Steady growth with increased profit margins drives income for the quarter and nine-months of 2009.
CHANGSHA, China, Nov. 10 /PRNewswire-Asia/ -- Tongxin International Ltd. (Nasdaq: TXIC), a China-based manufacturer of engineered vehicle body structures ("EVBS" or "truck cabs") and stamped parts for the commercial automotive industry, today announced the Company's third quarter 2009 financial results.
-- Q3 2009 revenues increased 18.8% to $27.1 million vs. Q3 2008.
-- Non-GAAP Q3 2009 net income increased 83.4% to $3.8 million vs. Q3 2008.
-- Non-GAAP Q3 2009 earnings per share were $0.29.
-- Nine-months 2009 revenues increased 19.9% to $91.5 million, non-GAAP
net income increased 51.9% to $12.3 million, with $1.08 in non-GAAP
earnings per share.
(*) Non-GAAP calculation excluded value of unrealized warrants.
Third Quarter Financial Results
Net revenues for the third quarter ended September 30, 2009 increased 18.8% to $27.1 million, an approximate $4.3 million improvement over the same period the prior year. "Mini," "Light," "Medium" and "Heavy-duty" trucks lead growth from shipments to Tongxin's customer base in 21 sales regions in throughout China.
Cost of goods sold were $19.1 million in the third quarter 2009; 71% of Tongxin's costs are cold rolled steel it purchases from supplies in China and Korea. The balances of cost of goods sold are components, paint and interiors used in the manufacturing process plus logistics costs and labor costs. Corresponding gross profits for the third quarter were $8.0 million compared to $4.4 million in the third quarter of 2008. Gross margins for the quarter were 29.5%, compared to 19.2% for the same period prior year. The strong increase in gross margins was mainly due to the steel material price reduction taking effect as well the Company's fixed costs reductions including labor cost, depreciation and amortization costs.
Total operating expenses for the third quarter of 2009 were $2.9 million versus $1.5 million for the same period in 2008. Included in the third quarter operating expenses were approximately $0.6 million costs reflecting added accounting expenses, ERP system implementation and SOX compliance costs. Operating expenses were 10.9% of net sales compared with 6.5% for the same period in 2008. Operating income and operating margins for the third quarter 2009 were $5.1 million and 18.7%, respectively, versus $2.9 million and 12.6% in 2008.
Non-GAAP net income was $3.8 million, representing an increase of 83.4% from $2.1 million reported in the same period prior year. Non-GAAP earnings per share for the quarter were $0.29 based on 13.1 weighted average diluted shares outstanding.
"We have been pleased with the financial result in our business for this quarter and the improving trends in key operating metrics we have witnessed this year," opened Jackie Chang, CFO of Tongxin International. "Not only our revenue out paced the overall commercial vehicle market in China, our gross margins continue to improve in many areas so we can sustain our overall net profit margin in the low season. We've seen the positive margin effect as a result of our new contract price for steel, our largest cost component, which effectively locks us in on current prices for the remainder of 2009, which we believe serves as a good hedge against rising prices in the face of improving economic activity," Chang concluded.
Nine-Months Ended September, 30, 2009
According to the September, 2009 China Business Update -- AutoStatistics ("CBU"), a total of 9.66 million vehicles were sold in China (excluding exports) during the nine month period ended September 30, 2009. A breakdown in sales volume by segment follows;
-- 5.06 million passenger cars, a 60.4 % increase from a year ago
-- 2.18 million Multi Purpose Vehicles (MPV), Sport Utility vehicles (SUV)
and Mini Vans (MV), a 41.2% increase from a year ago
-- 2.42 million commercial vehicles, a 15.6% increase from a year ago
During 2009, the Chinese automotive market became the largest in the world in terms of production and sales as all segments, including passenger cars, SUVs/MPVs/MPs, and commercial vehicles, exhibited double digit growth year over year.
For the first nine months ended September 30, 2009 Tongxin's total revenues were $91.5 million, representing an increase of 19.9% over the same period in 2008. Tongxin's increase in revenues outperformed the overall commercial vehicle market segment during the first nine months of 2009 which grew approximately 15.6%, and is attributed to the securing of 17 new manufacturing contracts earlier in the year, growth in the mini and light truck segments and the Company's move into on-site manufacturing programs with two of its top ten customers. Export in the first nine months also rebounded. Export sales to Vietnam were $11.3 million for the first nine months of 2009, a 2.7% increase from the same period the previous year. According to the Vietnamese Automotive Manufacturing Association ("VAMA"), Vietnam sold 37,000 commercial vehicles in the nine-month period ended September 30, 2009 versus 53,000 in the same period in 2008 or approximately a 30% decrease. Excluding exports from Tongxin's revenues, the Company reported an increase in domestic revenues of 22.8% for the first nine months of 2009.
Non-GAAP earnings before interest and taxes were $17.9 million versus $12.3 million. EBIT margins for the nine-month period were 19.5% for 2009 versus 16.1% in 2008. Tongxin currently pays the standard Chinese corporate tax rate of 25% however the Company has announced on November 3 that it has entered its final stage of approval to reduce its tax rate to 15% for a three-year period as New and High Technology Enterprise.
Non-GAAP net income for the nine month period ended September 30, 2009 increased 51.85% to $12.3 million from $8.1 million in the nine months of 2008. Non-GAAP earnings per share were $1.08 based on 11.4 million diluted shares outstanding versus $0.73 for the nine month period 2008, a 49.0% increase. GAAP net loss for the nine months ended September 2009 were $9.1 million which include unrealized warrant loss of $17.6 million and warrant expense of $3.8 million. GAAP loss per share were $0.80 based on 11.4 million weighted average basic and diluted shares outstanding.
The Company is reporting non-GAAP operating and net income as a result of the non-cash warrant loss of $21.4 million related to the Company's warrants as part of its 2006 IPO financing. Considering the effect the non-cash warrant loss has on the reported GAAP financials, the management of Tongxin believes non-GAAP numbers provide more visibility in its operational performance.
"We believe that the nine months of 2009 gives a strong representation of our capabilities as a valued added supplier to the market," stated CEO, Duanxiang Zhang, of Tongxin International. "As domestic demand and the effects of the stimulus packages including the latest subsidy program announced on July 15 to spur commercial vehicles sales continue to work their way through the economy plus a noticeable return of export orders, we anticipate a succession of strong quarters for Tongxin and continued demand for EVBS through the end of the year," Zhang concluded.
Balance Sheet and Cash Flow Discussion
As of September 30, 2009, Tongxin International had approximately $12.4 million in cash and cash equivalents compared to $11.3 million on December 31, 2008. The Company maintained a non-GAAP current ratio of 1.5, a GAAP current ratio of 1.15, and $26.0 million in accounts receivable on September 30, 2009. Corresponding days sales outstanding ("DSO") were 89 days. Non-GAAP stockholders' equity was $98.1 million on September 30, 2009 from $ 79.8 million as of December 31, 2008, an increase of $18.3 million as result of 2009 non-GAAP net income of $12.3 million, warrant redemption of $5.0 million and exchange rate of $1 million. GAAP stockholders' equity was $80.5 million. GAAP cash flow from operations was $5.4 million.
Company Announcements
Tongxin is planning a number of events in the coming months.
November 19-20, 2009 - Brean Murray Investment Conference
December 4, 2009 - 2009 Annual Shareholders Meeting - Shanghai
Q3 2009 Earnings Conference Call
To attend the call, please use the dial information below. When prompted, ask for the "Tongxin International Conference Call" and/or be prepared to provide the conference ID. Details of the conference call are noted below:
Date: November, 10th 2009
Time: 10:00am ET
Conference Line Dial-In (U.S.): 1-877-941-4776
International Dial-In: +1-480-629-9762
Conference ID: 4182012
Webcast link: http://viavid.net/dce.aspx?sid=00006CE2
Please dial in at least 10-minutes before the call to ensure timely participation. A playback will be available through November 17th, 2009. To listen, please call 1-800-406-7325 within the United States or +1-303-590-3030 when calling internationally. Utilize the pass code 4182012 for the replay.
About Tongxin International Ltd.
Tongxin International Ltd., the largest independent supplier of EVBS in China, is capable of providing EVBS for both the commercial truck and light vehicle market segments. The Company also designs, fabricates and tests dies used in the vehicle body structure manufacturing process. EVBS consists of exterior body panels including doors, floor pans, hoods, side panels and fenders. Tongxin maintains a network of more than 130 across 21 sales regions throughout China provinces in China. Headquartered in Changsha, Tongxin also maintains regional manufacturing in Dali, Ziyang and Zhucheng.
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.
For more information, please contact:
COMPANY:
Mr. Rudy Wilson, CEO
Tel: +1-248-593-8330
Email: rudy@txicint.com
Ms. Jackie Chang, CFO
Tel: +1-626-660-7117
China: +86-13467553808
Email: jackie@txicint.com
Web: http://www.txicint.com
INVESTOR RELATIONS:
HC International, Inc.
John Mattio, SVP
Tel: +1-203-616-5144 (U.S.)
Email: john.mattio@hcinternational.net
Web: http://www.hcinternational.net
TONGXIN INTERNATIONAL, LTD.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(US$ amounts expressed in thousands, except for share data and earnings
per share)
30-Sep-09 31-Dec-08
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $12,414 $11,313
Restricted cash - security deposit 5,572 5,836
Accounts receivable -trade, net of
allowance for doubtful accounts 14,771 13,153
Other receivable- net of allowance
for doubtful accounts 846 1,600
Due from related party 15,527 17,313
Notes receivable 3,613 --
Inventories 24,752 19,096
Investment in marketable securities 73 146
Prepaid expenses 10,041 4,197
Deferred income tax 1,940 2,067
Total current assets 89,549 74,721
Investment in non-consolidated
subsidiaries and affiliates 208 208
Property, plant and equipment, net of
depreciation 41,891 36,918
Land occupancy rights 9,115 9,633
Goodwill 19,296 36,696
$160,149 $158,176
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $26,855 $21,037
Accrued expenses and other
liabilities 2,692 7,393
Income tax payable 3,952 17,418
Short-term loans 25,839 16,669
Short-term loans from shareholders -- 8,591
Warrant liabilities 18,065 452
Total current liabilities 77,403 71,560
Long-term liabilities:
Long-term loans -- 4,523
Deferred income tax 2,244 2,243
Other -- 25
Total liabilities 79,647 78,351
Stockholders’ equity:
Preferred Stock, $0.001 par value,
authorized 1,000,000 shares; none
issued -- --
Common stock - $0.001 par value,
authorized 39,000,000 shares; issued
13,898,107 shares and outstanding
12,308,685 shares 14 13
Additional paid-in capital 85,953 77,081
Treasury stock, 1,589,422 shares (7,682) (7,682)
Accumulated other comprehensive
income 1,335 426
Retained earnings 882 9,987
Total stockholders’ equity 80,502 79,825
$160,149 $158,176
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(US$ amounts expressed in thousands, except for share data and earnings
per share)
Three Months Ended Nine Months Ended
September 30, 2009 September 30 2009,
2009 2008 2009 2008
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue $27,149 $22,849 $91,510 $76,328
Cost of goods sold (19,137) (18,468) (67,202) (59,713)
Gross profit 8,012 4,381 24,308 16,615
Operating expenses:
Selling, general and
administrative expenses (2,946) (1,493) (7,052) (4,698)
Operating income 5,066 2,888 17,256 11,917
Other income: Unrealized
warrant gain/(loss) (10,837) 151 (16,995) 373
Warrant expense (3,831) -- (3,831) --
Interest expenses (74) (437) (1,176) (1,667)
Income before income taxes (9,676) 2,602 (4,746) 10,623
Income taxes (1,222) (521) (4,360) (2,498)
GAAP Net income (loss) $(10,898) $2,081 $(9,106) $8,125
Non-GAAP Net Income * $3,816 $2,081 $12,338 $8,125
Comprehensive income
(loss) (9,989) 2,081 (8,197) 8,125
Non – GAAP Net income per
common share-basic * 0.33 0.19 1.08 0.73
Non-GAAP Net income per
common share-diluted * 0.29 0.16 1.08 0.63
Weighted average shares
outstanding – basic 11,649,143 11,205,270 11,417,883 11,205,270
Weighted average shares
outstanding – diluted 13,067,271 12,925,932 11,417,883 12,925,932
* Non-GAAP income excluded effects of non-cash unrealized warrant gain
TONGXIN INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND TWELVE MONTHS ENDED
DECEMBER 31, 2008
(US$ amounts expressed in thousands)
FOR THE NINE FOR THE TWELVE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30 DECEMBER 31
2009 2008
(unaudited) (audited)
Cash flows from operating activities:
Net (loss) income $(9,106) $20,486
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Reversal of bad debt allowance -- (944)
Depreciation expense 1,204 2,828
Amortization expense 518 54
Deferred income taxes 127
Unrealized gain on warrant 17,613 (13,535)
Warrant expense Changes in operating
assets and liabilities: 3,831
(Increase)/decrease in inventories (5,656) (5,112)
(Increase)/decrease in trade accounts
/ notes receivable (5,231) 11,453
(Increase)/decrease in due from
related party 1,786 (1,724)
(Increase)/decrease of prepaid
expenses and other current assets (5,507) (1,275)
(Increase)/decrease in deferred
income tax -- 192
(Increase)/decrease in other
receivable 754 2
Increase/(decrease) in accounts
payable 5,818 967
Increase/(decrease) of accrued
expenses and other liabilities (766) (943)
Net cash provided by operating
activities 5,385 12,449
Cash flows from investing activities:
Acquisition of Hunan Tongxin
Enterprise Co. Ltd., net of cash
acquired of $5,319 -- (7,700)
Cash paid for purchase of fixed
assets and intangible assets (6,267) (9,493)
Cash paid for investment -- (75)
Net cash used in investing activities (6,267) (17,268)
Cash flows from financing activities:
Proceeds from loans 17,449 23,649
Proceeds from warrant redemption 5,042
Proceeds from loans - related parties 0 9,894
Debt repayments (12,827) (23,444)
Debt repayments-related parties (8,591) (16,425)
Net cash (used in) provided by
financing activities 1,073 (6,326)
Effect of foreign exchange rate
changes 909 199
Net increase (decrease) in cash and
cash equivalents 1,101 9,651
Cash and cash equivalents at
beginning of year 11,313 1,662
Cash and cash equivalents at end of
year 12,414 11,313
Supplemental information:
Income taxes paid 1,570 2,843
Interest paid 1,176 2,702
