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China TransInfo Announces Second Quarter 2010 Results
Aug 13, 2010 (06:08 AM EDT)


BEIJING, Aug. 13 /PRNewswire-Asia-FirstCall/ -- China TransInfo Technology Corp., (Nasdaq: CTFO), ("China TransInfo" or "the Company"), a leading provider of public transportation information systems technology and comprehensive solutions in the People's Republic of China ("PRC"), today reported its unaudited financial results for the second quarter ended June 30, 2010.

    Second Quarter 2010 Highlights
    -- Revenue increased 151.1% year-over-year to $24.0 million
    -- Gross profit expanded 104.7% year-over-year to $9.6 million; gross
       margin was 39.9%, up 5.6 percentage points from the first quarter of
       2010
    -- Operating income grew 60.9% year-over-year to $4.6 million
    -- Adjusted net income increased 41.9% year-over-year to $4.1 million, or
       $0.16 per fully diluted share
    -- Majority-owned subsidiary, Beijing UNISITS Technology Corp. LTD
       ("UNISITS") was selected to design a highway management program in
       Chongqing, as part of the pioneer project for the National Highway
       Information Grid
    -- Launched the Company's Information and Control System for major
       commercial vehicles (the "IC System") at the World Expo in Shanghai
    -- Launched its Fleet Management Service business in Hunan Province

"After acquiring a majority stake in UNISITS, we have maintained our focus on further enhancing the synergies between the two companies and improving gross margin. We are delighted that both UNISITS and our legacy business enjoyed strong growth and improving margins due to an increasing number of higher margin contracts," commented by Mr. Shudong Xia, Chief Executive Officer of China TransInfo. "Meanwhile, we continued to enhance our position in the transportation information industry through our participation in the National Highway Information Grid and the debut of our IC System at the World Expo in Shanghai. The launch of our Fleet Management Service business in Hunan Province is a major milestone for us, and we expect it to begin contributing to our financial results in the fourth quarter of 2010."

Second Quarter 2010 Results

For the quarter ended June 30, 2010, revenue increased 151.1% to $24.0 million from $9.6 million in the comparable period of 2009. Revenue from products and applications in the transportation business sector was $22.6 million, or 93.9% of total revenue, as compared to $6.5 million, or 68.3% of total revenue, in the same period last year, primarily as a result of the UNISITS acquisition. For the second quarter, UNISITS contributed approximately $16.31 million of sales. The remainder of revenue was derived from the digital city, land & resources, and other business sectors.

The Company's gross profit increased 104.7% to $9.6 million in the second quarter of 2010, compared to $4.7 million in the same period of 2009. Gross margin improved 5.60 percentage points to 39.9% from 34.3% in the first quarter of 2010, though still lower than 48.9% in the same period of prior year. The decrease in gross margin resulted from the consolidation of UNISITS' financials into those of China TransInfo, since UNISITS' business involves more hardware components, which have much lower gross margins than do the products and services of the Company's legacy transportation business. However, in the second quarter, gross margin of UNISITS also improved to 29.7% from 25.4% in the first quarter, while that of legacy business hit a historical high of 61.3%.

Operating expenses were $5.0 million, as compared to $1.8 million in the second quarter of 2009. The increase was primarily due to the Company's expansion initiatives, enhanced research and development efforts as well as higher staffing and professional fees. Notably, the growth of selling expenses was well below the revenue growth rate. Selling expenses increased 48.4% to $0.5 million, or 1.9% of sales in the second quarter of 2010, from $0.3 million, or 3.2% of sales, during the same period of 2009. The decrease in selling expenses as a percentage of sales was primarily because the Company won many contracts from repeat customers due to its technology leadership and reputation, rather than through aggressive sales and marketing efforts.

Operating income increased 60.9% to $4.6 million, as compared to $2.8 million in the second quarter of 2009.

Other income was $0.7 million in the second quarter of 2010, compared to $0.1 million in the second quarter of 2009. The increase was due to subsidy income of $0.7 million in the second quarter of 2010 related to government high technology grants.

Net income attributable to the Company increased 28.9% to $3.6 million, or $0.14 per diluted share, as compared to $2.8 million, or $0.13 per diluted share, in the same period of 2009. Adjusted net income attributable to the Company, excluding non-cash stock based compensation expense and amortization expense of intangibles from acquisitions, increased 41.9% to $4.1 million, or $0.16 per diluted share, as compared to $2.9 million, or $0.13 per diluted share, in the comparable period of 2009. Weighted average diluted shares outstanding increased to 25.1 million shares, from 22.4 million shares in the second quarter of 2009.


         Table 1: CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

                  RECONCILIATION OF NON-GAAP FINANCIAL DATA

                                             For the three months ended
                                           June 30, 2010      June 30, 2009
                                                    Diluted            Diluted
                                        Net Income    EPS   Net Income   EPS
    Adjusted Amount                      4,073,296    0.16   2,870,742   0.13

    Adjustments
    Amortization of intangible assets
     from acquisitions (1)                  47,100    0.00       4,362   0.00
    Non-cash share based compensation      416,278    0.02      66,737   0.00
    Amount per consolidated statement of
     operations                          3,609,917    0.14   2,799,643   0.13


                                              For the six months ended
                                           June 30, 2010      June 30, 2009
                                                    Diluted            Diluted
                                        Net Income    EPS   Net Income   EPS
    Adjusted Amount                      6,293,896    0.26   4,383,448   0.20

    Adjustments
    Amortization of intangible assets
     from acquisitions (1)                  94,175    0.00       8,721   0.00
    Non-cash share based compensation      830,765    0.03     126,398   0.01
    Amount per consolidated statement of
     operations                          5,368,956    0.22   4,248,329   0.19

    (1) Amortizations of intangible assets from acquisitions for Q1 2010
         includes amortizations of intangible assets from acquisitions of
         China TranWiseway in 2008 and UNISITS in 2009

Six Months Results

Revenue for the six months ended June 30, 2010 increased 204.1% to $48.9 million, as compared to $16.1 million in the same period of 2009. Gross profit expanded 126.3% to $18.1 million from $8.0 million a year ago. Operating income grew 91.6% to $8.2 million from $4.3 million in the first six months of 2009. Net income attributable to the Company increased 26.4% to $5.4 million, or $0.22 per diluted share, as compared to net income of $4.2 million, or $0.19 per diluted share, in the first six months of 2009. Adjusted net income attributable to the Company excluding non-cash expenses increased 43.6% to $6.3 million, or $0.26 per diluted share, as compared to $4.4 million, or $0.20 per fully diluted share, in the first six months of 2009. Weighted average fully diluted shares outstanding increased to 24.1 million shares from 22.4 million shares in the first six months of 2009.

Financial Condition

As of June 30, 2010, cash and cash equivalents totaled $25.2 million, compared to $27.4 million as of December 31, 2009. Working capital increased to $62.5 million, compared to $44.4 million as of December 31, 2009. Stockholders' equity was $95.4 million, compared to $77.8 million as of December 31, 2009. Cash used in operating activities was $11.6 million, primarily the result of an increase in accounts receivable due to increased sales, seasonally slow collections, and an increase in other receivables and certain prepaid expenses. The Company believes these are all seasonal factors and expects cash flow from operations to improve in the second half of 2010.

Business Outlook

"There are vast business opportunities available in China's transportation information industry, due in large part to the government's emphasis on leveraging technology to manage the country's overwhelming traffic flow. The acquisition of UNISITS further strengthens our leading position in the Intelligent Transportation Systems (ITS) market and we look forward to increasing penetration in the highway segment while consolidating our foothold in the urban transportation market," commented Mr. Xia. "Our new fleet management business represents a largely untapped commercial market that enjoys strong support from the government. We believe we are well positioned to emerge as a major player in this evolving market."

For fiscal 2010, the Company reaffirms its previous guidance for revenue of approximately $120 million and adjusted net income of approximately $18 million. Historically, the Company sees lower sales during the first half than the second half of the year due to governmental seasonal budgeting activities.

Conference Call

The Company will host a conference call on Friday, August 13, 2010 at 8:00 a.m. Eastern Time to discuss its financial results for the second quarter ended June 30, 2010.

To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (877) 406-6165. International callers should dial (706) 902-4263. When prompted by the operator, enter conference pass code 895 061 40.

A replay will be available for 14 days starting on Friday, August 13, 2010 at 9:00 a.m. Eastern Time and can be accessed by dialing (800) 642-1687. International callers should dial (706) 645-9291. When prompted, enter conference pass code 895 061 40.

Use of Non-GAAP Financial Information

GAAP results for the three and six months ended June 30, 2010 and 2009 include non-cash share based compensation and amortization of intangible assets from acquisitions. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information, which are adjusted net income and adjusted earnings per share, excluding the impact of these items in this release. 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. The additional adjusted information is not meant to be considered in isolation or as a substitute for GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies. Management believes that these adjusted financial measures are useful to investors because they exclude non-cash expenses that management excludes when it internally evaluates the performance of the Company's business and makes operating decisions, including internal budgeting, and performance measurement, as these measures provide a consistent method of comparison to historical periods. As a result, the provision of these adjusted measures allows investors to evaluate the Company's performance using the same methodology and information as that used by the Company's management. Moreover, management believes that these adjusted measures reflect the essential operating activities of the Company. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the adjusted financial measure. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded. A reconciliation of adjustments to GAAP results appears in Table 1 in this release.

About China TransInfo

China TransInfo, through its affiliate, China TransInfo Technology Group Co., Ltd., (the "Group Company") and the Group Company's PRC operating subsidiaries, is primarily focused on providing transportation information services and comprehensive solutions based on Geographic Information System (GIS) technologies. The Company aims to become the largest transportation information products and comprehensive solutions provider, as well as the largest real time transportation information platform operator and provider in China. In addition, the Company is developing its transportation system to include Electronic Toll Collection technology. As the co-formulator of several transportation technology national standards, the Company owns software copyrights for 89 software products and has won 5 of the 10 model cases sponsored by the PRC Ministry of Communications. The Company's affiliation with Peking University provides the Company access to the University's GeoGIS Research Laboratory, including over 30 Ph.D. researchers. As a result, the Company is playing a key role in setting the standards for electronic transportation information solutions. For more information, please visit the Company's website at http://www.chinatransinfo.com .

Safe Harbor Statement

This press release contains certain statements that may include "forward looking statements". All statements other than statements of historical fact included herein are "forward-looking statements". These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You 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 (http://www.sec.gov). All forward-looking statements attributable to the Company or 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-



         Table 2: CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

                   Condensed Consolidated Income Statement

                               Three Months Ended       Six Months Ended
                                     June 30,                June 30,
                                2010         2009        2010          2009

    Net sales                $24,045,906  $9,577,921  $48,933,381  $16,091,316
    Cost of sales             14,463,937   4,895,845   30,818,236    8,086,742
    Gross profit               9,581,969   4,682,076   18,115,145    8,004,574
    Total operating Expenses   4,999,719   1,834,616    9,867,176    3,700,335
    Income from operations     4,582,250   2,847,460    8,247,969    4,304,239
    Non-operating income
     (expense):
     Interest income              46,442      18,744       76,928       32,483
     Interest expense           (105,457)    (44,268)    (203,311)     (89,989)
     Subsidy income              727,581      89,982      754,024      119,284
     Other expense, net          (17,918)      7,063      (74,829)       6,868
      Total non-operating
       income                    650,648      71,521      552,812       68,646
    Income before income taxes,
     non-controlling interests,
     and gain on equity
     investments in affiliates 5,232,898   2,918,981    8,800,781    4,372,885
    Income taxes:                464,027      24,203      839,823       24,082
    Net income before non-
     controlling interests
     and gain on equity
     investments in
     affiliates net income     4,768,871   2,894,778    7,960,958    4,348,803
    Gain (loss) on equity
     investments in
     affiliates due to
     proportional shares of
     the affiliates
     net income                   57,206          --     (301,589)          --
    Net income before non-
     controlling interests     4,826,077   2,894,778    7,659,369    4,348,803
     Non-controlling
      interests in net
      income of subsidiary     1,216,160      95,135    2,290,413      100,474
    Net income                $3,609,917  $2,799,643   $5,368,956   $4,248,329
     Weighted average
      number of shares of
      outstanding:
      Basic                   25,051,414  22,215,551   24,031,595   22,201,432
      Diluted                 25,096,523  22,394,557   24,088,927   22,376,216
     Earnings per share -
      Basic                        $0.14       $0.13        $0.22        $0.19
      Diluted                      $0.14       $0.13        $0.22        $0.19
     Comprehensive income
     Net income
      including
      noncontrolling
      interest                $4,826,077  $2,894,778   $7,659,369   $4,348,803
     Translation
      adjustments                340,372      60,485      341,398     (105,465)
     Comprehensive income     $5,166,449  $2,955,263   $8,000,767   $4,243,338
     Comprehensive income
      attributable to
      noncontrolling interest $1,216,160     $95,135   $2,290,413     $100,474
     Comprehensive income
      attributable to CTFO    $3,950,289  $2,860,128   $5,710,354   $4,142,864



          Table 3: CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

                     Condensed Consolidated Balance Sheets

                                                      June 30,     December 31,
                                                        2010           2009
                                                     (Unaudited)

    ASSETS
    Cash and cash equivalents                        $25,224,837   $27,400,420
    Restricted cash                                    2,931,719     1,591,076
    Accounts receivable, net of allowance for
     doubtful accounts of $45,071 and $38,209,
     respectively                                     22,330,831    14,968,778
    Inventories                                          539,611       482,286
    Costs and estimated earnings in excess of
     billings on incompleted contracts                35,672,455    33,853,708
    Prepaid expenses and other current assets         12,877,524     5,871,997
    Other receivables                                 10,048,905     8,416,096
    Deferred income tax assets                            24,769        28,715
    Total current assets                             109,650,651    92,613,076
    Property and equipment, net                       10,055,682    10,541,486
    Long-term investments                              6,996,939     8,027,122
    Intangible assets, net                             5,302,110     4,494,781
    Goodwill                                          10,020,447     9,979,631
    Other assets                                         976,674       826,671

    Total assets                                    $143,002,503  $126,482,767

    LIABILITIES AND
     STOCKHOLDERS' EQUITY
    Accounts payable                                 $23,649,449   $20,728,539
    Short-term borrowings from banks                   8,911,650     7,481,700
    Billings in excess of costs and estimated
     earnings on incompleted contracts                11,100,255    17,021,936
    Accrued expenses and other current liabilities     3,510,331     3,022,140
    Total current liabilities                         47,171,685    48,254,315
    Other long-term liabilities                          389,756       389,489

    Total liabilities                                 47,561,441    48,643,804

    Commitments and contingencies                             --            --

    Stockholders' equity
    Preferred stock, $0.001 par value per share,
     authorized 10,000,000 shares, no shares
     issued and outstanding at June  30, 2010 and
     December 31, 2009                                        --            --
    Common stock, $0.001 par value per share,
     authorized 150,000,000 shares, issued and
     outstanding 25,245,069 and 22,452,745 shares,
     respectively                                         25,245        22,453
    Additional paid-in capital                        43,222,562    25,253,666
    Retained earnings                                 37,317,279    31,948,323
    Non-controlling interests                         12,419,532    18,499,475
    Accumulated other comprehensive income             2,456,444     2,115,046

    Total stockholders' equity                        95,441,062    77,838,963

    Total liabilities and stockholders' equity      $143,002,503  $126,482,767



         Table 4: CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

         Condensed Consolidated Statements of Cash Flows (unaudited)

                                                      Six Months Ended June 30,
                                                           2010        2009

    CASH FLOWS FROM OPERATING
     ACTIVITIES:
    Net income                                          $5,368,956  $4,248,329
    Adjustments to reconcile net income to net cash
     provided by operating activities:
      Non-controlling interests                          2,290,413     100,474
      Depreciation and amortization expense              1,021,829     491,752
      Stock-based compensation                             843,481     126,398
      Gain on equity investments in affiliates due
       to proportional shares of the affiliates
       net income                                          301,589          --
      Loss on disposal of property and equipment             6,370          --
      Allowance for doubtful accounts                        6,677          --
      (Increase) Decrease in assets:
        Restricted cash                                 (1,328,611)   (371,248)
        Accounts receivable                             (7,277,274) (1,452,048)
        Inventories                                        (55,123)    (38,898)
        Prepaid expenses and other current assets       (3,950,462)    606,919
        Other receivables                               (1,596,043)    (63,283)
        Cost of estimated earnings in
         excess of billings on incompleted contracts    (1,673,328) (4,938,381)
        Other assets                                    (2,451,029)         --
      Decrease (Increase) in liabilities:
        Accounts payable                                 2,824,509    (882,636)
        Billings in excess of costs and
         estimated on incompleted contracts             (5,966,489)   (365,051)
        Accrued expenses and other current liabilities      77,457    (833,370)
    Net cash used in operating activities              (11,557,078) (3,371,043)

    CASH FLOWS FROM INVESTING ACTIVITIES:
      Increase in other non-current asset                       --     (38,081)
      Proceeds from disposal of property and equipment       5,520          --
      Purchases of property and equipment                 (420,344) (1,204,584)
      Disposal of property and equipment                    11,889          --
      Payments for acquisition of companies               (258,761)   (475,620)
      Dividends from subsidiaries'
       and variable interest entity                         50,973          --
      Purchases of intangible assets                      (888,986) (1,414,756)
    Net cash used in investing activities               (1,499,709) (3,133,041)

    CASH FLOWS FROM FINANCING
     ACTIVITIES:
      Proceeds from short-term borrowings                4,474,045          --
      Payments of short-term borrowings                 (3,080,490)         --
      Non-controlling interest
       shareholders' capital contribution                       --      87,960
      Proceeds from issuing common shares               10,000,000          --
      Payments to related parties                               --    (449,153)
      Payments of transaction costs
       related to shares issuance                               --     (32,500)
      Payments to third parties for stock financing       (610,439)         --
    Net cash used in financing activities               10,783,116    (393,693)

    Effect of foreign currency translation                  98,088     (16,643)

    Net decrease in cash and cash equivalents           (2,175,583) (6,914,420)
    Cash and cash equivalents - beginning of period     27,400,420  16,122,464
    Cash and cash equivalents - end of period          $25,224,837  $9,208,044

    Supplemental disclosures of cash flow information:
      Interest paid                                        $90,874     $89,989
      Income taxes paid                                   $447,795     $20,364


    For more information, please contact:

    Company Contact:
     Ms. Fan Zhou, Investor Relations Director
     China TransInfo Technology Corp.
     Email: ir@ctfo.com
     Tel  +86-10-5169-1657

    Investor Relations Contact:
     Mr. Athan Dounis, Account Manager
     Email: athan.dounis@ccgir.com
     Tel:   +1-646-213-1916

     Mr. Crocker Coulson, President
     Email: crocker.coulson@ccgir.com
     Tel: +1-646-213-1915

     CCG Investor Relations
     Web: http://www.ccgirasia.com

SOURCE China TransInfo Technology Corp.