Wuhan General Announces Second Quarter 2011 Results

WUHAN, China, Aug. 23, 2011 /PRNewswire-Asia-FirstCall/ -- Wuhan General Group (China), Inc. (Nasdaq: WUHN) ("Wuhan General" or the "Company"), a leading manufacturer of industrial blowers and turbines in China, operating through its subsidiaries, Wuhan Blower Co., Ltd. ("Wuhan Blower"), Wuhan Generating Equipment Co., Ltd. ("Wuhan Generating") and Wuhan Sungreen Environment Protection Equipment Co., Ltd. ("Wuhan Sungreen"), today reported its financial results for the three and six months ended June 30, 2011.

Second quarter 2011 Highlights

• Revenue increased 43.7% to $32.3 million
• Gross profit increased 99.2% year-over-year to $9.5 million, and gross margin increased 8.2 percentage points to 29.5%
• Operating income increased 64.4% year-over-year to $6.3 million
• Net income available to common stockholders increased 460.0% year-over-year to $2.8 million, or $0.06 per diluted share

"We continued to improve profitability of our continuing business. For the second quarter, growth was mainly driven by the strong performance of our turbine division, which benefited from a recovery in capital spending in the Chinese economy. In addition to positive sales growth, the improved gross margin of Wuhan Generating was a result of our shift to proprietary production from the use of subcontractors," said Mr. Ruilong Qi, the CEO of Wuhan General. "While we are pleased about our improved profitability, our collection cycle remains long and we rely on short term debt financing for our working capital. In order to improve our cash position, we carefully monitor the financial positions of our customers to avoid unnecessary delay of payments."

Second quarter 2011 Results

For the second quarter ended June 30, 2011, total revenues were $32.3 million, up 43.7% from $22.5 million for the same period last year. Wuhan Blower generated 49% of total revenues, compared to 57% for the same period last year. Wuhan Generating contributed 51% of total revenues, compared to 43% for the same period last year. The year-over-year increase in total revenues was mainly due to increased sales of turbines following a recovery in demand because of the improved economic climate.

Cost of sales for the second quarter increased 28.7% to $22.7 million, or 70.5% of total revenues, from $17.7 million, or 78.7% of total revenues, during the same period in 2010.   The 820-basis-point decrease in cost of sales as a percentage of total revenues was primarily attributable to a shift in the production process from subcontracting to in-house manufacturing at Wuhan Generating, resulting in a decrease in cost of production.

Gross profit for the second quarter was $9.5 million, up 99.2% from $4.8 million in the same quarter of 2010. Gross margin was 29.5%, up 8.2 percentage points from 21.3% for the same period in 2010. The increase in gross margin was mainly due to the increase in gross margin year-over-year for Wuhan Generating.  

Total operating expenses increased 243.4% to $3.2 million, or 9.9% of the total revenue for the second quarter of 2011, from $0.9 million, or 4.1% of the total revenue for the same period of 2010. The increase in total operating expenses was primarily attributed to a sharp increase in general and administrative expenses, partially offset by a decrease in warranty expenses. General and administrative expenses increased 488.9% from $0.5 million for the second quarter of 2010 to $2.9 million for the second quarter of 2011 primarily due to a shift in the production process from subcontracting to in-house manufacturing that resulted in increased expenses. Warranty expense was $21,674 for the second quarter compared to $195,721 for the same period of 2010. Selling expenses were $0.3 million, compared to $0.2 million for the same period of 2010. Selling expenses as a percentage of sales decreased, mainly due to an increase in sales turnover.

As a result, operating income increased 64.4% to 6.3 million for the second quarter of 2011, from $3.8 million for the same period of 2010. Operating margin was 19.6%, compared to 17.1% a year ago.

The Company had other net expenses of $2.8 million for the second quarter of 2011, down 6.1% from $3.0 million for the year-ago period, mainly due to a $0.2 million decrease in interest expenses and an increase in interest income.

Income taxes were $0.5 million for the second quarter of 2011, compared to $0.2 million for the same period of 2010. Wuhan Blower and Wuhan Generating were subject to 12.5% P.R.C. income tax for the three months ended June 30, 2011 and June 30, 2010, and Wuhan General did not incur any U.S. income tax liability for the three months ended June 30, 2011 and June 30, 2010.

Net income for the second quarter of 2011 was $3.0 million, compared with $0.7 million for the same period last year. Income from continuing operations was $3.1 million compared with $0.7 million for the same period last year. Loss from discontinued operations resulting from the discontinuation of Wuhan Sungreen was $90,893 compared with $40,818.

Net of preferred dividends declared, net income available to common stockholders was $2.8 million for the second quarter of 2011, compared with $0.5 million for the same period last year.

Earnings per diluted share were $0.06 for the second quarter of 2011 compared with $0.02 per diluted share for the same period of 2010. Earnings per diluted share from continuing operations were $0.06 compared with $0.02 for the corresponding period last year.

Six months 2011 Results

For the six months ended June 30, 2011, total revenue was $59.6 million, up 48.4% from $40.2 million in the same period of 2010. Gross profit was $16.1 million for the six months ended June 30, 2011, up 66.6% from $9.7 million in the same period of 2010. Overall gross margin was 27.0% compared with 24.0% for the six months of 2010. Operating income was $10.1 million for six months ended June 30, 2011, up 40.8% from $7.2 million for the same period in 2010. Net income was $1.6 million, compared to $2.6 million in the year-ago period. Income from continued operations was $1.8 million compared with $2.7 million for the six months ended June 30, 2010. Loss from discontinued operations was $0.2 million compared with $0.1 million for the six months ended June 30, 2010. Net income available to common stockholders was $1.2 million, compared to $2.2 million for the same period in 2010.

Earnings per diluted share were $0.04 for the six months ended June 30, 2011 compared with $0.08 per diluted share for the corresponding period in 2010. Earnings per diluted share from continuing operations were $0.05 compared with $0.09 for the corresponding period last year.

Financial Condition

As of June 30, 2011, Wuhan General had cash and cash equivalents of $79.3 million, including restricted cash of $24.1 million, compared to $57.5 million as of December 31, 2010. The Company had $57.9 million in accounts receivable compared to $49.5 million as of December 31, 2010 and its accounts receivable ratio was 162 days as of June 30, 2011, compared to 242 days as of June 30, 2010. The Company had $69.8 million in working capital with a current ratio of 1.5 to 1. Total stockholders' equity was $119.7 million as of June 30, 2011, compared to $112.3 million as of December 31, 2010. Wuhan General's short term bank loans and notes were $99.7 million as of June 30, 2011 compared with $72.0 million as of December 31, 2010. Cash used in operating activities for the six months ended June 30, 2011 was approximately $5.5 million, as compared to cash provided by operating activities of approximately $2.9 million for the same period in 2010. This change was mainly due to increased payments to suppliers and employees compared to the same period in 2010, in addition to a significant increase in taxes paid.

Business Outlook

"Our current backlog is RMB 280 million (approximately $43.3 million) for Wuhan Blower and RMB 220 million (approximately $34.0 million) for Wuhan Generating of which we expect to realize approximately $65.8 million in revenue for 2011. As our backlog remains encouraging, we believe that our improved performance will help us regain our former position in the market. The decision to divest Wuhan Sungreen has further improved our cash flow position and we hope to reach an agreement regarding the sale of the assets soon," said Mr. Qi, "While our business still faces challenges, particularly as the tightened credit environment may hamper collection of accounts receivable, we believe that our current product offerings and long term relationships with our customers will help us establish a prominent position in our industry."

About Wuhan General Group (China), Inc.

Through its subsidiaries, Wuhan Blower and Wuhan Generating, Wuhan General is a leading manufacturer of industrial blowers and turbines in China and the Company is based in Wuhan, Hubei Province, China. Wuhan Blower is a China-based manufacturer of industrial blowers that are principal components of steam-driven electrical power generation plants. Wuhan Generating is a China-based manufacturer of industrial steam and water turbines used for electricity generation in coal, oil, nuclear and hydroelectric power plants. The Company's primary customers are from the iron and steel, power generation, petrochemical and other industries. Led by a strong management team, Wuhan General is well recognized for its technological sophistication and quality construction of blowers and turbines. For more information, please visit http://www.wuhangeneral.com .

Safe Harbor Statement

Certain statements in this press release, including statements regarding our revenue, position in the market, sale of Wuhan Sungreen, collections of accounts receivable, and the fulfillment of our backlog orders may be forward-looking in nature or "forward-looking statements," as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties, including all business uncertainties relating to vulnerability of our business to general economic downturn, operating in the People's Republic of China (PRC) generally and the potential for changes in the laws of the PRC that affect our operations, our failure to meet or timely meet contractual performance standards and schedules, and other factors that may cause actual results to be materially different from those described in such forward-looking statements. Certain of these risks and uncertainties are or will be described in greater detail in our filings with the Securities and Exchange Commission. These forward-looking statements are based on Wuhan General's current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting Wuhan General will be those anticipated by the Company. Wuhan General undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

-FINANCIAL TABLES FOLLOW-

SOURCE Wuhan General Group (China), Inc.