SOURCE: Telestone Technologies Corporation

March 21, 2007 08:25 ET

Telestone Technologies Announces Fiscal 2006 Results

BEIJING -- (MARKET WIRE) -- March 21, 2007 -- Telestone Technologies Corporation (NASDAQ: TSTC)

Fiscal 2006 Highlights

--  Revenue increase 24.69% to $21.7 Million
--  Gross profit increase 30.01% to $11 Million
--  Gross margin up to 50.75%
--  Net income increase 23.67% to $4.6 Million
--  Diluted Earnings Per Share $0.53
    
Telestone Technologies Corporation (NASDAQ: TSTC), a leading provider of wireless communication coverage solutions primarily in China announced financial results for their fourth quarter and fiscal year ended December 31, 2006.

Revenue for the fourth quarter increased 35.2% to $7.4 million compared to $5.5 million in the prior year period. Net income increased 12.2% to $1.6 million, $.19 per share (diluted) compared to $1.4 million, $.17 per share (diluted) in the prior year period. Gross margin for the fourth quarter was 58% compared to 40% in the prior year.

For the 2006 fiscal year, total revenue increased 24.69% to $21.7 million from $17.4 million in 2005. Product sales increased 33.37% as compared to the corresponding period last year. Revenues from China Mobile, China Telecom, and China Netcom increased 112.93%, 68.761%, and 44.11%, respectively from the previous year. Our gross margin for the year was 50.75% compared to 48.67% in the prior year period. Net income for 2006 fiscal year was $4.6 million or $0.53 per share (diluted) as compared to $3.7 million or $0.43 per share (diluted) for 2005. Net income for 2006 increased 23.67% compared to the same period of last year. This was the first year that Telestone paid income taxes to the PRC (People's Republic of China) at a rate of 12%.

General and administrative expenses decreased 18.2% for 2006 fiscal year to $1,674,000 as compared to $2,048,000, in the prior year. The major reasons for the decrease in general and administrative expenses were due to our efforts to optimize the structure of the Company, improve working efficiency and reduction on daily expenses.

Sales and marketing expenses increased 3.9% for 2006 fiscal year to $2,917,000 as compared to $2,806,000 in the prior year. The increase in sales and marketing expenses originated from the expense in market development and the building of the new branches and other related fees. During fiscal year 2006, we continuously entered into overseas markets, such as Vietnam, Indonesia and India. We believe the investment will improve our Company's profitability.

Research and development expenses increased 38% for 2006 fiscal year to $605,000, as compared to $438,000, in the prior year. The main reason for this increase is that in fiscal year 2006 we put more investment in research and development to maintain our competitive edge.

Management of the Company currently anticipates 2007 fiscal year to be specifically above 30% growth in revenue and net earnings after taxes, as compared to 2006. This is without the inclusion of revenue generated from the upcoming 3G deployments in China. Management does expect a positive impact in revenue upon the arrival 3G, but at this time they are not able to predict the specific impact for 2007 due to the uncertainty of when the licenses will be issued to the Chinese mobile operators during the year. "The management team is pleased with the financial results of our company for 2006 fiscal year. We insist that we will achieve our planned business targets in fiscal 2007.

Telestone Technologies Corporation
Condensed Consolidated Statements of Operation



                                                      Years ended December
                                                              31,
                                                      --------------------
                                                        2006       2005
                                                       US$’000    US$’000
Operating revenues:

  Net sales of equipment                                 16,769     12,573
  Service income                                          4,939      4,837
                                                      ---------  ---------

                                                         21,708     17,410
                                                      ---------  ---------

Operating expenses:

  Equipment and services                                 10,691      8,936
  Sales and marketing                                     2,917      2,806
  General and administrative                              1,674      2,048
  Research and development                                  605        438
  Depreciation and amortization                             241        209
                                                      ---------  ---------

Total operating expenses                                 16,128     14,437
                                                      ---------  ---------

Operating income                                          5,580      2,973
Interest expense                                            (55)       (26)
Other income, net                                           442        784
                                                      ---------  ---------

Net income                                                5,967      3,731

Taxation                                                 (1,353)        --
                                                      ---------  ---------

                                                          4,614      3,731
                                                      ---------  ---------

Other comprehensive income
Foreign currency translation adjustment                     650        365
                                                      ---------  ---------

                                                          5,264      4,096
                                                      =========  =========

Earnings per share:

Weighted average number of shares outstanding

Basic                                                 8,682,736  8,498,681
                                                      =========  =========

Diluted                                               8,735,615  8,654,277
                                                      =========  =========

Net income per share of common stock

                                                      US$        US$
Basic:

  Net income                                               0.53       0.44
                                                      =========  =========

Diluted:

  Net income                                               0.53       0.43
                                                      =========  =========


Telestone Technologies Corporation
Condensed Consolidated Balance Sheets

                                                                  As of
                                                              December 31,
                                                              -------------
                                                              2006   2005
                                                              US$’0- US$’0-
ASSETS                                                          00     00

Current assets:
 Cash and cash equivalents                                     3,380  3,605
 Accounts receivable (net of provision of US$2,923,000; 2005:
  net of provision of US$2,540,000)                           29,777 22,530
 Due from related parties                                      1,409  1,322
 Inventories - Finished goods                                  5,048  2,287
 Prepayment                                                      315    535
 Other current assets                                            373    240
                                                              ------ ------

 Total current assets                                         40,302 30,519

Property, plant and equipment, net                               821  1,031
                                                              ------ ------

Total assets                                                  41,123 31,550
                                                              ====== ======

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

 Short-term bank loan                                          1,279     --
 Accounts payable - Trade                                      6,314  4,223
 Customer deposits for sales of equipment                         20      4
 Due to related parties                                        2,001  2,133
 Taxes payable                                                 2,571  5,556
 Accrued expenses and other accrued liabilities                4,668  1,703
                                                              ------ ------

 Total current liabilities                                    16,853 13,619
                                                              ------ ------

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 December 31,
  2006                                                            --     --
 Issued and outstanding - 8,935,106 shares as of
  December 31, 2006 and 8,577,106 shares as of
  December 31, 2005                                                9      8
Dedicated reserves                                             2,619  2,131
Additional paid-in capital                                     8,475  7,401
Cumulative translation adjustments                             1,015    365
Retained earnings                                             12,152  8,026
                                                              ------ ------

 Total stockholders’ equity                                   24,270 17,931
                                                              ------ ------

Total liabilities and stockholders’ equity                    41,123 31,550
                                                              ====== ======


Condensed Consolidated Statements of Cash Flows

                                                              Years ended
                                                             December 31,
                                                            --------------
                                                             2006    2005
                                                             US$’    US$’
                                                             000     000
Cash flows from operating activities
Net income                                                   4,614   3,731
Adjustments to reconcile net income to net cash provided by
 operating activities:
  Depreciation and amortization                                240     209
  Provision for doubtful accounts                              383     861
  Profit on disposal of property, plant and equipment         (239)   (120)
  Exchange difference                                           66      60
Changes in assets and liabilities:
  Accounts receivable                                       (6,896) (3,070)
  Inventories, net                                          (2,686)    275
  Due from related parties                                     (44)    (75)
  Prepayment                                                   237    (438)
  Other current assets                                        (125)    304
  Accounts payable                                           1,953     176
  Due to director                                             (202)   (102)
  Customer deposits for sales of equipment                      16     (44)
  Taxes payable                                             (3,166) (1,046)
  Accrued expenses and other accrued liabilities             2,910     430
                                                            ------  ------

  Net cash (used in) provided by operating activities       (2,939)  1,151
                                                            ------  ------

Cash flows from investing activities

Purchase of property, plant and equipment                     (148)   (311)
Proceeds from disposal of property, plant and equipment        391      --
                                                            ------  ------

  Net cash (used in) provided by investing activities          243    (311)
                                                            ------  ------

Cash flows from financing activities

Borrowings of short-term debts                               1,279      --
Repayment of short-term debts                                   --    (620)
Proceeds from issuance of shares                             1,075   1,101
                                                            ------  ------

  Net cash provided by financing activities                  2,354     481
                                                            ------  ------

Net (decrease) increase in cash and cash equivalents          (342)  1,321
Cash and cash equivalents, beginning of year                 3,605   2,230
Exchange gain on cash and cash equivalents                     117      54
                                                            ------  ------

Cash and cash equivalents, end of year                       3,380   3,605
                                                            ======  ======
About Telestone Technologies Corporation

Telestone provides wireless communications coverage solutions primarily in the People's Republic of China. These solutions include products such as repeaters, antennas and radio accessories. In addition, the Company provides services that include project design, project management, installation, maintenance and other after-sales services. Telestone Technologies currently has approximately 556 employees. Additional information on the Company can be found at www.telestonecorp.com

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.

Contact Information


  • For additional information please contact:
    Telestone Technologies Corporation
    East West Network Group
    Mark Miller
    770-436-7429
    Email Contact