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Telestone Technologies Corporation Ltd. Announces First Quarter 2009 Results

Posted on: Thursday, 14 May 2009, 22:55 CDT

BEIJING, May 14 /PRNewswire-Asia/ -- Telestone Technologies Corporation Ltd. ("Telestone" or the "Company") (Nasdaq: TSTC), a leading developer and provider of wireless communication coverage solutions based in the People's Republic of China, today announced its unaudited financial results for the first quarter of 2009.

First Quarter Highlights: -- Revenue for the quarter of US $7.89 million, an increase of 21.68% from the first quarter of 2008. -- Gross margins of 59.52%, compared to 48.61% in Q1 2008. -- Gross profit for the Q1 is US $4.7 million, increased by 49.02% compared to Q1 2008. -- Net income of US $1.1 million, an increase of 37.04% from Q1 2008.

"An investment in the construction of the 3G system of approximately $ 60 billion will be made in 3 years, under this background, the major telecom operators in China will accomplish the commercial launch of new 3G networks on the world telecommunication day, May 17,2009. So far we have been making full use of this opportunity. It has contributed to our revenues' increase by 21.68% as compared to the same period in 2008. We will enhance our competitive advantages in the future and I believe it will lead to continuous impressive progress," commented Mr. Han Daqing, Chairman and Chief Executive Officer of Telestone.

Our major achievements in the first quarter are as follows: 1. We standardized internal code of part products and issued product list for our proprietary WFDSTM products. In total, 43 products are categorized within three categories 2. We entered into a strategic cooperation with Huawei Technologies Corp., formed a solid foundation for future market expansion. 3. We won listing on the third edition of the independent innovative products catalog organized by the Beijing municipal government, This would increase future cooperation with the Chinese government and our market share. 4. We were granted a RMB 45,000,000 (about $6,592,500) bank credit facility, which will increase liquidity and facilitate business expansion opportunities. First Quarter Financial Results

Revenue

Telestone reported quarterly revenue of US $7.89 million, up 21.68% compared to US$6.48 million in Q1 2008, largely due to the increase of construction projects from our major customers with the 3G launching project in China.

Gross Profit and Gross Profit Margin

Our quarterly gross profit was $4.7 million represented a 49.02 % increase compared to Q1 2008. Our gross profit margin for Q1 was 59.52%, compared to 48.61% for Q1 2008. The increase is mainly attributable to the increases in service revenue which is resulted from two factors: the increasing quantity of services and the increase in service prices offered by our major customers.

Net Income

Due to the increase of the gross profit, for Q1 2009, our net income was $1.14million, up 37.04%, compared to Q1 2008.

BUSINESS OUTLOOK

We believe the fact that Chinese telecom restructuring and the issuance of 3G licenses in China with an investment in the construction of the 3G system of approximately $60 billion over the next three years, an average of approximately $20 billion per year, presents an excellent opportunity for our business development. With our advanced technologies, close relationships with the telecom operators in China and strong management team, we believe that we will continue to demonstrate increasingly impressive progress in the future.

Conference Call

Telestone's senior management team will then host a conference call and audio webcast at 8:00 am U.S. Eastern Time/5:00 am U.S. Pacific Time/8:00 pm Beijing time on May 15, 2009. The conference call will last for approximately one hour.

The Dial-in information is: U.S. Participants: +1-800-860-2442 International Participants: +1-412-858-4600 Passcode for all: Telestone

A live audio webcast of the conference call will also be available through the following link: The event's URL is: http://www.visualwebcaster.com/event.asp?id=58346

A replay will be available after the end of the call Until: May 25, 2009 AM

All participants please dial: U.S. Participants: +1-877-344-7529 (toll free) International Participants: +1-412-317-0088 Passcode: 430208

About Telestone Technologies Corporation

Telestone provides wireless communications coverage solutions primarily in the PRC. These solutions include products such as repeaters, antennas and radio accessories. Telestone also provides services that include project design, project management, installation, maintenance and other after-sales services. Telestone currently has approximately 800 employees. For more information please visit http://www.telestone.com .

Safe Harbor Statement

Statements about the Company's future expectations, including future revenue and earnings and all other statements in this press release, other than historical facts, are "forward-looking" statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties and are subject to change at any time. The Company's actual results could differ materially from expected results. In reflecting subsequent events or circumstances, the Company undertakes no obligation to update forward-looking statements.

For further information please contact: Telestone Technologies Corporation Ltd. Nick Li Secretary of the Board Tel: +86-10-8367-0088 x1002 Email: nickl@telestone.com Ya Ding Tel: +86-10-8367-0088 x1231 Email: dingxiaoya@telestone.com Jean Wen Tel: +86-10-8367-0088 x1232 Email: wenjing@telestone.com Dan Shang Tel: +86-10-8367-0088 x1233 Email: zongbushangdan@telestone.com Appendix: Financial Statements of Telestone Technology Corporation Ltd. Telestone Technologies Corporation Condensed Consolidated Statements of Operations and Other Comprehensive Income For the 3 months ended March 31, 2009 and 2008 (Dollars in thousands except share data and per share amounts) (Unaudited) Three months ended March 31, 2009 2008 US$'000 US$'000 Operating revenues: Net sales of equipment 3,263 3,930 Service income 4,633 2,559 Total operating revenues 7,896 6,489 Cost of operating revenues: Cost of net sales 1,898 2,100 Cost of service 1,298 1,235 Total cost of operating revenues 3,196 3,335 Gross income 4,700 3,154 Operating expenses: Sales and marketing 2,181 1,515 General and administrative 843 674 Research and development 136 130 Depreciation and amortization 90 77 Total operating expenses 3,250 2,396 Operating income 1,450 758 Interest expense (41) (36) Other income, net 267 318 Income before income taxes 1,676 1,040 Income taxes (529) (203) Net income 1,147 837 Other comprehensive income Foreign currency translation adjustment 245 1,460 Comprehensive income 1,392 2,297 Earnings per share: Weighted average number of common stock outstanding Basic 10,404,550 10,404,550 Dilutive effect of warrants -- 81,366 Diluted 10,404,550 10,485,916 Net income per share of common stock Basic and diluted (US$) 0.11 0.08 Condensed Consolidated Balance Sheets As of March 31, 2009 and December 31, 2008 (Dollars in thousands except share data and per share amounts) (Unaudited) As of As of March 31, December 31, 2009 2008 ASSETS US$'000 US$'000 Current assets: Cash and cash equivalents 4,636 7,866 Accounts receivable, net of allowance 68,002 62,136 Due from related parties 2,004 1,826 Inventories 10,313 7,843 Prepayment 1,484 2,347 Other current assets 1,327 1,352 Total current assets 87,766 83,370 Goodwill 3,119 3,119 Property, plant and equipment, net 1,174 1,050 4,293 4,169 Total assets 92,059 87,539 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term bank loans 1,758 2,918 Accounts payable - Trade 14,685 11,776 Customer deposits for sales of equipment 777 739 Due to related parties 1,711 1,673 Taxes payable 7,623 6,805 Accrued expenses and other accrued liabilities 11,682 11,197 Total current liabilities 38,236 35,108 Commitments and contingencies -- -- Stockholders' equity: Preferred stock, US$0.001 par value, 10,000,000 shares authorized, no shares issued -- -- Common stock and paid-in-capital, US$0.001 par value: Authorized - 100,000,000 shares as of March 31, 2009 and December 31, 2008 -- -- Issued and outstanding - 10,404,550 shares as of March 31, 2009 and December 31, 2008 11 11 Additional paid-in capital 18,989 18,989 Dedicated reserves 3,978 3,787 Other comprehensive income 5,818 5,573 Retained earnings 25,027 24,071 Total stockholders' equity 53,823 52,431 Total liabilities and stockholders' equity 92,059 87,539 Condensed Consolidated Statements of Changes in Stockholders' Equity For the 3 months ended March 31, 2009 (Dollars in thousands except share data and per share amounts) Common stock issued Other Additional compre- Number paid-in Dedicated hensive Retained of shares Amount capital reserves income earnings Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Balance at January 1, 2008 10,404,550 11 18,989 3,199 3,017 17,610 42,826 Net income -- -- -- -- -- 7,049 7,049 Foreign currency translation adjustment -- -- -- -- 2,556 -- 2,556 Transfer to dedicated reserves -- -- -- 588 -- (588) -- Balance at December 31, 2008 10,404,550 11 18,989 3,787 5,573 24,071 52,431 Balance at January 1, 2009 Net income -- -- -- -- -- 1,147 1,147 Foreign currency translation adjustment -- -- -- -- 245 -- 245 Transfer to dedicated reserves -- -- -- 191 -- (191) -- Balance at March 31, 2009 (unaudited) 10,404,550 11 18,989 3,978 5,818 25,027 53,823 Condensed Consolidated Statements of Cash Flows For the 3 months ended March 31, 2009 and 2008 (Dollars in thousands except share data and per share amounts) (Unaudited) Three months ended March 31, 2009 2008 US$'000 US$'000 Cash flows from operating activities Net income 1,147 837 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 90 77 Allowance for doubtful accounts 307 74 Changes in assets and liabilities: Accounts receivable (5,917) (1,811) Due from related parties (170) - Inventories (2,438) 858 Prepayment 873 (166) Other current assets 30 (39) Accounts payable 2,860 129 Customer deposits for sales of equipment 35 109 Due to related parties 31 (7) Taxes payable 789 198 Accrued expenses and other accrued liabilities 440 (683) Net cash used in operating activities (1,923) (424) Cash flows from investing activities Purchase of property, plant and equipment (203) (28) Net cash used in investing activities (203) (28) Cash flows from financing activities Repayment of short-term bank loans (1,172) -- Repayment of long-term loan -- (7) Net cash used in financing activities (1,172) (7) Net decrease in cash and cash equivalents (3,298) (459) Cash and cash equivalents, beginning of the period 7,866 5,473 Effect on exchange rate changes 68 (96) Cash and cash equivalents, end of the period 4,636 4,918 Supplemental disclosure of cash flows information Interest received 7 10 Interest paid (32) (36) Tax paid (1) (5)

SOURCE Telestone Technologies Corporation

Source: PR Newswire

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