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Wuhan General Group (China), Inc. Announces Strong Fourth Quarter and Full Year 2008 Results

Posted on: Wednesday, 1 April 2009, 05:04 CDT

WUHAN, China, April 1 /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, today announced its fourth quarter and full year financial results ended December 31, 2008. Wuhan General operates through its subsidiaries, Wuhan Blower Co., Ltd. ("Wuhan Blower"), Wuhan Generating Equipment Co., Ltd. ("Wuhan Generating") and Wuhan Xingelin Machinery Equipment Manufacturing Co., Ltd. ("Wuhan Xingelin").

Fourth Quarter 2008 Highlights -- Fourth quarter revenue reached $28.1 million, up 26.6% year over year -- Gross profit was $6.5 million, up 24.2% year over year -- Operating income totaled $4.4 million, up 115.9% year over year -- Net income was $1.3 million, or $0.00 per fully diluted share, down from $2.3 million, or $0.05 per fully diluted share in the same quarter last year Full Year 2008 Highlights -- Net revenue climbed to $118.6 million, up 43.8% from 2007 -- Gross profit was $34.2 million, an increase of 36.4% from 2007 -- Operating income $22.6 million, up 37.9% from 2007 -- Net income was $16.1 million, or $0.26 per fully diluted share, up from $14.9 million, or $0.10 per fully diluted share in 2007 -- Excluding $5.4 million non-cash charges related to the Company's capital markets activities, non-GAAP net income was $21.5 million or $0.35 million per fully diluted share

"2008 was a rewarding year for our Company. Despite the current unprecedented global economic crisis and challenging market conditions, we were able to achieve growth and profitability for fiscal 2008. We realized $118.6 million in revenue and $21.5 million in net income, excluding non-cash charges related to the capital markets," commented Mr. Jie Xu, CEO of Wuhan General. "We successfully listed the Company's common stock on the NASDAQ Capital Market and attracted qualified and experienced members to join our senior management team."

Fourth Quarter 2008 Results

For the fourth quarter ended December 31, 2008, total revenue was $28.1 million, up 26.6% from $22.2 million compared to the same period last year. Wuhan Blower generated $14.6 million of revenue, or 52.0% of the total revenue, compared to $14.4 million, or 64.8% of total revenue in the fourth quarter of 2007. Wuhan Generating contributed $13.5 million, or 48.0% of the total revenue, compared to $7.8 million, or 35.2% of total revenue in the same period last year. The increase was primarily due to the increased demand for anti-pollution equipment in China and revenue from the construction of a thermal electric power plant in Jiangyin, Jingsu Province.

Gross profit for the quarter was $6.5 million, up 24.8% from $5.2 million compared to the fourth quarter of 2007. Gross margin was 23.3%, relatively unchanged from 23.7% compared to the same period in 2007.

Operating expenses totaled $2.2 million, down 31.2% from $3.2 million from the same period prior year. Selling expenses increased 1022.4% to $1.2 million due to increased incentives compensation and entertainment expenses for sales staff in order to increase market shares in this challenging market condition. General and administrative expenses declined 50.3% due to tighter controls implemented by management. As a percentage of revenue, total operating expenses were 7.8% in the fourth quarter of 2008, compared to 14.6% for the same period last year.

Operating income was $4.4 million for the quarter or 15.5% of total revenue, up 115.9% from $2.0 million, or 9.1% of total revenue for the fourth quarter of 2007.

Net income for the fourth quarter of 2008 was $1.3 million, or $0.00 per diluted share, compared to $2.3 million, or $0.05 per diluted share in the same period the prior year.

Full Year 2008 Results

For the fiscal year ended December 31, 2008, revenue increased to $118.6 million, up 43.8%, from $82.5 million from the prior year. Wuhan Blower generated $58.8 million, or 49.6% of total revenue, compared to $44.6 million, or 54.0% of total revenue in 2007. Wuhan Generating contributed $59.8 million, or 50.4% of total revenue, compared to $37.9 million, or 46.0% in 2007. Gross profit for 2008 was $34.2 million, an increase of 36.4% from $25.1 million in 2007. Gross profit as a percentage of revenue decreased slightly to 28.8% for the fiscal year ended December 31, 2008, from 30.4% for the twelve months ended December 31, 2007. Operating income for 2008 was $22.6 million, up 37.9% from $16.4 million in 2007. Operating margin was 19.1% in 2008, compared to 19.9% in 2007. Net income increased to $16.1 million, or $0.26 per fully diluted share, up 8.6% from $14.9 million for 2007, or $0.10 per fully diluted share. Excluding non-cash penalty charges of $5.4 million associated with the Company's capital market activities, the Company's non-GAAP net income for 2008 was $21.5 million, or $0.35 per fully diluted share. Fully diluted shares in fiscal year 2008 increased to 47.1 million from 33.6 million in 2007.

Financial Condition

As of December 31, 2008, Wuhan General had $2.8 million in cash compared to $1.0 million as of December 31, 2007 and $28.7 million in working capital with a current ratio of 1.5:1. Short-term bank loans and notes were $35.2 million. At year end, the Company's total shareholders' equity stood at $93.6 million, compared to $55.4 million as of December 31, 2007. The Company generated $16.8 million in cash from operating activities, compared to cash used in operating activities of $11.1 million in prior year.

At December 31, 2008, the Company had $41.5 million in accounts receivable versus $31.9 million at December 31, 2007. Wuhan General believes that its payment terms are standard in its industry in China, and it would be at a competitive disadvantage if it made payment schedules more aggressive. Nonetheless, the Company has employed additional resources in collecting on outstanding accounts receivable and believes it has benefited from these measures in registering an increase of $9.6 million in accounts receivable despite an increase in sales of $36.1 million in 2008.

Business Outlook

"Along with the general slowdown of the Chinese economy, we have seen our sales soften in the first quarter of 2009. However, we believe Wuhan General is well positioned to weather the current economic crisis due to our strong track record with customers of producing high quality blowers and turbines. We will continue to identify opportunities to expand our market share among industries that require industrial blowers and turbines," stated Mr. Xu.

Despite a slowdown in sales during the first quarter, Wuhan General expects sales to strengthen in the second half of 2009 as the effects of the Chinese government's stimulus plan begin to impact the domestic economy. In particular, spending on environmentally friendly technology and products are expected to strengthen. This will create significant opportunities for both Wuhan General's turbine and blower businesses, whose products are used as part of pollution reduction and clean energy systems.

For 2009, Wuhan General intends to offer more competitive prices to its existing customers. Management will also strengthen its sales effort into new areas such as sewage treatment and subway aeration, both of which are expected to see growth due to the emphasis of the government's stimulus package on infrastructure development.

Conference Call

The Company will host a conference call at 9:00 a.m. EDT on Wednesday, April 1, 2009 to discuss the fourth quarter and full year 2008 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 800-688-0796. International callers should dial 617-614-4070. When prompted by the operator, mention conference passcode 571 499 58. If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Wednesday, April 1, 2009 at 11:00 a.m. EDT. To access the replay, please dial 888-286-8010 and enter passcode 75724878. International callers should dial 617-801-6888 and enter passcode 75724878.

About Wuhan General Group (China), Inc.

Wuhan General (Nasdaq: WUHN) designs, manufactures and distributes industrial blowers, turbines and parts for industrial blowers and electrical equipment. Blowers are used in a variety of applications where large amounts of air have to be moved. Examples include electricity generation, air pollution control, and ventilation and aeration in subways and vehicular tunnels, mines, and sewage treatment facilities. The Company's steam and water turbines are used for electricity generation in coal, oil, nuclear, and hydroelectric power plants. The Company is located in Wuhan, China, a major industrial city of 8 million people strategically located in the south-central part of China.

Safe Harbor Statement

Certain statements in this press release, including statements regarding future demand for our products, our ability to generate business in the current economic climate, our ability to expand our market share in our current industries and into new growth areas, the effects of the Chinese government's stimulus plan on our businesses and our future financial performance, 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 Wuhan General Group (China), Inc. Consolidated Statements of Income For the three months and years ended December 31, 2008 and 2007 (Stated in US Dollars) 3 months 3 months Year Year ended ended ended ended December 31, December 31, December 31, December 31, 2008 2007 2008 2007 Sales 28,052,142 22,160,736 118,633,833 82,503,510 Cost of Sales 21,510,148 16,917,878 84,442,278 57,429,085 Gross Profit 6,541,994 5,242,858 34,191,555 25,074,425 Operating Expenses Selling 1,216,615 108,395 3,346,586 1,741,539 General & Administrative 1,151,132 2,315,419 7,753,163 5,615,320 Warranty (177,589) 803,274 469,586 1,317,794 Total Operating Expense 2,190,158 3,227,088 11,569,335 8,674,653 Operating Income 4,351,836 2,015,770 22,622,220 16,399,772 Other Income (Expenses) Other Income 986,678 42,097 986,678 42,097 Interest Income (552,101) 194,975 84,525 303,898 Other Expenses 1,293,097 590,786 (199,621) (554,484) Interest Expense 531,296 (564,719) (1,990,477) (1,321,414) Stock Penalty for late listing on NASDAQ (5,355,233) -- (5,355,233) -- Total Other Income (Loss) & Expense (3,096,263) 263,139 (6,474,128) (1,529,903) Earnings before Tax 1,255,573 2,278,910 16,148,092 14,869,869 Income Tax -- -- -- -- Net Income 1,255,573 2,278,910 16,148,092 14,869,869 Preferred Dividends Declared 193,813 299,625 927,102 1,072,904 Series A Constructive Preferred Dividend -- -- -- 10,501,982 Series B Constructive Preferred Dividend 1,005,114 -- 4,032,656 -- Income Available to Common Stockholders 56,646 1,979,285 11,188,335 3,294,983 Earnings Per Share Basic $0.00 $0.10 $0.49 $0.17 Diluted $0.00 $0.05 $0.26 $0.10 Weighted Average Shares Outstanding Basic 24,384,785 19,712,446 22,675,532 19,712,446 Diluted 46,275,771 49,122,052 47,085,048 33,633,831 Wuhan General Group (China), Inc. Consolidated Balance Sheets At December 31, 2008 and 2007 (Stated in US Dollars) At At ASSETS December 31, December 31, Current Assets 2008 2007 Cash $2,817,503 $992,965 Restricted Cash 13,180,640 9,108,866 Notes Receivable -- 1,865,491 Accounts Receivable 41,486,856 31,875,411 Other Receivable 1,719,083 1,977,646 Inventory 8,395,467 7,895,960 Advances to Suppliers 20,274,473 12,743,130 Advances to Employees 189,516 138,420 Prepaid Expenses 92,279 -- Prepaid Taxes 604,610 257,554 Total Current Assets 88,760,427 66,855,443 Non - Current Assets Real Property Available for Sale 1,100,376 993,861 Property, Plant & Equipment, net 22,274,551 20,401,547 Land Use Rights, net 12,297,429 1,830,476 Construction in Progress 30,276,011 9,897,484 Intangible Assets, net 363,574 381,281 Total Assets $155,072,368 $100,360,092 Liabilities Current Liabilities Bank Loans & Notes 35,171,690 28,132,664 Accounts Payable 8,420,678 4,747,298 Taxes Payable 1,109,548 1,043,383 Other Payable 7,708,323 3,137,575 Dividend Payable 193,804 898,875 Accrued Liabilities 2,805,558 2,003,800 Customer Deposits 4,614,370 5,034,464 Total Current Liabilities 60,023,971 44,998,059 Long Term Liabilities Bank Loans and Notes 1,458,959 -- Total Liabilities 61,482,930 44,998,059 At At Stockholders' Equity December 31, December 31, 2008 2007 Preferred Stock - $0.0001 Par Value 50,000,000 Shares Authorized; 6,241,453 and 10,287,554 Shares of Series A Convertible Preferred Stock Issued & Outstanding at December 31, 2008 and 2007, respectively 624 1,029 Additional Paid in Capital - Preferred Stock 8,170,415 13,466,990 Additional Paid in Capital - Warrants 3,687,794 6,572,334 Additional Paid in Capital - Beneficial Conversion Feature 6,371,546 10,501,982 Preferred Stock - $0.0001 Par Value 50,000,000 Shares Authorized; 6,354,078 and 0 Shares of Series B Convertible Preferred Stock Issued & Outstanding at December 31, 2008 and 2007, respectively 635 -- Additional Paid in Capital - Preferred Stock 12,637,158 -- Additional Paid in Capital - Warrants 2,274,181 -- Additional Paid in Capital - Beneficial Conversion Feature 4,023,692 -- Common Stock - $0.0001 Par Value 100,000,000 Shares Authorized; 24,752,802 and 19,712,446 Shares Issued & Outstanding at December 31, 2008 and 2007, respectively 2,475 1,971 Additional Paid in Capital 28,436,835 12,349,602 Statutory Reserve 3,271,511 633,771 Retained Earnings 17,034,243 8,483,648 Accumulated Other Comprehensive Income 7,678,329 3,350,706 Total Stockholders' Equity 93,589,438 55,362,033 Total Liabilities & Stockholders' Equity $155,072,368 $100,360,092 Wuhan General Group (China), Inc. Consolidated Statements of Cash Flows For the years ended December 31, 2008 and 2007 (Stated in US Dollars) 12 months 12 months ended ended December 31, December 31, 2008 2007 Cash Flow from Operating Activities Cash Received from Customers $110,726,349 $73,532,077 Cash Paid to Suppliers & Employees (93,031,049) (83,510,411) Interest Received 84,525 157,072 Interest Paid (1,990,477) (1,321,415) Miscellaneous Receipts 986,678 42,096 Cash Sourced/(Used) in Operating Activities 16,776,026 (11,100,581) Cash Flows from Investing Activities Cash Invested in Restricted Time Deposits (4,071,775) (8,726,336) Repayment of/(Investment in) Notes -- (1,312,344) Payments for Purchases and Construction of Plant & Equipment (24,408,675) (14,962,822) Purchases of Land Use Rights (10,606,926) (127,793) Payments for Purchases of Intangible Assets -- (59,920) Cash Used/(Sourced) in Investing Activities (39,087,376) (25,189,215) Cash Flows from Financing Activities Proceeds from Issuance of Preferred Stock 13,081,477 20,040,353 Proceeds from Bank Loans -- 4,681,749 (Repayment of Bank Loans) (5,096,172) -- Proceeds from Issuance of Notes 13,594,158 9,905,857 Repayment of Notes -- -- Dividends Paid (1,632,173) (174,029) Cash Sourced/(Used) in Financing Activities 19,947,290 34,453,930 Net Increase/(Decrease) in Cash & Cash Equivalents for the Period (2,364,059) (1,835,866) Effect of Currency Translation 4,188,598 2,580,588 Cash & Cash Equivalents at Beginning of Period 992,965 248,243 Cash & Cash Equivalents at End of Period $2,817,503 $992,965 Non-Cash Investing Activity: Contribution of Capital Equipment -- -- Value of property surrendered by Hubei Dilong -- 993,861 Non-Cash Financing Activity: Constructive Preferred Stock Dividend 4,032,656 10,501,982 12 months 12 months ended ended December 31, December 31, 2008 2007 Net Income $16,148,092 $14,869,869 Adjustments to Reconcile Net Income to Net Cash Provided by / (Used in) Operating Activities : Reclassification of prior period stock compensation from liability to equity 14,479 -- Stock Penalties 5,355,233 -- Stock Compensation 227,603 14,479 Amortization 190,192 90,260 Depreciation 2,157,143 814,050 Decrease/(Increase) in Notes Receivable 1,865,491 (11,141) Decrease/(Increase) in Accounts Receivable (9,611,445) (19,387,329) Decrease/(Increase) in Other Receivable 258,563 6,833,053 Decrease/(Increase) in Inventory (499,507) (3,351,299) Decrease/(Increase) in Advances to Suppliers (7,531,343) (9,996,805) Decrease/(Increase) in Advances to Employees (51,096) 117,416 Decrease/(Increase) in Prepaid Expenses (92,279) -- Decrease/(Increase) in Prepaid Taxes (347,057) (253,665) Increase/(Decrease) in Accounts Payable 3,673,380 (3,784,553) Increase/(Decrease) in Taxes Payable 66,165 (680,162) Increase/(Decrease) in Other Payable 4,570,748 (1,457,064) Increase/(Decrease) in Accrued Liabilities 801,759 1,635,152 Increase/(Decrease) in Customer Deposits (420,094) 3,447,158 Total of all adjustments 627,934 (25,970,450) Net Cash Provided by Operating Activities $16,776,026 $(11,100,581) For more information, please contact: Wuhan General Group (China), Inc. Mr. Haiming Liu, CFO Tel: +86-27-5970-0069 Email: haiming.liu@wuhangeneral.com CCG Investor Relations Inc. Mr. Crocker Coulson, President Tel: +1-646-213-1915 (New York) Email: crocker.coulson@ccgir.com Mr. Graham Reed, Financial Writer Tel: +1-646-213-1907 Email: graham.reed@ccgir.com Web: http://www.ccgirasia.com

SOURCE Wuhan General Group (China), Inc.

Source: PR Newswire

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