EXTON, PA--(Marketwire - Jul 29, 2011) - WPCS International Incorporated (
For the fourth quarter, the company incurred goodwill and other intangible asset impairment charges of $27.5 million, as the company determined that certain intangible assets exceeded their fair value. The company emphasized that these impairment charges are non-cash charges and will have no impact on the company's operations or cash flow. Including the non-cash charges, for the fourth quarter ended April 30, 2011, WPCS reported a net loss of approximately $27.0 million or $3.89 per diluted share. This compares to net income of $12,000 or $0.00 per diluted share for the same period a year ago.
For the fiscal year ended April 30, 2011, WPCS reported revenue of $96.8 million compared to $105.8 million for the same period a year ago. For the fiscal year ended April 30, 2011, WPCS reported a net loss of approximately $36.8 million or $5.30 per diluted share which includes goodwill and other intangible asset impairment charges of $34.4 million and the one-time charges of $624,000 associated with seeking strategic alternatives including the possible sale of the company. This compares to net income of $854,000 or $0.12 per diluted share for the same period a year ago.
On June 16, 2011, Multiband Corporation, traded under the NASDAQ symbol MBND, announced that it entered into a non-binding letter of intent to acquire WPCS at $3.20 per share in cash. In addition, Multiband Corporation has acquired approximately 10% of the outstanding shares of WPCS in an open market transaction and deposited $1 million in escrow which will be forfeited to WPCS unless WPCS materially breaches the definitive agreement to be acquired or if another bidder tops the existing bid. The proposed merger is subject to customary due diligence and the negotiation of a definitive merger document as well as WPCS shareholder approval. The transaction is expected to close by the end of the third quarter of calendar year 2011.
Andrew Hidalgo, CEO of WPCS, commented, "Although fiscal year 2011 was a difficult year for WPCS, it is behind us and we look forward to a profitable fiscal year 2012. Of the $36.8 million in net income loss for the year, $34.4 million was due to goodwill and other intangible asset impairment charges that are non-cash and that have no impact on our operations or cash flow. The remaining loss was primarily related to cost overruns on certain projects and the cost of the strategic alternatives effort as has been reported throughout the year. WPCS maintains a healthy balance sheet with approximately $4.9 million in cash and $14.8 million in working capital as of April 30, 2011. Due to the relative strength of our balance sheet, the company expects to be able to finance our growth internally and meet our short term liquidity needs. As of April 30, 2011, the backlog of official projects awarded stands at $45 million and our bid list is at $147 million which gives us an optimistic outlook for the quarters ahead. We are also expecting to generate a positive EBITDA for the first quarter of fiscal year 2012 which is ending on July 31, 2011. We define EBITDA as earnings before interest, taxes, acquisition-related contingent earn-out costs, one-time charges related to seeking strategic alternatives and depreciation and amortization."
As a reminder, there will be an investor conference call at 5:00 pm ET today. To participate on the conference call, please dial 888-299-4099 for calls within the U.S. or 302-709-8337 for calls from international locations. Upon reaching the operator, verbally transmit the participant code VH31453. When the overview concludes, your questions can be asked by pressing *1 and your questions can be removed from the queue by pressing the number sign. Replays of the conference call will be available for a period of five days by dialing 402-220-2946 and entering 31453 # as the program identification number.
The attached press release references a financial measure, EBITDA that is not in accordance with GAAP. Management uses EBITDA to evaluate the Company's operating and financial performance in light of business objectives, for planning purposes, when publicly providing our business outlook and to facilitate period-to-period comparisons. WPCS believes that this measure is useful to investors because it enhances investors' ability to review the Company's business from the same perspective as our management and to facilitate comparisons of this period's results with prior periods. Non-GAAP measures are used by some investors when assessing the ongoing operating and financial performance of our Company. These financial measures are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. The presentation of the additional information should not be considered a substitute for net income or net income per diluted share prepared in accordance with GAAP. The primary material limitations associated with the use of non-GAAP measures as compared to the most directly comparable GAAP financial measures are (i) they may not be comparable to similarly titled measures used by other companies in our industry, and (ii) they exclude financial information that some may consider important in evaluating our performance.
About WPCS International Incorporated:
WPCS is a design-build engineering company that focuses on the implementation requirements of communications infrastructure. The company provides its engineering capabilities including wireless communication, specialty construction and electrical power to the public services, healthcare, energy and corporate enterprise markets worldwide. For more information, please visit www.wpcs.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.
| WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES | |||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||
| Three Months Ended | Years Ended | ||||||||||||||||||
| April 30, | April 30, | ||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||||||
| REVENUE | $ | 17,826,423 | $ | 29,211,709 | $ | 96,836,728 | $ | 105,769,432 | |||||||||||
| COSTS AND EXPENSES: | |||||||||||||||||||
| Cost of revenue | 15,787,950 | 22,458,658 | 78,910,135 | 77,930,126 | |||||||||||||||
| Selling, general and administrative expenses | 7,263,284 | 5,653,229 | 24,920,538 | 23,454,081 | |||||||||||||||
| Depreciation and amortization | 660,303 | 759,034 | 2,754,961 | 2,729,882 | |||||||||||||||
| Goodwill and intangible assets impairment | 27,470,285 | - | 34,370,285 | - | |||||||||||||||
| Change in fair value of acquisition-related contingent consideration | 39,141 | 125,092 | 217,571 | 125,092 | |||||||||||||||
| Total costs and expenses | 51,220,963 | 28,996,013 | 141,173,490 | 104,239,181 | |||||||||||||||
| OPERATING (LOSS) INCOME | (33,394,540 | ) | 215,696 | (44,336,762 | ) | 1,530,251 | |||||||||||||
| OTHER EXPENSE (INCOME): | |||||||||||||||||||
| Interest expense | 245,933 | 203,834 | 655,944 | 397,765 | |||||||||||||||
| Interest income | (12,560 | ) | (6,497 | ) | (48,364 | ) | (15,849 | ) | |||||||||||
| (LOSS) INCOME BEFORE INCOME TAX (BENEFIT) PROVISION | (33,627,913 | ) | 18,359 | (44,944,342 | ) | 1,148,335 | |||||||||||||
| Income tax (benefit) provision | (6,347,893 | ) | 95,792 | (7,938,430 | ) | 576,226 | |||||||||||||
| CONSOLIDATED NET (LOSS) INCOME | (27,280,020 | ) | (77,433 | ) | (37,005,912 | ) | 572,109 | ||||||||||||
| Net loss attributable to noncontrolling interest | (250,532 | ) | (89,304 | ) | (174,491 | ) | (282,292 | ) | |||||||||||
| NET (LOSS) INCOME ATTRIBUTABLE TO WPCS | $ | (27,029,488 | ) | 11,871 | (36,831,421 | ) | $ | 854,401 | |||||||||||
| Basic net (loss) income per common share attributable to WPCS | $ | (3.89 | ) | $ | 0.00 | $ | (5.30 | ) | $ | 0.12 | |||||||||
| Diluted net (loss) income per common share attributable to WPCS | $ | (3.89 | ) | $ | 0.00 | $ | (5.30 | ) | $ | 0.12 | |||||||||
| Basic weighted average number of common shares outstanding | 6,954,766 | 6,952,800 | 6,954,766 | 6,945,280 | |||||||||||||||
| Diluted weighted average number of common shares outstanding | 6,954,766 | 6,983,970 | 6,954,766 | 6,970,065 | |||||||||||||||
| WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES | |||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||
| April 30, | April 30, | ||||||||
| ASSETS | 2011 | 2010 | |||||||
| CURRENT ASSETS: | |||||||||
| Cash and cash equivalents | $ | 4,879,106 | $ | 5,584,309 | |||||
| Accounts receivable, net of allowance of $1,662,168 and $206,617 at April 30, 2011 and 2010, respectively | 22,474,024 | 26,011,955 | |||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts | 4,669,012 | 8,859,056 | |||||||
| Inventory | 1,972,905 | 2,720,052 | |||||||
| Prepaid expenses and other current assets | 1,413,151 | 848,626 | |||||||
| Prepaid income taxes | 173,700 | - | |||||||
| Income taxes receivable | 1,166,225 | - | |||||||
| Deferred tax assets | 2,621,329 | 666,000 | |||||||
| Total current assets | 39,369,452 | 44,689,998 | |||||||
| PROPERTY AND EQUIPMENT, net | 6,035,353 | 6,468,787 | |||||||
| OTHER INTANGIBLE ASSETS, net | 803,171 | 2,112,058 | |||||||
| GOODWILL | 2,044,856 | 34,919,384 | |||||||
| DEFERRED TAX ASSETS | 2,675,511 | - | |||||||
| OTHER ASSETS | 134,654 | 162,858 | |||||||
| Total assets | $ | 51,062,997 | $ | 88,353,085 | |||||
| WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES | |||||||
| CONSOLIDATED BALANCE SHEETS (continued) | |||||||
| LIABILITIES AND EQUITY | April 30, | April 30, | |||||
| 2011 | 2010 | ||||||
| CURRENT LIABILITIES: | |||||||
| Current portion of loans payable | $ | 35,724 | $ | 63,683 | |||
| Income taxes payable | - | 107,417 | |||||
| Borrowings under line of credit | 7,000,000 | - | |||||
| Current portion of capital lease obligations | 54,496 | 81,950 | |||||
| Accounts payable and accrued expenses | 10,249,503 | 10,962,016 | |||||
| Billings in excess of costs and estimated earnings on uncompleted contracts | 2,039,117 | 1,853,131 | |||||
| Deferred revenue | 792,414 | 503,502 | |||||
| Due joint venture partner | 3,415,641 | 3,288,294 | |||||
| Acquisition-related contingent consideration | 1,008,200 | 851,516 | |||||
| Total current liabilities | 24,595,095 | 17,711,509 | |||||
| Acquisition-related contingent consideration, net of current portion | - | 726,677 | |||||
| Borrowings under line of credit | - | 5,626,056 | |||||
| Loans payable, net of current portion | 10,554 | 46,364 | |||||
| Capital lease obligations, net of current portion | 15,465 | 69,961 | |||||
| Deferred tax liabilities | - | 2,018,462 | |||||
| Total liabilities | 24,621,114 | 26,199,029 | |||||
| COMMITMENTS AND CONTINGENCIES | |||||||
| EQUITY: | |||||||
| Preferred stock - $0.0001 par value, 5,000,000 shares authorized, none issued | - | - | |||||
| Common stock - $0.0001 par value, 25,000,000 shares authorized, 6,954,766 shares issued and outstanding at April 30, 2011 and 2010 | 695 | 695 | |||||
| Additional paid-in capital | 50,433,626 | 50,346,655 | |||||
| Retained earnings (deficit) | (26,595,831 | ) | 10,235,590 | ||||
| Accumulated other comprehensive income on foreign currency translation, net of tax effects of $185,060 and $133,648 at April 30, 2011 and 2010, respectively | 1,564,965 | 398,116 | |||||
| Total WPCS shareholders' equity | 25,403,455 | 60,981,056 | |||||
| Noncontrolling interest | 1,038,428 | 1,173,000 | |||||
| Total equity | 26,441,883 | 62,154,056 | |||||
| Total liabilities and equity | $ | 51,062,997 | $ | 88,353,085 | |||
Contact Information:
CONTACT:
WPCS International Incorporated
610-903-0400 x101