JINHUA, China, March 16, 2017 (GLOBE NEWSWIRE) -- Kandi Technologies Group, Inc. (the “Company,” “we” or “Kandi”) (NASDAQ:KNDI), today announced its financial results for the full year ended December 31, 2016.
Full Year 2016 Highlights
- Total revenues were $129.5 million in 2016, a decrease of 35.6% from total revenues of $201.1 million in 2015.
- EV parts sales decreased by 38.8% to $120.1 million in 2016, compared with EV parts sales of $196.1 million in 2015.
- Off-road vehicles sales increased by 13.5% to $5.7 million in 2016, compared with off-road vehicle sales of $5.0 million in 2015.
- Kandi Electric Vehicles Group Co., Ltd. (The “JV Company”) sold 10,148 EV products in 2016, compared to 24,220 EV products sold in 2015. Total EV products sales included 4,766 EV products sold to the Micro Public Transportation (“MPT”) program and 5,382 EV products sold through distribution channels under our direct sales program.
- GAAP net loss in 2016 was $6.5 million, or $0.14 loss per fully diluted share, compared with GAAP net income of $14.7 million, or $0.31 per fully diluted share, in 2015.
- Non-GAAP adjusted net income1, which excludes stock award expenses and changes in the fair value of financial derivatives, was $4.6 million in 2016, compared with non- GAAP adjusted net income of $28.5 million in 2015. Non-GAAP adjusted earnings per share1 was approximately $0.10 per fully diluted share for the full year of 2016, compared with non-GAAP adjusted earnings per share of $0.61 per fully diluted share for the same quarter of 2015.
- Working capital surplus was $86.3 million as of December 31, 2016. Cash, cash equivalents and restricted cash totaled $25.2 million as of December 31, 2016.
“2016 was a challenging year for us. Compared to the all-time high EV sales we recorded in 2015, our net sales and profitability decreased in 2016. This decrease was the result of confusion surrounding EVs manufactured and sold by the JV Company during 2013 and 2014 that used the reusable battery exchange model. These issues have since been properly resolved after the several conversations with the relevant regulatory authorities. Although the Chinese government’s EV subsidy review has now been finalized, it had a negative effect on our business in 2016. However, despite these setbacks, the Company has continued to put forth its best efforts to improve its products and its business. We are also excited about progress that we have made in the recent quarters,” commented Mr. Hu Xiaoming, Chairman and Chief Executive Officer of Kandi.
“First, Kandi’s wholly-owned subsidiary Kandi Hainan received a second subsidy payment of RMB 100 million (approximately USD 14.5 million) in November 2016 from the Hainan Provincial Government for research and development expenditures for a new EV model. The subsidy payment is a strong indicator of the Hainan government’s generous support for our Hainan EV project. Second, in December 2016, we received the final results of the Chinese government’s subsidy review for renewable energy vehicles. According to the results, EVs that were manufactured by the JV Company in 2015, 2016, and later will remain eligible for the same amount of government subsidies as previously anticipated. Third, in the first quarter of 2017, the JV Company’s two Global Hawk EV models, JL7001BEV18 (Kandi Model K11) and SMA7001BEV25 (Kandi Model K17), have been included in 2017’s first and second Directories of Recommended Models for Energy Saving and New Energy Vehicle Demonstration and Promotion issued by the Chinese Ministry of Industry and Information Technology. We believe that our inclusion in these directories has laid a solid foundation for Kandi’s business growth in 2017. Fourth, our wholly-owned subsidiary Yongkang Scrou successfully launched its next generation advanced drive motor, which achieves higher output efficiencies and rated power at roughly the same cost of production. The JV Company expects to purchase more than 20,000 next generation drive motor units from Yongkang Scrou in the second half of 2017. The new motor will help enhance our product capabilities and increase its competitive advantages while maintaining effective cost controls.”
“The Company’s recent form 8-K reports certain financial reporting issues identified by the Company’s management for the full years 2014 and 2015 and the first three quarters of 2016. The Company will include the restatement to its previously issued financial statements in the annual report on Form 10-K for the fiscal year ended December 31, 2016, which restatements will include separate audited financial statements for the JV Company. The restatements will have no effect on the net income of the Company as previously reported.”
“Going forward, we are confident with the continued support of our investors, we will be able to focus on innovation and regain our leading market position,” Mr. Hu concluded.
Full Year 2016 Financial Results
Net Revenues and Gross Profit
| 2016 | 2015 | Y-o-Y% | ||||||
| Net Revenues (US$mln) | $ | 129.5 | $ | 201.1 | -35.6 | % | ||
| Gross Profit (US$mln) | $ | 17.7 | $ | 28.4 | -37.6 | % | ||
| Gross Margin | 13.7 | % | 14.1 | % | - | |||
Net revenues for the full year 2016 decreased 35.6% from 2015. The decrease in net revenues was mainly due to the decrease of sales volume. Gross margin for the full year 2016 decreased to 13.7%, compared with 14.1% in 2015. The moderate decrease of gross margin was due to less profitable off-road vehicles sales this year.
Operating Income (Loss)
| 2016 | 2015 | Y-o-Y% | ||||||
| Operating Expenses (US$mln) | $ | 48.7 | $ | 32.4 | 50.3 | % | ||
| Operating Income (Loss) (US$mln) | ($ | 31.0 | ) | ($ | 4.0 | ) | 675 | % |
| Operating Margin | -24.0 | % | -2.0 | % | - | |||
| Operating Income (Loss) (US$mln) (Non-GAAP) | ($ | 16.1 | ) | $ | 18.4 | -187.5 | % | |
Total operating expenses in 2016 were $48.7 million, compared with $32.4 million in 2015. The significant increase in total operating expenses was due to significantly increased research and development costs for Hainan’s new EV model development.
GAAP Net Income
| 2016 | 2015 | Y-o-Y% | ||||||
| Net Income (US$mln) | ($ | 6.5 | ) | $ | 14.7 | -144.2 | % | |
| Earnings per Weighted Average Common Share | ($ | 0.14 | ) | $ | 0.31 | - | ||
| Earnings per Weighted Average Diluted Share | ($ | 0.14 | ) | $ | 0.31 | - | ||
| Stock award expenses | $ | 15.0 | $ | 22.4 | -33.0 | % | ||
| Change of the fair value of financial derivatives | ($ | 3.8 | ) | ($ | 8.5 | ) | -55.3 | % |
| Non-GAAP net income from continuing operations | $ | 4.6 | $ | 28.5 | -83.9 | % | ||
Net loss in 2016 was $6.5 million, compared with net income of $14.7 million in 2015. The decrease in net income was primarily attributable to decreased revenue and gross profits, the JV Company’s net losses, and significantly increased research and development expenses to help prepare the Company for future business growth.
JV Company Financial Results
In the fourth quarter 2016, the JV Company sold 2,764 EV products. For the full year 2016, the JV Company sold 10,148 EV products, a 58.1% decrease from 2015. Total EV product sales comprised 4,766 EV products through the MPT program and 5,382 EV products through our direct distribution channels.
The condensed financial income statement of the JV Company for the full year 2016 is as set forth below:
| 2016 | 2015 | Y-o-Y% | ||||||
| Net Revenues (US$mln) | $ | 179.3 | $ | 362.7 | -50.6 | % | ||
| Gross Profit (US$mln) | $ | 19.3 | $ | 59.6 | -67.6 | % | ||
| Gross Margin | 10.8 | % | 16.4 | % | - | |||
| Net Income | ($ | 14.2 | ) | $ | 23.3 | -160.9 | % | |
| % of Net revenues | -7.9 | % | 6.4 | % | - | |||
Kandi’s investments in the JV Company are accounted for under the equity method of accounting, as Kandi has a 50% ownership interest in the JV Company. As a result, Kandi recorded 50% of the JV Company’s loss for $7.1 million for the full year 2016. After eliminating intra-entity profits and losses, Kandi’s share of the after tax loss of the JV Company was $7.3 million for the full year 2016.
Full Year 2016 Conference Call Details
The Company has scheduled a conference call and live webcast to discuss the financial results at 8:00 AM (U.S. Eastern time) on March 16, 2017 (8:00 PM Beijing time on March 16, 2017). Mr. Hu Xiaoming, the Company’s Chief Executive Officer and Mr. Mei Bing, the Company’s Chief Financial Officer, will deliver prepared remarks, followed by a question and answer session.
The dial-in details for the conference call are as follows:
| • | Toll-free dial-in number: +1 877-407-3982 | ||
| • | International dial-in number: +1 201-493-6780 | ||
| • | Webcast and replay: http://public.viavid.com/index.php?id=123367 |
A live audio webcast of the call may also be accessed by visiting Kandi's Investor Relations website at http://ir.kandivehicle.com. An archive of the webcast will be available on the Company's website following the live call.
About Kandi Technologies Group, Inc.
Kandi Technologies Group, Inc. (KNDI), headquartered in Jinhua, Zhejiang Province, is engaged in the research and development, manufacturing and sales of various vehicle products. Kandi has established itself as one of China's leading manufacturers of pure electric vehicle ("EV") products (through its joint venture), EV parts and off-road vehicles. More information can be viewed at the Company's corporate website at http://www.kandivehicle.com. The Company routinely posts important information on its website.
Safe Harbor Statement
This press release contains certain statements that may include "forward-looking statements." All statements other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involving 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. You 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 the risk factors discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on the SEC's 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 risk factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
Follow us on Twitter: @ Kandi_Group
- Tables Below -
KANDI TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| December 31, 2016 | December 31, 2015 | |||||
| Restated | ||||||
| Current assets | ||||||
| Cash and cash equivalents | $ | 12,235,921 | $ | 16,738,559 | ||
| Restricted cash | 12,957,377 | 16,172,009 | ||||
| Short term investment | 4,463,097 | 1,613,727 | ||||
| Accounts receivable | 32,394,613 | 8,136,421 | ||||
| 11,914,110 | 17,773,679 | |||||
| Inventories (net of provision for slow moving inventory of $415,797 and $485,901 as of December 31, 2016 and December 31, 2015, respectively) | ||||||
| Notes receivable | - | 11,102,239 | ||||
| Notes receivable from JV Company and related party | 400,239 | 1,931,076 | ||||
| Other receivables | 66,064 | 332,922 | ||||
| Prepayments and prepaid expense | 4,317,855 | 181,534 | ||||
| Due from employees | 4,863 | 34,434 | ||||
| Advances to suppliers | 38,250,818 | 7,618,731 | ||||
| Amount due from JV Company, net | 136,536,159 | 76,172,471 | ||||
| Amount due from related party | 10,484,816 | 40,606,162 | ||||
| TOTAL CURRENT ASSETS | 264,025,932 | 198,413,964 | ||||
| LONG-TERM ASSETS | ||||||
| Property, Plant and equipment, net | 15,194,442 | 20,525,126 | ||||
| Land use rights, net | 11,775,720 | 12,935,121 | ||||
| Construction in progress | 27,054,181 | 46,821,816 | ||||
| Long Term Investment | 1,367,723 | 1,463,182 | ||||
| Investment in JV Company | 77,453,014 | 90,337,899 | ||||
| Goodwill | 322,591 | 322,591 | ||||
| Intangible assets | 413,211 | 495,306 | ||||
| Other long term assets | 42,091,371 | 154,019 | ||||
| TOTAL Long-Term Assets | 175,672,253 | 173,055,060 | ||||
| TOTAL ASSETS | $ | 439,698,185 | $ | 371,469,024 | ||
| CURRENT LIABILITIES | ||||||
| Accounts payables | $ | 115,870,051 | $ | 73,957,969 | ||
| Other payables and accrued expenses | 4,835,952 | 9,544,909 | ||||
| Short-term loans | 34,265,065 | 36,656,553 | ||||
| Customer deposits | 41,671 | 94,026 | ||||
| Notes payable | 14,797,325 | 3,850,478 | ||||
| Income tax payable | 1,364,235 | 624,276 | ||||
| Due to employees | 21,214 | 9,423 | ||||
| Deferred taxes liabilities | 118,643 | 2,374,924 | ||||
| Financial derivate - liability | - | 3,823,590 | ||||
| Deferred income | 6,363,751 | 13,726 | ||||
| Total Current Liabilities | 177,677,907 | 130,949,874 | ||||
| LONG-TERM LIABILITIES | ||||||
| Long term bank loans | 28,794,172 | - | ||||
| Deferred taxes liabilities | 878,639 | 1,593,582 | ||||
| Total Long-Term Liabilities | 29,672,811 | 1,593,582 | ||||
| TOTAL LIABILITIES | 207,350,718 | 132,543,456 | ||||
| STOCKHOLDER'S EQUITY | ||||||
| Common stock, $0.001 par value; 100,000,000 shares authorized; 47,699,638 and 46,964,855 shares issued and outstanding at December 31,2016 and | 47,700 | 46,965 | ||||
| December 31,2015, respectively | ||||||
| Additional paid-in capital | 227,911,477 | 212,564,334 | ||||
| 24,545,163 | 31,055,919 | |||||
| Retained earnings (the restricted portion is $4,219,808 and $4,172,324 at December 31,2016 and December 31,2015, respectively) | ||||||
| Accumulated other comprehensive income (loss) | (20,156,873 | ) | (4,741,650 | ) | ||
| TOTAL STOCKHOLDERS' EQUITY | 232,347,467 | 238,925,568 | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 439,698,185 | $ | 371,469,024 | ||
KANDI TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
| Year Ended | |||||||||
| December 31, 2016 | December 31, 2015 | December 31, 2014 | |||||||
| Restated | Restated | ||||||||
| REVENUES FROM UNRELATED PARTY, NET | $ | 47,870,589 | $ | 6,790,032 | $ | 49,539,910 | |||
| REVENUES FROM JV COMPANY AND RELATED PARTY, NET | 81,621,424 | 194,279,141 | 120,689,096 | ||||||
| REVENUES, NET | 129,492,013 | 201,069,173 | 170,229,006 | ||||||
| COST OF GOODS SOLD | 111,770,197 | 172,649,955 | 146,825,073 | ||||||
| GROSS PROFIT | 17,721,816 | 28,419,218 | 23,403,933 | ||||||
| OPERATING EXPENSES: | |||||||||
| Research and development | 26,504,650 | 3,482,511 | 2,755,637 | ||||||
| Selling and marketing | 1,567,707 | 633,863 | 1,345,588 | ||||||
| General and administrative | 20,665,709 | 28,255,267 | 14,058,548 | ||||||
| Total Operating Expenses | 48,738,066 | 32,371,641 | 18,159,773 | ||||||
| INCOME (LOSS) FROM OPERATIONS | (31,016,250 | ) | (3,952,423 | ) | 5,244,160 | ||||
| OTHER INCOME (EXPENSE): | |||||||||
| Interest income | 2,961,153 | 3,138,717 | 1,701,121 | ||||||
| Interest expense | (1,831,667 | ) | (2,214,635 | ) | (3,480,646 | ) | |||
| Change in fair value of financial instruments | 3,823,590 | 8,519,295 | 6,531,308 | ||||||
| Government grants | 25,913,540 | 1,645,032 | 288,498 | ||||||
| Share of profit (loss) in associated companies | 0 | 0 | (54,308 | ) | |||||
| Share of profit (loss) after tax of JV | (7,307,510 | ) | 11,841,855 | 4,490,266 | |||||
| Other income (expense), net | 1,627,933 | 1,814,882 | (34,649 | ) | |||||
| Total other income, net | 25,187,039 | 24,745,146 | 9,441,590 | ||||||
| INCOME (LOSS) BEFORE INCOME TAXES | (5,829,211 | ) | 20,792,723 | 14,685,750 | |||||
| INCOME TAX BENEFIT (EXPENSE) | (681,546 | ) | (6,127,228 | ) | (2,414,412 | ) | |||
| NET INCOME (LOSS) | (6,510,757 | ) | 14,665,495 | 12,271,338 | |||||
| OTHER COMPREHENSIVE INCOME (LOSS) | |||||||||
| Foreign currency translation | (15,415,223 | ) | (9,631,753 | ) | (2,725,143 | ) | |||
| COMPREHENSIVE INCOME (LOSS) | $ | (21,925,980 | ) | $ | 5,033,742 | $ | 9,546,195 | ||
| WEIGHTED AVERAGE SHARES OUTSTANDING BASIC | 47,447,665 | 46,744,718 | 42,583,495 | ||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED | 47,447,665 | 46,925,554 | 42,715,818 | ||||||
| NET INCOME (LOSS) PER SHARE, BASIC | $ | (0.14 | ) | $ | 0.31 | $ | 0.29 | ||
| NET INCOME (LOSS) PER SHARE, DILUTED | $ | (0.14 | ) | $ | 0.31 | $ | 0.29 | ||
KANDI TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
| Year Ended | |||||||||
| December 31, 2016 | December 31, 2015 | December 31, 2014 | |||||||
| As Restated | As Restated | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||
| Net income (loss) | $ | (6,510,757 | ) | $ | 14,665,495 | $ | 12,271,338 | ||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||||
| Depreciation and amortization | 4,863,277 | 5,788,780 | 5,571,465 | ||||||
| Assets Impairments | (40,142 | ) | 194,366 | 0 | |||||
| Deferred taxes | 3,651,362 | 1,446,345 | 1,579,855 | ||||||
| Change in fair value of financial instruments | (3,823,590 | ) | (8,519,295 | ) | (6,531,308 | ) | |||
| Loss (income) in investment in associated companies | 0 | 0 | 54,308 | ||||||
| Share of profit after tax of JV Company | 7,307,510 | (11,841,855 | ) | (4,490,266 | ) | ||||
| Decrease in reserve for fixed assets | 0 | 0 | (302,023 | ) | |||||
| Stock Compensation cost | 14,913,212 | 22,306,987 | 0 | ||||||
| Changes in operating assets and liabilities, net of effects of acquisition: | |||||||||
| (Increase) Decrease In: | |||||||||
| Accounts receivable | (40,962,889 | ) | (16,240,270 | ) | 13,739,774 | ||||
| Notes receivable | 1,383,605 | 1,708,223 | 0 | ||||||
| Notes receivable from the JV Company and related parties | |||||||||
| Inventories | 4,952,792 | (3,497,460 | ) | (6,280,502 | ) | ||||
| Other receivables | (43,650,395 | ) | (193,954 | ) | 315,071 | ||||
| Due from employee | 41,529 | (7,596 | ) | 5,139 | |||||
| Prepayments and prepaid expenses | (9,209,955 | ) | 6,664,779 | 2,609,162 | |||||
| Amount due from JV Company | (111,996,250 | ) | (127,667,063 | ) | (62,142,181 | ) | |||
| Due from related party | 28,715,113 | (42,249,905 | ) | 0 | |||||
| Increase (Decrease) In: | |||||||||
| Accounts payable | 112,150,789 | 164,704,112 | 43,114,334 | ||||||
| Other payables and accrued liabilities | (3,790,859 | ) | 5,300,095 | 2,694,689 | |||||
| Notes payable | (8,480,858 | ) | (15,398,471 | ) | (1,951,788 | ) | |||
| Customer deposits | (48,312 | ) | (2,496,382 | ) | 2,588,830 | ||||
| Income Tax payable | 1,008,274 | (1,039,187 | ) | 482,020 | |||||
| Net cash (used in ) provided by operating activities | $ | (49,526,543 | ) | $ | (6,372,255 | ) | $ | 3,327,918 | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||
| (Purchases)/Disposal of plant and equipment, net | (275,801 | ) | (827,059 | ) | (2,101,355 | ) | |||
| (Purchases)/Disposal of land use rights and other intangible assets | (3,388 | ) | 1,589,165 | (1,668,534 | ) | ||||
| (Purchases)/Disposal of construction in progress | (6,001,664 | ) | 1,128,443 | (58,860,969 | ) | ||||
| Disposal of associated company | 0 | 0 | (96,299 | ) | |||||
| Issuance of notes receivable | 0 | (9,411,720 | ) | (9,450,642 | ) | ||||
| Repayment of notes receivable | 10,335,807 | 6,410,154 | 15,043,109 | ||||||
| Long Term Investment | 0 | (1,522,411 | ) | 0 | |||||
| Short Term Investment | (3,088,327 | ) | (1,679,051 | ) | 0 | ||||
| Net cash provided by (used in) investing activities | $ | 966,627 | $ | (4,312,479 | ) | $ | (57,134,690 | ) | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||
| Restricted cash | 2,257,268 | (4,006,346 | ) | (13,010,291 | ) | ||||
| Proceeds from short-term and long-term bank loans | 65,912,237 | 50,640,214 | 48,306,743 | ||||||
| Repayments of short-term and long-term bank loans | (35,815,325 | ) | (47,595,391 | ) | (46,517,604 | ) | |||
| Proceeds from notes payable | 12,038,765 | 0 | 13,011,917 | ||||||
| Repayment of notes payable | 0 | 0 | (27,650,324 | ) | |||||
| Repayment of bond payable | 0 | 0 | (13,011,917 | ) | |||||
| Fund raising through issuing common stock and warrants | 0 | 0 | 78,358,991 | ||||||
| Option exercise, stock awards & other financing | 0 | 0 | 8,431,247 | ||||||
| Warrant exercise | 434,666 | 0 | 21,101,039 | ||||||
| Net cash provided by (used in) financing activities | $ | 44,827,611 | $ | (961,523 | ) | $ | 69,019,801 | ||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (3,732,305 | ) | (11,646,257 | ) | 15,213,029 | ||||
| Effect of exchange rate changes on cash | (770,333 | ) | 2,005,356 | (1,595,938 | ) | ||||
| Cash and cash equivalents at beginning of year | 16,738,559 | 26,379,460 | 12,762,369 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 12,235,921 | $ | 16,738,559 | $ | 26,379,460 | |||
| SUPPLEMENTARY CASH FLOW INFORMATION | |||||||||
| Income taxes paid | $ | 2,598,846 | $ | 2,496,654 | $ | 1,932,392 | |||
| Interest paid | $ | 1,671,372 | $ | 2,188,223 | $ | 3,475,893 | |||
| SUPPLEMENTAL NON-CASH DISCLOSURES: | |||||||||
| Construction in progress transferred back to prepayments | $ | 35,035,762 | $ | - | $ | 7,969,799 | |||
| Accounts payable transferred to construction in progress | $ | 4,191,246 | $ | - | $ | - | |||
| Settlement of due from JV Company and related parties with notes receivable | $ | 43,707,157 | $ | 99,147,703 | $ | 13,548,659 | |||
| Settlement of accounts receivables with notes receivable from unrelated parties | $ | 15,052,339 | $ | 23,292,896 | $ | 1,706,188 | |||
| Assignment of notes receivable to supplier to settle accounts payable | $ | 59,355,952 | $ | 119,107,737 | $ | 14,311,483 | |||
| Settlement of accounts payable with notes payables | $ | 8,146,783 | $ | 13,781,830 | $ | 5,707,027 | |||
______________________________________
1 Non-GAAP measures, including the Non-GAAP net income and Non-GAAP EPS are defined as the financial measures excluding the change of the fair value of financial derivatives and the effects of the stock award expense. We supply non-GAAP information because we believe it allows our investors to obtain a clearer understanding of our operations. Any non-GAAP measures should not be considered as a substitute for, and should only be read in conjunction with, measures of financial performance prepared in accordance with GAAP.