China TransInfo Announces Second-Quarter 2012 Results

China TransInfo Technology CTFO ("China TransInfo" or the "Company"), a leading provider of comprehensive intelligent transportation systems in China through its affiliate, China TransInfo Technology Group Co., Ltd. (the "Group Company"), today reported financial results for the second quarter ended June 30, 2012. Second-Quarter 2012 Highlights: Revenues were $31.4 million, a decrease of 14.8% year over year
Net income was $2.4 million, or $0.09 per diluted share
Adjusted net income was $2.6 million, or $0.10 per diluted share(*)
Backlog increased by $22 million to approximately $216 million
Entered into a merger agreement with TransCloud Company Limited and TransCloud Acquisition, Inc.
"During the second-quarter, our top line growth continued to vary due to the timing of contract progress and execution, however, we signed $54 million in new contracts, and our backlog increased by 11% to approximately $216 million, indicating a stronger book of business for China TransInfo," commented Mr. Shudong Xia. "In addition, we are pleased to see a year-over-year improvement in our gross margin, owing to our cost-effective project execution initiatives intended to optimize hardware purchasing practices and labor management. We maintained solid profitability despite the lower revenue level and higher tax rate. We remain committed to growing our business alongside the favorable dynamics of China's transportation market." Second-Quarter 2012 Results For the second quarter ended June 30, 2012, revenues were $31.4 million, a 14.8% decrease from $36.9 million in the year-ago quarter. The decrease in revenue was driven primarily by a 13.2% decrease in transportation revenue, mainly due to fluctuations in the progress of existing contracts and execution in the ITS business. Revenue from products and applications in the transportation business sector was $29.8 million, or 94.9% of total revenue, compared to $34.3 million, or 93.1% of total revenue, in the year-ago quarter. The remainder of revenue derived from other business categories. Gross profit decreased 7.2% to $9.8 million in the second quarter of 2012, as compared to $10.6 million in the year-ago quarter. The modest decrease was attributed to the decrease in net sales of our ITS business. However, the gross margin in the second quarter of 2012 increased to 31.3% from 28.7% in the year-ago quarter, mainly due to higher-margin transportation projects executed during the quarter versus the year-ago quarter, owing to improvements in hardware purchasing practice and labor management associated with these projects. Selling expenses were $1.3 million, as compared to $1.0 million in the second quarter of 2011, mainly due to our enhanced efforts in bidding for new contracts. General and administrative expenses were $6.1 million, as compared to $6.4 million in the year-ago quarter. The decrease was primarily due to lower sales-related bonus payments. Total operating expenses rose 0.6% to $7.4 million from the year-ago quarter. Operating income decreased 25.4% to $2.4 million from $3.2 million in the second quarter of 2011. In the second quarter, subsidy income was $0.8 million, as compared to $0.06 million in the year-ago quarter. Net income decreased 15.6% to $2.4 million, or $0.09 per diluted share, compared to $2.8 million, or $0.11 per diluted share, in the year-ago quarter. Adjusted net income, which excludes $0.25 million in non-cash, stock-based compensation expense and $0.01 million in intangible amortization expense from acquisitions, decreased 16.5% to $2.6 million, or $0.10 per diluted share, compared to $3.1 million, or $0.12 per diluted share, in the comparable period of 2011(*). Weighted average diluted shares outstanding increased to 25,320,592 shares from 25,273,195 shares in the year-ago quarter. Six-Month Results For the six months ended June 30, 2012, net sales were $60.3 million, a 17.8% decrease from $73.4 million during the same period of 2011. Gross profit decreased 7.5% to $19.4 million from $21.0 million. Operating income declined 30.8% to $5.0 million from $7.3 million in the first six months of 2011. Net income decreased 17.1% to $4.8 million, or $0.19 per diluted share compared to net income of $5.8 million, or $0.23 per diluted share, in the first six months of 2011. Adjusted net income, which excludes non-cash, stock-based compensation expense of $0.5 million and amortization expense of intangibles from acquisitions of $0.02 million, decreased 17.9% to $5.3 million, or $0.21 per diluted share, compared to $6.4 million, or $0.26 per diluted share, in the first six months of 2011.(*) Weighted average diluted shares outstanding increased to 25,295,931 shares from 25,273,317 shares in the first six months of 2011. Financial Condition As of June 30, 2012, cash and cash equivalents totaled $26.9 million, compared to $45.0 million as of December 31, 2011. For the quarter ended June 30, 2012, cash flow from operations was an outflow of $5.0 million. Working capital increased to $103.9 million compared to $97.3 million as of December 31, 2011. Stockholders' equity was $158.7 million compared to $149.9 million as of December 31, 2011. Business Outlook China TransInfo has successfully developed a commercial vehicle monitoring and control platform for the Ministry of Transport. To date, the Company has recorded more than 1.51 million vehicles registered on the platform and approximately 420,000 active users. In addition, the Company's variable interest entity, Beijing Zhangcheng Science and Technology Co., Ltd. (Palmcity), released an updated version of its Android-based Real-Time Traffic Information application with advanced features including enabling user sharing and searching of traffic information via Sina Weibo, the most popular social-networking platform in China. In addition, Palmcity officially released its iOS-based Real-Time Traffic Information application V3.1 for iPhone users on July 13, 2012. Mr. Xia continued, "At the end of the second quarter of 2012, our sales backlog was approximately $216 million, compared to $194 million at the end of the first quarter. We signed roughly $54 million in contracts during the second quarter. For 2012, we continue to expect revenues of approximately $170 million and adjusted net income of approximately $14 million, excluding non-cash, stock-based compensation expense and amortization expense of intangibles from acquisitions."