
| | | | 10,504 | | | | 17,226 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | | (25,770 | ) | | | (4,954 | ) |
| Inventories | | | 3,024 | | | | (17,472 | ) |
| Costs and estimated earnings in excess of billings on uncompleted projects | | | (962 | ) | | | (4,059 | ) |
| Prepayments, deposits and other receivables | | | (22,153 | ) | | | 12,810 | |
| Accounts payable and accrued liabilities | | | 2,058 | | | | 2,760 | |
| Customer deposits | | | 11,693 | | | | 4,886 | |
| Due to (from) related parties | | | (5 | ) | | | - | |
| Billings in excess of costs and estimated earnings on uncompleted projects | | | (3,073 | ) | | | 6,076 | |
| Income and other taxes payable | | | 259 | | | | 1,591 | |
| Retirement benefit obligation | | | 91 | | | | - | |
| Unearned revenue | | | (1,417 | ) | | | - | |
| Cash provided by (used in) operating activities | | | (25,751 | ) | | | 18,864 | |
| | | | | | | | | |
| Cash provided by (used in) investing activities | | | | | | | | |
| (Increase) decrease in restricted cash | | | (39,190 | ) | | | (4,223 | ) |
| Short-term investment | | | (73 | ) | | | - | |
| Purchase of property, plant, and equipment | | | (1,869 | ) | | | (800 | ) |
| Payment of intangible assets | | | (5,952 | ) | | | - | |
| Construction in progress | | | - | | | | (19,944 | ) |
| Loans to third parties | | | (8,390 | ) | | | - | |
| Net proceeds received from the disposition of property, plant, and equipment | | | | | | | 92 | |
| Acquisition of Hallys | | | (2,140 | ) | | | - | |
| Long-term investments | | | (36,625 | ) | | | (2,507 | ) |
| Cash provided by (used in) investing activities | | | (94,239 | ) | | | (27,382 | ) |
| | | | | | | | | |
| Cash provided by (used in) financing | | | | | | | | |
| Proceeds from share capital, net of cost | | | 5,566 | | | | 439 | |
| Net proceeds from private placement | | | 78,456 | | | | - | |
| Net proceeds from issuance of convertible notes | | | - | | | | 37,096 | |
| Proceeds from bank loans | | | 57,288 | | | | 13,241 | |
| Repayment of bank loans | | | (20,442 | ) | | | - | |
| Due (from) to related parties | | | (1,935 | ) | | | 3,962 | |
| Cash received from Evatech upon acquisition | | | 169 | | | | - | |
| Cash received from Hallys upon acquisition | | | - | | | | - | |
| Cash provided by (used in) financing | | | 119,102 | | | | 54,738 | |
| | | | | | | | | |
| Effect of exchange rate changes on cash | | | 2,656 | | | | 17 | |
| Net increase in cash and cash equivalents | | | 1,768 | | | | 46,237 | |
| Cash and cash equivalents, beginning of period | | | 166,476 | | | | 44,518 | |
| Cash and cash equivalents, end of period | | $ | 168,244 | | | $ | 90,755 | |
| | | | | | | | | |
| Supplemental disclosures of cash flow information | | | | | | | | |
| Interest paid | | $ | 223 | | | $ | 67 | |
| Income tax paid | | $ | 2,483 | | | $ | 469 | |
| A-Power Energy Generation Systems, Ltd. |
| 44 Jingxing North Street, Tiexi District, Shenyang, Liaoning, China 110021, telephone +86 24 8561 7888 |
| |
A-Power Energy Generation Systems, Ltd. and Subsidiaries
Interim Condensed Consolidated Statements of Shareholders' Equity
| | | | | | | | | | | | Accumulated | |
| | | Common stock | | | Additional | | | other | |
| US dollars in thousands | | | | | Share | | | paid-in | | | comprehensive | |
| | | Shares | | | value | | | capital | | | income | |
| Balance, December 31, 2009 (audited) | | | 39,585,706 | | | $ | 4 | | | $ | 203,491 | | | $ | 6,459 | |
| Stock-based compensation | | | - | | | | - | | | | 1,493 | | | | - | |
| Additional reserve based on 2009 net income | | | - | | | | - | | | | - | | | | - | |
| Net income | | | - | | | | - | | | | - | | | | - | |
| Additional contribution from a noncontrolling interest holder | | | - | | | | - | | | | - | | | | - | |
| Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | 8,907 | |
| Private placement (January 10) | | | 5,777,932 | | | | 1 | | | | 53,955 | | | | - | |
| Incentive shares issued re 2009 performance | | | 1,000,000 | | | | - | | | | - | | | | - | |
| Balance, September 30, 2010 (unaudited) | | | 46,363,638 | | | $ | 5 | | | $ | 258,939 | | | $ | 15,366 | |
| | | | | | Retained | | | Non- | | | | |
| | | Statutory | | | (deficit) | | | controlling | | | | |
| | | reserves | | | earnings | | | interest | | | Total | |
| Balance, December 31, 2009 (audited) | | $ | 4,155 | | | $ | (1,651 | ) | | $ | 40,180 | | | $ | 252,638 | |
| Stock-based compensation | | | - | | | | - | | | | - | | | | 1,493 | |
| Additional reserve based on 2009 net income | | | 42 | | | | (42 | ) | | | - | | | | - | |
| Net income | | | - | | | | 39,937 | | | | (1,090 | ) | | | 38,847 | |
| Additional contribution from a noncontrolling interest holder | | | - | | | | - | | | | 6,675 | | | | 6,675 | |
| Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | 8,907 | |
| Private placement (January 10) | | | - | | | | - | | | | - | | | | 53,956 | |
| Incentive shares issued re 2009 performance | | | - | | | | - | | | | - | | | | - | |
| Balance, September 30, 2010 (unaudited) | | $ | 4,197 | | | $ | 38,244 | | | $ | 45,765 | | | $ | 362,516 | |
A-Power Energy Generation Systems, Ltd. and Subsidiaries
GAAP and non-GAAP Reconciliation Table (Unaudited)
| | | Three Months Ended | |
| U.S. dollars in thousands | | September 30, | |
| | | 2010 | | | 2009 | |
| Net income attributable to A-Power – GAAP | | $ | (1,009 | ) | | $ | (623 | ) |
| Reconcilation items: | | | - | | | | - | |
| Non-cash stock-based compensation | | | 498 | | | | 342 | |
| Accretion expense on convertible notes | | | - | | | | 1,034 | |
| Change in fair value of warrants | | | 2,868 | | | | 2,958 | |
| Change in fair value of embedded derivative - convertible notes | | | - | | | | 6,028 | |
| Amortization of deferred financing costs | | | - | | | | 116 | |
| Adjusted Net income attributable to A-Power – non-GAAP | | $ | 2,357 | | | $ | 9,855 | |
