WUXI, China, March 31 /PRNewswire-Asia-FirstCall/ -- China Wind Systems, Inc. (Nasdaq: CWS), ("China Wind Systems" or the "Company"), a leading supplier of forged products and industrial equipment to the wind power and other industries in China, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2009.
Fourth Quarter 2009 Highlights -- Net revenues increased 45.9% year over year to $15.9 million -- Revenue from the sale of forged products for the wind power and other industries increased 111.4% year over year to $10.5 million, or 65.9% of net revenues -- Revenue from the sale of forged products exclusively to the wind power industry increased 327.1% year over year to $6.8 million, or 43.0% of net revenue -- Gross profit increased 63.2% year over year to $4.3 million -- Net income allocable to common shareholders was $1.1 million, or $0.05 per diluted share -- Excluding a $1.6 million deemed preferred dividend and other non-cash expenses, adjusted net income was $2.7 million, or $0.11 per diluted share, up 86.0% year-over-year 2009 Full Year Highlights -- Net revenues increased 26.4% to $53.5 million year over year -- Revenue from the sale of forged products for the wind power and other industries increased 104.2% year over year to $35.7 million, or 66.8% of net revenues -- Revenue from the sale of forged products exclusively to the wind power industry increased 198.5% year over year to $20.1 million, or 37.6% of net revenue -- Gross profit increased 22.5% to $12.9 million -- Net income allocable to common shareholders was $5.6 million, or $0.24 per diluted share -- Excluding deemed preferred dividends and other non-cash expenses, adjusted net income was $7.8 million, or $0.34 per diluted share, up 35.1% from adjusted net income of $5.8 million, or $0.27 per diluted share, in 2008 -- Opened new forged product manufacturing facility in Wuxi City -- Began construction of electro-slag remelted production line -- Listed on the NASDAQ Global Market
"This was a landmark year for China Wind Systems. We started production of our new forged products facility in March 2009 and won a number of sizable contracts for our forged products with customers in the wind power industry and other industries, resulting in substantial earnings growth," said Mr. Jianhua Wu, Chairman and CEO of China Wind Systems, Inc. "In October 2009, we announced our plans to expand our forged products facility to manufacture electro-slag remelted forged products for the high performance components market of the wind power industry, which we completed in March 2010. We have also listed our shares on the NASDAQ Global Market, further elevating our profile in the investment community."
Fourth Quarter 2009 Results
Net revenue for the fourth quarter of 2009 increased 45.9% to $15.9 million, compared to $10.9 million for the same period in 2008. The increase was primarily due to strong sales growth of forged rolled rings for the wind power industry segment. Revenue from the sale of forged rolled rings for the wind power industry and other industries grew 111.4% to $10.5 million, or 65.9% of net revenue, for the fourth quarter of 2009, compared to $4.9 million, or 45.5% of net revenue, for the same period of the prior year. Revenue from the sale of forged rolled rings exclusively for the wind power industry rose 327.1% to $6.8 million, representing 43.0% of net revenue, compared to $1.6 million, or 14.7% of net revenues in the fourth quarter of 2008. Revenue from the Company's dyeing and finishing equipment segment decreased 8.2% to $4.9 million, or 30.9% of net revenues, compared to $5.3 million, or 49.0% of net revenue, for the fourth quarter of 2009 due to the impact of the global recession on China's textile industry.
Gross profit for the fourth quarter of 2009 increased 63.2% to $4.3 million, from $2.7 million for the same period in the prior year. Gross margin was 27.3% compared to 24.4% for the same period in 2008. The dyeing and finishing equipment segment's gross margin was 21.7%, down from 26.3% in the comparable period in 2008, resulting from higher raw materials costs and industry pricing pressure. Gross margin for forged rolled rings and electric power equipment was 25.1%, compared with 23.8% in the same period last year. The increase was attributable to cost savings resulting from the Company's ability to manufacture its own forged products at its new forged products facility which came online in March 2009. As the Company improves its efficiency at the new facility, the Company expects the gross margins for forged products to continue to expand.
Operating expenses decreased 1.1% to $566,393, compared to $572,748 in the comparable period last year, primarily resulting from lower professional fees.
Operating income increased 80.8% to $3.7 million for the fourth quarter of 2009, from $2.1 million for the same period in the prior year.
Net income allocable to common shareholders was $1.1 million, compared to $1.5 million in the fourth quarter of 2008. Diluted earnings per share were $0.05 compared to $0.07 in the comparable period last year. Fourth quarter of 2009 adjusted net income excluding $1.6 million in non-cash deemed preferred stock dividends related to issuance of 2.4 million series A preferred shares and other non-cash expenses increased 86.0% to $2.7 million, or $0.11 per diluted share, from $1.5 million, or $0.07 per diluted share, a year ago. Diluted earnings per share were calculated using weighted average shares of 24,006,547 and 21,207,070 for the three months ended December 31, 2009 and December 31, 2008, respectively.
Fiscal Year 2009 Results
In 2009, revenue increased 26.4% to $53.5 million, as compared to $42.3 million in 2008. Gross profit increased 22.5% to $12.9 million, as compared to $10.5 million in 2008. Gross margin was 24.2%, as compared to 25.0% in 2008. Operating income increased 32.9% to $10.7 million, from $8.1 million in 2008. Net income allocable to common shareholders was $5.6 million, or $0.24 per diluted share, compared to $0.6 million, or $0.03 per diluted share, in 2008. Adjusted net income increased 35.1% to $7.8 million, or $0.34 per diluted share, from $5.8 million, or $0.27 per diluted share in 2008. Diluted earnings per share were calculated using weighted average shares of 22,821,086 and 21,207,070 for 2009 and 2008, respectively.
As of December 31, 2009, the Company had cash and cash equivalents of $2.3 million, accounts receivable of $6.0 million and working capital of $4.7 million. The Company had $2.0 million in short-term loans payable and stockholders' equity of $45.3 million.
In 2009, the Company generated $9.3 million in operating cash flow and spent $12.7 million in capital expenditures, primarily for property and equipment related to the new forged products facility and ESR production line.
"We completed trial production at our new ESR production line in March 2010 and anticipate delivering the first batch of ESR product towards the end of April 2010," commented Mr. Wu. "We believe that this new product line strengthens our competitive edge among other forged components suppliers in the industry. In addition, as the trend in China's wind power industry shifts towards producing larger 5MW offshore and near-shore wind turbines, we expect that, given our strategic positioning as a large precision forged rolled rings provider, we will be able to meet our 40,000-ton production capacity target and deliver 4,000 tons of ESR product in 2010."
China Wind Systems will conduct a conference call at 9:00 a.m. Eastern Time on Wednesday, March 31, 2010 to discuss its fourth quarter and full-year 2009 results. To participate in the live conference call, please dial (877) 359-2891 approximately ten minutes prior to the start of the call and when prompted enter passcode 658 881 10; international callers dial (702) 224-9578. A replay will be available for 14 days starting March 31 at 10:00 a.m. ET. To access the replay, dial (877) 642-1687 and enter passcode 658 881 10; international callers dial (706) 645-9291.
Use of Non-GAAP Financial Information
GAAP results for the three months and years ended December 31, 2009 and 2008 include the significant non-cash charges which do not relate to the operation of the business including deemed preferred dividends related to the Company's series A preferred stock and non-cash interest charges related to the 3% convertible notes issued in November 2007 and another financing. These are non-cash events which do not affect the Company's operations. To supplement the Company's consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information excluding the impact of these items in this release, which are non-GAAP net income and non-GAAP diluted earnings per share. The Company's management believes that these non-GAAP measures provide investors with a better understanding of how the results relate to the Company's historical performance. The additional adjusted information is not meant to be considered in isolation or as a substitute for GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies. Management believes that these adjusted financial measures are useful to investors because they exclude non-cash expenses that management excludes when it internally evaluates the performance of the Company's business and makes operating decisions, including internal budgeting, and performance measurement, as these measures provide a consistent method of comparison to historical periods. As a result, the provision of these adjusted measures allows investors to evaluate the Company's performance using the same methodology and information as that used by the Company's management. Moreover, management believes that these adjusted measures reflect the essential operating activities of the Company. Adjusted measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the adjusted financial measure. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded. A reconciliation of each adjusted measure to the nearest GAAP measure appears in the table at the end of this release.
About China Wind Systems, Inc.
China Wind Systems supplies forged rolled rings to the wind power and other industries and industrial equipment to the textile industry in China. With its newly finished state-of-the-art production facility, the Company has increased its production and shipment of high-precision rolled rings and other essential components primarily to the wind power and other industries. For more information on the Company, visit http://www.chinawindsystems.com . Information on the Company's Web site or any other Web site does not constitute a portion of this release.
Safe Harbor Statement
This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary and affiliated companies. These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (www.sec.gov). All forward-looking statements attributable to the Company or to persons acting on its behalf are expressly qualified in their entirety by these factors other than as required under the securities laws. The Company does not assume a duty to update these forward- looking statements.
- Financial Tables Follow - CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES RECONCILIATION OF ADJUSTED NET INCOME ALLOCABLE TO COMMON SHAREHOLDERS AND DILUTED EPS Three months Ended December 31, 2009 2008 Net income Net income allocable allocable to common Diluted to common Diluted shareholders EPS shareholders EPS Amount per consolidated statement of operations $1,124,063 $0.05 $1,460,078 $0.07 Adjustments Deemed dividend to preferred stockholders $1,560,000 $0.06 $-- $-- Non-cash interest from amortization of debt discount $32,000 $-- $-- $-- Amortization of debt issuance costs $-- $-- $-- $-- Non-cash interest from debt conversion $6,783 $-- $-- $-- Adjusted amount $2,716,063 $0.11 $1,460,078 $0.07 Weighted average diluted shares, 24,006,547 for three months ended December 31, 2009 and 21,207,070 for three months ended December 31, 2008 Twelve months Ended December 31, 2009 2008 Net income Net income allocable allocable to common Diluted to common Diluted shareholders EPS shareholders EPS Amount per consolidated statement of operations $5,587,173 $0.24 $598,201 $0.03 Adjustments Deemed dividend to preferred stockholders $2,022,000 $0.09 $2,884,062 $0.14 Non-cash interest from amortization of debt discount $47,992 $-- $2,263,661 $0.11 Amortization of debt issuance costs $-- $-- $21,429 $-- Non-cash interest from debt conversion $135,272 $0.01 $-- $-- Adjusted amount $7,792,437 $0.34 $5,767,353 $0.27 Weighted average diluted shares, 22,821,086 for twelve months ended December 31,2009 and 21,207,070 for twelve months ended December 31, 2008 CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME For the Three Months Ended For the Years Ended December 31, December 31, 2009 2008 2009 2008 (unaudited) (unaudited) (audited) (audited) NET REVENUES $15,880,399 $10,885,299 $53,457,566 $42,285,485 COST OF SALES 11,550,270 8,231,321 40,536,636 31,740,041 GROSS PROFIT 4,330,129 2,653,978 12,920,930 10,545,444 OPERATING EXPENSES: Depreciation 82,996 77,643 326,972 305,832 Selling, general and administrative 483,397 495,105 1,880,455 2,176,282 Total Operating Expenses 566,393 572,748 2,207,427 2,482,114 INCOME FROM OPERATIONS 3,763,736 2,081,230 10,713,503 8,063,330 OTHER INCOME (EXPENSE): Interest income 1,869 1,850 2,727 13,569 Interest expense (57,227) (25,985) (311,127) (2,324,859) Foreign currency loss (5,931) (13,400) (9,337) (13,400) Grant income 35 -- 146,180 -- Debt issuance costs -- -- (14,000) (21,429) Total Other Income (Expense) (61,254) (37,535) (185,557) (2,346,119) INCOME BEFORE INCOME TAXES 3,702,482 2,043,695 10,527,946 5,717,211 INCOME TAXES 1,018,419 583,617 2,918,773 2,234,948 NET INCOME 2,684,063 1,460,078 7,609,173 3,482,263 DEEMED PREFERRED STOCK DIVIDEND (1,560,000) -- (2,022,000) (2,884,062) NET INCOME ALLOCABLE TO COMMON SHAREHOLDERS $1,124,063 $1,460,078 $5,587,173 $598,201 COMPREHENSIVE INCOME: NET INCOME $2,684,063 $1,460,078 $7,609,173 $3,482,263 OTHER COMPREHENSIVE INCOME: Unrealized foreign currency translation gain 3,126 9,391 87,455 1,688,944 COMPREHENSIVE INCOME $2,687,189 $1,469,469 $7,696,628 $5,171,207 NET INCOME PER COMMON SHARE: Basic $0.07 $0.11 $0.37 $0.04 Diluted $0.05 $0.07 $0.24 $0.03 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic 15,514,682 13,333,496 15,236,023 13,333,496 Diluted 24,006,547 21,207,070 22,821,086 21,207,070 CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2009 2008 ASSETS CURRENT ASSETS: Cash and cash equivalents $2,278,638 $328,614 Notes receivable 329,492 269,549 Accounts receivable, net of allowance for doubtful accounts 6,046,422 4,518,259 Inventories, net of reserve for obsolete inventory 2,232,264 1,892,090 Advances to suppliers 450,507 117,795 Due from related party -- 437,688 Prepaid VAT on purchases 378,543 -- Prepaid expenses and other 213,835 21,744 Total Current Assets 11,929,701 7,585,739 PROPERTY AND EQUIPMENT - net 36,863,501 25,939,596 OTHER ASSETS: Land use rights, net 3,729,427 3,806,422 Total Assets $52,522,629 $37,331,757 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Loans payable $2,040,111 $1,021,272 Accounts payable 3,404,521 2,485,137 Accrued expenses 556,662 187,605 VAT and service taxes payable 25,284 97,341 Advances from customers 143,261 45,748 Income taxes payable 1,018,514 569,371 Total Current Liabilities 7,188,353 4,406,474 STOCKHOLDERS' EQUITY: Preferred stock $0.001 par value; (December 31, 2009 and 2008 - 60,000,000 shares authorized, all of which were designated as series A convertible preferred, 15,419,088 and 14,028,189 shares issued and outstanding at December 31, 2009 and 2008, respectively) 15,419 14,028 Common stock ($0.001 par value; 150,000,000 shares authorized; 16,402,204 and 14,965,182 shares issued and outstanding at December 31, 2009 and 2008, respectively) 16,402 14,965 Additional paid-in capital 22,332,756 15,601,219 Retained earnings 18,595,037 13,639,641 Statutory reserve 1,252,980 621,203 Other comprehensive gain - cumulative foreign currency translation adjustment 3,121,682 3,034,227 Total Stockholders' Equity 45,334,276 32,925,283 Total Liabilities and Stockholders' Equity $52,522,629 $37,331,757 CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2009 2008 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $7,609,173 $3,482,263 Adjustments to reconcile net income from operations to net cash provided by operating activities: Depreciation 1,808,899 648,952 Amortization of debt discount to interest expense 47,992 2,263,661 Interest expense related to debt conversion 135,272 -- Amortization of debt offering costs -- 21,429 Amortization of land use rights 86,413 84,906 Increase (decrease) in allowance for doubtful accounts (118,872) 203,414 Increase in inventory reserve 81,222 -- Stock-based compensation expense 188,483 113,420 Changes in assets and liabilities: Notes receivable (59,241) (265,366) Accounts receivable (1,397,241) (2,384,061) Inventories (416,511) 164,596 Prepaid VAT on purchases (378,339) -- Prepaid and other current assets (159,587) 338,063 Advances to suppliers (332,241) 869,784 Due from related party 438,540 (430,894) Accounts payable 912,852 490,230 Accrued expenses 376,435 (894) VAT and service taxes payable (72,260) (360,984) Income taxes payable 447,487 26,434 Advances from customers 97,347 (36,229) NET CASH PROVIDED BY OPERATING ACTIVITIES 9,295,823 5,228,724 CASH FLOWS FROM INVESTING ACTIVITIES: Decrease in due from related parties -- 145,534 Proceeds from sale of cost-method investee -- 35,908 Deposit on long-term assets - related party -- (89,721) Purchase of property and equipment (12,662,466) (13,813,297) NET CASH USED IN INVESTING ACTIVITIES (12,662,466) (13,721,576) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from loans payable 1,207,080 143,632 Proceeds from exercise of warrants 615,945 2,187,566 Proceeds from sale of common stock -- 1,393,883 Proceeds from sale of preferred stock, net 3,493,000 -- Payments on related party advances -- (102,979) NET CASH PROVIDED BY FINANCING ACTIVITIES 5,316,025 3,622,102 EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS 642 173,930 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,950,024 (4,696,820) CASH AND CASH EQUIVALENTS - beginning of year 328,614 5,025,434 CASH AND CASH EQUIVALENTS - end of year $2,278,638 $328,614 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for: Interest $125,430 $75,159 Income taxes $2,485,941 $2,208,514 NON-CASH INVESTING AND FINANCING ACTIVITIES: Debt discount for grant of warrants $92,985 $-- Deemed preferred stock dividend reflected in paid-in capital $2,022,000 $2,884,062 Reclassification of long-term deposit-related party to distribution $-- $2,717,099 Common stock issued for prior and future service $40,500 $-- Convertible debt converted to series A preferred stock $-- $5,525,000 Deposit on long-term assets-related party reclassified to intangible assets $-- $3,304,219 Deposit on long-term assets-related party reclassified to property and equipment $-- $5,516,895 Series A preferred converted to common shares $2,109 $759 Common stock issued for debt and interest $146,180 $-- For more information, please contact: Company Contact: Ms. Teresa Zhang Chief Financial Officer China Wind Systems, Inc. Phone: +1-877-224-6696 x705 Email: [email protected] Web: http://www.chinawindsystems.com Investor Relations Contact: Mr. Shaun Smolarz Financial Writer CCG Investor Relations Phone: +1-646-701-7444 Email: [email protected] Mr. Crocker Coulson President CCG Investor Relations Phone: +1-646-213-1915 (NY office) Email: [email protected] www.ccgirasia.com
SOURCE China Wind Systems, Inc.