NEW YORK and CHANGSHA, China, Sept. 15 /Xinhua-PRNewswire-FirstCall/ -- Tongxin International, Ltd. ("Tongxin") ("Company") (Nasdaq: TXIC) a manufacturer of engineered commercial vehicle body structures ("EVBS"), SUV passenger vehicle bodies and stamped body parts for the Chinese commercial vehicle market, today announced the Company's second quarter financial results ended June 30th, 2008.
-- Second quarter revenues increased 23.9% to $23.2 million vs. Q2 2007
-- Second quarter net income increased 8.4% to $2.5 million vs. Q2 2007
-- First six months revenues increased 30.1% to $53.5 million and net
income increased 25.0% to $6.3 million on year-over-year basis
-- Six-month EPS rose 23.6% over same period last year to $0.49, on 13.1
million weighted average shares outstanding
"We are pleased with our second quarter and year to date results. As a result of our teams' ability to closely monitor the effects of restricted customer operations and reductions in output as a result of lack of availability of engines and related hardware to meet new Euro III truck emission requirements and the Beijing Olympics, we were able to still report a measurable increase in our second quarter earnings," stated Rudy Wilson, CEO of Tongxin International. "Our current quarter will also be affected by these measures as July, August and part of September was restricted periods in manufacturing during the Olympics and following Special Olympics late August and early September. We are on-track to meet our guidance for the year and anticipate that any slowdown in the third quarter will be offset by a strong fourth quarter," Wilson concluded.
2008 Second Quarter Financial Results
Net revenues for the second quarter ended June 30, 2008 reached $23.2 million, an approximate $4.5 million or 23.9% increase over the same period of the prior year. The increase in revenue was due to the organic growth in sales and increased demand for painted and un-painted cabs. According to the National Board of Statistics in China (NSBC), year to date sales for commercial vehicles have outpaced passenger vehicles by 500 basis points, 22% and 17% respectively. Tongxin's growth has outpaced that of the market by 190- basis points. Currently 98% of Tongxin's production and sales are to commercial vehicle Original Equipment Manufacturers (OEMs) in China. The company maintains a network of more than 130 customers throughout China which include some of the largest commercial vehicle OEMs in the PRC.
Cost of goods sold were $18.5 million yielding gross profits of $4.7 million in the second quarter 2008, slightly lower than that of the second quarter 2007, which was approximately $4.9 million. For the second quarter, gross profit margin decreased to 19.6% from 26.0% for the three months ended June 30, 2007. The decrease was directly attributed to higher costs in raw materials, specifically the 29% increase in cold-rolled steel since January 1, from which pricing increases had yet to be fully passed on to customers. While Tongxin's customer contracts permit quarterly material pricing adjustments, sharp increases in raw materials during month to month periods can create short term margin fluctuations. Contract pricing for Tongxin customers has continuously been adjusted along with steel cost increases. As steel pricing stabilizes, the Company expects a return to its standard 25% gross margin percentages.
Total operating expenses for the second quarter of 2008 were $ 1.2 million versus $1.0 million for the same period in 2007. Operating expenses as a percentage of revenues were 5.0% compared with 5.3% for the same period, 2007. Operating income and operating margin for the quarter were $3.5 million and 15.2%, versus $3.9 million and 20.8% in 2007.
Net income was $2.5 million, representing an increase of 8.4% from $2.3 million reported in the same period prior year. Corresponding net profit margins were 10.6% for the quarter which represented a 150-basis point decrease versus the same quarter, 2007. This small decrease was related to increases in raw material costs. The Company incurred $0.7 million in taxes during the second quarter at an effective tax rate of 22.1%. Calculated on the Treasury Method, earnings were $0.19 for the quarter based on 13.1 million shares outstanding. The share count for the quarter was calculated based on the treasury method. Based on 16.2 fully-diluted shares, EPS for the quarter is $0.15.
"China remains the largest producer of light, medium and heavy duty commercial vehicles and the largest exporter of commercial vehicles in the world. Compared to 40% in the US, approximately 90% of all commercial goods in China are shipped by truck," stated Weiwu Peng, COO of Hunan Tongxin (HT), subsidiary of Tongxin International. "A combination of infrastructure projects including the building of more than 50,000 km of roads at a committed budget of $31 billion over the next four years and an estimated 31% increase in freight hauling for the same period will result in continued yearly growth for our company," Peng added.
Six Month Results
Revenue increased approximately 30.1% to $53.5 million for the six months ended June 30, 2008 as compared to $41.1 million for the same period last year. Operating expenses for the six months ended June 30, 2008 were $2.9 million compared to $2.5 million for the same period in 2007. Operating expenses as a percentage of revenues are 5.5% for the six months ended June 30, 2008 compared to 6.1% for the first six months of 2007. Operating income for the six months ended June 30, 2008 was $9.3 million, an increase of 9.6% compared to $8.5 million for the six months ended June 30, 2007.
Net income is $6.3 million for the six months ended June 30, 2008, an increase of $1.3 million, or approximately 25.0% compared to same period last year. Earnings per diluted share were $0.49 based on 13.1 million shares calculated by the treasury method, or $0.38 on a fully-diluted basis. Treasury method calculation for the period ended June 30, 2008 was based on an $8.20 share price at the close of trading, June 30th 2008.
Balance Sheet and Cash Flow Discussion
As of June 30, 2008, Tongxin International had approximately $16 million in cash and cash equivalents. The company maintained a current ratio of 1.02 to 1 and $32.6 million in accounts receivable on June 30, 2008. Stockholders' equity was $32.0 million on June 30, 2008 representing an increase of 70.7% versus same period 2007.
The Company has approximately five million warrants with strike price of $5.00 and callable at $10.00. If exercised, warrants would yield $25.2 million in proceeds to the Company.
Business Outlook
Based on the Company's order bookings and accrued demand for the same time period, the Company anticipates a strong fourth quarter as its customer base completely resumes production. Additionally, the Company is completing USGAAP audit of Meihua Bus for which a framework agreement was signed on July 28th, 2008. Preliminary results for Meihua Bus indicate higher than expected revenues and net income for the 2008 year. Tongxin anticipates closing the Meihua acquisition before year end.
As part of TXI's strategy, the Company's management team has reviewed a number of complementary acquisitions. Each acquisition target is focused on the commercial vehicle sector in China. Management will provide further details when appropriate and the Company is committed to making an acquisition which will be accretive in the year completed.
Guidance
Tongxin International, Ltd. has provided $1.00 EPS guidance for 2008 based on $13 million net income in organic growth. The EPS figure will be calculated based on treasury method share count at year end, December 31st, 2008, which is estimated to be 13.1 million shares. Based on the fully diluted share count of 16.2 million shares, EPS would be $0.80.
Up Coming Events
The Company recently participated at the Susquehanna Conference in Beijing September 10-12th and is pleased to announce it has been invited to attend the Maxim Growth Conference in October. Tongxin has also confirmed participation at additional investor conferences including; Rodman & Renshaw and the Roth China Conference in November of this year.
On October 31st, the Company will attend a ceremony for its NASDAQ listing and ring the NASDAQ closing bell.
Conference Call
The Company will host a conference call on September 16th, 2008, at 9:00a.m. EDT. To attend the call, please use the dial information below. When prompted, ask for the "Tongxin International" and/or be prepared to provide the conference ID.
Conference Line Dial-In (U.S.): 1 800-762-8779
International Dial-In: + 1 480-629-9041
Conference ID: 3919799
Webcast link: http://viavid.net/dce.aspx?sid=00005641
The conference call will take place at 9:00 a.m. ET on Tuesday, September 16th, 2008. Interested participants should call 800-762-8779 when calling within the United States or +1 480-629-9041 when calling internationally. Please dial in at least 10-minutes before the call to ensure timely participation. A playback will be available through September 21st, 2008. To listen, please call 800-406-7325 within the United States or +1 303-590-3030 when calling internationally. Utilize the pass code 3919799 for the replay.
About Tongxin International Ltd.
Tongxin International Ltd., is the largest independent supplier of EVBS in China, is capable of providing EVBS for both the commercial truck and light vehicle market segments, in addition to designing, fabricating and testing dies used in the manufacturing process. EVBS consists of exterior body panels including doors, floor pans, hoods, side panels and fenders.
Forward-Looking Statements
Statements contained in this press release, which are not historical fact, constitute "Forward-Looking Statements." Actual results may differ materially due to numerous important factors that are described in Tongxin International's most recent report to the SEC on Form 6-K, which may be revised or supplemented in subsequent reports to the SEC. Such factors include, among others, the cost and timing of implementing restructuring actions, the Company's ability to generate cost savings or manufacturing efficiencies to offset or exceed contractually or competitively required price reductions or price reductions to obtain new business, conditions in the automotive industry, and certain global and regional economic conditions. Tongxin International does not intend or assume any obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release.
-- FINANCIAL TABLES FOLLOW --
Tongxin International Ltd.
CONSOLIDATED BALANCE SHEET
(In thousands, In US$, except share data)
June 30, 2007 June 30, 2008
CURRENT ASSETS
Cash and cash equivalents $5,935 $15,966
Accounts receivable, net 26,443 32,579
Notes receivable 4,297 4,937
Inventories 12,645 18,225
Investment in marketable securities - 73
Prepaid expenses 6,162 7,644
Deferred tax assets 1,686 1,674
Total Current Assets 57,168 81,098
Investments in non-consolidated
subsidiaries and affiliates 817 907
Plant and equipment, net 21,764 31,167
Land occupancy rights 1,868 2,028
Total Assets 81,617 115,200
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 13,668 $18,677
Accrued expenses and other liabilities 7,840 11,602
Income taxes payable 7,610 17,975
Dividend payable 5,863 -
Short-term loans 18,097 18,976
Short-term loans from shareholders 4,512 2,463
Total Current Liabilities 57,590 69,693
Long-term loans 5,252 2,736
Long-term loans from shareholders - 10,476
Other 21 24
Total Liabilities 62,863 82,929
STOCKHOLDERS' EQUITY
Common stock (authorized, 39,000,000 shares
US $0.12 par value, issued and outstanding
11,205,270 shares 8,762 8,762
Reserve funds 1,994 13,059
Accumulated other comprehensive income 1,272 2,372
Retained earnings 6,726 8,077
Total Stockholders' Equity 18,754 32,007
Total Liabilities and Stockholders' Equity 81,617 115,200
Tongxin International, Ltd.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, In US$, except number of share and per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2008 2007 2008
REVENUES $ 18,719 $23,198 $41,100 $53,4799
COST OF GOODS SOLD 13,845 18,511 30,134 41,2455
GROSS PROFIT 4,874 4,687 10,966 12,234
OPERATING EXPENSES
Selling, general and
administrative 984 1,171 2,495 2,949
OTHER INCOME, NET 15 221
PROFIT BEFORE INCOME TAXES 3,314 3,145 7,484 8,276
INCOME TAX EXPENSE 1,051 694 2,446 1,977
NET INCOME 2,263 2,452 5,038* 6,299*
NET INCOME
PER SHARE - Basic 0.202 0.219 0.465 0.575
NET INCOME
PER SHARE - Diluted 0.173 0.187 0.398 0.492
COMMON SHARES used in
calculating basic net
income per shares** 11,205,270 11,205,270 11,205,270 11,205,270
COMMON SHARES used
in calculating
diluted net income
per share ***
(Treasury Method) 13,101,250 13,101,250 12,101,250 13,101,250
* This net income figure is exclusive of roughly US$145,000 dollars in the period ended June 30, 2008 and US$173,000 dollars in the period ended June 30, 2007 in expected of one time transaction and closing costs associated with the transaction dates April 17, 2008 between Asia Automotive Acquisition Corporation and Hunan Tongxin. We add back the one-time transaction to this net income for calculating the EPS
** Includes 7,649,000 Restricted common shares and 3,556,270 free float common shares
*** Include 5,031,250 warrants
Investor Relations Contact:
John Mattio
SVP, HC International, Inc.
Rita Jiang
VP, HC International, Inc.
US (914) 669-5340
john.mattio@hcinternational.net
rita.jiang@hcinternational.net
SOURCE Tongxin International Ltd.
International News / Press Release source: PR Newswire
Copyright PR Newswire. All Rights Reserved.