Net Income Up 0.62% to 3.7 Million Nine Months Ended September 30, 2008; Revenue Down 0.04% to 20.9 Million
BEIJING, Nov. 13 /Xinhua-PRNewswire-FirstCall/ -- Telestone Technologies Corporation Ltd. ("Telestone") (Nasdaq: TSTC), a leading developer and provider of wireless communication coverage solutions based in the People's Republic of China, today announced its unaudited financial results for the third quarter and nine months ended September 30, 2008.
Nine months ended September 30, 2008 Highlights:
-- Revenue of $20.9 million, flat compared to that of 2007.
-- Net income for the period up 0.6% from 2007, to $3.7 million.
-- Gross margins of 50.4%, almost same when compared to the 51.5% in
2007.
-- Gross profit of $10.5 million, a bit decrease of 2.2% from $10.8
million in 2007.
Third Quarter Highlights:
-- Revenue for the quarter of $8.4 million, a bit decrease of 9.6%
from $9.3 million in 2007.
-- Net income decreased to US $1.1 million, down 39.9% from the same
quarter in 2007.
-- Gross margins of 46.9%, close to 50.0% of 2007.
-- Gross profit of $3.9 million, down 15.13% compared to $4.6 million in
2007.
"During the second and third quarter, China Unicom, China Telecom and China Netcom postponed their network expenditures due to Chinese government's announcement of the restructuring plan for Chinese telecommunication operators. What is more, because of the Beijing Olympic Games holding in Beijing, all the projects in Beijing, Shanghai, Tianjin and Qingdao were all ceased for more than two months during the third quarter. These two events affected us negatively, especially in the third quarter," stated by Mr. Han Daqing, Chairman and Chief Executive Officer of Telestone, "However, for nine months ended September 30, 2008, our revenue and net income are flat when compared to that of 2007. And with the consideration of the restructuring under way and the promotion plan for Telestone's new products, we believe that our revenues and profits in the year 2008 will continue to improve and eventually eclipse fiscal year 2007's revenue."
Third Quarter Financial Results
Revenue
There is a slight downward of quarterly revenue of $8.4 million, 9.6% decline compared to $9.3 million in Q3 2007. This is largely due to the postponed network expenditures of China Unicom, China Telecom and China Netcom, which were severely affected during the quarter by the China Telecom Restructuring Plan. The decreased quarterly revenue is also because the Beijing Olympic Games was held in Beijing, Shanghai, Tianjin and Qingdao. In this connection, the projects in theses four cities were all ceased for more than two months during the third quarter. Usually, these cities contributed a lot to our revenues. However, we believe that, with the expected completion of the Restructuring and launch of the 3G wireless network, Chinese carriers' total capital investment in year 2008 will continue to increase over that of 2007.
Gross profit and gross margin
Gross profit decreased by 15.1% to US $3.9 million from US $4.6 million in Q3 2007. Our gross profit decrease during the reporting period is attributable to the same factors as the decrease in revenue. Gross margin for Q3 2008 was 46.9% compared to 50.0% in the third quarter of 2007.
Net income
Net income for the third quarter decreased to US $1.1 million compared to last year, from US $1.9 million in the third quarter of 2007. The net income decrease is mainly due to the decrease in revenue and increased interest expenses. The interest expenses went up with the increasing loan. The loan was borrowed in the late September of 2007. Therefore, the interest expense is much more in the third quarter of 2008 than that of the same period 2007.
Recent Operational Highlights:
-- On September 12, 2008, Telestone announced that it had launched a
new generation wireless distribution system WFDS-TM, which is the
Customer Premises Network and able to support all of the telecom
networks. With the development of our WFDS-TM technology, we
believe that WFDS-TM will be largely used in the wireless public
mobile network establishment and it will play a very important
role in the establishment of wireless network access, which will
bring huge benefits to Telestone.
-- On September 26, 2008, Telestone got good news from its branches
in Shanxi and Inner Mongolia that they won bids of indoor coverage
system in China Unicom Shanxi Branch and indoor distribution
system integration program in China Telecom Inner Mongolia Branch
separately. Winning this bid not only can evident of Telestone's
leading position in indoor distribution system integration program,
but also will help a lot for Telestone to win during the second
and third periods of this program.
-- On September 26, 2008, Telestone announced its winning bids
results from Vietnamese and Indonesian Operators. These winning
bids enhance the collaboration between Telestone and International
operators, which will help Telestone to get more profits in these
markets.
Business Outlook
As we mentioned in early July, despite the anticipation of Telestone's domestic business being impacted by the Beijing Olympic Games to be held in August, in light of the Restructuring currently under way and the promotion plan for Telestone's new products, the Company believes that its 2008 full year revenues and net income will grow by at least 20% compared with that of 2007. With the Restructuring expected to be completed in 2009, Chinese telecom operators are expected to increase their capital expenditures in indoor coverage networks and the Company therefore anticipates 2009 revenue increasing around 100% from that of 2008.
Conference Call
The Company's management team will conduct a conference call on November 14, 2008 at 5:00 am (Pacific)/8:00 am (Eastern)/9:00 pm (Beijing/Hong Kong).
U.S. Participants: +1-800-860-2442
International Participants: +1-412-858-4600
Passcode for all: Telestone
A live audio webcast of the conference call will also be available through our new corporate website, please visit: http://www.visualwebcaster.com/event.asp?id=53224®d=n .
The audio replay of the conference call will be available for one year following the announcement at the above link.
A replay will be available after the end of the call until November 21st.
All participants please dial:
U.S. Participants: +1-877-344-7529 (toll free)
International Participants: +1-412-317-0088
Passcode: 425249
About Telestone Technologies Corporation
Telestone provides wireless communications coverage solutions primarily in the PRC. These solutions include products such as repeaters, antennas and radio accessories. Telestone also provides services that include project design, project management, installation, maintenance and other after-sales services. Telestone currently has approximately 800 employees. For more information please visit http://www.telestone.com .
Safe Harbor Statement Statements about the Company's future expectations, including future revenue and earnings and all other statements in this press release, other than historical facts, are "forward-looking" statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties and are subject to change at any time. The Company's actual results could differ materially from expected results. In reflecting subsequent events or circumstances, the Company undertakes no obligation to update forward-looking statements .
Telestone Technologies Corporation
Condensed Consolidated Statements of Operations and Other Comprehensive Income
For the 9 months ended September 30, 2008 and 2007
(Dollars in thousands except share data and per share amounts)
(Unaudited) (Unaudited)
Three months ended Nine months ended
September 30, September 30,
2008 2007 2008 2007
US$'000 US$'000 US$'000 US$'000
Operating revenues
Sales of equipments 5,797 7,344 12,112 15,055
Service income 2,610 1,956 8,832 5,898
Total operating revenues 8,407 9,300 20,944 20,953
Cost of operating
revenues
Cost of net sales (3,586) (3,928) (7,116) (8,082)
Cost of service (879) (727) (3,281) (2,088)
Total cost of operating
revenues (4,465) (4,655) (10,397) (10,170)
Gross income 3,942 4,645 10,547 10,783
Operating expenses
Sales and marketing 1,430 1,462 4,028 3,447
General and administrative 571 713 1,824 1,893
Research and development 208 165 461 662
Depreciation and
amortization 76 61 237 217
Total operating expenses 2,285 2,401 6,550 6,219
Operating income 1,657 2,244 3,997 4,564
Interest expense (112) (12) (255) (64)
Other (expenses) income,
net (28) 5 915 17
Income before income taxes 1,517 2,237 4,657 4,517
Income taxes (395) (369) (917) (800)
Net income 1,122 1,868 3,740 3,717
Other comprehensive
income
Foreign currency
translation adjustment 26 34 1,515 63
Comprehensive income 1,148 1,902 5,255 3,780
Earnings per share:
Weighted average number of
Common stock outstanding
Basic 10,404,550 9,604,550 10,404,550 9,479,489
Dilutive effect of
warrants 19,860 108,506 58,712 102,735
Diluted 10,424,410 9,713,056 10,463,262 9,582,224
Net income per share of
common stock
Basic and diluted (US$) 0.11 0.19 0.36 0.39
Telestone Technologies Corporation
Condensed Consolidated Balance Sheets
As of September 30, 2008 and December 31, 2007
(Dollars in thousands except share data and per share amounts)
(Unaudited)
As of As of
September 30, December 31,
2008 2007
ASSETS US$'000 US$'000
Current assets:
Cash and cash equivalents 6,327 5,473
Accounts receivable, net of allowance 54,870 45,013
Due from related parties 1,818 1,792
Inventories 7,519 8,023
Prepayment 1,544 1,169
Other current assets 2,127 1,332
Total current assets 74,205 62,802
Goodwill 3,119 3,119
Property, plant and equipment, net
Property, plant and equipment, net 1,006 1,170
4,125 4,289
Total assets 78,330 67,091
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term loan from
related parties 32 28
Short-term bank loans 2,856 2,051
Accounts payable - Trade 9,612 7,614
Customer deposits for sales of equipment 211 262
Due to related parties 1,839 2,318
Taxes payable 4,888 4,741
Accrued expenses and other accrued
liabilities 10,809 7,221
Total current liabilities 30,247 24,235
Non-current liabilities:
Long term loan from related parties 2 30
30,249 24,265
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, US$0.001 par value,
10,000,000 shares authorized, no
shares issued -- --
Common stock and paid-in-capital, US$0.001
par value: Authorized - 100,000,000 shares
as of September 30, 2008 and December 31,
2007 -- --
Issued and outstanding - 10,404,550 shares
as of September 30, 2008 and December 31,
2007 11 11
Additional paid-in capital 18,989 18,989
Dedicated reserves 3,481 3,199
Other comprehensive income 4,532 3,017
Retained earnings 21,068 17,610
Total stockholders' equity 48,081 42,826
Total liabilities and stockholders' equity 78,330 67,091
Telestone Technologies Corporation
Condensed Consolidated Statements of Changes in Stockholders' Equity
For the 9 months ended September 30, 2008
(Dollars in thousands except share data and per share amounts)
Common stock issued
Additional
Number paid-in Dedicated
of shares Amount capital reserves
US$'000 US$'000 US$'000
Balance at January 1, 2007 8,935,106 9 8,475 2,619
Issuance of stock (net of
expenses) 1,469,444 2 10,514 --
Net income -- -- -- --
Foreign currency translation
adjustment -- -- -- --
Transfer to dedicated reserves -- -- -- 580
Balance at December 31, 2007 10,404,550 11 18,989 3,199
Net income -- -- -- --
Foreign currency translation
adjustment -- -- -- --
Transfer to dedicated reserves -- -- -- 282
Balance at September 30, 2008
(unaudited) 10,404,550 11 18,989 3,481
(Cont.)
Other
comprehensive Retained
income earnings Total
US$'000 US$'000 US$'000
Balance at January 1, 2007 1,015 12,152 24,270
Issuance of stock (net of
expenses) -- -- 10,516
Net income -- 6,038 6,038
Foreign currency translation
adjustment 2,002 -- 2,002
Transfer to dedicated reserves -- (580) --
Balance at December 31, 2007 3,017 17,610 42,826
Net income -- 3,740 3,740
Foreign currency translation
adjustment 1,515 -- 1,515
Transfer to dedicated reserves -- (282) --
Balance at September 30, 2008
(unaudited) 4,532 21,068 48,081
Telestone Technologies Corporation
Condensed Consolidated Statements of Changes in Stockholders' Equity
For the 9 months ended September 30, 2008
(Dollars in thousands except share data and per share amounts)
(Unaudited)
Nine months ended
September 30,
2008 2007
US$'000 US$'000
Cash flows from operating activities
Net income 3,740 3,717
Adjustments to reconcile net income to net cash
used in operating activities:
(Gain) Loss on disposal of property, plant
and equipment (15) 5
Depreciation and amortization 237 217
Provision for doubtful accounts 337 3,629
Changes in assets and liabilities:
Accounts receivable (8,349) (10,341)
Due from related parties 55 (419)
Inventories 881 (81)
Prepayment (330) (439)
Other current assets (751) 21
Accounts payable 1,693 (1,571)
Customer deposits for sales of equipment (64) 207
Due to related parties (595) (12)
Taxes payable (66) 1,845
Accrued expenses and other accrued
liabilities 3,335 (1,481)
Net cash generated from (used in) operating
activities 108 (4,703)
Cash flows from investing activities
Purchase of property, plant and equipment (32) (246)
Proceeds from disposal of property, plant and
equipment 49 31
Acquisition of a subsidiary, net of cash
disbursed -- (186)
Net cash generated from (used in) investing
activities 17 (401)
Cash flows from financing activities
Repayment of short-term bank loans (2,142) --
Proceeds from issuance of shares (net of
expenses) -- 5,454
Repayment of long-term loan from related parties (27) 631
Proceeds from new short-term bank loans raised 2,856 (8)
Net cash generated from financing 687 6,077
Net increase in cash and cash equivalents 812 973
Cash and cash equivalents, beginning of the
period 5,473 3,380
Effect on exchange rate changes 42 63
Cash and cash equivalents, end of the period 6,327 4,416
Supplemental disclosure of cash flows information
Interest received 23 21
Interest paid 187 64
Tax paid 54 --
Non-cash investing activity
Acquisition of a subsidiary -- 5,062
For further information contact:
Telestone Technologies Corporation Ltd.
Fang Cui
Tel: +86-10-8367-0088 x1202
Email: cuifang@telestone.com
Nick Li
Secretary of the Board
Tel: +86-10-8367-0088 x1002
Email: nickl@telestone.com
SOURCE Telestone Technologies Corporation Ltd.
International News / Press Release source: PR Newswire
Copyright PR Newswire. All Rights Reserved.