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.
Financial Condition
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.
Business Outlook
"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."
Conference Call
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: teresa.zhang@chinawindsystems.com
Web: http://www.chinawindsystems.com
Investor Relations Contact:
Mr. Shaun Smolarz
Financial Writer
CCG Investor Relations
Phone: +1-646-701-7444
Email: shaun.smolarz@ccgir.com
Mr. Crocker Coulson
President
CCG Investor Relations
Phone: +1-646-213-1915 (NY office)
Email: crocker.coulson@ccgir.com
www.ccgirasia.com
SOURCE China Wind Systems, Inc.