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StockMarketNewsAlert.com: StockMarketNewsAlert.com Issues Trade Alert
on China Wind Systems, Inc. (OTC Bulletin Board: CWSI)
(M2 PressWIRE Via Acquire Media NewsEdge)
RDATE:16052008
Boca Raton, Fl., StockMarketNewsAlert.com issues trade alert for China
Wind Systems, Inc. (OTC Bulletin Board: CWSI) According to M. D'Alonzo
at First Equity Group, Inc., recent news flow from the company has been
very positive. "The company ('China Wind Systems' or the 'Company'),
which through its wholly owned subsidiaries and variable interest
entities manufactures and sells industrial machines for use in the
textile and energy related industries in the People's Republic of
China, announced its financial results for the first quarter ended
March 31, 2008.
First Quarter 2008 Highlights -- Net revenues increased 104.6%
year-over-year to $8.4 million -- Gross profit increased 103.8%
year-over-year to $2.2 million -- Net loss allocable to common
shareholders, after a $2.9 million non-cash deemed preferred dividend,
totaled $(4.1) million, or $(0.11) per diluted share -- Adjusting for
non-cash items such as interest expense of $2.3 million and a deemed
preferred dividend of $2.9 million, non- GAAP net income was $1.0
million, or $0.03 per diluted share.
-- Revenue from the forging of rolled rings, for the wind power and
other industries grew from $0 in the March Quarter of 2007 to $3.2
million in the March Quarter of 2008.
'Last quarter we made progress in executing our long term strategy,
which is to expand our products to offer products and services for the
wind power industry. During 2007, we began to generate revenue from the
forging of rolled rings, for the wind power and other industries. These
activities accounted for $3,204,266, or 37.9% of total revenue for the
three months ended March 31, 2008, of which approximately 30% are used
for the wind industry. Wind industries revenues accounted for
$1,902,916, or 7.8% of revenues for the year ended December 31, 2007.
Management estimates that 25% of rings in 2007 and 30% of rings in the
March Quarter of 2008 are for use in the wind industry. We presently
only perform forging services relating to rolled rings, but intend to
be in a position to manufacture these components internally in the fall
of 2008,' said Mr. Jianhua Wu, Chairman and CEO of China Wind Systems.
Further, he said, 'To increase oversight, we elected two new
independent members to our board of directors who are serving on our
audit and compensation committees.' First Quarter 2008 Results Total
revenue for the first quarter of 2008 totaled $8.4 million, up 104.6%
from $4.1 million in the three month period ended March 31, 2007. The
increase in total revenue was attributable to increases from both
segments: dyeing and finishing equipment and electric power equipment.
Revenues from the electric power equipment segment increased to $3.8
million from $0.3 million a year ago. Revenues from dyeing and
finishing equipment increased 20% to $4.7 million from $3.9 million a
year ago, due to marketing efforts focused on developing new customers
and making follow-on sales to existing customers.
Gross profit for the first quarter of 2008 was $2.2 million, an
increase of 103.8% from $1.1 million for the three months ended March
31, 2007. Gross margin was 25.7% for the first quarter of 2008,
compared to 25.8% for the prior year period. Gross profit for dyeing
was $1.2 million for the first quarter 2008 compared to $1.0 million
for the same period prior year, representing gross margin of
approximately 26.1% and 25.8%, respectively. Gross profit for the
electrical power equipment segment was $1.0 million for the first
quarter 2008 compared to $0.1 for the same period prior year.
Operating expenses were $0.7 million in the first quarter of 2008,
compared to $0.2 million a year ago. Selling, general and
administrative expenses for the first quarter of 2008 totaled $0.6
million, compared to $0.1 million a year ago, primarily due to
increased professional fees associated with being a public company and
higher payroll and related benefits.
Operating income for the first quarter of 2008 totaled $1.5 million, a
66.6% increase from $0.9 million for the same period prior year.
Net loss, including non-cash items such as interest expense related to
amortization of debt discount of $2.3 million and a deemed preferred
dividend of $2.9 million, for the first quarter of 2008 was ($4.1)
million, or ($0.11) per fully diluted share, compared to net income of
$0.6 million, or $0.02 per fully diluted share, for the three months
ended March 31, 2007. Adjusting net loss for the non-cash items related
to the amortization of debt discount to interest expense and the deemed
preferred dividend, non-GAAP net income was $1.0 million, or $0.03 per
fully diluted share. Earnings per share were calculated using a diluted
weighted share count of 37.5 million shares for the first quarter of
2008 and 36.6 million shares for the first quarter of 2007. The
increase in weighted average shares includes the impact of the reverse
merger transaction and private placement in November 2007 as well as
the issuance of common shares for services.
Financial Condition As of March 31, 2008, the Company had cash and cash
equivalents of $2.6 million and working capital of $7.4 million.
Accounts receivable were $3.5 million. At March 31, 2008, the Company
had $1.0 million in short-term loans payable and stockholders' equity
of $26.8 million.
Business Outlook 'In 2008, we expect to significantly increase our
revenues generated from our electric power equipment business and our
wind power business. We have been evaluating working relationships with
leading wind energy companies in China to supply wind components. We
are on track to complete the first phase of our expansion plan and
expect to manufacture larger forged rolled rings and shafts at our
facilities by October 2008,' concluded Mr. Jianhua Wu, CEO of China
Wind Systems.
In 2008, the Company expects $40.0 million in revenues and $7.0 million
in net income after a 25% tax rate, or $0.11 per share based on 62.9
million weighted average diluted share count.
Use of Non-GAAP Financial Measures GAAP results for the quarter ended
March 31, 2008 include a one-time, non- cash interest expense related
to the amortization of debt discount in the amount of $2.3 million and
a non cash deemed preferred stock dividend in the amount of $2.9
million. To supplement the Company's condensed 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, non-GAAP net income available to common shareholders and
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. A
reconciliation of the adjustments to GAAP results appears in the table
accompanying this press release. This additional non-GAAP information
is not meant to be considered as a substitute for GAAP financials. The
non-GAAP financial information that the Company provides also may
differ from the non-GAAP information provided by other companies.
About China Wind Systems, Inc.
China Wind Systems, through its affiliates, Huayang Dye Machine and
Huayang Electrical Power Equipment, manufactures and sells industrial
equipment for use in the textile and energy related industries in
China. Since August 2007, the Company has shifted its strategy to focus
on the growing wind energy industry in China, and has begun to supply
high precision rolled rings to companies in the wind power energy
industry.
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 CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited)
For the Three Months Ended March 31, 2008 2007
NET REVENUES $8,447,074 $4,129,210
COST OF SALES 6,272,826 3,062,119
GROSS PROFIT 2,174,248 1,067,091
OPERATING EXPENSES: Depreciation and amortization 78,020 71,804
Selling, general and administrative 616,568 106,991
Total Operating Expenses 694,588 178,795
INCOME FROM OPERATIONS 1,479,660 888,296
OTHER INCOME (EXPENSE): Interest income 5,633 101 Interest expense
(2,259,694) (8,048) Debt issuance costs (21,429) --
Total Other Income (Expense) (2,275,490) (7,947)
INCOME (LOSS) BEFORE INCOME TAXES (795,830) 880,349
INCOME TAXES 454,031 298,584
NET INCOME (LOSS) (1,249,861) 581,765
DEEMED PREFERRED DIVIDEND (2,884,062) --
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $(4,133,923) $581,765
COMPREHENSIVE INCOME: NET INCOME (LOSS) $(1,249,861) $581,765
OTHER COMPREHENSIVE INCOME: Unrealized foreign currency translation
gain 1,007,245 83,161
COMPREHENSIVE INCOME (LOSS) $(242,616) $664,926
NET INCOME (LOSS) PER COMMON SHARE: Basic $(0.11) $0.02 Diluted $(0.11)
$0.02
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic 37,484,504 36,577,704
Diluted 37,484,504 36,577,704
CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, December 31, 2008 2007 (Unaudited) ASSETS
CURRENT ASSETS: Cash and cash equivalents $2,580,723 $5,025,434
Accounts receivable, net of allowance for doubtful accounts 3,539,495
2,158,412 Inventories, net of reserve for obsolete inventory 3,171,362
1,929,796 Advances to suppliers 649,745 938,331 Prepaid expenses and
other 412,506 378,429
Total Current Assets 10,353,831 10,430,402
PROPERTY AND EQUIPMENT - Net 6,638,714 6,525,986
OTHER ASSETS: Deposit on long-term assets - related party 12,155,472
10,863,706 Intangible assets, net of accumulated amortization 520,682
502,634 Investment in cost method investee -- 34,181 Due from related
parties 46,561 139,524
Total Assets $29,715,260 $28,496,433
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES: Loans payable $996,839 $820,333 Convertible debt,
net of discount on debt -- 3,261,339 Accounts payable 688,576 1,845,769
Accrued expenses 191,307 198,542 VAT and service taxes payable 516,940
434,839 Advances from customers 91,613 77,357 Due to related party --
98,541 Income taxes payable 463,955 508,407
Total Current Liabilities 2,949,230 7,245,127
STOCKHOLDERS' EQUITY: Series A convertible preferred ($0.001 par value;
60,000,000 shares authorized; 14,787,135 and 0 shares issued and
outstanding at March 31, 2008 and December 31, 2007, respectively)
14,787 -- Common stock ($0.001 par value; 150,000,000 shares
authorized; 37,732,295 and 36,577,704 shares issued and outstanding at
March 31, 2008 and December 31, 2007, respectively) 37,733 37,385
Additional paid-in capital 12,115,163 3,488,896 Retained earnings
11,874,576 16,074,270 Statutory reserve 371,243 305,472 Other
comprehensive gain - cumulative foreign currency translation adjustment
2,352,528 1,345,283
Total Stockholders' Equity 26,766,030 21,251,306
Total Liabilities and Stockholders' Equity $29,715,260 $28,496,433
CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited)
For the Three Months EndedMarch 31, 2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(1,249,861)
$581,765 Adjustments to reconcile net income (loss) from operations to
net cash provided by (used in) operating activities: Depreciation and
amortization 161,846 148,861 Amortization of debt discount to interest
expense 2,263,661 -- Amortization of debt offering costs 21,429 --
Stock based compensation expense 45,000 -- Changes in assets and
liabilities: Accounts receivable (1,263,740) (1,818,385) Inventories
(1,136,507) 806,749 Prepaid and other current assets (49,696) 42,988
Advanced to suppliers 320,583 2,173 Accounts payable (1,225,962)
487,098 Accrued expenses 7,150 47,042 VAT and service taxes payable
62,655 287,500 Income taxes payable (64,183) 275,060 Advances from
customers 10,804 380,041
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (2,096,821)
1,240,892
CASH FLOWS FROM INVESTING ACTIVITIES: Decrease in due from related
parties 96,650 (1,009) Proceeds from sale of cost-method investee
34,840 -- Deposit on long-term assets - related party (822,212)
(316,319) Purchase of property and equipment (3,907) (3,337)
NET CASH USED IN INVESTING ACTIVITIES (694,629) (320,665)
CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from (payments on) loans
payable 139,360 386,033 Proceeds from exercise of warrants 187,340 --
Proceeds from (payments on) related party advances (100,441) --
NET CASH PROVIDED BY FINANCING ACTIVITIES 226,259 386,033
EFFECT OF EXCHANGE RATE ON CASH 120,480 9,311
NET INCREASE (DECREASE) IN CASH (2,444,711) 1,315,571
CASH - beginning of year 5,025,434 421,390
CASH - end of period $2,580,723 $1,736,961
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for:
Interest $16,752 $8,048 Income taxes $518,214 $1,345
NON-CASH INVESTING AND FINANCING ACTIVITIES: Deemed preferred dividend
reflected in paid-in capital $2,884,062 $-- Convertible debt converted
to series A preferred stock $5,525,000 $--
CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS AND DILUTED EPS
For the Quarter Ended March 31, 2008 2007 Net Diluted Net Diluted
Income EPS Income EPS Adjusted Amount of Net Income available to Common
Shareholders $1,031,262 $0.03 $581,765 $0.02 Adjustment Interest
expenses related to amortization of conversion of convertible debt to
common stock (1) (2,259,694) (0.06) -- -- Amortization of debt issuance
costs (2) (21,429) Deemed preferred dividend (3) (2,884,062) (0.08)
Amount per consolidated statement of operations $(4,133,923) $(0.11)
$581,765 $0.02
(1) One-time, non-cash interest expenses related to amortization of
debt discount to interest expense, Q1 2008 (2) Amortization related to
debt issuance (3) One-time non-cash deemed preferred dividend related
to issuance of stock warrants upon conversion of convertible debt to
series A preferred stock Weighted average diluted shares, 37,484,504
for Q1 2008 and 36,577,704 for Q1 2007
For more information, please contact:
CCG Elite Investor Relations Mr. Crocker Coulson, President Phone:
+1-646-213-1915 (New York) Email: crocker.coulson@ccgir.com URL:
http://www.ccgelite.com SOURCE China Wind Systems, Inc.
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