WUXI, Jiangsu, China,
Aug. 16 /PRNewswire-Asia-FirstCall/
-- China Wind Systems, Inc. (Nasdaq: CWS), ("China Wind Systems" or
the "Company"), a leading supplier of forged rolled rings and other
forged components to the wind power and other industries and
industrial equipment primarily to the textile industry in
China, today announced its
financial results for the second quarter and the six months ended
June 30, 2010.
Second Quarter 2010 Highlights and Recent Events
-- Net revenue increased 39.7% year over year to $19.0 million
-- Revenue from the sale of forged products to the wind power and other
industries increased 40.5% year over year to $13.8 million, or 72.5% of
net revenues
-- Revenue from the sale of forged products exclusively to the wind power
industry increased 152.1% year over year to $9.2 million, or 48.4% of
net revenue
-- Operating income increased 59.4% year over year to $4.0 million
-- Earnings before interest, taxes, depreciation and amortization (EBITDA)
increased 46.4% year over year to $4.7 million
-- Net income increased 69.8% to $3.0 million, or $0.12 per diluted share
-- In July 2010, the Company delivered the first customer shipment of its
Electro-Slag Remelted (ESR) forged products
"During the quarter, our forged products continued to experience
strong growth, led by a significant increase in demand from our
wind power customers," commented Mr. Jianhua Wu, Chairman and CEO of China Wind
Systems, Inc. "In addition, we are currently in final stages of
negotiations with a number of wind power component clients to
supply shafts and other forged products in the second half of 2010.
We believe wind power is becoming an economically viable source of
clean and renewable energy, promotes energy conservation and
reduces carbon emissions in China,
and we believe that the Chinese government will continue to extend
strong support to this sector. We plan to leverage on what we see
as our competitive edge in the industry to strengthen our market
position."
Second Quarter 2010 Results
Net revenue for the second quarter of 2010 increased 39.7% to
$19.0 million, compared to
$13.6 million in the same period of
2009. The increase was primarily due to strong sales growth of
forged rolled rings and related components for the wind power
industry segment, as well as strong improvement in the dyeing and
finishing equipment segment, which was offset by a decline in sales
of forged rolled rings and other components to other industries.
Revenue from the sale of forged rolled rings to the wind power
industry and other industries grew 40.5% to $13.8 million, or 72.5% of net revenue, compared
to $9.8 million, or 72.0% of net
revenue, in the same period last year. Revenue from the sale of
forged rolled rings exclusively to the wind power industry rose
152.1% to $9.2 million, representing
48.4% of net revenue, compared to $3.6
million, or 26.8% of net revenues in the comparable period
last year. Revenue from the sale of forged rolled rings to other
industries decreased by 25.6% to $4.6
million, or 24.1% of net revenue, compared with $6.1 million for the comparable period of the
prior year. Revenue from the Company's dyeing and finishing
equipment segment increased 37.6% to $5.2
million, or 27.5% of net revenues, compared to $3.8 million, or 28.0% of net revenue, for the
second quarter of 2009. The dyeing and finishing equipment segment
improved year over year, reflecting both the effects of the Chinese
government's recent support for the textile industry in
China and the recovery of the
Chinese economy from the global economic downturn.
Gross profit for the second quarter of 2010 increased 60.3% to
$5.0 million, compared to
$3.1 million for the same period in
the prior year. Gross margin increased 3.3 percentage points to
26.2%, compared to 22.9% for the same period in 2009. Gross margin
for the Company's forged rolled rings and other components and
dyeing and finishing equipment were 28.3% and 20.7% respectively
during the second quarter of 2010 compared to 23.2% and 22.1%
respectively during the same quarter last year. The increase in
gross margin for forged rolled rings and other components segment
was largely attributable to improved operational efficiency as the
Company increased capacity utilization during the quarter compared
to the same period of fiscal 2009. The 1.4 percentage points
decline in gross margin for the Company's dyeing and finishing
equipment segment was due to reduction of sales price due to
stronger competition in the textile industry in China.
Operating expenses increased 64.1% to $1.0 million, compared to $0.6 million in the comparable period last year,
as a result of higher selling, general, and administrative expenses
related increased payroll expenses, stock-based compensation, and
professional fees.
Operating income increased 59.4% to $4.0
million, compared to $2.5
million for the same period in 2009. Operating margin
increased 2.6 percentage points to 21.1%, compared to 18.5% in the
first quarter last year.
EBITDA, a non-GAAP measurement, rose 46.4% to $4.7 million, compared to $3.2 million in the same period last year. The
reconciliation of EBITDA to net income is discussed below.
Net income increased 69.8% to $3.0
million, compared to $1.8
million in the comparable period last year. Diluted earnings
per share were $0.12, compared to
$0.08 in the same period of 2009.
Diluted earnings per share were calculated using weighted average
shares of 25,210,214 and 21,256,154 for the three months ended
June 30, 2010 and June 30, 2009, respectively.
Six months Results
For the first half of 2010, revenues increased to $35.8 million, up 67.0% from $21.4 million in the corresponding period of
2009. Gross profit increased 99.8% to $9.4
million, compared to $4.7
million in the same period one year ago. Gross margin in the
first half of 2010 was 26.2%, up 4.3 percentage points from 21.9%
during the corresponding period in 2009. Operating income increased
96.5% to $6.9 million from
$3.5 million. EBITDA, a non-GAAP
measurement, rose 86.7% to $8.2
million, compared to $4.4
million in the same period last year. Net income was
$5.0 million, or $0.20 per diluted share, 104.8% increase from
$2.4 million or $0.12 per diluted share.
Financial Condition
As of June 30, 2010, China Wind
Systems held cash and cash equivalents of $1.4 million, accounts receivable of $6.6 million, and working capital of $4.9 million. The Company had $1.0 million in short-term loans payable, no
long-term debt and stockholders' equity stood at $52.5 million.
In the first half of 2010, the Company generated $6.5 million in operating cash flow and spent
$8.0 million in capital expenditures,
primarily for property and equipment related to the Company's ESR
production line.
Business Outlook
In response to growing demand for the Company's forged products
for the wind industry, China Wind Systems plans to add an
additional small-scale production line to complement its current
forging facility and support strong order flow. The Company is in
final stage of negotiations with a number of wind power component
clients to supply shafts and other forged products in the second
half of 2010.
"We have received positive feedback on our ESR and forged
products and heightened interest from a number of potential wind
energy clients, some of whom received trial products from us,"
commented Mr. Wu. "In the short term, we plan to add a new
fabrication machine to meet the customization requirements by our
clients. Our ESR production line has quickly ramped up to full
utilization during the third quarter of 2010, and we plan on
expanding ESR production as we receive orders from new customers.
We anticipate significant growth in demand for our ESR products as
they gain wide acceptance among wind power component manufacturers.
With the Chinese government's recently announced commitment to
invest RMB 5.0 trillion (or
$737.5 billion) in new energy, we
believe the wind energy sector in China will continue to flourish."
The Company reaffirms its 2010 financial guidance estimating
revenues to be in the range of $76.5 million
to $85.0 million, EBITDA, a non-GAAP measurement, is
expected to be in the range of $22.7 million
to $25.2 million and net income is anticipated to be between
$15.5 million and $16.3 million
The Company anticipates stronger demand for both its traditional
forged products and ESR forged products in 2010, as management
expects stronger sales of precision forged products used in large
wind turbines. The Company anticipates revenue contributed by its
wind industry segment will increase by approximately 75% year over
year to $35 million.
Conference Call
China Wind Systems will conduct a conference call at
9:00 a.m. Eastern Time on
Monday, August 16, 2010 to discuss
results for the second quarter of fiscal 2010. To participate in
the live conference call, please dial the following number five to
ten minutes prior to the scheduled conference call time: (877)
359-2891. International callers should dial (702) 224-9578. When
prompted, please enter conference passcode: 935 38 714.
If you are unable to participate in the conference call at this
time, a replay will be available for 14 days starting on
August 16, 2010 at 10:00 a.m. ET. To access the replay, dial (800)
642-1687. International callers dial (706) 645-9291, and enter
passcode: 935 38 714.
About China Wind Systems, Inc.
China Wind Systems supplies precision forged components such as
rolled rings, shafts and flanges to the wind power and other
industries and industrial equipment primarily to the textile
industry in China. With its newly
finished state-of-the-art production facility, the Company has
increased its production and shipment of high-precision rolled
rings and other essential components primarily to the wind power
and other industries. For more information on the Company, visit
http://www.chinawindsystems.com . Information on the Company's Web
site or any other Web site does not constitute a portion of this
release.
Use of Non-GAAP Financial Information
To supplement the Company's consolidated financial statements
presented on a GAAP basis, the Company has provided non-GAAP
financial information, namely earnings before interest, taxes,
depreciation and amortization (EBITDA). The Company's management
believes that this non-GAAP measure provides investors with an
understanding of how the results relate to the Company's historical
performance. The non-GAAP information is not meant to be considered
in isolation or as a substitute for GAAP financials. A
reconciliation of each non-GAAP measures appear below:
China Wind Systems, Inc. and Subsidiaries
Reconciliation of Net Income to EBITDA
(USD)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
Net income from
consolidated
statement
of income $3,023,657 $1,780,535 $4,970,194 $2,426,593
Income tax
expense 1,007,823 701,494 1,918,116 1,038,155
Interest
expense(net of
interest income) 17,016 175,960 90,691 199,401
Depreciation and
amortization 637,623 543,620 1,243,887 740,318
EBITDA 4,686,119 3,201,609 8,222,888 4,404,467
Safe Harbor Statement
This release contains certain "forward-looking statements"
relating to the business of the Company and its subsidiary and
affiliated companies. These forward looking statements are often
identified by the use of forward-looking terminology such as
"believes," "expects" or similar expressions. Such forward looking
statements involve known and unknown risks and uncertainties that
may cause actual results to be materially different from those
described herein as anticipated, believed, estimated or expected.
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 (www.sec.gov). All
forward-looking statements attributable to the Company or to
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.
-- Financial Tables Follow --
CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2010 2009 2010 2009
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
NET REVENUES $18,977,274 $13,584,030 $35,817,956 $21,444,897
COST OF REVENUES 14,000,017 10,479,370 26,424,004 16,743,588
GROSS PROFIT 4,977,257 3,104,660 9,393,952 4,701,309
OPERATING EXPENSES:
Depreciation 78,060 83,393 161,015 160,923
Selling, general
and administrative 894,805 509,408 2,296,181 1,010,356
Total Operating
Expenses 972,865 592,801 2,457,196 1,171,279
INCOME FROM OPERATIONS 4,004,392 2,511,859 6,936,756 3,530,030
OTHER INCOME
(EXPENSE):
Interest income 1,478 98 2,722 328
Interest expense (18,494) (176,058) (93,413) (199,729)
Foreign currency
loss (5,042) -- (6,901) (11)
Grant income 49,146 146,130 49,146 146,130
Debt issuance
costs -- -- -- (12,000)
Total Other
Income
(Expense) 27,088 (29,830) (48,446) (65,282)
INCOME BEFORE INCOME
TAXES 4,031,480 2,482,029 6,888,310 3,464,748
INCOME TAXES 1,007,823 701,494 1,918,116 1,038,155
NET INCOME $3,023,657 $1,780,535 $4,970,194 $2,426,593
COMPREHENSIVE INCOME:
NET INCOME $3,023,657 $1,780,535 $4,970,194 $2,426,593
OTHER
COMPREHENSIVE
INCOME:
Unrealized
foreign
currency
translation
gain 208,813 3,253 216,083 44,793
COMPREHENSIVE
INCOME $3,232,470 $1,783,788 $5,186,277 $2,471,386
NET INCOME PER COMMON
SHARE:
Basic $0.17 $0.12 $0.29 $0.16
Diluted $0.12 $0.08 $0.20 $0.12
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING:
Basic 17,574,225 15,080,436 17,414,400 15,034,768
Diluted 25,210,213 21,256,154 25,193,516 20,207,770
CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2010 December 31, 2009
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,380,956 $2,278,638
Notes receivable 192,404 329,492
Accounts receivable, net of
allowance for doubtful accounts 6,651,052 6,046,422
Inventories, net of reserve for
obsolete inventory 3,468,206 2,232,264
Advances to suppliers 378,857 450,507
Prepaid VAT on purchases 711,533 378,543
Prepaid expenses and other 66,977 213,835
Total Current Assets 12,849,985 11,929,701
PROPERTY AND EQUIPMENT - net 43,824,230 36,863,501
OTHER ASSETS:
Land use rights, net 3,701,682 3,729,427
Total Assets $60,375,897 $52,522,629
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable $1,028,112 $2,040,111
Accounts payable 5,071,713 3,404,521
Accrued expenses 353,914 556,662
VAT and service taxes payable 81,029 25,284
Advances from customers 321,755 143,261
Income taxes payable 1,053,011 1,018,514
Total Current Liabilities 7,909,534 7,188,353
STOCKHOLDERS' EQUITY:
Preferred stock $0.001 par value
(60,000,000 shares authorized,
all of which were designated as
as series A convertible preferred,
14,934,264 and 15,419,088 shares
issued and outstanding; at June 30,
2010 and December 31, 2009,
respectively) 14,934 15,419
Common stock ($0.001 par value;
150,000,000 shares authorized;
17,639,787 and 16,402,204
shares issued and outstanding
at June 30, 2010 and December
31, 2009, respectively) 17,640 16,402
Additional paid-in capital 24,277,813 22,332,756
Retained earnings 23,565,231 18,595,037
Statutory reserve 1,252,980 1,252,980
Accumulated other comprehensive
gain - foreign currency
translation adjustment 3,337,765 3,121,682
Total Stockholders' Equity 52,466,363 45,334,276
Total Liabilities and
Stockholders' Equity $60,375,897 $52,522,629
CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended
June 30,
2010 2009
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $4,970,194 $2,426,593
Adjustments to reconcile net income
from operations to net cash
provided by operating activities:
Depreciation 1,200,642 697,127
Amortization of debt discount to
interest expense 44,993 16,997
Amortization of land use rights 43,245 43,191
Increase in allowance for doubtful
accounts 223,333 143,620
Interest expense related to debt
conversion -- 128,489
Stock-based compensation expense 345,386 119,612
Changes in assets and liabilities:
Notes receivable 137,942 (131,584)
Accounts receivable (800,348) (1,891,180)
Inventories (1,221,872) (621,840)
Prepaid value-added taxes on
purchases (330,132) (234,142)
Prepaid and other current assets 147,299 (50,602)
Advances to suppliers 73,262 (5,964)
Due from related party -- 438,389
Accounts payable 1,646,567 403,527
Accrued expenses (203,916) 82,146
VAT and service taxes payable 55,425 (97,497)
Income taxes payable 30,102 131,045
Advances from customers 177,212 426,134
NET CASH PROVIDED BY OPERATING
ACTIVITIES 6,539,334 2,024,061
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (7,980,484) (2,849,156)
NET CASH USED IN INVESTING ACTIVITIES (7,980,484) (2,849,156)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans payable -- 1,133,612
Repayment of loans payable (1,061,556) --
Proceeds from exercise of warrants 1,600,000 83,111
NET CASH PROVIDED BY FINANCING
ACTIVITIES 538,444 1,216,723
EFFECT OF EXCHANGE RATE ON CASH AND
CASH EQUIVALENTS 5,024 585
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (897,682) 392,213
CASH AND CASH EQUILAVENTS - beginning
of year 2,278,638 328,614
CASH AND CASH EQUIVALENTS - end of
period $1,380,956 $720,827
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for:
Interest $50,563 $46,443
Income taxes $1,888,014 $921,760
For more information, please contact:
Company Contact:
Ms. Teresa Zhang
Chief Financial Officer
China Wind Systems, Inc.
Tel: +1-877-224-6696 x705
Email: teresa.zhang@chinawindsystems.com
Web: http://www.chinawindsystems.com
Investor Relations Contact:
Mr. Athan Dounis
Account Manager
CCG Investor Relations
Tel: +1-646-213-1916 (NY Office)
Email: athan.dounis@ccgir.com
SOURCE China Wind Systems, Inc.
Copyright . 16 PR Newswire