China Information Technology, Inc. Announces Fourth Quarter And Year End 2012 Results PR Newswire SHENZHEN, China, April 22, 2013 SHENZHEN, China, April 22, 2013 /PRNewswire/ -- China Information Technology, Inc. (Nasdaq: CNIT) (the "Company", "our" or "we"), a leading provider of information technologies and display technologies ("DT') based in China, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2012. Fourth Quarter 2012 Financial Highlights oRevenues decreased by 5.9% YoY to $29.4 million oGross profit decreased by 8.7% YoY to $8.5 million oOperating loss of $45.4 million mainly due to increases in goodwill and other long-lived impairments and bad debt reserves oNet loss of $48.5 million; adjusted net loss of $23.1 million oFully diluted net loss per share of $1.79; oAdjusted fully diluted net loss per share of $0.86 oCash flow from operations decreased 89.0% to $1.0 million Year 2012 Financial Highlights oRevenues decreased 24.6% YoY to $86.4 million oGross profit decreased 53.7% YoY to $20.5 million oOperating loss of $85.7 million oNet loss of $89.6 million; adjusted net loss of $46.8 million oFully diluted net loss per share of $3.32; oAdjusted fully diluted net loss per share of $1.73 oCash flow from operations decreased 157.1% to a cash outflow of $9.3 million Mr. Jiang Huai Lin, Chairman and Chief Executive Officer of the company, commented, "During 2012, challenging macro environment and tight government fiscal policies in China continued to have a negative impact on our businesses, especially in our government-client based IT segment. Although our revenues for the full year 2012 decreased by 24.6% as compared with 2011, we continued to reap from our business transition strategy with tremendous efforts being invested in the display technology segment during past quarters. Our digital technology (DT) business continued to make more significant contributions to our overall sales mix, representing 53.8% of total revenue for the year, versus 40.5% in 2011." "Despite overall revenue decline, our DT business maintained its sales volume of the previous year. We secured and completed numerous important contracts in our DT segment under China's "Digital Campus" initiative, including a $10 million contract with education clients in Anhui Province. We expect our robust implementation of this pilot project will lead to greater opportunities with rollout of more education information technology initiatives in China. According to Chinabaogao.com, the IT spending in China's education industry reached RMB 43.9 billion in 2012, with a 20.9% annual growth rate. Furthermore, by leveraging our strong capabilities in software development to broaden and enhance our DT product features, and by introducing web-enabled services, including an advanced cloud distribution system embedded in our digital signage panel (DS-Pad) products, we are well positioned to meet the anticipated demand of our emerging markets." "In our IT segment, despite significant downturn of our traditional core digital public security business, we achieved healthy year-over-year growth in our GIS and DHIS sections, as we continued to win contracts related to China's "Smart Grid", "Map World" and health and medical reform initiatives. We also look to capture other IT market opportunities in China such as the newly launched "Smart City" plan, an initiative that focuses on the technologies of the Internet of Things and cloud computing and also embraces sectors such as transportation, healthcare and public security. According to CCID Consulting, the IT spending of China's Smart City initiative will reach RMB 170 billion by 2014." "The year of 2013 will be important for us as the company expects to finish the final phase of its strategic transition process. We also expect in the second half of the year to see momentum picking up in some of the new key sectors especially digital education. We have been channeling resources within our operations to synergize different elements between our DT and IT segments in an effort to create innovative and value-added product offerings. A good example is our new integrated offerings which comprise enhanced display technologies, proprietary software, and web technologies that will provide our customers with seamless and fully-integrated hardware, software, and cloud-based services that will allow the company to enhance profitability and generate recurring revenues." Fourth Quarter 2012 Results Revenue For Q4 2012, revenue was $29.4 million, compared to $31.2 million in Q4 2011, a decrease of $1.8 million, or 5.8%. The decline in total revenue was primarily due to the continued slowdown in projects for the Company's government customers, which have traditionally been its core customer base; and secondarily due to the Company's conscious effort to realign its business operations between IT and DT and between government and non-government customers. Product sales decreased by $1.0 million, or 7.0%, to $13.3 million in Q4 2012, as compared to $14.3 million in Q4 2011. Product sales constituted 45.3% of total revenue during the current period as compared with 45.7% during the prior year. The product sales decrease was primarily due to the Company's strategy of shifting from low-end to high-end DT products and lower prices of traditional LCD TV products in the midst of a challenging global business environment. Software sales decreased by 34.4% to $6.1 million in Q4 2012, from $9.3 million for the three months ended December 31, 2011, mainly due to the continued sluggishness in the Company's government client sector in light of the challenging government fiscal policies and our more stringent client acceptance policies. Software sales constituted 20.7% of total revenue, as compared to 29.8% during the prior year. Sales of system integration services increased by 30.7% to $9.8 million in Q4 2012, as compared to $7.5 million in Q4 2011. As a percentage of revenue, it increased to 33.2% during Q4 2012 as compared with 24.0% during Q4 2011. Other revenue was $217,899 in Q4 2012, an increase of 25.9%, from $173,101 in Q4 2011. Gross Profit and Gross Margin Cost of revenues decreased $1.1 million, or 5%, to $20.9 million in Q4 2012, from $22.0 million in Q4 2011. As a result, gross margin was 28.8% in Q4 2012, a decrease of 88 basis points, from 29.6% in Q4 2011. The decrease in the overall gross margin resulted from a number of factors, including revenue shifting from the IT segment to the DT segment, lower software revenues, lower system integration gross margins, and lower prices of LCD TV products, while the cost of manufacturing rose during Q4 2012. Administrative Expenses Total administrative expenses increased by $18.8 million, or 160.0%, to $30.5 million in Q4 2012, from $11.7 million in Q4 2011. As a percentage of revenue, administrative expenses increased to 103.7% in Q4 2012, from 37.5% for Q4 2011. Notable changes that resulted in increased administrative expenses included: (1) an increase of $13.3 million in provision of accounts receivable; (2) an increase of $4.1 million in impairment of purchased software; and (3) an increase of $2.8 million in depreciation and amortization expenses. The increase in the provision of accounts receivable was due mainly to the continued sluggishness in the Company's government client sector relating to the digital public security business in light of the challenging government fiscal policies. The impairment of purchased software reflected the declining market value of certain purchased software in light of the protracted challenging environment in the Chinese government software segment. Research and Development Expenses Research and development expenses decreased to $0.9 million in Q4 2012 from $1.5 million in Q4 2011, a decrease of $0.6 million, or 40.6%. As a percentage of revenue, research and development expenses decreased to 3.0% in Q4 2012, from 4.8% in Q4 2011. Selling Expenses Selling expenses increased $1.2 million in Q4 2012, or 52.2%, to $3.4 million, from $2.3 million in Q4 2011. As a percentage of revenue, selling expenses increased to 11.7% for Q4 2012, from 7.2% in Q4 2011. This increase was primarily due to the Company's efforts to introduce new products during the quarter. Impairment of goodwill In light of the negative impact as a result of the falling economic growth, stringent macro policies, and declining industry trends especially in the traditional hardware display sector, the Company tested its goodwill for impairment during the second quarter of 2012 and the fourth quarter 2012. After analyzing the various operations and reporting units, the Company came to the conclusion that a goodwill impairment loss was probable, and consequently recognized a goodwill impairment loss of $19.0 million during Q4 2012 based on its best estimation. Loss from Operations Loss from operations was $45.4 million in Q4 2012, representing an increase of loss in an amount of $39.2 million, from a loss of $6.2 million in Q4 2011. Net Loss Attributable to the Company As a result of the foregoing factors, net loss attributable to the Company decreased by $41.6 million to a loss of $48.5 million in Q4 2012, from $6.8 million in Q4 2011. Cash and Cash Equivalents As of December 31, 2012, the Company had $10.7 million in cash and cash equivalents, and $10.3 million in restricted cash, as compared to $14.0 million in cash and cash equivalents, and $12.5 million in restricted cash as of December 31, 2011. During Q4 2012, cash provided by operating activities amounted to $1.0 million, a decrease of 89.0% from $9.1 million in Q4 2011. Year 2012 Results Revenue For FY 2012, revenue was $86.4 million, compared to $114.5 million for FY 2011, a decrease of $28.2 million, or 24.6%. The decrease was primarily due to challenging macro environment and difficult fiscal environment faced by many public sector clients as a result of the Chinese government's implementation of macroeconomic tightening policies, which led to a slowdown in projects for government customers, which traditionally have been the Company's core customer base; and, secondarily, due to the Company's conscious effort to realign its business operations to create a better revenue mix between IT and DT segments and between government and non-government customers. Product sales decreased by $0.75 million, or 1.60%, to $45.7 million for FY 2012, as compared to $46.4 million for FY 2011. Product sales constituted 52.9% of total revenue during 2012 as compared with 40.5% during 2011. The increase in product sales as a percentage of total revenue primarily reflected the Company's successful marketing campaign in promoting new DT products, its ability to win significant large DT projects in the emerging China digital education market during 2012. Software sales decreased by $20.7 million, or 52.7%, to $18.60 million for FY 2012, from $39.3 million for FY 2011. Software sales constituted 21.5% of total revenue during 2012, compared with 34.3% during 2011. The decrease was mainly due to the Chinese government's continued austere fiscal policies and the curtailment of the massive government economic stimulus package, which led to a slowdown in software projects for our government customers. In addition, the Company instituted more stringent customer acceptance policies, which limited new projects to those with more solid credit credentials and long-term business prospects in light of the unfavorable government fiscal environment. Sales of system integration services decreased by $6.8 million, or 24.5%, to $20.9 million for FY 2012, as compared to $27.7 million for FY 2011. As a percentage of revenue, it was 24.2% the same as in 2011. The decrease was mainly the result of the relatively sluggish macro-economic growth in 2012 and a lack of new large system integration solutions engagements in connection with large projects comparable to the Shenzhen Summer Universiade, which was held in August 2011. Other revenue increased from $1.1 million for FY 2011 to $1.2 million for FY 2012, an increase of $0.1 million, or 5.7%. Other revenue was mainly derived from maintenance services. Cost of revenue and gross profit Cost of revenue decreased by $4.3 million, or 6.2%, to $65.9 million for FY 2012, from $70.2 million for FY 2011. As a percentage of revenue, cost of revenue increased to 76.3% for FY 2012, from 61.3% for FY 2011. As a result, gross profit as a percentage of revenue was 23.7% for FY 2012, a decrease of 1,496 basis points from 38.7% for FY 2011. The decrease in gross profit margins resulted from several factors. First, in the year ended December 31, 2012, the Company continued its efforts to increase DT solutions as a percentage of total revenue. The percentage of DT revenue increased from 40.4% for FY 2011 to 53.8% for FY 2012. The significant increase in contribution from DT revenue resulted in a decrease in gross profit margin for FY 2012, as DT solutions business generally has lower average gross margins than other segments of our business. Secondly, due to the Chinese government's implementation of macroeconomic tightening policies, the Company's government customers reduced software project orders. As a result, the percentage of software revenue decreased from 34.3% for FY 2011 to 21.5% for FY 2012. Our software business typically command higher gross margins that other business segments. Administrative expenses Administrative expenses increased by $41.8 million, or 183.5%, to $64.6 million for FY 2012, from $22.8 million for FY 2011. As a percentage of revenue, administrative expenses increased to 74.8% for 2012, from 19.9% for 2011. Notable changes that resulted in increased administrative expenses included: (1) an additional $2.2 million in inventory write downs; (2) an increase of $20.1 million in provision of accounts receivable; (3) an increase of $1.2 million in depreciation and amortization expenses; and (4) an increase of $11.8 million in impairment of purchased software. DT segment's inventory was written down mainly because the business has been shifting away from the traditional LCD business which has been facing a global decline. The increase in the provision of account receivable was due mainly to the continued sluggishness in the Company's government client sector relating to the digital public security business in light of the challenging government fiscal policies. The impairment of purchased software reflected the declining market value of certain purchased software in light of the protracted challenging environment in the Chinese government software segment. Research and development expenses Research and development expenses increased by $0.5 million, or 10.5%, to $5.0 million for FY 2012, from $4.5 million for FY 2011. As a percentage of revenue, research and development expenses increased to 5.7% for 2012, from 3.9% in 2011. Such increase was primarily due to the Company's efforts to develop new products as well as to improve the future profitability of existing products. Selling expenses Selling expenses increased by $2.3 million, or 30.1%, to $9.8 million for FY2012, from $7.5 million for FY 2011. As a percentage of revenue, selling expenses increased to 11.3% for FY 2012, from 6.6% for FY 2011. This increase was due to new product launches, increasingly nationwide market expansion, which requires increased travel, promotional, and telecommunication expenses, as well as increased total compensation to sales and marketing staff. Impairment of goodwill In light of the negative impact as a result of the falling economic growth, stringent macro policies, and declining industry trends especially in the traditional hardware display sector, we tested goodwill for impairment in the fourth quarter of 2012. After analyzing the various operations and reporting units, the Company came to the conclusion that a goodwill impairment loss was probable, and consequently recognized a goodwill impairment loss of $26.8 million for FY 2012 based on its best estimation. Net loss attributable to the Company Net loss attributable to the Company was $89.6 million for FY 2012, as compared to a net income of $7.9 million for FY 2011. Cash and Cash Equivalents During the year ended December 31, 2012, net cash used in operating activities was $9.3 million, as compared to an operating net cash inflow of $16.3 million in the same period of 2011. The decrease was primarily due to business operational loss during the year ended December 31, 2012. About Non-GAAP Financial Measures This press release contains non-GAAP financial measures for earnings that exclude non-cash charges. The Company believes that these non-GAAP financial measures are useful to investors because they exclude non-cash charges that management excludes when it internally evaluates the performance of the Company's business and makes operating decisions, including internal budgeting, and performance measurement, as these measures provide a consistent method of comparison to historical periods. Moreover, management believes these non-GAAP measures reflect the essential operating activities of the Company. Accordingly, management excludes the expense arising from certain non-cash charges when making operational decisions. The Company also believes that providing the non-GAAP measures that management uses to its investors is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand the Company's financial performance in comparison to historical periods. In addition, it allows investors to evaluate the Company's performance using the same methodology and information as that used by the Company's management. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the non-GAAP financial measure. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded. The following table presents the non-GAAP financial measures contained in this press release and the most directly comparable GAAP measures and provides a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures. Q4 and Full Year 2012 Reconciliation of Net (Loss) Income and EPS to Exclude Amortization of Intangible Assets, Goodwill Impairment, Change in Fair Value of Contingent Consideration and Other Asset Write-downs 3 Mos. 3 Mos. 12 Mos. 12 Mos. Ended Ended Ended Ended 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 Net (loss) income Attributable to the Company (48,476,569) (6,842,449) (89,630,508) 7,909,398 Amortization of Intangible Assets and Land-use Rights 316,738 321,796 1,249,538 1,272,616 Impairmentofgoodwill 19,025,565 - 26,832,255 - Change in fair value of contingent consideration - - (1,481,756) Impairment and loss on disposal of property and equipment 5,993,690 388,375 14,725,140 578,265 Adjusted (Loss) Net income (23,140,576) (6,132,278) (46,823,575) 8,278,523 Weighted Average Number of Shares Outstanding Basic 27,007,608 27,451,219 27,017,780 26,737,638 Diluted 27,007,608 27,451,219 27,017,780 26,965,006 (Loss) earnings per share Basic (1.79) (0.25) (3.32) 0.30 Diluted (1.79) (0.25) (3.32) 0.29 Adjusted (loss) earnings per share Basic (0.86) (0.22) (1.73) 0.31 Diluted (0.86) (0.22) (1.73) 0.31 About China Information Technology, Inc. China Information Technology, Inc., through its subsidiaries and other consolidated entities, specializes in geographic information systems (GIS), digital public security technology (DPST), and hospital information systems (HIS), as well as high-end digital display products and solutions in China. Headquartered in Shenzhen, China, the Company's integrated solutions include specialized software, hardware, systems integration, and related services to help its customers improve efficiency in information management. To learn more about the Company, please visit its corporate website at http://www.chinacnit.com. Safe Harbor Statement This press release may contain certain "forward-looking statements" relating to the business of China Information Technology, Inc., and its subsidiary companies. All statements, other than statements of historical fact included herein, are "forward-looking statements". These forward-looking statements, often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements. For further information, please contact: China Information Technology, Inc. Iris Yan Tel: +86 755 8370 4767 Nolan Liu Tel: +86 755 8831 9888 ext. 8020 Email: IR@chinacnit.com http://www.chinacnit.com CHINA INFORMATION TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2012 AND 2011 Expressed in U.S. dollars (Except for share amounts) December31 December31 2012 2011 ASSETS CURRENT ASSETS Cash and cash equivalents 10,747,998 14,019,634 Restrictedcash 10,347,015 12,538,049 Accounts receivable, billed and unbilled, net of allowance for doubtful accounts of $29,518,000 85,958,886 103,342,459 and $9,373,000, respectively Bills receivable 1,531,772 247,338 Advances to suppliers 6,089,210 5,020,747 Amounts due from related parties 1,212,226 22,823 Inventories, net of provision of $5,976,000 and $5,224,000, respectively 16,797,673 22,317,260 Other receivables and prepaid expenses 8,801,985 9,603,954 Deferred tax assets 2,297,617 2,548,834 TOTAL CURRENT ASSETS 143,784,382 169,661,098 Deposit for purchase of land use rights 19,085,878 27,564,586 Long-term investments 2,580,096 2,401,561 Property, plant and equipment, net 66,269,320 91,161,093 Land use rights, net 13,122,363 1,956,616 Intangible assets, net 14,416,976 14,380,459 Goodwill 27,622,490 53,983,687 Deferred tax assets 540,384 683,042 TOTAL ASSETS $ 287,421,889 $ 361,792,142 LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term bank loans $ 50,813,046 $ 40,983,457 Accounts payable 20,289,783 19,013,509 Bills payable 33,686,488 27,399,393 Advances from customers 3,754,442 6,403,966 Amounts due to related parties - 593,617 Accrued payroll and benefits 2,945,323 3,060,384 Other payables and accrued expenses 6,907,622 6,784,353 Income tax payable 3,660,926 3,525,949 TOTAL CURRENT LIABILITIES 122,057,630 107,764,628 Long-term bank loans 74,175 109,524 Amounts due to related parties, long-term portion 12,728 12,624 Deferred tax liabilities 1,263,423 1,365,680 TOTAL LIABILITIES $ 123,407,956 $ 109,252,456 COMMITMENTS AND CONTINGENCIES EQUITY Common stock, par $0.01; authorized capital 100,000,000 shares; shares issued and outstanding 2012: 27,007,608 shares, 286,326 $ 286,326 2011: 27,230,835 shares $ Treasury stock, 2012: 584,231 shares, 2011: 360,627 at cost (1,011,091) (695,514) Additional paid-in capital 101,261,307 101,261,307 Reserve 14,532,587 14,488,533 Retained earnings 5,804,023 95,600,619 Accumulated other comprehensive income 21,811,064 19,925,259 Total equity of the Company 142,684,216 230,866,530 Non-controlling interest 21,329,717 21,673,156 Total equity 164,013,933 252,539,686 TOTAL LIABILITIES AND EQUITY $ 287,421,889 $ 361,792,142 CHINA INFORMATION TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF (LOSS) INCOME YEARS ENDED/THREE MONTHS ENDED DECEMBER 31, 2012 and 2011 Expressed in U.S. dollars Three Months Ended Year Ended December31, December31, December31, December31, 2012 2011 2012 2011 Revenue – Products $ 13,317,286 $ 14,272,289 $ 45,690,706 $ 46,435,133 Revenue – Software 6,094,302 9,302,207 18,597,383 39,301,812 Revenue - System integration 9,759,529 7,488,858 20,905,251 27,678,685 Revenue – Others 217,899 173,101 1,184,115 1,119,923 TOTAL REVENUE 29,389,016 31,236,455 86,377,455 114,535,553 Cost - Products sold 10,665,830 11,905,308 40,119,790 36,815,966 Cost - Software sold 2,457,882 4,381,316 8,904,134 13,302,464 Cost - System integration 7,700,260 5,527,587 15,964,817 19,625,349 Cost – Others 114,068 165,484 889,234 472,270 TOTAL COST 20,938,040 21,979,695 65,877,975 70,216,049 GROSS PROFIT 8,450,976 9,256,760 20,499,480 44,319,504 Administrative expenses 30,483,268 11,724,243 64,609,752 22,785,631 Research and development expenses 887,262 1,493,517 4,951,166 4,483,754 Selling expenses 3,427,601 2,252,247 9,786,220 7,522,986 Impairment of goodwill 19,025,565 - 26,832,255 - (LOSS) INCOME FROM OPERATIONS (45,372,720) (6,213,247) (85,679,913) 9,527,133 Subsidyincome 732,322 1,347,257 1,709,246 1,939,787 Other income (loss), net (1,039,246) (943,168) (1,536,108) 538,624 Interest income 146,747 62,383 343,289 317,190 Interest expense 1,429,956 527,806 (4,646,818) (2,948,406) (LOSS) INCOME BEFORE INCOME TAXES (46,962,853) (6,274,581) (89,810,304) 9,374,328 Income tax benefit (expense) (1,477,857) 527,616 (812,254) (804,149) NET (LOSS) INCOME (48,440,710) (5,746,965) (90,622,558) 8,570,179 Less: Net (income) loss attributable to the non-controlling interest (35,859) (1,095,484) 992,050 (660,781) NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY $ (48,476,569) $ (6,842,449) $ (89,630,508) $ 7,909,398 Weighted average number of shares outstanding Basic 27,007,608 27,007,608 27,017,780 26,737,638 Diluted 27,007,608 27,007,608 27,017,780 26,965,006 (Loss) earnings per share - Basic and Diluted Basic - Net (loss) income attributable to the Company's $ (1.79) $ (0.25) $ (3.32) $ 0.30 common stockholders Diluted- Net (loss) income attributable to the Company's $ (1.79) $ (0.25) $ (3.32) $ 0.29 common stockholders CHINA INFORMATION TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010 Expressed in U.S. dollars 2012 2011 2010 Net (loss) income $ (90,622,558) $ 8,570,179 $ 35,473,630 Other comprehensive (loss) income: Foreigncurrencytranslationgain 2,128,770 8,903,913 6,668,353 Comprehensive (loss) income (88,493,788) 17,474,092 42,141,983 Comprehensive loss (income) attributable to the non-controlling 749,085 (964,475) (1,431,514) interest Comprehensive (loss) income attributable to the Company $ (87,744,703) $ 16,509,617 $ 40,710,469 CHINA INFORMATION TECHNOLOGY, INC CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010 Expressed in U.S. dollars Accumulated Common stock Treasury stock Additional other Non Par value $0.01 Par value $0.01 Paid-in Retained comprehensive controlling Shares Amount Shares Amount Capital Reserve Earnings income interest Total BALANCE AS AT JANUARY 1, 2010 24,952,571 233,548 (3,000) (11,468) 78,495,062 8,345,371 60,462,275 5,016,575 15,357,471 167,898,834 Issuance of common stock in private 826,017 16,520 - - 9,113,232 - - - - 9,129,752 placements Common stock issued upon the 20,625 413 - - 253,275 - - - - 253,688 exercise of warrants Stock-based compensation 231,681 4,634 - - 2,394,876 - - - - 2,399,510 Common stock released upon - - - - 1,850,405 - - - - 1,850,405 achieving earn-out target Net income for the year - - - - - - 34,402,004 - 1,071,626 35,473,630 Foreign currency translation gain - - - - - - - 6,308,465 359,888 6,668,353 Capital injection to Geo - - - - - - - - 1,714,022 1,714,022 Imputed interests in relation to - - - - 187,500 - - - - 187,500 shareholder's loan Transfertoreserve - - - - - 4,623,614 (4,623,614) - - - BALANCE AS AT DECEMBER 31, 2010 26,030,894 255,115 (3,000) (11,468) 92,294,350 12,968,985 90,240,665 11,325,040 18,503,007 225,575,694 Purchase of treasury stock - - (357,627) (684,046) - - - - - (684,046) Common stock issued upon the settlement of earn-out 344,353 6,887 - - 957,303 - - - - 964,190 target Stock-based compensation 125,000 2,500 - - 1,142,499 - - - - 1,144,999 Common stock released upon achieving earn-out 165,289 3,306 - - 1,719,006 - - - - 1,722,312 target Common stock issued on conversion of 925,926 18,518 4,981,482 5,000,000 shareholder's loan Net income for the year - - - - - - 7,909,398 - 660,781 8,570,179 Foreign currency translation gain - - - - - - - 8,600,219 303,694 8,903,913 Imputed interests in relation to - - - - 166,667 - - - - 166,667 shareholder's loan Changes in an ownership interest in - - - - - - (1,029,896) - 1,029,896 - Zhongtian Capital injection to Zhongtian by - - - - - - - - 1,175,778 1,175,778 minority shareholders Transfer to reserve - - - - - 1,519,548 (1,519,548) - - - BALANCE AS AT DECEMBER 31, 2011 27,591,462 $ 286,326 (360,627) $ (695,514) $ 101,261,307 $ 14,488,533 $ 95,600,619 $ 19,925,259 $ 21,673,156 $ 252,539,686 Purchase of treasury stock - - (223,604) (315,577) - - - - - (315,577) Rounding impact of share changes due to one for two reverse stock split 377 - - - - - - - - - of common stock Net loss for the year - - - - - - (89,630,508) - (992,050) (90,622,558) Foreign currency translation gain - - - - - - - 1,885,805 242,965 2,128,770 Transfer to reserve - - - - - 44,054 (44,054) - - - Capital injection to Zhongtian - - - - - - - - 283,612 283,612 ChangesinaParent'sOwnership - - - - - - (122,034) - 122,034 - InterestinZhongtian BALANCE AS AT DECEMBER 31, 2012 27,591,839 $ 286,326 (584,231) $ (1,011,091) $ 101,261,307 $ 14,532,587 $ 5,804,023 $ 21,811,064 $ 21,329,717 $ 164,013,933 CHINA INFORMATION TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010 Expressed in U.S. dollars 2012 2011 2010 OPERATING ACTIVITIES Net (loss) income $ (90,622,558) $ 8,570,179 $ 35,473,630 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Provision for losses on accounts 27,882,120 4,072,406 3,652,136 receivable and other current assets Depreciation 11,532,635 10,853,984 7,715,013 Impairment of goodwill 26,832,255 - - Impairment of property and 11,809,432 - - equipment Loss on disposal of intangible 69,319 - - assets, net Provision for obsolete inventories 2,235,574 4,627,598 378,619 Amortization of intangible assets 2,292,518 1,757,655 1,794,555 and land use rights Loss on disposal of property and 2,915,708 578,265 339,601 equipment, net Change in deferred income tax 306,838 (1,694,374) 110,200 Stock-based compensation - - 3,130,000 Loss on write-off of land use - - 232,938 rights Change in fair value of contingent - (1,481,756) (325,132) consideration Impairment of long-term investment - 1,002,755 855,176 Imputed interest on shareholder's - 166,667 187,500 loan Changes in operating assets and liabilities, net of effects of business acquisitions Increase in accounts payable and 7,175,522 7,101,150 3,761,608 bills payable Decrease (increase) in inventories 3,579,538 (6,171,310) (8,943,882) Decrease (increase) in restricted 250,306 (2,772,004) (743,913) cash Increase (decrease) in income tax 106,370 (275,586) 398,667 payable Increase (decrease) in other payables and accrued expenses and (64,095) 1,245,553 (6,673,381) other liabilities Increase in accounts receivable (7,460,031) (4,538,402) (27,889,936) (Decrease) increase in advances (2,700,713) (1,329,076) 3,324,359 from customers (Increase) decrease in advances to (1,551,504) 3,973,915 (2,044,930) suppliers (Increase) decrease in other (2,031,433) (8,944,900) 11,758,974 receivables and prepaid expenses (Decrease) increase in amounts due (1,825,311) (401,392) 457,735 to/from related parties Net cash (used in) provided by (9,267,510) 16,341,327 26,949,537 operating activities INVESTING ACTIVITIES Dividends received from Xiamen Yili Geo Information 79,268 - - Technology Co., Ltd. Proceeds from sale of property and 18,549 - 142,049 equipment Purchase of land use rights (2,513,648) - (232,938) Capitalized and purchased software (2,159,866) (1,850,595) (1,466,554) development costs Purchases of property and equipment (778,691) (16,776,095) (29,860,881) Investment in Hubei Information (158,600) - - Science and Technology Deposit for purchase of land use (47,561) - (25,310,974) rights Investment in Tianditu - - (1,183,520) Deposit for software purchase - - (2,958,800) Net cash used in investing (5,560,549) (18,626,690) (60,871,618) activities FINANCING ACTIVITIES Borrowings under short-term loans 99,000,812 87,474,985 52,361,076 Decrease (increase) in restricted 2,042,836 (1,048,220) (1,483,976) cash in relation to bank borrowings Capital injection to Zhongtian by 283,612 1,157,551 minority shareholders Repayment of short-term loans (89,499,942) (87,299,684) (35,938,146) Repurchase of common stock (315,577) (684,046) - Repayment of long-term loans (35,576) (1,769,920) (2,477,995) Repayment of shareholder's loan - - (1,035,580) Capital injection to Geo by - - 1,744,213 minority shareholders Borrowings from shareholder's loan - - 6,035,580 Borrowings under long-term loans - - 8,491,756 Issued common stock - - 9,383,440 Net cash (used in) provided by 11,476,165 (2,169,334) 37,080,368 financing activities Effect of exchange rate changes on 80,258 307,474 1,529,937 cash and cash equivalents NET (DECREASE) INCREASE IN CASH AND (3,271,636) (4,147,223) 4,688,224 CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, 14,019,634 18,166,857 13,478,633 BEGINNING CASH AND CASH EQUIVALENTS, ENDING $ 10,747,998 $ 14,019,634 $ 18,166,857 Supplemental disclosure of cash flow information: Cash paid during the year Income taxes $ 493,378 $ 2,708,313 $ 7,360,151 Interest $ 4,537,517 $ 2,725,058 $ 1,331,258 SOURCE China Information Technology, Inc. Website: http://www.chinacpby.com
China Information Technology, Inc. Announces Fourth Quarter And Year End 2012 Results
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