Steady growth with increased profit margins drives income for the quarter and nine-months of 2009.

CHANGSHA, China, Nov. 9 /PRNewswire-Asia-FirstCall/ -- 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 ¨C 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 ¨C basic       11,649,143  11,205,270  11,417,883  11,205,270
    Weighted average shares
     outstanding ¨C 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

SOURCE Tongxin International Ltd.

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