BEIJING, Aug. 31 /PRNewswire-Asia/ -- Wowjoint Holdings Limited ("Wowjoint," or the "Company") (Nasdaq: BWOW, BWOWU, BWOWW), a leading provider of customized heavy duty lifting and carrying machinery used in large scale infrastructure projects such as railway, highway and bridge construction reported today unaudited financial results for the second quarter and first six months of 2010.
Second-quarter Ended June 30, 2010
Revenues for the Company's second quarter ended June 30, 2010 were $2.6 million as compared to $1.7 million in the first quarter of 2010, and $8.4 million in the three month period ended June 30, 2009. The year-over-year decline in revenue is primarily attributable to a reduction in government spending beginning in late 2009 on large infrastructure projects, resulting in a significant reduction in new contracts being awarded for railway, highway and bridge projects. Government budgeting for large infrastructure projects has recently increased, which has in turn positively impacted Wowjoint's sales pipeline and backlog. Technical services sales as a component of revenue rose substantially to $1.6 million, or 61% of revenue, as compared to $0.3 million, or 3.5% of revenue in the three month period ended June 30, 2009. These services consisted primarily of technical aftermarket support such as disassembling, relocating, and reassembling equipment.
"Our financial results for the second quarter of 2010, while still disappointing, showed a slight increase over the first quarter of 2010," stated Mr. Yabin Liu, Chief Executive Officer of Wowjoint. "Our business continued to be impacted directly by government decisions and timing associated with major infrastructure purchases for new projects. While the effects of this policy were reflected in our second quarter 2010 financial results, China's fiscal policy is becoming more accommodative again, which is resulting in an increase in government budgeting for large infrastructure projects and in the current flow of potential contract activity. As a result, our contract backlog grew and we expect to see a significant improvement in our financial performance in the second half of 2010. It is important to note that management believes the recent short-term shift in government spending only resulted in a delay in these high-value infrastructure projects, and shall not have an effect on the long-term plans for these projects. Furthermore, we continue to work on diversifying our revenue stream as shown by our substantial growth in technical services sales during the second quarter of this year."
Cost of sales for the three months ended June 30, 2010 was approximately $2.0 million as compared to $5.7 million for the three months ended June 30, 2009, due to lower revenue and increased technical services sales. For the second quarter of 2010, the Company reported gross profit of $0.6 million, or 23.3% of total revenues compared to gross profit of $0.3 million, or 16.3% of total revenues for the first quarter of 2010 and $2.8 million, or 32.6% of total revenues, for the second quarter of 2009.
Operating expenses for the three months ended June 30, 2010 were approximately $1.4 million, compared to $0.8 million in the same period of 2009. Selling expenses for the three months ended June 30, 2010 totaled $0.3 million compared to $0.1 million in the same period of 2009, as the Company expanded its marketing efforts, which contributed to its increased contract backlog. General and administrative expenses increased to $1.1 million from $0.7 million in the three months ended June 30 of 2010 and 2009, respectively, with the increase primarily due to costs related with being a public company.
For the three months ended June 30, 2010, the Company reported a net loss of $0.8 million, or $.10 per share based on 7.9 million weighted average shares outstanding, compared to net income of $1.7 million for the three months ending June 30, 2009.
"Contract activity is improving and our sales and marketing team has made progress as we look for business opportunities both domestically and abroad," added Mr. Liu. Our recently announced sales contract with China Railway Group combined with the recently announced equipment lease and service agreements with China Railway Construction Company and China Railway Group bring the value of contracts announced since July 29th to approximately $11 million. Given the proprietary design of our equipment, our innovative engineering expertise and our market position, we expect to capitalize on long-term trends which benefit our business. To complement our growth and speed the sales cycle, we are investigating alternative business models, such as equipment leasing, which would enable us to capture additional share of customer expenditures on construction equipment."
Cash and cash equivalents totaled $7.2 million at June 30, 2010, as compared to $7.6 million at March 31, 2010. Accounts receivable were $10.7 million at June 30, 2010 as compared to $11.4 million at March 31, 2010, and inventories amounted to $7.3 million versus $5.3 million in the respective periods. The Company had total stockholders' equity of $18.5 million, with total assets of $33.1 million versus total liabilities of $14.6 million on June 30, 2010.
Six Months Ended June 30, 2010
Revenues for the six month period ended June 30, 2010 were $4.3 million as compared to $24.8 million in the six month period ended June 30, 2009. The decline in revenue is primarily attributable to a shift by China in its fiscal polices resulting in curtailment in government spending on large infrastructure projects.
Cost of sales for the six months ended June 30, 2010 was approximately $3.4 million as compared to $17.1 million for the six months ended June 30, 2009. For the first six months of 2010, the Company reported gross profit of $0.9 million, or 20.4% of total revenues compared to gross profit of $7.7 million, or 31.1% of total revenues for the 2009 six-month period. Key reasons for the lower gross margins include a lower profit revenue mix and greater price sensitivity among customers during this period.
Operating expenses for the six months ended June 30, 2010 were approximately $2.2 million, compared to $1.3 million in the same period of 2009. Selling expenses for the six month period increased to $0.3 million from $0.2 million in the same period of 2009, as the Company increased spending on the pursuit of new business opportunities, including in international markets such as the US and Korea. General and administrative expenses were $1.9 million and $1.1 million for the 2010 and 2009 periods, respectively, with the increase due to additional staff hires related to the costs of being a public company.
For the six months ending June 30, 2010, the Company reported a net loss of $1.2 million, or $.17 per share based on 7.2 million weighted average shares outstanding, compared to net income of $5.8 million for the six months ended June 30, 2009.
"Given the fact that the construction equipment business consists of large, long lead-time contracts subject to macro-economic factors, our business and our financial results are, by definition, difficult to predict and are extremely 'lumpy' in nature on a quarter to quarter basis. Recognizing that reality, we have structured our business and operations in a manner that maximizes our flexibility and ability to respond to changing market conditions, reduces exposure to fixed overhead, and reduces inventory buildups. We have achieved this in part by being a value-added design and engineering company rather than a pure manufacturing company. As a result, we focus our resources on designing and developing customized heavy machinery to solve complex lifting and bridge building problems. While we do manufacture machinery, we have not overbuilt our manufacturing capacity knowing that when necessary due to spikes in demand that we can outsource this relatively low value-added function. Our current operations are capable of producing more than $25 million in sales per quarter."
Revenue Guidance and Contract Backlog
Management issued revenue guidance for Q3 2010 of approximately $8.0 million, as current backlog of signed contracts totals approximately $17.0 million, up from $13.1 million at the end of the first quarter 2010.
The conference call will take place at 9:00 a.m. EDT on Tuesday, August 31, 2010. Interested participants should call 1-877-941-4774 when calling within the United States or 1-480-629-9760 when calling internationally (pass code 4348904).
A playback will be available through September 7, 2010. To listen, please call 1-877-870-5176 within the United States or 1-858-384-5517 when calling internationally. Utilize the pass code 4348904 for the replay.
About Wowjoint Holdings Limited
Wowjoint is a leading provider of customized heavy duty lifting and carrying machinery used in such large scale infrastructure projects as railway, highway and bridge construction. Wowjoint's main product lines include launching gantries, tyre trolleys, special carriers and marine hoists. The company's innovative design capabilities have resulted in patent grants and proprietary products. Wowjoint is well positioned to benefit directly from China's rapid infrastructure development by leveraging its extensive operational experience and long-term relationships with established blue chip customers. Information on Wowjoint's products and other relevant information are available on its website at http://www.wowjoint.com .
Forward Looking Statements
This press release includes "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Words such as "expect," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," "may," "will," "could," "should," "believes," "predicts," "potential," "continue," and similar expressions are intended to identify such forward-looking statements. Forward-looking statements in this press release include matters that involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to differ materially from results expressed or implied by this press release. Wowjoint undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after the date of this communication. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this communication. All forward-looking statements are qualified in their entirety by this cautionary statement. All subsequent written and oral forward-looking statements concerning Wowjoint or other matters and attributable to Wowjoint or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. Wowjoint does not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this news release.
For additional information contact: Company: Anthony (Tony) Hung Chief Financial Officer Tel: +86-10-8957-9330 x8011 Email: firstname.lastname@example.org Investors: Scott Powell HC International, Inc. Tel: +1-917-721-9480 Email: email@example.com Web: http://www.hcinternational.net - Financial Tables Follow - WOWJOINT HOLDINGS LTD Unaudited Consolidated Statement of Income (US dollars in thousands, except for EPS and share data) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2010 2010 2009 2010 2009 Sales Machinery sales 999 1,653 8,140 2,652 24,304 Technical service 1,563 79 296 1,642 476 Total sales 2,562 1,732 8,436 4,294 24,780 Cost of goods sold 1,966 1,450 5,686 3,416 17,066 Gross profit 596 282 2,750 878 7,714 Operating expenses: Selling expenses 267 74 109 341 162 General and administrative expenses 1,147 715 729 1,862 1,134 Total operating expenses 1,414 789 838 2,203 1,296 Income from operations (818) (507) 1,912 (1,325) 6,418 Other expenses: Interest expense (net) 6 10 7 16 17 Bank expense 14 1 5 15 10 Foreign currency exchange loss(gain) 16 -- 113 16 113 Other expense (profit) (29) (8) 1 (37) 0 Total other expenses 7 3 126 10 140 Income before income taxes (825) (510) 1,786 (1,335) 6,278 Income taxes (Benefits) expenses (63) (85) 134 (148) 471 Net income attributed to ordinary shareholders (762) (425) 1,652 (1,187) 5,807 Earnings per share Basis (0.10) (0.07) 0.29 (0.17) 1.02 Diluted (0.10) (0.07) 0.29 (0.17) 1.02 Weighted average number of shares used in computing earnings per share Basis 7,949,965 6,430,610 5,700,000 7,194,485 5,700,000 Diluted 7,949,965 6,430,610 5,700,000 7,194,485 5,700,000 WOWJOINT HOLDINGS LTD Unaudited Consolidated Balance Sheet (US dollars in thousands) June 30, March 31, December 31, 2010 2010 2009 ASSETS Current Assets: Cash and cash equivalents 7,242 7,554 675 Accounts receivable(net) 10,700 11,410 13,410 Other receivables 133 313 43 Advances to suppliers 1,463 1,306 790 Inventories 7,288 5,304 3,636 Costs and estimated earnings in excess of billings 1,731 2,437 2,321 Deferred tax assets 1,254 718 495 Amount due from related parties 84 62 62 Total Current Assets 29,895 29,104 21,432 Property, plant and equipment 1,715 1,664 1,630 Intangible asset, net 1,032 1,033 1,040 Deferred tax assets 66 533 670 Restricted cash 371 264 188 Prepaid expense - Long-term 53 5 5 Total Assets 33,132 32,603 24,965 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term loans 736 732 732 Accounts payable and accrued expenses 5,016 5,535 4,437 Advances from customers 1,931 928 480 Taxes payable 5,322 5,747 6,169 Other payables 431 486 258 Billings in excess of costs and estimated earnings 1,191 -- 23 Total Current Liabilities 14,627 13,428 12,099 Stockholders' Equity: Common stock 8 8 1 Additional paid in capital 4,718 4,718 3,575 Warrants 5,581 5,581 -- Statutory surplus reserves 2,674 2,674 2,674 Retained earnings 4,573 5,335 5,760 Accumulated other comprehensive income 951 859 856 Total Stockholders' Equity 18,505 19,175 12,866 Total Liabilities and Stockholders' Equity 33,132 32,603 24,965
SOURCE Wowjoint Holdings Limited